UNITED
STATES
SECURITIES
AND EXCHANGE COMMISSION
Washington,
D.C. 20549
FORM
10 – Q
[X]
|
QUARTERLY
REPORT UNDER SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934
|
For
the quarterly period ended: June 30, 2018
[ ]
|
TRANSITION
REPORT UNDER SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934
|
Commission
File Number 000-55555
FORTUNE
VALLEY TREASURES, INC.
(Exact
name of registrant as specified in its charter)
Nevada
|
|
32-0439333
|
(State
or other jurisdiction of
incorporation
or organization)
|
|
(IRS
Employer
Identification
Number)
|
No.10
of Tuanjie 2nd Road,Beice,
Humen,Dongguan,
518000, China
(Address
of principal executive offices including zip code)
(86)
76982268999
(Registrant’s
telephone number, including area code)
Indicate
by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Exchange Act
during the past 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been
subject to such filing requirements for the past 90 days.
Yes
[X] No [ ]
Indicate
by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive
Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the
preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).
Yes
[X] No [ ]
Indicate
by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting
company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,”
“smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
Large
Accelerated Filer [ ]
|
Accelerated
Filer [ ]
|
Non-Accelerated
Filer [ ]
|
Smaller
reporting company [X]
|
(Do
not check if a smaller reporting company)
|
Emerging
growth company [X]
|
If
an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for
complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. [ ]
Indicate
by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).
Yes
[ ] No [X]
The
number of shares outstanding of each of the issuer’s classes of common stock, as of August 20, 2018 is as follows:
Class
of Securities
|
|
|
Shares
Outstanding
|
|
Common
Stock, $0.001 par value
|
|
|
|
307,750,000
|
|
Fortune
Valley Treasures, Inc.
Note
Regarding Forward-Looking Statements
This
Report on Form 10-Q contains “forward-looking statements” within the meaning of Section 27A of the Securities Act
of 1933, as amended (the “Securities Act”), and Section 21E of the Securities Exchange Act of 1934, as amended (the
“Exchange Act”). In particular, statements contained in this Report Form 10-Q, including but not limited to, the sufficiency
of our cash, our ability to finance our operations and business initiatives and obtain funding for such activities; our future
results of operations and financial position, business strategy and plan prospects, or costs and objectives of management for
future acquisitions, are forward-looking statements. These forward-looking statements relate to our future plans, objectives,
expectations and intentions and may be identified by words such as “may,” “will,” “should,”
“expects,” “plans,” “anticipates,” “intends,” “targets,” “projects,”
“contemplates,” “believes,” “seeks,” “goals,” “estimates,” “predicts,”
“potential” and “continue” or similar words. Readers are cautioned that these forward-looking statements
are based on our current beliefs, expectations and assumptions and are subject to risks, uncertainties, and assumptions that are
difficult to predict, including those identified below, under Part II, Item 1A. “Risk Factors” and elsewhere in this
Report on Form 10-Q. Therefore, actual results may differ materially and adversely from those expressed, projected or implied
in any forward-looking statements. We undertake no obligation to revise or update any forward-looking statements for any reason.
USE
OF CERTAIN DEFINED TERMS
In
addition, unless the context otherwise requires and for the purposes of this report only, references to:
|
●
|
“we,”
“us,” “our,” or “our company,” the “Company” are relevant to the combined
business of Fortune Valley Treasures, Inc., a Nevada corporation, and its consolidated subsidiaries and variable interest
entities;
|
|
|
|
|
●
|
“FVTI”
are to Fortune Valley Treasures, Inc., a Nevada corporation.
|
|
|
|
|
●
|
“DIGL”
are to DaXingHuaShang Investment Group Limited, a Republic of Seychelles company and wholly-owned subsidiary of FVTI;
|
|
|
|
|
●
|
“DIL”
are to DaXingHuaShang Investment (Hong Kong) Limited, a Hong Kong company and wholly-owned subsidiary of DIGL;
|
|
|
|
|
●
|
“Qianhai
DaXing” are to Qianhai DaXingHuaShang Investment (Shenzhen) Co. Ltd., a Peoples Republic of China company and wholly-owned
subsidiary of DIL;
|
|
|
|
|
●
|
“FVI”
are to Dongguan City France Vin Tout Ltd
.,
a PRC company and wholly-owned subsidiary
of Qianhai DaXing;
|
|
|
|
|
●
|
“Hong
Kong” are to the Hong Kong Special Administrative Region of the People’s Republic of China;
|
|
|
|
|
●
|
“China”
and “PRC” are to the People’s Republic of China;
|
|
|
|
|
●
|
“Renminbi”
and “RMB” are to the legal currency of China;
|
|
|
|
|
●
|
“U.S.
dollars,” “dollars” and “$” are to the legal currency of the United States;
|
|
|
|
|
●
|
“SEC”
are to the U.S. Securities and Exchange Commission;
|
|
|
|
|
●
|
“Exchange
Act” are to the Securities Exchange Act of 1934, as amended; and
|
|
|
|
|
●
|
“Securities
Act” are to the Securities Act of 1933, as amended.
|
Fortune
Valley Treasures, Inc.
Index
Item
1.
Fortune
Valley Treasures, Inc.
Financial
Statements
June
30, 2018
(Unaudited)
FORTUNE
VALLEY TREASURES, INC.
