Item 1. Business.
General
As used in this Annual Report, references to “the Company”, “Fortune Valley Treasures, Inc. (formerly Crypto-Services, Inc.)”, “FVTI”, “we”, “our”, “ours” and “us” refer to Fortune Valley Treasures, Inc. (formerly Crypto-Services, Inc.)., unless otherwise indicated. In addition, references to our “financial statements” are to our consolidated financial statements except as the context otherwise requires.
We prepare our financial statements in United States dollars and in accordance with generally accepted accounting principles as applied in the United States, referred to as U.S. GAAP. In this Annual Report, references to “$” and “dollars” are to United States dollars.
Overview
Fortune Valley Treasures, Inc. (formerly Crypto-Services, Inc.) 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. We are a development-stage Company established to offer an information based website at www.digitalcoindaily.com that would provide users with up-to-date information on the leading digital currencies. We purchased the URL www.digitalcoindaily.com and plan to launch a website to provide daily news and updates for users of digital currencies. Some of the information we intend to provide included: information on the major digital currency exchanges including their current exchange rates, fee structures and volumes; news on major legal developments surrounding digital currencies, adoption of digital currencies by major retailers and other institutions and development of new hardware and software targeted at servicing digital currency users. We plan to generate revenue by advertising and referral fees.
Employees
The Company has one employee, the Company’s President, Secretary and Treasurer, who was Xinlong Shen from August 3, 2016 to December 14, 2016. He has been replaced by Yumin Lin since December 14, 2016. They work on a full time basis for the Company.
Our Corporate Information
Our principal executive office is located at 19F, Lianhe Tower, 1069 Nanhai Ave, Nanshan District, Shenzhen, China.
Available Information
Copies of our Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K and other documents that we will file with or furnish to the SEC will be available free of charge by sending a written request to our Corporate Secretary at our corporate headquarters. Additionally, the documents we file with the SEC is or will be available free of charge at the SEC’s Public Reference Room at 100 F Street, NE, Washington D.C. 20549. Other information on the operation of the Public Reference Room is or will be available by calling the SEC at (800) SEC-0330.
Item 1A.
Item 1A. Risk Factors.
Smaller reporting companies are not required to provide the information required by this item.
Item 1B.
Item 1B. Unresolved Staff Comments.
None.
Item 2.
Item 2. Properties.
Our principal executive office is located at 19F, Lianhe Tower, 1069 Nanhai Ave, Nanshan District, Shenzhen,China. The office is furnished to us by Xinlong Shen’s friend at no charge.
Item 3.
Item 3. Legal Proceedings.
We are currently not involved in any litigation that we believe could have a material adverse effect on our financial condition or results of operations. To our knowledge, there is no action, suit, proceeding, inquiry or investigation before or by any court, public board, government agency, self-regulatory organization or body pending or, to the knowledge of our executive officers or any of our subsidiaries, threatened against or affecting our company, our common stock, any of our subsidiaries or any of our companies or our companies’ subsidiaries’ officers or directors in their capacities as such, in which an adverse decision could have a material adverse effect.
Item 4.
Item 4. Mine Safety Disclosures.
Not applicable.
PART II
Item 5.
Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities.
There is a small market for our common stock.
Holders
As of November 22, 2017 there were 27 holders of record of our Common Stock.
Dividend Policy
We have not paid cash dividends on our common stock and do not plan to pay such dividends in the foreseeable future. Our board of directors (the “Board”) will determine our future dividend policy on the basis of many factors, including results of operations, capital requirements, and general business conditions.
Recent Sales of Unregistered Securities
In addition to those sales of unregistered securities previously disclosed in reports filed with the SEC during the fiscal year ended August 31, 2017, we issued the following securities without registration under the Securities Act of 1933.
On August 29, 2014, the Company issued 5,000,000 common shares at $0.01 per share for proceeds of $50,000
On July 29, 2015, the Company issued 1,450,000 common shares at $0.01 per share for proceeds of $14,500.
On August 18, 2015, the Company issued 1,300,000 common shares at $0.01 per share for proceeds of $13,000.
Outstanding Equity Awards
There are no outstanding equity awards.
Equity Compensation Plan Information
We currently do not have an equity compensation plan.
Director Compensation
Our directors are not compensated for their services. The board has not implemented a plan to award options to our director. There are no contractual arrangements with any member of the board of directors. We have no director’s service contracts.
Item 6.
