UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON,Washington, D.C. 20549
FORM 10-Q
(Mark One)
[X]☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended NovemberQuarterly Period Ended June 30, 20162023
Oror
[ ]☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from _______________ to _______________
Commission File Number: 333-200760Number 000-55555
CRYPTO-SERVICES, INC.Fortune Valley Treasures, Inc.
(Exact name of registrant issuer as specified in its charter)
Nevada | 32-0439333 | |
(State or other jurisdiction incorporation or organization) | (I.R.S. Employer Identification No.) | |
| ||
(86)75586961406B1601 Donogfang Yinxiang Building
No. 139 Liansheng Road, Humen Town
Dongguan, Guangdong, China523000
(Address of principal executive offices, including zip code)
Registrant’s telephonephone number, including area code)code (86)769-85729133
Securities registered pursuant to Section 12(b) of the Act: None
Securities registered pursuant to Section 12(g) of the Act: Common stock, par value $0.001 per share
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrantissuer 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, or a smaller reporting company, or an emerging growth company. See definitions of “large accelerated filer,” “accelerated filer”filer,” “smaller reporting company,” and “smaller reporting“emerging growth company” in Rule 12b-2 of the Exchange Act.
Large accelerated filer | Accelerated filer | |||||
Non-accelerated filer | Smaller reporting company | |||||
Emerging growth company | ☐ |
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 [X] ☐ No [ ] ☒
Indicate the numberAs of August 14, 2023, there were outstanding of eachpar value $0.001, of the issuer’s classes ofregistrant’s common stock as of the latest practicable date.outstanding. shares,
TABLE OF CONTENTS
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TABLE OF CONTENTS
PART I - FINANCIAL INFORMATION
Item 1. Condensed Consolidated Financial Statements.Statements.
TheFORTUNE VALLEY TREASURES, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
AS OF JUNE 30, 2023 AND DECEMBER 31, 2022
June 30, 2023 | December 31, 2022 | |||||||
(Unaudited) | ||||||||
Assets | ||||||||
Current assets | ||||||||
Cash and cash equivalents | $ | 75,950 | $ | 165,685 | ||||
Accounts receivable, net (including $72,372 and $146,087 from related parties as of June 30, 2023 and December 31, 2022, respectively) | 5,101,721 | 4,797,564 | ||||||
Inventories | 76,795 | 148,925 | ||||||
Prepayments and other current assets, net (including $1,162,622 and $1,102,861 to related parties as of June 30, 2023 and December 31, 2022, respectively) | 1,537,639 | 1,758,917 | ||||||
Total current assets | 6,792,105 | 6,871,091 | ||||||
Non-current assets | ||||||||
Deposits paid, net (including $573,584 and $758,445 to related parties as of June 30, 2023 and December 31, 2022, respectively) | 673,561 | 1,121,302 | ||||||
Property and equipment, net | 112,461 | 97,890 | ||||||
Operating lease right-of-use assets | 244,027 | 297,232 | ||||||
Operating lease right-of-use assets, related parties | 65,242 | 75,300 | ||||||
Operating lease right-of-use assets | 65,242 | 75,300 | ||||||
Intangible assets, net | 252,148 | 370,926 | ||||||
Goodwill | 435,562 | 454,201 | ||||||
Total Assets | $ | 8,575,106 | $ | 9,287,942 | ||||
Liabilities and Stockholders’ Equity | ||||||||
Current liabilities | ||||||||
Operating lease obligations – current | $ | 112,632 | $ | 110,201 | ||||
Operating lease obligations, related parties - current | 12,625 | 16,629 | ||||||
Operating lease obligations - current | 12,625 | 16,629 | ||||||
Accounts payable (including $107,454 and $80,426 to related parties as of June 30, 2023 and December 31, 2022, respectively) | 692,035 | 688,822 | ||||||
Accrued liabilities | 553,026 | 502,389 | ||||||
Bank and other borrowings - current | 483,233 | 422,653 | ||||||
Income tax payable | 20,116 | 38,879 | ||||||
Customer advances | 116,769 | 139,334 | ||||||
Due to related parties | 748,543 | 565,675 | ||||||
Total current liabilities | 2,738,979 | 2,484,582 | ||||||
Non-current liabilities | ||||||||
Operating lease obligations – non-current | 155,593 | 189,957 | ||||||
Operating lease obligations, related parties – non-current | 45,235 | 55,056 | ||||||
Operating lease obligations – non-current | 45,235 | 55,056 | ||||||
Bank and other borrowings | 46,356 | 58,438 | ||||||
Total Liabilities | 2,986,163 | 2,788,033 | ||||||
Stockholders’ Equity | ||||||||
Common stock ( | shares authorized, shares issued and outstanding as of June 30, 2023 and December 31, 2022)15,655 | 15,655 | ||||||
Additional paid-in capital | 11,061,233 | 11,061,233 | ||||||
Accumulated deficit and statutory reserves | (4,980,048 | ) | (4,504,404 | ) | ||||
Accumulated other comprehensive loss | (516,590 | ) | (180,826 | ) | ||||
Total Fortune Valley Treasures, Inc. stockholders’ equity | 5,580,250 | 6,391,658 | ||||||
Noncontrolling interests | 8,693 | 108,251 | ||||||
Total Stockholders’ Equity | 5,588,943 | 6,499,909 | ||||||
Total Liabilities and Stockholders’ Equity | $ | 8,575,106 | $ | 9,287,942 |
See accompanying notes to the unaudited interimcondensed consolidated financial statements of Crypto-Services, Inc. as of November 30, 2016, have been prepared by our management in conformity with accounting principles generally accepted in the United States of America and in accordance with the instructions to Form 10-Q and Rule 8-03 of Regulation S-X and, therefore, do not include all information and footnotes necessary for a complete presentation of financial position, results of operations, cash flows, and stockholders’ equity in conformity with generally accepted accounting principles. In the opinion of management, all adjustments considered necessary for a fair presentation of the results of operations and financial position have been included and all such adjustments are of a normal recurring nature.statements.
Operating results for the three-month period ended November 30, 2016 are not necessarily indicative of the results that can be expected for the year ending August 31, 2017.
As used in this Quarterly Report, the terms “we,” “us,” “our,” “Crypto-Services,” and the “Company” mean Crypto-Services, Inc., unless otherwise indicated. All dollar amounts in this Quarterly Report are expressed in U.S. dollars, unless otherwise indicated.
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Crypto-Services, Inc.FORTUNE VALLEY TREASURES, INC.
Balance SheetsCONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
November 30, 2016 | August 31, 2016 | |||||||
(Unaudited) | ||||||||
ASSETS | ||||||||
Current Assets | ||||||||
Prepaid expenses | $ | 5,493 | $ | 8,833 | ||||
Total Current Assets | $ | 5,493 | $ | 8,833 | ||||
Total Assets | $ | 5,493 | $ | 8,833 | ||||
LIABILITIES AND STOCKHOLDERS’ DEFICIT | ||||||||
Current Liabilities | ||||||||
Accounts payable and accrued liabilities | $ | 9,864 | $ | 20,150 | ||||
Due to related party | 18,000 | 3,000 | ||||||
Total Current Liabilities | 27,864 | 23,150 | ||||||
Total Liabilities | $ | 27,864 | $ | 23,150 | ||||
Stockholders’ Equity (Deficit) | ||||||||
Common stock authorized: 75,000,000 shares, par value $0.001, 7,750,000 common shares issued and outstanding as of November 30, 2016 and August 31, 2016 | 7,750 | 7,750 | ||||||
Additional paid-in capital | 71,229 | 71,229 | ||||||
Accumulated deficit | (101,350 | ) | (93,296 | ) | ||||
Total Stockholders’ Equity(Deficit) | (22,371 | ) | (14,317 | ) | ||||
Total Liabilities and Stockholders’ Equity (Deficit) | $ | 5,493 | $ | 8,833 |
AND COMPREHENSIVE INCOME (LOSS)
TheFOR THE THREE AND SIX MONTHS ENDED JUNE 30, 2023 AND 2022
(Unaudited)
2023 | 2022 | 2023 | 2022 | |||||||||||||
Three months ended June 30 | Six months ended June 30 | |||||||||||||||
2023 | 2022 | 2023 | 2022 | |||||||||||||
Net revenues (including $42,848 and $40,770 from related parties for the three months ended June 30, 2023 and 2022, respectively; $69,598 and $41,495 from related parties for the six months ended June 30, 2023 and 2022, respectively) | $ | 1,272,597 | $ | 2,336,459 | $ | 2,907,886 | $ | 3,598,269 | ||||||||
Cost of revenues (including $133,114 and $249,468 from related parties for the three months ended June 30, 2023 and 2022, respectively; $362,096 and $386,380 from related parties for the six months ended June 30, 2023 and 2022, respectively) | 652,798 | 1,099,523 | 1,330,165 | 1,617,985 | ||||||||||||
Gross profit | 619,799 | 1,236,936 | 1,577,721 | 1,980,284 | ||||||||||||
Operating expenses: | ||||||||||||||||
Selling and distribution expenses | 13,016 | 15,929 | 26,258 | 34,084 | ||||||||||||
General and administrative expenses | 1,027,572 | 347,657 | 1,978,967 | 874,943 | ||||||||||||
Operating income (loss) | (420,789 | ) | 873,350 | (427,504 | ) | 1,071,257 | ||||||||||
Other income (expense): | ||||||||||||||||
Other income | 6,436 | 1,995 | 8,210 | 8,202 | ||||||||||||
Interest income | 16 | 16 | 47 | 93 | ||||||||||||
Interest expense | (8,964 | ) | (4,864 | ) | (18,256 | ) | (10,689 | ) | ||||||||
Other expense, net | (2,512 | ) | (2,853 | ) | (9,999 | ) | (2,394 | ) | ||||||||
Income (loss) before income tax | (423,301 | ) | 870,497 | (437,503 | ) | 1,068,863 | ||||||||||
Income tax expense | 21,528 | 81,514 | 96,502 | 103,921 | ||||||||||||
Net income (loss) | $ | (444,829 | ) | $ | 788,983 | $ | (534,005 | ) | $ | 964,942 | ||||||
Less: Net income (loss) attributable to noncontrolling interests | (58,004 | ) | 41,250 | (58,361 | ) | 68,533 | ||||||||||
Net income (loss) attributable to Fortune Valley Treasures, Inc. | (386,825 | ) | 747,733 | (475,644 | ) | 896,409 | ||||||||||
Other comprehensive income: | ||||||||||||||||
Foreign currency translation loss | (422,433 | ) | (602,321 | ) | (376,961 | ) | (591,601 | ) | ||||||||
Total comprehensive income (loss) | (867,262 | ) | 186,662 | (910,966 | ) | 373,341 | ||||||||||
Less: comprehensive income (loss) attributable to noncontrolling interests | (99,383 | ) | (4,305 | ) | (99,558 | ) | 24,726 | |||||||||
Comprehensive income (loss) attributable to Fortune Valley Treasures, Inc. | $ | (767,879 | ) | $ | 190,967 | $ | (811,408 | ) | $ | 348,615 | ||||||
Earnings (loss) per share | ||||||||||||||||
Basic and diluted earnings (loss) per share | $ | ) | $ | $ | ) | $ | ||||||||||
Basic and diluted weighted average shares outstanding | $ | $ | $ | $ |
See accompanying notes are an integral part of theseto the unaudited condensed consolidated financial statementsstatements.
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Crypto-Services, Inc.FORTUNE VALLEY TREASURES, INC.