CONSOLIDATED
BALANCE SHEETS
AT
JUNE 30, 2018 AND DECEMBER 31, 2017
|
|
June 30, 2018
(Unaudited)
|
|
|
December 31, 2017
(Restated)
|
|
Assets
|
|
|
|
|
|
|
|
|
Current assets
|
|
|
|
|
|
|
|
|
Cash and cash equivalents
|
|
$
|
29,312
|
|
|
$
|
77,782
|
|
Accounts and other receivable, net
|
|
|
21,464
|
|
|
|
15,317
|
|
Inventories
|
|
|
265,760
|
|
|
|
273,491
|
|
Prepaid expenses
|
|
|
14,500
|
|
|
|
5,895
|
|
Due from related parties
|
|
|
33,841
|
|
|
|
40,126
|
|
Prepaid taxes and taxes recoverable
|
|
|
2,670
|
|
|
|
751
|
|
Total current assets
|
|
$
|
367,547
|
|
|
$
|
413,362
|
|
|
|
|
|
|
|
|
|
|
Non-current assets
|
|
|
|
|
|
|
|
|
Plant and equipment, net
|
|
|
10,757
|
|
|
|
13,824
|
|
Total Assets
|
|
$
|
378,304
|
|
|
$
|
427,186
|
|
|
|
|
|
|
|
|
|
|
Liabilities and Stockholders’ Equity
|
|
|
|
|
|
|
|
|
Current liabilities
|
|
|
|
|
|
|
|
|
Accounts and taxes payable
|
|
|
36,352
|
|
|
|
44,188
|
|
Accrued liabilities and other payables
|
|
|
303
|
|
|
|
2,175
|
|
Customers advances and deposits
|
|
|
44,497
|
|
|
|
11,697
|
|
Due to related parties
|
|
|
587,144
|
|
|
|
500,608
|
|
Total current liabilities
|
|
$
|
668,296
|
|
|
$
|
558,668
|
|
|
|
|
|
|
|
|
|
|
Total Liabilities
|
|
$
|
668,296
|
|
|
$
|
558,668
|
|
|
|
|
|
|
|
|
|
|
Stockholders’ Equity
|
|
|
|
|
|
|
|
|
Common stock (3,000,000,000 shares authorized, 307,750,000 issued and outstanding at December June 30, 2018 and 2017)
|
|
|
307,750
|
|
|
|
307,750
|
|
Additional paid in capital
|
|
|
-
|
|
|
|
-
|
|
Accumulated deficit
|
|
|
(607,294
|
)
|
|
|
(445,673
|
)
|
Accumulated other comprehensive income
|
|
|
9,552
|
|
|
|
6,441
|
|
Total Stockholders’ Deficit
|
|
|
(289,992
|
)
|
|
|
(131,482
|
)
|
|
|
|
|
|
|
|
|
|
Total Liabilities and Stockholders’ Equity
|
|
|
378,304
|
|
|
|
427,186
|
|
See
accompanying notes to the financial statements
Fortune
Valley Treasures, Inc.
Consolidated
Statements of Operations and Comprehensive Loss
For
the three months and six months ended June 30, 2018 and 2017
(Unaudited)
|
|
Three Months Ended
|
|
|
Six Months Ended
|
|
|
|
June 30, 2018
|
|
|
June 30, 2017
|
|
|
June 30, 2018
|
|
|
June 30, 2017
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net revenues (related party revenue $0 and $0 for 2018 and 2017)
|
|
$
|
14,226
|
|
|
$
|
7,109
|
|
|
$
|
27,973
|
|
|
$
|
25,376
|
|
Cost of revenues
|
|
|
9,574
|
|
|
|
4,206
|
|
|
|
17,133
|
|
|
|
13,370
|
|
Gross profit
|
|
|
4,652
|
|
|
|
2,903
|
|
|
|
10,840
|
|
|
|
12,006
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Selling, general
and administrative expenses
|
|
|
70,771
|
|
|
|
49,541
|
|
|
|
173,881
|
|
|
|
96,846
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating loss
|
|
|
(66,119
|
)
|
|
|
(46,638
|
)
|
|
|
(163,041
|
)
|
|
|
(86,102
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other income (expenses):
|
|
|
1,475
|
|
|
|
-
|
|
|
|
1,475
|
|
|
|
|
|
Interest income
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
Interest expense
|
|
|
-
|
|
|
|
(201
|
)
|
|
|
-
|
|
|
|
(201
|
)
|
|
|
|
1,475
|
|
|
|
(201
|
)
|
|
|
1,475
|
|
|
|
(201
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Earnings before tax
|
|
|
(64,644
|
)
|
|
|
(46,839
|
)
|
|
|
(161,566
|
)
|
|
|
(86,303
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income tax
|
|
|
-
|
|
|
|
376
|
|
|
|
-
|
|
|
|
376
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss
|
|
$
|
(64,644
|
)
|
|
$
|
(47,215
|
)
|
|
$
|
(161,566
|
)
|
|
$
|
(86,679
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other comprehensive income:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Foreign currency translation gain
|
|
|
4,942
|
|
|
|
(2,074
|
)
|
|
|
3,414
|
|
|
|
(2,144
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Comprehensive loss
|
|
$
|
(59,702
|
)
|
|
$
|
(49,289
|
)
|
|
$
|
(158,152
|
)
|
|
$
|
(88,825
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loss per share
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic and diluted earnings per share
|
|
$
|
(0.00
|
)
|
|
$
|
(0.00
|
)
|
|
$
|
(0.00
|
)
|
|
$
|
(0.00
|
)
|
Basic and diluted weighted average shares outstanding
|
|
|
307,750,000
|
|
|
|
307,750,000
|
|
|
|
307,750,000
|
|
|
|
307,750,000
|
|
See
accompanying notes to the financial statements
Fortune
Valley Treasures, Inc.
Consolidated
Statements of Cash Flows
For
the Six months ended June 30, 2018 and 2017
(Unaudited)
|
|
For the Six Months Ended
|
|
|
|
June 30, 2018
|
|
|
June 30, 2017
|
|
Cash flows from operating activities
|
|
|
|
|
|
|
|
|
Net loss
|
|
$
|
(161,566
|
)
|
|
$
|
(86,679
|
)
|
Depreciation of fixed assets
|
|
|
3,470
|
|
|
|
3,240
|
|
Increase in accounts and other receivables
|
|
|
(6,438
|
)
|
|
|
(10,688
|
)
|
Increase (decrease) in inventories
|
|
|
13,943
|
|
|
|
(12,808
|
)
|
Increase (decrease) in advances and prepayments to suppliers
|
|
|
23,233
|
|
|
|
(5,372
|
)
|
(Decrease) increase
in accounts and other payables and accruals
|
|
|
(10,812
|
)
|
|
|
7,035
|
|
Net cash used in operating activities
|
|
|
(138,170
|
)
|
|
|
(105,271
|
)
|
|
|
|
|
|
|
|
|
|
Cash flows from investing activities
|
|
|
|
|
|
|
|
|
Purchase of plant and equipment
|
|
|
-
|
|
|
|
-
|
|
Net cash used in investing activities
|
|
|
-
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
Cash flows from financing activities
|
|
|
|
|
|
|
|
|
Proceeds of owners’ injection of capital
|
|
|
-
|
|
|
|
-
|
|
Borrowing and payments to related parties, net
|
|
|
86,193
|
|
|
|
86,277
|
|
Net cash provided by financing activities
|
|
|
86,193
|
|
|
|
86,277
|
|
|
|
|
|
|
|
|
|
|
Net decrease of cash and cash equivalents
|
|
|
(51,977
|
)
|
|
|
(18,944
|
)
|
|
|
|
|
|
|
|
|
|
Effect of foreign currency translation on cash and cash equivalents
|
|
|
3,507
|
|
|
|
709
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents–beginning of period
|
|
|
77,782
|
|
|
|
103,966
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents–end of period
|
|
$
|
29,312
|
|
|
$
|
85,681
|
|
|
|
|
|
|
|
|
|
|
Supplementary cash flow information:
|
|
|
|
|
|
|
|
|
Interest received
|
|
$
|
-
|
|
|
$
|
-
|
|
Interest paid
|
|
$
|
-
|
|
|
$
|
-
|
|
Income taxes paid
|
|
$
|
-
|
|
|
$
|
-
|
|
See
accompanying notes to the financial statements
NOTE
1 - ORGANIZATION AND DESCRIPTION OF BUSINESS
Fortune Valley Treasures, Inc. (formerly Crypto-Services,
Inc.) was incorporated in the State of Nevada on March 21, 2014. The Company’s current primary business operations of wholesale
distribution and retail sales of alcoholic beverages consisting of wine and distilled liquors are conducted through its
subsidiaries in the People’s Republic of China (“PRC”).
