NOTE
1 - ORGANIZATION AND SUMMARY OF SIGNICANT ACCOUNTING POLICIES
Fortune
Valley Treasures, Inc. (formerly Crypto-Services, Inc., the “Company” or “FVTI”) was incorporated in the State
of Nevada on March 21, 2014. The Company is engaged in the business of wholesale distribution and retail sales of alcoholic beverages,
including wine and distilled liquors, through its subsidiaries in the People’s Republic of China (“PRC” or “China”).
On
January 5, 2018, the Company changed its 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 of common stock from 75,000,000 to 3,000,000,000.
On
April 11, 2018, the Company entered into a share exchange agreement by and among DaXingHuaShang Investment Group Limited, a Republic
of Seychelles limited liability company (“DIGLS”), and each of the shareholders of DIGLS, pursuant to which the Company issued
300,000,000 shares of common stock in exchange for 100% of the issued shares of DIGLS. This transaction was 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 in the Republic of Seychelles on July 4, 2016, with an authorized capital of $100,000, divided into 250,000,000 ordinary
shares, par value $0.0004 per share. DIGLS wholly owns DaXingHuaShang Investment (Hong Kong) Limited (“DILHK”), a company
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, the Company’s Chairman, Chief Executive Officer, Chief Financial Officer, President, Treasurer and Secretary.
On November 11, 2016, Mr. Yumin Lin transferred 100% of his ownership in DILHK to DIGLS for nominal consideration. DILHK wholly owns
Qianhai DaXingHuaShang Investment (Shenzhen) Co., Ltd. (“QHDX”), a PRC limited liability company formed on November 3, 2016
as a wholly foreign-owned enterprise. QHDX wholly owns Dongguan City France Vin Tout Ltd. (“FVTL”). FVTL was incorporated
on May 31, 2011 in the PRC as a limited liability company. FVTL was previously owned and controlled by Mr. Yumin Lin. On November 20,
2016, Mr. Yumin Lin transferred his ownership in FVTL 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.
On
March 1, 2019, the Company entered into a sale and purchase agreement (the “SP Agreement”) to acquire 100% of the shares
of Jiujiu Group Stock Co., Ltd. (“JJGS”), a company incorporated under the laws of the Republic of Seychelles. The transaction
contemplated in the SP Agreement was closed on March 1, 2019. Pursuant to the SP Agreement, the Company issued 100 shares of its common
stock to JJGS to acquire 100% of the shares of JJGS for a cost of $150. After the closing, JJGS became the Company’s wholly owned
subsidiary. JJGS owns all of the equity interests of Jiujiu (HK) Industry Limited (“JJHK”) and Jiujiu (Shenzhen) Industry
Co., Ltd. (“JJSZ”). None of JJGS, JJHK and JJSZ have any operations or active business, nor do they have any substantial
assets.
On
July 13, 2019, FVTI and QHDX entered into an equity interest transfer agreement (the “Makaweng Agreement”), which was later
amended on September 12, 2019, with Xingwen Wang, a shareholder and legal representative of Yunnan Makaweng Wine & Spirits Co., Ltd.
(“Makaweng” or MKW), a PRC limited liability company formed in 2015. Pursuant to the Makaweng Agreement, QHDX agreed to purchase
51%
of Makaweng’s equity interest from
Xingwen Wang in exchange for shares of FVTI’s common stock. On August 28, 2019, the registration of transferring the 51% of equity
interest of Makaweng to QHDX with local government authorities was completed. The control of Makaweng has
not been transferred to QHDX as of September 30, 2020.
On
June 22, 2020, the Company entered into a sale and purchase agreement along with Qianhai DaXingHuaShang Investment (Shenzhen) Co., Ltd.,
a company incorporated in China and a wholly-owned subsidiary of FVTI (“QHDX”), to acquire 90% of the shares of Dongguan
Xixingdao Technology Co., Ltd. (“Xixingdao”), a company incorporated in the PRC, from certain shareholders of Xixingdao in
exchange for 4,862,681 shares of the Company’s common stock. The Company obtained the control of Xixingdao and Xixingdao
became the Company’s subsidiary on August 31, 2020. As of September 30, 2020, the shares have not been issued.
NOTE 2 - SUMMARY OF SIGNIFICANT
ACCOUNTING POLICIES
Basis
of presentation
These condensed consolidated financial statements,
accompanying notes, and related disclosures have been prepared pursuant to the rules and regulations of the SEC. These financial statements
have been prepared using the accrual basis of accounting in accordance with the generally accepted accounting principles in the United
States (“GAAP”). The Company’s fiscal year end is December 31. The Company’s financial statements are presented
in U.S. 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. The results of subsidiaries acquired during the respective periods are included in the consolidated statements
of operations from the effective date of acquisition or up to the effective date of disposal, as appropriate. The portion of the income
or loss applicable to noncontrolling interests in subsidiaries is reflected in the consolidated statements of operations.
