UNITED
STATES
SECURITIES
AND EXCHANGE COMMISSION
Washington,
D.C. 20549
FORM
10 – Q
[X]
|
QUARTERLY
REPORT UNDER SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934
|
For
the quarterly period ended: March 31, 2018
[ ]
|
TRANSITION
REPORT UNDER SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934
|
Commission
File Number 333-200760
FORTUNE
VALLEY TREASURES, INC.
(Exact
name of registrant as specified in its charter)
Nevada
|
32-0439333
|
(State
or other jurisdiction of
incorporation
or organization)
|
(IRS
Employer
Identification
Number)
|
No.10
of Tuanjie 2nd Road,Beice,
Humen,Dongguan,
518000, China
(Address
of principal executive offices including zip code)
(86)
76982268999
(Registrant’s
telephone number, including area code)
Indicate
by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Exchange Act
during the past 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been
subject to such filing requirements for the past 90 days.
Yes
[X] No [ ]
Indicate
by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive
Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the
preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).
Yes [X] No [ ]
Indicate
by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting
company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,”
“smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
Large
Accelerated Filer [ ]
|
Accelerated
Filer [ ]
|
Non-Accelerated
Filer [ ]
|
Smaller
reporting company [X]
|
(Do
not check if a smaller reporting company)
|
Emerging
growth company [X]
|
If
an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for
complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. [ ]
Indicate
by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).
Yes [ ] No [X]
The
number of shares outstanding of each of the issuer’s classes of common equity, as of May 15, 2018 is as follows:
Class
of Securities
|
|
|
Shares
Outstanding
|
|
|
Common
Stock, $0.001 par value
|
|
|
|
307,750,000
|
|
Fortune
Valley Treasures, Inc.
Note
Regarding Forward-Looking Statements
This
Report on Form 10-Q contains “forward-looking statements” within the meaning of Section 27A of the Securities Act
of 1933, as amended (the “Securities Act”), and Section 21E of the Securities Exchange Act of 1934, as amended (the
“Exchange Act”). In particular, statements contained in this Report Form 10-Q, including but not limited to, the sufficiency
of our cash, our ability to finance our operations and business initiatives and obtain funding for such activities; our future
results of operations and financial position, business strategy and plan prospects, or costs and objectives of management for
future acquisitions, are forward-looking statements. These forward-looking statements relate to our future plans, objectives,
expectations and intentions and may be identified by words such as “may,” “will,” “should,”
“expects,” “plans,” “anticipates,” “intends,” “targets,” “projects,”
“contemplates,” “believes,” “seeks,” “goals,” “estimates,” “predicts,”
“potential” and “continue” or similar words. Readers are cautioned that these forward-looking statements
are based on our current beliefs, expectations and assumptions and are subject to risks, uncertainties, and assumptions that are
difficult to predict, including those identified below, under Part II, Item 1A. “Risk Factors” and elsewhere in this
Report on Form 10-Q. Therefore, actual results may differ materially and adversely from those expressed, projected or implied
in any forward-looking statements. We undertake no obligation to revise or update any forward-looking statements for any reason.
USE
OF CERTAIN DEFINED TERMS
In
addition, unless the context otherwise requires and for the purposes of this report only, references to:
|
●
|
“we,”
“us,” “our,” or “our company,” the “Company” are relevant to the combined
business of
Fortune Valley Treasures, Inc
., a Nevada corporation, and its consolidated
subsidiaries and variable interest entities;
|
|
|
|
|
●
|
“
FVTI
”
refers to
Fortune Valley Treasures, Inc
., a Nevada corporation.
|
|
|
|
|
●
|
“
DIGL
”
refers to
DaXingHuaShang Investment Group Limited
, a Republic of Seychelles company
and wholly-owned subsidiary of
FVTI
;
|
|
|
|
|
●
|
“DIL”
refers to DaXingHuaShang Investment (Hong Kong) Limited, a Hong Kong company and wholly-owned subsidiary of
DIGL
;
|
|
|
|
|
●
|
“Qianhai
DaXing” refers to Qianhai DaXingHuaShang Investment (Shenzhen) Co. Ltd. , a Peoples Republic of China company and wholly-owned
subsidiary of DIL
|
|
|
|
|
●
|
“FVI”
refers to
Dongguan
City
France Vin Tout Ltd
.,
a PRC company and
wholly-owned subsidiary of Qianhai DaXing.
|
|
|
|
|
●
|
“Hong
Kong” refers to the Hong Kong Special Administrative Region of the People’s Republic of China;
|
|
|
|
|
●
|
“China”
and “PRC” refer to the People’s Republic of China;
|
|
|
|
|
●
|
“Renminbi”
and “RMB” refer to the legal currency of China;
|
|
|
|
|
●
|
“U.S.
dollars,” “dollars” and “$” refer to the legal currency of the United States;
|
|
|
|
|
●
|
“SEC”
are to the U.S. Securities and Exchange Commission;
|
|
|
|
|
●
|
“Exchange
Act” refers to the Securities Exchange Act of 1934, as amended;
|
|
|
|
|
●
|
“Securities
Act” refers to the Securities Act of 1933, as amended.
|
Fortune
Valley Treasures, Inc.
Index
Item
1.
Fortune
Valley Treasures, Inc.
Financial
Statements
March
31, 2018
(Unaudited)
Fortune
Valley Treasures, Inc.