Statements of OperationsCONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY
(Unaudited)FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 2023 AND 2022
For the Three Months Ended | ||||||||
November 30, | ||||||||
2016 | 2015 | |||||||
Revenues | $ | - | $ | - | ||||
Expenses | ||||||||
General and administrative expenses | 18,554 | 25,125 | ||||||
Total operating expenses | 18,554 | 25,125 | ||||||
Loss from operations | $ | (18,554 | ) | $ | (25,125 | ) | ||
Other income (expense) | ||||||||
Gain on liabilities paid by former shareholder | $ | 10,500 | $ | - | ||||
Total other income | 10,500 | - | ||||||
Net loss | $ | (8,054 | ) | $ | (25,125 | ) | ||
Net Loss Per Common Share – Basic and Diluted | $ | (0.00 | ) | $ | (0.00 | ) | ||
Weighted Average Common Shares Outstanding | 7,750,000 | 7,750,000 |
(Unaudited)
The
Number of shares | Amount | Paid-in Capital | Comprehensive Income (Loss) | Statutory Reserves | controlling Interests | Stockholders’ Equity | ||||||||||||||||||||||
Common Stock | Additional | Accumulated Other | Accumulated Deficit and | Non | Total | |||||||||||||||||||||||
Number of shares | Amount | Paid-in Capital | Comprehensive Loss | Statutory Reserves | controlling Interests | Stockholders’ Equity | ||||||||||||||||||||||
Balance as of December 31, 2022 | 15,655,038 | $ | 15,655 | $ | 11,061,233 | $ | (180,826 | ) | $ | (4,504,404 | ) | $ | 108,251 | $ | 6,499,909 | |||||||||||||
Net loss | - | - | - | - | (88,819 | ) | (357 | ) | (89,176 | ) | ||||||||||||||||||
Foreign currency translation adjustment | - | - | - | 45,290 | - | 182 | 45,472 | |||||||||||||||||||||
Balance as of March 31, 2023 | 15,655,038 | $ | 15,655 | $ | 11,061,233 | $ | (135,536 | ) | $ | (4,593,223 | ) | $ | 108,076 | $ | 6,456,205 | |||||||||||||
Net loss | - | - | - | - | (386,825 | ) | (58,004 | ) | (444,829 | ) | ||||||||||||||||||
Foreign currency translation adjustment | - | - | - | (381,054 | ) | - | (41,379 | ) | (422,433 | ) | ||||||||||||||||||
Balance as of June 30, 2023 | 15,655,038 | $ | 15,655 | $ | 11,061,233 | $ | (516,590 | ) | $ | (4,980,048 | ) | $ | 8,693 | $ | 5,588,943 |
Common Stock | Additional | Accumulated Other | Accumulated Deficit and | Non | Total | |||||||||||||||||||||||
Number of shares | Amount | Paid-in Capital | Comprehensive Income (Loss) | Statutory Reserves | controlling Interests | Stockholders’ Equity | ||||||||||||||||||||||
Balance as of December 31, 2021 | 15,655,038 | $ | 15,655 | $ | 11,061,233 | $ | 544,305 | $ | (2,561,681 | ) | $ | 404,842 | $ | 9,464,354 | ||||||||||||||
Net income | - | - | - | - | 148,676 | 27,283 | 175,959 | |||||||||||||||||||||
Foreign currency translation adjustment | - | - | - | 8,972 | - | 1,748 | 10,720 | |||||||||||||||||||||
Balance as of March 31, 2022 | 15,655,038 | $ | 15,655 | $ | 11,061,233 | $ | 553,277 | $ | (2,413,005 | ) | $ | 433,873 | $ | 9,651,033 | ||||||||||||||
Balance | 15,655,038 | $ | 15,655 | $ | 11,061,233 | $ | 553,277 | $ | (2,413,005 | ) | $ | 433,873 | $ | 9,651,033 | ||||||||||||||
Net income | - | - | - | - | 747,733 | 41250 | 788,983 | |||||||||||||||||||||
Net income (loss) | - | - | - | - | 747,733 | 41250 | 788,983 | |||||||||||||||||||||
Foreign currency translation adjustment | - | - | - | (556,766 | ) | - | (45,555 | ) | (602,321 | ) | ||||||||||||||||||
Balance as of June 30, 2022 | 15,655,038 | $ | 15,655 | $ | 11,061,233 | $ | (3,489 | ) | $ | (1,665,272 | ) | $ | 429,568 | $ | 9,837,695 | |||||||||||||
Balance | 15,655,038 | $ | 15,655 | $ | 11,061,233 | $ | (3,489 | ) | $ | (1,665,272 | ) | $ | 429,568 | $ | 9,837,695 |
See accompanying notes are an integral part of theseto the unaudited condensed consolidated financial statementsstatements.
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Crypto-Services, Inc.FORTUNE VALLEY TREASURES, INC.
Statements of Cash FlowsCONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)FOR THE SIX MONTHS ENDED JUNE 30, 2023 AND 2022
For the Three Months Ended | ||||||||
November 30, | ||||||||
2016 | 2015 | |||||||
Cash Flows From Operating Activities: | ||||||||
Net loss | $ | (8,054 | ) | $ | (25,125 | ) | ||
Adjustments to reconcile net loss to net cash used in operating activities: | ||||||||
Changes in operating assets and liabilities: | ||||||||
Gain on liabilities paid by former shareholder | (10,500 | ) | - | |||||
Prepaid expense | 3,340 | - | ||||||
Accounts payable | 214 | - | ||||||
Cash Used in Operating Activities | (15,000 | ) | (25,125 | ) | ||||
Cash Flows From Financing Activities | ||||||||
Expenses paid by related party on behalf of the Company | 15,000 | - | ||||||
Cash Provided by Financing Activities | 15,000 | - | ||||||
Net Decrease in Cash | - | (25,125 | ) | |||||
Cash and Cash Equivalents at Beginning of period | - | 42,492 | ||||||
Cash and Cash Equivalents at End of Period | $ | - | $ | 17,367 | ||||
Supplemental Disclosures of Cash Flow Information: | ||||||||
Interest paid | $ | - | $ | - | ||||
Income taxes paid | $ | - | $ | - |
(Unaudited)
The
2023 | 2022 | |||||||
Six months ended June 30, | ||||||||
2023 | 2022 | |||||||
Cash flows from operating activities | ||||||||
Net income (loss) | $ | (534,005 | ) | $ | 964,942 | |||
Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities: | ||||||||
Depreciation and amortization expense | 124,680 | 433,417 | ||||||
Non-cash lease expense | 91,369 | 85,628 | ||||||
Allowance for credit losses | 960,144 | - | ||||||
Loss on disposal of intangible asset | 1,855 | - | ||||||
Changes in operating assets and liabilities | ||||||||
Accounts receivable, net | (896,403 | ) | (185,856 | ) | ||||
Inventories | 68,723 | (64,826 | ) | |||||
Prepayments and other current assets, net | 232 | (385,553 | ) | |||||
Due from related parties | - | 25,887 | ||||||
Deposits paid, net | (12,080 | ) | (583,325 | ) | ||||
Accounts payable | 32,763 | (37,455 | ) | |||||
Due to related parties | 111,324 | (122,702 | ) | |||||
Customer advances | (17,538 | ) | (110,633 | ) | ||||
Accrued liabilities | 74,167 | 56,060 | ||||||
Income tax payable | (17,871 | ) | 19,354 | |||||
Operating lease obligations | (73,176 | ) | (77,497 | ) | ||||
Net cash provided by (used in) operating activities | (85,816 | ) | 17,441 | |||||
Cash flows from investing activities | ||||||||
Acquisition of property and equipment | (4,786 | ) | - | |||||
Acquisition of intangible asset | (702 | ) | - | |||||
Net cash used in investing activities | (5,488 | ) | - | |||||
Cash flows from financing activities | ||||||||
Borrowings from and repayments to revolving credit lines, net | 7,224 | 148,606 | ||||||
Borrowings from bank loans | 113,418 | 10,352 | ||||||
Borrowings from a third party | - | 24,154 | ||||||
Repayments to related parties | - | (154,510 | ) | |||||
Repayments to bank loans | (58,299 | ) | (11,763 | ) | ||||
Repayments to a third party | (19,541 | ) | (66,379 | ) | ||||
Net cash provided by (used in) financing activities | 42,802 | (49,540 | ) | |||||
Effect of exchange rate changes on cash and cash equivalents | (41,233 | ) | (5,738 | ) | ||||
Net changes in cash and cash equivalents | (89,735 | ) | (37,837 | ) | ||||
Cash and cash equivalents–beginning of the period | 165,685 | 123,163 | ||||||
Cash and cash equivalents–end of the period | $ | 75,950 | $ | 85,326 | ||||
Supplementary cash flow information: | ||||||||
Interest paid | $ | 18,378 | $ | 10,191 | ||||
Income taxes paid | $ | 152,140 | $ | 86,546 | ||||
Non-cash investing and financing activities | ||||||||
Expenses paid by related parties on behalf of the Company | $ | - | $ | 38,627 | ||||
Operating lease right-of-use assets obtained in exchange for operating lease obligations | $ | 39,797 | $ | - | ||||
Liabilities assumed in connection with purchase of property and equipment | $ | 28,234 | $ | - |
See accompanying notes are an integral part of theseto the unaudited condensed consolidated financial statementsstatements.
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FORTUNE VALLEY TREASURES, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 2023 AND 2022
(Unaudited)
NOTE 1 - ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Fortune Valley Treasures, Inc. (formerly Crypto-Services, Inc.
Notes to Financial Statements
(Unaudited)
1. Nature of Operations
Crypto-Services, Inc.) (“FVTI” or the “Company”) was incorporated in the State of Nevada as a for-profit company on March 21, 20142014. The Company’s current primary business operations of wholesale distribution and establishedretail sales of alcoholic beverages of wine and distilled liquors, and drinking water distribution and delivery are conducted through its subsidiaries in the People’s Republic of China (“PRC”).
On April 11, 2018, the Company entered into a fiscal year endshare 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 shares of August 31. CRYTits common stock in exchange for all the outstanding shares in DIGLS. This transaction has been accounted for as a reverse takeover transaction and a recapitalization of the Company whereby the Company, the legal acquirer, is a development-stage Company which intended to offer an information based website at www.digitalcoindaily.com that would provide users with up to date information on the world of digital currencies.
Gordon Hum,accounting acquiree, and DIGLS, the legal acquiree, is the accounting acquirer; accordingly, the Company’s director, President, Treasurer, Secretary, Chief Executive Officer, Chief Financial Officerhistorical statement of stockholders’ equity has been retroactively restated to the first period presented.
On March 1, 2019, the Company entered into a sale and holderpurchase agreement (the “SP Agreement”) to acquire 100% of 3,500,000the shares of Jiujiu Group Stock Co., Ltd. (“JJGS”), a company incorporated under the laws of the Republic of Seychelles. The transaction closed on March 1, 2019. Pursuant to the SP Agreement, the Company issued shares of its common stock to JJGS to acquire 100% of the shares of JJGS for a cost of $150. After the closing, JJGS became the Company’s wholly owned subsidiary. JJGS owns all of the equity interest of Jiujiu (HK) Industry Limited (“JJHK”) and Jiujiu (Shenzhen) Industry Co., Ltd. (“JJSZ”). JJGS, JJHK and JJSZ did not have any material assets or liabilities as of December 31, 2019, and they did not have any substantial operations or active business during the year ended December 31, 2019.
On June 22, 2020, the Company entered into a sale and purchase agreement along with Qianhai DaXingHuaShang Investment (Shenzhen) Co., Ltd., a company incorporated in China and a wholly-owned subsidiary of FVTI (“QHDX”), to acquire 90% of the shares of Dongguan Xixingdao Technology Co., Ltd. (“Xixingdao”), a company incorporated in the PRC, from certain shareholders of Xixingdao in exchange for shares of the Company’s common stock representing approximately 45.16%stock. The Company obtained the control of Xixingdao on August 31, 2020, the shares were issued on December 28, 2020. Xixingdao became the Company’s issuedsubsidiary since August 31, 2020.