On
January 5, 2018, the Company’s board of directors unanimously approved to modify the Company’s accounting fiscal year
end from August 31 to December 31. On January 29, 2018, the Company filed a Certificate of Amendment with the State of Nevada
to increase its authorized shares to 3,000,000,000.
On
April 11, 2018, the Company entered into share exchange agreement by and among DaXingHuaShang Investment Group Limited (“DIGLS”)
and its shareholders: 1.) Yumin Lin, 2.) Gaosheng Group Co., Ltd. and 3.) China Kaipeng Group Co., Ltd whereby the Company newly
issued 300,000,000 shares of its common stock in exchange for all the outstanding shares in DIGLS. This transaction has been accounted
for a reverse takeover transaction and a recapitalization of the Company whereby the Company, the legal acquirer, is the accounting
acquiree, and DIGLS, the legal acquiree, is the accounting acquirer; accordingly, the Company historical statement of stockholders’
equity has been retroactively restated to the first period presented.
DIGLS
was incorporated with limited liability in the Republic of Seychelles on July 4, 2016, with a share capital of $100,000 divided
into 250,000,000 ordinary shares with $0.0004 par value. DIGLS wholly owns DaXingHuaShang Investment (Hong Kong) Limited (“DILHK”).
DILHK was incorporated in Hong Kong on June 22, 2016 as an investment holding company with limited liability. DILHK was previously
wholly owned by Mr. Yumin Lin. On November 11, 2016, Mr. Yumin Lin, transferred 100% of his ownership in DILHK to DIGLS. DILHK
wholly owns Qianhai DaXingHuaShang Investment (Shenzhen)Co. Ltd. (“QHDX”) which was incorporated with limited liability
on November 3, 2016 in the PRC as a wholly foreign-owned enterprise. QHDX wholly owns Dongguan City France Vin Tout Ltd. (“FVTL”).
FTVL was incorporated on May 31, 2011 in the PRC with limited liability. FTVL was previously owned and controlled by Mr. Yumin
Lin. FTVL has been a license to sell foods up through September 10, 2022. On November 20, 2016, Mr. Yumin Lin transferred his
ownership in FTVL to QHDX for nominal consideration. The share transfers detailed above by and among Mr. Yumin Lin, DIGLS, DILHK,
QHDX, and FVTL have been accounted for as a series of business combination of entities under common control; accordingly, the
values in these financial statements reflect the carrying values of those entities, and no goodwill was recorded as a result of
these transactions.
NOTE
2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis
of presentation
These
consolidated financial statements, accompanying notes, and related disclosures have been prepared pursuant to the rules and regulations
of the U.S. Securities and Exchange Commission (“SEC”). These financial statements have been prepared using the accrual
basis of accounting in accordance with the generally accepted accounting principles (“GAAP”) in the United States.
The Company’s fiscal year end is December 31. The Company’s financial statements are presented in US dollars.
Basis
of consolidation
The
consolidated financial statements include the accounts of the Company and its subsidiaries. All intercompany accounts and transactions
have been eliminated.
Entity Name
|
|
Incorporation date
|
|
Entity Owned By
|
|
Nature of Operation
|
|
Country of Incorporation
|
DaXingHuaShang Investment Group Limited
|
|
July 4, 2016
|
|
FVTI
|
|
Investment holding
|
|
Seychelles
|
|
|
|
|
|
|
|
|
|
DaXingHuaShang Investment (Hong Kong) Ltd (“DILHK”)
|
|
June 22, 2016
|
|
DIGLS
|
|
Investment holding
|
|
Hong Kong, China
|
|
|
|
|
|
|
|
|
|
Qianhai DaXingHuaShang Investment (Shenzhen) Co. Ltd. (“QHDX”)
|
|
November 3, 2016
|
|
DILHK
|
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Investment holding
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China
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Dongguan City France Vin Tout Ltd. (“FVTL”)
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May 31, 2011
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QHDX
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Trading of wine
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China
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Use
of estimates
The
preparation of financial statements in conformity with accounting principles generally accepted in the United States of America
requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure
of contingent assets and liabilities at the date of the financial statements. The estimates and judgments will also affect the
reported amounts for certain revenues and expenses during the reporting period. Actual results may materially differ from these
estimates.
Foreign
currency translation and re-measurement
The
Company translates its foreign operations to the U.S. dollar in accordance with ASC 830, “
Foreign Currency Matters
”.
The
reporting currency for the Company and its subsidiaries is the US dollar. The Company’s, DIGLS’, and DILH’s
functional currency is the U.S. dollar; QHDX and FVTL use the Chinese Renminbi (“RMB”) as their functional currency.
The
Company’s subsidiaries, whose records are not maintained in that company’s functional currency, re-measure their records
into their functional currency as follows:
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Monetary
assets and liabilities at exchange rates in effect at the end of each period
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Nonmonetary
assets and liabilities at historical rates
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Revenue
and expense items at the average rate of exchange prevailing during the period
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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:
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●
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Assets
and liabilities at the rate of exchange in effect at the balance sheet date
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●
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Equities
at the historical rate
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●
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Revenue
and expense items at the average rate of exchange prevailing during the period
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Adjustments
arising from such translations are included in accumulated other comprehensive income in shareholders’ equity.
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June 30, 2018
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December 31, 2017
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June 30, 2017
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Spot RMB: USD exchange rate
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$
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0.1511
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0.14415
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$
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0.1476
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Average RMB: USD exchange rate
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$
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0.1549
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0.15031
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$
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0.1461
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The
RMB is not freely convertible into foreign currency and all foreign exchange transactions must take place through authorized institutions.
