Item
2.01
|
COMPLETION
OF ACQUISITION OR DISPOSITION OF ASSETS
|
THE
SHARE EXCHANGE AGREEMENT AND RELATED TRANSACTIONS
Original
Share Purchase Agreement
On
July 22, 2015, the Company filed an Amendment to its articles of Incorporation with the Nevada Secretary of State changing its
name from Crypto-Services, Inc. to Fortune Valley Treasures, Inc.
As
previously reported in a Current Report on Form 8-K filed on December 14, 2016
,
we entered into a Sale and Purchase Agreement (the “Original Agreement”) with
DIGL and its shareholders, Mr. Lin Yumin,
Gaosheng Group Co., Ltd.
and
China
Kaipeng Group Co., Ltd.
to acquire 100% of the shares and assets of DIGL, a company incorporated
under the laws of the Republic of Seychelles. Pursuant to the Original Agreement, FVTI had agreed to issue Three Hundred Million
(300,000,000) shares of common stock of FVTI to the existing stockholders of DIGL to acquire 100% of the shares of DIGL.
On
December 14, 2016
, in anticipation of the reverse merger between the Company and
DIGL, Shen Xinlong resigned from
the position of President, Secretary and Treasurer but
remained on the Board as a Director. Additionally, the Company announced the appointment of Mr. Lin Yumin to the Board of Directors,
and as President, Secretary and Treasurer.
Termination
Agreement
On April 11, 2018, the Company entered
into a termination agreement (“Termination Agreement”) with DIGL, terminating the Original Agreement and all transactions
contemplated under the Original Agreement.
Share
Exchange Agreement
On April 11, 2018, the Company, DIGL and the
shareholders of DIGL entered into the Share Exchange Agreement, which closed on April 19, 2018. Pursuant to the terms of
the Share Exchange Agreement, we issued Three Hundred Million (300,000,000) new shares of our common stock, par value $0.001 per
share (the “Common Stock”) for all of the outstanding capital stock of DIGL with the result that DIGL became a wholly
owned subsidiary of ours.
Pursuant
to the Share Exchange, we acquired the business of DIGL, which is to engage in the sell and distribution of wine products in China
and Hong Kong. As a result, we have ceased to be a shell company.
At the closing of the Share Exchange, 250,000,000
shares of DIGL capital stock issued and outstanding immediately prior to the closing of the Share Exchange were exchanged
for Three Hundred Million (300,000,000) new shares of our Common Stock.
The
Share Exchange Agreement contained customary representations and warranties and pre- and post-closing covenants of each party
and customary closing conditions.
The
Share Exchange will be treated as a recapitalization of the Company for financial accounting purposes. DIGL will be considered
as the accounting acquirer for accounting purposes, and our historical financial statements before the Share Exchange will be
replaced with the consolidated historical financial statements of DIGL before the Share Exchange in all future filings with the
SEC.
The
Share Exchange is intended to be treated as a tax-free reorganization under the Internal Revenue Code of 1986, as amended.
The
issuance of shares of our Common Stock to holders of I DIGL’s capital stock in connection with the Share Exchange was not
registered under the Securities Act, in reliance upon the exemption from registration provided by Section 4(a)(2) of the Securities
Act, which exempts transactions by an issuer not involving any public offering, Regulation D promulgated by the SEC under that
section and/or Regulation S promulgated by the SEC. These securities may not be offered or sold in the United States absent registration
or an applicable exemption from the registration requirement, and some of these securities are subject to further contractual
restrictions on transfer as described below.
The
form of the Share Exchange Agreement is filed as an exhibit 2.1 to this Report.
Pro
Forma Ownership
Immediately
after giving effect to the Share Exchange, there were 300,000,000 issued and outstanding shares of our Common Stock, as follows:
●
|
The
stockholders of DIGL prior to the Share Exchange hold 0 shares of our Common Stock; and
|
|
|
●
|
The
stockholders of the Company prior to the Share Exchange hold the remaining 7,750,000 shares of our Common Stock.
|
No
other securities convertible into or exercisable or exchangeable for our Common Stock are outstanding.
Our
Common Stock is quoted on the OTCQB Markets under the symbol “FVTI”
Accounting
Treatment; Change of Control
The
Share Exchange is being accounted for as a “reverse acquisition,” and DIGL is deemed to be the accounting acquirer
in the reverse acquisition. Consequently, the assets and liabilities and the historical operations that will be reflected in the
financial statements prior to the Share Exchange will be those of DIGL and will be recorded at the historical cost basis of DIGL
and the consolidated financial statements after completion of the Share Exchange will include the assets and liabilities of DIGL,
historical operations of DIGL and operations of the Company and its subsidiary from the closing date of the Share Exchange.
As
a result of the issuance of the shares of our Common Stock pursuant to the Share Exchange, a change in control of the Company
occurred as of the date of consummation of the Share Exchange. Except as described in this Current Report, no arrangements or
understandings exist among present or former controlling stockholders with respect to the election of members of our Board of
Directors and, to our knowledge, no other arrangements exist that might result in a change of control of the Company.
We
continue to be a “smaller reporting company,” as defined under the Exchange Act, following the Share Exchange.
Following
the Share Exchange, the Company will no longer be designated as a shell company.
We
are an “emerging growth company” as defined in the Jumpstart Our Business Startups Act of 2013 (the “JOBS Act”)
and, as such, may elect to comply with certain reduced public company reporting requirements for future filings.
Form
10 Information
Prior
to the Share Exchange, the Company had nominal operations. We were deemed a “shell company,” as defined in Rule 12b-2
of the Exchange Act, and in light of the lack of operations prior to the completion of the Share Exchange.
Immediately
following the Share Exchange, the business of DIGL became our business. DIGL is engaged in the business of retail and wholesale
of a wide spectrum of wine products in China and Hong Kong.
With
the resulting change in our business, we are voluntarily providing the information as is required pursuant to Item 2.01(f) of
Form 8-K as if we were filing a general form for registration of securities on Form 10 under the Exchange Act for our Common Stock,
which is the only class of our securities subject to the reporting requirements of Section 13 or Section 15(d) of the Exchange
Act upon consummation of the Share Exchange.