Basis of presentation
The accompanying unaudited condensed consolidated financial statements as of June 30, 2023 and outstanding securities, entered into a Stock Purchase Agreement, pursuant to which he agreed to sell to twelve unrelated third parties all of his securities offor the Company, for aggregate cash consideration of $35,000. On the same day, Edwin Jong, the Company’s director, Vice Presidentthree and holder of 1,500,000 shares of the Company’s common stock representing approximately 19.35% of the Company’s issuedsix months ended June 30, 2023 and outstanding securities, entered into a Stock Purchase Agreement, pursuant to which he agreed to sell to five unrelated third parties all of his securities of the Company, for aggregate cash consideration of $15,000. In connection with the sales of the Company’s securities, Gordon Hum and Edwin Jong resigned from all of their positions with the Company effective August 3, 2016. Concurrently, Xinlong Shen was appointed to serve as the sole director, President, Treasurer, Secretary, Chief Executive Officer and Chief Financial Officer of the Company. Effective December 14, 2016, the Company accepted the resignation of Xinlong Shen from the position of President, Secretary and Treasurer. He will remain on the Board as a director. Also effective December 14, 2016, the Company appointed Yumin Lin as the new President, Secretary and Treasurer. He will also serve as a director.
Effective 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. However, the name change is subject to the approval of Financial Industry Regulatory Authority (FINRA). Thus, the Company currently is still using Crypto-Services, Inc. as its company name.
2. Going Concern
These financial statements2022, have been prepared on a going concern basis, which impliespursuant to the Company will continue to realize its assetsrules and discharge its liabilities in the normal course of business. During the period ended November 30, 2016, the Company had recurring losses and did not generate any cash flows from operations. The continuationregulations of the Company as a going concern is dependent upon the continuedSecurities and Exchange Commission (the “SEC”) that permit reduced disclosure for interim periods. Certain information and footnote disclosures normally included in financial support from its shareholders, the ability of the Company to obtain necessary equity financing to continue operations, and the attainment of profitable operations. These factors raise substantial doubt regarding the Company’s ability to continue as a going concern. These financial statements do not include any adjustments to the recoverability and classification of recorded asset amounts and classification of liabilities that might be necessary should the Company be unable to continue as a going concern.
3. Basis of Presentation
The accompanying unaudited interim financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America and the rules of the Securities and Exchange Commission, and should be read in conjunction with the audited financial statements and notes thereto for the year ended August 31, 2016 contained in the Company’s Form 10-K/A filed with the Securities and Exchange Commission on February 17, 2017.(“U.S. GAAP”) have been condensed or omitted. In the opinion of management, all adjustments consisting of normal recurring adjustments,entries considered necessary for a fair presentation of financial position and the results of operations for the interim periods presented have been reflected herein.included. The results of operations for the interimthese periods are not necessarily comparable to, or indicative of, the results to be expectedof any other interim period or for the full year. Notes tofiscal year taken as a whole. The condensed consolidated balance sheet information as of December 31, 2022 was derived from the interimCompany’s audited consolidated financial statements which would substantially duplicate the disclosure contained in the audited financial statements as reportedincluded in the Company’s Annual Report on Form 10-K/A10-K, for the year ended December 31, 2022, filed with the SEC on March 31, 2023 (the “report”). These unaudited condensed consolidated financial statements should be read in conjunction with the report.
Basis of consolidation
The unaudited condensed consolidated financial statements include the accounts of the Company and its subsidiaries. All intercompany accounts and transactions have been omitted. Theseeliminated. The results of subsidiaries acquired during the respective periods are included in the consolidated statements of operations from the effective date of acquisition or up to the effective date of disposal, as appropriate. The portion of the income or loss applicable to noncontrolling interests in subsidiaries is reflected in the unaudited condensed consolidated statements of operations.
7 |
As of June 30, 2023, details of the Company’s major subsidiaries were as follows:
SCHEDULE OF ENTITIES AND ITS SUBSIDIARIES
Entity Name | Date of Incorporation | Parent Entity | Nature of Operation | Place of Incorporation | ||||
DIGLS | July 4, 2016 | FVTI | Investment holding | Republic of Seychelles | ||||
DILHK | June 22, 2016 | DIGLS | Investment holding | Hong Kong, PRC | ||||
QHDX | November 3, 2016 | DILHK | Investment holding | PRC | ||||
FVTL | May 31, 2011 | QHDX | Trading of food and platform | PRC | ||||
JJGS | August 17, 2017 | FVTI | Investment holding | Republic of Seychelles | ||||
JJHK | August 24, 2017 | JJGS | Investment holding | Hong Kong, PRC | ||||
JJSZ | November 16, 2018 | JJHK | Trading of food | PRC | ||||
Xixingdao | August 28, 2019 | QHDX | Drinking water distribution and delivery | PRC | ||||
Dongguan City Fu La Tu Trade Ltd (“FLTT”) | September 27, 2020 | FVTL | Trading of alcoholic beverages | PRC | ||||
Dongguan City Fu Xin Gu Trade Ltd (“FXGT”) | December 2, 2020 | FVTL | Trading of alcoholic beverages | PRC | ||||
Dongguan City Fu Xin Technology Ltd (“FXTL”) | November 12, 2020 | Xixingdao | Drinking water distribution and delivery | PRC | ||||
Dongguan City Fu Guan Healthy Industry Technology Ltd (“FGHL”) | December 21, 2020 | Xixingdao | Drinking water distribution and delivery | PRC | ||||
Dongguan City Fu Jing Technology Ltd (“FJTL”) | November 17, 2020 | Xixingdao | Drinking water distribution and delivery | PRC | ||||
Dongguan City Fu Xiang Technology Ltd (“FGTL”) | November 16, 2020 | Xixingdao | Drinking water distribution and delivery | PRC | ||||
Dongguan City Fu Ji Food & Beverage Ltd (“FJFL”) | November 9, 2020 | Xixingdao | Drinking water distribution and delivery | PRC | ||||
Dongguan City Fu Lai Food Ltd (“FLFL”) | September 27, 2020 | Xixingdao | Drinking water distribution and delivery | PRC | ||||
Dongguan City Fu Yi Beverage Ltd (“FYBL”) | November 12, 2020 | Xixingdao | Drinking water distribution and delivery | PRC | ||||
Dongguan City Fu Xi Drinking Water Company Ltd (“FXWL”) | March 17, 2021 | Xixingdao | Drinking water distribution and delivery, sales of alcoholic beverages and water purifier | PRC | ||||
Dongguan City Fu Jia Drinking Water Company Ltd (“FJWL”) | March 29, 2021 | Xixingdao | Drinking water distribution and delivery, sales of water purifier | PRC | ||||
Dongguan City Fu Sheng Drinking Water Company Ltd (“FSWL”) | March 29, 2021 | Xixingdao | Drinking water distribution and delivery, sales of water purifier | PRC | ||||
Shenzhen Fu Jin Trading Technology Company Ltd (“FJSTL”) | June 7, 2021 | Xixingdao | Drinking water distribution and delivery, sales of water purifier | PRC | ||||
Dongguan City Fu Li Trading Ltd (“FLTL”) | September 10, 2021 | Xixingdao | Drinking water distribution and delivery, sales of water purifier | PRC | ||||
Guangdong Fu Gu Supply Chain Group Ltd (“FGGC”) | September 13, 2021 | QHDX | Trading of alcoholic beverages | PRC | ||||
Dongguan City Fu Zhi Gu Trading Ltd (“FZGTL”) | September 9, 2022 | FVTL | Trading of alcoholic beverages | PRC | ||||
Dongguan City Chang Fu Trading Ltd (“CFTL”) | September 9, 2022 | FVTL | Trading of alcoholic beverages | PRC | ||||
Dongguan City La Tong Trading Ltd (“LTTL”) | August 8, 2022 | FVTL | Trading of alcoholic beverages | PRC | ||||
Dongguan City Kai Fu Trading Ltd (“KFTL”) | September 8, 2022 | FVTL | Trading of alcoholic beverages | PRC |
8 |
Use of estimates
The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions relating to the reporting of assets and liabilities and the disclosure of contingent liabilities at the date of the financial statements, and notes are presentedthe reported amounts of revenues and expenses during the reporting period. Significant accounting estimates include certain assumptions related to going concern, allowance of credit losses, allowance of deferred tax asset and uncertain tax position, implicit interest rate of operating leases, useful lives and impairment of long-lived assets, and impairment of goodwill. Actual results may differ from these estimates.
Foreign currency translation and re-measurement
The Company translates its foreign operations to the U.S. dollar in accordance with accounting principles generally acceptedASC 830, “Foreign Currency Matters”.
The reporting currency for the Company and its subsidiaries is the U.S. dollar. The Company, DIGLS, DILHK, JJGS and JJHK’s functional currency is the U.S. dollar; QHDX, JJSZ and their subsidiaries which are incorporated in PRC use the Chinese Renminbi (“RMB”) as their functional currency.
The Company’s subsidiaries, whose records are not maintained in that company’s functional currency, re-measure their records into their functional currency as follows:
● | Monetary assets and liabilities at exchange rates in effect at the end of each period | |
● | Nonmonetary assets and liabilities at historical rates | |
● | Revenue and expense items at the average rate of exchange prevailing during the period |
Gains and losses from these re-measurements were not significant and have been included in the United States. Company’s results of operations.
The Company’s fiscal year endsubsidiaries, whose functional currency is August 31.not the U.S. dollar, translate their records into the U.S. dollar as follows:
● | Assets and liabilities at the rate of exchange in effect at the balance sheet date | |
● | Equities at the historical rate | |
● | Revenue and expense items at the average rate of exchange prevailing during the period |
Translation of amounts from the local currencies of the Company into US$ has been made at the following exchange rates for the respective periods:
SCHEDULE OF FOREIGN CURRENCY EXCHANGE RATE TRANSLATION
2023 | 2022 | |||||||
As of and for the six months ended June 30, | ||||||||
2023 | 2022 | |||||||
Period-end RMB:US$1 exchange rate | 0.13880 | 0.14927 | ||||||
Period-average RMB:US$1 exchange rate | 0.14448 | 0.15451 |
The RMB is not freely convertible into foreign currency and all foreign exchange transactions must take place through authorized institutions. No representation is made that the RMB amounts could have been, or could be, converted into U.S. dollars at the rates used in translation.
Impairment of long-lived assets other than goodwill
The Company reviews its long-lived assets for impairment 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.
The Company did not recognize any impairment of long-lived assets during the six months ended June 30, 2023 and 2022.
Goodwill
Goodwill represents the excess of the purchase price over the fair value of the net identifiable assets acquired in a business combination. In accordance with FASB ASC Topic 350, “Intangibles-Goodwill and Others”, goodwill is subject to at least an annual assessment for impairment or more frequently if events or changes in circumstances indicate that an impairment may exist, applying a fair-value based test. Fair value is generally determined using a discounted cash flow analysis. The Company would recognize an impairment charge for the amount by which the carrying amount of a reporting unit exceeds its fair value up to the amount of goodwill allocated to that reporting unit.
During the six months ended June 30, 2023 and 2022, the Company did not record any impairment of goodwill.