No representation is made that the RMB amounts could have been, or could be, converted into US Dollars at the rates used in translation.
Cash
and cash equivalents
Cash
and cash equivalents include cash on hand, deposits in banks, and any investments with maturities with less three months from
inception to maturity. The Company’s primary bank deposits are located in the Hong Kong and the PRC; those deposits are
not provided protection under FDIC insurance; however, management has determined that the risk of loss from insolvency by those
financial institution at which it has deposited it funds is insignificant.
Accounts
receivable
Accounts
receivable are carried at the amounts invoiced to customers less allowance for doubtful accounts. The allowance is an estimate
based on a review of individual customer accounts on a regular basis. Accounts receivable are written off when deemed uncollectible.
Recoveries of accounts receivable previously written off are recorded when received.
The
Company reviews the collectability of accounts receivable based on an assessment of historical experience, current economic conditions,
and other collection indicators.
During
the two years ended December 31, 2017 and the six months ended June 30, 2018, the Company did not experience any delinquent or
uncollectible balances; accordingly, the Company did not record any valuation allowance for bad debt during this period.
Inventories
Inventories
consisting of finished goods are stated at the lower of cost or market value. The Company used the weighted average cost method
of accounting for inventory. Inventories on hand are evaluated on an on-going basis to determine if any items are obsolete, spoiled,
or in excess of future demand. The Company provides impairment that is charged directly to cost of sales when is has been determined
the product is obsolete, spoiled, and the Company will not be able to sell it at a normal profit above its carrying cost. The
Company’s primary products are alcoholic beverages; the selling price of alcoholic beverages tend to increase over time;
however, there are circumstances where alcoholic beverages may be subject to spoilage if stored for prolong periods of time. The
Company did not experience an impairment on inventory during the six months ended June 30, 2018.
Advances
and prepayments to suppliers
In
certain instances, in order to secure the supply of limited and sought-after wines and liquors, the Company will make advance
payments to suppliers for the procurement of inventory. Upon physical receipt and inspection of such products from those suppliers,
the applicable balances are reclassified from advances and prepayments to suppliers to inventory.
Property,
plant and equipment
Equipment
is carried at cost less accumulated depreciation. Depreciation is provided over their estimated useful lives, using the straight-line
method. Estimated useful lives of the equipment are as follows:
The
cost of maintenance and repairs is charged to expenses as incurred, whereas significant renewals and betterments are capitalized.
Accounting
for long-lived assets
The
Company annually reviews its long-lived assets for impairment or whenever events or changes in circumstances indicate that the
carrying amount of assets may not be recoverable. Impairment may be the result of becoming obsolete from a change in the industry
or new technologies. Impairment is present if the carrying amount of an asset is less than its undiscounted cash flows to be generated.
If
an asset is considered impaired, a loss is recognized based on the amount by which the carrying amount exceeds the fair market
value of the asset. Assets to be disposed of are reported at the lower of the carrying amount or fair value less costs to sell.
Customer
advances and deposits
On
certain occasions, the Company may receive prepayments from downstream retailers or retails customer for wines and liquor prior
to their taking possession of the Company’s products; the Company records these receipts as customer advances and deposits
until it has met all the criteria for recognition of revenue including the passing possession of the products to its customer,
at such point Company will reduce the customer and deposits balance and credit the Company’s revenues.
Revenue
recognition
Revenues
are recognized when the Company has negotiated the terms of the transaction, which includes determining and fixing the sales price,
the transfer of possession of the product to the customer, the customer does not have the right to return the product, the customer
is able to further sell or transfer the product onto others for economic benefit without any other obligation to be fulfilled
by the Company, and the Company is reasonably assured that funds have been or will be collected from the customer. The Company’s
gross revenue consists the value of goods invoiced, net of any value-added tax (VAT) or excise tax.
Advertising
All advertising costs are expensed as incurred.
Advertising expense for the three and six months ended June 30, 2018 and June 30, 2017 were $0 and 0, respectively.
Shipping
and handling
Outbound
shipping and handling are expensed as incurred.
Retirement
benefits
Retirement
benefits in the form of mandatory government sponsored defined contribution plans are charged to the either expenses as incurred
or allocated to inventory as a part of overhead.
Income
taxes
The
Company accounts for income tax using an asset and liability approach and allows for recognition of deferred tax benefits in future
years. Under the asset and liability approach, deferred taxes are provided for the net tax effects of temporary differences between
the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes.
A valuation allowance is provided for deferred tax assets if it is more likely than not these items will either expire before
the Company is able to realize their benefits, or that future realization is uncertain.
Statutory
reserves
Statutory
reserves are referring to the amount appropriated from the net income in accordance with laws or regulations, which can be used
to recover losses and increase capital, as approved, and are to be used to expand production or operations. PRC laws prescribe
that an enterprise operating at a profit must appropriate and reserve, on an annual basis, an amount equal to 10% of its profit.
Such an appropriation is necessary until the reserve reaches a maximum that is equal to 50% of the enterprise’s PRC registered
capital.
Earnings
per share
The
Company computes earnings per share (“EPS”) in accordance with ASC Topic 260, “Earnings per share”. Basic
EPS is measured as the income or loss available to common shareholders divided by the weighted average common shares outstanding
for the period. Diluted EPS is similar to basic EPS but presents the dilutive effect on a per share basis of potential common
shares (e.g., convertible securities, options, and warrants) as if they had been converted at the beginning of the periods presented,
or issuance date, if later. Potential common shares that have an anti-dilutive effect (i.e. those that increase income per share
or decrease loss per share) are excluded from the calculation of diluted EPS.
Financial
instruments
The
Company’s accounts for financial instruments in accordance to ASC Topic 820, “Fair Value Measurements and Disclosures,”
which requires disclosure of the fair value of financial instruments held by the Company and ASC Topic 825, “Financial Instruments,”
which defines fair value, and establishes a three-level valuation hierarchy for disclosures of fair value measurement that enhances
disclosure requirements for fair value measures. The carrying amounts reported in the consolidated balance sheets for receivables
and current liabilities each qualify as financial instruments and are a reasonable estimate of their fair values because of the
short period of time between the origination of such instruments and their expected realization and their current market rate
of interest. The three levels of valuation hierarchy are defined as follows:
●
Level 1 inputs to the valuation methodology are quoted prices for identical assets or liabilities in active markets.
●
Level 2 inputs to the valuation methodology include quoted prices for similar assets and liabilities in active markets, and inputs
that are observable for the asset or liability, either directly or indirectly, for substantially the full term of the financial
instrument.