As
of September 30, 2020, details of the Company’s major subsidiaries were as follows:
SCHEDULE OF ENTITIES AND ITS SUBSIDIARIES
Entity
Name
|
|
Date
of Incorporation
|
|
Parent
Entity
|
|
Nature
of Operation
|
|
Place
of
Incorporation
|
DIGLS
|
|
July
4, 2016
|
|
FVTI
|
|
Investment
holding
|
|
Republic
of Seychelles
|
DILHK
|
|
June
22, 2016
|
|
DIGLS
|
|
Investment
holding
|
|
Hong
Kong, PRC
|
QHDX
|
|
November
3, 2016
|
|
DILHK
|
|
Investment
holding
|
|
PRC
|
FVTL
|
|
May
31, 2011
|
|
QHDX
|
|
Trading
of wine
|
|
PRC
|
JJGS
|
|
August
17, 2017
|
|
FVTI
|
|
Investment
holding
|
|
Republic
of Seychelles
|
JJHK
|
|
August
24, 2017
|
|
JJGS
|
|
Investment
holding
|
|
Hong
Kong, PRC
|
JJSZ
|
|
November
16, 2018
|
|
JJHK
|
|
No
operations
|
|
PRC
|
MKW
|
|
August 28, 2019
|
|
QHDX
|
|
Trading of alcohol
|
|
PRC
|
LJRB
|
|
November 16, 2015
|
|
MKW
|
|
No operation
|
|
PRC
|
Xixingdao
|
|
May
31, 2019
|
|
QHDX
|
|
Drinking
water distribution and delivery
|
|
PRC
|
Use
of estimates
The
preparation of financial statements is in conformity with GAAP, which requires management to make estimates and assumptions that affect
the reported amounts of assets and liabilities, as well as the 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.
Reclassification
Certain
prior year amounts have been reclassified to conform to the current period presentation. These reclassifications had no impact on net
earnings and financial position.
Foreign
currency translation and re-measurement
The
Company translates its results of operations into the U.S. dollar in accordance with ASC 830, “Foreign Currency Matters.”
The
reporting currency for the Company and its subsidiaries is the U.S. dollar. The Company, DIGLS, JJGS, JJHK and DILHK’s functional
currency is the U.S. dollar. QHDX, JJSZ, FVTL, MKW, LJRB and Xixingdao 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, and
|
|
●
|
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, and
|
|
●
|
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.
SCHEDULE OF FOREIGN CURRENCY EXCHANGE RATE TRANSLATION
|
|
September 30, 2020
|
|
|
December 31, 2019
|
|
Spot RMB: USD exchange rate
|
|
$
|
0.14703
|
|
|
$
|
0.14334
|
|
Average RMB: USD exchange rate
|
|
$
|
0.14298
|
|
|
$
|
0.14505
|
|
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 U.S. 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. Under the Deposit Insurance System in
China, a company’s deposits at one bank is insured for a maximum of RMB500,000 (approximately $70,000). However, management has
determined that the risk of loss from insolvency by those financial institutions at which it has deposited its 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 year ended December 31, 2019 and the nine months ended September 30, 2020, the Company did not experience any delinquent or uncollectible
balances; accordingly, the Company did not record any valuation allowance for bad debt during these periods.
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 it has been determined that the product
is obsolete, spoiled, and that the Company will not be able to sell it at a normal profit above its carrying cost. The Company’s
primary products are imported alcoholic beverages. The selling price of alcoholic beverages tends 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 nine months ended September 30, 2020 and 2019.
Right-of-use
asset and lease liabilities
In
February 2016, the FASB issued ASU 2016-02 “Leases (Topic 842).” The new standard requires lessees to recognize lease assets
(right of use) and lease obligations (lease liability) for leases previously classified as operating leases under U.S. GAAP on the balance
sheet for leases with terms in excess of 12 months. The standard is effective for annual periods beginning after December 15, 2018, including
interim periods within those fiscal years.
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 retail customers for wines and liquors 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 deposits balance and credit the Company’s revenues.
Revenue
recognition
The
Company adopted ASC Topic 606, Revenue from Contracts with Customers, and all subsequent ASUs that modified ASC 606 on April 1,
2017 using the full retrospective method which requires the Company to present the financial statements for all periods as if Topic 606
had been applied to all prior periods. Revenue from contracts with customers is recognized using the following five steps:
|
1.
|
Identify
the contract(s) with a customer;
|
|
2.
|
Identify
the performance obligations in the contract;
|
|
3.
|
Determine
the transaction price;
|
|
4.
|
Allocate
the transaction price to the performance obligations in the contract; and
|
|
5.
|
Recognize
revenue when (or as) the entity satisfies a performance obligation.
|
In
applying ASC 606, the Company recognizes revenue when the Company has negotiated the terms of the transaction, set forth the sales price,
transferred of possession of product to customer, determined that the customer does not have the right to return the product, determined
that 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 of the value of goods invoiced, net of any value-added tax.
Advertising
All
advertising costs are expensed as incurred. Advertising expenses for the nine months ended September 30, 2020 and 2019 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 as 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;
and
|
|
|
●
|
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 Financial Accounting Standards Board (“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
In
February 2018, the FASB issued guidance, which eliminates the stranded tax effects in other comprehensive income resulting from the Tax
Cuts and Jobs Act of 2017 (“TCJA”). Because the amendments only relate to the reclassification of the income tax effects
of the TCJA, the underlying guidance that requires that the effect of a change in tax laws or rates be included in income from continuing
operations is not affected. The Company adopted the guidance in the first quarter of fiscal year 2020. There was no material impact to
its financial statements.
In
August 2017, the FASB issued guidance, which amends the existing accounting standards for derivatives and hedging. The amendment improves
the financial reporting of hedging relationships to better represent the economic results of an entity’s risk management activities
in its financial statements and made certain targeted improvements to simplify the application of the hedge accounting guidance in current
GAAP. The Company is required to adopt the guidance in the first quarter of fiscal year 2020. Earlier adoption is permitted. The Company
adopted the new guidance. There was no material impact to its financial statements.
On
March 17, 2016, the FASB issued Accounting Standards Update (“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 a principal in its primary business operations.
In
August 2018, the FASB issued ASU 2018-13, Disclosure Framework-Changes to the Disclosure Requirements for Fair Value Measurement. The
amendments in this standard will remove, modify and add certain disclosures under ASC Topic 820, Fair Value Measurement, with the objective
of improving disclosure effectiveness. ASU 2018-13 will be effective for the Company’s year beginning January 1, 2020, with early
adoption permitted. The transition requirements are dependent upon each amendment within this update and will be applied either prospectively
or retrospectively. The Company does not expect ASU 2018-13 to have a material impact to the Company’s consolidated financial statements.
