What changed in this filing

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Item 1. Business

2022-04-01 compared with 2021-04-26 · 1855 added, 315 removed, 30 unchanged (99% of the section changed)

have been engaged in the retail and wholesale distribution of a wide spectrum of food and beverage products in Guangdong province,

China since 2011.

We have eight stores in Dongguan City, Guangdong Province to serve our clients and we have developed

our online platform for our wholesaler and other end users.

In addition, we are actively seeking quality target companies in the

food, beverage and alcohol industries for mergers and acquisition for further development of our company.

conduct our business through our PRC subsidiaries, which are a food and beverage supply chain company group based in Guangdong

province, China.

With the mission to improve people’s lives by offering safe and quality foods, we are committed to building a

first class food supply chain business in China and in the global markets.

Through quality control and sales of selected branded products,

we provide a one-stop quality food purchase experience for both businesses and individual customers.

Our products are well recognized

among consumer groups in the Pearl River Delta region of China.

vision is “Safe Foods for the People.” We strive to improve the consumers’ food experience in respect of brand, quality,

service and speed.

Through online and offline channels, we deliver quality food products to consumers through sales targeting regional

wholesalers, major food and beverage chains, supermarkets and other retailers.

purchase, supply, distribute and sell alcohol and non-alcohol beverages, packaged staple foods, condiments and seasonings, and household

drinking water related purification devices.

Since our founding in 2011, we have primarily engaged in the wholesale distribution and

retail sale of wine and liquor products in Southern China.

In the recent years, we have expanded into the non-alcohol beverage and food

markets through strategic acquisitions.

currently mainly purchase and sell four categories of food and beverage and related products.

Our offerings have evolved over our history

of development.

Our current core lines of products include the following four categories:

beverage, including wine, liquor and spirits;

beverage, primarily bottled drinking water;

food products, primarily including edible oil, condiments and seasonings;

water purification products, such as whole house water filtration systems and purification solution products.

manage the entire process of product procurement, warehousing, distribution, logistics, and delivery through our supply chain system.

We cultivate long-term cooperation relationships with many high-quality upstream suppliers to secure the supply demand and stable product

We continuously enhance food quality and safety standards through our quality control system and supplier development management

Through continuous optimization and management of supply planning, logistics management and quality assurance, we have improved

product procurement efficiency and order management capabilities.

advertise and sell products using a hybrid marketing model through our supply chain platform, social media, primarily WeChat, distributor

network, key customer channels, product displays at our stores, and community promotions.

We promote direct sales to business and individual

consumers on our e-commerce supply chain platform – “Fugu Online.” Further, we make online or offline bulk sales through

our agents and independent distributors.

Prior to the launching of our supply chain platform, the majority of our sales had been made

through independent distributors.

We believe our distribution network is still an important component of our hybrid sales model.

agent and distributor sales model helps enhance the brand awareness of our products among end customers.

Furthermore, we have achieved

a substantial portion of our sales through key customer channels.

We have established long-term and stable cooperative relations with

certain large enterprises.

We hold periodic offline promotions, offline anniversary activities, and offer loyalty rewards to key customers.

We initiate promotions to expand our customer base and build brand awareness.

As we have multiple product lines, there are many opportunities

for cross-selling across our platform as we seek to introduce customers to all product offerings.

We also believe our strong reputation

is a factor in retaining and attracting customers.

are on path to build a closed-loop industry supply chain system for our products.

Through connecting upstream suppliers and downstream

enterprises, we have formed a supply chain network, broadened market penetration through the technology driven e-commerce platform and

services, and aligned third-party production, supply and marketing with distribution and sale to achieve cost reduction and efficiency.

our deeply rooted brand image, fast and efficient multi-channel sales model, precise consumer positioning, superior service experience,

and an online platform connecting suppliers, core enterprises, and customers in the food supply chain, today we are well positioned to

become a competitive leader in the food supply chain market in China.

History and Structure

Valley Treasures, Inc., formerly Crypto-Services, Inc., was incorporated in the State of Nevada on March 21, 2014.

We were initially

incorporated to offer users with up-to-date information on digital currencies.

July 22, 2015, we filed an amendment to its Articles of Incorporation with the Nevada Secretary of State to change our name from

Crypto-Services, Inc.

to Fortune Valley Treasures, Inc.

December 14, 2016, we entered into a sale and purchase agreement (the “Original Agreement”) with DaXingHuaShang Investment

Group Limited, a company incorporated under the laws of the Republic of Seychelles (“DIGLS”), and its shareholders.

DIGLS is engaged in the business of retail and wholesale of imported wine products in China and owns all of the equity capital

of DaXingHuaShang Investment (Hong Kong) Limited (“DILHK”), Qianhai DaXingHuaShang Investment (Shenzhen) Co., Ltd.

(“QHDX”) and Dongguan City France Vin Tout Ltd.

(“FVTL”).

Pursuant to the Original Agreement, we agreed

to issue 300,000,000 shares of our common stock to the stockholders of DIGLS in exchange for 100% of the shares of DIGLS.

11, 2018, we entered into a termination agreement with DIGLS, terminating the Original Agreement and all transactions contemplated

under the Original Agreement.

On April 6, 2018, we entered into a share exchange agreement by and among DIGLS, and each of the

shareholders of DIGLS, pursuant to which we issued 300,000,000 shares of common stock in exchange for 100% of the issued shares

The share exchange closed on April 19, 2018 and DIGLS became our wholly-owned subsidiary.

the year 2020, in order to increase our wine market share, FVTL set up two subsidiaries, namely “Dongguan City Fu

La Tu Trade Ltd (FLTT)”

and “Dongguan City Fu Xin Gu Trade Ltd (FXGT)”

in Dongguan City.

March 1, 2019, we entered into a sale and purchase 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, in exchange for 100 shares of our common stock and closed

the acquisition of JJGS on March 1, 2019.

After the closing, JJGS became the Company’s wholly owned subsidiary.

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 our wine products.

June 22, 2020, we 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 China, in exchange for 4,862,681 shares of

our common stock and closed the acquisition of Xixingdao on August 31, 2020.

After the closing, Xixingdao became the Company’s

The shares were issued to the original owners of Xixingdao on December 28, 2020.

Xixingdao’s principal business

is drinking water distribution and delivery in Dongguan City, Guangdong Province.

To increase its market share,

Xixingdao set up eight subsidiaries primarily operating wholesale distribution of our water products to serve the local

following diagram illustrates our corporate structure as of the date of this Annual Report.

was incorporated under the laws of the State of Nevada on March 21, 2014 under the name Crypto-Services, Inc.

The company was originally

formed with the purpose of providing users with up-to-date information on digital currencies.

On September 22, 2016, the company amended

its articles of incorporation to change its name from “Crypto-Services, Inc.” to “Fortune Valley Treasures, Inc.”

April 11, 2018, FVTI entered into a share exchange agreement with DaXingHuaShang Investment Group Limited, a company incorporated under

the laws of the Republic of Seychelles (“DIGLS”), and its shareholders, Yumin Lin, Gaosheng Group Co., Ltd.

and China Kaipeng

Group Co., Ltd, pursuant to which FVTI issued 15,000,000 shares of common stock (split-adjusted) to the shareholders of DIGLS in exchange

for 100% of the issued shares of DIGLS (the “Share Exchange”).

Upon the consummation of the Share Exchange on April 19, 2018,

DIGLS became our wholly owned subsidiary.

is a holding company and owns all of the equity of DaXingHuaShang Investment (Hong Kong) Limited (“DILHK”), a private company

limited by shares formed under the laws of Hong Kong.

DILHK owns 100% of the equity of Qianhai DaXingHuaShang Investment (Shenzhen) Co.,

(“QHDX”), a wholly foreign owned enterprise organized under the laws of China, which, in turn, owns 100% of the equity

of FVT Supply Chain, an operating subsidiary.

March 1, 2019, FVTI entered into a share purchase agreement to acquire 100% of the shares of Jiujiu Group Stock Co., Ltd.

a company incorporated under the laws of the Republic of Seychelles, with the shareholders of JJGS in exchange for 5 shares of our common

stock (split-adjusted).

Following the closing of the acquisition on March 1, 2019, JJGS became our wholly owned subsidiary.

all of the equity of Jiujiu (HK) Industry Limited (“JJHK”), a Hong Kong company limited by shares.

JJHK owns 100% of the

equity of Jiujiu (Shenzhen) Industry Co., Ltd.

(“JJSZ”), a PRC operating company engaged in retail and wholesale distribution

of alcohol beverage products.

July 13, 2019, FVTI and QHDX entered into an equity interest transfer agreement, which was amended on September 12, 2019, with the controlling

shareholder of Yunnan Makaweng Wine & Spirits Co., Ltd.

(“Makaweng”), a PRC limited liability company engaged in the

business of distribution of wine and beer.

Pursuant to the agreement, QHDX would purchase 51% of Makaweng’s equity interest from

the controlling shareholder of Makaweng in exchange for shares of FVTI common stock.

On August 28, 2019, the registration of the transfer

of the 51% of equity interest of Makaweng to QHDX with local government agencies was completed.

On December 3, 2020, QHDX and the controlling

shareholder of Makaweng entered into a share transfer agreement, pursuant to which the parties agreed that QHDX would transfer all of

the 51% of Makaweng equity interest back to the controlling shareholder.

Upon the effectiveness of the agreement, QHDX no longer owned

an equity interest in Makaweng.

FVTI has not issued any shares to the controlling shareholder and the control of Makaweng has never been

transferred to QHDX.

However, the registration of the transfer of the 51% interest by QHDX to the controlling shareholder has not been

completed as of the date hereof.

June 22, 2020, FVTI and QHDX entered into a share purchase agreement with Dongguan Xixingdao Technology Co., Ltd.

(“Xixingdao”),

a PRC company, and the two former shareholders of Xixingdao, who collectively owned all of the equity interest in Xixingdao.

is engaged in the business of drinking water distribution and delivery in Dongguan City, Guangdong Province.

Pursuant to the agreement,

QHDX purchased 90% of Xixingdao’s equity interest from the sellers in exchange for 243,135 shares of FVTI’s common stock

(split-adjusted).

We obtained the control of Xixingdao and Xixingdao became our subsidiary on August 31, 2020.

The shares were issued

on December 28, 2020.

September 28, 2021, FVTI effected a one-for-twenty reverse stock split (referred to herein as “reverse split”) of the issued

and outstanding shares of common stock, $0.001 par value, by filing a Certificate of Change with the Secretary of State of the State

The reverse split became effective with FINRA and in the OTC marketplace on October 21, 2021 when the common stock began trading

on a split-adjusted basis.

Prior to the reverse split, FVTI was authorized to issue 3,000,000,000 shares of common stock and there were

313,098,220 shares of common stock outstanding.

As a result of the reverse split, FVTI is authorized to issue 150,000,000 shares of common

stock, and there are currently 15,655,038 shares of common stock outstanding.

Unless otherwise stated, all shares and per share amounts

in this report have been retroactively adjusted to give effect to this reverse stock split.

chart below depicts the corporate structure of the Company as of the date of this report.

Plan and Recent Development

(COVID-19) Update

December 2019, a novel strain of coronavirus (COVID-19) was

first identified in China and has since spread rapidly globally.

The outbreak of COVID-19 has resulted in quarantines,

travel restrictions, and the temporary closure of stores and business facilities globally.

In March 2020, the World Health

Organization declared the COVID-19 a pandemic.

In 2020, COVID-19 had a material impact on our business, financial condition,

and results of operations.

December 2019, a novel strain of coronavirus (COVID-19) was first identified in China and has since spread rapidly globally.

of COVID-19 has resulted in quarantines, travel restrictions, and the temporary closure of stores and business facilities globally.

March 2020, the World Health Organization declared the COVID-19 a pandemic.

In 2020, COVID-19 had a material impact on our business,

financial condition, and results of operations.

including, but not limited to, the following:

temporally closed our offices in early 2020, as required by relevant PRC regulatory authorities.

Our offices were

subsequently reopened pursuant to local guidelines.

In 2020, the pandemic caused disruptions in our operations

and supply chains, which resulted in delays in the shipment of products to certain of our customers.

large number of our employees were in mandatory self-quarantine and the entire business operations of the Company halted

for over a month from February to March 2020.

Our offices were subsequently reopened

pursuant to local guidelines.

In 2020, the pandemic caused disruptions in our operations and supply chains, which resulted in delays

in the shipment of products to certain of our customers.

large number of our employees were in mandatory self-quarantine and the entire business operations of the Company halted for over

a month from February to March 2020.

customers were negatively impacted by the pandemic, which reduced the demand of our products.

As a result, our revenue and

income were negatively impacted in the first half of 2020.

the second quarter of 2020, the COVID outbreak in China

has gradually been controlled.

Our business has also returned to normal operations, although management assessed that our results

of operations had been negatively impacted for the year.

COVID-19 could adversely affect our business and results of operations

in 2021 if any COVID resurgence causes significant disruptions to our operations or the business of our supply chain, logistics

and service providers.

We cannot predict the severity and duration of the impact from such resurgence,

If any new outbreak of COVID-19 is not effectively and timely controlled, or if government responses to outbreaks

or potential outbreaks are severe or long-lasting, our business operations and financial condition may be materially and adversely

affected as a result of the deteriorating market outlook, the slowdown in regional and national economic growth, weakened liquidity

and financial condition of our customers or other factors that we cannot foresee.

Any of these factors and other factors beyond

our control could have an adverse effect on the overall business environment, cause uncertainties in the regions where we conduct

business, and could materially and adversely impact our business, financial condition and results of operations.

business plan is to extend our market share through acquiring quality businesses in the food and beverage industries, in

order to increase our customer base and supply channels, as well as to acquire more skilled employees and business connections

in the industries.

We plan to further develop our online marketing platform and internal operation management system by

engaging an external IT company during 2021.

In the past year, we successfully acquired Xixingdao, a drinking water distribution

While we terminated proposed acquisitions of two target companies as a result of their inability to meet our performance

requirements, as disclosed below, we are in the process of completing the acquisition of Valley Holdings, a food wholesale and

food additives business.

We expect to continue to explore new opportunities to acquire additional quality and compatible businesses

in our industries.

As a result, our revenue and income

were negatively impacted in the first half of 2020.

the second quarter of 2020, the COVID outbreak in China has gradually been controlled.

Our business has also returned to normal operations,

although management assessed that our results of operations had been negatively impacted for the 2020 fiscal year.

COVID-19 could

adversely affect our business and results of operations in 2022 if any COVID resurgence causes significant disruptions to our

operations or the business of our supply chain, logistics and service providers.

We cannot predict the severity and duration of the impact

from such resurgence, if any.

If any new outbreak of COVID-19 is not effectively and timely controlled, or if government responses to

outbreaks or potential outbreaks are severe or long-lasting, our business operations and financial condition may be materially and adversely

affected as a result of the deteriorating market outlook, the slowdown in regional and national economic growth, weakened liquidity and

financial condition of our customers or other factors that we cannot foresee.

Any of these factors and other factors beyond our control

could have an adverse effect on the overall business environment, cause uncertainties in the regions where we conduct business, and could

materially and adversely impact our business, financial condition and results of operations.

Holdings Acquisition

business plan is to extend our market share through acquiring quality businesses in the food and beverage industries, in order to increase

our customer base and supply channels, as well as to acquire more skilled employees and business connections in the industries.

to further develop our online marketing platform and internal operation management system by engaging an external IT company during 2021.

In the past year, we successfully acquired Xixingdao, a drinking water distribution business.

We expect to continue to explore new opportunities

to acquire additional quality and compatible businesses in our industries.

Our management believes that successful acquisitions will

bring synergies to our business and enhance our shareholders’ value.

consider the following factors when evaluating quality acquisition targets:

(i) costs involved in an acquisition;

(ii) financial

performance of the target;

(ii) financial performance

of the target;

(iii) the reputation of the target in its industry;

(iv) the target’s existing customer base;

(v) the target’s supplier network;

(vi) the expertise and experience of the target’s management and employees;

(vii) the inventory condition of the target.

management believes that successful acquisitions will bring synergies to our business and enhance our shareholders’

Acquisition and Termination

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”), a PRC limited liability company engaged in the business of distribution of wine and

Pursuant to the Makaweng Agreement, QHDX purchased 51% of Makaweng’s equity interest from Xingwen Wang in exchange

for shares of our common stock (“Makaweng Issuable Shares”).

On August 28, 2019, the registration of transferring

the 51% of equity interest of Makaweng to QHDX with local government authorities was completed.

December 3, 2020, QHDX and Xingwen Wang, an original shareholder of Makaweng, signed a share transfer agreement (the “Share

Transfer Agreement”) pursuant to which the parties agreed that QHDX would transfer all of the 51% of equity interest of

Makaweng it held to Mr.

Upon the effectiveness of the Share Transfer Agreement, QHDX no longer owned an equity interest

As of the date of the

Share Transfer Agreement, the Company has not issued any common shares to Xingwen Wang and the control of Makaweng has

never been transferred to QHDX.

Acquisition and Termination

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.

to the BTF Agreement, QHDX agreed to purchase 80% of BTF’s equity interest (the “BTF Equity Transfer”) from

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”).