Item 6. Selected Financial Data.
Not applicable to smaller reporting companies.
Item 7.
Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations.
The following discussion should be read in conjunction with our audited financial statements and the related notes that appear elsewhere in this annual report. The following discussion contains forward-looking statements based upon current expectations that involve risks and uncertainties, such as our plans, objectives, expectations and intentions. Actual results and the timing of events could differ materially from those anticipated in these forward-looking statements as a result of a number of factors, including those set forth under the Item 1A. Risk Factors, Cautionary Notice Regarding Forward-Looking Statements and Business sections in this Form 10-K. We use words such as “anticipate,” “estimate,” “plan,” “project,” “continuing,” “ongoing,” “expect,” “believe,” “intend,” “may,” “will,” “should,” “could,” and similar expressions to identify forward-looking statements.
Our audited financial statements are stated in United States Dollars and are prepared in accordance with United States Generally Accepted Accounting Principles.
Overview
Fortune Valley Treasures, Inc. (formerly Crypto-Services, Inc.) 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. The Company 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.
Upon the consummation of the sale, a change of control occurred with Gordon Hum and Edwin Jong appointing Xinlong Shen as the designee of the Purchasers to serve as the Company’s Chief Executive Officer, Chief Financial Officer, President, Secretary, Treasurer and Sole Director of the Company. Mr. Hum and Mr. Jong resigned from all of their positions with the Company. A Form 8-K was filed with the Securities Commission reflecting this change of officers and directors.
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.
Effective December 14, 2016, 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 limited 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, 2017. This means that there is substantial doubt that we can continue as an on-going business for the next twelve months unless we 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
The following discussion should be read in conjunction with the financial statements and notes thereto included elsewhere in this form 10-K.
For the Fiscal Years Ended August 31, 2017 and August 31, 2016
Revenue
For the years ended August 31, 2017 and 2016 we generated no revenue.
Operating Expense
Operating expense increased to $105,943 for the year ended August 31, 2017 as compared with $47,465 for the year ended August 31, 2016. This increase is primarily attributable to the increase in general and administrative expenses due to accounting, legal and consulting expenses.
Net loss
Net loss increased to $105,943 for the year ended August 31, 2017 as compared with $47,465 for the year ended August 31, 2016. The increase is attributable to an increase in operating expenses of approximately $58,478.
Liquidity and Capital Resources
Net cash used in operations was $0 for the fiscal year ended August 31, 2017 compared to $42,492 for the year ended August 31, 2016. The decrease is mainly due to the cash inflow from advances from related parties for operating expenses.
Net cash used in investing activities was $0 for the fiscal year ended August 31, 2017 and for the year ended August 31, 2016.
Cash flows provided by financing activities for the fiscal year ended August 31, 2017 were $0 compared to $0 for the year ended August 31, 2016.
We have substantial capital resource requirements and have incurred significant losses since inception. As of August 31, 2017, we had $0 in cash. Based upon our current business plans, we will need considerable cash investments to be successful. Such capital requirements are in excess of what we have in available cash and what we currently have commitment for. Therefore, we do not have enough available cash to meet our obligations over the next twelve (12) months.
Related Party Transactions
Since inception, we have conducted transactions with directors and director related entities. These transactions included the following:
As of August 31, 2017, the Company was indebted to the then-CEO, Xinlong Shen, in the amount of $ 21,500, which is non-interest bearing, unsecured, and due on demand.
As of August 31, 2017, the Company was indebted to the CEO, Yumin Lin, in the amount of $74,057, which is non-interest bearing, unsecured, and due on demand.
A friend of Xinlong Shen, provided non-compensated book keeping and financial reporting services from August, 2017 to December, 2017.
Our principal executive office of the Company is provided by a friend of Xinlong Shen at no charge.
In consideration for the assignment of the Company’s assets and liabilities, Mr. Hum agreed to retire any and all shares of preferred stock of the Company for return to treasury. Pursuant to the assignment of the assets and liabilities to Gordon Hum, the Company agreed to deliver to Mr. Hum any documentary evidence of the full and unrestricted title to the assets and liabilities, and such other documents as may be required under applicable law or reasonably requested by Mr. Hum. Effective October 18, 2016, the Company delivered to Mr. Hum the required documentary evidence of the full and unrestricted title to the assets and liabilities and Mr. Hum delivered to the Company the full documentary evidence of the retirement of the Preferred Stock to treasury.