Consolidated
Balance Sheets
At
March 31, 2018 and December 31, 2017
|
|
March
31, 2018
(Unaudited)
|
|
|
December
31, 2017
(Restated)
|
|
Assets
|
|
|
|
|
|
|
|
|
Current assets
|
|
|
|
|
|
|
|
|
Cash and cash equivalents
|
|
$
|
76,737
|
|
|
$
|
77,782
|
|
Accounts and other receivable, net
|
|
|
46,533
|
|
|
|
15,317
|
|
Inventories
|
|
|
287,149
|
|
|
|
273,491
|
|
Prepaid expenses
|
|
|
17,000
|
|
|
|
5,895
|
|
Due from related parties
|
|
|
7,849
|
|
|
|
40,126
|
|
Prepaid taxes
and taxes recoverable
|
|
|
2,872
|
|
|
|
751
|
|
Total current
assets
|
|
$
|
438,140
|
|
|
$
|
413,362
|
|
|
|
|
|
|
|
|
|
|
Non-current assets
|
|
|
|
|
|
|
|
|
Plant and
equipment, net
|
|
|
13,086
|
|
|
|
13,824
|
|
Total Assets
|
|
$
|
451,226
|
|
|
$
|
427,186
|
|
|
|
|
|
|
|
|
|
|
Liabilities and Stockholders’
Equity
|
|
|
|
|
|
|
|
|
Current liabilities
|
|
|
|
|
|
|
|
|
Accounts and taxes payable
|
|
|
50,998
|
|
|
|
44,188
|
|
Accrued liabilities and other payables
|
|
|
319
|
|
|
|
2,175
|
|
Customers advances and deposits
|
|
|
42,217
|
|
|
|
11,697
|
|
Due to related
parties
|
|
|
573,487
|
|
|
|
500,608
|
|
Total current
liabilities
|
|
$
|
667,021
|
|
|
$
|
558,668
|
|
|
|
|
|
|
|
|
|
|
Total Liabilities
|
|
$
|
667,021
|
|
|
$
|
558,668
|
|
|
|
|
|
|
|
|
|
|
Stockholders’ Equity
|
|
|
|
|
|
|
|
|
Common stock (3,000,000,000 shares
authorized, 307,750,000 issued and outstanding at December 31, 2017 and 2016)
|
|
|
307,750
|
|
|
|
307,750
|
|
Additional paid in capital
|
|
|
-
|
|
|
|
-
|
|
Accumulated deficit
|
|
|
(528,458
|
)
|
|
|
(445,673
|
)
|
Accumulated
other comprehensive income
|
|
|
4,913
|
|
|
|
6,441
|
|
Total Stockholders’
Equity
|
|
|
(215,795
|
)
|
|
|
(131,482
|
)
|
|
|
|
|
|
|
|
|
|
Total Liabilities
and Stockholders’ Equity
|
|
|
451,226
|
|
|
|
427,186
|
|
See
accompanying notes to the financial statements
Fortune
Valley Treasures, Inc.
Consolidated
Statements of Operations and Comprehensive Loss
For
the three months ended March 31, 2018 and 2017
|
|
Three
Months Ended
|
|
|
|
March
31, 2018
|
|
|
March
31, 2017
|
|
|
|
|
|
|
|
|
Net
revenues (related party revenue $0 and $0 for 2018 and 2017)
|
|
$
|
13,747
|
|
|
$
|
18,267
|
|
Cost of revenues
|
|
|
7,559
|
|
|
|
9,164
|
|
Gross profit
|
|
|
6,188
|
|
|
|
9,103
|
|
|
|
|
|
|
|
|
|
|
Operating expenses:
|
|
|
|
|
|
|
|
|
Selling and marketing expenses
|
|
|
|
|
|
|
|
|
General and administrative
expenses
|
|
|
102,619
|
|
|
|
48,567
|
|
|
|
|
|
|
|
|
|
|
Operating loss
|
|
|
(96,431
|
)
|
|
|
(39,464
|
)
|
|
|
|
|
|
|
|
|
|
Other income (expenses):
|
|
|
|
|
|
|
|
|
Interest income
|
|
|
(491
|
)
|
|
|
-
|
|
Interest expense
|
|
|
-
|
|
|
|
-
|
|
|
|
|
(491
|
)
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
Earnings before tax
|
|
|
(96,922
|
)
|
|
|
(39,464
|
)
|
|
|
|
|
|
|
|
|
|
Income tax
|
|
|
-
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
Net loss
|
|
$
|
(96,922
|
)
|
|
$
|
(39,464
|
)
|
|
|
|
|
|
|
|
|
|
Other comprehensive income:
|
|
|
|
|
|
|
|
|
Foreign
currency translation gain
|
|
|
(1,528
|
)
|
|
|
(72
|
)
|
|
|
|
|
|
|
|
|
|
Comprehensive
loss
|
|
$
|
(98,450
|
)
|
|
$
|
(39,536
|
)
|
|
|
|
|
|
|
|
|
|
Loss per share
|
|
|
|
|
|
|
|
|
Basic and diluted earnings per share
|
|
$
|
(0.00
|
)
|
|
$
|
(0.00
|
)
|
Basic and diluted weighted average
shares outstanding
|
|
|
307,750,000
|
|
|
|
307,750,000
|
|
See
accompanying notes to the financial statements
Fortune
Valley Treasures, Inc.
Consolidated
Statements of Cash Flows
For
the three months ended March 31, 2018 and 2017
(Unaudited)
|
|
For
the Three Months Ended
|
|
|
|
March
31, 2018
|
|
|
March
31, 2017
|
|
Cash flows from operating activities
|
|
|
|
|
|
|
|
|
Net loss
|
|
$
|
(96,922
|
)
|
|
$
|
(39,464
|
)
|
Depreciation of
fixed assets
|
|
|
1,749
|
|
|
|
1,616
|
|
Increase in accounts
and other receivables
|
|
|
(29,759
|
)
|
|
|
(4,003
|
)
|
Increase in inventories
|
|
|
6,634
|
|
|
|
(15,892
|
)
|
Increase in advances
and prepayments to suppliers
|
|
|
(16,188
|
)
|
|
|
46,364
|
|
Increase
(decrease) in accounts and other payables
|
|
|
3,473
|
|
|
|
3,431
|
|
Net
cash used in operating activities
|
|
|
(98,637
|
)
|
|
|
(7,947
|
)
|
|
|
|
|
|
|
|
|
|
Cash flows from investing activities
|
|
|
|
|
|
|
|
|
Purchase
of plant and equipment
|
|
|
-
|
|
|
|
-
|
|
Net
cash used in investing activities
|
|
|
-
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
Cash flows from financing activities
|
|
|
|
|
|
|
|
|
Proceeds of owners’
injection of capital
|
|
|
-
|
|
|
|
-
|
|
Borrowing
and payments to related parties, net
|
|
|
93,384
|
|
|
|
(29,920
|
)
|
Net cash provided by (used
in) financing activities
|
|
|
93,384
|
|
|
|
(29,920
|
)
|
|
|
|
|
|
|
|
|
|
Net decrease of cash and
cash equivalents
|
|
|
(5,253
|
)
|
|
|
(37,867
|
)
|
|
|
|
|
|
|
|
|
|
Effect of foreign currency translation
on cash and cash equivalents
|
|
|
4,208
|
|
|
|
7
|
|
|
|
|
|
|
|
|
|
|
Cash and cash
equivalents–beginning of period
|
|
|
77,782
|
|
|
|
103,966
|
|
|
|
|
|
|
|
|
|
|
Cash and cash
equivalents–end of period
|
|
$
|
76,737
|
|
|
$
|
66,106
|
|
|
|
|
|
|
|
|
|
|
Supplementary cash flow information:
|
|
|
|
|
|
|
|
|
Interest received
|
|
$
|
491
|
|
|
$
|
-
|
|
Interest paid
|
|
$
|
-
|
|
|
$
|
-
|
|
Income taxes paid
|
|
$
|
-
|
|
|
$
|
-
|
|
See
accompanying notes to the financial statements
NOTE
1 - ORGANIZATION AND DESCRIPTION OF BUSINESS
Fortune
Valley Treasures, Inc. (formerly Crypto-Services, Inc.) was incorporated in the State of Nevada on March 21, 2014. The Company’s
current primary business operations of wholesale distribution and retail sales of alcoholic beverages of wine and distilled liquors
are conducted through its subsidiaries in the People’s Republic of China (“PRC”).