In
December 2019, the FASB issued ASU 2019-12, Income Taxes (Topic 740) Simplifying the Accounting for Income Taxes. The amendments in this
Update related to separate financial statements of legal entities that are not subject to tax should be applied on a retrospective basis
for all periods presented. The amendments related to changes in ownership of foreign equity method investments or foreign subsidiaries
should be applied on a modified retrospective basis through a cumulative-effect adjustment to retained earnings as of the beginning of
the fiscal year of adoption. The amendments related to franchise taxes that are partially based on income should be applied on either
a retrospective basis for all periods presented or a modified retrospective basis through a cumulative-effect adjustment to retained
earnings as of the beginning of the fiscal year of adoption. All other amendments should be applied on a prospective basis. The Company
does not expect the adoption of ASU 2019-12 to have a material impact on its condensed consolidated financial statements.
Unless
otherwise stated, the Company is currently assessing the above accounting pronouncements and their potential impact from their adoption
on the Company’s financial statements.
NOTE
3 - GOING CONCERN
The
accompanying financial statements have been prepared in conformity with GAAP which contemplate continuation of the Company as a going
concern. 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 September 30, 2020 and 2019, the Company reported net losses
of $281,542 and
$321,839,
respectively. As of September 30, 2020, the Company had working capital deficit of approximately $10,845,630.
In addition, the Company had net cash outflows of $363,601
from operating activities during the nine
months ended September 30, 2020. These conditions still raise a substantial doubt as to whether the Company may continue as a going concern.
The
Company relies on related parties to provide 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 September 30, 2020 and December 31, 2019:
SCHEDULE OF ACCOUNTS RECEIVABLE
|
|
September
30,
2020
|
|
|
December
31,
2019
|
|
Gross accounts and other receivables
|
|
$
|
121,316
|
|
|
$
|
146
|
|
Less: Allowance for doubtful accounts
|
|
|
-
|
|
|
|
-
|
|
Accounts and other receivables
net
|
|
$
|
121,316
|
|
|
$
|
146
|
|
NOTE
5 – INVENTORIES
Inventories
consisted of the following as of September 30, 2020 and December 31, 2019:
SCHEDULE OF INVENTORIES
|
|
September
30,
2020
|
|
|
December
31,
2019
|
|
Finished goods
|
|
$
|
121,306
|
|
|
$
|
28,502
|
|
NOTE
6 - PROPERTY AND EQUIPMENT, NET
Property
and equipment consisted of the following as of September 30, 2020 and December 31, 2019:
SCHEDULE OF PROPERTY AND EQUIPMENT, NET
|
|
September
30,
2020
|
|
|
December
31,
2019
|
|
At Cost:
|
|
|
|
|
|
|
|
|
Equipment
|
|
$
|
64,804
|
|
|
$
|
61,510
|
|
Improvements
|
|
|
53,558
|
|
|
|
-
|
|
Property, plant and equipment, gross
|
|
|
118,362
|
|
|
|
61,510
|
|
Less: Accumulated depreciation
|
|
|
(67,366
|
)
|
|
|
(52,899
|
)
|
Property, plant and equipment,
net
|
|
$
|
50,996
|
|
|
$
|
8,611
|
|
NOTE
7 – INTANGIBLE ASSETS
Intangible
assets and related accumulated amortization were as follows:
SCHEDULE OF INTANGIBLE ASSETS
|
|
September
30,
2020
|
|
|
December
31,
2019
|
|
At Cost:
|
|
|
|
|
|
|
|
|
Distributor channel
|
|
$
|
3,165,208
|
|
|
$
|
-
|
|
Less: Accumulated depreciation
|
|
|
(64,162
|
)
|
|
|
-
|
|
Total
|
|
$
|
3,101,046
|
|
|
$
|
-
|
|
Amortization
expense for the nine months ended September 30, 2020 and 2019 was $64,162
and
$0,
respectively, included in cost of revenues.
As
of September 30, 2020, the future estimated amortization costs for distribution channel are as follows:
SCHEDULE OF FUTURE AMORTIZATION EXPENSE FOR DISTRIBUTION CHANNELS
|
|
|
|
|
2020 (remaining of the year)
|
|
$
|
197,939
|
|
2021
|
|
|
791,756
|
|
2022
|
|
|
791,756
|
|
2023
|
|
|
791,756
|
|
2024
|
|
|
527,839
|
|
Total
|
|
$
|
3,101,046
|
|
NOTE
8 – BUSINESS COMBINATION AND GOODWILL
On
August 31, 2020, FVTI completed the acquisition of 90%
equity interest of Xixingdao. The Company aimed
to enter the service of drinking water distribution and delivery market in Dongguan City, Guangdong Province through this acquisition.
The purchase consideration is $9,773,989,
consists of 4,862,681
shares of the Company’s common stock, which have not been issued. The Company accounted for the acquisition using the purchase method of accounting for business combination
under ASC 805. The total purchase price was allocated to the tangible and identifiable intangible assets acquired and liabilities based
on their estimated fair values as of the acquisition date.
The
determination of fair values involves the use of significant judgment and estimates and in the case of Xixingdao, this is with specific
reference to acquired intangible asset. The judgments used to determine the estimated fair value assigned to assets acquired and liabilities
assumed, as well as the intangible asset life and the expected future cash flows and related discount rate, can materially impact the
Company’s consolidated financial statements. Significant inputs and assumptions used for the model included the amount and timing
of expected future cash flows and discount rate. The Company utilized the assistance of a third-party valuation appraiser to determine
the fair value as of the date of acquisition.
