| 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
15,000,000 On
March 1, 2019, the Company entered into a sale and purchase agreement (the “SP Agreement”) to acquire 100 5 100 150 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 90 243,134 Basis
of presentation The
accompanying unaudited condensed consolidated financial statements as of June 30, 2023 and for the three and six months ended June 30,
2023 and 2022, 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, 2022 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, 2022, filed with the SEC on March 31, 2023 (the “report”). These unaudited
condensed consolidated financial statements should be read in conjunction with the report. Basis
of consolidation The
unaudited condensed 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 unaudited condensed consolidated statements
of operations. As
of June 30, 2023, 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 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 (“FYBL”) November
12, 2020 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, sales of alcoholic beverages and water purifier PRC
Dongguan
City Fu Jia Drinking Water Company Ltd (“FJWL”) March
29, 2021 Xixingdao Drinking
water distribution and delivery, sales of water purifier PRC
Dongguan
City Fu Sheng Drinking Water Company Ltd (“FSWL”) March
29, 2021 Xixingdao Drinking
water distribution and delivery, sales of water purifier PRC
Shenzhen
Fu Jin Trading Technology Company Ltd (“FJSTL”) June
7, 2021 Xixingdao Drinking
water distribution and delivery, sales of water purifier PRC
Dongguan
City Fu Li Trading Ltd (“FLTL”) September
10, 2021 Xixingdao Drinking
water distribution and delivery, sales of water purifier PRC
Guangdong
Fu Gu Supply Chain Group Ltd (“FGGC”) September
13, 2021 QHDX Trading
of alcoholic beverages PRC
Dongguan
City Fu Zhi Gu Trading Ltd (“FZGTL”) September
9, 2022 FVTL Trading
of alcoholic beverages PRC
Dongguan
City Chang Fu Trading Ltd (“CFTL”) September
9, 2022 FVTL Trading
of alcoholic beverages PRC
Dongguan
City La Tong Trading Ltd (“LTTL”) August
8, 2022 FVTL Trading
of alcoholic beverages PRC
Dongguan
City Kai Fu Trading Ltd (“KFTL”) September
8, 2022 FVTL Trading
of alcoholic beverages PRC Use
of estimates The
preparation of financial statements in conformity with U.S. 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 credit losses, allowance of deferred tax asset and uncertain tax position, implicit interest rate of operating
leases, useful lives and impairment of long-lived assets, and impairment of goodwill. Actual results may differ from these estimates. 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
2023 2022
As of and for the
2023 2022
Period-end RMB:US$1 exchange rate 0.13880 0.14927
Period-average RMB:US$1 exchange rate 0.14448 0.15451 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 U.S. 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 six months ended June 30, 2023 and 2022. 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 six months ended June 30, 2023 and 2022, 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 liquor, water, water purifier and other products directly to agents, wholesalers and end
users, with majority of sales transactions were conducted offline. 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
2023 2022 2023 2022
Three months ended Six months ended
2023 2022 2023 2022
Sales of liquor $ 878,952 $ 1,203,484 $ 1,782,672 $ 1,833,946
Sales of water 213,582 808,648 633,202 1,338,092
Sales of water purifier 114,714 310,807 367,837 395,548
Others 65,349 13,520 124,175 30,683
Total $ 1,272,597 $ 2,336,459 $ 2,907,886 $ 3,598,269 Contract
liabilities Contract
liabilities consist mainly of customer advances. On certain occasions, the Company may receive prepayments from downstream retailers
or wholesales customers for liquors, 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 June 30, 2023
and December 31, 2022, the Company had customer advances of $ 116,769 139,334 24,707 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. Recently
adopted accounting pronouncements In
June 2016, the FASB issued Accounting Standards Update (“ASU”) No. 2016-13, Financial Instruments – Credit Losses (Topic
326), Measurement of Credit Losses on Financial Instruments. ASU No. 2016-13 was further amended in November 2020 by ASU No. 2020-10,
Financial Instruments – Credit Losses (Topic 326), Derivatives and Hedging (Topic 815), and Leases (Topic 842). As a result, ASC
Topic 326, Financial Instruments – Credit Losses is effective for smaller reporting companies for fiscal years beginning after
December 15, 2022, including interim periods within those fiscal years. The Company adopted ASU No. 2016-13 on January 1, 2023 and the
adoption did not have a material impact on the Company’s unaudited condensed consolidated financial statements. In
October 2021, the FASB issued ASU No. 2021-08, Business Combinations (Topic 805), Accounting for Contract Assets and Contract Liabilities
from Contracts with Customers. This ASU clarifies that an acquirer of a business should recognize and measure contract assets and contract
liabilities in a business combination in accordance with ASC Topic 606, “Revenue from Contracts with Customers”. This ASU
is expected to improve comparability for both the recognition and measurement of acquired revenue contracts with customers at the date
of and after a business combination. The new guidance is effective for fiscal years beginning after December 15, 2022, including interim
periods within those fiscal years. The Company adopted ASU No. 2021-08 on January 1, 2023 and the adoption did not have a material impact
on the Company’s unaudited condensed consolidated financial statements. |