On
January 5, 2018, the Company’s board of directors unanimously approved to modify the Company’s accounting fiscal year
end from August 31 to December 31. On January 29, 2018, the Company filed a Certificate of Amendment with the State of Nevada
to increase its authorized shares to 3,000,000,000.
On
April 11, 2018, the Company entered into share exchange agreement by and among DaXingHuaShang Investment Group Limited (“DIGLS”)
and its shareholders: 1.) Yumin Lin, 2.) Gaosheng Group Co., Ltd. and 3.) China Kaipeng Group Co., Ltd whereby the Company newly
issued 300,000,000 shares of its common stock in exchange for all the outstanding shares in DIGLS. This transaction has been accounted
for a reverse takeover transaction and a recapitalization of the Company whereby the Company, the legal acquirer, is the accounting
acquiree, and DIGLS, the legal acquiree, is the accounting acquirer; accordingly, the Company historical statement of stockholders’
equity has been retroactively restated to the first period presented.
DIGLS
was incorporated with limited liability in the Republic of Seychelles on July 4, 2016, with share capital of $100,000 divided
into 250,000,000 ordinary shares with $0.0004 par value. DIGLS wholly owns DaXingHuaShang Investment (Hong Kong) Limited (“DILHK”).
DILHK was incorporated in Hong Kong on June 22, 2016 as an investment holding company with limited liability. DILHK was previously
wholly owned by Mr. Yumin Lin. On November 11, 2016, Mr. Yumin Lin, transferred 100% of his ownership in DILHK to DIGLS. DILHK
wholly owns Qianhai DaXingHuaShang Investment (Shenzhen)Co. Ltd. (“QHDX”) which was incorporated with limited liability
on November 3, 2016 in the PRC as a wholly foreign-owned enterprise. QHDX wholly owns Dongguan City France Vin Tout Ltd. (“FVTL”).
FTVL was incorporated on May 31, 2011 in the PRC with limited liability. FTVL was previously owned and controlled by Mr. Yumin
Lin. FTVL has been a license to sell foods up through September 10, 2022. On November 20, 2016, Mr. Yumin Lin transferred his
ownership in FTVL to QHDX for nominal consideration. The share transfers detailed above by and among Mr. Yumin Lin, DIGLS, DILHK,
QHDX, and FVTL have been accounted for as a series of business combination of entities under common control; accordingly, the
values in these financial statements reflect the carrying values of those entities, and no goodwill was recorded as a result of
these transactions.
NOTE
2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis
of presentation
These
consolidated financial statements, accompanying notes, and related disclosures have been prepared pursuant to the rules and regulations
of the U.S. Securities and Exchange Commission (“SEC”). These financial statements have been prepared using the accrual
basis of accounting in accordance with the generally accepted accounting principles (“GAAP”) in the United States.
The Company’s fiscal year end is December 31. The Company’s financial statements are presented in US dollars.
Basis
of consolidation
The
consolidated financial statements include the accounts of the Company and its subsidiaries. All intercompany accounts and transactions
have been eliminated.
Entity
Name
|
|
Incorporation
date
|
|
Entity
Owned By
|
|
Nature
of Operation
|
|
Country
of Incorporation
|
DaXingHuaShang
Investment (Hong Kong) Ltd (“DILHK”)
|
|
June
22, 2016
|
|
DIGLS
|
|
Investment
holding
|
|
Hong
Kong, China
|
|
|
|
|
|
|
|
|
|
Qianhai
DaXingHuaShang Investment (Shenzhen) Co. Ltd. (“QHDX”)
|
|
November
3, 2016
|
|
DILHK
|
|
Investment
holding
|
|
China
|
|
|
|
|
|
|
|
|
|
Dongguan
City France Vin Tout Ltd., (“FVTL”)
|
|
May
31, 2011
|
|
QHDX
|
|
Trading
of wine
|
|
China
|
Use
of estimates
The
preparation of financial statements in conformity with accounting principles generally accepted in the United States of America
requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure
of contingent assets and liabilities at the date of the financial statements. The estimates and judgments will also affect the
reported amounts for certain revenues and expenses during the reporting period. Actual results may materially differ from these
estimates.
Foreign
currency translation and re-measurement
The
Company translates its foreign operations to the U.S. dollar in accordance with ASC 830, “
Foreign Currency Matters
”.
The
reporting currency for the Company and its subsidiaries is the US dollar. The Company, DIGLS, and DILH’s functional currency
is the U.S. dollar; QHDX and FVTL use the Chinese Renminbi (“RMB”) as their functional currency.
The
Company’s subsidiaries, whose records are not maintained in that company’s functional currency, re-measure their records
into their functional currency as follows:
|
●
|
Monetary
assets and liabilities at exchange rates in effect at the end of each period
|
|
●
|
Nonmonetary
assets and liabilities at historical rates
|
|
●
|
Revenue
and expense items at the average rate of exchange prevailing during the period
|
Gains
and losses from these re-measurements were not significant and have been included in the Company’s results of operations.
The
Company’s subsidiaries, whose functional currency is not the U.S. dollar, translate their records into the U.S. dollar as
follows:
|
●
|
Assets
and liabilities at the rate of exchange in effect at the balance sheet date
|
|
●
|
Equities
at the historical rate
|
|
●
|
Revenue
and expense items at the average rate of exchange prevailing during the period
|
Adjustments
arising from such translations are included in accumulated other comprehensive income in shareholders’ equity.
|
|
March
31, 2018
|
|
|
March
31, 2017
|
|
Spot RMB: USD exchange rate
|
|
$
|
0.1590
|
|
|
$
|
0.1480
|
|
Average RMB: USD exchange rate
|
|
$
|
0.1574
|
|
|
$
|
0.1524
|
|
The
RMB is not freely convertible into foreign currency and all foreign exchange transactions must take place through authorized institutions.
No representation is made that the RMB amounts could have been, or could be, converted into US Dollars at the rates used in translation.
Cash
and cash equivalents
Cash
and cash equivalents include cash on hand, deposits in banks, and any investments with maturities with less three months from
inception to maturity. The Company’s primary bank deposits are located in the Hong Kong and the PRC; those deposits are
not provided protection under FDIC insurance; however, management has determined that the risk of loss from insolvency by those
financial institution at which it has deposited it funds is insignificant.
