Oriental Culture(OCG) - 2020 Q4 - Annual Report

Key Financial and Operational Highlights Oriental Culture Holding LTD achieved revenue and gross profit growth in FY2020, despite a significant net income decline, driven by strong operational expansion in product listings and new accounts Fiscal Year 2020 vs 2019 Financial Highlights | ($ millions, except per share data) | 2020 | 2019 | % Change | | :--- | :--- | :--- | :--- | | Revenue | $17.4 | $13.4 | 29.7% | | Gross profit | $14.8 | $12.1 | 22.1% | | Gross margin | 85.1% | 90.3% | -5.2 p.p. | | Income from operations | $1.65 | $8.98 | -81.7% | | Operating profit margin | 9.5% | 67.0% | -57.5 p.p. | | Net income | $2.0 | $9.1 | -77.5% | | Earnings per share | $0.13 | $0.64 | -79.6% | | Net book value per share | $2.15 | $0.92 | 133.7% | - As of December 31, 2020, the number of types of collectibles, artwork, and commodities listed on OCG's platforms reached 303, a 163% increase from the previous year[4] - Approximately 95,000 new accounts were opened on the company's trading platforms in 2020, representing a 44% year-on-year growth from about 66,000 new accounts in 2019[4] Management Commentary Management anticipates capital inflow into real, liquid RMB-denominated assets on OCG's platforms due to economic recovery, with the CFO crediting H2 2020's positive performance to new listings and account growth - The Chairman believes that as money is used to stimulate economic growth, the scarcest assets will be real, liquid assets, especially those valued in RMB, which are traded on OCG's platforms[3] - Management is confident that the company's long-term performance will benefit from capital inflow and growth in client numbers as investor confidence in China's economy rises[3] - The CFO stated that the positive performance in the second half of 2020 was driven by sales from collectibles and artwork listing services, marketing services, and transaction fees, fueled by new product listings and new accounts[4] Consolidated Financial Statements The consolidated financial statements for FY2020 detail the company's financial position, operational results, and cash flows, highlighting asset and equity growth from IPO, revenue growth offset by rising expenses, and significant cash movements Consolidated Balance Sheets As of December 31, 2020, total assets and shareholders' equity significantly increased to $41.1 million and $33.6 million respectively, primarily due to cash surge, a new deposit, and additional paid-in capital from the IPO Consolidated Balance Sheets (as of Dec 31) | (In USD) | 2020 | 2019 | | :--- | :--- | :--- | | Total current assets | $39,027,941 | $12,229,929 | | Cash and cash equivalents | $24,036,174 | $9,184,671 | | Deposit | $13,333,538 | - | | Total assets | $41,108,765 | $14,713,587 | | Total current liabilities | $7,539,519 | $1,614,315 | | Accounts payable | $4,831,394 | $333,505 | | Total liabilities | $7,539,519 | $1,614,315 | | Total shareholders' equity | $33,569,246 | $13,099,272 | | Additional paid-in capital | $18,884,992 | $1,608,045 | Consolidated Statements of Income and Comprehensive Income In FY2020, total operating revenues grew to $17.4 million, but a 318.7% surge in operating expenses led to an 81.7% decline in income from operations to $1.6 million, resulting in net income of $2.0 million Consolidated Statements of Income (For the Years Ended Dec 31) | (In USD) | 2020 | 2019 | | :--- | :--- | :--- | | Total operating revenues | $17,438,802 | $13,449,435 | | Gross profit | $14,796,639 | $12,119,558 | | Total operating expenses | ($13,150,551) | ($3,140,465) | | Selling and marketing | ($6,004,883) | ($675,230) | | General and administrative | ($7,145,668) | ($2,465,235) | | Income from operations | $1,646,088 | $8,979,093 | | Net income | $2,048,107 | $9,087,872 | | Earnings per share (Basic and diluted) | $0.13 | $0.64 | Consolidated Statements of Cash Flows In 2020, net cash from operating activities was $8.1 million, while investing activities used $11.8 million, and financing activities provided $18.0 million from the IPO, resulting in an end-of-year cash balance of $24.0 million Consolidated Statements of Cash Flows (For the Years Ended Dec 31) | (In USD) | 2020 | 2019 | | :--- | :--- | :--- | | Net cash provided by operating activities | $8,101,587 | $9,559,467 | | Net cash (used in) investing activities | ($11,769,294) | ($1,438,760) | | Deposit on real estate purchase | ($12,613,083) | - | | Net cash provided by (used in) financing activities | $18,036,395 | ($853,579) | | Proceeds from initial public offering, net | $18,090,668 | - | | Increase in cash and cash equivalents | $14,851,503 | $7,167,813 | | Cash and cash equivalents, end of year | $24,036,174 | $9,184,671 |