February 28, 2021, FVTI, QHDX and the Original Shareholders of BTF signed a termination agreement pursuant to which the parties

mutually agreed to terminate the Agreement.

The BTF Agreement was terminated effective as of 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

Holdings Acquisition

March 16, 2020, the Company, along with JJGS, entered into an equity interest transfer agreement (the “Valley Holdings Original

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.

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).

January 6, 2021, the parties entered into an agreement to terminate

the Valley Holdings Original Agreement.

Under the termination agreement, there were no termination penalties incurred by FVTI

January 6, 2021, FVTI, along with its Hong Kong subsidiary, DILHK, entered into a new equity interest transfer agreement

(the “Valley Holdings Agreement”) with the Seller and Valley Holdings.

Pursuant to the agreement, DILHK

agreed to purchase 70% of Valley Holdings’

equity interest (the “Equity Transfer”) from the Seller in consideration

of shares of FVTI’s common stock (“Issuable Shares”) valued at $12 million (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).

According to the agreement, the total number of Issuable Shares

will be determined based on the average of the closing prices of FVTI’s common stock for the 30 business days preceding

the date of the Closing (as defined below).

closing of the Equity Transfer (the “Closing”) is intended to occur on or around April 30, 2021.

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 DILHK, (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 of all of the intellectual property related to the operations of Valley Holdings and its subsidiaries.

to the agreement, FVTI will issue the Issuable Shares to an escrow account for the beneficiary of the Seller within

30 business days after the Closing.

The Issuable Shares shall be released from the escrow account to the Seller within

30 days upon an independent registered accounting firm’s written confirmation that Valley Holdings’

audited net profit

is at least HK$3 million (approximately US$0.4 million) for the fiscal year ended December 31, 2020.

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 management members

(iv) the target’s existing customer base;

(v) the target’s

supplier network;

(vi) the expertise and experience of the target’s management and employees;

and (vii) the inventory condition

of the target.

January 6, 2021, we 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”), 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 agreement, we would purchase 70% of Valley

Holdings’ equity interest from the Valley Holdings Seller in consideration of shares of our common stock valued at $10.5 million

(subject to certain adjustments).

According to the agreement, the total number of issuable shares will be determined based on the average

of the closing prices of our common stock for the 30 business days preceding the date of the closing.

closing of the acquisition has not occurred as of the date of the report as a result of delays in satisfaction of the closing

The closing is subject to certain conditions, including but not limited to (a) completion of due diligence review of Valley

Holdings and its subsidiaries to our satisfaction, (b) completion of the audited consolidated financial statements of Valley Holdings

as provided in the agreement, (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 of all of the intellectual property related to the operations

of Valley Holdings and its subsidiaries.

The parties further agreed that Valley Holdings will not make any profit distributions

within two years after the execution of the Agreement.

DILHK or the Seller may terminate this Agreement

in writing in the event that any closing condition is not met before April 30, 2021.

As of the date of this report,

the closing of the Valley Holdings Equity Transfer has not occurred.

plan to diversify our existing product portfolio strategically, and thereby provide our customers with a wider range of choices

and broaden our existing customer base.

plan to continue to solidify our relationships with our existing suppliers as well as identifying new suppliers.

plan to strengthen our corporate image by increasing marketing and promotion efforts.

plan to attract, motivate and retain high-quality talent.

will continue to expand and explore additional services and products to enrich our one-stop services to our customers.

Business, Products and Product Distribution

sell a variety of wines, such as dry red wine, dry white wine, rosé

wine, and sweet wine.

industry and Market

obtained the industry and market data used throughout industry publications and research, studies and other similar third-party sources,

as well as our estimates based on such data.

All of the market data and estimates used in this report involve a number of

assumptions and limitations, and you are cautioned not to give undue weight to such data and estimates.

We believe that the data from

these third-party sources is reliable;

however, we have not independently verified the data, besides our business and the industry which

we are operating is subject to a high degree of risk and uncertainties.

in food and beverage market in China

to China Economic Vision, a research and consulting company with the research coverage mainly in China, the growth rate of food and beverage

market in China reached 6.28% in 2018 and then declined to 4.40% in 2019.

The decline was mainly due to the drop in demand of liquor

products and dairy products.

In 2020, the COVID-19 pandemic led to a sharp decrease in the growth rate of the industry, the market

reached RMB4,590.2 billion, and a year-over-year (“YoY”) growth of 0.86%.

The decrease in the growth rate was mainly due

to the quarantine measures implemented in some areas, store and office closures, lockdown and social gatherings restrictions to control

the COVID-19 outbreaks in China.

and Beverage Market Scale in China from 2016 to 2020

China Economic Vision

Economic Vision estimated that, with the orderly recovery of the overall economic and the upgrading of product consumption structure,

the food and beverage industry will develop favorably in the future, but the growth rate will slow down.

The food and beverage market

in China is expected to reach RMB5608.8 billion by 2025, and a YoY growth of 3.45%.

and Beverage Market Forecast in China from 2021 to 2025

China Economic Vision

of alcohol beverage market in China

In 2018, the growth rate of alcohol beverage market

in China reached 10.68% driven by multiple factors, such as industrial restructure adjustment, consumption upgrading,

and the rapidly growth of the Baijiu (Chinese alcohol beverage) industry.

In 2019, the growth rate dropped to 2.21%

because the market returned to rationality which caused the decrease of Baijiu sales;

the downtrend of domestic wine production

and the reduction of imported wines.

2020, the alcohol beverage products market scale in China reached RMB 859.6 billion, and the YoY negative growth of 0.22%.

It was mainly

due to the city lockdown order and the prohibition of social gatherings.

Beverage Products Market in China from 2016 to 2020

China Economic Vision

Economic Vision estimated that, although the pandemic has brought uncertainties to the alcohol beverage products market, the trend of

raising quality standard of production for the alcohol beverage products market has never changed.

Alcohol consumption has gradually

changed from basic consumption to personalized and diversified high-quality consumption.

With the orderly recovery of the consumption

in China, the market will continue to develop steadily in the future.

The alcohol beverage products market in China is expected to reach

997.8 billion in RMB by 2025, and a YoY growth of 2.24%.

Beverage Products Market Forecast in China from 2021 to 2025

of bottled water market in China

bottled water industry in China has a vigorous development in recent years.

More household users have changed their drinking water habits

and demanded for high-quality drinking water, especially natural mineral water, which has been the major driver for the growth in bottled

water products (with natural mineral).

The bottled water market in China reached RMB107.8 billion in 2019, with a YoY growth of 20.58%.

to China Economic Vision, a large number of companies, which were the main consumers of the bottled water market, stopped the operation

and production and reduced their use of bottled water the during the COVID-19 pandemic in 2020.

In addition, to avoid the risk of spreading

the COVID-19, people are recommended to use the bottled water only without returning buckets and promoted to use one-time disposable

packaged water.

These measures caused the decline in the demand for bottled water.

The bottled water market in China reached RMB113.6

billion in 2020, and the YoY growth of 5.38%.

Water Market in China from 2016 to 2020

China Economic Vision

with bottled water, disposable medium and large packaged water has better quality and consumption experience, and its cost is lower than

the bottled water, which is suitable for the household consumption.

Based on China Economic Vision’s estimate, even with

the gradual replacement of disposable medium and large packaged water, it will have a limited impact on the bottled water market

in the short term, but the growth rate of bottled water market will slow down in the long run.

The bottled water market in China

is expected to reach RMB223.7 billion by 2025, and the YoY growth was 14.13%.

Water Market Forecast in China from 2021 to 2025

China Economic Vision

sell a variety of wines, such as dry red wine, dry white wine, rosé wine, and sweet wine.

Currently we sell about 40 different

1 unchanged sentence

sell a variety of water, peanut oil, soybean oil and blended oil.

Currently we sell about 30 different brands of water and 3

different brands of oil.

Currently we sell about 30 different brands of water and 3 different

brands of oil.

have put significant efforts in developing and promoting our brand name in different regions of China.

Our products are mainly

sold to retailers, such as wine and water retail stores, convenience stores and supermarkets.

The selling price varies

by quantities of products each retailer orders from us.

have cultivated business relationships and achieved recognitions with different organizations over the years, which have improved

our business and management efficacy.

Specifically, we have been collaborating with Shenzhen Institute of Tsinghua University

since 2011, who has been helping us develop an innovative management model, operating model and franchising model.

been a member of Guangdong Provincial Liquor Industry Association since 2011.

Our products are mainly sold to

retailers, such as wine and water retail stores, convenience stores and supermarkets.

The selling price varies by quantities of products

each retailer orders from us.

have cultivated business relationships and achieved recognitions with different organizations over the years, which have improved our

business and management efficacy.

Specifically, we have been collaborating with Shenzhen Institute of Tsinghua University since 2011,

who has been helping us develop an innovative management model, operating model and franchising model.

We have been a member of Guangdong

Provincial Liquor Industry Association since 2011.

wine product operations are based in Humen Town, Dongguan City.

We lease a six-floor building with a total floor

area of 1,200 square meters.

Our wine retail store is located on the first floor which we use exclusively as

a retail store and for sample products display.

We use the remaining five floors as the Company’s conference room, offices

We lease a six-floor building with a total floor area of 1,200 square

Our wine retail store is located on the first floor which we use exclusively as a retail store and for sample products display.

We use the remaining five floors as the Company’s conference room, offices and storage.

water and oil product management office is also located in Humen Town, Dongguan City.

We lease the building which has

over 1,300 square meters.

We lease the building which has over 1,300 square

It includes sales, customer service, warehouse, delivery and finance departments.

manages one office, seven wholesales stores and one warehouse.

We also maintain one registered office for the subsidiary

with lease term of three years.

As of December 31, 2020, the Company has total twelve separate operating lease agreements for

three office spaces, one warehouse and eight stores in PRC with remaining lease terms of from 21 months to 76 months.

have developed our WeChat applet “FVTI food safety & healthy supply platform”

(short name “Fu Gu Online”).

The office manages one office, seven wholesales

stores and one warehouse.

We also maintain one registered office for the subsidiary with lease term of three years.

As of December 31,

2021, the Company has total three office spaces, one warehouse and thirteen stores in PRC with remaining lease terms of from

21 months to 76 months.

have developed our WeChat applet “FVTI food safety & healthy supply platform” (short name “Fu Gu Online”).

Some of our agents and wholesalers have ordered from this platform.

purchase, distribute and sell a wide range of beverage and foods through our supply chain online platform and offline sales channels.

We also develop some of the water products we distribute.

We offer the following four categories of food and beverage products:

of brands offered

Alcohol beverage

Liquor/Spirits

Non-alcohol beverage

Packaged staple foods

and seasonings

Household products

purification system

Wine and Liquor Products

offer a variety of wine products including dry red wine, dry white wine, rose wine and sweet wine.

Our liquor products include imported

liquor and domestically produced spirits.

We currently sell over 30 different types of wine, liquor and spirits products.

launched our brand “Falantu Art Winery,” with the goal to cultivate a wine-centered food and art culture, advocate healthy

living, and bring romance to people’s lives.

Our supply chain brings together high-quality wines from most major French producing

regions and selected wine production countries.

We forge alliance relationship with vineyards at French Burgundy (Bourgogne), Bordeaux

(Bordeaux), Chile’s Central Valley, Spanish wineries and other high-quality wine makers.

To increase our market share, we have

set up multiple branches in Guangdong, China, to promote wine sale and wine culture to Chinese consumers.

Bottled Water and Soft Beverage Products

drinking water products we sell mainly include bottled water of different sizes.

The sources of our bottled water are from tap water

or extracted groundwater.

In addition to selling on our supply chain platform, these different brands of bottled water are available

at supermarkets, grocery stores, other E-commerce platforms, and through the manufacturer’s distributors.

currently sell 36 different brands of bottled water products.

In response to consumer preferences, our water products are packaged in

individual containers of difference sizes, ranging from small single serving bottles of 380 milliliter to 750 milliliters, to medium-sized

jugs of 1.5 to 5 liter and large 15 to 19 liter carboys.

Below are some of branded bottled water products that have generated large sales

volume on our supply chain platform.

Pre-package Foods

foods include various brands of edible oils, condiments and seasonings.

have selected to sell edible oil based on their quality and popularity among the customers

(b) Condiments

and seasonings

offer a variety of kitchen condiment products on the platform, and through multiple layers of screening, brands that are widely welcomed

by consumers in the Pearl River Delta region are selected.

Household drinking water purification products

sells a series drinking household water treatment systems and devices that improve water quality and healthy lifestyle.

whole house water purification systems and water filtration devices.

are continuously seeking new and suitable brands of products for sales to enrich our product varieties.

We have recently added several

new brands of wine and liquor products to our product portfolio.

We aim to offer more high-quality wine and liquor products for our customers.

Providing a wide variety of wine and liquor products to the customers will continue to be our alcohol beverage segment operational strategies.

Product Distribution / Supply Chain Operations

supply chain system manages the entire process of product procurement, warehousing, distribution, logistics and delivery.

digital management system, we can fully track our products from upstream suppliers to downstream end customers.

emphasize to provide products with high standard of food safety and quality, therefore we carefully select high quality products.

conduct market research and supplier information review to select manufacturers and products, and carry out our own and third parties

sample testing on their products to ensure the product with high quality and safety.

When we completed the selection process with satisfactory

results, we will sign a contact with the suppliers to purchase selected products from selected manufactures and seek to maintain a long-term

cooperation relationship to secure stable supply and quality control.

To maintain the standard of food safety and quality, we conduct

sample checking on the products on a regular basis and evaluate the suppliers’ performance annually.

mainly have two types of customers:

retailer customers and wholesale distributors.

For the year ended December 31, 2019, sales to one

customer accounted for 10% or more of our revenue and approximately 80% of our revenue were generated from that customer.

we had successfully expanded our customer base and launched more products.

As a result, none of our customers accounted for 10% or more

of our revenue.

We have generated income from a wider range of customers for the years ended December 31, 2021 and

recognized brand

believe that our brand image and reputation give us a distinct competitive advantage among the food and beverage companies in Guangdong

Province and the Pearl Delta Region.

Since the launch of our wine distribution business in 2011, we have demonstrated a strong brand

advantage in the food and beverage industry and become a well-recognized brand among consumers in the geographic areas in which we operate,

especially in Guangdong Province.

In recent years, our offline sales mainly in Dongguan City, and online sales have covered major online

sales channels.

With a greater brand influence and revenue growth, we are able to further strengthen our product procurement capacity.

Our growing business scale, increasingly diversified sales channels and reliable product supplies have further promoted our company’s

brand awareness and influence.

The strength of our brands facilitates the organic growth of customer traffic on our platform, enhances

buyer loyalty and attracts more sellers to our platform.

quality product portfolio

have built a diversified product portfolio spanning primarily from alcohol beverage and drinking water, to pre-packaged staple foods,

condiments, and household water purification devices and systems.

A diversified product mix enables us to enhance our company’s

sales volume and market influence.

We strive to create a one-stop shopping experience and become one of the first places for food shopping

for consumers.

independently manage the core links of the food and beverage industry supply chain and achieve product quality control through supplier

access, quality inspection and other measures.

Leveraging our information technology capability, we utilize our information management

platform to effectively control all links in the industry chain to achieve the full traceability of product quality.

product supply chain system

manage the entire process of product procurement, distribution, logistics, and delivery through our supply chain system.

Our supply chain

e-commerce platform is our central control hub that is facilitated by logistics management to ensure product supply and quality management

to reinforce safety and quality assurance.

We continuously strengthen cooperation with reputable suppliers to form a stable and long-term

relationship and optimize procurement costs while ensuring product quality.

On product source, our supply planning team, based on the

sales history and trend forecasts of various channels, analyzes and forecasts sales and supply, formulate procurement plans, and improve

procurement efficiency.

We also formulate a complete product quality control system to enhance product quality assurance.

Through continuous

optimization and management of supply planning, logistics management and quality assurance, we have improved product procurement efficiency

and order management capabilities while ensuring high product quality.

Multi-channel

marketing and sales model

have established a multi-channel marketing and sales model consisting of e-commerce supply chain platform, social media, primarily WeChat,

distributor network, key customer channels, product displays at our brick and mortar stores, and community promotions.

Our Fugu Online

platform not only identifies potential customers and market products and services to targeted groups based on data collected through

our information systems, it also serves as our O2O management platform, which can provide marketing services to traditional merchants.

Our online and offline bulk sales through our agents and independent distributors help enhance the brand awareness of our products among

end customers and collect feedback for us to improve our product selection and management.

Our key customer and large enterprise sales

channels, online and offline promotions, and community activities all offer loyalty rewards to key customers.

Our brand reputation and

cross-selling across our platform further strengthen our ability to retain customers and drive revenue growth.

in class customer services management

a food industry enterprise, we have been focused on improving the consumer shopping experience since our establishment, have built a

customer-oriented corporate culture and best in class customer service capabilities.

Combining with our own brand positioning, we promote

a corporate culture with a customer first mindset with the highest quality service as our purpose.

We are committed to improving customer

satisfaction and loyalty.