DESCRIPTION
OF BUSINESS
Overview
Immediately
following the Share Exchange, the business of DIGL became our business. DIGL is engaged in the business of retail and wholesale
of a wide spectrum of wine products in China and Hong Kong. We now own all of the issued and outstanding shares of
DIGL
,
a holding company, which in turn owns all of the equity capital of DIL and its subsidiary.
We
are a holding company that, through our wholly-owned subsidiaries, is engaged business of retail and wholesale of a wide spectrum
of wine products in China and Hong Kong.
Corporate
Structure
The
following is an organizational chart setting forth our corporate structure, immediately following the Share Exchange:
Fortune
Valley Treasures, Inc. (Nevada, USA)
|
(100% shareholding)
|
|
|
|
DaXingHuaShang
Investment Group Limited (Republic of Seychelles)
|
|
|
|
(100% shareholding)
|
|
|
|
DaXingHuaShang
Investment(Hong Kong)Limited (Hong Kong)
|
|
|
|
(100% shareholding)
|
|
|
|
Qianhai
DaXingHuaShang Investment(Shenzhen)Co. Ltd. ( PRC)
|
|
|
|
(100% shareholding)
|
|
|
|
Dongguan
City
France Vin Tout Ltd
.
(PRC)
|
DaXingHuaShang
Investment Group Limited is a Seychelles company, founded on April 7, 2016. The share capital of the company is $100,000 divided
into 250,000,000 ordinary shares of $0.0004 par value each.
DaXingHuaShang
Investment(Hong Kong)Limited was incorporated in Hong Kong on June 22, 2016 as a company with limited liability
as an investment holding company. DIL is wholly owned by DIGL.
Qianhai
DaXingHuaShang Investment(Shenzhen)Co. Ltd. was incorporated in the PRC as a wholly-owned foreign enterprise with
limited liability on December 31, 2016. Qianhai DaXing is wholly owned by DIL.
Dongguan
City France Vin Tout Ltd. was incorporated in the PRC on May 31, 2011. It is wholly owned by Qianhai DaXing.
Change
of Name
On
August 28, 2016, shareholders of Crypto-Services, Inc. representing 54.19% of the Company’s issued stock approved changing
the Company’s name from Crypto-Services, Inc., to Fortune Valley Treasures, Inc. The Company filed a Certificate of Amendment
with the State of Nevada on September 21, 2016. On March 29, 2017, we received formal notification from FINRA that our request
to change the Company name from Crypto-Services, Inc. to Fortune Valley Treasures, Inc. and to change our trading symbol from
CRYT to FVTI have been approved. On March 30, 2017 our name and symbol change took effect with FINRA and on the OTCQB Markets
Fiscal
Year
We
have a fiscal year end of December 31.
Office
Our
office is located at No.10 of Tuanjie 2nd Road,Beice,Humen,Dongguan, 518000, China. Our telephone number is:
(86)
76982268999
Current
Business
We
have 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
.
The followings are some of the most popular products we are selling at the moment:
Name
|
|
Photo
|
|
R
egion
|
|
Alcohol
content
|
Le
Petit Tour
|
|
|
|
France
|
|
13%
|
Los
Beceux
|
|
|
|
Spain
|
|
12%
|
Sorlada
|
|
|
|
Spain
|
|
12%
|
Lapso
|
|
|
|
Chile
|
|
13%
|
Saint
Martin
|
|
|
|
France
|
|
12.5%
|
Seguelongue
|
|
|
|
France
|
|
13%
|
Saint
Emilion
|
|
|
|
France
|
|
13%
|
We
have put in significant efforts into strengthening our management, marketing and sales teams to develop and promote our own brand
“FVT ARTS WINERY” to different regions of China. We provide different forms of sales and management models including
shopping chain stores: i.e. “chain shops”, approved license chain shops, regional exclusive agents, and consumers’
bulk buying of our red wine and relevant products to increase the sales turnover and profits.
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.
We also build up an efficient logistics
system by cooperating with China Post, SF Express, Excel Express and other brand-name delivery services companies.
This ensures that we can deliver what the customer’s order, in excellent condition,
and precisely when they need it.
Our
Future Business Plan
We plan to extend our size and volume business
by acquiring high quality wine merchant outlets and related suppliers of the industry, which we call “industrial chain”
model. By acquiring other wine merchants, based on our historical acquisition experience, we believe: (i) we can increase our
customer base and obtain more wine supply channels; (ii) such acquisition will increase staff and provide the Company with a growing
array of relevant skill sets and connections in the wine industry;
When
we evaluate an acquisition target, we will consider factors including: (i) the consideration and the related costs of acquisition;
(ii) the financial performance of the potential target; (iii) the reputation of the target in the wine industry; (iv) the target’s
track records; (v) the target’s existing customer base; (vi) the target’s supplier portfolio; (vii) the expertise
and experience of the staff of the target; and (viii) the wine inventory of the target.
Our
management believe that successful acquisitions will bring synergies to our Company and enhance our shareholders’ value.
Planning
and promotion service platform
The
development of corporate culture, the popularization of the brand and the sales of the products are the process of intelligence
and power competition. Our planning and promotion team applies creativity and industry experience in business operation and provides
enterprises with comprehensive planning and promotion service such as enterprise image beautification, business planning, enterprise
positioning, trademark service, brand image design, business model design, marketing scheme design, implementation scheme design,
brand management consulting, enterprise promotion, brand promotion and product popularization, etc.
Product
Research & Development and service platform
Product research and development is key
in the wine industry. We intend to start a new trend of alcohol consumption, integrated many liquor product
research and development institutions and an experienced wine taster, and can provide industry enterprises with services such
as liquor product design, product appearance design and custom design for special product. Through the use of internet data analysis,
the platform can capture the market information more quickly and accurately, position the market demand accurately and
design the customers favorite products by combing demand and product research and development.
Raw
material service platform
There are many different kinds of raw materials
needed to the wine industry, especially the materials on soil and light is very demanding, and different growth environment
and cultivation technology have great influence on quality of raw materials. Therefore, a complete system is needed to control
the quality of raw materials and supply the raw materials fast with low price. The Company raw material service platform integrates
the global mainstream raw materials enterprises of great variety of goods from fruits to grains, from ingredients to package materials,
realizing unified management and unified procurement. The platform integrates online with offline, providing you with the most
suitable and cost-effective raw materials in the shortest time;
Production
service platform
Through supply chain management, the Company
integrates the modern enterprises with large-scale standardized capacity and sets up various types of wine production platform,
providing convenient channel for wine products such wine, liquor, beer, yellow rice wine and health care wine. By internet
data management system, the platform can assign suitable order for production with the fastest speed, master production schedule
in real-time and ensure delivery, making it easy for customers with professional and efficient manufacturing services.