Accounts
receivable
Accounts
receivable are carried at the amounts invoiced to customers less allowance for doubtful accounts. The allowance is an estimate
based on a review of individual customer accounts on a regular basis. Accounts receivable are written off when deemed uncollectible.
Recoveries of accounts receivable previously written off are recorded when received.
The
Company reviews the collectability of accounts receivable based on an assessment of historical experience, current economic conditions,
and other collection indicators.
During
the two years ended December 31, 2017 and the three months ended March 31, 2018, the Company did not experience
any delinquent or uncollectible balances; accordingly, the Company did not record any valuation allowance for bad debt during
this period.
Inventories
Inventories
consisting of finished goods are stated at the lower of cost or market value. The Company used the weighted average cost method
of accounting for inventory. Inventories on hand are evaluated on an on-going basis to determine if any items are obsolete, spoiled,
or in excess of future demand. The Company provides impairment that is charged directly to cost of sales when is has been determined
the product is obsolete, spoiled, and the Company will not be able to sell it at a normal profit above its carrying cost. The
Company’s primary products are alcoholic beverages; the selling price of alcoholic beverages tend to increase over time;
however, there are circumstances where alcoholic beverages may be subject to spoilage if stored for prolong periods of time. The
Company did not experience an impairment on inventory during the three months ended March 31, 2018.
Advances
and prepayments to suppliers
In
certain instances, in order to secure the supply of limited and sought-after wines and liquors, the Company will make advance
payments to suppliers for the procurement of inventory. Upon physical receipt and inspection of such products from those suppliers,
the applicable balances are reclassified from advances and prepayments to suppliers to inventory.
Property,
plant and equipment
Equipment
is carried at cost less accumulated depreciation. Depreciation is provided over their estimated useful lives, using the straight-line
method. Estimated useful lives of the equipment are as follows:
The
cost of maintenance and repairs is charged to expenses as incurred, whereas significant renewals and betterments are capitalized.
Accounting
for long-lived assets
The
Company annually reviews its long-lived assets for impairment or whenever events or changes in circumstances indicate that the
carrying amount of assets may not be recoverable. Impairment may be the result of becoming obsolete from a change in the industry
or new technologies. Impairment is present if the carrying amount of an asset is less than its undiscounted cash flows to be generated.
If
an asset is considered impaired, a loss is recognized based on the amount by which the carrying amount exceeds the fair market
value of the asset. Assets to be disposed of are reported at the lower of the carrying amount or fair value less costs to sell.
Customer
advances and deposits
On
certain occasions, the Company may receive prepayments from downstream retailers or retails customer for wines and liquor prior
to their taking possession of the Company’s products; the Company records these receipts as customer advances and deposits
until it has met all the criteria for recognition of revenue including the passing possession of the products to its customer,
at such point Company will reduce the customer and deposits balance and credit the Company’s revenues.
Revenue
recognition
Revenues
are recognized when the Company has negotiated the terms of the transaction, which includes determining and fixing the sales price,
the transfer of possession of the product to the customer, the customer does not have the right to return the product, the customer
is able to further sell or transfer the product onto others for economic benefit without any other obligation to be fulfilled
by the Company, and the Company is reasonably assured that funds have been or will be collected from the customer. The Company’s
gross revenue consists the value of goods invoiced, net of any value-added tax (VAT) or excise tax.
Advertising
All
advertising costs are expensed as incurred. Advertising expense for the three months ended March 31, 2018 and March 31, 2017 were
$0 and 0, respectively.
Shipping
and handling
Outbound
shipping and handling are expensed as incurred.
Retirement
benefits
Retirement
benefits in the form of mandatory government sponsored defined contribution plans are charged to the either expenses as incurred
or allocated to inventory as a part of overhead.
Income
taxes
The
Company accounts for income tax using an asset and liability approach and allows for recognition of deferred tax benefits in future
years. Under the asset and liability approach, deferred taxes are provided for the net tax effects of temporary differences between
the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes.
A valuation allowance is provided for deferred tax assets if it is more likely than not these items will either expire before
the Company is able to realize their benefits, or that future realization is uncertain.
Statutory
reserves
Statutory
reserves are referring to the amount appropriated from the net income in accordance with laws or regulations, which can be used
to recover losses and increase capital, as approved, and are to be used to expand production or operations. PRC laws prescribe
that an enterprise operating at a profit must appropriate and reserve, on an annual basis, an amount equal to 10% of its profit.
Such an appropriation is necessary until the reserve reaches a maximum that is equal to 50% of the enterprise’s PRC registered
capital.
Earnings
per share
The
Company computes earnings per share (“EPS”) in accordance with ASC Topic 260, “Earnings per share”. Basic
EPS is measured as the income or loss available to common shareholders divided by the weighted average common shares outstanding
for the period. Diluted EPS is similar to basic EPS but presents the dilutive effect on a per share basis of potential common
shares (e.g., convertible securities, options, and warrants) as if they had been converted at the beginning of the periods presented,
or issuance date, if later. Potential common shares that have an anti-dilutive effect (i.e. those that increase income per share
or decrease loss per share) are excluded from the calculation of diluted EPS.
Financial
instruments
The
Company’s accounts for financial instruments in accordance to ASC Topic 820, “Fair Value Measurements and Disclosures,”
which requires disclosure of the fair value of financial instruments held by the Company and ASC Topic 825, “Financial Instruments,”
which defines fair value, and establishes a three-level valuation hierarchy for disclosures of fair value measurement that enhances
disclosure requirements for fair value measures. The carrying amounts reported in the consolidated balance sheets for receivables
and current liabilities each qualify as financial instruments and are a reasonable estimate of their fair values because of the
short period of time between the origination of such instruments and their expected realization and their current market rate
of interest. The three levels of valuation hierarchy are defined as follows:
●
Level 1 inputs to the valuation methodology are quoted prices for identical assets or liabilities in active markets.
●
Level 2 inputs to the valuation methodology include quoted prices for similar assets and liabilities in active markets, and inputs
that are observable for the asset or liability, either directly or indirectly, for substantially the full term of the financial
instrument.
●
Level 3 inputs to the valuation methodology are unobservable and significant to the fair value measurement.
Commitments
and contingencies
Liabilities
for loss contingencies arising from claims, assessments, litigation, fines and penalties and other sources are recorded when it
is probable that a liability has been incurred and the amount of the assessment can be reasonably estimated.
Comprehensive
income
Comprehensive
income is defined to include all changes in equity except those resulting from investments by owners and distributions to owners.
Among other disclosures, all items that are required to be recognized under current accounting standards as components of comprehensive
income are required to be reported in a financial statement that is presented with the same prominence as other financial statements.
