XML 31 R20.htm IDEA: XBRL DOCUMENT

Risks and Uncertainties

12 Months Ended

Dec. 31, 2021

NOTE 13 RISKS AND UNCERTAINTIES

Economic and Political Risks

The Company’s results of operations could be adversely affected by general conditions in the global economy, including conditions that are outside of its control, such as the impact of health and safety concerns from the outbreak of COVID-19. The outbreak in China has resulted in the reduction of customer traffic and temporary closures of shopping malls as mandated by the provincial governments in various provinces of China from late January to March, which has adversely affected the company in the retail business with a decline in sales since February 2020. The Company’s wholesale business is also significantly affected as the Company is facing a sharp decline in its order quantities. Some of the Company’s wholesale clients have also cancelled or postponed existing orders. Due to the Chinese factories’ shutdowns and traffic restrictions during the outbreak in China and potential shutdowns and traffic restrictions in the countries where the Company’s suppliers are located, The Company’s supply chain and business operations of its suppliers may be affected. Disruptions from the closure of supplier and manufacturer facilities, interruptions in the supply of raw materials and components, personnel absences, or restrictions on the shipment of the Company’s or its suppliers’ or customers’ products, could have adverse ripple effects on the Company’s manufacturing output and delivery schedule. The Company could also face difficulties in collecting its accounts receivables due to the effects of COVID-19 on its customers and risk gaining a large amount of bad debt. Global health concerns, such as COVID-19, could also result in social, economic, and labor instability in the countries and localities in which the Company, its suppliers and customers operate.

Although China has already begun to recover from the outbreak of COVID-19, the epidemic continues to spread on a global scale and there is the risk of the epidemic returning to China in the future, thereby causing further business interruption. While the potential economic impact brought by and the duration of COVID-19 may be difficult to assess or predict, a widespread pandemic could result in significant disruption of global financial markets, reducing our ability to access capital, which could in the future negatively affect the Company’s liquidity. In addition, a recession or market correction resulting from the spread of COVID-19 could materially affect the Company’s business and the value of its common stock. If the Company’s future sales continue to decline significantly, it may risk facing financial difficulties due to its recurring fixed expenses. The extent to which COVID-19 impacts the Company’s operating is uncertain and cannot be predicted at this time, and it will depend on many factors and future developments, including new information about COVID-19 and any new government regulations which may emerge to contain the virus, among others.

The majority of the Company’s operations are conducted in the PRC. Accordingly, the Company’s business, financial condition and results of operations may be influenced by the political, economic and legal environment in the PRC, and by the general state of the PRC economy. The Company’s operations in the PRC are subject to special considerations and significant risks not typically associated with companies in North America and Western Europe. These include risks associated with, among others, the political, economic and legal environment and foreign currency exchange. The Company’s results may be adversely affected by changes in the political and social conditions in the PRC, and by changes in governmental policies with respect to laws and regulations, anti-inflationary measures, currency conversion, remittances abroad, and rates and methods of taxation.

Credit risks

The Company extends unsecured credit to its customers in the normal course of business and generally does not require collateral. As a result, management performs ongoing credit evaluations, and the Company maintains an allowance for potential credit losses based upon its loss history and its aging analysis. Management reviews the allowance for doubtful accounts each reporting period based on a detailed analysis of accounts receivable. In the analysis, management primarily considers the age of the customer’s receivable and also considers the credit worthiness of the customer, the economic conditions of the customer’s industry, and general economic conditions and trends, among other factors. If any of these factors change, the Company may also change its original estimates, which could impact the level of the Company’s future allowance for doubtful accounts. If judgments regarding the collectability of accounts receivables are incorrect, adjustments to the allowance may be required, which would reduce profitability.

Concentration risks

For the Company’s wholesale business, the Company had one customer which represented approximately 12.9% of the total revenues for the year ended December 31, 2021 and had no customer which represented over 10% of the total revenues for the year ended December 31, 2020. In 2021 and 2020, sales to our five largest customers generated approximately 37.8% and 38.7% of our total wholesale sales, respectively.

For our wholesale business, purchases from our five largest contract manufacturers represented approximately 45.3% and 45.2% of finished goods purchases for the years ended December 31, 2021 and 2020, respectively.

For the Company’s retail business, the Company had five suppliers represented approximately 8.2%, 10.7%, 18.6%, 19.1% and 34.4% of the total raw materials purchased, respectively during 2021. For the Company’s retail business, the Company had five suppliers represented approximately 10.8%, 15.9%, 16.0%, 19.8% and 34.6% of the total raw materials purchased, respectively during 2020.

For the wholesale business, the Company relied on one finished goods supplier which is a related-party that represented 27.0% of the total finished goods purchases during 2021. For the wholesale business, the Company relied on two manufacturers for 12.6% and 11.2% of total purchased finished goods, respectively during 2020.

For the retail business, the Company did not rely on any supplier that represented more than 10% of the total finished goods purchases during 2021 and 2020.

The Company’s revenues for the years ended December 31, 2021 and 2020 were earned in the following geographic areas:

	2021		2020
	(In thousands of U.S. Dollars)
Mainland China	$	71,325	$	29,055
Hong Kong China		24,986		19,873
United Kingdom		7,428		8,753
Europe-Other		23,418		19,950
Japan		17,075		11,406
United States		40,668		28,172
Total wholesale business		184,900		117,209
Retail business		146,078		150,145
Total	$	330,978	$	267,354

Substantially all of the Company’s long-lived assets are located in the PRC as of December 31, 2021 and 2020.