| 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 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 100 100 150 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 China 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, from certain shareholders
of Xixingdao in exchange for 243,134
shares (given effect of the Reverse Stock
Split, see Note 10) of the Company’s common stock. The Company obtained the control of Xixingdao and Xixingdao became the Company’s
subsidiary on August 31, 2020. The shares were issued on December 28, 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 12 subject to adjustments in the event Valley Holdings’ net profit is more than HK$5 million
(approximately US$0.6 million) or less than HK$3 million (approximately US$0.4 million) for the fiscal year ended December 31, 2020 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 nine months ended September 30, 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 $ 712,200 1,242,318 2,778,546 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 September 30, 2021, details of the Company’s major subsidiaries were as follows: SCHEDULE
OF ENTITIES AND ITS SUBSIDIARIES
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 Lai Food Ltd (“FLFL”) September 27, 2020 Xixingdao Drinking water distribution and delivery PRC
Dongguan
City Fu Xin Technology Ltd (“FXTL”) November
12, 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 Yi Beverage Ltd (“FYDL”) 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 Sheng Drinking Water Company Ltd (“FSWL”) March 29, 2021 Xixingdao Drinking water distribution and delivery PRC
Dongguan
City Fu Jia Drinking Water Company Ltd (“FJWL”) March
29, 2021 Xixingdao Drinking
water distribution and delivery PRC
Dongguan City Fu Xi Drinking Water Company Ltd (“FXWL”) March 17, 2021 Xixingdao Drinking water
distribution and delivery PRC
Dongguan City Fu Li Trading Ltd (“FLTL”) September 10, 2021 Xixingdao Trading of food, domestic appliance, plastic products PRC
Shenzhen
Fu Jin Trading Technology Company Ltd (“FJSTL”) June
7, 2021 Xixingdao Trading
of primary agricultural products, household appliances and plastic products; and Software technology development PRC
Guangdong
Fu Gu Supply Chain Group Ltd (“FGGC”) September
13, 2021 QHDX
Providing supply chain management service, and trading
of food, domestic appliance, and plastic products 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 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 Translation
of amounts from the local currencies of the Company into US$ has been made at the following exchange rates for the respective periods: SCHEDULE
OF FOREIGN CURRENCY EXCHANGE RATE TRANSLATION
As of and for the nine months ended September 30,
2021 2020
Period-end RMB:US$1 exchange rate 0.15512 0.14703
Period-average RMB:US$1 exchange rate 0.15452 0.14298 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 nine months ended September 30, 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 nine months ended September 30, 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: SCHEDULE
OF DISAGGREGATION REVENUE
Three months ended September 30, Nine months ended September 30,
2021 2020 2021 2020
Sales of wine $ 639,635 $ 156,340 $ 2,036,423 $ 247,567
Sales of water 1,099,586 127,220 2,827,732 127,220
Sales of oil 14 - 217,131 -
Others 266,155 - 393,608 -
Total $ 2,005,390 $ 283,560 $ 5,474,894 $ 374,787 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 September 30,
2021 and December 31, 2020, the Company had customer advances of $ 538,829 580,151 353,033 Related
party transaction 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. | ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES NOTE
2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Basis
of presentation These
consolidated financial statements, accompanying notes, and related disclosures have been prepared pursuant to the rules and regulations
of the U.S. Securities and Exchange Commission (“SEC”). These financial statements have been prepared using the accrual basis
of accounting in accordance with the generally accepted accounting principles in the United States (“U.S. GAAP”). The Company’s
fiscal year end is December 31. The Company’s financial statements are presented in U.S. dollars. 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. SCHEDULE OF ENTITIES AND ITS SUBSIDIARIES
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 Lai Food Ltd (“FLFL”) September 27, 2020 Xixingdao Drinking water distribution and delivery 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
Dongguan City Fu Sheng Drinking Water Company Ltd (“FSWL”) March 29, 2021 Xixingdao Drinking water distribution and delivery PRC
Dongguan
City Fu Jia Drinking Water Company Ltd (“FJWL”) March
29, 2021 Xixingdao Drinking
water distribution and delivery PRC
Dongguan City Fu Xi Drinking Water Company Ltd (“FXWL”) March 17, 2021 Xixingdao Drinking water
distribution and delivery PRC
Dongguan City Fu Li Trading Ltd (“FLTL”) September 10, 2021 Xixingdao Trading of food, domestic appliance, plastic products PRC
Shenzhen
Fu Jin Trading Technology Company Ltd (“FJSTL”) June
7, 2021 Xixingdao Trading
of primary agricultural products, household appliances and plastic products; and Software technology development PRC
Guangdong
Fu Gu Supply Chain Group Ltd (“FGGC”) September
13, 2021 QHDX
Providing supply chain management service, and trading
of food, domestic appliance, and plastic products 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. Certain significant accounting policies that contain subjective management
estimates and assumptions include those related to going concern, allowance of doubtful accounts, allowance of deferred tax asset, useful
lives and impairment of long-lived assets, valuation of intangible assets acquired and impairment of goodwill. Actual results may materially
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 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. SCHEDULE OF FOREIGN CURRENCY EXCHANGE RATE TRANSLATION
December 31, 2020 December 31,2019
Spot RMB: USD exchange rate $ 0.15317 $ 0.14334
Average RMB: USD exchange rate $ 0.14496 $ 0.14505 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. Cash
and cash equivalents Cash
and cash equivalents consist of cash on hand, demand deposits placed with banks or other financial institutions and have original maturities
of less than three months. The Company’s primary bank deposits are located in the Hong Kong and the PRC. Accounts
receivable and allowance for doubtful accounts Accounts
receivable are stated at the customer obligations due under normal trade terms net of allowance for doubtful accounts. The
Company maintains an allowance for doubtful accounts which reflects its best estimate of amounts that potentially will not be collected.