The Company’s current component of other comprehensive income includes the foreign currency translation adjustment and unrealized
gain or loss.
Goodwill
Goodwill
represents the excess of the purchase price over the fair value of the net tangible and identifiable assets acquired in a business
combination. In accordance with FASB ASC Topic 350, “Goodwill and Other Intangible Assets”, goodwill is no longer
subject to amortization. Rather, goodwill is subject to at least an annual assessment for impairment, applying a fair-value based
test. Fair value is generally determined using a discounted cash flow analysis.
Recent
accounting pronouncements
On
January 5, 2016, the FASB issued ASU 2016-01 “Financial Instruments—Overall (Subtopic 825-10): Recognition and Measurement
of Financial Assets and Financial Liabilities”, which amends the guidance in U.S. GAAP on the classification and measurement
of financial instruments. Although the ASU retains many current requirements, it significantly revises an entity’s accounting
related to (1) the classification and measurement of investments in equity securities and (2) the presentation of certain fair
value changes for financial liabilities measured at fair value. The ASU also amends certain disclosure requirements associated
with the fair value of financial instruments. The new standard is effective for fiscal years and interim periods within those
fiscal years beginning after December 15, 2017. Management has determined that the new pronouncement did not have a material impact
on these financial statements.
On
February 25, 2016, the FASB issued ASU 2016-02 “Leases (Topic 842)”, its new standard on accounting for leases. ASU
2016-02 introduces a lessee model that brings most leases on the balance sheet. The new standard also aligns many of the underlying
principles of the new lessor model with those in ASC 606, the FASB’s new revenue recognition standard (e.g., those related
to evaluating when profit can be recognized). Furthermore, the ASU addresses other concerns related to the current leases model.
For example, the ASU eliminates the requirement in current U.S. GAAP for an entity to use bright-line tests in determining lease
classification. The standard also requires lessors to increase the transparency of their exposure to changes in value of their
residual assets and how they manage that exposure. The new model represents a wholesale change to lease accounting. As a result,
entities will face significant implementation challenges during the transition period and beyond, such as those related to:
Applying
judgment and estimating.
●
Managing the complexities of data collection, storage, and maintenance.
●
Enhancing information technology systems to ensure their ability to perform the calculations necessary for compliance with reporting
requirements.
●
Refining internal controls and other business processes related to leases.
●
Determining whether debt covenants are likely to be affected and, if so, working with lenders to avoid violations.
●
Addressing any income tax implications.
The
new guidance will be effective for public business entities for annual periods beginning after December 15, 2018 (e.g., calendar
periods beginning on January 1, 2019), and interim periods therein. Management is still evaluating the accounting impact of the
new pronouncement.
On
March 15, 2016, the FASB issued ASU 2016-07 “Investments—Equity Method and Joint Ventures (Topic 323): Simplifying
the Transition to the Equity Method of Accounting”, which simplifies the equity method of accounting by eliminating the
requirement to retrospectively apply the equity method to an investment that subsequently qualifies for such accounting as a result
of an increase in the level of ownership interest or degree of influence. Consequently, when an investment qualifies for the equity
method (as a result of an increase in the level of ownership interest or degree of influence), the cost of acquiring the additional
interest in the investee would be added to the current basis of the investor’s previously held interest and the equity method
would be applied subsequently from the date on which the investor obtains the ability to exercise significant influence over the
investee. The ASU further requires that unrealized holding gains or losses in accumulated other comprehensive income related to
an available-for-sale security that becomes eligible for the equity method be recognized in earnings as of the date on which the
investment qualifies for the equity method. The guidance in the ASU is effective for all entities for fiscal years beginning after
December 15, 2016, including interim periods within those fiscal years; early adoption is permitted for all entities. Entities
are required to apply the guidance prospectively to increases in the level of ownership interest or degree of influence occurring
after the ASU’s effective date. Additional transition disclosures are not required upon adoption. Management has determined
that new pronouncement did not have a material effect on these financial statements.
On
March 17, 2016, the FASB issued ASU 2016-08 “Revenue from Contracts with Customers (Topic 606): Principal versus Agent Considerations
(Reporting Revenue Gross versus Net)”, which amends the principal-versus-agent implementation guidance and illustrations
in the Board’s new revenue standard (ASU 2014-09). The FASB issued the ASU in response to concerns identified by stakeholders,
including those related to (1) determining the appropriate unit of account under the revenue standard’s principal-versus-agent
guidance and (2) applying the indicators of whether an entity is a principal or an agent in accordance with the revenue standard’s
control principle. Among other things, the ASU clarifies that an entity should evaluate whether it is the principal or the agent
for each specified good or service promised in a contract with a customer. As defined in the ASU, a specified good or service
is “a distinct good or service (or a distinct bundle of goods or services) to be provided to the customer.” Therefore,
for contracts involving more than one specified good or service, the entity may be the principal for one or more specified goods
or services and the agent for others. The ASU has the same effective date as the new revenue standard (as amended by the one-year
deferral and the early adoption provisions in ASU 2015-14). In addition, entities are required to adopt the ASU by using the same
transition method they used to adopt the new revenue standard. The Company has determined that it acts as principal its primary
business operations.
On
March 30, 2016, the FASB issued ASU 2016-09 “Compensation—Stock Compensation (Topic 718): Improvements to Employee
Share-Based Payment Accounting”, which simplifies several aspects of the accounting for employee share-based payment transactions
for both public and nonpublic entities, including the accounting for income taxes, forfeitures, and statutory tax withholding
requirements, as well as classification in the statement of cash flows. The ASU is for annual reporting periods beginning after
December 15, 2016, including interim periods within those annual reporting periods. Management has determined that the new standard
did not have a material impact on these financial statements.
The
Company is currently assessing the above the accounting pronouncements and their potential impact from their adoption on the financial
statements.
NOTE
3 - GOING CONCERN
The
accompanying financial statements have been prepared in conformity with generally accepted accounting principles which contemplate
continuation of the Company as a going-concern basis. The going-concern basis assumes that assets are realized, and liabilities
are settled in the ordinary course of business at amounts disclosed in the financial statements. The Company’s ability to
continue as a going concern depends upon its ability to market and sell its products to generate positive operating cash flows.
As of March 31, 2018 and 2017, the Company reported net losses of $528,458 and $445,673, respectively. As of March 31, 2018, the
Company had working capital deficit of approximately $228,881. In addition, the Company had net cash outflows of $98,637 from
operating activities during the three months March 31, 2018. These conditions still raise a substantial doubt as to whether the
Company may continue as a going concern.