We improve the pre-sales and after-sales service system to enhance consumer stickiness.

Further, we have established

a membership system to promote customer loyalty.

We are able to conduct a more in-depth analysis of customer needs and historical buying

habits through the purchase tracking, which provides us with valuable information related to future product procurement and marketing

our product portfolio and provide our customers with a wider range of choices

believe continuous expansion of our existing product portfolio and accommodation of evolving demand and customers’ preferences

will distinguish us from our competitors, while providing our customers with a wider range of choices will facilitate the broadening

of our customer base as well as reinforcing our market presence in wine industry.

to solidify our relationships with supply chain participants

intend to continue solidifying our relationship with our existing suppliers as well as identifying new suppliers.

We intend to increase

our market share by diversifying our existing product portfolio and procuring products which we anticipate demand.

We believe that our

strategic diversification will further complement our existing product portfolio, enhance our product mix and strengthen our market position

in the food and beverage industry in China.

our corporate image by increasing marketing and promotion efforts.

believe our brands and reputation are critical to our business development.

To further enhance customer awareness of our brands, we

will continue our effective and targeted marketing efforts.

This may include (i) placing mass media commercials, (ii) advertising in

newspapers, magazines, the internet, billboards and banners, and (iii) sponsoring programs.

We also utilize innovative multimedia

promotional channels such as social media and mobile phone applications.

motivate and retain high-quality talent.

customer-oriented business philosophy emphases on delivering excellent customer service.

We believe maintaining a positive working environment

will encourage better staff relations and talent retention, as well as enhancing the quality of our customer service by motivating staff.

In order to foster a work environment that attracts and inspires our people to achieve excellent performance, we seek to motivate and

retain valuable and talented staff by aligning compensation and remuneration with performance.

As part of our continuing efforts to enhance

our customer service, we will also continue to enhance our employee training programs by developing our orientation program, coaching,

on-the-job training to enhance individual staff skills and knowledge of sales and marketing techniques, customer services, product information,

quality control and industry knowledge.

opportunities to acquire quality companies in the food and beverage industry for further development of our company.

of our key corporate strategies has been to expand our market share through acquiring quality businesses in the food and beverage industries,

in order to increase our customer base and supply channels, as well as to acquire more skilled employees and business connections in

the industries.

We have previously successfully acquired Xixingdao, a drinking water distribution and delivery company.

continue to explore new opportunities to acquire additional quality and compatible businesses in our industries.

Our management believes

that successful acquisitions will bring synergies to our business and increase long term value to our shareholders.

and explore additional services and products to enrich our one-stop services to our customers.

will continue to strive to provide our customers with the convenience of our one-stop shopping experience and a wide variety of unique,

quality products at reasonable and competitive prices.

We believe this is one of the keys to differentiating ourselves from our competitors

in the food and beverage industry in China.

To further strengthen our services, we will continue to refine our product related services

to our customers by enhancing our product consultation services, sourcing services, delivery services, and post-sale evaluation with

improved customer service and service options.

With our continued expansion and dedication to exploring additional product related services

to amplify our one-stop services to our customers, we believe we can strengthen and maintain our position in the food and beverage industry

Required from the PRC Authorities to Operate and Securities Listing and Issuance

required for the Operations of Our PRC Subsidiaries

PRC subsidiaries are required to obtain certain permits and licenses from the PRC government agencies to operate our business in China,

(a) business licenses, (b) food business licenses, and (c) Electronic Data Interchange License (“EDI”) license.

conduct our business in China through our PRC subsidiaries.

All of our PRC subsidiaries are required to obtain, and have obtained, the

required business licenses from the State Administration for Market Regulation (“SAMR”).

The PRC Food Safety Law mandates

a licensing system for food production and trade and requires vendors engaging in food production or sale or catering services to obtain

a food business license in accordance with the applicable laws.

Among our PRC subsidiaries, the following thirteen companies are required

to obtain food business licenses and have received such licenses pursuant to the PRC Food Safety Law:

Dongguan City FVT Supply Chain

Technology Co., Ltd.

(“FVTL or FVT Supply Chain”), Dongguan Xixingdao Technology Co., Ltd.

(“Xixingdao”), Dongguan

City Fu La Tu Trade Co., Ltd.

(“FLTT”), Dongguan City Fu Xin Gu Trade Co., Ltd.

(“FXGT”), Dongguan City Fu Lai

Food Co., Ltd.

(“FLFL”), Dongguan City Fu Xin Technology Co., Ltd.

(“FXTL”), Dongguan City Fu Xiang Technology

Co., Ltd (“FGTL”), Dongguan City Fu Ji Food & Beverage Co., Ltd.

(“FJFL”), Dongguan City Fu Yi Beverage Co.,

(“FYBL”), Dongguan City Fu Jing Technology Co., Ltd.

(“FJTL”), Dongguan City Fu Sheng Drinking Water Co.

(“FSWL”), Dongguan City Fu Jia Drinking Water Co., Ltd.

(“FJWL”), and Shenzhen Fu Jin Trading Technology

Therefore, these thirteen subsidiaries have the required government permits to engage in food purchase

and sale activities.

However, a food business license is not required for the sale of edible agricultural products and prepacked food.

Companies engaged in the sale of prepacked food must report to the food safety regulatory agencies of the local government for recordation.

Four of our subsidiaries, Dongguan City Fu Guan Healthy Industry Technology Co., Ltd.

(“FGHL”), Dongguan City Fu Xi Drinking

Water Co., Ltd.

(“FXWL”), Dongguan City Fu Li Trading Co., Ltd.

(“FLTL”) and Guangdong Fu Gu Supply Chain Group

(“FGGC” or “FG Supply Chain”), are subject to such reporting requirement and are in the process of

completing the recordation procedure.

Guangdong provincial government has not issued detailed implementation rules, and as such, changes

in rules and regulations may impose additional requirements for our subsidiaries in China.

relevant PRC Telecommunications Regulations require a telecommunication service provider in China to obtain an operating license from

the Ministry of Industry and Information Technology, or MIIT, or its provincial counterparts, prior to commencement of operations.

subsidiary, FVT Supply Chain, engages in food, beverage and related product purchases and sales via its online platform.

As a provider

of online data processing and transaction processing services, FVT Supply Chain is required to obtain an Electronic Data Interchange

(EDI) license and has obtained the EDI license.

The relevant PRC regulations, including the Classification Catalogue of Telecommunications

Services, are still evolving, and there have been limited guidance and interpretation with respect to the scope of various types of telecommunication

We may be subject to additional license requirements if we further expand our online operations and services.

addition, on November 14, 2021, the CAC published the Regulations of Internet Data Security Management (Draft for Comments) (the “Internet

Data Security Regulations”), which further regulate the internet data processing activities and emphasize the supervision and management

of network data security, and further stipulate the obligations of internet platform operators, such as to establish a system for disclosure

of platform rules, privacy policies and algorithmic strategies related to data.

The draft regulations require data processors to (i)

adopt immediate remediation measures when finding that network products and services they use or provide have security defects and vulnerabilities,

or threaten national security or endanger public interest, and (ii) follow a series of detailed requirements with respect to processing

of personal information, management of important data and proposed overseas transfer of data.

As of the date of this report,

the draft regulations have not been adopted and the final provisions are subject to changes.

If the above proposed regulations are adopted

as proposed, based on our initial evaluation, while we have implemented some of the data security measures, we would not be in full compliance

with the new draft regulations.

We are also still evaluating any additional necessary actions we should take pursuant to the proposed

regulations to satisfy the personal information protection and internet data security regulatory requirements.

Failure to comply with

the effective cybersecurity, data privacy and internet data security regulatory requirements in a timely manner may subject us to government

enforcement actions and investigations, fines, penalties, suspension or disruption of our operations, among other things.

December 28, 2021, the CAC, NDRC, and several other agencies jointly issued the Cybersecurity Review Measures, or the Measures,

which took effect on February 15, 2022 and replaced the previously issued Revised Measures for Cybersecurity Review.

Under the Measures, an “online platform operator” in possession of personal data of more than one million users must apply

for a cybersecurity review if it intends to list its securities on a foreign stock exchange.

The operators of critical information infrastructure

purchasing network products and services, and the online platform operators (together with the operators of critical information infrastructure,

the “Operators”) carrying out data processing activities that affect or may affect national security, shall conduct a cybersecurity

review, and any online platform operator who controls more than one million users’ personal information must go through a cybersecurity

review by the cybersecurity review office if it seeks to be listed in a foreign country.

Pursuant to the Measures, we don’t believe

we will be subject to the cybersecurity review by the CAC, given that (i) we possess personal information of a relatively small number

of users in our business operations as of the date of this report, significantly less than the one million user threshold set

for a data processing operator applying for listing on a foreign exchange that is required to pass such cybersecurity review;

data processed in our business does not have a bearing on national security and thus shall not be classified as core or important data

by the authorities.

We don’t believe that we are an Operator within the meaning of the Measures, nor do we control more than one

million users’ personal information, and as such, we should not be required to apply for a cybersecurity review under the Measures.

However, in view of the fact that the Measures was released recently and there is a general lack of guidance and substantial uncertainties

exist with respect to their interpretation and implementation.

For example, there is still no clear definition of “online platform

operator.” Whether the data processing activities carried out by traditional enterprises (such as food, medicine, automobile and

other production enterprises) are subject to such review and the scope of the review remain to be further clarified by the regulatory

authorities in the subsequent implementation process.

regard to the current effective data security management regulations, we don’t believe that we are required to conduct data security

review for listing overseas.

However, according to the Regulations on Network Data Security Management (Draft for Comment), as an overseas

listed company, we will be required to conduct an annual data security review and to comply with the relevant reporting obligations.

We have been closely monitoring the development in the regulatory landscape in China, particularly regarding the requirement of approvals,

including on a retrospective basis, from the CSRC, the CAC or other PRC authorities with respect to this offering, as well as regarding

any annual data security review or other procedures that may be imposed on us.

If any approval, review or other procedure is in fact

required, we cannot assure you that we will be able to obtain such approval or complete such review or other procedure timely or at all.

For any approval that we may be able to obtain, it could nevertheless be revoked and the terms of its issuance may impose restrictions

on our operations and offerings relating to our securities.

The regulatory requirements with respect to cybersecurity and data privacy

are constantly evolving and can be subject to varying interpretations, and significant changes, resulting in uncertainties about the

scope of our responsibilities in that regard.

Failure to comply with the cybersecurity and data privacy requirements in a timely manner,

or at all, may subject us to government enforcement actions and investigations, fines, penalties, suspension or disruption of our operations,

among other things.

See “Risk Factor — The Chinese government may intervene or influence the operations of our PRC subsidiaries

and exercise significant oversight and discretion over the conduct of their business and may intervene in or influence their operations

at any time, which could result in a material change in operations of our PRC subsidiaries and/or the value of our common stock”;“Risk

Factor — Recent regulatory developments in China, including greater oversight and control by the CAC over data security, particularly

for companies seeking to list on a foreign exchange, may subject us to additional regulatory review or otherwise restrict our ability

to raise capitals outside China;

and any actions by the Chinese government to exert more oversight and control over overseas securities

offerings could significantly limit or completely hinder our ability to offer or continue to offer securities to investors and cause

the value of such securities to significantly decline or be worthless.”

Required to Issue Securities

are subject to PRC rules and regulations relating to overseas listing and securities offering, and a substantial extension of the PRC

government’s oversight over our business operations or overseas listings may hinder our ability to offer or continue to offer our

Based on PRC laws and regulations effective as of the date of this report and subject to different interpretations

of these laws and regulations that may be adopted by PRC authorities, we believe that, as of the date of this report, we or

our PRC subsidiaries are not required to obtain any permission from the CSRC, the CAC, or any other PRC authority in connection with

this offering.

As a result, we have not submitted any application to the CSRC, the CAC or other PRC authorities for the approval of this

offering or the Nasdaq listing.

As of the date of this report, we and our PRC subsidiaries have not received any inquiry,

notice, warning or objection in relation to this offering or Nasdaq listing from the CSRC, the CAC or any other PRC authorities.

August 8, 2006, six PRC regulatory agencies, including the Ministry of Commerce, the State-owned Assets Supervision and Administration

Commission, the State Administration for Taxation, the State Administration for Industry and Commerce, CSRC and the State Administration

for Foreign Exchange (“SAFE”), jointly issued the Regulations on Mergers and Acquisitions of Domestic Enterprises by Foreign

Investors (the “M&A Rule”), effective on September 8, 2006 and amended on June 22, 2009.

The M&A Rule requires that

an offshore special purpose vehicle (“SPV”) formed for listing purposes and controlled directly or indirectly by Chinese

companies or individuals shall obtain the approval of the CSRC prior to the listing and trading of such SPV’s securities on an

overseas stock exchange.

On September 21, 2006, the CSRC published procedures specifying documents and materials required to be submitted

to it by an SPV seeking CSRC approval of overseas listings.

However, the provisions of the M&A Rule remain ambiguous as to the scope

and applicability of the CSRC approval requirement.

The CSRC has not issued any definitive rule or interpretations.

Based on the current

PRC law, rules and regulations, our Chinese legal counsel, Grandall Law Firm, is of the opinion that the M&A Rule and related regulations

do not require the Company or PRC subsidiaries to obtain prior approval from CSRC for the listing and trading of our shares on an overseas

securities market, given that our wholly foreign-owned enterprise subsidiaries were established by direct investment, rather than by

a merger with or an acquisition of any PRC domestic companies as defined under the M&A Rule.

However, there remains uncertainty as

to how the M&A Rules will be interpreted or implemented, and the opinions of our PRC counsel are subject to any new laws, rules and

regulations or detailed implementations and interpretations in any form relating to the M&A Rules.

We cannot assure you that the

relevant Chinese government agencies, including the CSRC, will reach the same conclusion.

July 6, 2021, the General Office of the Central Committee of the Communist Party of China and the General Office of the State Council

jointly issued the Opinions on Severely Cracking Down on Illegal Securities Activities According to Law, or the Opinions.

emphasize the need to strengthen the administration over illegal securities activities and the supervision over overseas listings by

Chinese companies.

Effective measures, such as promoting the construction of relevant regulatory systems, will be taken to address risks

and incidents of China-based companies that are listed overseas, cybersecurity issues, data privacy protection requirements and other

similar matters.

As of the date of this report, no official guidance or related implementation rules have been issued, and

our PRC counsel is of the opinion that this offering does not constitute illegal securities activities under the Opinions.

the Company has obtained all requisite licenses and operational permits and none of our permits has been denied.

Notwithstanding the

forgoing, there are still uncertainties as to how the Opinions will be interpreted and implemented by the relevant PRC governmental authorities.

addition, on December 28, 2021, the CAC, the National Development and Reform Commission (“NDRC”), and several other governmental

agencies jointly issued the Revised Measures for Cybersecurity Review, or the Revised Cybersecurity Measures, which took effect

on February 15, 2022.

Under the Revised Cybersecurity Measures, an “online platform operator” in possession of personal data

of more than one million users must apply for a cybersecurity review if it intends to list its securities on a foreign stock exchange.

The operators of critical information infrastructure purchasing network products and services, and the online platform operators (together

with the operators of critical information infrastructure, the “Operators”) carrying out data processing activities that

affect or may affect national security, shall conduct a cybersecurity review, and any online platform operator who controls more than

one million users’ personal information must go through a cybersecurity review by the cybersecurity review office if it seeks to

be listed in a foreign country.

December 24, 2021, the CSRC issued the Administrative Provisions of the State Council Regarding the Overseas Issuance and Listing of

Securities by Domestic Enterprises (the “Draft Administrative Provisions”) and the Measures for the Overseas Issuance of

Securities and Listing Record-Filings by Domestic Enterprises (Draft for Comments) (the “Draft Filing Measures”), collectively,

the Draft Overseas Listing Rules, which are currently published for public comments only.

The Draft Overseas Listing Rules require that

companies applying for overseas securities issuance, listing, and post-listing capital operations, including IPO, multi-listing, spin-off

listing, SPAC, refinancing, issuance for asset acquisitions, equity incentives, changes of control and certain other transactions, shall

be subject to statutory procedures, such as filing and information reporting requirement.

According to the Draft Overseas Listing Rules,

among other things, after making initial applications with overseas stock markets for offerings or listings, all China-based companies

shall file with the CSRC within three business days.

In addition, overseas offerings and listings may be prohibited for such China-based

companies when any of the following applies:

(a) if the securities offerings and listings are prohibited by applicable PRC laws and rules;

(b) if securities offerings and listings may constitute a threat to, or endanger national security as reviewed and determined by PRC

(d) if a PRC company or its controlling shareholders or de facto controllers have committed certain crimes, under investigation

for suspicion of major violations in the prior three years;

(e) if any directors, supervisors, or senior executives of applicants have

been subject to administrative punishments for severe violations, or are under investigations for crimes or major violations;

other circumstances as provided.

The Draft Administrative Provisions further stipulate that a fine between RMB 1 million and RMB 10 million

may be imposed if a company fails to fulfill the filing requirements with the CSRC or conducts an overseas offering or listing in violation

of the Draft Overseas Listing Rules.