The Company determines the allowance for doubtful accounts taking into consideration various factors including but not limited to historical
collection experience and credit-worthiness of the customers as well as the age of the individual receivables balance. Additionally,
the Company makes specific bad debt provisions based on any specific knowledge the Company has acquired that might indicate that an account
is uncollectible. The facts and circumstances of each account may require the Company to use substantial judgment in assessing its collectability. Inventories Inventories
consisting of finished goods are stated at the lower of cost or market value. The Company used the weighted average cost method of accounting
for inventory. Inventories on hand are evaluated on an on-going basis to determine if any items are obsolete, spoiled, or in excess of
future demand. The Company provides impairment that is charged directly to cost of sales when is has been determined the product is obsolete,
spoiled, and the Company will not be able to sell it at a normal profit above its carrying cost. The Company’s primary products
are alcoholic beverages and water. The selling price of alcoholic beverages tend to increase over time, however, there are circumstances
where alcoholic beverages may be subject to spoilage if stored for prolong periods of time. Property
and equipment Property
and equipment is carried at cost less accumulated depreciation. Depreciation is provided over their estimated useful lives, using the
straight-line method. Estimated useful lives of the property and equipment are as follows: SCHEDULE OF ESTIMATED USEFUL LIVES OF PROPERTY AND EQUIPMENT
Office
equipment 3 20
Leasehold
improvements 3 The
cost of maintenance and repairs is charged to expenses as incurred, whereas significant renewals and betterments are capitalized. Intangible
asset, net Intangible
assets with definite lives are stated at cost less accumulated amortization and consist mainly of distribution channel that was acquired
in the acquisition of Xixingdao. Amortization
is calculated on the straight-line basis over the following estimated useful lives: SCHEDULE OF ESTIMATED USEFUL LIVES OF AMORTIZATION
Categories Estimated
useful life
Distribution
channel 4 Operating
leases The
Company recognizes its leases in accordance with ASC 842 - Leases. Under ASC 842, operating lease right-of-use (“ROU”) assets
and liabilities are recognized at commencement date based on the present value of lease payments over the lease term. ROU assets represent
our right to use an underlying asset for the lease term and lease liabilities represent our obligation to make lease payments arising
from the lease. The initial lease liability is equal to the future fixed minimum lease payments discounted using the Company’s
incremental borrowing rate, on a secured basis. The lease term includes option renewal periods and early termination payments when it
is reasonably certain that the Company will exercise those rights. The initial measurement of the ROU asset is equal to the initial lease
liability plus any initial direct costs and prepayments, less any lease incentives. The Company elected the short-term lease exemption
for contracts with lease terms of 12 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 no 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. In
January 2017, the FASB issued Accounting Standards Update No. 2017-04, Intangibles - Goodwill and Other (Topic 350): Simplifying the
Test for Goodwill Impairment (ASU 2017-04), which eliminates step two from the goodwill impairment test. Under ASU 2017-04, an entity
should 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. ASU 2017-04 is effective for annual and interim reporting periods beginning after
December 15, 2022 for smaller reporting companies. The Company has early adopted ASU 2017-04 on January 1, 2020. During
the year ended December 31, 2020, the Company has recorded impairment of goodwill in the amount of $ 5,594,692 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: SCHEDULE
OF DISAGGREGATION REVENUE
For the years ended
December 31, 2020 December 31, 2019
Sales of wine $ 2,704,662 $ 275,219
Sales of water 1,297,554 -
Sales of oil 493,284 -
Others 510,194 -
Total $ 5,005,694 $ 275,219 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 December 31,
2020 and 2019, the Company had customer advances of $ 580,151 Nil Sales
and distribution expenses Sales
and distribution expenses amounted to $ 23,191 Nil General
and administrative expenses General
and administrative expenses consist primarily of salary and welfare for general and administrative personnel, rental expenses, entertainment
expenses, general office expenses and professional service fees. Value-added
taxes Revenue
is recognized net of value-added taxes (“VAT”). The VAT is based on gross sales price and VAT rates applicable to the Company
is 17 16 13 3 3 1 Income
taxes The
Company followed the liability method of accounting for income taxes in accordance with ASC 740, Income Taxes, or ASC 740. Under this
method, deferred tax assets and liabilities are determined based on the difference between the financial reporting and tax bases of assets
and liabilities using enacted tax rates that will be in effect in the period in which the differences are expected to reverse. The Company
