Exhibit 99.3

 

Fortune Valley Treasures, Inc.

Proforma Combined Financial Statements

June 30, 2020

 

 

Contents		Page
Proforma Combined Balance Sheet		F-2
Proforma Combined Statement of Operations and Comprehensive Loss		F-3
Notes to Financial Statements		F-4 to F-6

 

 

Fortune Valley Treasures, Inc.

Proforma Combined Balance Sheet

As of September 30, 2020

 

		FTVI				XXD				Adjustments				Combined
Assets
Current assets
Cash and cash equivalents		$	14,194				8,903							$	23,097
Accounts and other receivable, net			80,371				40,945								121,316
Inventories			50,787				70,519								121,306
Advances and prepayments to suppliers			7,801				30,049								37,850
Prepaid expenses			11,000				-								11,000
Prepaid taxes and taxes recoverable			97,827				-								97,827
Due from related parties			8,066				8,204								16,270
Total current assets			270,046				158,620				-				428,666
Property, plant and equipment, net			48,442				2,554								50,996
Right of use assets, net			101,710				61,041								162,751
Security deposits			-				283,491								283,491
Goodwill			-				-				8,535,403				8,535,403
Total Non-current assets			150,152				347,086				8,535,403				9,032,641
Total Assets		$	420,198				505,706				8,535,403			$	9,461,307
Liabilities and Stockholders’ Equity
Short term loans			197,934				-								197,934
Lease obligations - current			14,419				30,443								44,862
Accounts payable			37,172				50,072								87,244
Taxes payable			32,407				7,049								39,456
Other payable			17,644				-								17,644
Customers advances and deposits			8,629				-								8,629
Due to related parties			878,100				103,287								981,387
Total current liabilities			1,186,305				190,851								1,377,156
Lease obligations - non-current			89,856				31,291								121,147
Other long-term liabilities			99,981												99,981
Total Non-Current Liabilities			189,837				31,291								222,128
Total Liabilities		$	1,376,142				222,142				-			$	1,598,284
Stockholders’ Equity
Common stock (3,000,000,000 shares authorized, 312,126,942 issued and outstanding as of June 30, 2020)			307,750				-				4,377				312,127
Additional paid in capital			-				-				7,677,486				7,677,486
Accumulated deficit			(1,287,830	)			254,431				(27,740	)			(1,061,139	)
Accumulated other comprehensive income (loss)			7,285				7,820				-				15,105
Non-controlling interest			16,851				21,313				881,280				919,894
Total Stockholders’ (Deficit) Equity			(955,944	)			283,564				8,535,403				7,863,023
Total Liabilities and Stockholders’ Equity		$	420,198				505,706				8,535,403			$	9,461,307

 

See accompanying notes to the financial statements

 

 

Fortune Valley Treasures, Inc.

Proforma Combined Statement of Operations

For the Nine months ended September 30, 2020

 

		FVTI				XXD				Adjustments				Combined
Net revenues			247,567				450,412			$	-			$	697,979
Cost of revenues			172,797				265,486				-				438,283
Gross profit			74,770				184,926				-				259,696
Operating expenses:
Selling and marketing expenses			12,527				18,613				-				31,140
General and administrative expenses			328.077				107,928				-				436,005
Operating income/loss			(265,834	)			58,385				-				(207,449	)
Other income (expenses):			73,947				9,377				-				83,324
Interest income			96				-				-				96
Interest expense			(10,186	)			(78	)			-				(10,264	)
Earnings before tax			(201,977	)			67,684				-				(134,293	)
Income tax			-				3,415				-				3,415
Net Income/loss:
attributable to non-controlling interest			(15,920	)			6,427				-				(9,493	)
attributable to FVTI			(186,057	)			57,842				-				(128,215	)
			(201,977	)			64,269			$	-			$	(137,708	)
Other comprehensive income (loss):
Foreign currency translation adjustment
attributable to non-controlling interest			(191	)			(782	)			-				(191	)
attributable to FVTI			(3,276	)			(7,038	)			-				(10,314	)
			(2,685	)			(7,820	)			-				(10,505	)
Comprehensive loss:
attributable to non-controlling interest			(16,111	)			5,645				-				(9,684	)
attributable to FVTI			(189,333	)			50,804				-				(138,529	)
Comprehensive loss			(204,662	)			56,449			$	-			$	(148,213	)
Loss per share
Basic and diluted earnings per share														$	(0.00	)
Basic and diluted weighted average shares outstanding															312,126,942

 

See accompanying notes to the financial statements

 

 

Fortune Valley Treasures, Inc.

Notes to Financial Statements

 

NOTE 1 - ORGANIZATION AND DESCRIPTION OF BUSINESS

 

Fortune Valley Treasures, Inc. (formerly Crypto-Services, Inc.) was incorporated in the State of Nevada on March 21, 2014. The Company’s current primary business operations of wholesale distribution and retail sales of alcoholic beverages of wine are conducted through its subsidiaries in the People’s Republic of China (“PRC”).

 

Xixingdao Acquisition

 

On June 22, 2020, FVTI and QHDX entered into an equity interest transfer agreement (the “Xixingdao Agreement”) with Dongguan Xixingdao Technology Co., Ltd. (“Xixingdao” or “XXD”), a company incorporated in China, and the two shareholders of Xixingdao, who collectively own 100% equity interest of Xixingdao (the “Xixingdao Sellers”). Xixingdao is engaged in the business of drinking water distribution and delivery in Dongguan City, Guangdong Province, China.

