| Organization and Description of Business | NOTE 1 - ORGANIZATION AND DESCRIPTION OF BUSINESS Fortune Valley Treasures, Inc. (formerly Crypto-Services,
Inc., the “Company” or “FVTI”) was incorporated in the State of Nevada on March 21, 2014. The Company is
engaged in the business of wholesale distribution and retail sales of alcoholic beverages, including wine and distilled liquors,
through its subsidiaries in the People’s Republic of China (“PRC” or “China”). On January 5, 2018, the Company changed its
accounting fiscal year end from August 31 to December 31. On January 29, 2018, the Company filed a Certificate of Amendment with
the State of Nevada to increase its authorized shares of common stock from 75,000,000 to 3,000,000,000. On April 6, 2018, the Company entered into
a share exchange agreement by and among DaXingHuaShang Investment Group Limited, a Republic of Seychelles limited liability company
(“DIGLS”), and each of the shareholders of DIGLS, pursuant to which the Company issued 300,000,000 shares of common
stock in exchange for 100% of the issued shares of DIGLS. This transaction was accounted for a reverse takeover transaction and
a recapitalization of the Company whereby the Company, the legal acquirer, is the accounting acquiree, and DIGLS, the legal acquiree,
is the accounting acquirer. Accordingly, the Company historical statement of stockholders’ equity has been retroactively
restated to the first period presented. DIGLS was incorporated in the Republic of Seychelles
on July 4, 2016, with an authorized capital of $100,000, divided into 250,000,000 ordinary shares, par value $0.0004 per share.
DIGLS wholly owns DaXingHuaShang Investment (Hong Kong) Limited (“DILHK”), a company incorporated in Hong Kong on June
22, 2016 as an investment holding company with limited liability. DILHK was previously wholly owned by Mr. Yumin Lin, the Company’s
Chairman, Chief Executive Officer, Chief Financial Officer, President, Treasurer and Secretary. On November 11, 2016, Mr. Yumin
Lin transferred 100% of his ownership in DILHK to DIGLS for nominal consideration. DILHK wholly owns Qianhai DaXingHuaShang Investment
(Shenzhen) Co., Ltd. (“QHDX”), a PRC limited liability company formed on November 3, 2016 as a wholly foreign-owned
enterprise. QHDX wholly owns Dongguan City France Vin Tout Ltd. (“FVTL”). FVTL was incorporated on May 31, 2011 in
the PRC as a limited liability company. FVTL was previously owned and controlled by Mr. Yumin Lin. On November 20, 2016, Mr. Yumin
Lin transferred his ownership in FVTL to QHDX for nominal consideration. The share transfers detailed above by and among Mr. Yumin
Lin, DIGLS, DILHK, QHDX, and FVTL have been accounted for as a series of business combination of entities under common control.
Accordingly, the values in these financial statements reflect the carrying values of those entities, and no goodwill was recorded
as a result of these transactions. On March 1, 2019, the Company entered into
a sale and purchase agreement (the “SP Agreement”) to acquire 100% of the shares of Jiujiu Group Stock Co., Ltd. (“JJGS”),
a company incorporated under the laws of the Republic of Seychelles. The transaction contemplated in the SP Agreement was closed
on March 1, 2019. Pursuant to the SP Agreement, the Company issued 100 shares of its common stock to JJGS to acquire 100% of the
shares of JJGS for a cost of $150. After the closing, JJGS became the Company’s wholly owned subsidiary. JJGS owns all of
the equity interests of Jiujiu (HK) Industry Limited (“JJHK”) and Jiujiu (Shenzhen) Industry Co., Ltd. (“JJSZ”).