The
purchase price was allocated on the acquisition date of Xixingdao as follows:
SCHEDULE
OF ASSETS ACQUIRED AND LIABILITIES ASSUMED
|
|
|
|
|
Account
and other receivables
|
|
$
|
305,866
|
|
Inventories
|
|
|
79,332
|
|
Other
net assets
|
|
|
(12,884
|
)
|
Distribution
channel
|
|
|
3,145,260
|
|
Due
to related parties
|
|
|
(135,080
|
)
|
Noncontrolling
interest
|
|
|
(549,033
|
)
|
Goodwill
|
|
|
6,940,530
|
|
Total
|
|
$
|
9,773,991
|
|
The
results of operations, financial position, and cash flows of Xixingdao have been included in the Company’s consolidated financial
statements since the date of acquisition. Goodwill arising from this business combination is not tax deductible.
The
following unaudited pro forma information presents the combined results of operations for the nine months ended September 30, 2020 and
2019 as if the acquisition of Xixingdao had occurred as of January 1, 2020 and May 31, 2019, the inception date of Xixingdao. These unaudited
pro forma results are presented for informational purpose only and are not necessarily indicative of what the actual results of operations
of the combined company would have been if the Company consummated the acquisition on January 1, 2020 or May 31, 2019, nor are they indicative
of future results of operations:
SCHEDULE
OF PRO FORMA INFORMATION
|
|
For nine months ended September 30, 2020
|
|
|
For nine months ended September30, 2019
|
|
Pro forma net revenues
|
|
$
|
889,983
|
|
|
$
|
201,535
|
|
Pro forma net loss
|
|
|
109,971
|
|
|
|
337,155
|
|
Pro forma net loss attributable to Fortune Valley Treasures, Inc.
|
|
|
110,036
|
|
|
|
335,623
|
|
The Company’s
policy is to perform its annual impairment testing on goodwill for its reporting unit on December 31, of each fiscal year or more frequently
if events or changes in circumstances indicate that an impairment may exist.
NOTE
9 – LONG TERM BORROWINGS
In
August 2020, the Company entered in long term line of credit with China Construction Bank-Dongguan City Branch for an aggregate of
RMB910,000 (approximately $138,656) for working capital purposes. The line of credit comes due on July 21, 2023. It carries a variable
interest rate of the Chinese Loan Prime Rate plus 40 basis points. The loan is unsecured. As of September 30, 2020, the Company had drawn
$99,981 (RMB 680,000) against the line.
NOTE
10 - INCOME TAXES
The
Company’s primary operations are conducted in the PRC 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%; and
|
|
|
●
|
Seychelles
is on permanent tax holiday.
|
The
following table provides the reconciliation of differences between statutory and effective tax expenses for nine months ended September
30, 2020 and 2019:
SCHEDULE
OF RECONCILIATION OF TAX EXPENSES
|
|
September 30, 2020
|
|
|
September 30, 2019
|
|
Loss attributed to PRC operations
|
|
$
|
(96,902
|
)
|
|
$
|
(145,784
|
)
|
Loss attributed to Seychelles and Hong Kong
|
|
|
1,066
|
|
|
|
(208
|
)
|
Loss attributed to U.S.
|
|
|
(182,291
|
)
|
|
|
(175,763
|
)
|
Loss before tax
|
|
|
)
|
|
|
)
|
|
|
|
|
|
|
|
|
|
PRC statutory tax at 25% rate
|
|
|
(69,532
|
)
|
|
|
(80,439
|
)
|
Effect of Seychelles, PRC, Hong Kong, deductions and other reconciling items
|
|
|
66,117
|
|
|
|
80,523
|
|
Income tax
|
|
$
|
3,415
|
|
|
$
|
84
|
|
The
difference between the U.S. federal statutory income tax rate and the Company’s effective tax rate was as follows for nine months
ended September 30, 2020 and 2019:
Schedule
of Effective Income Tax Rate
|
|
September 30, 2020
|
|
|
September 30, 2019
|
|
U.S. federal statutory income tax rate
|
|
|
21.0
|
%
|
|
|
21.0
|
%
|
Higher rates in PRC, net
|
|
|
4.0
|
%
|
|
|
4.0
|
%
|
Effect of reconciling items
|
|
|
(26.2
|
%)
|
|
|
(25.0
|
%)
|
The Company’s effective tax rate
|
|
|
(1.2
|
%)
|
|
|
0.0
|
%
|
NOTE
11 - RELATED PARTY TRANSACTIONS
Amounts
due from related parties as of September 30, 2020 and December 31, 2019 are as follow:
SCHEDULE OF AMOUNT DUE FROM AND DUE TO RELATED PARTIES
|
|
Relationship with the Company
|
|
September 30, 2020
|
|
|
December 31, 2019
|
|
|
|
|
|
|
|
|
|
|
Mr. Naiyong Luo
|
|
Director of DIGLS
|
|
$
|
3,727
|
|
|
$
|
-
|
|
Ms. Lihua Li
|
|
Mr. Yumin Lin’s wife
|
|
|
8,204
|
|
|
|
-
|
|
|
|
|
|
$
|
11,931
|
|
|
$
|
-
|
|
Amounts
due to related parties as of September 30, 2020 and December 31, 2019 are as follow:
|
|
Relationship with the Company
|
|
September 30, 2020
|
|
|
December 31, 2019
|
|
|
|
|
|
|
|
|
|
|
Mr. Yumin Lin
|
|
Chairman, Chief Executive Officer, President and Secretary
|
|
$
|
840,942
|
|
|
$
|
791,576
|
|
Ms. Qingmei Lin
|
|
Mr. Yumin Lin’s wife
|
|
|
9,263
|
|
|
|
17,201
|
|
Mr. Yuwen Li
|
|
Vice President
|
|
|
103,287
|
|
|
|
-
|
|
Hua Hui (Shenzhen) Education Management
Ltd.
