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




6







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 )




7

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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