None of JJGS, JJHK and JJSZ have any operations or active business, nor do they have any substantial assets. Makaweng Acquisition On July 13, 2019, the Company and QHDX entered
into an equity interest transfer agreement, which was later amended on September 12, 2019 (“Makaweng Agreement”), with
Xingwen Wang, a shareholder and legal representative of Yunnan Makaweng Wine & Spirits Co., Ltd. (“Makaweng” or
“MKW”), a PRC limited liability company engaged in the business of distribution of wine and beer. Pursuant to the Makaweng
Agreement, QHDX purchased 51% of Makaweng’s equity interests from Xingwen Wang in exchange for shares of our common stock
(“Makaweng Issuable Shares”), the number of which is determined according to the following formula: Number of Makaweng Issuable Shares = A x 51%
x 20 x B ÷ C For the purpose of the foregoing formula: A = Audited net annual profit of Makaweng in
fiscal year 2020. B = The daily average middle exchange rate
of U.S. Dollars to Chinese Yuan published by the State Administration of Foreign Exchange of the People’s Republic of China
on December 31, 2020. C = The closing price of FVTI’s common
stock on December 31, 2020. Mr. Wang has agreed not to transfer the Makaweng
Issuable Shares for at least three years after delivery of the Makaweng Issuable Shares (the “Delivery”). He may only
transfer up to 30% of his FVTI common stock during the fourth year after the Delivery and cumulatively no more than 60% of his
FVTI common stock during the fifth year after the Delivery. The 51% of equity interest of Makaweng was
transferred to QHDX and the registration of such transfer with local government authorities was completed on August 28, 2019. Makaweng acquired 95% of equity interest of
Lijiang Rendetang Biotechnology Co., Ltd., a PRC limited corporation with no operations (“LJRB”), from an existing
shareholder of LJRB in January 2020 for a nominal amount as consideration. BTF Acquisition On December 30, 2019, the Company, along with
QHDX, entered into an equity interest transfer agreement (the “BTF Agreement”) with shareholders (the “BTF Original
Shareholders”) of Foshan BaiTaFeng Beverage Development Co., Ltd. (“BTF”), who collectively owned 100% equity
interest of BTF, a limited liability company engaged in the business of bottling and distributing of drinking water in China. Pursuant to the BTF Agreement, QHDX agreed
to purchase 80% of BTF’s equity interest (the “BTF Equity Transfer”) from Mr. Chunbin Li, the legal representative
and one of the BTF Original Shareholders of BTF (the “BTF Seller”), in exchange for shares of our common stock (“BTF
Issuable Shares”). The completion of the registration of the BTF Equity Transfer with local government authorities (the “BTF
Closing”) is subject to satisfaction of all the closing conditions (unless waived), including but not limited to, the approval
of the BTF Equity Transfer by BTF shareholders, completion of due diligence review of BTF to the satisfaction of QHDX, waiver from
the BTF Original Shareholders to the right of first refusal to purchase the equity interest subject to the BTF Equity Transfer.
It is agreed that the BTF Closing shall be conducted prior to the completion of an initial draft of the audited financial statements
of BTF. According to the BTF Agreement, the total number
of BTF Issuable Shares will be determined according to the following formula: Number of BTF Issuable Shares = X x 80% x 15
÷ 3.02 ÷ Y For the purpose of the foregoing formula: X = Net profit of BTF during the period from
October 1, 2019 to September 30, 2020. Y = 7:1, which is the exchange rate of U.S.
Dollars to Chinese Yuan mutually agreed by the parties. Pursuant to the BTF Agreement, we will issue
the BTF Issuable Shares to the BTF Seller within 30 business days after September 30, 2020 pursuant to a separate subscription
agreement to be entered into by the Company and the BTF Seller or his designee. BTF and the BTF Original Shareholders have
agreed to achieve certain operation objectives of BTF, including a net profit of RMB 9 million (approximately $1.29 million) for
the period from October 1, 2019 to September 30, 2020 and a net profit of RMB 3 million (approximately $0.14 million) for the fiscal
year ended December 31, 2019. Pursuant to the BTF Agreement, as long as the BTF Seller continues to serve as the general manager
and legal representative of BTF, the BTF Original Shareholders and BTF shall ensure BTF achieves an increase in annual net profit
of no less than 10% during each year of the five years after September 30, 2020. Pursuant to the BTF Agreement, BTF will establish
a board of directors consisting of three individuals, two of which will be designated by QHDX and one by the BTF Original Shareholders,
and appoint a person designated by the BTF Original Shareholders as general manager. To ensure the continuous operations of BTF,
the parties agreed that BTF will retain its existing employees and all the management members of BTF shall sign employment agreements