|
|
Mr. Hongwei Ye, manager of a subsidiary, is the
supervisor of Hua Hui (Shenzhen) Education Management Ltd.
|
|
|
197,934
|
|
|
|
-
|
|
Mr. Xingwen Wang
|
|
Manager of a subsidiary
|
|
|
1,429
|
|
|
|
-
|
|
Shenzhen Daxinghuashang
Industry Group Co., Ltd.
|
|
Mr. Yumin Lin is the supervisor
of Shenzhen Daxinghuashang Industry Group Co., Ltd.
|
|
|
22,127
|
|
|
|
-
|
|
|
|
|
|
$
|
1,174,982
|
|
|
$
|
808,777
|
|
Due
from related parties mainly consists of funds advanced to related parties as to pay off the Company’s expenses. The balance is
unsecured, non-interest bearing.
Due
to related parties mainly consists of borrowings for working capital purpose, the balance is unsecured, non-interest bearing.
The balance with Hua Hui (Shenzhen) Education Management Ltd. bears interest at the rate of 0.7% per month.
In addition, during the nine months ended September
30, 2020, these related parties paid expenses on the Company’s behalf in an amount of $277,081.
NOTE
12 – LEASE COMMITMENTS
The
Company has six operating leases for five office spaces, and one warehouse in PRC with remaining lease terms of 13 months to 79
months.
Three
of these leases were entered with related parties. The Company has an operating lease agreement with Qingmei Lin, a related party, for
the premises in Dongguan City, PRC. The agreement covers the period from January 1, 2019 to April 30, 2027. The monthly rent expense
is RMB10,000 (approximately $1,450). The Company has an operating lease agreement with subsidiary of Shenzhen DaXingHuaShang Industry
Development Ltd., a related party, for the premises in Shenzhen City, PRC. The agreement covers the period from October 28, 2016 to October
28, 2021. The monthly rent expense is RMB30,000 (approximately $4,349). The Company has an operating lease agreement with Hongwei Ye,
a related party, for the premises in Dongguan City, PRC. The agreement covers the period from September 27, 2020 to September 30, 2023.
The monthly rent expense is RMB960 (approximately $139).
The
components of lease expense and supplemental cash flow information related to leases for the nine months ended September 30, 2020 and
2019 are as follows:
SCHEDULE OF COMPONENTS OF LEASE EXPENSE AND SUPPLEMENTAL CASH FLOW INFORMATION
Operating lease cost (included in general and administrative expenses in the Company’s
consolidated statements of operations)
|
|
For the nine
months ended
September 30, 2020
|
|
|
|
|
|
Related parties
|
|
$
|
85,212
|
|
Non-related parties
|
|
|
2,139
|
|
Total
|
|
$
|
87,351
|
|
Other information for the nine months ended
|
|
September 30,
2020
|
|
Cash paid for amounts included in the measurement of lease obligations
|
|
$
|
11,152
|
|
Weighted average remaining lease term (in years)
|
|
|
3.91
|
|
Weighted average discount rate
|
|
|
3.23
|
%
|
Maturities
of the Company’s lease obligations as of September 30, 2020 are as follows:
SCHEDULE OF MATURITIES OF LEASE OBLIGATIONS
|
|
|
|
|
2020
|
|
$
|
93,641
|
|
2021
|
|
|
96,970
|
|
2022
|
|
|
46,244
|
|
2023
|
|
|
24,207
|
|
2024
|
|
|
17,644
|
|
Thereafter:
|
|
|
41,169
|
|
Total lease payment
|
|
|
319,875
|
|
Less: Imputed interest
|
|
|
(15,082
|
)
|
Operating lease obligations
|
|
$
|
304,793
|
|
NOTE
13 - RISKS
Credit
risk
The
Company is subject to risk borne from credit extended to customers.
FVTL,
MKW, LJRB and QHDX bank deposits are with banks located in the PRC. JJHK’s bank account is located in Hong Kong. DIGLS and JJGS
do not have any bank accounts. The bank accounts that the Company uses are located outside of the U.S. and the Company’s bank accounts
in China are protected by a deposit insurance system.
Economic
and political risks and national emergencies risk
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 imported alcoholic beverages are considered
a luxury item in the PRC, they may be subject to political risks. From time to time, the PRC government limits the amount of import of
foreign alcoholic beverages based on diplomatic relationships with foreign countries. The Company’s results of operations may be
materially and adversely affected if it is unable to procure such products because of change of government policies.
In
addition, the Company’s sales and operations may materially adversely affected by national emergencies, such as COVID-19 pandemic.
Inflation
risk
Management
monitors changes in prices. 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 to the Company’s customers could adversely impact the Company’s
results of operations.
Concentrations
risk
During
the nine months ended September 30, 2020 and the year ended December 31, 2019, the Company had a concentration of risk in its supply
of goods, as one vendor supplied all of the Company’s purchases of finished goods.