In
an effort to improve its financial position, the Company is working to obtain new working capital through a reverse merger with
a publicly listed entity and shortly thereafter the sales of equity or debt securities by the listed entity to investors for cash
to fund operations and further expansion. The Company also relies on relates parties to provided financing and management services
at cost that may not be the prevailing market rate for such services.
If
the Company is not able to generate positive operating cash flows, raise additional capital, and retain the services of certain
related parties, it may become insolvent.
NOTE
4 - ACCOUNTS AND OTHER RECEIVABLES
Accounts
and other receivables consisted of the following as of March 31, 2018 and December 31, 2017:
|
|
March
31, 2018
|
|
|
December
31, 2017
|
|
Gross accounts and other
receivables
|
|
$
|
46,533
|
|
|
$
|
15,317
|
|
Less: Allowance
for doubtful accounts
|
|
|
-
|
|
|
|
-
|
|
|
|
$
|
46,533
|
|
|
$
|
15,317
|
|
NOTE
5 – INVENTORIES
Inventories
consisted of the following as of March 31, 2018 and December 31, 2017:
|
|
March
31, 2018
|
|
|
December
31, 2017
|
|
Finished
goods
|
|
$
|
287,149
|
|
|
$
|
273,491
|
|
NOTE
6 - EQUIPMENT
Property,
plant and equipment consisted of the following as of March 31, 2018 and December 31, 2017:
|
|
March
31, 2018
|
|
|
December
31, 2017
|
|
At Cost:
|
|
|
|
|
|
|
|
|
Equipment
|
|
|
68,241
|
|
|
|
63,512
|
|
Less: Accumulated depreciation
|
|
|
|
|
|
|
|
|
Equipment
|
|
|
55,155
|
|
|
|
49,688
|
|
|
|
$
|
13,086
|
|
|
$
|
13,824
|
|
NOTE
7 - INCOME TAXES
The
Company’s primary operations are in the PRC, and in accordance with the relevant tax laws and regulations. The corporate
income tax rate for each country is as follows:
|
●
|
PRC
tax rate is 25%.
|
|
●
|
Hong
Kong tax rate is 16.5%
|
|
●
|
Seychelles
is on permanent tax holiday
|
The
Company is registered the British Virgin Islands, which is a tax-exempt region.
The
following tables provide the reconciliation of the differences between the statutory and effective tax expenses for three months
ended March 31, 2018 and March 31, 2017:
|
|
March
31, 2018
|
|
|
March
31, 2017
|
|
Income attributed to PRC
operations
|
|
$
|
(53,650
|
)
|
|
$
|
(4,108
|
)
|
Loss attributed to Seychelles and HK
|
|
|
(119
|
)
|
|
|
(393
|
)
|
Loss attributed
to US
|
|
|
(43,153
|
)
|
|
|
(34,963
|
)
|
Loss before tax
|
|
|
(96,922
|
)
|
|
|
(39,464
|
)
|
|
|
|
|
|
|
|
|
|
PRC Statutory Tax at 25% Rate
|
|
|
(13,412
|
)
|
|
|
1,027
|
|
Effect of Seychelles,
PRC, HK, deductions and other reconciling items
|
|
|
13,412
|
|
|
|
(1,027
|
)
|
Income tax
|
|
$
|
-
|
|
|
$
|
-
|
|
The
difference between the U.S. federal statutory income tax rate and the Company’s effective tax rate was as follows for three
months ended March 31, 2018 and 2017:
|
|
March
31, 2018
|
|
|
March
31, 2017
|
|
U.S. federal statutory income
tax rate
|
|
|
21.0
|
%
|
|
|
34.0
|
%
|
Lower rates in PRC, net
|
|
|
-9.0
|
%
|
|
|
-9.0
|
%
|
Net operating losses in PRC and other
jurisdictions
|
|
|
0.0
|
%
|
|
|
0.0
|
%
|
Unrecognized
deferred tax benefit
|
|
|
-12.0
|
%
|
|
|
-25.0
|
%
|
The Company’s
effective tax rate
|
|
|
0.0
|
%
|
|
|
0.0
|
%
|
NOTE
8- RELATED PARTY TRANSACTIONS
Amounts
due to related parties as of March 31, 2018 and December 31, 2017:
|
|
|
|
March
31, 2018
|
|
|
December
31, 2017
|
|
|
|
|
|
|
|
|
(Restated)
|
|
Mr. Yumin Lin
|
|
Director, CEO, Shareholder
|
|
$
|
404,946
|
|
|
$
|
360,018
|
|
Mr. Sheng
|
|
Former Director of the Company
|
|
|
21,500
|
|
|
|
21,500
|
|
Ms. Qingmei Lin
|
|
Mr. Yumin Lin’s wife
|
|
|
27,830
|
|
|
|
25,902
|
|
Mr. Naiyong Luo
|
|
Director of DIGL
|
|
|
119,211
|
|
|
|
93,188
|
|
|
|
|
|
$
|
573,487
|
|
|
$
|
500,608
|
|
The
outstanding payables due to Mr. Yumin Lin are comprised of working capital advances and borrowings. These amounts are due on demand
and are non-interest bearing.
The
amounts due to Ms. Qingmei Lin are for office rental expenses. The Company’s operating facilities are located within a building
owned by Ms. Qingmei Lin.
The
amounts due to Mr Naiyong Luo are payments received in advanced for future purchases of products.
NOTE
9 – LEASE COMMITMENTS
The
Company has a non-cancelable operating lease agreement with Ms. Qingmei Lin, a related party, for the premises in Dongguan City,
PRC. The agreement covers the period from May 1, 2017 to April 30, 2027 which increased the space covered in prior agreements.
The monthly rent expense is $3,811 (RMB 25,000). The total rental rent expense for three months ended March 31, 2018 and 2017
was $11,802 and $3,608. The agreement does not call for a rental deposit equivalent.
Minimum
operating lease commitment for the agreement is as follows:
2018
|
|
|
45,732
|
|
2019
|
|
|
45,732
|
|
2020
|
|
|
45,732
|
|
2021
|
|
|
45,732
|
|
2022
|
|
|
45,732
|
|
Thereafter:
|
|
|
182,932
|
|
|
|
$
|
411,592
|
|
NOTE
10 - RISKS
Credit
risk
The
Company is subject to risk borne from credit extended to customers.
FTVL
and QHDX bank deposits are with banks located in the PRC. DILHK’s bank account is with located in Hong Kong. DIGLS does
not have any bank accounts. The bank accounts that the Company uses that that are located outside of the U.S. do not carry federal
deposit insurance.
Interest
risk
The
Company is subject to interest rate risk when its loans become due and require refinancing.