Brand
service platform
The Company intends to build an impressive
inventory of wine products, some of which carry well-known brand names, and develop a capacity of providing quality
services to both wine suppliers and customers such as brand agency and brand merchants. By using online advertising tools,
the platform will also expend brand awareness and business channel in hope of achieving a win-win situation for
both the suppliers and customers.
International
trade service platform
We intend to leverage our management team’s
extensive experience in international trade by creating a whole supply chain service platform to conduct long-term
business operations with domestic and foreign enterprises. The platform will be designed to carry out purchasing
order customized to the requirements of the purchaser, helping consumers to reduce transaction costs,
simplifying the process of procurement and improving the efficiency of the procurement. Given the high demand in the Chinese
wine market, the platform has the potential of yielding significant profits by providing convenient services to consumers.
Logistics
service platform
The Company intends to set up high-quality
logistics management system and integrates both domestics and international logistics network with high speed and builds
professional logistics service platform. Through scientific management, the platform can provide professional service such as
transportation, warehousing sorting and distribution of import and export customs clearance. With proper technical supports,
the platform can reduce logistics cost, improve circulation efficiency, save operating cost for the enterprise and improve
the economic benefit. By connecting the domestic delivery companies with international delivery companies, the platform
provides a fast and secure channel for the high quality products to be shipped to our customers.
Supporting
service platform
To improve the supply chain service system,
we set up supporting service platform related to the wine industry, and it offers professional wine set, wine rack
and other wine related to satisfy the demanding of customers. One of the main purposes of establishing such a platform
is to meet customer demand in all dimensions.
Our
Strategies:
We
plan to diversify our existing product portfolio strategically, and thereby provide our customers with a wider range of choices
and broaden our existing customer base.
We
believe continuous expansion of our existing product portfolio and accommodation of evolving demand and customers’ preferences
will distinguish us from our competitors, while providing our customers with a wider range of choices will facilitate the broadening
of our customer base as well as reinforcing our market presence in wine industry.
We
plan to continue to solidify our relationships
We
intend to continue solidifying our relationship with our existing suppliers as well as identifying new suppliers. We intend to
increase our market share by diversifying our existing product portfolio and procuring wine products which we anticipate demand.
We believe that our strategic diversification will further complement our existing product portfolio, enhance our product mix
and strengthen our market position in the wine industry in China.
We
plan to strengthen our corporate image by increasing marketing and promotion efforts.
We
believe our corporate image is critical to our business development. To further enhance customer awareness of our corporate image,
we will continue our effective and targeted marketing efforts. This may include (i) placing mass media commercials, (ii) advertising
in newspapers, magazines, the internet, billboards and banners, and (iii) sponsoring programs. We also make use of innovative
multimedia promotional channels such as social media and mobile phone applications.
We
plan to attract, motivate and retain high-quality talent.
Our
customer-oriented business philosophy emphases on delivering excellent customer service. We believe maintaining a positive working
environment will encourage better staff relations and talent retention, as well as enhancing the quality of our customer service
by motivating staff. In order to foster a work environment that attracts and inspires our people to achieve excellent performance,
we will also seek to motivate and retain valuable and talented staff by implementing an incentive plan to align compensation and
remuneration with performance. Our Board of Directors will review the remuneration package on a regular basis to ensure it remains
competitive at all times. As part of our continuing efforts to enhance our customer service, we will also continue to enhance
our employee training programs by developing our orientation program, coaching, on-the-job training to enhance individual staff
skills and knowledge of sales and marketing techniques, client management skills, customer service, product information, quality
control and industry knowledge.
We
will continue to expand and explore additional services and products to enrich our one-stop services to our customers.
We
will continue to strive to provide our customers with the convenience of our one-stop shopping experience and a wide variety of
unique, quality products at reasonable and competitive prices, we believe this is one of the keys to differentiating ourselves
from our competitors in the wine industry in China. To further strengthen our supplementary services, we will continue to refine
our wine related services to our customers by enhancing each of our wine consultation services, wine sourcing services, wine delivery
services, wine storage services and wine evaluation and consignment services with improved customer service and service options.
Furthermore, we plan to develop such services by devoting additional resources and implementing a structured service manual. With
our continued expansion and dedication to exploring additional wine related services to amplify our one-stop services to our customers,
we believe we can strengthen and maintain our position in the wine industry in China.
Market
and Competition
China
is a country with both an ancient wine tradition and a new and an emerging wine-consuming market. Wine production
in China has thousands of year of history. Today, China is also an emerging wine-producing nation in its own right with
brands such as Great Wall, Changyu and Dynasty. Local wines account for 80 percent of wine consumed in China. According to The
International Wine and Spirit Record (the “IWSR”), China is undoubtedly one of the fastest-growing wine markets
in the world, with the rising resident income and the enhancement of life tastes and consumption level, wine has the increasingly
large development space. In 2017, the wine consumption per capita was about 1.2 liters accounting for less than 1/3 of the global
as well as 1/10 of the U.S. Therefore, there are great development potentials in the Chinese wine market.
Following
a significant decline in volume since 2012 due to the impact of the government’s anti-extravagance campaign, Chinese wine
imports show signs of slow recovery in 2015. By the end of September 2015, France bottled wine exports to China increased by 29
per cent in value to USD $313 million and by 37 per cent in volume to 59 million liters, compared to the same period in 2014.