NOTE
14 – RESTATEMENT
Our
interim financial statements for the nine months ended September 30, 2020, as previously filed with the SEC on November 23, 2020, have
been restated. The previously filed financial statements did not reflect the acquisition of Xixingdao, completed on August 31, 2020
and the results of Xixingdao from the effective date of acquisition. The impact of this restatement on the Company’s Condensed
Consolidated Balance Sheet, Statements of Operations and Comprehensive Loss, and Statement of Cash Flows is reflected in the tables below:
SCHEDULE
OF RESTATEMENT TO BALANCE SHEET
CONDENSED CONSOLIDATED
BALANCE SHEET
(Unaudited)
|
|
Previously
filed
September
30,
|
|
|
|
|
|
Restated
September
30,
|
|
|
|
2020
|
|
|
Adjustment
|
|
|
2020
|
|
|
|
|
|
|
|
|
|
|
|
Assets
|
|
|
|
|
|
|
|
|
|
|
|
|
Current assets
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents
|
|
$
|
14,194
|
|
|
$
|
8,903
|
|
|
$
|
23,097
|
|
Accounts and other receivables, net
|
|
|
80,371
|
|
|
|
40,945
|
|
|
|
121,316
|
|
Inventories
|
|
|
50,787
|
|
|
|
70,519
|
|
|
|
121,306
|
|
Prepayments and other current assets
|
|
|
116,628
|
|
|
|
30,049
|
|
|
|
146,677
|
|
Due from related parties
|
|
|
8,066
|
|
|
|
3,865
|
|
|
|
11,931
|
|
Total current assets
|
|
|
270,046
|
|
|
|
154,281
|
|
|
|
424,327
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-current assets
|
|
|
|
|
|
|
|
|
|
|
|
|
Property and equipment, net
|
|
|
48,442
|
|
|
|
2,554
|
|
|
|
50,996
|
|
Operating lease right of use asset
|
|
|
-
|
|
|
|
68,684
|
|
|
|
68,684
|
|
Operating lease right of use asset, related parties
|
|
|
101,710
|
|
|
|
68,218
|
|
|
|
169,928
|
|
Deposits paid
|
|
|
-
|
|
|
|
283,491
|
|
|
|
283,491
|
|
Intangible assets, net
|
|
|
-
|
|
|
|
3,101,046
|
|
|
|
3,101,046
|
|
Goodwill
|
|
|
-
|
|
|
|
6,988,560
|
|
|
|
6,988,560
|
|
Total Assets
|
|
$
|
420,198
|
|
|
$
|
10,666,834
|
|
|
$
|
11,087,032
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Liabilities
|
|
|
|
|
|
|
|
|
|
|
|
|
Current liabilities
|
|
|
|
|
|
|
|
|
|
|
|
|
Accounts payable
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
-
|
|
Unearned revenues
|
|
|
8,629
|
|
|
|
(131
|
)
|
|
|
8,498
|
|
Operating lease obligation - current
|
|
|
-
|
|
|
|
31,762
|
|
|
|
31,762
|
|
Operating lease obligation, related parties - current
|
|
|
14,419
|
|
|
|
120,775
|
|
|
|
135,194
|
|
Accounts, taxes, other payables, and accruals
|
|
|
87,223
|
|
|
|
58,309
|
|
|
|
145,532
|
|
Short
term borrowings
|
|
|
197,934
|
|
|
|
(197,934
|
)
|
|
|
-
|
|
Due to related parties
|
|
|
878,100
|
|
|
|
296,882
|
|
|
|
1,174,982
|
|
Common stock payable
|
|
|
-
|
|
|
|
9,773,989
|
|
|
|
9,773,989
|
|
Total current liabilities
|
|
|
1,186,305
|
|
|
|
10,083,652
|
|
|
|
11,269,957
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-current liabilities
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating lease obligation - non-current
|
|
|
-
|
|
|
|
39,738
|
|
|
|
39,738
|
|
Operating lease obligation, related parties - non-current
|
|
|
89,856
|
|
|
|
8,243
|
|
|
|
98,099
|
|
Long term borrowings
|
|
|
99,981
|
|
|
|
-
|
|
|
|
99,981
|
|
Total liabilities
|
|
|
1,376,142
|
|
|
|
10,131,633
|
|
|
|
11,507,775
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stockholders’ Deficit
|
|
|
|
|
|
|
|
|
|
|
|
|
Common stock (3,000,000,000 shares authorized, 307,750,100 issued and outstanding at
September 30, 2020 and December 31, 2019)
|
|
|
307,750
|
|
|
|
-
|
|
|
|
307,750
|
|
Additional paid in capital
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
Accumulated deficit
|
|
|
(1,271,910
|
)
|
|
|
(78,298
|
)
|
|
|
(1,350,208
|
)
|
Accumulated other comprehensive income
|
|
|
7,285
|
|
|
|
65,185
|
|
|
|
72,470
|
|
Total Stockholders’ Deficit
|
|
|
(956,875
|
)
|
|
|
(13,113
|
)
|
|
|
(969,988
|
)
|
Non-controlling interest
|
|
|
931
|
|
|
|
548,314
|
|
|
|
549,245
|
|
Total Deficit
|
|
|
(955,944
|
)
|
|
|
535,201
|
|
|
|
(420,743
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Liabilities and Stockholders’ Deficit
|
|
$
|
420,198
|
|
|
$
|
10,666,834
|
|
|
$
|
11,087,032
|
|
SCHEDULE
OF RESTATEMENT TO OPERATIONS AND COMPREHENSIVE INCOME
CONDENSED
CONSOLDIATED STATEMENT OF OPERATIONS AND COMPREHENSIVE LOSS
(Unaudited)
For
Three Months Ended September 30, 2020
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Previously
filed
Three
months ended
September
30,
|
|
|
|
|
|
Restated
Three
months ended
September
30,
|
|
|
|
2020
|
|
|
Adjustment
|
|
|
2020
|
|
|
|
|
|
|
|
|
|
|
|
Revenue from third parties
|
|
$
|
156,340
|
|
|
$
|
125,263
|
|
|
$
|
281,603
|
|
Revenue from related
parties
|
|
|
-
|
|
|