In the case of severe violations, an order to suspend relevant businesses or halt operations for

rectification may be issued, and relevant business permits or operational license revoked.

issuance and listings subject to the Draft Overseas Listing Rules include direct and indirect issuance and listings.

Where an enterprise

whose principal business activities are conducted in PRC seeks to issue and list its shares in the name of an overseas enterprise based

on equity ownership, assets, income or other similar rights and interests of an PRC domestic enterprise, such activities are deemed an

indirect overseas issuance and listing (the “Indirect Overseas Issuance and Listing”) under the Draft Overseas Listing Rules.

Our PRC counsel has advised us that this offering and the proposed listing of our shares on Nasdaq Capital Market would be deemed an

Indirect Overseas Issuance and Listing under the Draft Overseas Listing Rules and will be required to complete the filing procedures

and submit the relevant information to CSRC after the Draft Overseas Listing Rules become effective.

As of the date hereof, the rules

have not become effective and we are not required to complete the filing procedures if we complete the offering and transferring the

trading of our securities on the Nasdaq before the rules take effect.

In addition, our PRC counsel advised us that, even if the filing

procedures are implemented, we would only submit the filing materials as provided by the rules and no CSRC approve is required under

Because we are relying on an opinion of counsel, there is uncertainty inherent in relying on an opinion of counsel in connection

with whether we are required to obtain permissions from a governmental agency that is required to approve of our operations and/or listings.

the CSRC requires that we obtain its approval prior to the completion of this offering, the offering would be delayed until we have obtained

CSRC approval, which may take several months.

There is also the possibility that we may not be able to obtain or maintain such approval

or that we inadvertently concluded that such approval was not required.

If prior CSRC approval was required while we inadvertently concluded

that such approval was not required or if applicable laws and regulations or the interpretation of such were modified to require us to

obtain the CSRC approval in the future, we may face regulatory actions or other sanctions from the CSRC or other Chinese regulatory authorities.

These authorities may impose fines and penalties upon our subsidiaries’ operations in China, limit our operating privileges in

China, delay or restrict the repatriation of the proceeds from this offering into China, or take other actions that could have a material

adverse effect upon our business, financial condition, results of operations, reputation and prospects, as well as the trading price

of our common stock.

The CSRC or other Chinese regulatory agencies may also take actions requiring us, or making it advisable for us,

to terminate this offering prior to closing.

Any failure of us to fully comply with new regulatory requirements may significantly limit

or completely hinder our ability to offer or continue to offer the common stock, causing significant disruption to our business operations,

severely damage our reputation, materially and adversely affect our financial condition and results of operations and cause the common

stock to significantly decline in value or become worthless.

See “Risk Factor — “China Securities Regulatory Commission

and other government agencies may exert more oversight and control over offerings that are conducted overseas and foreign investment

in China-based issuers, and we face uncertainty with respect to future actions by the PRC government that could significantly affect

our ability to offer or continue to offer securities to investors and cause the value of our securities to significantly decline or be

worthless.” “Risk Factor — The Chinese government may intervene or influence the operations of our PRC subsidiaries

and exercise significant oversight and discretion over the conduct of their business and may intervene in or influence their operations

at any time, which could result in a material change in operations of our PRC subsidiaries and/or the value of our common stock”;

“Risk Factor — Recent regulatory developments in China, including greater oversight and control by the CAC over data security,

may subject us to additional regulatory review, and any actions by the Chinese government to exert more oversight and control over foreign

investment in China-based issuers could significantly limit or completely hinder our ability to offer or continue to offer securities

to investors and cause the value of such securities to significantly decline or be worthless.”

is a country with both an ancient wine tradition and a new and an emerging wine-consuming market.

Wine production in China has

thousands of year of history.

Today, China is also an emerging wine-producing nation in its own right with brands such as Great

Wall, Changyu and Dynasty.

Wine production in China has thousands

of years of history.

Today, China is also an emerging wine-producing nation in its own right with brands such as Great Wall, Changyu

Local wines account for 80 percent of wine consumed in China.

According to The International Wine and

Spirit Record (the “IWSR”), China is one of the fastest-growing wine markets in the world, with rising personal incomes

driving an enhancement of tastes and consumption levels.

In 2017, the wine consumption per capita was only about 1.2 liters accounting

for less than 1/3 of the global total as well as 1/10 of the U.S.

Therefore, we believe there are great potential

for growth in the Chinese wine market.

still dominates the Chinese wine market with a share of 48 per cent according to

Euromonitor International.

The best sales in Chinese supermarkets

are imported wines from RMB60-180, or approximately $9.00 - $27.00 per bottle.

One major challenge is that Chinese consumers switch

from one brand to another rather quickly, exhibiting little brand loyalty.

According to The International Wine and Spirit Record (the

“IWSR”), China is one of the fastest-growing wine markets in the world, with rising personal incomes driving an enhancement

of tastes and consumption levels.

In 2017, the wine consumption per capita was only about 1.2 liters accounting for less than 1/3 of

the global total as well as 1/10 of the U.S.

Therefore, we believe there are great potential for growth in the Chinese wine

use a hybrid marketing model through our supply chain platform, social media (primarily WeChat), distributor network, key customer channels,

product displays at our physical stores, and community promotions.

promote direct sales to businesses and individual consumers on our e-commerce supply chain platform, “Fugu Online”.

Online platform identifies the customers ‘consumption habits and present relevant products to targeted customers through the information

Online is also served as our O2O management platform, which can provide marketing services to traditional merchants such as supermarkets,

retail stores, hotels and restaurants.

Fugu Online provides weekly sales flyers, highlight our products offering and special deals.

Fugu Online platform enable the users to become our suppliers which encourage suppliers initiatively to join us and enlarge our supplier

To ensure the safety and quality of food, we request the suppliers provide qualified certification for their products.

have our own supply chain system and quality control to verify the safety of product for our customers.

Through the operation of online

platform, we diversify the product type on our platform and strengthen the customers ‘confidence to our products.

also maintain a “Fugu Online” WeChat mini-program through which we include mobile coupons and customized offers based on

the user’s preferences.

The WeChat platform serves a wide variety of business types of different sizes, such as B2C and B2B companies,

in addition to individual consumers.

following showcases the programming interfaces of our Fugu Online WeChat mini-program:

launched our Fugu Online on WeChat in April 2021.

For the first five months from April to September 2021, we recorded 1,768 sales orders

through the Fugu Online platform with an average sales amount of RMB8,465 per order.

Although the Fugu Online platform is still being

developed, the first five months’ sales amount already indicated a high revenue growth potential of the Fugu Online platform.

make online or offline bulk sales through our agents and independent distributors.

Prior to the launch of our supply chain platform,

the majority of sales had been made through independent distributors.

We believe our distribution network is an important component of

our hybrid sales model because it utilizes the resources and personal connections among our independent distributors and their retail

Such a sales model helps to enhance the brand awareness of our products among end-customers and collect feedbacks to improve

our merchandise selection process and management method.

we have achieved a substantial portion of sales through key customer channels.

We have established long-term and stable cooperative relations

with certain large enterprises by carry out offline promotions, offline anniversary activities, and offer loyalty rewards to key customers.

We initiate promotions to expand our customer base and build brand awareness.

As we have multiple product lines, there are many opportunities

for cross-selling across our platform as we seek to introduce customers to other offerings.

We also believe our strong reputation is

a factor in retaining and attracting customers.

also seek to expand our sales into the international food supply chain markets and are in the process of establishing our online

store on the Amazon platform targeting the food supply and distribution markets outside of China.

We engaged a third-party

consultant to assist with marketing and sales strategies to further increase our sales.

In addition to other online sales channels,

we have also begun to promote our product sales on major e-commerce platforms in China, such as Tao.1688.com and

still dominates the Chinese wine market with a share of 48 per cent according to Euromonitor International.

The best sales in Chinese

supermarkets are imported wines from RMB60-180, or approximately $9.00 - $27.00 per bottle.

One major challenge is that Chinese consumers

switch from one brand to another rather quickly, exhibiting little brand loyalty.

Online sales particularly enable the consumers to source

and purchase budget wines.

Management believes that wineries will most benefit from growth in China will be those that demonstrate

patience, professional service while building brand awareness and a long term strategy to develop the market with their Chinese

Management believes that wineries will most benefit from growth in China will be those that demonstrate patience,

professional service while building brand awareness and a long-term strategy to develop the market with their Chinese partners.

our Company, there are two major competitors in our market, Aussino Liquor and ASC Fine Wines.

1 unchanged sentence

more recognized and well accepted by consumers in China.

operate our business in China under a legal regime consisting of the National People’s Congress, which is the country’s

highest legislative body;

and Beverage Supply Chains

compete with two types of food supply chain companies, including those carrying all-inclusive food products and those focusing on certain

categories of product offerings.

Some of our major competitors in supply chain industry are ShuHai Supply Chain Solutions, Wujiu.com,

Meicai.com, Kuailujinhuo and Shenzhen Farmgirl Supply Chain.

Supply Chain Solutions provides comprehensive food supply chain services for food enterprises and retail customers.

modern cooling logistics centers, food processing factories and other operation bases.

With its strengths in the areas of clean

vegetable production industry standardization, Shuhai is recognized by the industry and customers as a benchmark enterprise in the

food supply chain industry.

is a subsidiary of Beijing Wajiu E-Commerce Co., Ltd., a cross-border B2B trading website for beverages.

It operates a B2B platform

for foreign wineries and China domestic wine distribution channels based on an “overseas direct procurement + cross-border

supply chain + warehousing lo business is to connect the upstream global winery suppliers with the downstream Chinese and foreign

small and medium wholesalers and retailers.

is an F2B (farm-to-business) fresh produce supply chain company providing one-stop food ingredient procurement services to restaurants

throughout China.

Built on a self-serving model and a cooling logistics network, the company provides restaurants with an all-category

raw material and ingredient procurement service.

It shortens the circulation of agricultural products, reduces prices from the source

to the end user, lower the supply chain costs of merchants, and reduces the risk of farmers’ losses.

is a matching platform that provides catering merchants with the purchase service with regards to rice, noodles, grains, edible oils,

tableware, tissues and other commodities.

Kuailu cooperates with local warehousing companies to utilize their warehousing facilities.

The suppliers deliver merchandise to the front-end warehouse, and after sorting and loading the order, they cooperate with local logistics

or distribution service providers to deliver the orders to the restaurant.

in December 2014, Shenzhen Farmgirl Supply Chain is a nationwide agricultural B2B trading platform.

Mainly serving Shenzhen and

Guangzhou, its main products include vegetables, fruits, meat, frozen products, aquatic seafood, dry foods and seasoning

It h marketing teams, and cooperates with food production bases and large wholesale markets to ensure the quality of

the vegetables exported.

Flows, Dividends and Other Asset Transfers between the U.S.

Holding Company and Our Subsidiaries

may be transferred within our organization in the following manners:

(i) we may transfer funds to our PRC subsidiaries by way of capital

contributions or loans, through intermediate holding companies, such as our Hong Kong subsidiaries;

(ii) we or our intermediate holding

companies may provide loans to our PRC operating subsidiaries directly and vice versa ;

and (iii) our PRC subsidiaries may make dividends

or other distributions to us through our intermediate holding subsidiaries.

following table describes transfers among us and our subsidiaries made during the periods presented:

For the years ended December 31

Capital contributions from

us to our offshore subsidiaries (1)

Loans from us to our offshore subsidiaries

Capital contributions from our offshore subsidiaries or WFOEs to PRC operating subsidiaries

Loans from our WFOEs to PRC operating subsidiaries

Loans from PRC operating subsidiaries to our WFOEs

Other amounts paid by WFOEs

to our offshore subsidiaries (2)

Other amounts paid by PRC

operating subsidiaries to WFOEs (3)

Other amounts paid by WFOEs

to our PRC operating subsidiaries (4)

subsidiaries” refer to all of our subsidiaries except our PRC subsidiaries;

paid by one of our WFOEs to our Hong Kong subsidiaries for expenses;

paid by one of PRC operating subsidiaries to one of our WFOEs for sales of goods;

paid by one of our WFOEs to one of our PRC operating subsidiaries for purchases.

of the date of this report, none of our subsidiaries have made any dividends or other distributions to us or their respective shareholders,

nor have we ever made a dividend or distribution to our shareholders.

Our PRC subsidiaries presently intend to retain all earnings to

fund their operations and business expansions.

a result of PRC laws and regulations (noted below) that require annual appropriations of 10% of after-tax income to be set aside in a

general reserve fund prior to payment of dividends, our WFOE subsidiary, QHDX, is restricted in that respect, as well as in other respects

noted below, in its ability to transfer a portion of their net assets to our Hong Kong subsidiary as a dividend.

We note the following:

PRC regulations currently permit the payment of dividends only out of accumulated profits, as determined in accordance with accounting

standards and PRC regulations;

Our PRC subsidiaries, including QHDX, are required to set aside, at a minimum, 10% of their net income after taxes, based on PRC accounting

standards, each year as statutory surplus reserves until the cumulative amount of such reserves reaches 50% of their registered capital;

in addition, they may, subject to a resolution of their shareholder, draw a discretionary common reserve from its after-tax profits;

Those reserves may not be distributed as cash dividends and may be used to cover losses made in past years, to enhance the company’s

productivity and expand its business or to increase its registered capital;

The incurrence of debt, specifically the instruments governing such debt, may restrict a PRC subsidiary’s ability to pay shareholder

dividends or make other cash distributions.

the PRC laws and regulations, our PRC subsidiaries, as wholly foreign-owned enterprises in China, may pay dividends only out of their

respective accumulated after-tax profits as determined in accordance with PRC accounting standards and regulations.

In addition, a wholly

foreign-owned enterprise is required to set aside at least 10% of its accumulated after-tax profits each year, if any, to fund certain

statutory reserve funds, until the aggregate amount of such funds reaches 50% of its registered capital.

At its discretion, a wholly

foreign-owned enterprise may allocate a portion of its after-tax profits based on PRC accounting standards to discretional funds.

reserve funds and discretional funds are not distributable as cash dividends.

Remittance of dividends by a wholly foreign-owned company

out of China is subject to examination by the banks designated by SAFE and declaration and payment of withholding tax.

Additionally,

if our PRC subsidiaries incur debt on their own behalf in the future, the instruments governing their debt may restrict their ability

to pay dividends or make other distributions or payments to us.

As a holding company, we may rely on dividends and other distributions

on equity paid by our subsidiaries, including our PRC subsidiaries, for our cash and financing requirements.

However, our PRC subsidiaries

will not be able to pay dividends until they generate accumulated profits and meet the requirements described above.

Please see “Risk

Factor — PRC regulation of loans and direct investment by offshore holding companies to PRC entities may delay or prevent us

from using the proceeds of this Offering to make loans or additional capital contributions to our PRC subsidiary, which could materially

and adversely affect our liquidity and our ability to fund and expand our business”;

“Risk Factor — Payment

of dividends is subject to restrictions under Nevada and the PRC laws;

and “ Risk Factor — Governmental control of

currency conversion may affect the value of your investment.”

we are deemed by the PRC tax authorities as a PRC tax resident enterprise for tax purposes, any dividends we pay to our non-PRC resident

shareholders may be regarded as China-sourced income and as a result, may be subject to PRC withholding tax at a rate of up to 10.0%.

Pursuant to the Arrangement between Mainland China and the Hong Kong Special Administrative Region for the Avoidance of Double Taxation

and Tax Evasion on Income, or the Double Tax Avoidance Arrangement, the 10% withholding tax rate may be reduced to 5% if a Hong Kong

resident enterprise owns no less than 25% of a PRC entity.

However, the 5% withholding tax rate does not automatically apply and certain

requirements must be satisfied, including, without limitation, that (a) the Hong Kong entity must be the beneficial owner of the relevant

and (b) the Hong Kong entity must directly hold no less than 25% share ownership in the PRC entity during the 12 consecutive

months preceding its receipt of the dividends.

In practice, a Hong Kong entity must obtain a tax resident certificate from the Hong Kong

tax authority to apply for the 5% lower PRC withholding tax rate.

As the Hong Kong tax authority will issue such a tax resident certificate

on a case-by-case basis, we cannot be certain that we will be able to obtain the tax resident certificate from the relevant Hong Kong

tax authority and enjoy the preferential withholding tax rate of 5% under the Double Taxation Arrangement with respect to any dividends

to be paid by our WFOE, QHDX, to our Hong Kong subsidiary.

Our WFOE currently does not have any plan to declare and pay dividends, and

we have not applied for the tax resident certificate from the relevant Hong Kong tax authority.

Our Hong Kong subsidiary will apply for

the tax resident certificate when our WFOE plans to declare and pay dividends.

following discussions illustrate taxes we would hypothetically be required to pay in China, assuming that:

(i) our PRC subsidiaries have

taxable earnings, and (ii) they determine to pay dividends in the future:

Taxation Scenario Statutory Tax and Standard Rates

Hypothetical pre-tax earnings

Tax on earnings at statutory

rate of 25% (2)

Net earnings available for distribution

Withholding tax at standard

rate of 10% (3)

Net distribution to Parent/Shareholders

purposes of this example, the tax calculation has been simplified.