recorded a valuation allowance to offset deferred tax assets if based on the weight of available evidence, it is more-likely-than-not
that some portion, or all, of the deferred tax assets will not be realized. The effect on deferred taxes of a change in tax rate is recognized
in tax expense in the period that includes the enactment date of the change in tax rate. The
Company accounted for uncertainties in income taxes in accordance with ASC 740. Interest and penalties related to unrecognizable tax
benefit recognized in accordance with ASC 740 are classified in the consolidated statements of comprehensive loss as income tax expense. Statutory
reserves Statutory
reserves are referring to the amount appropriated from the net income in accordance with laws or regulations, which can be used to recover
losses and increase capital, as approved, and are to be used to expand production or operations. PRC laws prescribe that an enterprise
operating at a profit must appropriate and reserve, on an annual basis, an amount equal to 10 50 Earnings
per share The
Company computes earnings per share (“EPS”) in accordance with ASC Topic 260, “Earnings per share”. Basic EPS
is measured as the income or loss available to common shareholders divided by the weighted average common shares outstanding for the
period. Diluted EPS is similar to basic EPS but presents the dilutive effect on a per share basis of potential common shares (e.g., convertible
securities, options, and warrants) as if they had been converted at the beginning of the periods presented, or issuance date, if later.
Potential common shares that have an anti-dilutive effect (i.e. those that increase income per share or decrease loss per share) are
excluded from the calculation of diluted EPS. Financial
instruments The
Company accounts for financial instruments in accordance to ASC Topic 820, “Fair Value Measurements and Disclosures,” which
requires disclosure of the fair value of financial instruments held by the Company and ASC Topic 825, “Financial Instruments,”
which defines fair value, and establishes a three-level valuation hierarchy for disclosures of fair value measurement that enhances disclosure
requirements for fair value measures. The carrying amounts reported in the consolidated balance sheets for financial assets and liabilities,
which primarily consist of cash and cash equivalents, accounts receivable, inventories, prepayments and other current assets, accounts
payable, accrued liabilities, income tax payable, customer advances, are a reasonable estimate of their fair values because of the short
period of time between the origination of such instruments and their expected realization and their current market rate of interest.
The three levels of valuation hierarchy are defined as follows: ●
Level 1 inputs to the valuation methodology are quoted prices for identical assets or liabilities in active markets. ●
Level 2 inputs to the valuation methodology include quoted prices for similar assets and liabilities in active markets, and inputs that
are observable for the asset or liability, either directly or indirectly, for substantially the full term of the financial instrument. ●
Level 3 inputs to the valuation methodology are unobservable and significant to the fair value measurement. Commitments
and contingencies Liabilities
for loss contingencies arising from claims, assessments, litigation, fines and penalties and other sources are recorded when it is probable
that a liability has been incurred and the amount of the assessment can be reasonably estimated. Comprehensive
income Comprehensive
income is defined to include all changes in equity except those resulting from investments by owners and distributions to owners. Among
other disclosures, all items that are required to be recognized under current accounting standards as components of comprehensive income
are required to be reported in a financial statement that is presented with the same prominence as other financial statements. The Company’s
current component of other comprehensive income includes the foreign currency translation adjustment. Segment
reporting The
Company reports each material operating segment in accordance with ASC 280, “Segment Reporting”. Operating segments are defined
as components of an enterprise about which separate financial information is available that is evaluated regularly by the chief operating
decision maker in deciding how to allocate resources and in assessing performance. The Company’s chief operating decision maker
is the chief executive officer. The Company has determined that it has only one operating segment. Significant
risk Currency
risk A
majority of the Company’s expense transactions are denominated in RMB and a significant portion of the Company and its subsidiaries’
assets and liabilities are denominated in RMB. RMB is not freely convertible into foreign currencies. In the PRC, certain foreign exchange
transactions are required by law to be transacted only by authorized financial institutions at exchange rates set by the People’s
Bank of China (“PBOC”). Remittances in currencies other than RMB by the Company in the PRC must be processed through the
PBOC or other Company foreign exchange regulatory bodies which require certain supporting documentation in order to affect the remittance. The