●
Level 3 inputs to the valuation methodology are unobservable and significant to the fair value measurement.
Commitments
and contingencies
Liabilities
for loss contingencies arising from claims, assessments, litigation, fines and penalties and other sources are recorded when it
is probable that a liability has been incurred and the amount of the assessment can be reasonably estimated.
Comprehensive
income
Comprehensive
income is defined to include all changes in equity except those resulting from investments by owners and distributions to owners.
Among other disclosures, all items that are required to be recognized under current accounting standards as components of comprehensive
income are required to be reported in a financial statement that is presented with the same prominence as other financial statements.
The Company’s current component of other comprehensive income includes the foreign currency translation adjustment and unrealized
gain or loss.
Goodwill
Goodwill
represents the excess of the purchase price over the fair value of the net tangible and identifiable assets acquired in a business
combination. In accordance with FASB ASC Topic 350, “Goodwill and Other Intangible Assets”, goodwill is no longer
subject to amortization. Rather, goodwill is subject to at least an annual assessment for impairment, applying a fair-value based
test. Fair value is generally determined using a discounted cash flow analysis.
Recent
accounting pronouncements
On
January 5, 2016, the FASB issued ASU 2016-01 “Financial Instruments—Overall (Subtopic 825-10): Recognition and Measurement
of Financial Assets and Financial Liabilities”, which amends the guidance in U.S. GAAP on the classification and measurement
of financial instruments. Although the ASU retains many current requirements, it significantly revises an entity’s accounting
related to (1) the classification and measurement of investments in equity securities and (2) the presentation of certain fair
value changes for financial liabilities measured at fair value. The ASU also amends certain disclosure requirements associated
with the fair value of financial instruments. The new standard is effective for fiscal years and interim periods within those
fiscal years beginning after December 15, 2017. Management has determined that the new pronouncement did not have a material impact
on these financial statements.
On
February 25, 2016, the FASB issued ASU 2016-02 “Leases (Topic 842)”, its new standard on accounting for leases. ASU
2016-02 introduces a lessee model that brings most leases on the balance sheet. The new standard also aligns many of the underlying
principles of the new lessor model with those in ASC 606, the FASB’s new revenue recognition standard (e.g., those related
to evaluating when profit can be recognized). Furthermore, the ASU addresses other concerns related to the current leases model.
For example, the ASU eliminates the requirement in current U.S. GAAP for an entity to use bright-line tests in determining lease
classification. The standard also requires lessors to increase the transparency of their exposure to changes in value of their
residual assets and how they manage that exposure. The new model represents a wholesale change to lease accounting. As a result,
entities will face significant implementation challenges during the transition period and beyond, such as those related to:
Applying
judgment and estimating.
●
Managing the complexities of data collection, storage, and maintenance.
●
Enhancing information technology systems to ensure their ability to perform the calculations necessary for compliance with reporting
requirements.
●
Refining internal controls and other business processes related to leases.
●
Determining whether debt covenants are likely to be affected and, if so, working with lenders to avoid violations.
●
Addressing any income tax implications.
The
new guidance will be effective for public business entities for annual periods beginning after December 15, 2018 (e.g., calendar
periods beginning on January 1, 2019), and interim periods therein. Management is still evaluating the accounting impact of the
new pronouncement.
On
March 15, 2016, the FASB issued ASU 2016-07 “Investments—Equity Method and Joint Ventures (Topic 323): Simplifying
the Transition to the Equity Method of Accounting”, which simplifies the equity method of accounting by eliminating the
requirement to retrospectively apply the equity method to an investment that subsequently qualifies for such accounting as a result
of an increase in the level of ownership interest or degree of influence. Consequently, when an investment qualifies for the equity
method (as a result of an increase in the level of ownership interest or degree of influence), the cost of acquiring the additional
interest in the investee would be added to the current basis of the investor’s previously held interest and the equity method
would be applied subsequently from the date on which the investor obtains the ability to exercise significant influence over the
investee. The ASU further requires that unrealized holding gains or losses in accumulated other comprehensive income related to
an available-for-sale security that becomes eligible for the equity method be recognized in earnings as of the date on which the
investment qualifies for the equity method. The guidance in the ASU is effective for all entities for fiscal years beginning after
December 15, 2016, including interim periods within those fiscal years; early adoption is permitted for all entities. Entities
are required to apply the guidance prospectively to increases in the level of ownership interest or degree of influence occurring
after the ASU’s effective date. Additional transition disclosures are not required upon adoption. Management has determined
that new pronouncement did not have a material effect on these financial statements.
On
March 17, 2016, the FASB issued ASU 2016-08 “Revenue from Contracts with Customers (Topic 606): Principal versus Agent Considerations
(Reporting Revenue Gross versus Net)”, which amends the principal-versus-agent implementation guidance and illustrations
in the Board’s new revenue standard (ASU 2014-09). The FASB issued the ASU in response to concerns identified by stakeholders,
including those related to (1) determining the appropriate unit of account under the revenue standard’s principal-versus-agent
guidance and (2) applying the indicators of whether an entity is a principal or an agent in accordance with the revenue standard’s
control principle. Among other things, the ASU clarifies that an entity should evaluate whether it is the principal or the agent
for each specified good or service promised in a contract with a customer. As defined in the ASU, a specified good or service
is “a distinct good or service (or a distinct bundle of goods or services) to be provided to the customer.” Therefore,
for contracts involving more than one specified good or service, the entity may be the principal for one or more specified goods
or services and the agent for others. The ASU has the same effective date as the new revenue standard (as amended by the one-year
deferral and the early adoption provisions in ASU 2015-14). In addition, entities are required to adopt the ASU by using the same
transition method they used to adopt the new revenue standard. The Company has determined that it acts as a principal in
its primary business operations.
On
March 30, 2016, the FASB issued ASU 2016-09 “Compensation—Stock Compensation (Topic 718): Improvements to Employee
Share-Based Payment Accounting”, which simplifies several aspects of the accounting for employee share-based payment
transactions for both public and nonpublic entities, including the accounting for income taxes, forfeitures, and statutory tax
withholding requirements, as well as classification in the statement of cash flows. The ASU is for annual reporting periods beginning
after December 15, 2016, including interim periods within those annual reporting periods. Management has determined that the new
standard did not have a material impact on these financial statements.
The
Company is currently assessing the above the accounting pronouncements and their potential impact from their adoption on the financial
statements.