Market
trends include:
|
●
|
Wine
consumption in China reached 6.41 billion liters in 2017
(Source: Euromonitor International)
. New world wines are more
easily accepted by consumers because it is easy for the market to understand product classification.
|
|
|
|
|
●
|
French
Wine is also well received by the market due to varied price points, stable quality, continuous marketing, industry star rating,
etc.
|
|
|
|
|
●
|
Importers
gained confidence from the implementation of CHAFTA in late 2017. The reduction of tariffs also makes French wines more competitive
in the market.
|
|
●
|
Chinese
middle class consumers are the main market for higher value French wines. Their importance lies in their long-term, stable
purchasing power, brand awareness and influence on those around them, making them the true driving force of the consumer market
in the wine industry.
|
|
|
|
|
●
|
The
younger generation and female consumers are leading the new trend in sparkling, white and sweet wines in the market. As of
June 2014, imported sparkling wines in China increased 45 per cent by volume and 39 per cent by value compared to the same
period last year, while the total imported bottled wine volume dropped by 12.8 per cent. As sparkling wine occupies just three
per cent of total import volume, its impact is at this stage is limited, although affordable prices and trendy lifestyles
should prompt further growth in this sector.
|
|
|
|
|
●
|
Wine
makers adjust their product portfolios to meet the needs of the market in providing more affordable wines. OEM mid-end wines
are seen in the market for distributors to sell in the off trade channels.
|
|
|
|
|
●
|
Chinese
distillers and distributors have begun to OEM their grape wine brands to fix the loss of sales in the rice wine market through
existing distribution channels.
|
Competition
France
still dominates the Chinese wine market with a share of 48 per cent
(Source:
Euromonitor International)
, the best sales in supermarkets are imported wines from RMB60-180.
One major challenge is that Chinese consumers switch from one brand to another rather quickly, exhibiting little brand
loyalty. Online sales particularly enable the consumers to source and purchase budget wines. Wineries that will most benefit from
growth in China will be those that demonstrate patience, professional service while building brand awareness and a long term strategy
to develop the market with their Chinese partners.
For
our Company, there are two major competitors in our market, Aussino Liquor and ASC Fine Wines. These companies are well established,
more recognized and well accepted by consumers in China.
Government
Regulations
Major
Wine Regulations Effective in China
Type
|
|
Name
|
|
Effective
Date
|
|
Remark
|
President
Order 21 of 2015
|
|
Food
Safety Law
|
|
2015/10/01
|
|
The
law at the top of all food-related regulations
|
AQSIQ
Order 144 of 2011
|
|
Measures
for Administration of Imported/Exported Food Safety
|
|
2012/3/1
|
|
|
CFDA
Order 16 of 2015
|
|
Measures
for Administration of Food Production Licensing
|
|
2015/10/01
|
|
The
basis that requires all food producers in China to procure a production license
|
AQSIQ
Order 27 of 2012
|
|
Administrative
Provisions on Inspections and Supervisions of Labeling of Imported/Exported Pre-packaged Foods
|
|
2012/6/1
|
|
The
general provisions on labeling that all pre-packaged foods should conform to
|
AQSIQ
Order 55 of 2012
|
|
Administrative
Provisions on Filing of Importers and Exporters of Imported Foods
|
|
2012/10/1
|
|
|
AQSIQ
Order 55 of 2012
|
|
Administrative
Provisions on Recording of Import and Marketing of Imported Foods
|
|
2012/10/1
|
|
Management
in the stage of domestic circulation, mainly on the consignee part
|
|
|
Measures
for Administration of Imported Alcohol in Domestic Market
|
|
1997/9/9
|
|
Promulgated
by the State Economic and Trade Commission, the State Administration for Industry and Commerce, the Customs General Administration,
the State Bureau of Technical Supervision, the Ministry of Public Health, and the State Administration of Import and Export
Commodities Inspection
|
SAIC
Order 39 of 1995
|
|
Administrative
Measures on Adverting of Alcohol
|
|
1996/1/1
|
|
|
AQSIQ
Notice on Dec 23 2004
|
|
Rules
for Inspection on Production Licensing of Wines and Fruit Wines
|
|
2005/1/1
|
|
|
AQSIQ
Order 78 of 2005
|
|
Geographical
Indication Product Protection Regulation
|
|
2005/7/15
|
|
Champaign(2013),
Bordeaux(2014), Napa Valley NV(2013)
|
The
Food Safety Law is the foundation and most important food safety legislation in China, most wine-related regulations built upon
this stable base.
Intellectual
Property
Our
trademark registration has been approved in Dongguan, China.
Research
and Development
We
do not invest any money in R&D section.
Environmental
Matters
Our
operations are not subject to environmental laws, including any laws addressing air and water pollution and management of hazardous
substances and wastes and we do not anticipate capital expenditures for environmental control facilities.
Employees
As
of April 19
th
2018, the Company has 18 full time employees. All employment contracts comply with PRC law. The
Company believes its relationship with its employees is satisfactory.
Description
of Property
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 the year ended December 31, 2017 and 2016 was
$31,707 and $3,608. The agreement does not call for a rental deposit equivalent.
RISK
FACTORS
As
a “smaller reporting company” as defined by Item 10 of Regulation S-K, we are not required to provide information
required by this Item.
MANAGEMENT’S
DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The
following discussion and analysis should be read in conjunction with our financial statements and related notes thereto.
Results of Operations
|
|
Years Ended December 31,
|
|
|
|
|
|
|
2017
|
|
|
2016
|
|
|
Change
|
|
Revenue
|
|
$
|
260,973
|
|
|
$
|
111,313
|
|
|
$
|
149,660
|
|
Cost of revenue
|
|
|
134,728
|
|
|
|
63,104
|
|
|
|
71,624
|
|
Gross profit
|
|
|
126,245
|
|
|
|
48,209
|
|
|
|
78,036
|
|
Gross profit (%)
|
|
|
48
|
%
|
|
|
43
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating expense
|
|
|
168,456
|
|
|
|
30,129
|
|
|
|
(138,327
|
)
|
Other income(expense)
|
|
|
177
|
|
|
|
(1,028
|
)
|
|
|
|
|
Provision for income taxes
|
|
|
2,833
|
|
|
|
1,854
|
|
|
|
|
|
Foreign currency translation gain
|
|
|
(489
|
)
|
|
|
1,459
|
|
|
|
|
|
Comprehensive loss(income)
|
|
$
|
(45,356
|
)
|
|
$
|
16,657
|
|
|
$
|
(62,013
|
)
|
Revenue
Net
revenues totaled $260,973 for the year ended December 31, 2017, an increase of $149,660 compared to December 31, 2016. The
increase was primarily a result of increase in sales because of Luo Naiyong
Cost
of revenue
Cost
of revenue totaled $134,728 for the year ended December 31, 2017, an increase of $71,624 compared to December 31, 2016,
primarily as the result of increasing in revenue and hence increase in purchases of goods . Our cost of revenues
consisted mainly of purchases of goods sold.