9 |
Revenue recognition
The Company follows the guidance of ASC 606, revenue from contracts with customers is recognized using the following five steps:
1. | Identify the contract(s) with a customer; | |
2. | Identify the performance obligations in the contract; | |
3. | Determine the transaction price; | |
4. | Allocate the transaction price to the performance obligations in the contract; and | |
5. | Recognize revenue when (or as) the entity satisfies a performance obligation. |
Under Topic 606, revenues are recognized when the promised products have been confirmed of delivery or services have been transferred to the consumers in amounts that reflect the consideration the customer expects to be entitled to in exchange for those services. The Company presents value added taxes (“VAT”) as reductions of revenues. The Company recognizes revenues net of value added taxes (“VAT”) and relevant charges.
We generate revenue primarily from the sales of liquor, water, water purifier and other products directly to agents, wholesalers and end users, with majority of sales transactions were conducted offline. We recognize product revenue at a point in time when the control of the products has been transferred to customers. The transfer of control is considered complete when products have been picked up by or delivered to our customers. We account for shipping and handling fees as a fulfillment cost.
The following table provides information about disaggregated revenue based on revenue by product types:
SCHEDULE OF DISAGGREGATION REVENUE
2023 | 2022 | 2023 | 2022 | |||||||||||||
Three months ended June 30, | Six months ended June 30, | |||||||||||||||
2023 | 2022 | 2023 | 2022 | |||||||||||||
Sales of liquor | $ | 878,952 | $ | 1,203,484 | $ | 1,782,672 | $ | 1,833,946 | ||||||||
Sales of water | 213,582 | 808,648 | 633,202 | 1,338,092 | ||||||||||||
Sales of water purifier | 114,714 | 310,807 | 367,837 | 395,548 | ||||||||||||
Others | 65,349 | 13,520 | 124,175 | 30,683 | ||||||||||||
Total | $ | 1,272,597 | $ | 2,336,459 | $ | 2,907,886 | $ | 3,598,269 |
Contract liabilities
Contract liabilities consist mainly of customer advances. On certain occasions, the Company may receive prepayments from downstream retailers or wholesales customers for liquors, water and other products prior to them taking possession of the Company’s products. The Company records these receipts as customer advances until the control of the products has been transferred the customers. As of June 30, 2023 and December 31, 2022, the Company had customer advances of $116,769 and $139,334, respectively. During the six months ended June 30, 2023, the Company recognized $24,707 of customer advances in the opening balance.
Related party transaction
Transactions involving related parties cannot be presumed to be carried out on an arm’s-length basis, as the requisite conditions of competitive, free market dealings may not exist. Representations about transactions with related parties, if made, shall not imply that the related party transactions were consummated on terms equivalent to those that prevail in arm’s-length transactions unless such representations can be substantiated.
Recently adopted accounting pronouncements
In June 2016, the FASB issued Accounting Standards Update (“ASU”) No. 2016-13, Financial Instruments – Credit Losses (Topic 326), Measurement of Credit Losses on Financial Instruments. ASU No. 2016-13 was further amended in November 2020 by ASU No. 2020-10, Financial Instruments – Credit Losses (Topic 326), Derivatives and Hedging (Topic 815), and Leases (Topic 842). As a result, ASC Topic 326, Financial Instruments – Credit Losses is effective for smaller reporting companies for fiscal years beginning after December 15, 2022, including interim periods within those fiscal years. The Company adopted ASU No. 2016-13 on January 1, 2023 and the adoption did not have a material impact on the Company’s unaudited condensed consolidated financial statements.
In October 2021, the FASB issued ASU No. 2021-08, Business Combinations (Topic 805), Accounting for Contract Assets and Contract Liabilities from Contracts with Customers. This ASU clarifies that an acquirer of a business should recognize and measure contract assets and contract liabilities in a business combination in accordance with ASC Topic 606, “Revenue from Contracts with Customers”. This ASU is expected to improve comparability for both the recognition and measurement of acquired revenue contracts with customers at the date of and after a business combination. The new guidance is effective for fiscal years beginning after December 15, 2022, including interim periods within those fiscal years. The Company adopted ASU No. 2021-08 on January 1, 2023 and the adoption did not have a material impact on the Company’s unaudited condensed consolidated financial statements.
10 |
4. Related Party Transactions
5. Subsequent EventNOTE 2 – ACCOUNTS RECEIVABLE, NET
EffectiveAccounts receivable consisted of the following as of June 30, 2023 and December 14, 2016,31, 2022:
SCHEDULE OF ACCOUNTS RECEIVABLE
June 30, 2023 | December 31, 2022 | |||||||
Accounts receivable (including $73,096 and $nil to related parties as of June 30, 2023 and December 31, 2022, respectively) | $ | 5,461,870 | $ | 4,797,564 | ||||
Less: Doubtful allowance (including $724 and $nil to related parties as of June 30, 2023 and December 31, 2022, respectively) | (360,149 | ) | - | |||||
Accounts receivable, net | $ | 5,101,721 | $ | 4,797,564 |
Allowance for doubtful accounts movement is as follows:
SCHEDULE OF ALLOWANCE FOR DOUBTFUL ACCOUNTS
June 30, 2023 | December 31, 2022 | |||||||
Beginning balance | $ | - | $ | - | ||||
Additions to allowance | 374,894 | - | ||||||
Foreign currency translation adjustment | (14,745 | ) | - | |||||
Ending balance | $ | 360,149 | $ | - |
NOTE 3 – PREPAYMENTS AND OTHER CURRENT ASSETS, NET
Prepayments and other current assets consisted of the following as of June 30, 2023 and December 31, 2022:
SCHEDULE OF PREPAYMENT AND OTHER CURRENT ASSETS
June 30, 2023 | December 31, 2022 | |||||||
Prepayments (including $2,394,062 and $2,255,288 to related parties as of June 30, 2023 and December 31, 2022, respectively) | $ | 2,875,927 | $ | 3,001,866 | ||||
Other current assets | 6,995 | 4,631 | ||||||
Total prepayments and other current assets | 2,882,922 | 3,006,497 | ||||||
Less: Allowance for doubtful accounts (including $1,231,440 and $1,152,427 to related parties as of June 30, 2023 and December 31, 2022, respectively) | (1,345,283 | ) | (1,247,580 | ) | ||||
Prepayments and other current assets, net | $ | 1,537,639 | $ | 1,758,917 |
Balance of prepayments represented the advanced payments to suppliers including related party suppliers.
Allowance for doubtful accounts movements is as follows:
SCHEDULE OF ALLOWANCE FOR DOUBTFUL ACCOUNTS
June 30, 2023 | December 31, 2022 | |||||||
Beginning balance | $ | 1,247,580 | $ | - | ||||
Additions to allowance | 154,985 | 1,284,005 | ||||||
Foreign currency translation adjustment | (57,282 | ) | (36,425 | ) | ||||
Ending balance | $ | 1,345,283 | $ | 1,247,580 |
NOTE 4 – DEPOSITS PAID, NET
Deposits paid consisted of the following as of June 30, 2023 and December 31, 2022:
SCHEDULE OF DEPOSITS PAID
June 30, 2023 | December 31, 2022 | |||||||
Deposits paid (including $1,573,209 and $1,628,511 to related parties as of June 30, 2023 and December 31, 2022, respectively) | $ | 2,280,196 | $ | 2,365,652 | ||||
Less: Allowance for doubtful accounts (including $999,625 and $870,066 to related parties as of June 30, 2023 and December 31, 2022, respectively) | (1,606,635 | ) | (1,244,350 | ) | ||||
Deposits paid, net | $ | 673,561 | $ | 1,121,302 |
Allowance for doubtful accounts movement is as follows:
SCHEDULE OF ALLOWANCE FOR DOUBTFUL ACCOUNTS OF DEPOSITS PAID
June 30, 2023 | December 31, 2022 | |||||||
Beginning balance | $ | 1,244,350 | $ | - | ||||
Additions to allowance | 430,265 | 1,280,681 | ||||||
Foreign currency translation adjustment | (67,980 | ) | (36,331 | ) | ||||
Ending balance | $ | 1,606,635 | $ | 1,244,350 |
NOTE 5 – PROPERTY AND EQUIPMENT, NET
Property and equipment consisted of the following as of June 30, 2023 and December 31, 2022:
SCHEDULE OF PROPERTY AND EQUIPMENT
June 30, 2023 | December 31, 2022 | |||||||
Office equipment | $ | 116,520 | $ | 116,520 | ||||
Leasehold improvement | 126,386 | 126,386 | ||||||
Vehicle | 31,910 | - | ||||||
Property and equipment | 274,816 | 242,906 | ||||||
Less: Accumulated depreciation | (162,355 | ) | (145,016 | ) | ||||
Property and equipment, net | $ | 112,461 | $ | 97,890 |
Depreciation expense, which was included in general and administrative expenses, for the six months ended June 30, 2023 and 2022 was $18,046 and $15,647, respectively.
11 |
NOTE 6 – INTANGIBLE ASSETS, NET
Intangible assets and related accumulated amortization were as follows:
SCHEDULE OF INTANGIBLE ASSETS
June 30, 2023 | December 31, 2022 | |||||||
Distribution channel | $ | 2,989,709 | $ | 3,117,635 | ||||
Others | 25,553 | 27,809 | ||||||
Total intangible assets | 3,015,262 | 3,145,444 | ||||||
Less: Accumulated amortization | (1,850,517 | ) | (1,822,875 | ) | ||||
Less: Accumulated impairment | (912,597 | ) | (951,643 | ) | ||||
Intangible assets, net | $ | 252,148 | $ | 370,926 |
Amortization expense for the six months ended June 30, 2023 and 2022 was $106,634 and $417,770, respectively, included in cost of revenues and general and administrative expenses.