The hypothetical book pre-tax earnings amount, not considering

timing differences, is assumed to equal taxable income in China.

For income tax purposes, our PRC subsidiaries file income tax returns

on a separate company basis.

of our subsidiaries qualify for preferential income tax rates 20% in China.

However, such rates are subject to qualification, are

temporary in nature, and may not be available in a future when distributions are paid.

For purposes of this hypothetical example,

the table above reflects a maximum tax scenario under which the full statutory rate would be effective.

PRC Enterprise Income Tax Law imposes a withholding income tax of 10% on dividends distributed by a foreign invested enterprise,

or FIE, to its immediate holding company outside of China.

Pursuant to the Arrangement between Mainland China and the Hong Kong Special

Administrative Region for the Avoidance of Double Taxation and Tax Evasion on Income, or the Double Tax Avoidance Arrangement, a

lower withholding income tax rate of 5% is applied, subject to a qualification review at the time of the distribution.

of this hypothetical example, the table above assumes a maximum tax scenario under which the full withholding tax would be applied.

operate our business in China under a legal regime consisting of the National People’s Congress, which is the country’s highest

legislative body;

the State Council, which is the highest authority of the executive branch of the PRC central government;

and several ministries and agencies under its authority, including the Ministry of Industry and Information Technology, State

Administration For Industry & Commerce, State Administration of Taxation and their respective local offices.

summarizes the principal PRC regulations related to our business.

Order 21 of 2015

Food Safety Law is the foundational law and the most important food safety law for alcoholic products in China.

A great majority

of wine regulations are drafted in conformity to the requirements of this law.

on December 29, 2018

Order 144 of 2011

for Administration of Imported/Exported Food Safety

rule oversees the safety of imported and exported food.

on 11/23/2018

Order 16 of 2015

for Administration of Food Production Licensing

rule requires all food producers in China to procure a production license.

by the State Administration for Market Regulation Order 24 in 2020

Order 27 of 2012

Administrative

Provisions on Inspections and Supervisions of Labelling of Imported/Exported Pre-packaged

rule provides guidelines that governs all pre-packaged foods.

Order 55 of 2012

Administrative

Provisions on Filing of Importers and Exporters of Imported Foods

rule provides the guidelines for imported food inspection procedures, including investigation

of food importers and exporters, tracking of the source and flow of imported foods and

handling of imported food safety inspections.

Notice on December 23, 2004

for Inspection on Production Licensing of Wines and Fruit Wines

rule sets forth inspection procedures on production licensing of wines and fruit wines.

Order 78 of 2005

Indication Product Protection Regulation

regulation regulates the use of geographical indication product names and trademarks while safeguarding the quality of geographical

indication products.

Natural Mineral Water（GB8537-2018）

standard specifies the product classification, requirements, inspection methods, inspection rules, marks, packaging, transportation

and storage of drinking natural mineral water.

for the Supervision and Administration of the Sanitation of Drinking Water

measure ensures the safety of drinking water, protect human health, and strengthen supervision and management.

Drinking Water（GB19298-2014）

standard specifies the product scope, requirements, inspection methods, label identification and name of packaged drinking

on further strengthening the supervision and management of the quality and safety of “Big Buckets of Water”

notice emphasizes the strict implementation of the main responsibility of production enterprises, the strict implementation

of production license, the strict implementation of supervision and inspection, the strict supervision and random inspection

of products, and the strict investigation and punishment of illegal acts.

on urging drinking water production enterprises to strengthen safety management of added substances

notice protects human health, standardizes production, and further strengthens the supervision of drinking

water production enterprises.

ministries and agencies under its authority, including the Ministry of Industry and Information Technology, State Administration for

Industry & Commerce, State Administration of Taxation and their respective local offices.

This section summarizes the principal PRC

regulations related to our business.

Relating to Food Business Operations

PRC laws and regulations governing food business activities and operations primarily consist of the Food Safety Law of the PRC, effective

as of April 29, 2021 (the “Food Safety Law”);

the Regulations on the Implementation of the Food Safety Law, effective as

of December 1, 2019 (the “Food Safety Regulations”);

the Product Quality Law, effective as of December 29, 2018;

the Administrative

Measures for Food Recalls, as amended in October 23, 2020;

the Special Rules of the State Council on Strengthening the Supervision and

Management of the Safety of Food and Other Products, effective as of July 26, 2007;

the Administrative Measures for Food Distribution

Licensing, effective as of November 17, 2017;

and the Law of the People’s Republic of China on the Protection of Consumer Rights

and Interests, effective as of November 17, 2017.

Other laws and regulations relevant to our business include, among others, the E-Commerce

Law of the People’s Republic of China, effective as of January 1, 2019;

the Law of the People’s Republic of China on Import

and Export Commodity Inspection, effective as of April 29, 2021;

Foreign Trade Law of the People’s Republic of China, effective

as of November 7, 2016;

and Measures of the People’s Republic of China for the Administration of Safety of Imported and Exported

Food, effective as of January 1, 2022.

Food Safety Law of the People’s Republic of China, as most recently amended and effective on April 29, 2021, governs activities

with respect to food manufacturing and processing (hereinafter referred to as “food manufacturing”) and circulation of foods

and food and beverage services (hereinafter referred to as “food business operations”).

the PRC adopts a system of supervision,

monitoring and appraisal on the food safety risks, compulsory adoption of food safety standards.

To engage in food production, sale or

catering services, the business operators shall obtain a license in accordance with the laws and regulations.

However, the sale of edible

agricultural products and the sale of pre-packaged food only are not subject to a permit.

The sale of prepacked food shall be reported

to the food safety regulatory department of the local government at or above the county level for recordation.

As the date of this report,

all of our PRC subsidiaries have obtained the required business licenses from the SAMR, and thirteen of our PRC subsidiaries are required

to obtain food business licenses and have received such licenses pursuant to the Food Safety Law.

Therefore, these subsidiaries are qualified

to engage in food purchase and sale activities.

Four of our subsidiaries are subject to the reporting requirement but have not completed

the required recordation procedure.

We intend to fully comply with such recordation requirement as soon as practicable.

Guangdong provincial

government has not issued detailed implementation rules, and as such, changes in rules and regulations may impose additional requirements

for our subsidiaries in China.

on the Implementation of the Food Safety Law stipulate that, food manufacturers purchasing food ingredients, food additives and food-related

products shall check the supplier’s license and product quality certificate;

and inspect food ingredients without a product quality

certificate pursuant to food safety standards;

and shall not purchase or use food ingredients, food additives and food-related products

which do not comply with food safety standards.

In the contracts we signed with the suppliers, we require them to provide a laboratory

qualification report on the products issued by authoritative institutions at the time when the product is delivered to certify product

The contract provides that the supplier shall bear the responsibility for product quality and safety.

We strictly control the

safety of the food purchased.

a view to strengthening the administration of food production and operation, reducing and avoiding the harm of unsafe food so as to ensure

the health and life safety of the general public, the Administrative Measures for Food Recalls are formulated according to the Food Safety

Law of the People’s Republic of China and its implementation regulations.

The food manufacturing is exposed to the foodstuffs recall

system, food manufacturers shall, upon discovery that the foodstuffs manufactured do not comply with food safety standards or based on

the evidence that the foodstuffs may endanger human health, forthwith cease manufacturing, recall foodstuffs from the market, notify

the relevant food business operators and consumers, and record information of the recall and notification.

Where the food manufacturer

or business operator failed to recall foodstuffs or cease business operation pursuant to the provisions of this Article, the food safety

supervision and administration department of the local government may order the food manufacturer or business operator to recall foods

or cease business operations.

We have not had an emergency food recall.

Standing Committee of the National People’s Congress promulgated the Product Quality Law of the PRC, released and effective on

December 29, 2018, which provides the producers and sellers should bear liability for product quality.

Pursuant to the Regulations on

the Implementation of the Food Safety Law, issued on October 11, 2019, and effective on December 1, 2019, as a food seller, we should

abide by the Product Quality Law, which stipulates product quality liability and obligations of food sellers.

Sellers shall adopt measures

to maintain the quality of products sold, and shall not counterfeit or imitate quality marks such as certification marks, shall not adulterate

or mix improper elements with the products, shall not use fake products as genuine products or products of poor quality as high quality

products, shall not falsify the place of origin of products and shall not falsify or imitate the name or address of another factory,

among other things.

a product does not comply with the national or industry standards for the protection of health or personal safety or the safety of property,

the product manufacturer or seller will be ordered to cease their production or sale.

Products that have been illegally produced or sold

shall be confiscated.

A fine shall be imposed equal to an amount greater than the value of the products that have been illegally produced

or sold (hereafter including products already sold and goods not yet sold) but less than three (3) times the value of the products;

there is illegal income, the illegal income shall be confiscated;

where the circumstances are serious, the business license shall be

where the case constitutes a crime, criminal liability shall be pursued in accordance with law.

the case of damage to consumers due to defects in the product, the Product Quality Law of the PRC stipulates the corresponding responsible

If a defect in a product causes physical injury or damage to third party property, the party which was injured or incurred damage

may claim compensation against the producer or may claim compensation against the seller.

If the producer of the product is liable and

compensation is made by the seller of the product, the seller of the product shall have the right of recovery against the producer of

if the seller of the product is liable and compensation is made by the producer of the product, the producer of the product

shall have the right of recovery against the seller of the product.

Where a product is defective due to a mistake made by the seller

and such defect causes physical injury or damage to third party property, the seller shall bear liability for compensation.

is unable to identify the producer of a defective product and is also unable to identify the supplier thereof, the seller shall bear

liability for compensation.

All the products we sell are sourced from upstream suppliers.

In the event that we are held liable for product

defects as a seller, we have the right to recover compensation or damages paid to consumers from the supplier in accordance with applicable

Rules of the State Council on Strengthening the Supervision and Management of the Safety of Food and Other Products were promulgated

and came into force on July 26, 2007.

The products as mentioned in these Rules shall include edible agricultural products, and other

products related to the human health and life safety, in addition to food.

A business operator shall be responsible for the safety of

products sold by it, and shall not sell products that do not conform to the statutory requirements.

A seller must establish and implement

a product supply inspection and acceptance system, examine the business qualifications of suppliers, verify the certificates of qualified

products and product labels, and establish a product supply account to truly record the names, specifications, quantities, suppliers

and their contacts, time of supply of products.

The product supply account and sale account shall be kept for at least two years.

the production lot of products, a seller shall ask for an inspection report issued by an inspection agency in conformity with the statutory

conditions or a photocopy of an inspection report signed or sealed by the suppler from the supplier;

and where such an inspection report

or a photocopy of an inspection report cannot be provided, the products shall not be sold.

for the Supervision and Administration of the Sanitation of Domestic Drinking Water shall apply to the supervision and administration

of the sanitation of central water supply and secondary water supply entities and products involving the sanitation and safety of drinking

The PRC adopts a sanitary licensing system for products involving the sanitation and safety of drinking water.

The entities and

individuals that produce products involving the sanitation and safety of drinking water shall apply for the sanitary licensing approval

documents for their products to the competent departments of health and family planning of governments as required, and may not produce

or sell those products until they have obtained the approval documents.

No entity or individual may produce, sell or use the products

as mentioned in the preceding paragraph without approval documents.

Products involving the sanitation and safety of drinking water shall

be subject to sanitation and safety evaluation in accordance with relevant provisions and shall conform to the requirements of sanitary

standards and specifications.

Products involving the sanitation and safety of drinking water that are produced by using new materials,

new processes and new chemical substances shall obtain the sanitary licensing approval documents issued by the competent department of

health and family planning of the State Council;

and products involving the sanitation and safety of drinking water other than those

produced by using new materials, new processes and new chemical substances shall obtain the sanitary licensing approval documents issued

by the competent departments of health and family planning of the provincial people’s governments.

Law of the People’s Republic of China was promulgated on August 31, 2018 and came into force on January 1, 2019.

businesses” means natural persons, legal persons or organizations without the status of legal person that engage in the business

activities of selling commodities, or providing services, through the Internet or any other information network, including e-commerce

platform businesses, in-platform businesses, and e-commerce businesses that sell commodities or provide services through a self-built

website or any other network services.

“E-commerce platform business” means a legal person, or an organization without the

status of legal person, which, in e-commerce, provides both or multiple parties to trading with services We are both an e-commerce businesses

and an e-commerce platform business.

E-commerce business operators shall complete market entity registration formalities pursuant to

the law, except for individuals selling self-produced agricultural products and home-made handicraft products, and individuals using

their own skills to engage in convenient labor activities and sporadic small transactions for which licensing is not required, as well

as e-commerce business operators who are not required to register pursuant to the laws and administrative regulations.

The E-commerce

platform businesses are required to develop commodities and service quality assurance mechanism favorable to e-commerce development and

protection of consumer rights and interests.

As an e-commerce business, we shall sell commodities or provide services meeting the requirements

for guaranteeing personal and property safety and for environmental protection and shall not sell or provide commodities or services

the trading of which is prohibited by any law or administrative regulation.

As an e-commerce platform business, we shall request a business

applying for selling commodities or providing services in our platform to submit authentic information including its identity, address,

contact information, and administrative licensing, make verification and registration, establish a register, and make regular updates

and verification, submit the identity information of in-platform businesses to the administrative authorities and taxation authorities,

and remind a business that has not made market participant registration to make registration as legally required.

Consumer Rights and Interests Protection Law of the PRC, or the Consumer Protection Law, promulgated on October 31, 1993 and most recently

amended on October 25, 2013 (effective as of March 15, 2014), provides that consumers shall be entitled to the protection of their personal

safety and property security at the time of purchase and use of goods and receipt of services.

Consumers shall have the right to require

that the goods and services provided by business operators satisfy the requirements for protection of consumers’ personal safety

and property security.

Consumers shall be entitled to the knowledge of actual information of the goods they purchase or use and the services

they receive.

Consumers shall have the right to require business operators to provide, based on different situations of the goods or

services, the relevant information pertaining to the price, place of manufacturing, manufacturer, purpose, function, specifications,

grade, main ingredients, manufacturing date, shelf life, inspection certificate, user manual, after-sale services of goods or the contents,

specifications and fees and charges of services, etc.

In the sales contract, we guarantee the specifications, quality and safety, origin

and price of the products consistent with the contract.

Law sets out the obligations of business operators and the rights and interests of the customers.

For example, business operators must

guarantee the quality, function, usage, term of validity, personal or property safety requirement of the goods and services and provide

customers with authentic information about the goods and services.

Consumer whose legitimate rights and interests are harmed in the purchase

of goods or receipt of services rendered through an online trading platform may seek compensation from the seller or the service provider.

Additionally,

Internet information service providers, under the Civil Code of the PRC, which became effective on January 1, 2021, shall bear tortious

liabilities in the event they infringe upon other person’s rights and interests due to providing false or inaccurate content through

the internet.

Where an internet service provider conducts tortious acts through internet services, the infringed person has the right

to request the internet service provider take necessary actions such as deleting contents, screening and de-linking.

Failing to take

necessary actions after being informed, the internet service provider will be subject to its liabilities with regard to the additional

damages incurred.

Where an internet service provider knows that an internet user is infringing upon other persons’ rights and interests

through its internet service but fails to take necessary actions, it is jointly and severally liable with the internet user.

Relating to M&A Rules and Overseas Listings

August 8, 2006, six PRC regulatory agencies, including the China Securities Regulatory Commission, or the CSRC, adopted the Regulations

on Mergers of Domestic Enterprises by Foreign Investors, or the M&A Rules, which became effective on September 8, 2006 and was amended

on June 22, 2009.

Foreign investors shall comply with the M&A Rules when they purchase equity interests of a domestic company or

subscribe the increased capital of a domestic company, thus changing the nature of the domestic company into a foreign-invested enterprise;

or when the foreign investors establish a foreign-invested enterprise in the PRC, purchase the assets of a domestic company and operate

or when the foreign investors purchase the asset of a domestic company, establish a foreign-invested enterprise by injecting

such assets and operate the assets.

The M&A Rules purport, among other things, to require offshore special purpose vehicles formed

for overseas listing purposes through acquisitions of PRC domestic companies and controlled by PRC companies or individuals, to obtain

the approval of the CSRC prior to publicly listing their securities on an overseas stock exchange.

to the Anti-Monopoly Law which took effect as at August 1, 2008, where the concentration of business operators reaches the filing thresholds

stipulated by the State Council, business operators shall file a declaration with the SAMR, and no concentration shall be implemented

until the SAMR clears the anti-monopoly filing.

Pursuant to the Notice of the General Office of the State Council on the Establishment

of the Security Review System for Mergers and Acquisitions of Domestic Enterprises by Foreign Investors and the Security Review Rules

issued by the General Office of the State Council on February 3, 2011 and became effective on March 3, 2011, mergers and acquisitions

by foreign investors that raise “national defense and security” concerns, and mergers and acquisitions through which foreign

investors may acquire de facto control over domestic enterprises that raise “national security” concerns, are subject to

strict review by the PRC government authorities.