Gross
profit
Gross
profit was 48% ($126,245) and 43% ($48,209) for the year ended December 31, 2017 and 2016, respectively.
Operating
expenses
General
and administrative expenses totaled $168,456 for the year ended December 31, 2017, an increase of $138,327 compared to 2016. The
increase was primarily a result of professional fees, including incorporation and consulting fees.
Net
loss
Net
loss totaled $45,356 for the year ended December 31, 2017, an increase of 62,013 compared to 2016, primarily as the result of
an increase in operating expenses.
Liquidity
and Capital Resources
Working
Capital
|
|
December 31,
|
|
|
|
|
|
|
2017
|
|
|
2016
|
|
|
Change
|
|
|
|
|
|
|
|
|
|
|
|
Total current assets
|
|
$
|
407,467
|
|
|
$
|
252,017
|
|
|
$
|
155,450
|
|
Total current liabilities
|
|
|
380,460
|
|
|
|
188,266
|
|
|
|
192,194
|
|
Working capital
|
|
$
|
27,007
|
|
|
$
|
63,751
|
|
|
$
|
(36,744
|
)
|
As
of December 31, 2017, we had cash and cash equivalents of $77,782 to Date, 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 $252,489.
Cash
Flows
|
|
Years Ended December 31,
|
|
|
|
|
|
|
2017
|
|
|
2016
|
|
|
Change
|
|
Cash Flows (used in) generated in Operating Activities
|
|
$
|
(52,432
|
)
|
|
$
|
109,354
|
|
|
$
|
(161,966
|
)
|
Cash Flows used in Investing Activities
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
Cash Flows provided by(used in) Financing Activities
|
|
|
27,874
|
|
|
|
(9,661
|
)
|
|
|
37,535
|
|
Net (decrease) increase in Cash During Period
|
|
$
|
(24,558
|
)
|
|
$
|
99,693
|
|
|
$
|
(124,431
|
)
|
Cash
Flow from Operating Activities
For
the year ended December 31, 2017 net cash flows used in operating activities consisted of a net loss of $44,866 and was reduced
by depreciation of $6,776, and a net change of operating assets and liabilities of $14,342. For the year ended December 31, 2016,
net cash flows provided in operating consisted of a net income of $15,199 and was reduced by depreciation of $6,682 and a net
change of operating assets and liabilities of $87,473.
Cash
Flow from Financing Activities
Net
cash provided by financing for the year ended December 31, 2017 was $27,874 as compared to 9,661 net cash used in financing
activities for the year ended December 31, 2016. 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.
PROPERTIES
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 the year ended December 31, 2017 and 2016 was
$31,707 and $3,608. The agreement does not call for a rental deposit equivalent.
SECURITY
OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
Beneficial
ownership is determined in accordance with the rules of the SEC and generally includes voting or investment power with respect
to securities.
Pre-Share
Exchange
The following table sets forth certain information
regarding the beneficial ownership of our Common Stock as of April 18, 2018, prior to the Share Exchange, by (i) each stockholder
known by us to be the beneficial owner of more than 5% of our Common Stock (our only classes of voting securities), (ii) each
of our directors and executive officers, and (iii) all of our directors and executive officers as a group. Unless otherwise indicated,
the persons named in the table below had sole voting and investment power with respect to the number of shares indicated as beneficially
owned by them.
Name and Address of Beneficial Owner
(1)
|
|
Amount and Nature of Beneficial Ownership
|
|
|
Percentage of Class
(2)
|
|
Yumin Lin
19F, Lianhe Tower, 1069 Nanhai Ave, Nanshan District,Shenzhen, 518000, China
|
|
|
18,000,000
(Direct)
|
|
|
|
5.85
|
%
|
Xinlong Shen
19F, Lianhe Tower, 1069 Nanhai Ave, Nanshan District,Shenzhen, 518000, China
|
|
|
1,090,000
(Direct)
|
|
|
|
0.35
|
%
|
All directors and executive officers as a group
(2 persons)
|
|
|
19,090,000
|
|
|
|
6.2
|
%
|
|
(1)
|
The
persons named above may be deemed to be a “promoter” of the Company, within the meaning of such terms under the
Securities Act of 1933, as amended, by virtue of his direct holdings in the Company.
|
|
|
|
|
(2)
|
Based
on 7,750,000 shares of Common Stock issued and outstanding as of April 18,
2018 immediately prior to the Share Exchange.
|
Post
Share Exchange
The following table sets forth information
with respect to the beneficial ownership of our Common Stock as of April 19, 2018, after the Share Exchange, by (i) each
stockholder known by us to be the beneficial owner of more than 5% of our Common Stock (our only class of voting securities),
(ii) each of our directors and executive officers, and (iii) all of our directors and executive officers as a group. To the best
of our knowledge, except as otherwise indicated, each of the persons named in the table has sole voting and investment power with
respect to the shares of our Common Stock beneficially owned by such person, except to the extent such power may be shared with
a spouse. To our knowledge, none of the shares listed below are held under a voting trust or similar agreement, except as noted.
Other than the Share Exchange, to our knowledge, there is no arrangement, including any pledge by any person of securities of
the Company or any of its parents, the operation of which may at a subsequent date result in a change in control of the Company.
Name and Address of Beneficial Owner
(1)
|
|
Amount and Nature of Beneficial Ownership
|
|
|
Percentage
of Class
(2)
|
|
China Kaipeng Group Co., Ltd.
Ma Huijun (Beneficial owner)
No.22 JiyuQiaoXia,
Tangkeng Village, Xiajiashan Town
Puning, Guangdong,China
|
|
|
153,000,000
|
|
|
|
49.7
|
%
|
Gaosheng Group Co., Ltd.
