Company Overview
Fortune Valley Treasures, Inc. (the "Company," "we," "our" or "us") was
incorporated in the State of Nevada on March 21, 2014. We were initially
incorporated to offer users with up-to-date information on digital currencies.
We are engaged in the retail and wholesale distribution of a wide spectrum of
food and beverage products in Guangdong, China. In addition, we are actively
seeking quality target companies in the food, beverage and alcohol industries
for mergers and acquisition for further development of our company.
Coronavirus (COVID-19) Update
Recently, there is an ongoing outbreak of a novel strain of coronavirus
(COVID-19) first identified in China and has since spread rapidly globally. The
pandemic has resulted in quarantines, travel restrictions, and the temporary
closure of stores and business facilities globally for the past few months. In
March 2020, the World Health Organization declared the COVID-19 as a pandemic.
Given the rapidly expanding nature of the COVID-19 pandemic, and because
substantially all of our business operations and our workforce are concentrated
in China, our business, results of operations and financial condition have been
and will continue to be adversely affected. Potential impact to our results of
operations will also depend on future developments and new information that may
emerge regarding the duration and severity of the COVID-19 and the actions taken
by government authorities and other entities to contain the COVID-19 or mitigate
its impact, almost all of which are beyond our control.
The impacts of COVID-19 on our business, financial condition, and results of
operations include, but are not limited to, the following:
? We temporarily closed our offices for approximately one month from late
January 2020, as required by relevant PRC regulatory authorities. In the first
quarter of 2020, the COVID-19 outbreak caused disruptions in our operations
and supply chains, which have resulted in delays in the shipment of products
to certain of our customers.
? Our customers have been negatively impacted by the outbreak, which reduced the
demand of our products. The demand may decrease further if the COVID-19
pandemic continues.
Our operations and supply chains have gradually recovered from the impact of
COVID-19 during the three months ended September 30, 2020 due to the effective
control of the COVID-19 by the PRC government.
However, we cannot foresee whether any reoccurrence of COVID-19 will be
forthcoming in the future. If any reoccurrence of COVID-19 is not effectively
and timely controlled, our business operations and financial condition may be
materially and adversely affected as a result of the deteriorating market
outlook, the slowdown in regional and national economic growth, weakened
liquidity and financial condition of our customers or other factors that we
cannot foresee. Any of these factors and other factors beyond our control could
have an adverse effect on the overall business environment, cause uncertainties
in the regions where we conduct business, cause our business to suffer in ways
that we cannot predict and materially and adversely impact our business,
financial condition and results of operations.
5
Results of Operations
Three Months Ended September 30, 2020 and 2019
Three Months Ended September 30,
2020 2019 Change
(Restated)
Revenue $ 283,560 $ 95,578 $ 187,982
Cost of revenue (245,504 ) (75,795 ) (169,709 )
Gross profit 38,056 19,783 18,273
Gross profit (%) 13 % 21 % 92 %
Operating expense (185,101 ) (98,483 ) (86,618 )
Other income (expense) 78,525 (87 ) 78,612
Interest income (loss) 16 44 (28 )
Interest expense (5,221 ) (100 ) (5,121 )
Provision for income taxes (3,415 ) - (3,415 )
Net loss (77,140 ) (78,843 ) 1,703
Net loss attributable to
non-controlling interest (2,518 ) - (2,518 )
Net loss attributable to Fortune
Valley Treasures, Inc $ (74,622 ) $ (78,843 ) $ 4,221
Revenue
Revenue was $283,560 for three months ended September 30, 2020, reflecting an
increase of $187,982 from $95,578 for the three months ended September 30, 2019.
The reason for the increase was that the Company made sales to a handful of new
customers which increased our sales volume and the acquisition of Xixingdao.
Cost of revenue
Cost of revenue was $245,504 for the three months ended September 30, 2020,
reflecting an increase of $169,709 from $75,795 for the three months ended
September 30, 2019. The increase was due to the increase in sales volume and the
acquisition of Xixingdao.
Gross profit
Gross profit was $38,056 and $19,783 for the three months ended September 30,
2020 and 2019, respectively, reflecting an increase of $18,273. Gross profit
margin decreased to 13% for the three months ended September 30, 2020 from 21%
for the corresponding period in 2019. The increase in gross profit was primarily
attributable to the increase in revenue as a result of sales to new customers
and existing customers' revenge spending since the business reopening after the
COVID-19 lockdown and the significant increase in gross profit margin. The
decrease in gross profit margin was primarily due to the decrease in cost per
unit resulting from procurement of larger quantities of supplies.
Operating expense
Operating expense was $185,101 for the three months ended September 30, 2020,
reflecting an increase of $86,618 from $98,483 for the three months ended
September 30, 2019. The increase was due to an increase in professional service
fees and the amortization of intangible asset.
Net loss
For the three months ended September 30, 2020, net loss was $77,140 compared to
net loss of $78,843 for the three months ended September 30, 2019.
Net loss attributable to noncontrolling interest
For the three months ended September 30, 2020, the Company recorded net loss
attributable to noncontrolling interest of $2,518 compared to net loss
attributable to noncontrolling interest of $0 for the three months ended
September 30, 2019.