As of June 30, 2023, the future estimated amortization costs for intangible assets are as follows:
SCHEDULE OF FUTURE AMORTIZATION EXPENSES FOR DISTRIBUTION CHANNELS
Year ending December 31, | ||||
2023 (remaining) | $ | 102,773 | ||
2024 | 138,256 | |||
2025 | 5,010 | |||
2026 | 5,010 | |||
2027 | 1,099 | |||
Total | $ | 252,148 |
NOTE 7 - RELATED PARTY TRANSACTIONS
Amounts due to related parties as of June 30, 2023 and December 31, 2022 are as follows:
SCHEDULE OF AMOUNT DUE FROM AND DUE TO RELATED PARTIES
June 30, 2023 | December 31, 2022 | |||||||||
Mr. Yumin Lin | President, Chief Executive Officer, Secretary, Director and majority shareholder | $ | 517,426 | $ | 389,051 | |||||
Ms. Xiulan Zhou | Manager of a subsidiary, Mr. Yumin Lin’s wife | 1,287 | 508 | |||||||
Mr. Huagen Li | Manager of a subsidiary | 2,221 | 2,316 | |||||||
Mr. Guodong Jia | Manager of a subsidiary | 4,462 | 2,342 | |||||||
Mr. Hongwei Ye | Manager of a subsidiary, Shareholder | 15 | 16 | |||||||
Mr. Anping Chen | Manager of a subsidiary | 5,424 | 1,290 | |||||||
Mr. Jiangwei Jia | Manager of a subsidiary | 6,497 | 3,678 | |||||||
Mr. Yuwen Li | Vice President | 69,925 | 64,924 | |||||||
Ms. Lihua Li | Manager of a subsidiary | 3,376 | - | |||||||
Shenzhen DaXingHuaShang Industrial Group Ltd. (fka Shenzhen DaXingHuaShang Industry Development Ltd.) | Mr. Yumin Lin is the supervisor of Shenzhen DaXingHuaShang Industrial Group Ltd. | 83,279 | 86,842 | |||||||
Ms. Chunxiang Zhang | Manager of a subsidiary | 3,168 | 998 | |||||||
Mr. Meng Xue | Manager of a subsidiary | 7,359 | 5,449 | |||||||
Ms. Shuqin Chen | Manager of a subsidiary | 5,400 | 1,358 | |||||||
Mr. Zhipeng Zuo | Manager of a subsidiary | 16,762 | 59 | |||||||
Mr. Deqin Ke | Manager of a subsidiary | - | 724 | |||||||
Mr. Aisheng Zhang | Manager of a subsidiary | 15,982 | 2,320 | |||||||
Mr. Zhihua Liao | Manager of a subsidiary | 5,960 | 3,800 | |||||||
$ | 748,543 | $ | 565,675 |
12 |
Revenues generated from related parties during the six months ended June 30, 2023 and 2022 are as follows:
SCHEDULE OF REVENUE GENERATED FROM RELATED PARTIES
Six months ended June 30, | ||||||||||
2023 | 2022 | |||||||||
Mr. Kaihong Lin | Chief Financial Officer and Treasurer | $ | 278 | $ | 652 | |||||
Mr. Yumin Lin | President, Chief Executive Officer, Secretary, Director and majority shareholder | - | 438 | |||||||
Mr. Zihao Ye | Manager of a subsidiary | - | 262 | |||||||
Ms. Xiulan Zhou | Manager of a subsidiary, Mr. Yumin Lin’s wife | 14 | - | |||||||
Dongguan Huanhai Trading Co., Ltd. | Mr. Hongwei Ye, a shareholder of the Company and a manager of a subsidiary, is the controlling shareholder of Dongguan Huanhai Trading Co., Ltd. | 10,886 | 13,553 | |||||||
Guangdong Yuexin Jiaotong Construction Co., Ltd. | Mr. Naiyong Luo, a manager of a subsidiary, is the controlling shareholder of Guangdong Yuexin Jiaotong Construction Co., Ltd. | 10,578 | 7,581 | |||||||
Dongguan City Hualianguan Chemical Co., Ltd. | Mr. Hongwei Ye, a shareholder of the Company and a manager of a subsidiary, is the controlling shareholder of Dongguan City Hualianguan Chemical Co., Ltd. | 14,808 | 19,009 | |||||||
Dongguan Humen Shuiyan Drinking Water Store | Ms. Shuiyan Li, a shareholder of the Company, is the controlling shareholder of Dongguan Humen Shuiyan Drinking Water Store | 33,034 | - | |||||||
Revenues generated from related parties | $ | 69,598 | $ | 41,495 |
Cost of revenues from related parties during the six months ended June 30, 2023 and 2022 is as follows:
SCHEDULE OF COST OF REVENUES FROM RELATED PARTIES
Six months ended June 30, | ||||||||||
2023 | 2022 | |||||||||
Dongguan Baxi Food Distribution Co., Ltd. | Significantly influenced by the Company | $ | 57,509 | $ | 15,899 | |||||
Dongguan Dalingshan Xinwenhua Drinking Water Store | Significantly influenced by the Company | 23,614 | 43,759 | |||||||
Dongguan Pengqin Drinking Water Co., Ltd. | Significantly influenced by the Company | 23,433 | 33,836 | |||||||
Dongguan Dengqinghu Drinking Water Store | Significantly influenced by the Company | 2,934 | 1,475 | |||||||
Dongguan Tailai Trading Co., Ltd. | Significantly influenced by the Company | 52,324 | 34,519 | |||||||
Dongguan Anxiang Technology Co., Ltd. | Significantly influenced by the Company | 56,704 | 64,639 | |||||||
Guangdong Jiaduonuo Shengshi Trading Co., Ltd. | Significantly influenced by the Company | 90,355 | 64,565 | |||||||
Dongguan Dalingshan Runxin Drinking Water Store | Significantly influenced by the Company | 11,473 | 16,312 | |||||||
Dongguan City Yijia Trading Co., Ltd. | Mr. Yongming Li, a shareholder of the Company, is the controlling shareholder of Dongguan City Yijia Trading Co., Ltd. | 43,750 | 111,376 | |||||||
Cost of revenues from related parties | $ | 362,096 | $ | 386,380 |
Purchases from related parties during the six months ended June 30, 2023 and 2022 are as follows:
SCHEDULE OF PURCHASES FROM RELATED PARTIES
Six months ended June 30, | ||||||||||
2023 | 2022 | |||||||||
Dongguan Baxi Food Distribution Co., Ltd. | Significantly influenced by the Company | $ | 61,259 | $ | 19,406 | |||||
Dongguan Dalingshan Xinwenhua Drinking Water Store | Significantly influenced by the Company | 25,221 | 56,842 | |||||||
Dongguan Pengqin Drinking Water Co., Ltd. | Significantly influenced by the Company | 25,416 | 37,266 | |||||||
Dongguan Dengqinghu Drinking Water Store | Significantly influenced by the Company | 3,124 | 1,659 | |||||||
Dongguan Tailai Trading Co., Ltd. | Significantly influenced by the Company | 55,999 | 33,634 | |||||||
Dongguan Anxiang Technology Co., Ltd. | Significantly influenced by the Company | 56,965 | 66,220 | |||||||
Guangdong Jiaduonuo Shengshi Trading Co., Ltd. | Significantly influenced by the Company | 90,430 | 69,407 | |||||||
Dongguan Dalingshan Runxin Drinking Water Store | Significantly influenced by the Company | 12,522 | 16,374 | |||||||
Dongguan City Yijia Trading Co., Ltd. | Mr. Yongming Li, a shareholder of the Company, is the controlling shareholder of Dongguan City Yijia Trading Co., Ltd. | 43,750 | 48,579 | |||||||
Purchase from related party | $ | 374,686 | $ | 349,387 |
Due to related parties mainly consists of borrowings for working capital purpose, the balances are unsecured, non-interest bearing and due on demand.
Mr. Yuwen Li, the Vice President of the Company, executed a Saleauthorized the Company to use trademarks that were owned by him for ten years from October 5, 2019 to October 4, 2029 at no cost.
Also see Note 2, 3, 4, 9 and Purchase Agreement (the Agreement”)10 for more transactions with related parties.
13 |
NOTE 8 - INCOME TAXES
United States of America
The Company is registered in the State of Nevada and is subject to acquire 100%United States of America tax law. The U.S. federal income tax rate is 21%.
Seychelles
Under the current laws of the sharesSeychelles, DIGLS and assetsJJGS are registered as an international business company governed by the International Business Companies Act of DaXingHuaShang Investment Group Limited (“DIGL”Seychelles and there is no income tax charged in Seychelles.
Hong Kong
From year of assessment of 2018/2019 onwards, Hong Kong profit tax rates are 8.25% on assessable profits up to HK$2,000,000 (approximately $255,112), a companyand 16.5% on any part of assessable profits over HK$2,000,000. For the six months ended June 30, 2023 and 2022, the Company did not have any assessable profits arising in or derived from Hong Kong, therefore no provision for Hong Kong profits tax was made in the periods reported.
The PRC
The Company’s subsidiaries are incorporated underin the laws of Republic of Seychelles. PursuantPRC, and are subject to the Agreement, PRC Enterprise Income Tax Laws (“EIT Laws”) with the statutory income tax rate of 25% with the following exceptions.
On April 2, 2021, the State Taxation Administration issued the notice of the Ministry of Finance and the State Administration of Taxation (“MOF and SAT”) [2021] No.12 to provide an enterprise income tax rate of 2.5% on small-scale and low-profit enterprises whose annual taxable income is less than RMB1,000,000, approximately $142,209, from January 1, 2021 to December 31, 2022. MOF and SAT [2022] No.13 also provides an enterprise income tax rate of 5% on small-scale and low-profit enterprises whose annual taxable income is more than RMB1,000,000, approximately $144,482, but less than RMB3,000,000, approximately $433,445, from January 1, 2022 to December 31, 2024. The qualifications of small-scale and low-profit enterprises were examined annually by the Tax Bureau. All of the Company’s PRC subsidiaries met the criteria of small-scale and low-profit enterprises, except for Xixingdao, FVT Supply Chain and FLTT.
The components of the income tax provision are as follows:
SCHEDULE OF COMPONENTS OF INCOME TAX PROVISION
Six months ended June 30, | ||||||||
2023 | 2022 | |||||||
Current: | ||||||||
– United States of America | $ | 41,444 | $ | 45,562 | ||||
– Seychelles | - | - | ||||||
– Hong Kong | - | - | ||||||
– The PRC | 55,058 | 58,359 | ||||||
Current income tax expense | ||||||||
Deferred | ||||||||
– United States of America | - | - | ||||||
– Seychelles | - | - | ||||||
– Hong Kong | - | - | ||||||
– The PRC | - | - | ||||||
Deferred income tax expense | ||||||||
Total | $ | 96,502 | $ | 103,921 |
The effective tax rate was -22.1% and 9.7% for the six months ended June 30, 2023 and 2022, respectively.
14 |
NOTE 9 - OPERATING LEASES
As of June 30, 2023, the Company has nineteen separate operating lease agreements for three office spaces, one warehouse and fifteen stores in PRC with remaining lease terms of from 1 month to 46 months.
Two of the leases described above were entered with related parties. The operating lease entered with Ms. Qingmei Lin, a related party, is for the premises in Dongguan City, PRC. The agreement covers the period from January 1, 2019 to April 30, 2027 with the monthly rent expense of RMB10,000 (approximately $1,445). The operating lease agreement entered with Mr. Hongwei Ye, another related party, is for the premises in Dongguan City, PRC. The agreement covers the period from September 27, 2020 to September 30, 2023 with the monthly rent expense of RMB960 (approximately $138).
The components of lease expense and supplemental cash flow information related to leases for the six months ended June 30, 2023 and 2022 are as follows:
SCHEDULE OF COMPONENTS OF LEASE EXPENSE AND SUPPLEMENTAL CASH FLOW INFORMATION
Operating lease cost (included in general and administrative expenses in the Company’s unaudited condensed consolidated statements of operations) | Six months ended June 30, | |||||||
2023 | 2022 | |||||||
Related parties | $ | 9,501 | $ | 11,347 | ||||
Non-related parties | 63,683 | 74,009 | ||||||
Total | $ | 73,184 | $ | 85,356 | ||||
Operating Lease Cost | $ | 73,184 | $ | 85,356 |
Other information for the six months ended | June 30, 2023 | June 30, 2022 | ||||||
Cash paid for amounts included in the measurement of lease obligations | $ | 77,612 | $ | 78,215 | ||||
Weighted average remaining lease term (in years) | 2.72 | 3.55 | ||||||
Weighted average discount rate | 3.23 | % | 3.23 | % |
Maturities of the Company’s lease obligations as of June 30, 2023 are as follows:
SCHEDULE OF MATURITIES OF LEASE OBLIGATIONS
Year ending December 31, | ||||
2023 (remaining) | $ | 65,998 | ||
2024 | 121,342 | |||
2025 | 103,943 | |||
2026 | 40,951 | |||
2027 | 5,552 | |||
Total lease payment | 337,786 | |||
Less: Imputed interest | (11,701 | ) | ||
Operating lease obligations | $ | 326,085 |
NOTE 10 – BANK AND OTHER BORROWINGS
In August 2020, the Company obtained a revolving credit line in the principal amount of RMB910,000 (approximately $139,000 when borrowed) from China Construction Bank, which bears interest at 4.10%. The credit line is guaranteed by Xiulan Zhou, a related party, and pledged by her property. The maturity date is on August 7, 2023.