Luo Naiyong(Beneficial owner)
Room 6 , Building 10,
JinNiu Garden Section10,Dezheng Xi Road Changan Town, Dongguan,
Guangdong, China
|
|
|
129,000,000
|
|
|
|
41.9
|
%
|
Lin Yu Min
19F, Lianhe Tower, 1069 Nanhai Ave, Nanshan District,Shenzhen, 518000, China
|
|
|
18,000,000
|
|
|
|
5.85
|
%
|
All directors and executive officers as a group
(2 persons)
|
|
|
19,090,000
|
|
|
|
6.2
|
%
|
DIRECTORS,
EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS
Directors
and Executive Officers
Below
are the names of and certain information regarding the Company’s current executive officers and directors:
Name
|
|
Age
|
|
Position(s)
|
Lin
Yumin
|
|
50
|
|
Director,
President, Chief Executive Officer, Chief Financial Officer, and Secretary
|
Xinlong
Shen
|
|
36
|
|
Director
|
Directors
are elected to serve until the next annual meeting of stockholders and until their successors are elected and qualified. Directors
are elected by a majority of the votes cast at the annual meeting of stockholders and hold office until the expiration of the
term for which he or she was elected and until a successor has been elected and qualified.
A
majority of the authorized number of directors constitutes a quorum of the Board of Directors for the transaction of business.
The directors must be present at the meeting to constitute a quorum. However, any action required or permitted to be taken by
the Board of Directors may be taken without a meeting if all members of the Board of Directors individually or collectively consent
in writing to the action.
Executive
Officers to be elected by the Board of Directors shall be elected annually by the Board of Directors at the first meeting of the
Board of Directors held after each annual meeting of the shareholders.
Background
of Officers and Directors
Yumin
Lin, President, Chief Executive Officer, Chief Financial Officer, Secretary and Director
From
July 1987 to April 1992 Mr. Lin worked as a manager at the LuChengXinChao Furniture Factory. From April 1992 to April 1999 he
was a manager at the Shangying Business Development Company in Guangdong, China and from April 1993 to April 1999 he worked to
establish the Huizhou Branch of Shangying Business Development Company located in Guangdong. He was the company’s operations
manager and was also responsible for selling construction steel products. From April 1999 to May 2011 he was the General Manager
of the Dongguan Saite Building Material Company. From May 2011 to the present he has served as chairman to Dongguan France Vin
Tout Co., Ltd., located in Dongguan, Guangdong, China. Additionally, from November 2015 to the present, he has served as chairman
at the Shenzhen DaxingHuashang Liquor Culture Company in the Nanchang District, Shenzhen, China.
Xinlong
Shen, Director
Xinlong
Shen has more than ten years of experience in electronic appliances trading and marketing field in several China-based enterprises.
He graduated in 2003 from Xidian University in China with a bachelor degree in management and major in business administration.
In July 2003, Mr. Shen started his first career as Overseas Sales in Shenzhen Yu Ou Electronics Co., Ltd., which produces and
sells consumer electronics. In August 2005, he worked as an Overseas Trade Manager in Shenzhen Richtec Industry Co., Ltd., a high-tech
company specializing in developing, producing and marketing home theater systems, iPod/Mp3/mobile speakers and car speakers. In
January 2008, he worked as an Overseas Trade Manager in Shenzhen Zhongmeipeng Industry Co., Ltd., a trading company producing
industrial products and consumer electronics. As Overseas Trade Manager in these two firms, Mr. Shen was responsible for leading
the marketing team to conduct overseas marketing for the companies’ products. From December 2013 to September 2014, Mr.
Shen served as Vice President in Shenzhen Boao Asset Management Consulting Service Co., Ltd., a financial consulting firm providing
professional financial services including asset management and financial planning services to clients. From September 2014 to
present, Mr. Shen has served as Chairman of the Board in Qianhai Shenzhen Xinzilong Media Co., Ltd., a film, video and media and
entertainment programs production company. Since November 2014, Mr. Shen has served as Vice Chairman in Chinacom Investment Association
(which aims at providing integrated information platform service to facilitate communication between association members and government
departments and bilateral and multilateral trade and investment activities).
Director
Independence
We
are not currently subject to listing requirements of any national securities exchange or inter-dealer quotation system which has
requirements that a majority of the board of directors be “independent” and, as a result, we are not at this time
required to have our Board of Directors comprised of a majority of “independent directors.”
Family
Relationships
There
are no family relationships among our directors or executive officers.
Involvement
in Certain Legal Proceedings
None
of our directors or executive officers has been involved in any of the following events during the past ten years:
|
o
|
any
bankruptcy petition filed by or against any business of which such person was a general partner or executive officer either
at the time of the bankruptcy or within two years prior to that time;
|
|
|
|
|
o
|
any
conviction in a criminal proceeding or being subject to a pending criminal proceeding (excluding traffic violations and other
minor offences);
|
|
|
|
|
o
|
being
subject to any order, judgment, or decree, not subsequently reversed, suspended or vacated, of any court of competent jurisdiction,
permanently or temporarily enjoining, barring, suspending or otherwise limiting his or her involvement in any type of business,
securities or banking activities; or
|
|
|
|
|
o
|
being
found by a court of competent jurisdiction (in a civil action), the Commission or the Commodity Futures Trading Commission
to have violated a federal or state securities or commodities law, and the judgment has not been reversed, suspended, or vacated.
|
EXECUTIVE
COMPENSATION
The
following table sets forth information concerning the total compensation paid or accrued by us and DIGL during the last two fiscal
years indicated to (i) all individuals that served as our or DIGL’s principal executive officer or acted in a similar capacity
for us or DIGL at any time during the most recent fiscal year indicated; (ii) the two most highly compensated executive officers
who were serving as executive officers of us or DIGL at the end of the most recent fiscal year indicated that received annual
compensation during such fiscal year in excess of $100,000; and (iii) up to two additional individuals for whom disclosure would
have been provided pursuant to clause (ii) above but for the fact that the individual was not serving as an executive officer
of us or DIGL at the end of the most recent fiscal year indicated. No executive officer of ours or DIGL has received annual compensation
in excess of $100,000.
