| Organization and Summary of Significant Accounting Policies | NOTE 1 - ORGANIZATION AND SUMMARY OF SIGNIFICANT
ACCOUNTING POLICIES Fortune Valley Treasures, Inc. (formerly Crypto-Services,
Inc.) (“FVTI” or the “Company”) 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 and distilled liquors, and
drinking water distribution and delivery are conducted through its subsidiaries in the People’s Republic of China (“PRC”). On April 11, 2018, the Company
entered into a share exchange agreement by and among DaXingHuaShang Investment Group Limited (“DIGLS”) and its shareholders:
1.) Yumin Lin, 2.) Gaosheng Group Co., Ltd. and 3.) China Kaipeng Group Co., Ltd whereby the Company newly issued 300,000,000 shares of
its common stock in exchange for all the outstanding shares in DIGLS. This transaction has been accounted for as 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’s historical statement of stockholders’ equity has been retroactively
restated to the first period presented. 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 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 interest of Jiujiu (HK) Industry Limited (“JJHK”)
and Jiujiu (Shenzhen) Industry Co., Ltd. (“JJSZ”). JJGS and JJHK are holding companies and conduct business through their
operating subsidiary, JJSZ, which engages in retail and wholesale distribution of wine products. On June 22, 2020, the Company entered into a sale
and purchase agreement along with Qianhai DaXingHuaShang Investment (Shenzhen) Co., Ltd., a company incorporated in the PRC and a wholly-owned
subsidiary of FVTI (“QHDX”), to acquire 90% of the shares of Dongguan Xixingdao Technology Co., Ltd. (“Xixingdao”),
a company incorporated in the PRC, in exchange for 4,862,681 shares of the Company’s common stock. The Company obtained the control
of Xixingdao on August 31, 2020, the shares were issued on December 28, 2020. Xixingdao became the Company’s subsidiary since August
31, 2020. On January 6, 2021, FVTI, JJGS, Valley Holding Limited
(“Valley Holdings”) and Angel International Investment Holdings Limited (the “Valley Holdings Seller”) signed
a termination agreement, pursuant to which the parties mutually agreed to terminate the original equity interest transfer agreement signed
on March 16, 2020. On the same date, FVTI, DILHK, Valley Holdings and the Valley Holdings Seller entered into a new equity interest transfer
agreement, pursuant to which DILHK agreed to purchase 70% of Valley Holdings’ equity interest (the “Valley Holdings Equity
Transfer”) from the Valley Holdings seller in consideration of FVTI’s common shares with value equivalents to $15 million.
As of the date of this filing, the closing of the Valley Holdings Equity Transfer has not occurred. On February 28, 2021, FVTI, QHDX and the original
shareholders of Foshan BaiTaFeng Beverage Development Co., Ltd. (“BTF”) signed a termination agreement, pursuant to which
the parties mutually agreed to terminate the original equity interest transfer agreement signed on December 31, 2019 (“BTF Agreement”).
The BTF Agreement was terminated effective February 28, 2021 and the parties have no further rights or obligations under the BTF Agreement.
The parties further agreed to waive their rights to any claims that may arise under the BTF Agreement. As of the date of the termination
agreement, no equity interest of BTF had been transferred to QHDX. Basis of presentation The accompanying unaudited condensed consolidated
financial statements as of and for the three months ended March 31, 2021 and 2020, have been prepared pursuant to the rules and regulations
of the Securities and Exchange Commission (the “SEC”) that permit reduced disclosure for interim periods. Certain information
and footnote disclosures normally included in financial statements prepared in accordance with accounting principles generally accepted
in the United States of America (“U.S. GAAP”) have been condensed or omitted. In the opinion of management, all adjustments
consisting of normal recurring entries considered necessary for a fair presentation have been included. The results of operations for
these periods are not necessarily comparable to, or indicative of, results of any other interim period or for the fiscal year taken as
a whole. The condensed consolidated balance sheet information as of December 31, 2020 was derived from the Company’s audited consolidated
financial statements included in the Company’s Annual Report on Form 10-K, for the year ended December 31, 2020, filed with the
SEC on April 26, 2021 (the “report”). These unaudited condensed consolidated financial statements should be read in conjunction
with the report. The accompanying financial statements have been prepared
in conformity with U.S. GAAP which contemplates continuation of the Company as a going-concern basis. The going-concern basis assumes
that assets are realized, and liabilities are settled in the ordinary course of business at amounts disclosed in the financial statements.