Going Concern Qualification
We did not generate any revenue for the fiscal year ended August 31, 2017 or the year ended August 31, 2016 and have incurred significant losses and cash used in operations, and such losses and use of cash are expected to continue. During the year ended August 31, 2017, the Company has an accumulated deficit of $199,239. Our Independent Registered Public Accounting Firm has included a “Going Concern Qualification” in their report for the years ended August 31, 2017 and August 31, 2016. In addition, we have negative working capital. The foregoing raises substantial doubt about the Company’s ability to continue as a going concern. Management’s plans include seeking additional capital or debt financing. There is no guarantee that additional capital or debt financing will be available when and to the extent required, or that if available, it will be on terms acceptable to us. The consolidated financial statements do not include any adjustments that might result from the outcome of this uncertainty. The “Going Concern Qualification” might make it substantially more difficult to raise capital.
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.
Item 7A.
Item 7A. Quantitative and Qualitative Disclosures About Market Risk
Not applicable to smaller reporting companies.
Item 8.
Item 8. Financial Statements and Supplementary Data.
Fortune Valley Treasures, Inc. (formerly Crypto-Services, Inc.)
INDEX TO INTERIM FINANCIAL STATEMENTS
August 31, 2017
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Board of Directors and Stockholders’ of
Fortune Valley Treasures, Inc. (formerly Crypto-Services, Inc.)
Shenzhen, China
We have audited the accompanying balance sheets of Fortune Valley Treasures, Inc. (formerly Crypto-Services, Inc.) (the “Company”) as of August 31, 2017 and 2016, and the related statements of operations, changes in stockholders’ equity and cash flows for the years then ended. These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these financial statements based on our audits.
We conducted our audits in accordance with standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. Our audits included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of Fortune Valley Treasures, Inc. as of August 31, 2017 and 2016, and the results of its operations and its cash flows for the years then ended, in conformity with accounting principles generally accepted in the United States of America.
The accompanying financial statements have been prepared assuming the Company will continue as a going concern, which contemplates continuity of business, realization of assets, and liquidation of liabilities in the ordinary course of business. As discussed in Note 2 to the financial statements, the Company has suffered recurring losses from operations which raises substantial doubt about the Company’s ability to continue as a going concern. The financial statements do not include any adjustments that might result from the outcome of this uncertainty.
/s/ Anthony Kam & Associates Limited
Anthony Kam & Associates Limited
Certified Public Accountants
November 22, 2017
Hong Kong, China
Fortune Valley Treasures, Inc. (formerly Crypto-Services, Inc.)
Balance Sheets
The accompanying notes are an integral part of these audited financial statements
Fortune Valley Treasures, Inc. (formerly Crypto-Services, Inc.)
Statements of Operations
The accompanying notes are an integral part of these audited financial statements
Fortune Valley Treasures, Inc. (formerly Crypto-Services, Inc.)
Statements of Changes in Stockholders’ Equity
The accompanying notes are an integral part of these audited financial statements.
Fortune Valley Treasures, Inc. (formerly Crypto-Services, Inc.)
Statements of Cash Flows
The accompanying notes are an integral part of these audited financial statements
Fortune Valley Treasures, Inc. (formerly Crypto-Services, Inc.)
Notes to Financial Statements
August 31, 2017
1. Nature of Operations
Fortune Valley Treasures, Inc. (formerly Crypto-Services, Inc.) 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. The Company 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, the Company’s director, President, Treasurer, Secretary, Chief Executive Officer, Chief Financial Officer and holder of 3,500,000 shares of the Company’s common stock representing approximately 45.16% of the Company’s issued 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 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 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, 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. Effective March 29, 2017, we received formal notification from FINRA that our request to change the Company name from Crypto-Services, Inc. to Fortune Valley Treasures, Inc. and to change our trading symbol from CRYT to FVTI have been approved. On March 30, 2017 our name and symbol change took effect with FINRA and on the OTC Markets OTCQB platform.
2. Going Concern
These financial statements have been prepared on a going concern basis, which implies the Company will continue to realize it assets and discharge its liabilities in the normal course of business. During the year ended August 31, 2017, the Company has recurring losses and negative cash flows from operations. 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.