On August 25, 2011, the MOFCOM issued the Provisions of the Ministry of Commerce for

the Implementation of the Security Review System for Mergers and Acquisitions of Domestic Enterprises by Foreign Investors, which provides

that if a foreign investor’s merger or acquisition of a domestic enterprise falls within the scope of security review specified

in the Notice of the General Office of the State Council on the Establishment of the Security Review System for Mergers and Acquisitions

of Domestic Enterprises by Foreign Investors, the foreign investor shall file an application with MOFCOM for security review.

a foreign investor’s merger or acquisition of a domestic enterprise falls within the scope of security review or not shall be determined

based on the substance and actual influence of the merger or acquisition transaction.

No foreign investor is allowed to substantially

avoid the security review in any way, including but not limited to, holding shares on behalf of others, trust arrangements, multi-level

reinvestment, leasing, loans, contractual control, or overseas transactions.

December 24, 2021, the CSRC issued the Administrative Provisions of the State Council Regarding the Overseas Issuance and Listing of

Securities by Domestic Enterprises (the “Draft Administrative Provisions”) and the Measures for the Overseas Issuance of

Securities and Listing Record-Filings by Domestic Enterprises (Draft for Comments) (the “Draft Filing Measures”), collectively,

the “Draft Overseas Listing Regulations,” which are currently published for public comments only.

The Draft Overseas Listing

Regulations require that companies applying for overseas issuance, listing and post-listing capital operations, including IPO, multi-listing,

spin-off listing, SPAC, refinancing, issuance for asset acquisitions, equity incentives, and changes of control and other stipulated

transactions, shall be subject to statutory procedures, such as filing and information reporting requirement.

Overseas issuance and listings

include direct and indirect issuance and listings.

Where an enterprise whose principal business activities are conducted in PRC seeks

to issue and list its shares in the name of an overseas enterprise based on equity, assets, income or other similar rights and interests

of the relevant PRC domestic enterprise, such activities are deemed an indirect overseas issuance and listing under the Draft Overseas

Listing Regulations.

According to the Draft Overseas Listing Regulations, among other things, after making initial applications with

overseas stock markets for offerings or listings, all China-based companies shall file with the CSRC within three working days.

filing materials with the CSRC include (without limitation):

(i) record-filing reports and related undertakings, (ii) compliance certificates,

filing or approval documents from the primary regulator of the applicants’ businesses (if applicable), (iii) security assessment

opinions issued by related departments (if applicable), (iv) PRC legal opinions, and (v) prospectus.

In addition, overseas offerings

and listings may be prohibited for such China-based companies when any of the following applies:

(1) if the intended securities offerings

and listings are specifically prohibited by the laws, regulations or provision of the PRC;

(2) if the intended securities offerings and

listings may constitute a threat to, or endanger national security as reviewed and determined by competent authorities under the State

Council in accordance with laws;

(3) if there are material ownership disputes over applicants’ equity interests, major assets,

core technologies, or the others;

(4) if, in the past three years, applicants’ domestic enterprises or controlling shareholders,

de facto controllers have committed corruption, bribery, embezzlement, misappropriation of property, or other criminal offenses disruptive

to the order of the socialist market economy, or are currently under judicial investigation for suspicion of criminal offenses, or are

under investigation for suspicion of major violations;

(5) if, in the past three years, any directors, supervisors, or senior executives

of applicants have been subject to administrative punishments for severe violations, or are currently under judicial investigation for

suspicion of criminal offenses, or are under investigation for suspicion of major violations;

(6) other circumstances as prescribed by

the State Council.

The Draft Administrative Provisions further stipulate that a fine between RMB 1 million and RMB 10 million may be

imposed if an applicant fails to fulfill the filing requirements with the CSRC or conducts an overseas offering or listing in violation

of the Draft Rules Regarding Overseas Listings, and in cases of severe violations, a parallel order to suspend relevant businesses or

halt operations for rectification may be issued, and relevant business permits or operational license revoked.

Relating to Foreign Investment

activities in the PRC by foreign investors are principally governed by the Industry Guidelines of Encouraged Foreign Investment, or the

Industry Guidelines, effective on January 27, 2021, and the Special Administrative Measures for Entrance of Foreign Investment (Negative

List), or the Negative List, effective on July 23, 2020, and together with the PRC Foreign Investment Law, which took effect on January

1, 2020, and its respective implementation rules and ancillary regulations.

The Industry Guidelines and the Negative List lay out the

basic framework for foreign investments in China, classifying businesses into three categories with regard to foreign investments:

“encouraged”,

“restricted” and “prohibited”.

Industries not listed in the Industry Guidelines or the Negative List are generally

deemed as falling into a fourth category “permitted” unless specifically restricted by other PRC laws.

The Negative List

specifies that Investment in Internet news service, Internet publishing service, Internet audio-visual program service, cyber culture

operation (except for music) and Internet information dissemination service (except for contents opened up in China’s WTO commitments)

shall be prohibited.

to the PRC Foreign Investment Law, foreign investments shall enjoy pre-entry national treatment, except for those foreign-invested entities

that operate in industries deemed to be either “restricted” or “prohibited” in the “negative list.”

While foreign investors shall refrain from investing in any of the foreign “prohibited” industries, foreign-invested entities

operating in foreign “restricted” industries shall require market entry clearance and other approvals from relevant PRC governmental

Furthermore, the PRC Foreign Investment Law provides that foreign-invested enterprises that have been established before

the implementation of PRC Foreign Investment Law according to the then existing laws regulating foreign investments may maintain their

structure and corporate governance within five years after the implementation of the PRC Foreign Investment Law.

December 19, 2020, MOFCOM and NDRC released the Measures for the Security Review of Foreign Investments, which took effect on January

18, 2021.For foreign investments within the following scope, foreign investors or the relevant parties in China (hereinafter referred

to collectively as the “parties concerned”) shall take the initiative to declare to the office of the working mechanism prior

to implementation of the investments:…(II) investments in important agricultural products, important energy and resources, important

equipment manufacturing, important infrastructure, important transport services, important cultural products and services, important

information technology and Internet products and services, important financial services, key technologies and other important fields

relating to national security, and obtaining the actual controlling stake in the investee enterprise.

Prior to a decision made by the

office of the working mechanism, the parties concerned shall not make the investment.

The parties concerned shall not make the investment

unless the office of the working mechanism decides that security review is not required.

Where the declared foreign investment affects

national security, a decision on prohibiting the investment shall be made.

Foreign-invested entities of the group have businesses that

conduct Internet services, but not related to national security within the scope of the regulations above.

December 26, 2019, the State Council promulgated the Regulations for Implementing the PRC Foreign Investment Law, which took effect on

January 1, 2020.

The implementation regulations further clarified that the State encourages and promotes foreign investments, protects

the lawful rights and interests of foreign investors, regulates foreign investment administration, continues to optimize foreign investment

environment, and advances a higher-level opening.

December 30, 2019, MOFCOM and SAMR jointly promulgated the Measures for Information Reporting on Foreign Investment, which became effective

on January 1, 2020.

Pursuant to the Measures for Information Reporting on Foreign Investment, where a foreign investor carries out investment

activities in China directly or indirectly, the foreign investor or the foreign-invested enterprise shall submit the investment information

to the competent commerce department.

Regulations related to Anti-Monopoly and Competition

On August 17, 2021, the State Administration

for Market Regulation, or the SAMR, issued a discussion draft of Provisions on the Prohibition of Unfair Competition on the Internet,

under which business operators should not use data or algorithms to hijack traffic or influence users’ choices, or use technical

means to illegally capture or use other business operators’ data.

Furthermore, business operators are not allowed to (i) fabricate

or spread misleading information to damage the reputation of competitors, or (ii) employ marketing practices such as fake reviews

or use coupons or “red envelopes” to entice positive ratings.

On September 11, 2020, the Anti-Monopoly

Commission of the State Council issued Anti-Monopoly Compliance Guideline for Operators, which requires operators to establish anti-monopoly

compliance management systems under the PRC Anti-Monopoly Law to manage anti-monopoly compliance risks.

On February 7, 2021, the

Anti-Monopoly Commission of the State Council published Anti-Monopoly Guidelines for the Internet Platform Economy Sector that specified

circumstances where an activity of an internet platform will be identified as monopolistic act as well as concentration filing procedures

for business operators, including those involving variable interest entities, or the VIEs.

According to the PRC Anti-Monopoly Law, if

a business operator carries out a concentration in violation of the law, the relevant authority shall order the business operator to

terminate the concentration, dispose of the shares or assets or transfer the business within a specified time limit, or take other measures

to restore the pre-concentration status, and impose a fine of up to RMB500,000.

On October 23, 2021, the Standing Committee

of the National People’s Congress issued a discussion draft of the amended Anti-Monopoly Law, which proposes to increase the fines

for illegal concentration of business operators to no more than ten percent of its last year’s sales revenue if the concentration

of business operator has or may have an effect of excluding or limiting competitions;

or a fine of up to RMB5 million if the concentration

of business operator does not have an effect of excluding or limiting competition.

The draft also proposes that the relevant authority

shall investigate a transaction where there is any evidence that the concentration has or may have the effect of eliminating or restricting

competitions, even if such concentration does not reach the filing threshold.

Relating to Value-added Telecommunications Services

to the Provisions on Administration of Foreign-Invested Telecommunications Enterprises which was promulgated by the State Council on

December 11, 2001 and amended on September 10, 2008 and February 6, 2016, or the FITE Regulations, and the Telecommunications Regulations

of the PRC, or the Telecom Regulations, promulgated by the PRC State Council on September 25, 2000 and most recently amended on February

6, 2016, telecom operators shall apply for a telecommunications business permit pursuant to the provisions of these Regulations.

No organization

or individual shall engage in telecommunications business without obtaining a telecommunications business permit.

In addition, the ultimate

foreign equity ownership in a value-added telecommunications services provider shall not exceed 50%.

Moreover, for a foreign investor

to acquire any equity interest in value-added telecommunication business in China, it must satisfy a number of stringent performance

and operational experience requirements, including demonstrating good track records and experience in operating value-added telecommunication

business overseas.

June 19, 2015, the Ministry of Industry and Information Technology, or the MIIT, issued the Circular on Removing the Restrictions on

Equity Ratio Held by Foreign Investors in Online Data Processing and Transaction Processing (Operating E-Commerce) Business, allowing

foreign investors to own 100% of equity interest in an operator of “operating e-commerce” business.

The latest Negative List

further provides that foreign investors are allowed to hold more than 50% equity interests in a value-added telecommunications service

provider engaging in e-commerce, domestic multiparty communication, storage-and-forward and call center businesses, while other requirements

with respect to track record and experience provided by the FITE Regulations shall still apply and foreign investors are still prohibited

from holding more than 50% of equity interest in a provider of other subcategories of value-added telecommunications services.

Relating to Cybersecurity and Privacy Protection

PRC Constitution states that PRC law protects the freedom and privacy of communications of citizens and prohibits infringement of these

In recent years, PRC government authorities have enacted legislation on the Internet use to protect personal information from

any unauthorized disclosure.

Under the Several Provisions on Regulating the Market Order of Internet Information Services which was promulgated

by MIIT on December 29, 2011, an Internet content service operator may not collect any user personal information or provide any such

information to third parties without the consent of a user, unless otherwise stipulated by laws and administrative regulations.

content service operator must expressly inform the users of the method, content and purpose of the collection and processing of such

user personal information and may only collect such information necessary for the provision of its services.

An Internet content service

operator is also required to properly keep the user personal information, and in case of any leak or likely leak of the user personal

information, the Internet content service operator must take immediate remedial measures and, in severe circumstances, to make an immediate

report to the telecommunication regulatory authority.

addition, the Decision on Strengthening Network Information Protection, which was promulgated by the Standing Committee of NPC on December

28, 2012, provides that electronic information that is able to identify personal identities of citizens or is concerned with personal

privacy of citizens is protected by law and shall not be unlawfully obtained or provided.

Internet content service operators collecting

or using personal electronic information of citizens shall specify purposes, manners and scopes of information collection and use, obtain

the consent of citizens concerned, and strictly keep confidential personal information collected.

Internet content service operators

are prohibited from disclosing, tampering with, damaging, selling or illegally providing others with personal information collected.

Technical and other measures are required to be taken by Internet content service operators to prevent personal information collected

from unauthorized disclosure, damage or being lost.

Internet content service operators are subject to legal liability, including warnings,

fines, confiscation of illegal gains, revocation of licenses or filings, closing of websites concerned, public security administration

punishment, criminal liabilities, or civil liabilities, if they violate relevant provisions on Internet privacy.

to the Order for the Protection of Telecommunication and Internet User Personal Information which was promulgated by MIIT on July 16,

2013, any collection and use of users’ personal information must be subject to the consent of the users, abide by the principles

of legality, rationality and necessity and be within the specified purposes, methods and scopes.

Pursuant to the Ninth Amendment to the

Criminal Law which was issued by the Standing Committee of NPC on August 29, 2015 and became effective on November 1, 2015, any Internet

service provider that fails to fulfill obligations to manage information and network security as required by applicable laws and refuses

to rectify upon orders from government authorities, will be subject to the criminal penalty if such failure (i) causes dissemination

of illegal information in large scale;

(ii) causes user information leaks resulting in severe consequences;

(iii) causes serious loss

of evidence to criminal investigations;

or (iv) implicates other severe circumstances.

Moreover, any individual or entity that (i) sells

or provides personal information to others in violation of applicable laws, or (ii) steals or illegally obtains any personal information,

in either case implicating severe circumstances, will be subject to the criminal penalty.

The PRC government, however, has the power

and authority to order Internet content service operators to turn over personal information if an Internet user posts any prohibited

content or engages in illegal activities on the Internet.

further regulate cybersecurity and privacy protection, the PRC Cybersecurity Law which was promulgated by the Standing Committee of NPC

on November 7, 2016 and took effect on June 1, 2017, provides that:

subject to certain exceptions, (i) to collect and use personal information,

network operators must follow the principles of legitimacy, rightfulness, and necessity, disclose their rules of data collection and

use, clearly express the purposes, means, and scope of collecting and using the information, and obtain the consent of the persons whose

data is gathered;

(ii) network operators can neither gather personal information unrelated to the services they provide, nor gather or

use personal information in violation of the provisions of laws and administrative regulations or the scopes of consent given by the

persons whose data is gathered, and must dispose of personal information they have saved in accordance with the provisions of laws and

administrative regulations and agreements reached with users;

(iii) network operators cannot divulge, tamper with, or damage the personal

information they have collected, and cannot provide the personal information to others without the consent of persons whose data is collected.

According to the PRC Cybersecurity Law, personal information refers to all kinds of information that are recorded electronically or that

can otherwise be used to independently identify or be combined with other information to identify natural persons’ personal information,

including but not limited to natural persons’ names, dates of birth, identification numbers, biologically identified personal information,

addresses, and telephone numbers.

Any Internet information services provider that violates these privacy protection requirements under

the PRC Cybersecurity Law and related laws and regulations may be ordered to turn in illegal gains generated from unlawful operations

and pay a fine of no less than one but no more than ten times of the illegal gains and may be ordered to cease the relevant business

operations when the violation is serious.

June 28, 2016, the CAC issued the Administrative Provisions on Mobile Internet Applications Information Services, which became effective

on August 1, 2016, to further strengthen the regulation of the mobile app information services.

Pursuant to these provisions, owners

or operators of mobile apps that provide information services are required to be responsible for information security management, establish

and improve the protective mechanism for user information, observe the principles of legality, rightfulness and necessity, and expressly

state the purpose, method and scope of, and obtain user consent to, the collection and use of users’ personal information.

May 8, 2017, the Supreme People’s Court and the Supreme People’s Procuratorate issued the Interpretations of the Supreme

People’s Court and the Supreme People’s Procuratorate on Several Issues Concerning the Application of Law in the Handling

of Criminal Cases Involving Infringement of Citizens’ Personal Information, or the Personal Information Interpretations, which

became effective on June 1, 2017.

The Personal Information Interpretations provides more practical conviction and sentencing criteria

for the infringement of citizens’ personal information.

January 23, 2019, the PRC Office of the Central Cyberspace Affairs Commission and other three authorities jointly issued the Circular

on the Special Campaign of Correcting Unlawful Collection and Usage of Personal Information via Apps.

Pursuant to this circular, (i)

app operators are prohibited from collecting any personal information irrelevant to their services;

(ii) information collection and usage

policy should be presented in a simple and clear way, and such policy should be consented by the users voluntarily, and;

(iii) authorization

from users should not be obtained by coercing users with default or bundling clauses or making consent a condition of service.

App operators

violating these rules can be ordered by authorities to correct their noncompliance within a given period of time, be publicly reported,

or ordered to quit its operation or cancel its business license or operational permits.

April 10, 2019, the Ministry of Public Security promulgated the Guidelines for Internet Personal Information Security Protection, which

establishes the management mechanism, security technical measures and business workflows for personal information security protection.

On August 22, 2019, the CAC promulgated the Provisions on the Cyber Protection of Children’s Personal Information which requires,

among others, that network operators who collect, store, use, transfer and disclose personal information of children under the age of

14 shall establish special rules and user agreements for the protection of children’s personal information, inform the children’s

guardians in a noticeable and clear manner, and shall obtain the consent of the children’s guardians.