NOTE
3 - GOING CONCERN
The accompanying financial statements have
been prepared in conformity with generally accepted accounting principles which contemplate continuation of the Company as a going-concern
basis. The going-concern basis assumes that assets are realized, and liabilities are settled in the ordinary course of business
at amounts disclosed in the financial statements. The Company’s ability to continue as a going concern depends upon its
ability to market and sell its products to generate positive operating cash flows. As of June 30, 2018 and December 31, 2017,
the Company reported accumulated deficits of $607,294 and $445,673, respectively. As of June 30, 2018, the Company
had working capital deficit of approximately $300,749. In addition, the Company had net cash outflows of $138,170 from
operating activities during the six months June 30, 2018. These conditions continue to raise substantial doubt as to whether
the Company will continue as a going concern.
In an effort to improve its financial position,
the Company is working to obtain new working capital through the sale of equity or debt securities to investors for cash to fund
operations and further expansion. The Company also relies on relates parties to provided financing and management services at
cost that may not be the prevailing market rate for such services.
If
the Company is not able to generate positive operating cash flows, raise additional capital, and retain the services of certain
related parties, it may become insolvent.
NOTE
4 - ACCOUNTS AND OTHER RECEIVABLES
Accounts
and other receivables consisted of the following as of June 30, 2018 and December 31, 2017:
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June
30, 2018
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December
31, 2017
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Gross
accounts and other receivables
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$
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21,464
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$
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15,317
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|
Less:
Allowance for doubtful accounts
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|
-
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|
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-
|
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$
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21,464
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$
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15,317
|
|
NOTE
5 – INVENTORIES
Inventories
consisted of the following as of June 30, 2018 and December 31, 2017:
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June
30, 2018
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|
December
31, 2017
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Finished
goods
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$
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265,760
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$
|
273,491
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NOTE
6 - EQUIPMENT
Property,
plant and equipment consisted of the following as of June 30, 2018 and December 31, 2017:
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June
30, 2018
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December
31, 2017
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At
Cost:
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Equipment
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64,853
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63,512
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Less:
Accumulated depreciation
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Equipment
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54,096
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49,688
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$
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10,757
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$
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13,824
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|
NOTE
7 - INCOME TAXES
The
Company’s primary operations are in the PRC, and the Company is taxed in accordance with the relevant tax laws and regulations.
The corporate income tax rate for each country is as follows:
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PRC
tax rate is 25%.
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●
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Hong
Kong tax rate is 16.5%
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●
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Seychelles
is on permanent tax holiday
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●
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USA
tax rate is 21%
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The
Company is registered the British Virgin Islands, which is a tax-exempt region.
The
following tables provide the reconciliation of the differences between the statutory and effective tax expenses for three months
ended June 30, 2018 and March 31, 2017:
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June
30, 2018
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June
30, 2017
|
|
Income
attributed to PRC operations
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$
|
(50,703
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)
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$
|
(24,789
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)
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Loss
attributed to Seychelles and HK
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(37
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)
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(56
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)
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Loss
attributed to US
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(13,978
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)
|
|
|
(22,482
|
)
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Loss
before tax
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|
|
(64,718
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)
|
|
|
(47,327
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)
|
|
|
|
|
|
|
|
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PRC
Statutory Tax at 25% Rate
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12,676
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|
6,197
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Effect
of Seychelles, PRC, HK, deductions and other reconciling items
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(12,676
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)
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(6,197
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)
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Income
tax
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$
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-
|
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|
$
|
-
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|
The
difference between the U.S. federal statutory income tax rate and the Company’s effective tax rate was as follows for three
months ended June 30, 2018 and 2017:
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June
30, 2018
|
|
|
June
30, 2017
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|
U.S.
federal statutory income tax rate
|
|
|
21.0
|
%
|
|
|
34.0
|
%
|
Lower
rates in PRC, net
|
|
|
-9.0
|
%
|
|
|
-9.0
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%
|
Net
operating losses in PRC and other jurisdictions
|
|
|
0.0
|
%
|
|
|
0.0
|
%
|
Unrecognized
deferred tax benefit
|
|
|
-12.0
|
%
|
|
|
-25.0
|
%
|
The
Company’s effective tax rate
|
|
|
0.0
|
%
|
|
|
0.0
|
%
|
NOTE
8- RELATED PARTY TRANSACTIONS
Amounts
due to related parties as of June 30, 2018 and December 31, 2017:
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|
|
June
30, 2018
|
|
|
December
31, 2017
|
|
|
|
|
|
|
|
|
(Restated)
|
|
Mr.
Yumin Lin
|
|
Director,
CEO, Shareholder
|
|
$
|
422,290
|
|
|
$
|
360,018
|
|
Mr.
Sheng
|
|
Former
Director of the Company
|
|
|
21,500
|
|
|
|
21,500
|
|
Ms.
Qingmei Lin
|
|
Mr.
Yumin Lin’s wife
|
|
|
15,869
|
|
|
|
25,902
|
|
Mr.
Naiyong Luo
|
|
Director
of DIGL
|
|
|
113,292
|
|
|
|
93,188
|
|
|
|
|
|
$
|
572,951
|
|
|
$
|
500,608
|
|
The
outstanding payables due to Mr. Yumin Lin are comprised of working capital advances and borrowings. These amounts are due on demand
and are non-interest bearing.
The
amounts due to Ms. Qingmei Lin are for office rental expenses. The Company’s operating facilities are located within a building
owned by Ms. Qingmei Lin.
The
amounts due to Mr Naiyong Luo are payments received in advanced for future purchases of products.
The
amounts due to Mr.Xinlong Sheng are comprised of working capital advances and borrowings. These amounts are due on demand
and are non-interest bearing.
NOTE
9 – LEASE COMMITMENTS
The
Company has a non-cancelable operating lease agreement with Ms. Qingmei Lin, a related party, for the premises in Dongguan
City, PRC. The term of the lease is from May 1, 2017 to April 30, 2027. The monthly rent expense was $3,811 (RMB 25,000), but
effective as of May 1,2018 was lowered to $2,323 (RMB15,000) based on agreement between Ms. Qingmei and Company. The
total rental rent expense for six months ended June 30, 2018 and 2017 was $20,134 and $8,475 respectively. The agreement does
not call for a rental deposit or equivalent.
Minimum
operating lease commitment for the agreement is as follows:
2018
|
|
|
27,876
|
|
2019
|
|
|
27,876
|
|
2020
|
|
|
27,876
|
|
2021
|
|
|
27,876
|
|
2022
|
|
|
27,876
|
|
Thereafter:
|
|
|
111,504
|
|
|
|
$
|
250,884
|
|
NOTE
10 - RISKS
Credit
risk
The
Company is subject to risk borne from credit extended to customers.