|
1,957
|
|
|
|
1,957
|
|
Revenue
|
|
|
156,340
|
|
|
|
127,220
|
|
|
|
283,560
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cost of revenues
|
|
|
118,454
|
|
|
|
127,050
|
|
|
|
245,504
|
|
Gross profit
|
|
|
37,886
|
|
|
|
170
|
|
|
|
38,056
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating
expenses
|
|
|
|
|
|
|
|
|
|
|
|
|
Selling and distribution expenses
|
|
|
-
|
|
|
|
1,530
|
|
|
|
1,530
|
|
General and administrative expenses
|
|
|
102,112
|
|
|
|
81,459
|
|
|
|
183,571
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating loss
|
|
|
(64,226
|
)
|
|
|
(82,819
|
)
|
|
|
(147,045
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other income (expenses):
|
|
|
|
|
|
|
|
|
|
|
|
|
Other income (expenses)
|
|
|
71,841
|
|
|
|
6,684
|
|
|
|
78,525
|
|
Interest income
|
|
|
16
|
|
|
|
-
|
|
|
|
16
|
|
Interest expense
|
|
|
(5,206
|
)
|
|
|
(15
|
)
|
|
|
(5,221
|
)
|
Other
income (expenses), net
|
|
|
66,651
|
|
|
|
6,669
|
|
|
|
73,320
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income tax
|
|
|
-
|
|
|
|
3,415
|
|
|
|
3,415
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
income (loss)
|
|
$
|
2,425
|
|
|
$
|
(79,565
|
)
|
|
$
|
(77,140
|
)
|
Less:
Net income (loss) attributable to non-controlling interest
|
|
|
(1,251
|
)
|
|
|
(1,267
|
)
|
|
|
(2,518
|
)
|
Net
income (loss) attributable to Fortune Valley Treasures, Inc.
|
|
|
3,676
|
|
|
|
(78,298
|
)
|
|
|
(74,622
|
)
|
Other comprehensive income (loss):
|
|
|
|
|
|
|
|
|
|
|
|
|
Foreign
currency translation gain (loss)
|
|
|
(15,788
|
)
|
|
|
65,733
|
|
|
|
49,945
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Comprehensive loss
|
|
|
(15,788
|
)
|
|
|
(11,407
|
)
|
|
|
(27,195
|
)
|
Less:
Comprehensive loss attributable to non-controlling interest
|
|
|
(1,145
|
)
|
|
|
(719
|
)
|
|
|
(1,864
|
)
|
Comprehensive
loss attributable to Fortune Valley Treasures, Inc.
|
|
$
|
(13,363
|
)
|
|
$
|
(11,968
|
)
|
|
$
|
(25,331
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loss per share
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
and diluted loss per share
|
|
$
|
(0.00
|
)
|
|
$
|
-
|
|
|
$
|
(0.00
|
)
|
Basic and diluted weighted average shares
outstanding
|
|
|
307,750,000
|
|
|
|
100
|
|
|
|
307,750,100
|
|
For
Nine Months Ended September 30, 2020
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Previously
filed
Nine
months
|
|
|
|
|
|
Restated
Nine
months
|
|
|
|
ended
|
|
|
|
|
|
ended
|
|
|
|
September 30,
|
|
|
|
|
|
September 30,
|
|
|
|
2020
|
|
|
Adjustment
|
|
|
2020
|
|
|
|
|
|
|
|
|
|
|
|
Revenue from third parties
|
|
$
|
247,567
|
|
|
$
|
125,263
|
|
|
$
|
372,830
|
|
Revenue from related parties
|
|
|
-
|
|
|
|
1,957
|
|
|
|
1,957
|
|
Revenue
|
|
|
247,567
|
|
|
|
127,220
|
|
|
|
374,787
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cost of revenues
|
|
|
172,797
|
|
|
|
127,050
|
|
|
|
299,847
|
|
Gross profit
|
|
|
74,770
|
|
|
|
170
|
|
|
|
74,940
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating expenses
|
|
|
|
|
|
|
|
|
|
|
|
|
Selling and distribution expenses
|
|
|
-
|
|
|
|
1,530
|
|
|
|
1,530
|
|
General and administrative expenses
|
|
|
340,604
|
|
|
|
81,459
|
|
|
|
422,063
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating loss
|
|
|
(265,834
|
)
|
|
|
(82,819
|
)
|
|
|
(348,653
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other income (expenses):
|
|
|
|
|
|
|
|
|
|
|
|
|
Other income (expenses)
|
|
|
73,947
|
|
|
|
6,684
|
|
|
|
80,631
|
|
Interest income
|
|
|
96
|
|
|
|
-
|
|
|
|
96
|
|
Interest expense
|
|
|
(10,186
|
)
|
|
|
(15
|
)
|
|
|
(10,201
|
)
|
Other
income (expenses), net
|
|
|
63,857
|
|
|
|
6,669
|
|
|
|
70,526
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income tax expense
|
|
|
-
|
|
|
|
3,415
|
|
|
|
3,415
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss
|
|
$
|
(201,977
|
)
|
|
$
|
(79,565
|
)
|
|
$
|
(281,542
|
)
|
Less: Net loss attributable to
non-controlling interest
|
|
|
(15,920
|
)
|
|
|
(1,237
|
)
|
|
|
(17,187
|
)
|
Net loss
attributable to Fortune Valley Treasures, Inc.
|
|
|
(186,057
|
)
|
|
|
(78,328
|
)
|
|
|
(264,355
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other comprehensive gain (loss):
|
|
|
|
|
|
|
|
|
|
|
|
|
Foreign currency translation gain (loss)
|
|
|
(10,505
|
)
|
|
|
65,733
|
|
|
|
55,228
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Comprehensive loss:
|
|
|
(212,482
|
)
|
|
|
(13,832
|
)
|
|
|
(226,314
|
)
|
Less: Comprehensive loss attributable
to non-controlling interest
|
|
|
(16,111
|
)
|
|
|
(719
|
)
|
|
|
(16,830
|
)
|
Comprehensive
loss attributable to Fortune Valley Treasures, Inc.