3. Summary of Significant Accounting Policies
a) Basis of Presentation
These financial statements and notes are presented in accordance with accounting principles generally accepted in the United States. The Company’s fiscal year end is August 31.
b) Use of Estimates
The preparation of financial statements in conformity with U.S. generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. The Company regularly evaluates estimates and assumptions related to deferred income tax asset valuation allowances. The Company bases its estimates and assumptions on current facts, historical experience and various other factors that it believes to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities and the accrual of costs and expenses that are not readily apparent from other sources. The actual results experienced by the Company may differ materially and adversely from the Company’s estimates. To the extent there are material differences between the estimates and the actual results, future results of operations will be affected.
c) Cash and Cash Equivalents
The Company considers all highly liquid instruments with a maturity of three months or less at the time of issuance to be cash equivalents.
d) Financial Instruments
The fair values of financial instruments which include cash and cash equivalents, prepaid expense and accrued liabilities were estimated to approximate their carrying values due to the immediate or relatively short maturity of these instruments.
Transactions involving related parties cannot be presumed to be carried out on an arm’s-length basis, as the requisite conditions of competitive, freemarket 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. It is not, however, practical to determine the fair value of amounts due from/to related parties due to their related party nature.
The Company’s operations and financing activities are conducted primarily in United States dollars, and as a result the Company is not subject to significant exposure to market risks from changes in foreign currency rates. Management has determined that the Company is not exposed to significant credit risk.
3. Summary of Significant Accounting Policies (continued)
e) Loss per Share
The Company computes net loss per share in accordance with ASC 740 “Earnings per Share”. ASC 260 requires presentation of both basic and diluted earnings per share (“EPS”) on the face of the income statement. Basic EPS is computed by dividing net income (loss) available to common shareholders by the weighted average number of common shares outstanding during the period. Diluted EPS gives effect to all dilutive potential common shares outstanding during the period including stock options, using the treasury stock method, and convertible preferred stock, using the if-converted method. In computing diluted EPS, the average stock price for the period is used in determining the number of shares assumed to be purchased from the exercise of stock options or warrants. Diluted EPS excludes all dilutive potential common shares if their effect is anti-dilutive.
f) Income Taxes
The Company accounts for income taxes using the asset and liability approach. Deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date. Valuation allowances are established, when necessary, to reduce deferred tax assets to the amounts expected to be realized
g) Recent Accounting Pronouncements
The Company does not expect the adoption of any other recently issued accounting pronouncements to have a significant effect on its financial statements.
h) Related parties
The Company follows ASC 850, Related Party Disclosures, for the identification of related parties and disclosure of related party transactions.
4. Related Party Transactions
a) During the year ended August 31, 2017, Our former CEO, Gordon Hum, forgave $11,629 owed by the Company, which was recorded as additional paid-in capital.
b) As of August 31, 2017, the Company was indebted to the then-CEO, Xinlong Shen, in the amount of $21,500, which is non-interest bearing, unsecured, and due on demand.
c) As of August 31, 2017, the Company was indebted to the CEO, Yumin Lin, in the amount of $74,057, which is non-interest bearing, unsecured, and due on demand.
5. Common Stock
a) On August 29, 2014, the Company issued 5,000,000 common shares at $0.01 per share for proceeds of $50,000.
b) On July 29, 2015, the Company issued 1,450,000 common shares at $0.01 per share for proceeds of $14,500.
c) On August 18, 2015, the Company issued 1,300,000 common shares at $0.01 per share for proceeds of $13,000.
As of August 31, 2017 and 2016, the Company has issued and outstanding common stock of 7,750,000 at par value of $0.001.
6. Income Taxes
Potential benefits of income tax losses are not recognized in the accounts until realization is more likely than not. The Company has incurred a net operating loss of $199,239 which expires beginning in 2034. The Company has adopted ASC 740, “Accounting for Income Taxes”, as of its inception. Pursuant to ASC 740, the Company is required to compute tax asset benefits for non-capital losses carried forward. The potential benefit of the net operating loss has not been recognized in these financial statements because the Company cannot be assured it is more likely than not it will utilize the loss carried forward in future years.
The income tax benefit differs from the amount computed by applying the federal income tax rate of 34% to net loss before income taxes.
Significant components of the Company’s deferred tax assets and liabilities as at August 31, 2017 and 2016, after applying enacted corporate income tax rates, are as follows:
7. Subsequent Events
Effective December 14, 2016, the Company executed a Sale and Purchase Agreement (the Agreement”) to acquire 100% of the shares and assets of DaXingHuaShang Investment Group Limited (“DIGL”), a company incorporated under the laws of the Republic of Seychelles. Pursuant to the Agreement, the Company has agreed to issue 300 million shares of the Company to DIGL to acquire 100% of the shares and assets for a consideration of $12 million reflecting the value of the rights, titles and interests in the business assets and all attendant or related assets of DIGL. Both partied agreed that this share issuance by the Company represents payment in full of the $12 million consideration.