FTVL
and QHDX bank deposits are with banks located in the PRC. DILHK’s bank account is with located in Hong Kong. DIGLS does
not have any bank accounts. The bank accounts that the Company uses that that are located outside of the U.S. do not carry federal
deposit insurance.
Interest
risk
The
Company is subject to interest rate risk when its loans become due and require refinancing.
Economic
and political risks
The
Company’s operations are conducted in the PRC. Accordingly, the Company’s business, financial condition, and results
of operations may be influenced by changes in the political, economic, and legal environments in the PRC. As alcoholic beverages
are considered a luxury item, they may be subject to political pressure and risks. The PRC has government from time to time limited
the amount of import of foreign alcoholic beverages based on their relationships with those foreign countries. The Company’s
results of operations may be materially adversely affected if the are unable to procure such products because the PRC government
has limited the amount of imports.
Inflation
risk
Management
monitors changes in prices levels. Historically inflation has not materially impacted the Company’s financial statements;
however, significant increases in the price of wine and liquors that cannot be passed on the Company’s customers could adversely
impact the Company’s results of operations.
Concentrations
risks
During
the six months ended June 30, 2018 and in fiscal year 2017, the Company had a concentration of risk in its supply of raw materials,
one vendor supplied all of the Company’s purchases for finished goods inventory.
NOTE
11 - SUBSEQUENT EVENTS
Company
evaluates subsequent events that have occurred after the balance sheet date but before the financial statements are issued. There
are two types of subsequent events: (1) recognized, or those that provide additional evidence with respect to conditions that
existed at the date of the balance sheet, including the estimates inherent in the process of preparing financial statements, and
(2) non-recognized, or those that provide evidence with respect to conditions that did not exist at the date of the balance sheet
but arose subsequent to that date.
There were no other events that management
deems necessary for disclosure.
NOTE
12 - CORRECTION OF ERROR
During
the six months ended June 30, 2018, management discovered an error in its audited December 31, 2017 balance sheet. An amount $93,188
due to Mr. Naiyong Luo was not properly disclosed as a due to related party. The table below shows the original and restated figures
for the year ended December 31, 2017:
|
|
Original
|
|
|
AJE
|
|
|
Restated
|
|
Customers
advances and deposits
|
|
|
104,885
|
|
|
|
(93,188
|
)
|
|
|
11,697
|
|
Due
to related parties
|
|
|
407,420
|
|
|
|
93,188
|
|
|
|
500,608
|
|
Current
liabilities
|
|
|
558,668
|
|
|
|
-
|
|
|
|
558,668
|
|
Total
liabilities
|
|
|
558,668
|
|
|
|
-
|
|
|
|
558,668
|
|
The
Company’s results of operations for the year ended December 31, 2017 unaffected by this correction of error. Accordingly,
the company loss per share for the year ended December 31, 2017 remains unchanged.
Item
2. MANAGEMENT DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The
following discussion and analysis should be read in conjunction with, and is qualified in its entirety by, Fortune Valley Treasures,
Inc.’s audited annual financial statements and the related notes thereto, each of which are included as an exhibit to our
Annual Report on Form 10-K filed with the SEC on November 24, 2017. This discussion contains certain forward-looking statements
that involve risks and uncertainties, as described under the heading “Forward-Looking Statements” in this Report on
Form 10-Q. Actual results could differ materially from those projected in the forward-looking statements. The Management Discussion
and Analysis of Financial Condition and Results of Operations below is based upon only the financial performance of Fortune Valley
Treasures, Inc.
Company
Overview
Fortune
Valley Treasures, Inc. (“FVTI” or the “Company”), formerly Crypto-Services, Inc. (“CRYT”),
was incorporated in the State of Nevada on March 21, 2014. The Company is an early stage company which was initially incorporated
to offer an information-based website at www.digitalcoindaily.com that would provide users with up-to-date information on digital
currencies worldwide.
We
engaged in the retail and wholesale distribution of a wide spectrum of wine products in Dongguan City, Guangdong Province since
2011. We offer a variety of wine products including dry red wine, dry white wine, rose wine, sweet wine and etc.
Our
main store located in Humen Town, Dongguan City, 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, which located in
Guangzhou, Shenzhen, Zhangjiajie, Zhuzhou, Huayin and Dongguan. These stores are licensed to use our trade name and we provide
them with our products and marketing support.
Since
2011, we have been cultivating strategic partnerships with various organizations to strengthen and extend our business. We have
partnered with Shenzhen Institute of Tsinghua University since 2011 to help us develop an innovative management, operating model
and franchising model. In 2011, we became a member of the Guangdong Provincial Liquor Industry Association and won the Excellent
Marketing Agency of the Year awardby the Guangdong Provincial Liquor Industry Association in 2012.
Results
of Operations
|
|
Three
months ended June 30,
|
|
|
|
|
|
|
2018
|
|
|
2017
|
|
|
Change
|
|
Revenue
|
|
$
|
14,226
|
|
|
$
|
7,109
|
|
|
$
|
7,117
|
|
Cost
of revenue
|
|
|
9,574
|
|
|
|
4,206
|
|
|
|
5,368
|
|
Gross
profit
|
|
|
4,652
|
|
|
|
2,903
|
|
|
|
1,749
|
|
Gross
profit (%)
|
|
|
33
|
%
|
|
|
41
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating
expense
|
|
|
70,771
|
|
|
|
49,541
|
|
|
|
20,985
|
|
Other
income(expense)
|
|
|
1,475
|
|
|
|
(201
|
)
|
|
|
|
|
Provision
for income taxes
|
|
|
-
|
|
|
|
376
|
|
|
|
|
|
Foreign
currency translation gain
|
|
|
4,492
|
|
|
|
(2,074
|
)
|
|
|
|
|
Comprehensive
loss
|
|
$
|
(59,702
|
)
|
|
$
|
(49,289
|
)
|
|
$
|
(10,413
|
)
|
Revenue
Net
revenues totaled $14,226 for three months ended June 30, 2018, an increase of $7,117 from $7,109 as compared to the three months
ended June 30, 2017. The increase was primarily due to the result of normal fluctuation of sales.
Cost
of revenue
Cost of revenue totaled $9,574 for three months
ended June 30, 2018 a decrease of $5,368 from $4,206 as compared to the three months ended June 30, 2017. Our cost of revenues
consists primarily of purchases of finished goods which are carried as inventory until they are sold.
Gross
profit
Gross profit margin were 33% and 41%, and
gross profits were $4,652 and $2,903 for the three months ended June 30, 2018 and 2017, respectively.