SUMMARY COMPENSATION TABLE
|
Name and Principal Position
|
|
Year
|
|
Salary ($)
|
|
|
Bonus ($)
|
|
|
Stock Awards ($)
|
|
|
Option Awards ($)
|
|
|
Non-Equity Incentive Plan Compensation ($)
|
|
|
Change in Pension Value and Nonqualified Deferred Compensation Earnings ($)
|
|
|
All Other Compensation (3) ($)
|
|
|
Total ($)
|
|
Xinlong Shen
(1)
President, CEO, Secretary, CFO and Director
|
|
2016
2017
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
Yumin Lin
2
President, CEO,
Treasurer
,
CFO and Director
|
|
2016
2017
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
(1)
|
Xinlong
Shen was appointed as President, CEO, Secretary, CFO and director on August 3, 2016.
Xinlong
Shen resigned from the position of President, Secretary and Treasurer on December 14, 2016, and remains on the Board as a
Director.
|
|
|
(2)
|
Yumin
Lin was appointed as President, CEO, Treasurer, CFO and director on
December 14, 2016.
|
Narrative
Disclosure to Summary Compensation Table
Other
than set out below, there are no arrangements or plans in which we provide pension, retirement or similar benefits for directors
or executive officers. Our directors and executive officers may receive share options at the discretion of our board of directors
in the future. We do not have any material bonus or profit sharing plans pursuant to which cash or non-cash compensation is or
may be paid to our directors or executive officers, except that share options may be granted at the discretion of our board of
directors.
Stock
Option Plan
Currently,
we do not have a stock option plan in favor of any director, officer, consultant or employee of our company.
Grants
of Plan-Based Awards
To
date, there have been no grants or plan-based awards.
Outstanding
Equity Awards
To
date, there have been no outstanding equity awards.
Option
Exercises and Stock Vested
To
date, there have been no options exercised by our named officers.
Compensation
of Directors
We
do not have any agreements for compensating our directors for their services in their capacity as directors.
Pension,
Retirement or Similar Benefit Plans
There
are no arrangements or plans in which we provide pension, retirement or similar benefits for directors or executive officers.
We have no material bonus or profit sharing plans pursuant to which cash or non-cash compensation is or may be paid to our directors
or executive officers, except that stock options may be granted at the discretion of the board of directors or a committee thereof.
Employment
Agreements
We
have no formal employment agreements with any of our employees, directors or officers.
CERTAIN
RELATIONSHIPS AND RELATED TRANSACTIONS CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
SEC
rules require us to disclose any transaction or currently proposed transaction in which the Company is a participant and in which
any related person has or will have a direct or indirect material interest involving the lesser of $120,000.00 or one percent
(1%) of the average of the Company’s total assets as of the end of last two completed fiscal years. A related person is
any executive officer, director, nominee for director, or holder of 5% or more of the Company’s common stock, or an immediate
family member of any of those persons.
The
descriptions set forth above under the captions “The Share Exchange and Related Transactions—Share Exchange Agreement,”
and “Executive Compensation—Employment Agreements” and “—Director Compensation” and below
under “Description of Securities—Options” are incorporated herein by reference.
Lily
Chen, a friend of Xinlong Shen, our President, CFO, CEO, Secretary and a member of the Board of Directors provided non-compensated
book keeping and financial reporting services to the Company from August, 2016 to December, 2016
LEGAL
PROCEEDINGS
From
time to time, we may become involved in various lawsuits and legal proceedings which arise in the ordinary course of business.
However, litigation is subject to inherent uncertainties, and an adverse result in these or other matters may arise from time
to time that may harm business.
We
are currently not aware of any pending legal proceedings to which we are a party or of which any of our properties or assets is
the subject, nor are we aware of any such proceedings that are contemplated by any civil entity, any regulatory agency or governmental
authority.
MARKET
PRICE OF AND DIVIDENDS ON COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
Market
Information
Our
Common Stock is quoted on the OTCBB under the symbol “FVTI”. Our Common Stock was not eligible to trade until February
22, 2016. There is a public trading market for our Common stock.
The
following table sets forth the quarterly high and low bid prices for the common stock from February 22, 2016 to November 30, 2017.
The prices set forth below represent inter-dealer quotations, without retail markup, markdown or commission and may not be reflective
of actual transactions.
|
|
High
|
|
|
Low
|
|
Quarter ended February 28, 2016
|
|
$
|
0.01
|
|
|
$
|
0.01
|
|
Quarter ended May 31, 2016
|
|
$
|
0.01
|
|
|
$
|
0.01
|
|
Quarter ended August 31, 2016
|
|
$
|
0.01
|
|
|
$
|
0.01
|
|
Quarter ended November 30, 2016
|
|
$
|
2.00
|
|
|
$
|
0.01
|
|
Quarter ended February 28, 2017
|
|
$
|
2.30
|
|
|
$
|
0.75
|
|
Quarter ended May 31, 2017
|
|
$
|
2.01
|
|
|
$
|
1.02
|
|
Quarter ended August 31, 2017
|
|
$
|
1.82
|
|
|
$
|
1.82
|
|
Quarter ended November 30, 2017
|
|
$
|
1.40
|
|
|
$
|
1.40
|
|
Holders
As of April 19, 2018, there were 27
stockholders of record, and an aggregate of 7,750,000 shares of our Common Stock was issued and outstanding.
Transfer
agent is Globex Transfer, LLC, at 780 Deltona Blvd. Deltona, FL 32725
Dividend
Policy
We
have never paid any cash dividends on our Common Stock and have no present intention of paying any dividends on Common Stock in
the foreseeable future. We intend to retain future earnings to fund ongoing operations and future capital requirements. Any future
determination to pay cash dividends will be at the discretion of our Board of Directors and will be dependent upon financial condition,
results of operations, capital requirements and such other factors as the Board of Directors deems relevant.
Equity
Compensation Plan Information
We
do not have in effect any compensation plans under which our equity securities are authorized for issuance and we do not have
any outstanding stock options.
RECENT
SALES OF UNREGISTERED SECURITIES
We
did not sell any equity securities which were not registered under the Securities Act during the year ended August 31, 2017 and
the quarter ended November 30, 2017 that were not otherwise disclosed on our quarterly reports on Form 10-Q or our current reports
on Form 8-K filed during the year ended August 31, 2017, and any Form 10-Q subsequent to that date.
DESCRIPTION
OF SECURITIES
The
authorized capital stock of our company consists of 3,000,000,000 of common stock, at $0.001 par value.