Although the Company has generated a negative operating cash flow of $508,778 during the three months ended March 31, 2021, it has reported
a net income of $335,574. In addition, as of March 31, 2021, the Company had a working capital of $2,437,539. The Company’s independent
registered public accounting firm expressed in its report on the Company’s financial statements for the year ended December 31,
2020 a substantial doubt about the Company’s ability to continue as a going concern. Based on the Company’s effort in improving
its operation and the significant working capital raised as of March 31, 2021, the management believes that the substantial doubt has
been alleviated. Basis of consolidation The consolidated financial
statements include the accounts of the Company and its subsidiaries. All intercompany accounts and transactions have been eliminated.
The results of subsidiaries acquired during the respective periods are included in the consolidated statements of operations from the
effective date of acquisition or up to the effective date of disposal, as appropriate. The portion of the income or loss applicable to
noncontrolling interests in subsidiaries is reflected in the consolidated statements of operations. As of March 31, 2021, details of the Company’s
major subsidiaries were as follows:
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 food and platform 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 Trading of food PRC
Xixingdao August 28, 2019 QHDX Drinking water distribution and delivery PRC
Dongguan City Fu La Tu Trade Ltd (“FLTT”) September 27, 2020 FVTL Trading of alcoholic beverages PRC
Dongguan City Fu Xin Gu Trade Ltd (“FXGT”) December 2, 2020 FVTL Trading of alcoholic beverages PRC
Dongguan City Fu Xin Technology Ltd (“FXTL”) November 12, 2020 Xixingdao Drinking water distribution and delivery PRC
Dongguan City Fu Guan Healthy Industry Technology Ltd (“FGHL”) December 21, 2020 Xixingdao Drinking water distribution and delivery PRC
Dongguan City Fu Jing Technology Ltd (“FJTL”) November 17, 2020 Xixingdao Drinking water distribution and delivery PRC
Dongguan City Fu Xiang Technology Ltd (“FGTL”) November 16, 2020 Xixingdao Drinking water distribution and delivery PRC
Dongguan City Fu Ji Food & Beverage Ltd (“FJFL”) November 9, 2020 Xixingdao Drinking water distribution and delivery PRC
Dongguan City Fu Lai Food Ltd (“FLFL”) September 27, 2020 Xixingdao Drinking water distribution and delivery PRC
Dongguan City Fu Yi Beverage Ltd (“FYDL”) November 12, 2020 Xixingdao Drinking water distribution and delivery PRC
Dongguan City Fu Tai Food Trade Ltd (“FTFL”) October 23, 2020 Xixingdao Drinking water distribution and delivery PRC
Huizhou City Fu Ye Trade Ltd (“FYTL”) February 5, 2021 Xixingdao Drinking water distribution and delivery PRC
Dongguan City Fu Xi Drinking Water Ltd (“FXDW”) March 17, 2021 Xixingdao Drinking water distribution and delivery PRC
Dongguan City Hao Xian Sheng Food Ltd (“HXSF”) March 25, 2021 Xixingdao Drinking water distribution and delivery PRC
Dongguan City Fu Jia Drinking Water Ltd (“FJDW”) March 29, 2021 Xixingdao Drinking water distribution and delivery PRC
Dongguan City Fu Sheng Drinking Water Ltd (“FSDW”) March 29, 2021 Xixingdao Drinking water distribution and delivery PRC Use of estimates The preparation of financial statements in conformity
with US GAAP requires management to make estimates and assumptions relating to the reporting of assets and liabilities and the disclosure
of contingent liabilities at the date of the financial statements, and the reported amounts of revenues and expenses during the reporting
period. Significant accounting estimates include certain assumptions related to going concern, allowance of doubtful accounts, allowance
of deferred tax asset, useful lives and impairment of long-lived assets, and impairment of goodwill. Actual results may differ from these
estimates. Reclassification Certain prior year amounts have been reclassified
to conform to the current period presentation. These reclassifications had no impact on net earnings and financial position. 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 U.S. dollar. The Company, DIGLS, DILHK, JJGS and JJHK’s functional currency is the U.S.
