Item 2.02 Results of Operations and Financial Condition.
Fortune Valley Treasures, Inc. (the "Company") incorporates by reference the
disclosure below in Item 4.02(a).
Item 4.02(a) Non-Reliance on Previously Issued Financial Statements or a Related
Audit Report or Completed Interim Review.
In connection with the preparation of the unaudited consolidated financial
statements for the quarter ended September 30, 2021, management of the Company
determined that the comparative figures presented in the previously issued
unaudited consolidated financial statements contained in the Company's quarterly
report on Form 10-Q for the quarter ended September 30, 2020 should be amended
to correct errors in the financial statements.
On November 8, 2021, management of the Company presented its findings and
recommendation to the Audit Committee of the Board of Directors of the Company,
which approved the recommendation of management to restate the unaudited
financial statements for the quarter ended September 30, 2020. The decision to
restate the financial statements was made after management's analysis of
transactions that should have been reflected in such financial statements.
Management discussed its conclusion and recommendation with the Audit Committee
that the Company's previously issued unaudited consolidated financial statements
for the period ended September 30, 2020 contained in the Company's quarterly
report on Forms 10-Q filed with the Securities and Exchange Commission on
November 23, 2020, should be restated to correctly reflect the transactions as
stated below in the financial statements. The Audit Committee approved the
recommendation of management. The Audit Committee discussed the issues related
to the non-reliance and restatement with the Company's independent auditor,
MaloneBailey, LLP. A draft of the Company's current report on Form 8-K dated
November 10, 2021 was provided to the auditors prior to filing. The corrections
stated below have no material or significant impact on the Company's financial
statements in period prior to the quarter ended September 30, 2020 or the
Company's audited consolidated financial statements for the year ended December
31, 2020.
The previously filed unaudited consolidated financial statements contained in
the Company's quarterly report on Form 10-Q for the quarter ended September 30,
2020 did not reflect the acquisition of Dongguan Xixingdao Technology Co., Ltd.
("Xixingdao") completed on August 31, 2020. The purchase consideration was
$9,773,989, consisting of 4,862,681 shares of the Company's common stock, which
had not been issued as of September 30, 2020. The results of operations,
financial position, and cash flows of Xixingdao for the period from September 1,
2020 to September 30, 2020 had not been included in the previously filed
unaudited consolidated financial statements. The proposed key adjustments are as
follows:
Total assets is expected to be adjusted from $420,198 to $11,087,032, increased
$10,666,834, or 2,539%, as compared to the previously filed unaudited
consolidated financial statements as at September 30, 2020 (hereinafter referred
to as the "previously filed financial statements" or the "previous filing").
Total liabilities adjusted from $1,376,142 to $11,507,775, increased
$10,131,633, or 736%, as compared to the previous filing. Total stockholder's
equity adjusted from negative $955,944 to negative $420,743, increased $535,201,
or 56%, as compared to the previous filing.
For the three months ended September 30, 2020, revenue is expected to be
adjusted from $156,340 to $283,560, increased $127,220, or 81%, from the
previous filing. Cost of revenue adjusted from $118,454 to $245,504, increased
$127,050, or 107%, from the previous filing. Gross profit adjusted from $37,886
to $38,056, increased $170, or 1%, from the previous filing. Net income for the
three months adjusted from $2,425 to negative $77,140, decreased $79,565, or
3,281%, from the previous filing.
For the nine months ended September 30, 2020, total revenue is expected to be
adjusted from $247,567 to $374,787, increased $127,220, or 51%, from the
previous filing. Cost of revenue adjusted from $172,797 to $299,847, increased
$127,050, or 73%, from the previous filing. Gross profit adjusted from $74,770
to $74,940, increased $170, or 1%, from the previous filing. Net loss adjusted
from $201,977 to $281,542, decreased $79,565, or 39%, from the previous filing.
The Company has made a preliminary determination of the result of the above
adjustments, which are subject to change prior to filing an amendment on Form
10-Q/A for the quarterly periods ended September 30, 2020 with the SEC.
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