|
|
$
|
(196,371
|
)
|
|
$
|
(13,113
|
)
|
|
$
|
(209,484
|
)
|
Loss per share
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic and diluted loss
per share
|
|
$
|
(0.00
|
)
|
|
|
-
|
|
|
$
|
(0.00
|
)
|
Basic and diluted weighted average shares outstanding
|
|
|
307,750,000
|
|
|
|
100
|
|
|
|
307,750,100
|
|
SCHEDULE
OF RESTATEMENT TO STOCKHOLDERS’ EQUITY
SCHEDULE
OF RESTATEMENT TO CASH FLOWS
CONDENSED
CONSOLDIATED STATEMENTS OF CASH FLOWS
(Unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Previously
filed Nine months
ended
|
|
|
|
|
|
Restated
Nine
months
ended
|
|
|
|
September 30,
|
|
|
|
|
|
September
30,
|
|
|
|
2020
|
|
|
Adjustment
|
|
|
2020
|
|
Cash flows from operating activities
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss
|
|
$
|
(201,977
|
)
|
|
$
|
(79,565
|
)
|
|
$
|
(281,542
|
)
|
Adjustments to reconcile net income to net cash provided by (used for) operating activities
|
|
|
|
|
|
|
|
|
|
|
|
|
Depreciation of fixed assets
|
|
|
23,293
|
|
|
|
55,336
|
|
|
|
78,629
|
|
Non-cash lease expense
|
|
|
-
|
|
|
|
87,351
|
|
|
|
87,351
|
|
Changes in operating assets and liabilities
|
|
|
|
|
|
|
|
|
|
|
|
|
Accounts and other receivables
|
|
|
(69,620
|
)
|
|
|
(51,550
|
)
|
|
|
(121,170
|
)
|
Inventories
|
|
|
(20,958
|
)
|
|
|
(71,846
|
)
|
|
|
(92,804
|
)
|
Prepayments and other current
assets
|
|
|
(106,539
|
)
|
|
|
(32,953
|
)
|
|
|
(139,492
|
)
|
Accounts and other payables
|
|
|
40,174
|
|
|
|
80,996
|
|
|
|
121,170
|
|
Lease liabilities
|
|
|
-
|
|
|
|
(15,743
|
)
|
|
|
(15,743
|
)
|
Net cash used in operating activities
|
|
|
(335,627
|
)
|
|
|
(27,974
|
)
|
|
|
(363,601
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash flows from investing activities
|
|
|
|
|
|
|
|
|
|
|
|
|
Advance to related parties
|
|
|
-
|
|
|
|
(12,099
|
)
|
|
|
(12,099
|
)
|
Repayment from related parties
|
|
|
-
|
|
|
|
168
|
|
|
|
168
|
|
Proceeds from acquisition of subsidiary
|
|
|
-
|
|
|
|
7,672
|
|
|
|
7,672
|
|
Purchase of property and equipment
|
|
|
(50,543
|
)
|
|
|
(6,309
|
)
|
|
|
(56,852
|
)
|
Net cash used in investing activities
|
|
|
(50,543
|
)
|
|
|
(10,568
|
)
|
|
|
(61,111
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash flows from financing activities
|
|
|
|
|
|
|
|
|
|
|
|
|
Capital injections from owners
|
|
|
17,157
|
|
|
|
(17,157
|
)
|
|
|
-
|
|
Proceeds from short term borrowings
|
|
|
192,477
|
|
|
|
(192,477
|
)
|
|
|
-
|
|
Borrowings from related parties
|
|
|
55,074
|
|
|
|
506,033
|
|
|
|
561,107
|
|
Repayment to related parties
|
|
|
-
|
|
|
|
(194,902
|
)
|
|
|
(194,902
|
)
|
Proceeds from long term bank borrowings, net
|
|
|
97,225
|
|
|
|
2,756
|
|
|
|
99,981
|
|
Net cash provided by financing activities
|
|
|
361,933
|
|
|
|
104,253
|
|
|
|
466,186
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Effect of foreign currency translation on cash and cash equivalents
|
|
|
294
|
|
|
|
(56,808
|
)
|
|
|
(56,514
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net (decrease)/increase of cash and cash equivalents
|
|
|
(23,943
|
)
|
|
|
8,903
|
|
|
|
(15,040
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents-beginning of period
|
|
|
38,137
|
|
|
|
-
|
|
|
|
38,137
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents-end of period
|
|
$
|
14,194
|
|
|
$
|
8,903
|
|
|
$
|
23,097
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Supplementary cash flow information:
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest received
|
|
$
|
96
|
|
|
$
|
-
|
|
|
$
|
96
|
|
Interest paid
|
|
$
|
10,186
|
|
|
$
|
15
|
|
|
$
|
10,201
|
|
Income tax paid
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-cash investing and financing activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
Expense paid by related parties
|
|
$
|
-
|
|
|
$
|
277,081
|
|
|
$
|
277,081
|
|
Shares payable for acquisition of subsidiary
|
|
$
|
-
|
|
|
$
|
9,773,989
|
|
|
$
|
9,773,989
|
|
Operating lease right-of-use assets obtained in exchange for operating lease obligations
|
|
$
|
-
|
|
|
$
|
172,022
|
|
|
$
|
172,022
|
|
NOTE
15 - 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.
There was RMB 1,000,000 (approximately $147,031)
received as revenue in October 2020.