dollar; QHDX, JJSZ and their subsidiaries which are incorporated in the PRC 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. Translation of amounts from the local currencies of
the Company into US$ has been made at the following exchange rates for the respective periods:
As of and for the three months ended
2021 2020
Period-end RMB : US$1 exchange rate 0.15261 0.14114
Period-average RMB : US$1 exchange rate 0.15424 0.14300 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. Impairment of long-lived assets other than goodwill The Company reviews its long-lived assets for impairment
whenever events or changes in circumstances indicate that the carrying amount of assets may not be recoverable. Impairment may be the
result of becoming obsolete from a change in the industry or new technologies. Impairment is present if the carrying amount of an asset
is less than its undiscounted cash flows to be generated. If an asset is considered impaired, a loss is recognized
based on the amount by which the carrying amount exceeds the fair market value of the asset. Assets to be disposed of are reported at
the lower of the carrying amount or fair value less costs to sell. The Company did not recognize any impairment of long-lived
assets during the three months ended March 31, 2021 and 2020. Goodwill Goodwill represents the excess of the purchase price
over the fair value of the net identifiable assets acquired in a business combination. In accordance with FASB ASC Topic 350, “Intangibles-Goodwill
and Others”, goodwill is subject to at least an annual assessment for impairment or more frequently if events or changes in circumstances
indicate that an impairment may exist, applying a fair-value based test. Fair value is generally determined using a discounted cash flow
analysis. The Company would recognize an impairment charge for the amount by which the carrying amount of a reporting unit exceeds its
fair value up to the amount of goodwill allocated to that reporting unit. During the three months ended March 31, 2021, the
Company did not record any impairment of goodwill. Revenue recognition The Company follows the guidance of ASC 606, revenue
from contracts with customers is recognized using the following five steps:
1. Identify the contract(s) with a customer;
2. Identify the performance obligations in the contract;
3. Determine the transaction price;
4. Allocate the transaction price to the performance obligations in the contract; and
5. Recognize revenue when (or as) the entity satisfies a performance obligation. Under Topic 606, revenues are recognized
when the promised products have been confirmed of delivery or services have been transferred to the consumers in amounts that reflect
the consideration the customer expects to be entitled to in exchange for those services. The Company presents value added taxes (“VAT”)
as reductions of revenues. The Company recognizes revenues net of value added taxes (“VAT”) and relevant charges. We generate revenue primarily from the sales of wine,
water and oil directly to agents, wholesalers and end users. We recognize product revenue at a point in time when the control of the products
has been transferred to customers. The transfer of control is considered complete when products have been picked up by or delivered to
our customers. We account for shipping and handling fees as a fulfillment cost. The following table provides information about disaggregated
revenue based on revenue by product types:
Three months ended
2021 2020
Sales of wine $ 779,220 $ 22,051
Sales of water 700,495 -
Sales of oil 135,997 -
Others 28,448 -
Total $ 1,644,160 $ 22,051 Contract liabilities Contract liabilities consist mainly of customer advances.
On certain occasions, the Company may receive prepayments from downstream retailers or wholesales customers for wines, water and other
products prior to them taking possession of the Company’s products. The Company records these receipts as customer advances until
the control of the products has been transferred the customers. As of March 31, 2021 and December 31, 2020, the Company had customer advances
of $795,293 and $580,151, respectively. During the three months ended March 31, 2021, the Company recognized $146,811 of customer advances
in the opening balance. Related party transaction A related party is generally defined as (i) any person
that holds 10% or more of the Company’s securities and their immediate families, (ii) the Company’s management, (iii) someone
that directly or indirectly controls, is controlled by or is under common control with the Company, or (iv) anyone who can significantly
influence the financial and operating decisions of the Company. A transaction is considered to be a related party transaction when there
is a transfer of resources or obligations between related parties. Transactions involving related parties cannot be presumed
to be carried out on an arm’s-length basis, as the requisite conditions of competitive, free market 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. Recent accounting pronouncements adopted In December 2020, the FASB issued ASU 2019-12, Income
Taxes (Topic 740) Simplifying the Accounting for Income Taxes. The ASU removes certain exceptions to the general principles in Topic 740
and improves consistent application of and simplifies GAAP for other areas of Topic 740 by clarifying and amending existing guidance.
On January 1, 2021, the Company adopted ASU 2019-12 on a prospective basis. The adoption did not have a material impact on the Company’s
consolidated financial statements. |