Item 9.
Item 9. Changes In and Disagreements with Accountants on Accounting and Financial Disclosure.
None
Item 9A.
Item 9A. Controls and Procedures.
Evaluation of Disclosure Controls and Procedures
Our management is responsible for establishing and maintaining disclosure controls and procedures that are designed to ensure that information required to be disclosed in our reports under the Securities Exchange Act of 1934 (the “Exchange Act”) is recorded, processed, summarized and reported within the time periods specified in the rules and forms of the SEC, and that such information is accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosure based closely on the definition of “disclosure controls and procedures” in Rule 15d-15(e) under the Exchange Act. In designing and evaluating the disclosure controls and procedures, management recognized that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives, and management necessarily was required to apply its judgment in evaluating the cost-benefit relationship of possible controls and procedures.
At the end of the period covered by this Annual Report, 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. Based upon the foregoing, our Chief Executive Officer and Chief Financial Officer concluded that, as of August 31, 2017, the disclosure controls and procedures of our Company were not effective to ensure that the information required to be disclosed in our Exchange Act reports was recorded, processed, summarized and reported on a timely basis.
The Company is undertaking to improve its internal control over financial reporting and improve its disclosure controls and procedures. As of August 31, 2017, we had identified the following material weaknesses which still exist through the date of this report:
As of August 31, 2017 and as of the date of this report, we did not maintain effective controls over the control environment. Specifically, the Board does not currently have a director who qualifies as an audit committee financial expert as defined in Item 407(d)(5)(ii) of Regulation S-K. The Company does not have sufficient written policies and procedures for accounting and financial reporting with respect to the requirements and application of both US GAAP and SEC guidelines. The Company also lacks accounting personnel with technical knowledge in certain debt and equity transactions and qualified personnel with an appropriate level of SEC filing knowledge and experience. Because of the size of the Company’s administrative staff, controls related to the segregation of certain duties have not been developed and the Company has not been able to adhere to them. Additionally the Company does not have a well-established procedure to identify, approve, and report related party transactions.
Management’s Report on Internal Control over Financial Reporting
Our management is responsible for establishing and maintaining adequate internal control over financial reporting, as such term is defined in Exchange Act Rule 13a-15(f). The design of any system of controls is based in part upon certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions, regardless of how remote. All internal control systems, no matter how well designed, have inherent limitations. 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. Therefore, even those systems determined to be effective can provide only reasonable assurance with respect to financial statement preparation and presentation.
We carried out an evaluation, under the supervision and with the participation of our Chief Executive Officer and Chief Financial Officer, of the effectiveness of our internal controls over financial reporting as of August 31, 2017. Based on this assessment, management believes that, as of August 31, 2017, we did not maintain effective controls over the financial reporting control environment. Specifically, the Board does not currently have a director who qualifies as an audit committee financial expert as defined in Item 407(d)(5)(ii) of Regulation S-K. Further, because of the limited size of its administrative support staff, and due to the financial constraints on the Company, management has not been able to develop or implement controls related to the segregation of duties for purposes of financial reporting. The Company also lacks accounting personnel with technical knowledge in certain debt and equity transactions; and does not have a well-established procedure to identify, approve, and report related party transactions. Additionally, the Company filed a Form 10-K on December 13, 2016 without obtaining the approval of the Company’s auditor. Because of these material weaknesses, management has concluded that we did not maintain effective internal control over financial reporting as of August 31, 2017, based on the criteria established in the “Internal Integrated Framework” issued by COSO.
No Attestation Report by Independent Registered Accountant
The effectiveness of our internal control over financial reporting as of August 31, 2017 has not been audited by our independent registered public accounting firm by virtue of our exemption from such requirement as a smaller reporting company.
Changes in Internal Controls over Financial Reporting
There were no changes in internal controls over financial reporting that occurred during the period covered by this report, which have materially affected, or are reasonably likely to materially affect, our internal controls over financial reporting.
Item 9B.
Item 9B. Other Information.
None.
PART III
Item 10.