In November 2021, the Company obtained a bank loan in the principal amount of RMB500,000 (approximately $79,000 when borrowed) from Shenzhen Qianhai Webank Co., Ltd. (“WeBank”), which bears interest at 3.6%. The maturity date is on December 11, 2021. On December 11, 2021, the Company and WeBank agreed to issue 300 million sharesextend the maturity date of the Companyloan to DIGLDecember 21, 2023 and increase the principal amount to acquire 100% of the shares and assets for a cost of $12 millionRMB500,750 (approximately $79,000 when borrowed) reflecting the value ofaccrued interest. The loan is guaranteed by Yumin Lin and bears interest at 10.71%.
In May 2022, the rights, titles and interestsCompany obtained a revolving credit line in the business assets and all attendant orprincipal amount of RMB1,000,000 (approximately $149,000 when borrowed) from China Construction Bank, which bears interest at 4.45%. The credit line is guaranteed by Xiulan Zhou, a related assetsparty. The credit line was fully repaid on the maturity date of DIGL. Both partied agreed that this share issuance by the Company represents payment in full of the $12 million.As of the filing date, the transaction has not been closed and the Company has not increased the authorized shares or issued the 300 million shares.May 26, 2023.
15 |
In May 2022, the Company obtained a loan in the principal amount of RMB161,000 (approximately $24,000 when borrowed) from Huaneng Guicheng Trust Co., Ltd. (“Huaneng Guicheng”), which bears interest at 11.34%. The loan is guaranteed by Yumin Lin. The maturity date is on May 21, 2024.
In May 2022, the Company obtained a bank loan in the principal amount of RMB69,000 (approximately $10,000 when borrowed) from WeBank, which bears interest at 11.34%. The loan is guaranteed by Yumin Lin. The maturity date is on May 21, 2024.
In July 2022, the Company obtained two loans in the principal amount of RMB99,000 (approximately $15,000 when borrowed) and RMB231,000 (approximately $34,000 when borrowed) from WeBank and Guangdong Nanyue Bank Co., Ltd. (“Nanyue Bank”), respectively, which bear interest at 14.4%. The loans are guaranteed by Kaihong Lin. The maturity date is on July 8, 2024.
In July 2022, the Company obtained two loans in the principal amount of RMB153,000 (approximately $23,000 when borrowed) and RMB357,000 (approximately $53,000 when borrowed) from WeBank and Nanyue Bank, respectively, which bear interest at 14.4%. The loans are guaranteed by Falan Zhou, a manager of subsidiaries. The maturity date is on July 13, 2024.
In July 2022, the Company obtained a loan in the principal amount of RMB380,000 (approximately $57,000 when borrowed) from Huaneng Guicheng, which bears interest at 12.6%. The loan is guaranteed by Yumin Lin. The maturity date is on July 21, 2024.
In February 2023, the Company obtained a revolving credit line in the principal amount of RMB465,000 (approximately $68,000 when borrowed) from China Construction Bank, which bears interest at 4.00%. The loan is guaranteed by Shuqin Chen, a related party. The maturity date is on February 11, 2024.
In April 2023, the Company obtained two bank loans in the principal amount of RMB224,000 (approximately $31,000 when borrowed) and RMB96,000 (approximately $13,000 when borrowed) from Bank of Ningbo and WeBank, respectively, which bear interest at 12.24%. The loans are guaranteed by Falan Zhou, a manager of subsidiaries. The maturity date is on April 7, 2025.
In April 2023, the Company obtained a mortgage loan in the principal amount of RMB195,415 (approximately $27,000 when borrowed) from WeBank, which bears interest at 6.54%. The loan is pledged by a vehicle of the Company. The maturity date is on April 10, 2028.
In May 2023, the Company obtained a revolving credit line in the principal amount of RMB1,050,000 (approximately $146,000 when borrowed), with Yumin Lin as a co-borrower, from China Construction Bank, which bears interest at 4.20%. The maturity date is on May 26, 2024.
The balance of the loans borrowed as of June 30, 2023 and December 31, 2022 were as follows:
SCHEDULE OF BALANCE OF LOAN BORROWED UNDER CREDIT LINES
June 30, 2023 | December 31, 2022 | |||||||
Loans from a trust in PRC | $ | 38,810 | $ | 60,049 | ||||
China Construction Bank | 336,585 | 276,447 | ||||||
WeBank | 81,488 | 77,220 | ||||||
Guangdong Nanyue Bank | 44,207 | 67,375 | ||||||
Bank of Ningbo | 28,499 | - | ||||||
Aggregate outstanding principal balances | 529,589 | 481,091 | ||||||
Less: current portion | 483,233 | 422,653 | ||||||
Non-current portion | $ | 46,356 | $ | 58,438 |
The total interest expense was $18,256 and $10,689 for the six months ended June 30, 2023 and 2022, respectively.
Future minimum loan payments as of June 30, 2023 are as follows:
SCHEDULE OF FUTURE MINIMUM LOAN PAYMENTS
Year ending December 31, | ||||
2023 (remaining) | $ | 210,155 | ||
2024 | 293,951 | |||
2025 | 12,826 | |||
2026 | 5,425 | |||
2027 | 5,425 | |||
Thereafter | 1,807 | |||
Total | $ | 529,589 |
NOTE 11 - SUBSEQUENT EVENTS
In July 2023, the Company obtained a bank loan in the principal amount of RMB817,000 (approximately $114,000 when borrowed) from China Construction Bank, which bears interest at 3.85% with the maturity date on July 22, 2024.
16 |
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations.
This section includesThe information contained in this Form 10-Q is intended to update the information contained in our Annual Report on Form 10-K for the year ended December 31, 2022 filed with the Securities and Exchange Commission on March 31, 2023 (the “Form 10-K”) and presumes that readers have access to, and will have read, the “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and other information contained in such Form 10-K. The following discussion and analysis also should be read together with our financial statements and the notes to the financial statements included elsewhere in this Form 10-Q.
The following discussion contains certain statements that may be deemed “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. Such statements appear in a number of forward-lookingplaces in this Report, including, without limitation, “Management’s Discussion and Analysis of Financial Condition and Results of Operations.” These statements are not guaranteed of future performance and involve risks, uncertainties and requirements that reflectare difficult to predict or are beyond our current views with respect to future events and financial performance.control. Forward-looking statements are often identified by words like “believe”, “expect”, “estimate”, “anticipate”, “intend”, “project” and similar expressions, or words which, by their nature, refer to future events.speak only as of the date of this quarterly report. You should not placeput undue certaintyreliance on theseany forward-looking statements. These forward-looking statements are subjectWe strongly encourage investors to carefully read the factors described in our Form 10-K in the section entitled “Risk Factors” for a description of certain risks and uncertainties that could, among other things, cause actual results to differ materially from our predictions.these forward-looking statements. We assume no responsibility to update the forward-looking statements contained in this quarterly report on Form 10-Q. The following should also be read in conjunction with the unaudited Financial Statements and notes thereto that appear elsewhere in this report.
We qualify as an “emerging growth company” under the JOBS Act. As a result, we are permitted to, and intend to, rely on exemptions from certain disclosure requirements. For so long as we are an emerging growth company, we will not be required to:Overview
In addition, Section 107 of the JOBS Act also provides that an emerging growth company can take advantage of the extended transition period provided in Section 7(a)(2)(B) of the Securities Act for complying with newFortune Valley Treasures, Inc. (the “Company,” “we,” “our” or revised accounting standards. In other words, an emerging growth company can delay the adoption of certain accounting standards until those standards would otherwise apply to private companies. We have elected to take advantage of the benefits of this extended transition period. Our financial statements may therefore not be comparable to those of companies that comply with such new or revised accounting standards.
We will remain an “emerging growth company” for up to five years, or until the earliest of (i) the last day of the first fiscal year in which our total annual gross revenues exceed $1 billion, (ii) the date that we become a “large accelerated filer” as defined in Rule 12b-2 under the Securities Exchange Act of 1934, which would occur if the market value of our ordinary shares that is held by non-affiliates exceeds $700 million as of the last business day of our most recently completed second fiscal quarter or (iii) the date on which we have issued more than $1 billion in non-convertible debt during the preceding three year period.
Overview
Crypto-Services, Inc.“us”) was incorporated in the State of Nevada as a for-profit company on March 21, 2014 and established a fiscal year end of August 31. CRYT is a development-stage Company which intended2014. We were initially incorporated to offer an information based website at www.digitalcoindaily.com that would provide users with up to dateup-to-date information on the world of digital currencies. We engage in the food supply chain operations and management through a service platform. Through various acquisitions of high-quality upstream and downstream companies in the industry, the Company creates a complete industrial chain to reduce costs and enhance competitiveness. The company mainly focuses on online and offline sales targeting regional wholesalers, retailers, supermarkets and major food and beverage (“F&B”) chains.
During the six months ended June 30, 2023, the Company conducted its business in one revenue stream: product sales – liquor, water, water purifier and other F&B products.
Results of Operations
Three months ended June 30, 2023 and 2022
Three months ended June 30, | ||||||||||||
2023 | 2022 | Change | ||||||||||
Net revenues | $ | 1,272,597 | $ | 2,336,459 | $ | (1,063,862 | ) | |||||
Cost of revenues | (652,798 | ) | (1,099,523 | ) | 446,725 | |||||||
Gross profit | 619,799 | 1,236,936 | (617,137 | ) | ||||||||
Operating expense | (1,040,588 | ) | (363,586 | ) | (677,002 | ) | ||||||
Other income | 6,436 | 1,995 | 4,441 | |||||||||
Interest income | 16 | 16 | - | |||||||||
Interest expense | (8,964 | ) | (4,864 | ) | (4,100 | ) | ||||||
Income taxes | (21,528 | ) | (81,514 | ) | 59,986 | |||||||
Net income (loss) | (444,829 | ) | 788,983 | (1,233,812 | ) | |||||||
Net income (loss) attributable to noncontrolling interests | (58,004 | ) | 41,250 | (99,254 | ) | |||||||
Net income (loss) attributable to Fortune Valley Treasures, Inc. | $ | (386,825 | ) | $ | 747,733 | $ | (1,134,558 | ) |
Six months ended June 30, 2023 and 2022
Six months ended June 30, | ||||||||||||
2023 | 2022 | Change | ||||||||||
Net revenues | $ | 2,907,886 | $ | 3,598,269 | $ | (690,383 | ) | |||||
Cost of revenues | (1,330,165 | ) | (1,617,985 | ) | 287,820 | |||||||
Gross profit | 1,577,721 | 1,980,284 | (402,563 | ) | ||||||||
Operating expense | (2,005,225 | ) | (909,027 | ) | (1,096,198 | ) | ||||||
Other income | 8,210 | 8,202 | 8 | |||||||||
Interest income | 47 | 93 | (46 | ) | ||||||||
Interest expense | (18,256 | ) | (10,689 | ) | (7,567 | ) | ||||||
Income taxes | (96,502 | ) | (103,921 | ) | 7,419 | |||||||
Net income (loss) | (534,005 | ) | 964,942 | (1,498,947 | ) | |||||||
Net income (loss) attributable to noncontrolling interests | (58,361 | ) | 68,533 | (126,894 | ) | |||||||
Net income (loss) attributable to Fortune Valley Treasures, Inc. | $ | (475,644 | ) | $ | 896,409 | $ | (1,372,053 | ) |
17 |
Net Revenues
Net revenues were $1,272,597 for the three months ended June 30, 2023, reflecting a decrease of $1,063,862, or 46%, from $2,336,459 for the three months ended June 30, 2022. The decrease in net revenues was mainly due to the lower product sales volume than the same period of the prior year and to a lesser extent, the lower unit sales prices of wine products. The decrease in product sales was resulted from a decline in market demand resulting from the sluggish economic environment and slow recovery in China’s economy as compared to the same period of the prior year. And in order to attract new customers, the Company has lowered the unit sales prices of wine products beginning in April 2023.