Economic
and political risks
The
Company’s operations are conducted in the PRC. Accordingly, the Company’s business, financial condition, and results
of operations may be influenced by changes in the political, economic, and legal environments in the PRC. As alcoholic beverages
are considered a luxury item, they may be subject to political pressure and risks. The PRC has government from time to time limited
the amount of import of foreign alcoholic beverages based on their relationships with those foreign countries. The Company’s
results of operations may be materially adversely affected if the are unable to procure such products because the PRC government
has limited the amount of imports.
Inflation
risk
Management
monitors changes in prices levels. Historically inflation has not materially impacted the Company’s financial statements;
however, significant increases in the price of wine and liquors that cannot be passed on the Company’s customers could adversely
impact the Company’s results of operations.
Concentrations
risks
In
2017, the Company had a concentration of risk in its supply of raw materials, one vendor supplied all of the Company’s purchases
for finished goods inventory.
NOTE
11 - SUBSEQUENT EVENTS
Company
evaluates subsequent events that have occurred after the balance sheet date but before the financial statements are issued. There
are two types of subsequent events: (1) recognized, or those that provide additional evidence with respect to conditions that
existed at the date of the balance sheet, including the estimates inherent in the process of preparing financial statements, and
(2) non-recognized, or those that provide evidence with respect to conditions that did not exist at the date of the balance sheet
but arose subsequent to that date.
The
Company entered into share exchange agreement on April 11, 2018. Refer to NOTE 1 - ORGANIZATION AND DESCRIPTION OF BUSINESS.
Except
for the above mentioned material subsequent event, there were no other events that management deems necessary for disclosure.
NOTE
12 - CORRECTION OF ERROR
During
the three months ended March 31, 2018, management discovered an error in its audited December 31, 2017 balance sheet. An amount
$93,188 due to Mr. Naiyong Luo was not properly disclosed as a due to related party. The table below shows the original and restated
figures for the year ended December 31, 2017:
|
|
Original
|
|
|
AJE
|
|
|
Restated
|
|
Customers advances and deposits
|
|
|
104,885
|
|
|
|
(93,188
|
)
|
|
|
11,697
|
|
Due to related parties
|
|
|
407,420
|
|
|
|
93,188
|
|
|
|
500,608
|
|
Current liabilities
|
|
|
558,668
|
|
|
|
-
|
|
|
|
558,668
|
|
Total liabilities
|
|
|
558,668
|
|
|
|
-
|
|
|
|
558,668
|
|
The
Company’s results of operations for the year ended December 31, 2017 unaffected by this correction of error. Accordingly,
the company loss per share for the year ended December 31, 2017 remains unchanged.
Item
2.
MANAGEMENT
DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The
following discussion and analysis should be read in conjunction with, and is qualified in its entirety by, Fortune Valley Treasures,
Inc.’s audited annual financial statements and the related notes thereto, each of which are included as an exhibit to our
Annual Report on Form 10-K filed with the SEC on November 24, 2017. This discussion contains certain forward-looking statements
that involve risks and uncertainties, as described under the heading “Forward-Looking Statements” in this Report on
Form 10-Q. Actual results could differ materially from those projected in the forward-looking statements. The Management Discussion
and Analysis of Financial Condition and Results of Operations below is based upon only the financial performance of Fortune Valley
Treasures, Inc.
Company
Overview
Fortune
Valley Treasures, Inc. (“FVTI”
or
the “Company”
), formerly Crypto-Services, Inc. (“CRYT”), was incorporated
in the State of Nevada on March 21, 2014. The Company is an early stage company which was initially incorporated to offer an information-based
website at www.digitalcoindaily.com that would provide users with up-to-date information on digital currencies worldwide.
We
engaged in the retail and wholesale distribution of a wide spectrum of wine products in Dongguan City, Guangdong Province since
2011. We offer a variety of wine products including dry red wine, dry white wine, rose wine, sweet wine and etc. Currently we
sell about 40 kinds of different brands of wine, most of which are imported from France and Spain. Our product portfolio is comprised
of wines that offer the utmost quality and value and that are highly relevant particularly to Chinese customers
.
Our
main store located in Humen Town, Dongguan City, with six floors and 1200 square meters building area. All the samples are displayed
in first floor;
our friendly and knowledgeable staff cultivates long-term relationships
with customers, helping them make informed buying decisions.
Currently,
eight stores are approved to use our brand name:’
FVT
ARTS WINERY’
in different regions of China,
wh
ich
located in Guangzhou, Shenzhen, Zhangjiajie, Zhuzhou, Huayin an
d Dongguan. These stores are licensed to use our trade name
and we provide them with our products and marketing support.
There
are 151 regional exclusive agents and normal agents sell our products throughout China.
After
seven years’ development, we have cultivated strategic partnerships with various organizations to strengthen and extend
our business. We have partnered with Shenzhen Institute of Tsinghua University since 2011, they helped us to develop an innovative
management, operating model and franchising model; we became a member of Guangdong Provincial Liquor Industry Association since
2011 and was awarded as Excellent Marketing Agency of the Year in 2012; in 2013, we signed a strategic cooperation with the French
Bordeaux Winery Alliance to assure the quality of wine, diversify product selection and reduce procurement costs.
Results
of Operations
|
|
Three months ended March
31,
|
|
|
|
|
|
|
2018
|
|
|
2017
|
|
|
Change
|
|
Revenue
|
|
$
|
13,747
|
|
|
$
|
18,267
|
|
|
$
|
(4,520
|
)
|
Cost of revenue
|
|
|
7,559
|
|
|
|
9,164
|
|
|
|
(1,605
|
)
|
Gross profit
|
|
|
6,188
|
|
|
|
9,103
|
|
|
|
2,915
|
|
Gross profit (%)
|
|
|
45
|
%
|
|
|
50
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating expense
|
|
|
102,619
|
|
|
|
48,567
|
|
|
|
54,052
|
|
Other income(expense)
|
|
|
(491
|
)
|
|
|
-
|
|
|
|
|
|
Provision for income taxes
|
|
|
-
|
|
|
|
-
|
|
|
|
|
|
Foreign currency
translation gain
|
|
|
(1,528
|
)
|
|
|
(72
|
)
|
|
|
|
|
Comprehensive
loss
|
|
$
|
(98,450
|
)
|
|
$
|
(39,536
|
)
|
|
$
|
(58,914
|
)
|
Revenue
Net revenues totaled $13,747 for three
months ended March 31, 2018, a decrease of $4,520 from $18,267 as compared to the three months ended March 31, 2017. The decrease
was primarily a result of an ineffective marketing strategy.
Cost of revenue
Cost of revenue totaled $7,559 for three
months ended March 31, 2018 a decrease of $1,605 from $9,164 as compared to the three months ended March 31, 2017. The decrease
was primarily the result of a decrease in related sales revenue. Our cost of revenues consists primarily of purchases of
finished goods which are carried as inventory until they are sold.