Item 10. Directors, Executive Officers, and Corporate Governance
The following is a list of our directors and executive officers. All directors serve one-year terms or until each of their successors is duly qualified and elected. The officer is elected by our Board.
Name
Position Held with Our Company
Age
Date First
Elected or
Appointed
Xinlong Shen
Former President, Chief Executive Officer, Chief Financial Officer, Secretary, Treasurer, and Director
August 3, 2016-December 14,2016
Yumin Lin
Current President, Chief Executive Officer, Chief Financial Officer, Secretary, Treasurer, and Director
December 14,2016
Business Experience
The following is a brief account of the education and business experience of our directors and executive officers during at least the past five years, indicating their principal occupations and employment during the period, and the name and principal business of the organization in which such occupations or employment were carried on.
Xinlong Shen, Prior President, Chief Executive Officer, Chief Financial Officer, Secretary, Treasurer, and Director
Xinlong Shen, age 35, has more than 10-year experience in electronic appliances trading and marketing field in several China-based enterprises. He graduated in 2003 from Xidian University in China with a bachelor degree in management and major in business administration.
In July 2003, Mr. Shen started his first career as Overseas Sales in Shenzhen Yu Ou Electronics Co., Ltd., which produces and sells consumer electronics such as DVD and MP3 players. In August 2005, he worked as an Overseas Trade Manager in Shenzhen Richtec Industry Co., Ltd., which is a high-tech corporation and a global exporter and manufacturer specializing in developing, producing and marketing home theater systems, iPod/Mp3/mobile speakers and car speakers. In January 2008, he worked as an Overseas Trade Manager in Shenzhen Zhongmeipeng Industry Co., Ltd., which is an integrated trading company producing industrial products and consumer electronics. As Overseas Trade Manager in these two firms, Mr. Shen was responsible for leading the marketing team to conduct overseas marketing for the company’s products.
From December 2013 to September 2014, Mr. Shen served as Vice President in Shenzhen Boao Asset Management Consulting Service Co., Ltd., which is a financial consulting firm providing professional financial services including asset management and financial planning services to clients. In order to solve clients’ financial issues, he was dedicated to offer comprehensive, integrated and tailor-made in-depth financial advisory services.
From September 2014 to present, Mr. Shen has served as Chairman of the Board in Qianhai Shenzhen Xinzilong Media Co., Ltd., which specializes in production of film, video and media and entertainment programs. In addition, the Company manages various events ranging from cultural activities to conferences and exhibitions and provides advisory services. Mr. Shen is responsible for managing media production and sales and marketing. Moreover, he gives professional advice to clients related to branding, marketing and advertising.
Since November 2014, Mr. Shen has served as Vice Chairman in Chinacom Investment Association, which was mutually found by Chinese merchants and entrepreneurs. It aims at providing integrated information platform service to facilitate communication between association members and government departments and bilateral and multilateral trade and investment activities.
Yumin Lin, Current President, Chief Executive Officer, Chief Financial Officer, Secretary, Treasurer, and Director
From July 1987 to April 1992 Mr. Lin worked as a manager at the LuChengXinChao Furniture Factory. From April 1992 to April 1999 he was a manager at the Shangying Business Development Company in Guangdong, China and from April 1993 to April 1999 he worked to establish the Huizhou Branch of Shangying Business Development Company located in Guangdong). He was the company’s operations manager and was also responsible for selling construction steel products. From April 1999 to May 2011 he was the General Manager of the Dongguan Saite Building Material Company. From May 2011 to the present he has served as chairman to Dongguan France Vin Tout Co., Ltd., located in Dongguan, Guangdong, China. Additionally, from November 2015 to the present, he has served as chairman at the Shenzhen DaxingHuashang Liquor Culture Company in the Nanchang District, Shenzhen, China.
Committees of the Board of Directors
We presently do not have an audit committee, nominating committee, compensation committee, or other committee or committees performing similar functions, as our management believe that until this point it has been premature at the early stage of our management and business development to form an audit, compensation or other committees.
Code of Ethics
The Board does not have a formal Code of Conduct and Ethics.
Shareholder Communications
Although we do not have a formal policy regarding communications with the Board, shareholders may communicate with the Board by writing to us at 19F, Lianhe Tower, 1069 Nanhai Ave, Nanshan District, Shenzhen, China. Shareholders who would like their submission directed to a member of the Board may so specify, and the communication will be forwarded, as appropriate.