Net revenues were $2,907,886 for the six months ended June 30, 2023, reflecting a decrease of $690,383, or 19%, from $3,598,269 for the six months ended June 30, 2022. The decrease in net revenues was mainly due to the lower product sales volume than the same period of the prior year and to a lesser extent, the lower unit sales prices of wine products. The decrease in product sales reflected a decline in market demand resulting from the sluggish economic environment and slow recovery in China’s economy as compared to the same period of the prior year. And in order to attract new customers, the Company has lowered the unit sales prices of wine products since April 2023.
Cost of Revenues
Cost of revenues was $652,798 for the three months ended June 30, 2023, reflecting a decrease of $446,725, or 41%, from $1,099,523 for the three months ended June 30, 2022. The decrease in cost of revenues was due to the lower product sales volume in line with our revenue decrease.
Cost of revenues was $1,330,165 for the six months ended June 30, 2023, reflecting a decrease of $287,820, or 18%, from $1,617,985 for the six months ended June 30, 2022. The decrease in cost of revenues was due to the lower product sales volume in line with our revenue decrease.
Gross Profit
Gross profit was $619,799 and $1,236,936 for the three months ended June 30, 2023 and 2022, respectively, reflecting a decrease of $617,137, or 50%. The decrease in gross profit was due to the decrease in the net revenues.
Gross profit was $1,577,721 and $1,980,284 for the six months ended June 30, 2023 and 2022, respectively, reflecting a decrease of $402,563, or 20%. The decrease in gross profit was due to the decrease in the net revenues.
Operating Expenses
Operating expenses were $1,040,588 for the three months ended June 30, 2023, reflecting an increase of $677,002, or 186%, from $363,586 for the three months ended June 30, 2022. The increase in operating expenses was mainly due to the increase in professional service fees and credit loss expenses.
Operating expenses were $2,005,225 for the six months ended June 30, 2023, reflecting an increase of $1,096,198, or 121%, from $909,027 for the six months ended June 30, 2022. The increase in operating expenses was mainly due to the increase in professional service fees and credit loss expenses.
Net Income (loss)
For the three months ended June 30, 2023, our net loss was $444,829, compared to a net income of $788,983 for the three months ended June 30, 2022. The decrease in net income was a result of the factors described above.
For the six months ended June 30, 2023, our net loss was $534,005, compared to a net income of $964,942 for the six months ended June 30, 2022. The decrease in net income was a result of the factors described above.
Net income (loss) attributable to noncontrolling interests
The Company records net income (loss) attributable to noncontrolling interests in the unaudited condensed consolidated statements of operations for any noncontrolling interests of consolidated subsidiaries.
For the three months ended June 30, 2023 and 2022, the Company recorded a net loss attributable to noncontrolling interests of $58,004 and a net income attributable to noncontrolling interests of $41,250, respectively.
For the six months ended June 30, 2023 and 2022, the Company recorded a net loss attributable to noncontrolling interests of $58,361 and a net income attributable to noncontrolling interests of $68,533, respectively.
18 |
Gordon Hum, the Company’s director, President, Treasurer, Secretary, Chief Executive Officer, Chief Financial OfficerLiquidity and holderCapital Resources
Working Capital
June 30, 2023 | December 31, 2022 | Change | ||||||||||
Total current assets | $ | 6,792,105 | $ | 6,871,091 | $ | (78,986 | ) | |||||
Total current liabilities | 2,738,979 | 2,484,582 | 254,397 | |||||||||
Working capital | $ | 4,053,126 | $ | 4,386,509 | $ | (333,383 | ) |
As of 3,500,000 sharesJune 30, 2023, we had working capital of the Company’s common stock representing approximately 45.16%$4,053,126, as compared to working capital of the Company’s issued$4,386,509 as of December 31, 2022. We had total current assets of $6,792,105, consisting of cash and outstanding securities, entered into a Stock Purchase Agreement, pursuantcash equivalents of $75,950, inventories of $76,795, prepayments and other current assets of $1,537,639, accounts receivable of $5,101,721 compared to which he agreed to sell to twelve unrelated third parties alltotal current assets of his securities$6,871,091 as of the Company, for aggregate cash consideration of $35,000. On the same day, Edwin Jong, the Company’s director, Vice President and holder of 1,500,000 shares of the Company’s common stock representing approximately 19.35% of the Company’s issued and outstanding securities, entered into a Stock Purchase Agreement, pursuant to which he agreed to sell to five unrelated third parties all of his securities of the Company, for aggregate cash consideration of $15,000. In connection with the sales of the Company’s securities, Gordon Hum and Edwin Jong resigned from all of their positions with the Company effective August 3, 2016. Concurrently, Xinlong ShenDecember 31, 2022. The decrease in total current assets was appointed to serve as the sole director, President, Treasurer, Secretary, Chief Executive Officer and Chief Financial Officer of the Company. Effective December 14, 2016, Company accepted the resignation of Xinlong Shen from the position of President, Secretary and Treasurer. He will remain on the Board as a director. Also effective December 14, 2016, the Company appointed Yumin Lin as the new President, Secretary and Treasurer. He will also serve as a director.
Effective 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. However, the name change is subjectmainly due to the approvaldecrease in prepayments and other current assets, inventories and cash and cash equivalents, and offset by the increase in accounts receivable. We had current liabilities of Financial Industry Regulatory Authority (FINRA). Thus,$2,738,979, consisting of operating lease obligations of $125,257, accounts payable of $692,035, accrued liabilities of $553,026, bank and other borrowing - current of $483,233, customer advances of $116,769, income tax payable of $20,116 and due to related parties of $748,543. The increase in total current liabilities was mainly due to the increase in the current portion of bank and other borrowings, and the amount due to related parties.
Our cash and cash equivalents balance decreased to $75,950 as of June 30, 2023, from $165,685 as of December 31, 2022. We estimate the Company currently is still using Crypto-Services, Inc. ashas sufficient working capital to support its company name.
Effective December 14, 2016, Crypto-Services, Inc. (the “Company”) has accepted the resignation of Xinlong Shen from the position of President, Secretary and Treasurer. He will remain on the Board as a Director.
Also effective December 14, 2016, the company announced the appointment of Yumin Lin to the Board of Directors in the position of President, Secretary and Treasurer. He will also serve as a Director.
We have had limiteddaily operations and have been issued a “going concern” opinion by our auditor, based upon our reliance on the sale of our common stock as the sole source of funds for our future operations.
Plan of Operation
We are a development stage entity devoting substantially all of our efforts to establishing a new business for which our planned principal operations have not yet commenced. We believe our current equity at risk is sufficient to finance our current activities.
Our auditors have issued a going concern opinion on our audited financial statements for the year ended August 31, 2016.This means that there is substantial doubt that we can continue as an on-going business for the next twelve months, unless wewithout raising additional capital. The Company is continuing to look for different financing opportunities in order to increase working capital and improve liquidity.
Despite the positive working capital of the Company, no assurance can be given that any future financing, if needed, will be available or, if available, that it will be on terms that are satisfactory to the Company. Even if the Company is able to obtain additional capital to pay our bills. This is because we have not generated any revenues and no revenues are anticipated until we launch our business platform. There is no assurance we will ever reach this point. Accordingly, we must raise cash from other sources. Our only other source for cash at this time is investments by others or loans from our shareholders or officers. We have no assurances that such loans will become available upon acceptable terms when the funds are required for our operations.
Results of Operations
Our operating results for the three months ended November 30, 2016 and 2015 are summarizedfinancing, if needed, it may contain undue restrictions on its operations, in the table below.
Three Months Ended November 30, | ||||||||
2016 | 2015 | |||||||
Revenue | $ | - | $ | - | ||||
General and administrative | $ | 18,554 | $ | 25,125 | ||||
Net Loss | $ | (8,054 | ) | $ | (25,125 | ) |
Revenues
Our revenue during the three-month period ended November 30, 2016 and 2015 was $0.
Operating Expenses
Our operating expenses amounted to $18, 554 during the three-month period ended November 30, 2016 which comprisedcase of general and administrative costs. For the three-month period ended November 30, 2015, our operation expenses amounted to $25,125. The decreasedebt financing, or cause substantial dilution for its shareholders, in the current period is due to the fact that we incurred less general and administrative costs.case of equity financing.
Capital Resources and Liquidity
Working Capital
November 30, 2016 | August 31, 2016 | |||||||
Current Assets | $ | 5,493 | $ | 8,833 | ||||
Current Liabilities | $ | 27,864 | $ | 23,150 | ||||
Working Capital (Deficit) | $ | (22,371 | ) | $ | (14,317 | ) |
Cash Flows
For the Three Months Ended, | ||||||||
November 30, 2016 | November 30, 2015 | |||||||
Net cash used in operating activities | $ | (15,000 | ) | $ | (25,125 | ) | ||
Net cash used in investing activities | $ | - | $ | - | ||||
Net cash provided by financing activities | $ | 15,000 | $ | - | ||||
Net change in cash | $ | - | $ | (25,125 | ) |
Six months ended June 30, | ||||||||||||
2023 | 2022 | Change | ||||||||||
Cash Flows provided by (used in) Operating Activities | $ | (85,816 | ) | $ | 17,441 | $ | (103,257 | ) | ||||
Cash Flows used in Investing Activities | (5,488 | ) | - | (5,488 | ) | |||||||
Cash Flows provided by (used in) Financing Activities | 42,802 | (49,540 | ) | 92,342 | ||||||||
Effect of exchange rate changes | (41,233 | ) | (5,738 | ) | (35,495 | ) | ||||||
Net Changes in Cash and Cash Equivalents | $ | (89,735 | ) | $ | (37,837 | ) | $ | (51,898 | ) |
Cash Flow from Operating Activities
Net cash used in operations was $15,000operating activities for the three-months periodsix months ended NovemberJune 30, 20162023 was $85,816, as compared to $25,125the amount of $17,441 provided by operating activities for the periodsix months ended NovemberJune 30, 2015. This2022, reflecting a decrease of $103,257. The cash used in operating activities during the six months ended June 30, 2023 was primarily attributablemainly resulted from the net loss of $534,005, the increase in accounts receivable of $896,403, and offset by the allowance for credit losses of $960,144, depreciation and amortization expense of $124,680, non-cash lease expense of $91,369 and the increase in due to the decrease in generalrelated parties of $111,324 and administrative expensesaccrued liabilities of $6,571 for the three-month period ended November 30, 2016 compared to that ended November 30, 2015.$74,167.
Cash Flow from Investing Activities
Net cash used in investing activities was $0$5,488 for the periodsix months ended NovemberJune 30, 2016 and2023, compared to net cash used in investing activities of $nil for the periodsix months ended NovemberJune 30, 2015.2022. The cash used in investing activities during the six months ended June 30, 2023 was mainly for the purchase of a vehicle in April 2023 for daily operating use.
Cash flowsFlow from Financing Activities
Net cash provided by financing activities was $42,802 for the six months ended June 30, 2023, compared to net cash used in financing activities of $49,540 for the six months ended June 30, 2022. The cash provided by financing activities for the periodsix months ended NovemberJune 30, 2016 were $15,000 compared2023 was mainly resulted from the net proceeds from bank loans of $113,418, and offset by the net repayments to $0bank loans of $58,299.
19 |
Critical Accounting Policies and Estimates
The discussion and analysis of our financial condition and results of operations are based upon our financial statements, which have been prepared in accordance with the accounting principles generally accepted in the United States. The preparation of financial statements requires management to make estimates and assumptions that affect the amounts reported and disclosed in our financial statements and the accompanying notes. Actual results could differ materially from these estimates under different assumptions or conditions. We identified no critical accounting estimates in the current period.