Common
Stock
The
holders of outstanding shares of Common Stock are entitled to receive dividends out of assets or funds legally available for the
payment of dividends of such times and in such amounts as the board from time to time may determine. Holders of Common Stock are
entitled to one vote for each share held on all matters submitted to a vote of stockholders. There is no cumulative voting of
the election of directors then standing for election. The Common Stock is not entitled to pre-emptive rights and is not subject
to conversion or redemption. Upon liquidation, dissolution or winding up of our company, the assets legally available for distribution
to stockholders are distributable ratably among the holders of the Common Stock after payment of liquidation preferences, if any,
on any outstanding payment of other claims of creditors. Each outstanding share of Common Stock is duly and validly issued, fully
paid and non-assessable.
Other
Securities
As
of the date hereof, the Company does not have any other securities outstanding.
Transfer
Agent
The
transfer agent of our Common Stock is Globex Transfer. LLC. The transfer agent’s address at 780 Deltona Blvd, Suite 202
Deltona, FL 32725
INDEMNIFICATION
OF DIRECTORS AND OFFICERS
Nevada
Corporation Law, our Articles of Incorporation and Bylaws allow us to indemnify our officers and directors from certain liabilities
and our Bylaws state that we shall indemnify every (i) present or former director or officer of us, (ii) any person who while
serving in any of the capacities referred to in clause (i) served at our request as a director, officer, partner, venturer, proprietor,
trustee, employee, agent or similar functionary of another foreign or domestic corporation, partnership, joint venture, trust,
employee benefit plan or other enterprise, and (iii) any person nominated or designated by (or pursuant to authority granted by)
the Board of Directors or any committee thereof to serve in any of the capacities referred to in clauses (i) or (ii) (each an
“Indemnitee”).
Our
Bylaws provide that we shall indemnify an Indemnitee against all judgments, penalties (including excise and similar taxes), fines,
amounts paid in settlement and reasonable expenses actually incurred by the Indemnitee in connection with any proceeding in which
he was, is or is threatened to be named as defendant or respondent, or in which he was or is a witness without being named a defendant
or respondent, by reason, in whole or in part, of his serving or having served, or having been nominated or designated to serve,
if it is determined that the Indemnitee (a) conducted himself in good faith, (b) reasonably believed, in the case of conduct in
his official capacity, that his conduct was in our best interests and, in all other cases, that his conduct was at least not opposed
to our best interests, and (c) in the case of any criminal proceeding, had no reasonable cause to believe that his conduct was
unlawful; provided, however, that in the event that an Indemnitee is found liable to us or is found liable on the basis that personal
benefit was improperly received by the Indemnitee, the indemnification (i) is limited to reasonable expenses actually incurred
by the Indemnitee in connection with the proceeding and (ii) shall not be made in respect of any proceeding in which the Indemnitee
shall have been found liable for willful or intentional misconduct in the performance of his duty to us.
Other
than in the limited situation described above, our Bylaws provide that no indemnification shall be made in respect to any proceeding
in which such Indemnitee has been (a) found liable on the basis that personal benefit was improperly received by him, whether
or not the benefit resulted from an action taken in the Indemnitee’s official capacity, or (b) found liable to us. The termination
of any proceeding by judgment, order, settlement or conviction, or on a plea of nolo contendere or its equivalent, is not of itself
determinative that the Indemnitee did not meet the requirements set forth in clauses (a) or (b) above. An Indemnitee shall be
deemed to have been found liable in respect of any claim, issue or matter only after the Indemnitee shall have been so adjudged
by a court of competent jurisdiction after exhaustion of all appeals therefrom. Reasonable expenses shall, include, without limitation,
all court costs and all fees and disbursements of attorneys for the Indemnitee. The indemnification provided shall be applicable
whether or not negligence or gross negligence of the Indemnitee is alleged or proven.
In
addition to our Bylaws and our Articles of Incorporation, we have entered into an Indemnification Agreement with each of our directors
pursuant to which we will be obligated to maintain liability insurance in favor of the directors serving the Company and its subsidiaries
and affiliates. We will also be required to indemnify, and to advance expenses on behalf of, such persons to the fullest extent
permitted by applicable law and our governing documents. We believe that entering into the contemplated agreements will help attract
and retain highly competent and qualified persons to serve the Company.
Other
than discussed above, none of our Bylaws, our Articles of Incorporation or any indemnification agreement with any director of
the Company includes any specific indemnification provisions for our officers or directors against liability under the Securities
Act. Additionally, insofar as indemnification for liabilities arising under the Securities Act may be permitted to directors,
officers and controlling persons of the Company pursuant to the foregoing provisions, or otherwise, the Company has been advised
that, in the opinion of the United States SEC, such indemnification is against public policy as expressed in the Securities Act
and is, therefore, unenforceable.
ADDITIONAL
INFORMATION
We
are required to file quarterly, annual and current reports. The Company files its reports electronically with the SEC. The SEC
maintains an Internet site that contains reports, proxy and information statements, and other electronic information regarding
issuers that file electronically with the SEC at http://www.sec.gov.
Item
3.02 SHARES ISSUED IN CONNECTION WITH THE SALE AND PURCHASE AGREEMENT
On April 19, 2018, pursuant to the
terms of the Share Exchange, all of the shares of DIGL were exchanged for 300,000,000 shares of our Common Stock. This transaction
was exempt from registration pursuant to Section 4(a)(2) of the Securities Act as not involving any public offering and/or Regulation
S under the Securities Act. None of the shares of our Common Stock were sold through an underwriter and accordingly, there were
no discounts or commissions involved.
Except
for the Share Exchange, DIGL had no unregistered sales of securities in the past three years.
On
July 29, 2015, the Company issued 1,450,000 common shares at $0.01 per share for proceeds of $14,500.
On
August 18, 2015, the Company issued 1,300,000 common shares at $0.01 per share for proceeds of $13,000.
On
August 3, 2016, Gordon Hum and Edwin Jong entered into a Stock Purchase Agreement (the “Stock Purchase Agreement”),
pursuant to which they agreed to sell to sixteen (16) unrelated third parties (collectively, the “Purchasers”), Five
Million Shares of common stock of Crypto-Services, Inc., a Nevada corporation (the “Company”), for aggregate cash
consideration of Fifty Thousand Dollars ($50,000).