Board Diversity
While we do not have a formal policy on diversity, our Board considers diversity to include the skill set, background, reputation, type and length of business experience of our Board members as well as a particular nominee’s contributions to that mix. Our Board believes that diversity brings a variety of ideas, judgments and considerations that benefit FVTI and our shareholders. Although there are many other factors, the Board seeks individuals with experience in business, financial and scientific research and development.
Board Assessment of Risk
Our risk management function is overseen by our Board. Our management keeps our Board apprised of material risks and provides our directors access to all information necessary for them to understand and evaluate how these risks interrelate, how they affect Fortune, and how management addresses those risks. Mr. Shen, our Chief Executive Officer works closely together with the Board once material risks are identified on how to best address such risk. Presently, the primary risks affecting the Company is the lack of working capital, the inability to generate sufficient revenues so that we have positive cash flow from operations. The Board focuses on these key risks at each meeting and actively interfaces with management on seeking solutions.
Item 11.
Item 11. Executive Compensation.
Termination Provisions
The Company has not entered into employment agreements with any of its directors or officers.
Summary Compensation Table
The following table sets forth the compensation paid or accrued by us to our Chief Executive Officer, Chief Financial Officer and each of our other officers for the year ended August 31, 2017 and the period ended August 31, 2016.
(1)Gordon Hum ceased to be an officer or director on August 3, 2016.
(2)Edwin Jong ceased to be an officer or director on August 3, 2016
(3)Xinlong Shen was appointed as President, CEO, Secretary, CFO and director on August 3, 2016. He resigned from all the positions except director on December 14, 2016.
(4)Yumin Lin was appointed as President, CEO, Secretary, CFO and director on December 14, 2016.
We have not paid any salaries to date. We do not anticipate beginning to pay salaries until we have adequate funds to do so. There are no other stock option plans, retirement, pension, or profit sharing plans for the benefit of our officers and director other than as described herein.
Outstanding Equity Awards
There are no outstanding equity awards.
Equity Compensation Plan Information
We currently do not have an equity compensation plan.
Director Compensation
We do not pay our directors any money and we have no plans to pay our directors any money in the future.
Section 16(a) Beneficial Ownership Reporting Compliance
Under the securities laws of the United States, our directors, executive (and certain other) officers, and any persons holding ten percent or more of our Common Stock must report on their ownership of the Common Stock and any changes in that ownership to the Commission. Specific due dates for these reports have been established. During the fiscal year ended August 31, 2017, we believe that all reports required to be filed by Section 16(a) were filed on a timely basis.
Item 12.
Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters
The following table sets forth the number of shares of our voting stock beneficially owned, as of December 14, 2016 by (i) those persons Fortune Valley to be owners of more than 5% of the Company’s common stock, (ii) each director, (iii) our Named Executive Officer, and (iv) all executive officers and directors known by as a group:
1. Gordon Hum resigned as an officer and director on August 3, 2016.
2. Edwin Jong resigned as an officer and director on August 3, 2016.
3. Xinlong Shen was appointed as an officer and director on August 3, 2016.
Applicable percentages are based on 7,750,000 shares outstanding, adjusted as required by rules of the SEC. Beneficial ownership is determined under the rules of the SEC and generally includes voting or investment power with respect to securities. Shares of common stock subject to options, warrants and convertible notes currently exercisable or convertible, or exercisable or convertible within 60 days are deemed outstanding for computing the percentage of the person holding such securities but are not deemed outstanding for computing the percentage of any other person. Unless otherwise indicated in the footnotes to this table, the Company believes that each of the shareholders named in the table has sole voting and investment power with respect to the shares of common stock indicated as beneficially owned by them.
Item 13.
Item 13. Certain Relationships and Related Transactions, and Director Independence.
Certain Relationships and Related Transactions
Other than as disclosed below, there has been no transaction, since our inception on March 21, 2014, or currently proposed transaction, in which we were or are to be a participant and the amount involved exceeds the lesser of $120,000 or one percent of our total assets at year-end for the last completed fiscal year, and in which any of the following persons had or will have a direct or indirect material interest:
(i) Any director or executive officer of our company;
(ii) Any person who beneficially owns, directly or indirectly, shares carrying more than 5% of the voting rights attached to our outstanding shares of common stock;
(iii) Any of our promoters and control persons; and
(iv) Any member of the immediate family (including spouse, parents, children, siblings and in- laws) of any of the foregoing persons.