Operating
expenses
General and administrative expenses totaled
$70,771 for the three months ended June 30, 2018, an increase of $21,230, as compared to $49,541 for the three months
ended June 30, 2017. The increase was primarily a result of the increase in general and administrative expense related to reporting
and maintenance costs of being a publicly listed company.
Net
loss
Net
loss totaled $59,702 for three months ended June 30, 2018, an increase of 49,289 compared to 2017, primarily as the result
of an increase in operating expenses.
Liquidity
and Capital Resources
Working
Capital
|
|
June 30, 2018
|
|
|
December 31, 2017
|
|
|
Change
|
|
|
|
|
|
|
|
|
|
|
|
Total current assets
|
|
$
|
367,547
|
|
|
$
|
413,362
|
|
|
$
|
(45,815
|
)
|
Total current liabilities
|
|
|
668,296
|
|
|
|
558,668
|
|
|
|
109,628
|
|
Working capital
|
|
$
|
(300,749
|
)
|
|
$
|
(145,306
|
)
|
|
$
|
(155,443
|
)
|
As of June 30, 2018, we had cash and cash
equivalents of $29,312, we have financed our operations primarily though borrowings from our related party. The change in working
capital was primarily from an increase in due to related parties of $86,193.
Cash
Flows
|
|
Six
months Ended June 30,
|
|
|
|
|
|
|
2018
|
|
|
2017
|
|
|
Change
|
|
Cash
Flows used in Operating Activities
|
|
$
|
(138,170
|
)
|
|
$
|
(105,271
|
)
|
|
$
|
(32,899
|
)
|
Cash
Flows used in Investing Activities
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
Cash
Flows provided by Financing Activities
|
|
|
86,193
|
|
|
|
86,277
|
|
|
|
(84
|
)
|
Net
Decrease in Cash During Period
|
|
$
|
(51,977
|
)
|
|
$
|
(18,994
|
)
|
|
$
|
(32,983
|
)
|
Cash
Flow from Operating Activities
For
six months ended June 30, 2018 net cash flows used in operating activities consisted of a net loss of $138,170 and was reduced
by depreciation of $3,470, and a net change of operating assets and liabilities of $19,926. For six months ended June 30, 2017,
net cash flows provided in operating consisted of a net loss of $105,271 and was reduced by depreciation of $3,240 and a net change
of operating assets and liabilities of $21,833.
Cash
Flow from Financing Activities
Net cash provided by financing for the six
months ended June 30, 2018 was $86,193 as compared to $86,277 net cash provided by financing activities for six months
ended June 30, 2017. The net cash provided by financing activities was mainly attributable to borrowings and advances from
related parties.
Critical
Accounting Policy and Estimates
In
the ordinary course of business, we make a number of estimates and assumptions relating to the reporting of results of operations
and financial condition in the preparation of our financial statements in conformity with U.S. generally accepted accounting principles.
We base our estimates on historical experience, when available, and on other various assumptions that are believed to be reasonable
under the circumstances. Actual results could differ significantly from those estimates under different assumptions and conditions.
Off-Balance
Sheet Arrangements
We
do not have any off-balance sheet arrangements that have or are reasonably likely to have a current or future effect on our financial
condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures, or capital
resources that is material to investors.
Item
3. Quantitative and Qualitative Disclosure About Market Risk.
Not
applicable because we are a smaller reporting company.
Item
4. Controls and Procedures.
Evaluation
of Disclosure Controls and Procedures
We
maintain disclosure controls and procedures, as defined in Rule 13a-15(e) promulgated under the Exchange Act, that are designed
to ensure that information required to be disclosed by us in the reports that we file or submit under the Exchange Act is recorded,
processed, summarized and reported within the time periods specified in the Securities and Exchange Commission’s rules and
forms and that such information is accumulated and communicated to our management, including our president (our principal executive
officer and principal financial officer), as appropriate to allow timely decisions regarding required disclosure.
We
carried out an evaluation, under the supervision and with the participation of our management, including our president (our principal
executive officer and principal financial officer), of the effectiveness of the design and operation of our disclosure controls
and procedures as of quarter covered by this report. Based on the evaluation of these disclosure controls and procedures the president
(our principal executive officer and principal financial officer and principal accounting officer) concluded that our disclosure
controls and procedures were not effective as of the end of the period covered by this quarterly report due to we did not maintain
effective controls over the control environment. Specifically, the Board does not currently have a director who qualifies as an
audit committee financial expert as defined in Item 407(d)(5)(ii) of Regulation S-K. The Company does not have sufficient written
policies and procedures for accounting and financial reporting with respect to the requirements and application of both US GAAP
and SEC guidelines. The Company also lacks accounting personnel with technical knowledge in certain debt and equity transactions
and qualified personnel with an appropriate level of SEC filing knowledge and experience. Because of the size of the Company’s
administrative staff, controls related to the segregation of certain duties have not been developed and the Company has not been
able to adhere to them. Additionally, the Company does not have a well-established procedure to identify, approve, and report
related party transactions.
Changes
in Internal Controls
During
the quarter covered by this Report there were no changes in our internal control over financial reporting that materially affected,
or are reasonably likely to materially affect, our internal control over financial reporting.
Part
II. OTHER INFORMATION
Item
1. Legal Proceedings
From
time to time we may become involved in legal proceedings or be subject to claims arising in the ordinary course of our business.
We are not presently a party to any legal proceedings that, if determined adversely to us, would individually or taken together
have a material adverse effect on our business, operating results, financial condition or cash flows. Regardless of the outcome,
litigation can have an adverse impact on us because of defense and settlement costs, diversion of management resources and other
factors.
Item
1A. Risk Factors
Smaller
reporting companies are not required to provide the information required by this item.
Item
2. Unregistered Sales of Equity Securities and Use of Proceeds for the three months ended June 30, 2018
None.
Item
3. Defaults upon senior Securities
None.
Item
4. Mine Safety Disclosures
None.
Item
5. Other Information
None.
Item
6. Exhibits
EXHIBIT
INDEX
The
exhibits listed on the Exhibit Index are provided as part of this Report.
*Previously
filed
**
Filed herewith.
***
Furnished herewith.
SIGNATURES
Pursuant
to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this Report to be signed on its behalf
by the undersigned thereunto duly authorized.
|
Fortune
Valley Treasures, Inc.
|
|
|
Date:
August 20, 2018
|
By:
|
/s/
Yumin Lin
|
|
|
Yumin
Lin
|
|
|
Chief
Executive Officer
|
|
|
(Principal
Executive Officer)
|
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