Nine Months Ended September 30, 2020 and 2019
Nine Months Ended September 30,
2020 2019 Change
(Restated)
Revenue $ 374,787 $ 179,534 $ 195,253
Cost of revenue (299,847 ) (137,470 ) (162,377 )
Gross profit 74,940 42,064 32,876
Gross profit (%) 20 % 23 % 78 %
Operating expense (423,593 ) (366,050 ) (57,543 )
Other income(expense) 80,631 2,417 78,214
Interest income 96 185 (89 )
Interest expense (10,201 ) (371 ) (9,830 )
Provision for income taxes (3,415 ) (84 ) (3,331 )
Net loss (281,542 ) (321,839 ) 40,297
Net loss attributable to
noncontrolling interest (17,187 ) - (17,187 )
Net loss attributable to Fortune
Valley Treasures, Inc $ (264,355 ) $ (321,839 ) $ 57,484
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Revenue
Net revenue was $374,787 for nine months ended September 30, 2020, reflecting an
increase of $195,253 from $179,534 for the nine months ended September 30, 2019.
The reason for the increase in revenue was that the Company made sales of a
handful of new customers that led to increased sales volume and the acquisition
of Xixingdao.
Cost of revenue
Cost of revenue was $299,847 for the nine months ended September 30, 2020,
reflecting an increase of $162,377 from $137,470 for the nine months ended
September 30, 2019. The increase was due to an increase in sales volume and the
acquisition of Xixingdao.
Gross profit
Gross profit was $74,940 and $42,064 for the nine months ended September 30,
2020 and 2019, respectively. Gross profit margin decreased to 20% for the nine
months ended September 30, 2020 from 23% for the corresponding period in 2019.
The decrease in gross profit was attributable to the increase in cost of revenue
and gross profit margin.
Operating expense
Operating expense was $423,593 for the nine months ended September 30, 2020,
reflecting an increase of $57,543 from $366,050 for the nine months ended
September 30, 2019. The increase was primarily due to increases in salaries,
marketing and general and administrative costs related to mergers and the
amortization of intangible asset, as a result of the Company's limited business
activities due to the COVID-19 pandemic.
Net loss
For the nine months ended September 30, 2020, net loss was $281,542 compared to
net loss of $321,839 for the nine months ended September 30, 2019.
Net loss attributable to noncontrolling interest
For the nine months ended September 30, 2020, the Company recorded net loss
attributable to noncontrolling interest of $17,187 compared to net loss
attributable to noncontrolling interest of $0 for the nine months ended
September 30, 2019.
Liquidity and Capital Resources
Working Capital
September 30, December 31,
2020 2019 Change
(Restated)
Total current assets $ 424,327 $ 73,970 $ 350,357
Total current liabilities 11,269,957 855,352 10,414,605
Working capital deficit $ (10,845,630 ) $ (781,382 ) $ (10,064,248 )
As of September 30, 2020, we had cash and cash equivalents in an amount of
$23,097. We have financed our operations primarily though borrowings from
related parties. The decrease in working capital deficit was primarily due to a
decrease in losses from operations and net cash used in operating activities.
Cash Flows
Nine Months Ended September 30,
2020 2019 Change
(Restated)
Cash Flows Used in Operating
Activities $ (363,601 ) $ (205,921 ) $ (157,680 )
Cash Flows Used in Investing
Activities (61,111 ) - (61,111 )
Cash Flows Provided by Financing
Activities 466,186 215,027 251,159
Effect of change rate changes in
cash and cash equivalent (56,514 ) (899 ) (55,615 )
Net (Decrease)/Increase in Cash
During Period $ (15,040 ) $ 8,207 $ (23,247 )
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Cash Flow from Operating Activities
For the nine months ended September 30, 2020, net cash used in operating
activities was $363,601, which represents a $157,680 increase compared to
$205,921 net cash used in operating activities for the nine months ended
September 30, 2019. The change was primarily due to an increase in accounts
payables of $87,045 and amortization of intangible assets of $64,162.
Cash Flow from Investing Activities
Net cash used in investing activities for the nine months ended September 30,
2020 was $61,111 as compared to $0 for the nine months ended September 30, 2019.
The increase in net cash used in investing activities was mainly due to certain
office renovation and improvements, advanced to related parties.
Cash Flow from Financing Activities
Net cash provided by financing activities for the nine months ended September
30, 2020 was $466,186 as compared to $215,027 for the nine months ended
September 30, 2019. The increase in net cash provided by financing activities
was mainly due to an increase in advanced from related parties and long term
bank borrowings.
Critical Accounting Policy and Estimates
In the ordinary course of business, we make a number of estimates and
assumptions relating to the reporting of results of operations and financial
condition in the preparation of our financial statements in conformity with U.S.
generally accepted accounting principles. We base our estimates on historical
experience, when available, and on other various assumptions that are believed
to be reasonable under the circumstances. Actual results could differ
significantly from those estimates under different assumptions and conditions.
Off-Balance Sheet Arrangements
We do not have any off-balance sheet arrangements that have or are reasonably
likely to have a current or future effect on our financial condition, changes in
financial condition, revenues or expenses, results of operations, liquidity,
capital expenditures, or capital resources that is material to investors.
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