November 28, 2019, the CAC, MIIT, the Ministry of Public Security and SAMR jointly promulgated the Measures for the Determination of

the Collection and Use of Personal Information by Apps in Violation of Laws and Regulations, which provides guidance for the regulatory

authorities to identify the illegal collection and use of personal information through mobile apps, and for the app operators to conduct

self-examination and self-correction and social supervision by citizens.

May 28, 2020, the NPC approved the Civil Code of the PRC or the Civil Code, which came into effect on January 1, 2021.

Pursuant to the

Civil Code, the personal information of a natural person shall be protected by the law.

Any organization or individual that needs to

obtain personal information of others shall obtain such information legally and ensure the safety of such information, and shall not

illegally collect, use, process or transmit personal information of others, or illegally purchase or sell, provide or make public personal

information of others.

Furthermore, information processors shall not divulge or tamper with personal information collected or stored

without the consent of a natural person, information processors shall not illegally provide personal information of such person

to others, except for information that has been processed so that specific persons cannot be identified and that cannot be restored.

In addition, an information processor shall take technical measures and other necessary measures to ensure the security of the personal

information that is collected and stored and to prevent the information from being divulged, tampered with or lost;

where personal information

has been or may be divulged, tampered with or lost, the information processor shall take remedial measures in a timely manner, inform

the natural person concerned in accordance with the provisions and report the case to the relevant competent department.

August 20, 2021, the SCNPC adopted the Personal Information Security Law, which took effect on November 1, 2021.

The Personal Information

Protection Law includes the basic rules for personal information processing, the rules for cross-border provision of personal information,

the rights of individuals in personal information processing activities, the obligations of personal information processors, and the

legal responsibilities for illegal collection, processing, and use of personal information.

As the first systematic and comprehensive

law specifically for the protection of personal information in the PRC, the Personal Information Protection Law provides, among others,

that (i) an individual’s consent shall be obtained to use sensitive personal information, such as biometric characteristics and

individual location tracking, (ii) personal information operators using sensitive personal information shall notify individuals of the

necessity of such use and impact on the individual’s rights, and (iii) where personal information operators reject an individual’s

request to exercise his or her rights, the individual may file a lawsuit with a People’s Court.

November 14, 2021, the CAC published the Regulations of Internet Data Security Management (Draft for Comments), which further regulate

the internet data processing activities and emphasize the supervision and management of network data security, and further stipulate

the obligations of internet platform operators, such as to establish a system for disclosure of platform rules, privacy policies and

algorithmic strategies related to data.

Specifically, the draft regulations require data processors to, among others, (i) adopt immediate

remediation measures when finding that network products and services they use or provide have security defects and vulnerabilities, or

threaten national security or endanger public interest, and (ii) follow a series of detailed requirements with respect to processing

of personal information, management of important data and proposed overseas transfer of data.

In addition, the draft regulations require

data processors handling important data or the data processors to be listed overseas to complete an annual data security assessment and

file a data security assessment report to applicable regulators.

Such annual assessment, as required by the draft regulations, would

encompass areas including, but not limited to, the status of important data processing, data security risks identified and the measures

adopted, the effectiveness of data protection measures, the implementation of national data security laws and regulations, data security

incidents that occurred and their handling, and a security assessment with respect to sharing and provision of important data overseas.

As of the date of this report, the draft regulations have been released for public comment only and have not been formally adopted.

The final provisions and the timeline for its adoption are subject to changes and uncertainties.

currently operate an online trading platform, primarily engaged in sales of products to our customers in China, where our customers can

Our online platform collects

and transmits product, supplier and customer information and data.

Since our online trading platform has only been in operation for about a year, we are in the process of studying the newly issued rules and regulations governing cybersecurity and data protection and the

industry best practice, as well as assessing the extent to which our information and data system is not in full compliance with the various

requirements under the newly proposed regulations.

are committed to taking the necessary actions to satisfy the effective personal information protection and internet data security regulatory

requirements.

We have designed a user information protection mechanism, which includes the following measures:

adopt data security technical measures by the introduction of an extended verification (EV) SSL certificate at the user information security

technology implementation level, offering strong encryption technology and extended verification function, and providing security guarantee

for online transactions;

(ii) improve the technical level protection and the monitoring mechanism for data use, and for the data modules

related to user information in the e-commerce platform system, use MD5 irreversible encryption for storage and display of information

security sensitive fields;

(iii) develop a complete personal information operation process and system, and designate responsible personnel

system for information security work;

(iv) develop a user information collection, storage and user rules and privacy agreement, following

the “inform + express consent” model, informing users of the purpose, method and scope of information collection and use,

as well as the channels for inquiring and correcting inaccuracies in information and data;

(v) conduct assessments on technology, operational

risks and system common issues, and data security governance;

(vi) voluntarily engage a data security service organization to conduct

an annual data security assessment and fulfil reporting obligations if required by applicable rules and regulations;

(vii) establish

an emergency plan for personal information security incidents, which includes, among other things, an emergency response mechanism for

security incidents, incident impact assessment and mitigation measures, and emergency response training and drills;

(viii) provide training

to employees;

and (ix) promote consumer data protection awareness and education engagement.

We have implemented most of above measures

and plan to put in place the remaining measures by mid-2022.

We are committed to taking the necessary actions to satisfy the effective

personal information protection and internet data security regulatory requirements in accordance with the applicable laws.

Relating to Intellectual Property Rights

in the PRC are principally protected under the Patent Law of the PRC.

The duration of a patent right is either 10 years or 15 year

or 20 years from the date of application, depending on the type of patent right.

The Patent Law of the PRC and its implementation

rules provide for three types of patents, namely, “invention”, “utility model” and “design”.

Invention patents are valid for twenty years, utility model patents are valid for fifteen years, while design patents are valid for

ten years, from the date of application.

The Chinese patent system adopts a “first-to-file” principle, which means that

where more than one person files a patent application for the same invention, a patent will be granted to the person who files the

application first.

To be patentable, invention or utility models must meet three criteria:

novelty, inventiveness and

practicability.

A third party must obtain consent or a proper license from the patent owner to use the patent.

Otherwise, the use

constitutes an infringement of the patent rights.

in the PRC, including copyrighted software, is principally protected under the Copyright Law of the PRC and related rules and regulations.

Under the Copyright Law, promulgated in September 1990, implemented in June 1991, amended in October 2001, February 2010 and November

2020, and effective on June 1, 2021 the term of protection for copyrighted software is 50 years.

The Regulation on the Protection of

the Right to Communicate Works to the Public over Information Networks, as most recently amended on January 30, 2013, provides specific

rules on fair use, statutory license, and a safe harbor for use of copyrights and copyright management technology and specifies the liabilities

of various entities for violations, including copyright holders, libraries and Internet service providers.

Trademarks are protected by the PRC Trademark Law which was adopted by the Standing Committee of NPC on August 23, 1982 and most recently

amended on April 23, 2019 as well as the Implementation Regulation of the PRC Trademark Law which was adopted by the State Council on

August 3, 2002 and amended on April 29, 2014.

The Trademark Office of the National Intellectual Property Administration under SAMR handles

trademark registrations and grants a term of ten years to registered trademarks which may be renewed for consecutive ten-year periods

upon request by the trademark owner.

For licensed use of a registered trademark, the licensor shall file record of the licensing of the

said trademark with the Trademark Office, otherwise it may not defend against a bona fide third party.

The PRC Trademark Law has adopted

a “first-to-file” principle with respect to trademark registration.

Where a trademark for which a registration has been made

is identical or similar to another trademark which has already been registered or been subject to a preliminary examination and approval

for use on the same kind of or similar commodities or services, the application for registration of such trademark may be rejected.

person applying for the registration of a trademark may not prejudice the existing right first obtained by others, nor may any person

register in advance a trademark that has already been used by another party and has already gained a “sufficient degree of reputation”

through such party’s use.

PRC law, any of the following acts will be deemed as an infringement to the exclusive right to use a registered trademark:

a trademark that is the same as or similar to a registered trademark for identical or similar goods without the permission of the trademark

(ii) sale of any goods that have infringed the exclusive right to use any registered trademark;

(iii) counterfeit or unauthorized

production of the label of another’s registered trademark, or sale of any such label that is counterfeited or produced without

authorization;

(iv) change of any trademark of a registrant without the registrant’s consent, and selling goods bearing such replaced

trademark on the market;

or (v) other acts that have caused any other damage to another’s exclusive right to use a registered trademark.

to the PRC Trademark Law, in the event of any of the foregoing acts, the infringing party will be ordered to stop the infringement immediately

and may be imposed a fine;

the counterfeit goods will be confiscated.

The infringing party may also be held liable for the right holder’s

damages, which will be equal to the losses suffered by the right holder as a result of the infringement, including reasonable expenses

incurred by the right holder for stopping the infringement, or the gains obtained by the infringing party if the losses are difficult

to be ascertained.

If both gains and losses are difficult to be ascertained, the damages may be determined by referring to the amount

of royalties for the license of such trademarks, which will be one to five times of the royalties in the case of any serious infringement

with malicious intent.

If the gains, losses and royalties are all difficult to be ascertained, the court may render a judgment awarding

damages no more than RMB5 million.

Notwithstanding the above, if a distributor does not know that the goods it sells infringe another’s

registered trademark, it will not be liable for infringement provided that the seller shall prove that the goods are lawfully obtained

and identify its supplier.

names are protected under the Administrative Measures on Internet Domain Names promulgated by the MIIT on August 24, 2017 and effective

as of November 1, 2017.

Domain name registrations are handled through domain name service agencies established under the relevant regulations,

and applicants become domain name holders upon successful registration.

Relating to Foreign Exchange

on Foreign Currency Exchange

principal regulations governing foreign currency exchange in China are the Foreign Exchange Administration Regulations, most recently

amended on August 5, 2008.

Under PRC foreign exchange regulations, payments of current account items, such as profit distributions,

interest payments and trade and service-related foreign exchange transactions, can be made in foreign currencies without prior approval

from the State Administration of Foreign Exchange, or SAFE, by complying with certain procedural requirements.

By contrast, approval

from or registration with appropriate government authorities is required where RMB is to be converted into foreign currency and remitted

out of China to pay capital account items, such as direct investments, repayment of foreign currency-denominated loans, repatriation

of investments and investments in securities outside of China.

November 19, 2012, SAFE promulgated the Circular of Further Improving and Adjusting Foreign Exchange Administration Policies on

Foreign Direct Investment, or Circular 59, which substantially amends and simplifies the current foreign exchange procedure.

Pursuant to Circular 59, the opening of various special purpose foreign exchange accounts, such as pre-establishment expenses

accounts, foreign exchange capital accounts and guarantee accounts, the reinvestment of RMB proceeds derived by foreign investors in

the PRC, and remittance of foreign exchange profits and dividends by a foreign-invested enterprise to its foreign shareholders no

longer require the approval or verification of SAFE, and multiple capital accounts for the same entity may be opened in different

provinces, which was not possible previously.

In 2013, SAFE specified that the administration by SAFE or its local branches over

direct investment by foreign investors in the PRC must be conducted by way of registration and banks must process foreign exchange

business relating to the direct investment in the PRC based on the registration information provided by SAFE and its branches.

February 2015, SAFE promulgated the Notice on Further Simplifying and Improving the Administration of the Foreign Exchange

Concerning Direct Investment, or SAFE Notice 13.

Instead of applying for approvals regarding foreign exchange registrations of

foreign direct investment and overseas direct investment from SAFE, entities and individuals may apply for such foreign exchange

registrations from qualified banks.

The qualified banks, under the supervision of SAFE, may directly review the applications and

conduct the registration.

March 2015, SAFE promulgated the Circular of the SAFE on Reforming the Management Approach regarding the Settlement of Foreign Capital

of Foreign-invested Enterprise, or Circular 19, which expands a pilot reform of the administration of the settlement of the foreign exchange

capitals of foreign-invested enterprises nationwide.

Circular 19 replaced both the Circular of the SAFE on Issues Relating to the Improvement

of Business Operations with Respect to the Administration of Foreign Exchange Capital Payment and Settlement of Foreign-invested Enterprises,

or Circular 142, and the Circular of the SAFE on Issues concerning the Pilot Reform of the Administrative Approach Regarding the Settlement

of the Foreign Exchange Capitals of Foreign-invested Enterprises in Certain Areas, or Circular 36.

Circular 19 allows all foreign-invested

enterprises established in the PRC to settle their foreign exchange capital on a discretionary basis according to the actual needs of

their business operation, provides the procedures for foreign invested companies to use Renminbi converted from foreign currency-denominated

capital for equity investments and removes certain other restrictions that had been provided in Circular 142.

However, Circular 19 continues

to prohibit foreign-invested enterprises from, among other things, using RMB funds converted from their foreign exchange capital for

expenditure beyond their business scope and providing entrusted loans or repaying loans between non-financial enterprises.

SAFE promulgated

the Notice of the State Administration of Foreign Exchange on Reforming and Standardizing the Foreign Exchange Settlement Management

Policy of Capital Account, or Circular 16, effective June 2016, which reiterates some of the rules set forth in Circular 19.

16 provides that discretionary foreign exchange settlement applies to foreign exchange capital, foreign debt offering proceeds and remitted

foreign listing proceeds, and the corresponding RMB capital converted from foreign exchange may be used to extend loans to related parties

or repay inter-company loans (including advances by third parties).

However, there are substantial uncertainties with respect to Circular

16’s interpretation and implementation in practice.

Circular 19 or Circular 16 may delay or limit us from using the proceeds of

offshore offerings to make additional capital contributions to our PRC subsidiaries and any violations of these circulars could result

in severe monetary or other penalties.

January 2017, SAFE promulgated the Circular on Further Improving Reform of Foreign Exchange Administration and Optimizing Genuineness

and Compliance Verification, or Circular 3, which stipulates several capital control measures with respect to the outbound remittance

of profits from domestic entities to offshore entities, including (i) banks must check whether the transaction is genuine by reviewing

board resolutions regarding profit distribution, original copies of tax filing records and audited financial statements, and (ii) domestic

entities must retain income to account for previous years’ losses before remitting any profits.

Moreover, pursuant to Circular

3, domestic entities must explain in detail the sources of capital and how the capital will be used, and provide board resolutions, contracts

and other proof as a part of the registration procedure for outbound investment.

October 23, 2019, SAFE issued Circular of the State Administration of Foreign Exchange on Further Promoting the Facilitation of Cross-border

Trade and Investment, or the Circular 28, which took effect on the same day.

Circular 28 allows non-investment foreign-invested enterprises

to use their capital funds to make equity investments in China, provided that such investments do not violate the effective special entry

management measures for foreign investment (negative list) and the target investment projects are genuine and in compliance with laws.

on Foreign Debt

loan made by a foreign entity as direct or indirect shareholder in a FIE is considered to be foreign debt in China and is regulated by

various laws and regulations, including the Regulation of the People’s Republic of China on Foreign Exchange Administration, the

Interim Provisions on the Management of Foreign Debts, the Statistical Monitoring of Foreign Debts Tentative Provisions, the Detailed

Rules for the Implementation of Provisional Regulations on Statistics and Supervision of External Debt, and the Administrative Measures

for Registration of Foreign Debts.

Under these rules and regulations, a shareholder loan in the form of foreign debt made to a PRC entity

does not require the prior approval of SAFE.

However, such foreign debt must be registered with and recorded by SAFE or its local branches

within fifteen (15) business days after entering into the foreign debt contract.

Pursuant to these rules and regulations, the maximum

amount of the aggregate of (i) the outstanding balance of foreign debts with a term not longer than one year, and (ii) the accumulated

amount of foreign debts with a term longer than one year, of a FIE shall not exceed the difference between its registered total investment

and its registered capital, or Total Investment and Registered Capital Balance.

January 12, 2017, the People’s Bank of China, or PBOC, promulgated the Notice of the People’s Bank of China on Matters concerning

the Macro-Prudential Management of Full-Covered Cross-Border Financing, or PBOC Circular 9, which sets forth an upper limit for PRC entities,

including FIEs and domestic enterprises, regarding their foreign debts.

Pursuant to PBOC Circular 9, the outstanding cross-border financing

of an enterprise (the outstanding balance drawn, here and below) shall be calculated using a risk-weighted approach, or Risk-Weighted

Approach, and shall not exceed the specified upper limit, namely:

risk-weighted outstanding cross-border financing £ the upper

limit of risk-weighted outstanding cross-border financing.

Risk-weighted outstanding cross-border financing =∑ outstanding amount

of RMB and foreign currency denominated cross-border financing * maturity risk conversion factor * type risk conversion factor +∑

outstanding foreign currency denominated cross-border financing * exchange rate risk conversion factor.

Maturity risk conversion factor

shall be 1 for medium- and long-term cross-border financing with a term of more than one year and 1.5 for short-term cross-border financing

with a term of one year or less than one year.

Type risk conversion factor shall be 1 for on-balance-sheet financing and 1 for off-balance-sheet

financing (contingent liabilities) for the time being.