Gross
profit
Gross
profit was 45% ($6,188) and 50% ($9,103) for the three months ended March 31, 2018 and 2017, respectively.
Operating expenses
General and administrative expenses totaled
$102,619 for the three months ended March 31, 2018, an increase of $54,052, as compared to $48,567 for the three months ended
March 31, 2017. The increase was primarily a result of the increase in general and administrative expense related to reporting
and maintenance costs of being a publicly listed company.
Net
loss
Net
loss totaled $98,450 for three months ended March 31, 2018, an increase of 58,914 compared to 2017, primarily as the result of
an increase in operating expenses.
Liquidity
and Capital Resources
Working
Capital
|
|
March
31, 2018
|
|
|
December
31, 2017
|
|
|
Change
|
|
|
|
|
|
|
|
|
|
|
|
Total current assets
|
|
$
|
438,140
|
|
|
$
|
413,362
|
|
|
$
|
24,778
|
|
Total current
liabilities
|
|
|
667,021
|
|
|
|
558,668
|
|
|
|
108,353
|
|
Working capital
|
|
$
|
(228,881
|
)
|
|
$
|
(145,306
|
)
|
|
$
|
(83,575
|
)
|
As
of March 31, 2018, we had cash and cash equivalents of $76,737, we have financed our operations primarily though borrowings from
our related party. The change in working capital was primarily from an increase in due from related party of $83,575.
Cash
Flows
|
|
Three Ended March 31,
|
|
|
|
|
|
|
2018
|
|
|
2017
|
|
|
Change
|
|
Cash Flows used in Operating
Activities
|
|
$
|
(98,637
|
)
|
|
$
|
(7,947
|
)
|
|
$
|
(90,690
|
)
|
Cash Flows used in Investing Activities
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
Cash Flows provided by Financing Activities
|
|
|
93,384
|
|
|
|
(29,920
|
)
|
|
|
123,304
|
|
Net Decrease in Cash During Period
|
|
$
|
(5,253
|
)
|
|
$
|
(37,867
|
)
|
|
$
|
32,614
|
|
Cash
Flow from Operating Activities
For
three months ended March 31, 2018 net cash flows used in operating activities consisted of a net loss of $96,922 and was reduced
by depreciation of $1,749, and a net change of operating assets and liabilities of $98,637. For three months ended March 31, 2017,
net cash flows provided in operating consisted of a net loss of $39,464 and was reduced by depreciation of $1,616 and a net change
of operating assets and liabilities of $7,947.
Cash
Flow from Financing Activities
Net
cash provided by financing for the three months ended March 31, 2018 was $93,384 as compared to 29,920 net cash used in financing
activities for three months ended March 31, 2017. The increase of net cash provided by financing activities was mainly attributable
to borrow loan from related party.
Critical
Accounting Policy and Estimates
In
the ordinary course of business, we make a number of estimates and assumptions relating to the reporting of results of operations
and financial condition in the preparation of our financial statements in conformity with U.S. generally accepted accounting principles.
We base our estimates on historical experience, when available, and on other various assumptions that are believed to be reasonable
under the circumstances. Actual results could differ significantly from those estimates under different assumptions and conditions.
Off-Balance
Sheet Arrangements
We
do not have any off-balance sheet arrangements that have or are reasonably likely to have a current or future effect on our financial
condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures, or capital
resources that is material to investors.
Item
3. Quantitative and Qualitative Disclosure About Market Risk.
Not applicable because we are a smaller
reporting company.
Item 4. Controls and Procedures.
Evaluation of Disclosure Controls and
Procedures
We maintain disclosure controls and procedures,
as defined in Rule 13a-15(e) promulgated under the Securities Exchange Act of 1934 (the “Exchange Act”), that are
designed to ensure that information required to be disclosed by us in the reports that we file or submit under the Exchange Act
is recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission’s
rules and forms and that such information is accumulated and communicated to our management, including our president (our principal
executive officer and principal financial officer), as appropriate to allow timely decisions regarding required disclosure.
We carried out an evaluation, under the
supervision and with the participation of our management, including our president (our principal executive officer and principal
financial officer), of the effectiveness of the design and operation of our disclosure controls and procedures as of quarter covered
by this report. Based on the evaluation of these disclosure controls and procedures the president (our principal executive officer
and principal financial officer and principal accounting officer) concluded that our disclosure controls and procedures were not
effective as of the end of the period covered by this quarterly report due to we did not maintain effective controls over the
control environment. Specifically, the Board does not currently have a director who qualifies as an audit committee financial
expert as defined in Item 407(d)(5)(ii) of Regulation S-K. The Company does not have sufficient written policies and procedures
for accounting and financial reporting with respect to the requirements and application of both US GAAP and SEC guidelines. The
Company also lacks accounting personnel with technical knowledge in certain debt and equity transactions and qualified personnel
with an appropriate level of SEC filing knowledge and experience. Because of the size of the Company’s administrative staff,
controls related to the segregation of certain duties have not been developed and the Company has not been able to adhere to them.
Additionally, the Company does not have a well-established procedure to identify, approve, and report related party transactions.
Changes in Internal Controls
During the quarter covered by this report
there were no changes in our internal control over financial reporting that materially affected, or are reasonably likely to materially
affect, our internal control over financial reporting.
Part
II. OTHER INFORMATION
Item
1. Legal Proceedings
From
time to time we may become involved in legal proceedings or be subject to claims arising in the ordinary course of our business.
We are not presently a party to any legal proceedings that, if determined adversely to us, would individually or taken together
have a material adverse effect on our business, operating results, financial condition or cash flows. Regardless of the outcome,
litigation can have an adverse impact on us because of defense and settlement costs, diversion of management resources and other
factors.
Item
1A. Risk Factors
Smaller
reporting companies are not required to provide the information required by this item.
Item
2. Unregistered Sales of Equity Securities and Use of Proceeds for the three months ended March 31, 2018
None.
Item
3. Defaults upon senior Securities
None.
Item
4. Mine Safety Disclosures
None.
Item
5. Other Information
None.
Item
6. Exhibits
EXHIBIT
INDEX
The
exhibits listed on the Exhibit Index are provided as part of this report.
SIGNATURES
Pursuant
to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf
by the undersigned thereunto duly authorized.
|
Fortune
Valley Treasures, Inc.
|
|
|
Date:
May 21, 2018
|
By:
|
/s/
Yumin Lin
|
|
|
Yumin
Lin
|
|
|
Chief
Executive Officer
|
|
|
(Principal
Executive Officer)
|
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