and non-compete agreements with BTF. The parties further agreed that BTF will not make any profit distribution within three years
after the execution of the BTF Agreement. Any subsequent share transfer or share pledge of QHDX’s equity interest in BTF
is subject to the prior written consent of the BTF Original Shareholders. In the event of a late payment of the consideration by
QHDX or any delay in the registration of the BTF Equity Transfer with local government caused by the BTF Seller, a daily penalty
of 0.05% of the outstanding payment is assessed. As of the date this report, the Company has
not closed the transaction with the BTF shareholders. Valley Holdings Acquisition On March 16, 2020, the Company, along with
JJGS, entered into an equity interest transfer agreement (the “Valley Holdings Agreement”) with Valley Holdings Limited
(“Valley Holdings”), a Hong Kong company, and Angel International Investment Holdings Limited (the “Valley Holdings
Seller”), a 70% shareholder of Valley Holdings. Valley Holdings owns approximately 88.44% of the equity interest of Valley
Foods Holdings (Guangzhou) Co., Ltd. (“Valley Food”), which is a limited liability company incorporated in China and
engaged in the business of food wholesale and production and sale of food additives in China. Pursuant to the Valley Holdings Agreement,
JJGS agreed to purchase 70% of Valley Holdings’ equity interest (the “Valley Holdings Equity Transfer”) from
the Valley Holdings Seller in consideration of shares of FVTI’s common stock (“Valley Holdings Issuable Shares”)
valued at $14 million (subject to adjustments in the event of Valley Holdings failing to meet a net profit of HK$5 million (approximately
US$0.6 million) for the fiscal year ended December 31, 2019). According to the Valley Holdings Agreement, the total number of Valley
Holdings Issuable Shares will be determined based on the closing price of FVTI’s common stock as of the business day immediately
preceding the date of the Valley Holdings Closing (as defined below). The closing of the Valley Holdings Equity Transfer
(the “Valley Holdings Closing”) is intended to occur on or before April 30, 2020 or such later date agreed upon in
writing. The Valley Holdings Closing is subject to certain conditions, including, but not limited to, (a) completion of due diligence
review of Valley Holdings and its subsidiaries to the satisfaction of JJGS, (b) completion of the initial draft of the audited
consolidated financial statements of Valley Holdings for the fiscal year ended December 31, 2019, (c) execution of non-competition
agreements and confidentiality agreements with the senior management members of Valley Holdings and its subsidiaries, and (d) assignment
to Valley Holdings all of the intellectual properties related to the operations of Valley Holdings and its subsidiaries. Pursuant to the Valley Holdings Agreement,
FVTI will issue the Valley Holdings Issuable Shares to the Valley Holdings Seller within 30 business days after the later of the
Valley Holdings Closing and the issuance of audit report of Valley Holdings for the fiscal year ended December 31, 2019, pursuant
to a separate subscription agreement to be entered into by FVTI and the Valley Holdings Seller or its designee. To ensure the continuous operations of Valley
Holdings and its subsidiaries, the parties agreed that Valley Holdings and its subsidiaries will retain their existing employees
and will enter into non-competition and employment agreements with all the management members of Valley Holdings and its subsidiaries.
The parties further agreed that Valley Holdings will not make any profit distribution within three years after the execution of
the Valley Holdings Agreement. JJGS or the Valley Holdings Seller may terminate Valley Holdings Agreement in writing in the event
that any closing condition is not met before April 30, 2020. As of the date of this report, the Company
has not completed the transaction to acquire Valley Holdings. 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”),
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 consolidated 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 = Audited net profit
of Xixingdao during the period from June 1, 2020 to May 31, 2021. B = The average of the
closing prices of FVTI’s common stock for the 30 business days before the date the Xixingdao 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 Xixingdao Agreement, as long as Yuwen Li, one of the Xixingdao
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 Xixingdao Sellers as general manager. The parties further agreed that Xixingdao will
not make any profit distribution within four years after the execution of the Xixingdao Agreement. In the event of a late payment
of the consideration by QHDX or any delay in the registration of the Xixingdao Equity Transfer with local government caused by
the Xixingdao Sellers, a daily penalty of 0.01% of the outstanding payment is assessed. As of the date of this report, the Company
has not completed the transaction to acquire Xixingdao. |