Company maintains certain bank accounts in the PRC. On May 1, 2015, the PRC’s new Deposit Insurance Regulation came into effect,
pursuant to which banking financial institutions, such as commercial banks, established in the PRC are required to purchase deposit insurance
for deposits in RMB and in foreign currency placed with them. Such Deposit Insurance Regulation would not be effective in providing complete
protection for the Company’s accounts, as its aggregate deposits are much higher than the compensation limit, which is RMB 500,000 Other
than the deposit insurance mechanism in the PRC mentioned above, the Company’s bank accounts are not insured by Federal Deposit
Insurance Corporation insurance or other insurance. Concentration
and credit risk Financial
instruments that potentially subject the Company to the concentration of credit risks consist of cash and short-term investments. The
maximum exposures of such assets to credit risk are their carrying amounts as of the balance sheet dates. The Company deposits its cash
and cash equivalents with financial institutions located in jurisdictions where the subsidiaries are located. The Company believes that
no significant credit risk exists as these financial institutions have high credit quality. The
Company’s also exposure to credit risk associated with its trading and other activities is measured on an individual counterparty
basis, as well as by group of counterparties that share similar attributes. Concentrations of credit risk can be affected by changes
in political, industry, or economic factors. To reduce the potential for risk concentration, the Company generally requires payment after
delivery of the goods within 60 to 90 days. Credit limits are established and exposure is monitored in light of changing counterparty
and market conditions. During the year ended December 31, 2019, the Company had a concentration
of risk in its demand for goods, as a single customer, whom is also a related party accounted for $ 220,203 Interest
rate risk Fluctuations
in market interest rates may negatively affect our financial condition and results of operations. The Company is exposed to floating
interest rate risk on cash deposit and floating rate borrowings, and the risks due to changes in interest rates is not material. The
Company has not used any derivative financial instruments to manage our interest risk exposure. 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. Business
combination The
purchase price of an acquisition is measured as the aggregate of the fair value of the consideration transferred. The purchase price
is allocated to the fair values of the tangible and intangible assets acquired and liabilities assumed, with any excess recorded as goodwill.
These fair value determinations require judgment and may involve the use of significant estimates and assumptions. The purchase price
allocation may be provisional during a measurement period of up to one year to provide reasonable time to obtain the information necessary
to identify and measure the assets acquired and liabilities assumed. Any such measurement period adjustments are recognized in the period
in which the adjustment amount is determined. Transaction costs associated with the acquisition are expensed as incurred. Recent
accounting pronouncements In
June 2016, the FASB issued ASU 2016-13, Financial Instruments-Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments.
ASU 2016-13 requires an entity to utilize a new impairment model known as the current expected credit loss (“CECL”) model
to estimate its lifetime “expected credit loss” and record an allowance that, when deducted from the amortized cost basis
of the financial asset, presents the net amount expected to be collected on the financial asset. The CECL model is expected to result
in more timely recognition of credit losses. ASU 2016-13 also requires new disclosures for financial assets measured at amortized cost,
loans and available-for-sale debt securities. ASU 2016-13 will be effective for smaller reporting companies for fiscal years beginning
after December 15, 2022, including interim periods within those fiscal years. Entities will apply the standard’s provisions as
a cumulative-effect adjustment to retained earnings as of the beginning of the first reporting period in which the guidance is adopted.
The Company is evaluating the impact of the adoption of ASU 2016-13 on its consolidated financial statements and does not expect the
adoption to have a material impact. In
August 2018, the FASB issued ASU 2018-13, Disclosure Framework-Changes to the Disclosure Requirements for Fair Value Measurement. The
amendments in this standard has removed, modified and added certain disclosures under ASC Topic 820, Fair Value Measurement, with the
objective of improving disclosure effectiveness. On January 1, 2020, the Company adopted ASU 2018-13 on a prospective basis. The adoption
did not have a material impact on the Company’s consolidated financial statements. 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. ASU 2019-12 is effective for public entities for annual reporting periods and interim
periods within those years beginning after December 15, 2020, and early adoption is permitted. The Company does not expect the adoption
of ASU 2019-12 to have a material impact on its consolidated financial statements. |