As described in our Annual Report on Form 10-K for the periodfiscal year ended November 30, 2015. During the period ended November 30, 2016, the Company borrowed $15,000 from its then-CEO, Xinlong Shen. As of November 30, 2016, the Company was indebted to Xinlong Shen in the amount of $18,000, which is non-interest bearing, unsecured, and due on demand.
We have substantial capital resource requirements and have incurred significant losses since inception. As of November 30, 2016, December 31, 2022, we had $0 in cash. Based uponconsider our current business plans, we will need considerable cash investmentscritical accounting policies to be successful. Such capital requirements arethose related to revenue recognition, allowance of doubtful accounts and impairment of intangible assets and goodwill. There have been no material changes to our critical accounting policies as disclosed in excess of what we have in available cash and what we currently have commitment for. Therefore, weour Annual Report on Form 10-K for the fiscal year ended December 31, 2022.
Off-Balance Sheet Arrangements
We do not have enough available cash to meet our obligations over the next twelve (12) months.
Anticipated Cash Requirements
We will require additional funds to fund our budgeted expenses over the next 12 months. These funds may be raised through, equity financing, debt financing, or other sources, which may result in further dilution in the equity ownership of our shares.
We anticipate that our cash expenses over the next 12 months (beginning November 2016) will be approximately $50,000 as described in the table below. These estimates may change significantly depending on the nature of our business activities and our ability to raise capital from our shareholders or other sources.
Description | Estimated Expenses | |||
Legal and accounting fees | $ | 34,000 | ||
Marketing and advertising | - | |||
Investor relations and capital raising | - | |||
Management and operating costs | - | |||
Salaries and consulting fees | 15,000 | |||
General and administrative expenses | 1,000 | |||
Total | $ | 50,000 |
Our general and administrative expenses for the year will consist primarily of transfer agent fees, bank and interest charges and general office expenses. The professional fees are related to our regulatory filings throughout the year and include legal, accounting and auditing fees.
Based on our planned expenditures, we will require approximately $50,000 to proceed with our business plan over the next 12 months. As of November 30, 2016, we had $0 cash on hand. If we secure less than the full amount of financing that we require, we will not be able to carry out our complete business plan and we will be forced to proceed with a scaled back business plan based on our available financial resources.
We intend to raise the balance of our cash requirements for the next 12 months from private placements, shareholder loans or possibly a registered public offering (either self-underwritten or through a broker-dealer). If we are unsuccessful in raising enough money through such efforts, we may review other financing possibilities such as bank loans. At this time we do not have a commitment from any broker-dealer to provide us with financing. There is no assurance that any financing will be available to us or if available, on terms that will be acceptable to us.
Even though we plan to raise capital through equity or debt financing, we believe that the latter may not be a viable alternative for funding our operations as we do not have sufficient tangible assets to secure any such financing. We anticipate that any additional funding will be in the form of equity financing from the sale of our common stock. However, we do not have any financing arranged and we cannot provide any assurance that we will be able to raise sufficient funds from the sale of our common stock to finance our operations. In the absence of such financing, we may be forced to abandon our business plan.
Going Concern
During the period ended November 30, 2016, the Company had net operating loss. The continuation of the Company as a going concern is dependent upon the continued financial support from its shareholders, the ability of the Company to obtain necessary equity financing to continue operations, and the attainment of profitable operations. These factors raise substantial doubt regarding the Company’s ability to continue as a going concern. These financial statements do not include any adjustments to the recoverability and classification of recorded asset amounts and classification of liabilities that might be necessary should the Company be unable to continue as a going concern.
Off-balance sheet arrangements
The Company has no off-balance sheet arrangements that have or are reasonably likely to have a current or future effect or change on the Company’sour financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures, or capital resources that areis material to investors. The term “off-balance sheet arrangement” generally means any transaction, agreement or other contractual arrangement to which an entity unconsolidated with
Related Party Transactions
As of June 30, 2023 and December 31, 2022, the Company is a party, under whichhad accounts receivable from related parties in the amounts of $72,372 and $146,087, prepayments to related parties in the amounts of $1,162,622 and $1,102,861, deposits to related parties in the amounts of $573,584 and $758,445, and accounts payable to related parties in amounts of $107,454 and $80,426, respectively.
As of June 30, 2023 and December 31, 2022, the Company has (i) any obligation arising under a guarantee contract, derivative instrument or variable interest; or (ii) a retained or contingent interesthad outstanding payables due to its related parties in assets transferredthe amounts of $748,543 and $565,675, respectively, which mainly consisted of borrowings for working capital purpose. The balances were unsecured, non-interest bearing and due on demand.
During the six months ended June 30, 2023 and 2022, the Company sold products to such entity or similar arrangement that serves as credit, liquidity or market risk supportits related parties in the amounts of $69,598 and $41,495, respectively, purchased goods from its related parties in the amounts of $374,686 and $349,387, and incurred the costs of revenues from related parties in the amounts of $362,096 and $386,380, respectively.
During the six months ended June 30, 2023 and 2022, the rental expenses to related parties were $9,501 and $11,347, respectively.
Our related parties are primarily those who are significantly influenced by the Company based on our common business relationships. Refer to Note 7 to the unaudited condensed consolidated financial statements for such assets.additional details regarding the related party transactions.
Item 3. Quantitative and Qualitative DisclosureDisclosures About Market Risk.
Not applicable because we areAs a smaller“smaller reporting company.
Item 4. Controls and Procedures.
Evaluation of Disclosure Controls and Procedures
We maintain disclosure controls and procedures,company” as defined inby Rule 13a-15(e) promulgated under12b-2 of the Securities Exchange Act of 1934, (the “Exchangethe Company is not required to provide the information under this item.
Item 4. Controls and Procedures.
Evaluation of Disclosure Controls and Procedures
We conducted an evaluation under the supervision and with the participation of our management, including our Chief Executive Officer and Chief Financial Officer, of the effectiveness of the design and operation of our disclosure controls and procedures. The term “disclosure controls and procedures”, as defined in Rules 13a-15(e) and 15d-15(e) under the Securities and Exchange Act of 1934, as amended (“Exchange Act”), means controls and other procedures of a company that are designed to ensure that information required to be disclosed by usthe company in the reports that we fileit files or submitsubmits under the Exchange Act is recorded, processed, summarized and reported, within the time periods specified in the Securities and Exchange Commission’s rules and formsforms. Disclosure controls and procedures also include, without limitation, controls and procedures designed to ensure that such information required to be disclosed by a company in the reports that it files or submits under the Exchange Act is accumulated and communicated to ourthe company’s management, including our president (ourits principal executive officer and principal financial officer),officers, or persons performing similar functions, as appropriate, to allow timely decisions regarding required disclosure. Based on this evaluation, our Chief Executive Officer and Chief Financial Officer concluded as of June 30, 2023, that our disclosure controls and procedures were not effective.
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The matters involving internal controls and procedures that our management considered to be material weakness under the standards of the Public Company Accounting Oversight Board was lack of well-established procedures to identify, approve and review related party transactions.
Management’s Report on Internal Control over Financial Reporting
Our management is responsible for establishing and maintaining adequate internal control over financial reporting. Internal control over financial reporting is defined in Rule 13a-15(f) or 15d-15(f) promulgated under the Exchange Act as a process designed by, or under the supervision of, the Company’s principal executive and principal financial officers and effected by the board of directors (the “Board”), management and other personnel, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with accounting principles generally accepted in the United States (“GAAP”) and includes those policies and procedures that:
● | Apply to the maintenance of records that in reasonable detail accurately and fairly reflect the transactions and dispositions of the assets of the company; | |
● | Provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with GAAP and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and | |
● | Provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of the company’s assets that could have a material effect on the financial statements. |
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate. All internal control systems, no matter how well designed, have inherent limitations. Therefore, even those systems determined to be effective can provide only reasonable assurance with respect to financial statement preparation and presentation. Because of the inherent limitations of internal control, there is a risk that material misstatements may not be prevented or detected on a timely basis by internal control over financial reporting. However, these inherent limitations are known features of the financial reporting process. Therefore, it is possible to design into the process safeguards to reduce, though not eliminate, this risk.
We carried out an evaluation,assessment, under the supervision and with the participation of our management, including our president (our principal executive officerChief Executive Officer and principal financial officer),Chief 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) 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 effectiveinternal controls over the control environment. Specifically, the Board does not currently have a director who qualifies as an audit committee financial expertreporting, as defined in Item 407(d)(5)(ii)Rules 13a-15(e) and 15d-15(e) of Regulation S-K. The Company does not have sufficient written policies and proceduresthe Exchange Act, as of June 30, 2023. Management based the assessment on criteria for accounting andeffective internal control over financial reporting with respect todescribed in Internal Control - Integrated Framework issued by the requirements and applicationCommittee 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. BecauseSponsoring Organizations of the sizeTreadway Commission (2013 framework). Management’s assessment included an evaluation of the Company’s administrative staff, controls related to the segregationdesign 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. The Company filed a Form 10-K on December 13, 2016 without obtaining the approval of the Company’s auditors. Since these entity level programs have a pervasive effect across the organization, management has determined that these circumstances constitute a material weakness.
Changes in Internal Controls
During the quarter covered by this report there were no changes in our internal control over financial reporting and testing of the operational effectiveness of its internal control over financial reporting. Based on this assessment, management has concluded that as of June 30, 2023, our internal control over financial reporting was not effective to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with U.S. generally accepted accounting principles. In an effort to remediate the identified material weaknesses and other deficiencies and enhance our internal controls, we have initiated, or plan to initiate, the following series of measures:
● | We have increased our personnel resources and technical accounting expertise within the accounting function and intend to hire one or more additional personnel for the function due to turnover. | |
● | We plan to test our updated controls and remediate our deficiencies in the year 2023. |
Changes in Internal Control over Financial Reporting
There have been no changes in our internal controls over financial reporting that occurred during the period covered by this Report, which has materially affected, or areis reasonably likely to materially affect, our internal controlcontrols over financial reporting.
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None.We know of no material, active or pending legal proceedings against us, nor are we involved as a plaintiff in any material proceedings or pending litigation. There are no proceedings in which any of our directors, officers or affiliates, or any beneficial shareholder are an adverse party or has a material interest adverse to us.
Not applicable because we areto a smaller reporting company.company
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.
None.
Item 3. Defaults Upon Senior Securities.
None.
Item 4. Mine Safety Disclosures.
Not applicable.
None.
Exhibit No. | Description | |
31.1 | Rule 13(a)-14(a)/15(d)-14(a) Certification | |
Rule 13(a)-14(a)/15(d)-14(a) Certification | ||
32.1 | Section 1350 | |
Section 1350 Certification of principal financial officer and principal accounting officer | ||
101.INS | Inline XBRL Instance Document | |
101.SCH | Inline XBRL Taxonomy Extension Schema Document | |
101.CAL | Inline XBRL Taxonomy Extension Calculation Linkbase Document | |
101.DEF | Inline XBRL Taxonomy Extension Definition Linkbase Document | |
101.LAB | Inline XBRL Taxonomy Extension Label Linkbase Document | |
101.PRE | Inline XBRL Taxonomy Extension Presentation Linkbase Document | |
104 | ||
22 |
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrantRegistrant has duly caused this reportReport to be signed on its behalf by the undersigned, thereunto duly authorized.
Date: | By: | /s/ Yumin Lin |
Yumin Lin | ||
President and Chief Executive Officer | ||
(Principal Executive Officer) | ||
Date: August 14, 2023 | By: | /s/ Kaihong Lin |
Kaihong Lin | ||
Chief Financial Officer | ||
( |
23 |