 

Pursuant to the Xixingdao Agreement, QHDX agreed to purchase 90% of Xixingdao’s equity interest (the “Xixingdao Equity Transfer”) from the Xixingdao Sellers in consideration of shares of FVTI’s common stock (“Xixingdao Issuable Shares”). The completion of the registration of the Xixingdao Equity Transfer with local government authorities (the “Xixingdao Closing”) is subject to satisfaction of all the closing conditions (unless waived), including, but not limited to, (a) completion of due diligence review of Xixingdao to the satisfaction of QHDX, (b) completion of the initial draft of the audited financial statements of Xixingdao for the fiscal year ended December 31, 2019, and (c) execution of non-competition agreements and confidentiality agreements with the senior management members of Xixingdao.

 

According to the Xixingdao Agreement, the total number of Xixingdao Issuable Shares will be determined according to the following formula:

 

Number of Issuable Shares = A x 15 ÷ B ÷ C

 

For the purpose of the foregoing formula:

 

A = Expected audit net profit of Xixingdao during the period from January 1, 2020 to December 31, 2020.

 

B = The average of the closing prices of FVTI’s common stock for the 30 business days before the date the Issuable Shares are issued.

 

C = The central parity rate of Chinese Yuan against U.S. Dollars on the date the Xixingdao Issuable Shares are issued as reported by China Foreign Exchange Trading Center.

 

Xixingdao and Xixingdao Sellers have agreed to achieve certain operation objectives of Xixingdao, including a net profit of RMB 4 million (approximately $565,155) for the period from January 1, 2020 to December 31, 2020. Pursuant to the Agreement, as long as Yuwen Li, one of the Sellers, continues to serve as the general manager and legal representative of Xixingdao, Xixingdao and Xixingdao Sellers shall ensure Xixingdao achieves an increase in annual net profit of no less than 10% during its fiscal years between 2022 to 2025.

 

To ensure the continuous operations of Xixingdao, the parties agreed that Xixingdao will retain their existing employees and will enter into non-competition and employment agreements with the management team of Xixingdao.

 

Pursuant to the Xixingdao Agreement, Xixingdao will establish a board of directors consisting of three individuals, two of which will be designated by QHDX and one by the Xixingdao Sellers, and appoint a person designated by the Sellers as general manager.

 

 

Fortune Valley Treasures, Inc.

Notes to Financial Statements

 

The parties further agreed that Xixingdao will not make any profit distribution within four years after the execution of the Xixingdao Agreement.

 

The transaction is expected to be closed on or about October 8, 2020. The Company will issue 4,376,942 shares of common stock valued at $2.01 per share. The total transaction value was $8,797,654. XXD net assets as of September 30, 2020 were $262,251. The goodwill resulting from the transition was $8,535,403.

 

NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

 

Basis of presentation

 

These proforma combined financial statements, accompanying notes, and related disclosures have been prepared on an as-if basis assuming that the reverse takeover transaction between the Company, QHDX and XXD has been in effect since the beginning of the period presented. The financial position and results of operations are combined using historical financial statements of the entities and eliminating any intercompany balances. Goodwill was recognized in this transaction, and the carrying values of the Company and DIGLS are their respective historical values as those values approximated their current fair market value. Actual combined results may have differed from those presented herein.

 

These financial statements have been prepared using the accrual basis of accounting in accordance with the generally accepted accounting principles (“GAAP”) in the United States.

 

Basis of proforma combined financial statements

 

These proforma combined financial statements include the accounts of the Company and the entities listed below. All intercompany accounts and transactions have been eliminated.

 

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 wine		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		No operations		PRC
MKW		August 28, 2019		QHDX		Trading of alcohol		PRC
LJRB		June 9, 2015		MKW		No operations		PRC
XXD		May 31, 2019		QHDX		Trading of beverages		PRC

 

Use of estimates

 

The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America 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. The estimates and judgments will also affect the reported amounts for certain revenues and expenses during the reporting period. Actual results may materially differ from these estimates.

 

 

Fortune Valley Treasures, Inc.

Notes to Financial Statements

 

Foreign currency translation and re-measurement

 

The Company translates its foreign operations to the U.S. dollar in accordance with ASC 830, “Foreign Currency Matters”.

 

The reporting currency for the Company and its subsidiaries is the US dollar. The Company, DIGLS, and DILH’s functional currency is the U.S. dollar; QHDX and FVTL 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 Company’s results of operations.

 

The Company’s subsidiaries, whose functional currency is 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

 

Adjustments arising from such translations are included in accumulated other comprehensive income in shareholders’ equity.

 

		September 30,
		2020
Spot RMB:USD exchange rate			6.80127
Average RMB:USD exchange rate			6.99409

 

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 US Dollars at the rates used in translation.

 

NOTE 3 – PROFORMA ADJUSTMENTS

 

Entry No.		Description		Dr.		Cr.
1		Goodwill		8,535,403
		Common stock				4,377
		Additional paid in capital				7,677,486
		Retained earnings		27,740
		Non-controlling interest				881,280

 

Issuance of shares under share exchange agreement for business combination.