Exchange rate risk conversion factor shall be 0.5.

The PBOC Circular 9 further

provides that the upper limit of risk-weighted outstanding cross-border financing for enterprises, or Net Asset Limits, shall be 200%

of its net assets.

The PBOC Circular 9 does not supersede the Interim Provisions on the Management of Foreign Debts, but rather serves

as a supplement to it.

PBOC Circular 9 provided for a one-year transitional period, or the Transitional Period, from its promulgation

date for FIEs, during which period FIEs could choose to calculate their maximum amount of foreign debt based on either (i) the Total

Investment and Registered Capital Balance, or (ii) the Risk-Weighted Approach and the Net Asset Limits.

Under the PBOC Circular 9, after

the Transitional Period ends on January 11, 2018, the PBOC and SAFE will determine the cross-border financing administration mechanism

for the foreign-invested enterprises after evaluating the overall implementation of PBOC Circular 9.

In addition, according to PBOC Circular

9, a foreign loan must be filed with SAFE through the online filing system of SAFE after the loan agreement is signed and at least three

business days prior to the borrower withdraws any amount from such foreign loan.

on Foreign Exchange Registration of Overseas Investment by PRC Residents

July 4, 2014, SAFE issued Circular on Relevant Issues Concerning Foreign Exchange Control on Domestic Residents’ Offshore Investment

and Financing and Roundtrip Investment Through Special Purpose Vehicles, or SAFE Circular 37, that requires PRC residents, including

PRC resident natural persons or PRC entities, to register with SAFE or its local branch in connection with their establishment or control

of an offshore entity established for the purpose of overseas investment or financing.

The term “control” under SAFE Circular

37 is broadly defined as the operation rights, beneficiary rights or decision-making rights acquired by the PRC residents in the offshore

special purpose vehicles by such means as acquisition, trust, proxy, voting rights, repurchase, convertible bonds or other arrangements.

In addition, such PRC residents must update their SAFE registrations when the offshore special purpose vehicle undergoes material events

relating to any change of basic information (including change of such PRC citizens or residents, name and operation term), increases

or decreases in investment amount, transfers or exchanges of shares, or mergers or divisions.

SAFE further enacted the Notice on Further

Simplifying and Improving Foreign Exchange Administration Policy on Direct Investment, or SAFE Notice 13, which allows PRC residents

to register with qualified banks in connection with their establishment or control of an offshore entity established for the purpose

of overseas investment or financing.

However, remedial registration applications made by PRC residents that previously failed to comply

with the SAFE Circular 37 continue to fall under the jurisdiction of the relevant local branch of SAFE.

Few remedial registration applications

have in fact been approved by the SAFE or its local branch.

the event that a PRC resident holding interests in a special purpose vehicle fails to fulfill the required SAFE registration, the PRC

subsidiaries of that special purpose vehicle may be prohibited from distributing profits to the offshore parent and from carrying out

subsequent cross-border foreign exchange activities, and the special purpose vehicle may be restricted in its ability to contribute additional

capital into its PRC subsidiary.

Moreover, failure to comply with the various SAFE registration requirements described above could result

in liability under PRC law for evasion of foreign exchange controls.

Relating to Employment, Social Insurance and housing fund

Labor Law and The Labor Contract Law provide requirements concerning employment contracts between an employer and its employees.

employer fails to enter into a written employment contract with an employee within one year from the date on which the employment relationship

is established, the employer must rectify the situation by entering into a written employment contract with the employee and pay the

employee twice the employee’s salary for the period from the day following the lapse of one month from the date of establishment

of the employment relationship to the day prior to the execution of the written employment contract.

All employers must comply with local

minimum wage standards.

The Labor Contract Law and its implementation rules also require compensation to be paid upon certain terminations,

which significantly affects the cost of reducing workforce for employers.

In addition, if an employer intends to enforce a non-compete

provision with an employee in an employment contract or non-competition agreement, it has to compensate the employee on a monthly basis

during the term of the restriction period after the termination or ending of the labor contract.

Employers in most cases are also required

to provide a severance payment to their employees after their employment relationship are terminated.

Violations of the PRC Labor Contract

Law and the PRC Labor Law may result in the imposition of fines and other administrative and criminal liability in the case of serious

in China are required by PRC laws and regulations to participate in certain employee benefit plans, including social insurance funds,

namely a pension plan, a medical insurance plan, an unemployment insurance plan, a work-related injury insurance plan and a maternity

insurance plan, and a housing provident fund, and contribute to the plans or funds in amounts equal to certain percentages of salaries,

including bonuses and allowances, of the employees as specified by the local government from time to time at locations where they operate

their businesses or where they are located.

According to the Social Insurance Law, an employer that fails to make social insurance contributions

may be ordered to pay the required contributions within a stipulated deadline and be subject to a late fee.

If the employer still fails

to rectify the failure to make social insurance contributions within the stipulated deadline, it may be subject to a fine ranging from

one to three times the amount overdue.

According to the Regulations on Management of Housing Fund, an enterprise that fails to make housing

fund contributions may be ordered to rectify the noncompliance and pay the required contributions within a stipulated deadline;

an application may be made to a local court for compulsory enforcement.

the Enterprise Income Tax Law of the PRC, or the EIT Law, which became effective on January 1, 2008 and was subsequently amended on February

24, 2017 and December 29, 2018, and its implementing rules, enterprises are classified as resident enterprises and non-resident enterprises.

PRC resident enterprises typically pay an enterprise income tax at the rate of 25% while non-PRC resident enterprises without any branches

in the PRC should pay an enterprise income tax in connection with their income from the PRC at the tax rate of 10%.

An enterprise established

outside of the PRC with its “de facto management bodies” located within the PRC is considered a “resident enterprise,”

meaning that it can be treated in a manner similar to a PRC domestic enterprise for enterprise income tax purposes.

The implementing

rules of the EIT Law define a de facto management body as a managing body that in practice exercises “substantial and overall management

and control over the production and operations, personnel, accounting, and properties” of the enterprise.

Enterprises qualified

as “High and New Technology Enterprises” are entitled to a 15% enterprise income tax rate rather than the 25% uniform statutory

The preferential tax treatment continues as long as an enterprise can retain its “High and New Technology Enterprise”

EIT Law and the implementation rules provide that an income tax rate of 10% should normally be applicable to dividends payable to investors

that are “non-resident enterprises,” and gains derived by such investors, which (a) do not have an establishment or place

of business in the PRC or (b) have an establishment or place of business in the PRC, but the relevant income is not effectively connected

with the establishment or place of business to the extent such dividends and gains are derived from sources within the PRC.

tax on the dividends may be reduced pursuant to a tax treaty between China and other jurisdictions.

Pursuant to the Arrangement Between

the Mainland of China and the Hong Kong Special Administrative Region for the Avoidance of Double Taxation on Income, or the Double Tax

Avoidance Arrangement, and other applicable PRC laws, if a Hong Kong resident enterprise is determined by the competent PRC tax authority

to have satisfied the relevant conditions and requirements under such Double Tax Avoidance Arrangement and other applicable laws, the

10% withholding tax on the dividends the Hong Kong resident enterprise receives from a PRC resident enterprise may be reduced to 5% upon

receiving approval from in-charge tax authority.

However, based on the Notice on Certain Issues with Respect to the Enforcement of Dividend

Provisions in Tax Treaties issued on February 20, 2009 by the SAT, if the relevant PRC tax authorities determine, in their discretion,

that a company benefits from such reduced income tax rate due to a structure or arrangement that is primarily tax-driven, such PRC tax

authorities may adjust the preferential tax treatment;

and based on the Announcement on Relevant Issues Concerning the “Beneficial

Owners” in Tax Treaties issued on February 3, 2018 by the SAT and effective from April 1, 2018, which replaces the Notice on the

Interpretation and Recognition of Beneficial Owners in Tax Treaties and the Announcement on the Recognition of Beneficial Owners in Tax

Treaties by the SAT, comprehensive analysis based on the stipulated factor therein and actual circumstances shall be adopted when recognizing

the “beneficial owner” and agents and designated wire beneficiaries are specifically excluded from being recognized as “beneficial

to applicable PRC tax regulations, any entity or individual conducting business in the service industry used to be generally required

to pay a business tax at the rate of 5% on the revenues generated from providing such services.

However, if the services provided are

related to technology development and transfer, such business tax may be exempted subject to approval by the relevant tax authorities.

Whereas, pursuant to the Provisional Regulations on Value-Added Tax of the PRC and its implementation regulations, unless otherwise specified

by relevant laws and regulations, any entity or individual engaged in the sales of goods, provision of processing, repairs and replacement

services and importation of goods into China is generally required to pay a value-added tax, or VAT, for revenues generated from sales

of products, while qualified input VAT paid on taxable purchase can be offset against such output VAT.

November 2011, the Ministry of Finance and the State Administration of Taxation promulgated the Pilot Plan for Imposition of Value-Added

Tax to Replace Business Tax.

In March 2016, the Ministry of Finance and the State Administration of Taxation further promulgated the

Notice on Fully Promoting the Pilot Plan for Replacing Business Tax by Value-Added Tax, which became effective on May 1, 2016.

to the pilot plan and relevant notices, VAT is generally imposed in lieu of business tax in the modern service industries, including

the VATS, on a nationwide basis.

VAT of a rate of 6% applies to revenue derived from the provision of some modern services.

Certain small

taxpayers under PRC law are subject to reduced value-added tax at a rate of 3%.

Unlike business tax, a taxpayer is allowed to offset

the qualified input VAT paid on taxable purchases against the output VAT chargeable on the modern services provided.

April 4, 2018, the Ministry of Finance and the State Administration of Taxation issued the Notice on Adjustment of VAT Rates, which

came into effect on May 1, 2018.

According to the abovementioned notice, the taxable goods previously subject to VAT rates of 17%

and 11%, respectively, become subject to lower VAT rates of 16% and 10%, respectively, starting from May 1, 2018.

according to the Announcement on Relevant Policies for Deepening Value-added Tax Reform jointly promulgated by the Ministry of

Finance, the State Administration of Taxation and the General Administration of Customs, which became effective on April 1, 2019,

the taxable goods previously subject to VAT rates of 16% and 10%, respectively, become subject to lower VAT rates of 13% and 9%,

respectively, starting from April 1, 2019.

Under Provisional Regulations of the People’s Republic of China on Value-added Tax,

amended and effective on November 19, 2017, for entities that are VAT small taxpayers, VAT is levied at a levy rate of 3%.

February 29, 2020, the State Administration of Taxation issued the Announcement on Taxation Matters to Support Individual Businesses

in Resumption of Business, during the COVID-19, the small taxpayers are allowed to enjoy the preferred tax policy, tax rate from 3%

to 1% for the period from March 1, 2020 to December 31, 2021.

of our intellectual property is a strategic priority for our business.

We rely primarily on a combination of trademark and trade

secret laws to establish and protect our proprietary rights.

currently have three registered trademarks in China.

of April 13, 2021, the Company had 56 employees, all of which were on a full-time basis.

The following table sets forth

the number of our full-time employees categorized by function as of April 13, 2021:

We rely primarily on a combination of trademark and trade secret

laws to establish and protect our proprietary rights.

currently have seven registered trademarks in China as follows:

of our products and services bear the registered trademarks of “ ” (“水宜家”) or “Shui

Yi Jia.” These trademarks are owned by Yuwen Li, one of our shareholders.

Yuwen Li has signed a license agreement with Xixingdao

to authorize Xixingdao to use those trademarks at no cost to us.

Pursuant to the agreement with Mr.

Li, titles to those trademarks will

be transferred to Xixingdao upon the completion of the registration transfer.

currently have the following three registered works copyrights in China:

国作登字-2020-F-01147904

国作登字-2020-F-00001673

国作登字-2020-F-00001391

currently have the following eighteen registered software copyrights in China

2021SR0833407

water online distribution management system

2021SR0833438

water sales financial statement management system

2021SR0833409

water transportation service management system

2021SR0833441

Environmental

monitoring and management system for barreled water storage

2021SR0833447

management system for barreled water transport vehicles

2021SR0833448

water sales service management system

2021SR0833451

water sales customer management system

2021SR0833369

system of barreled water sales data

2021SR0833366

water storage service management system

2021SR0833450

water sales financial service management system

2021SR1675516

trading internet platform system

2021SR1675492

trading customer software

2021SR1675466

supermarket trading system

2021SR1684106

tracking label identification system software

2021SR1684107

safety data tracking system

2021SR1671192

e-commerce portal management platform

2021SR1671159

distributor management system

2021SR1671739

product online sales promotion exchange platform

currently have the following registered Internet domain names in China:

Capital Resources

of March 31, 2022, the Company had 72 full-time employees and no part-time employees in the following functions:

and marketing

and Engineering

and supply chain

and administrative

of our employees are based in the cities of Shenzhen and Dongguan, where our operations are located.

required by PRC regulations, we participate in various government statutory employee benefit plans, including social insurance

funds, namely a pension contribution plan, a medical insurance plan, an unemployment insurance plan, a work-related injury insurance

plan, a maternity insurance plan and a housing provident fund.

We are required under PRC law to make contributions to employee

benefit plans at specified percentages of the salaries, bonuses and certain allowances of our employees, up to a maximum amount

specified by the local government from time to time.

We have not made adequate employee benefit payments, and may be required

to make up the contributions for these plans as well as to pay late fees and fines.

board of directors provides oversight on certain human capital matters, including diversity, and our employee rewards and benefits program.

Under the board’s oversight, the Company conducts employee retention reviews to attract, retain and develop a workforce that aligns

with our values and strategies.

Culture and People Philosophy

believe that employees with strong people philosophy and people-based corporate culture are likely to develop a strong sense of belonging

in the organization.

We care about employees’ interests and personal preferences and offer each employee with the best job suitable

for their skillset and career interest.

We support a transparent and accessible corporate culture to make management and team leaders

accessible to employees.

We value the benefits of two-ways communications (top-down and bottom-up) to hear the voices from the employees

to promote the strong sense of belonging in our Company.

Training and Talent Development

Training and self-development programs are provided

to employees periodically which include customer service training, financial controller training, delivery procedures training, compliance

training on industry related government rules and regulations, as well as informal training.

Employees are encouraged to participate

in different training programs to enhance their problem-solving skills, advancement and continuous self-development.

support employee involvement and personal and professional development in our Company.

We engage employees and offer continued opportunities

Inclusion and Equal Opportunities

are committed to gender equality by providing fair recruitment, training and promotion opportunities for all employees.

year-end of 2021, female employees represented approximately 40% of the total workforce.

We aim to invest in developing

talented leaders across all management levels including increased women members of management at our company and subsidiaries.

addition to gender equality, we also seek to hire employees from different educational background, profession, demographics and

We have hired employees from different ethnicities, backgrounds and regions all across mainland China.

In order to retain

the best available candidates, we evaluate the qualifications and experience of the employees through interviews and professional

references to recruit the right persons from a wide range of sources.

We aim to create an inclusive workplace, further promote a diverse workforce, and bring in new cultures and energy.

required by PRC regulations, we participate in various government statutory employee benefit plans, including social insurance funds,

namely a pension contribution plan, a medical insurance plan, an unemployment insurance plan, a work-related injury insurance plan, a

maternity insurance plan and a housing provident fund.

We are required under PRC law to make contributions to employee benefit plans

at specified percentages of the salaries, bonuses and certain allowances of our employees, up to a maximum amount specified by the local

government from time to time.

We previously had not made all employee benefit payments, and may be required to make up the contributions

for these plans as well as to pay late fees and fines.

believe that we maintain a good working relationship with our employees, and we have not experienced any major labor disputes.

Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K, and amendments to reports filed pursuant

to Sections 13(a) and 15(d) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), are filed with

the Securities and Exchange Commission (the “SEC”).

Such reports and other information filed by the Company with the

SEC are available free of charge on our corporate website (http://www.fvti.show/ as soon as reasonably practicable after

they are electronically filed with or furnished to the SEC.

The SEC maintains an internet site that contains reports, proxy and

information statements, and other information regarding issuers that file electronically with the SEC at www.sec.gov.

The foregoing

website addresses are provided as inactive textual references only.

We periodically provide other information for investors on

our corporate website.

This includes press releases and other information about financial performance and information on corporate

The information contained on the websites referenced in this Form 10-K is not part of this report and is not incorporated

by reference into this filing.

Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K, and amendments to reports filed pursuant to

Sections 13(a) and 15(d) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), are filed with the Securities

and Exchange Commission (the “SEC”).

Such reports and other information filed by the Company with the SEC are available free

of charge on our corporate website (http://www.fvti.show/ as soon as reasonably practicable after they are electronically filed with

or furnished to the SEC.

The SEC maintains an internet site that contains reports, proxy and information statements, and other information

regarding issuers that file electronically with the SEC at www.sec.gov.

The foregoing website addresses are provided as inactive textual

references only.

We periodically provide other information for investors on our corporate website.

This includes press releases and other

information about financial performance and information on corporate governance.

The information contained on the websites referenced

in this Form 10-K is not part of this report and is not incorporated by reference into this filing.

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 1. Business