On August 7, 2014 we issued 3,500,000 shares of our common stock to our director Gordon Hum at a price of $0.01. On August 8, 2014 we issued 1,500,000 shares of our common stock to Edwin Jong at a price of $0.01 per share. The shares were issued to both subscribers pursuant to Section 4(2) of the Securities Act of 1933 and/or Regulation S of the Securities Act of 1933 on the basis that the subscribers represented to us that they were not a “U.S. Person” as such term is defined in Regulation S.
Our former CEO forgave $1,129, which the Company recorded to additional paid-capital.
As of August 31, 2017, the Company was indebted to the then-CEO, Xinlong Shen, in the amount of $21,500, which is non-interest bearing, unsecured, and due on demand.
As of August 31, 2017, the Company was indebted to the CEO, Yumin Lin, in the amount of $74,057, which is non-interest bearing, unsecured, and due on demand.
In consideration for the assignment of the Company’s assets and liabilities, Mr. Hum agreed to retire any and all shares of preferred stock of the Company for return to treasury. Pursuant to the assignment of the assets and liabilities to Gordon Hum, the Company agreed to deliver to Mr. Hum any documentary evidence of the full and unrestricted title to the assets and liabilities, and such other documents as may be required under applicable law or reasonably requested by Mr. Hum. Effective October 18, 2016, the Company delivered to Mr. Hum the required documentary evidence of the full and unrestricted title to the assets and liabilities and Mr. Hum delivered to the Company the full documentary evidence of the retirement of the Preferred Stock to treasury.
Item 14.
Item 14. Principal Accounting Fees and Services.
The Company’s board of directors reviews and approves audit and permissible non-audit services performed by its independent registered public accounting firm, as well as the fees charged for such services. In its review of non-audit service and its appointment of Anthony KAM & associates ltd,as our independent registered public accounting firm, the board considered whether the provision of such services is compatible with maintaining independence. All of the services provided and fees charged by Anthony KAM & associates ltd in 2017 were approved by the board of directors. The following table shows the fees for the years ended August 31, 2017 and 2016:
(1) Audit fees - these fees relate to the audit of our annual financial statements and the review of our interim quarterly financial statements.
(2) Audit related fees - these fees relate primarily to the auditors’ review of our registration statements and audit related consulting.
(3) Tax fees - no fees of this sort were billed by Anthony KAM & associates ltd, our principal accountant during 2017 and 2016.
All Other Fees
We did not incur any other fees related to services rendered by our independent registered public accounting firm for the fiscal year ended August 31, 2017 and the period ended August 31, 2016.
The SEC requires that before our independent registered public accounting firm is engaged by us to render any auditing or permitted non-audit related service, the engagement be either: (i) approved by our audit committee or (ii) entered into pursuant to pre-approval policies and procedures established by the audit committee, provided that the policies and procedures are detailed as to the particular service, the audit committee is informed of each service, and such policies and procedures do not include delegation of the audit committee’s responsibilities to management.
We do not have an audit committee. Our Board pre-approves all services provided by our independent registered public accounting firm. All of the above services and fees during 2017 and 2016 were reviewed and approved by our Board of Directors either before or after the respective services were rendered.
PART IV
Item 15.
Item 15. 32s
Exhibit
Number
Description
3.1
Articles of Incorporation, incorporated by reference to Exhibit 3.1 to the Company’s Registration Statement on Form S-1, as amended; filed with the SEC on December 5, 2014.
3.2
Bylaws, incorporated by reference to Exhibit 3.2 to the Company’s Registration Statement on Form S-1, as amended; filed with the SEC on December 5, 2014
31.1*
Certifications of the Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
32.1+
Certification Pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
101. INS
XBRL Instance Document.
101. SCH
XBRL Taxonomy Extension Schema Document
101. CAL
XBRL Taxonomy Extension Calculation Linkbase Document.
101. LAB
XBRL Taxonomy Extension Label Linkbase Document.
101. PRE
XBRL Taxonomy Extension Presentation Linkbase Document.
101. DEF
XBRL Taxonomy Extension Definition Linkbase Document.
*
Filed herewith
+
In accordance with the SEC Release 33-8238, deemed being furnished and not filed.
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed by the following persons on behalf of the registrant and in the capacities and on the dates indicated.
Name
Title
Date
Chief Executive Officer and
November 24, 2017
/s/ Yumin Lin
Director (Principal Executive Officer)
Yumin Lin
Director
November 24, 2017