What changed in this filing

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Item 9A. Controls and Procedures

2023-03-31 compared with 2022-04-01 · 682 added, 809 removed, 872 unchanged (63% of the section changed)

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matters involving internal controls and procedures that our management considered to be material weakness under the standards of the

Public Company Accounting Oversight Board was lack of well-established procedures to identify, approve and review related party

transactions.

Public Company Accounting Oversight Board was lack of well-established procedures to identify, approve and review related party transactions.

Report on Internal Control over Financial Reporting

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15d-15(e) of the Exchange Act, as of December 31, 2022.

Management based the assessment on criteria for effective internal control

over financial reporting described in Internal Control - Integrated Framework issued by the Committee of Sponsoring Organizations of

the Treadway Commission (2013 framework).

Management’s assessment included an evaluation of the design of our internal control

over financial reporting and testing of the operational effectiveness of its internal control over financial reporting.

Based on this

assessment, management has concluded that as of December 31, 2021, our internal control over financial reporting is improving,

however, not effective enough to provide reasonable assurance regarding the reliability of financial reporting and the preparation

of financial statements for external purposes in accordance with U.S.

Management based the assessment on criteria for effective internal control over

financial reporting described in Internal Control - Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway

Commission (2013 framework).

Management’s assessment included an evaluation of the design of our internal control over financial

reporting and testing of the operational effectiveness of its internal control over financial reporting.

Based on this assessment, management

has concluded that as of December 31, 2022, our internal control over financial reporting is not effective enough

to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external

purposes in accordance with U.S.

generally accepted accounting principles.

In an effort to remediate

the identified material weaknesses and other deficiencies and enhance our internal controls, we have initiated, or plan to initiate,

the following series of measures or actions:

In an effort to remediate the identified material weaknesses

and other deficiencies and enhance our internal controls, we have initiated, or plan to initiate, the following series of measures or

have increased our personnel resources and technical accounting expert within the accounting function and intend to hire additional

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have established an audit committee to oversee accounting controls consistent with control objectives.

We plan to prepare written policies and procedures for operating, accounting

and financial reporting to establish a formal process to close our books monthly on an accrual basis and account for all transactions,

including equity and debt transactions.

have tested our updated controls and remediate our deficiencies in the year 2021.

Our internal control will be continuously

updated and tested in the future.

retained a director who is qualified as an Audit Committee financial expert as defined in the

Regulation S-K

Annual Report does not include an attestation report of the Company’s registered public accounting firm regarding internal control

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in Internal Control over Financial Reporting

was no change in our internal controls over financial reporting that occurred during the three months ended December 31, 2021,

which has materially affected or is reasonably likely to materially affect, our internal controls over financial reporting, except that

we have hired outside consultant to remediate our material weakness in lack of accounting and finance personnel with technical knowledge

in SEC rules and regulations.

was no change in our internal controls over financial reporting that occurred during the three months ended December 31, 2022, which

has materially affected or is reasonably likely to materially affect, our internal controls over financial reporting.

Other Information

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degree in software engineering with a concentration in financial informatics from Tianjin University.

Cheng , was appointed director on April 9, 2021.

Cheng has over twenty years of experience in the planning and development of

commercial real estate projects, and clothing industry cluster development and clothing e-commerce platform operations.

the founder and serves as Chairman of the board of directors of Dongguan City Daying Garment Wholesale Ltd, which owns and operates Dongguan

City Daying Garment Wholesale Centre, a well-known network clothing supply center in China.

As an expert on the integrated wholesale

and e-commerce business model, Mr.

Cheng serves as a director and Vice-President of the Guangdong Wholesale Industry Market Association

and the Dongguan E-Commerce Federation.

Cheng graduated from Hong Kong Institute of Fashion Technology with an associate’s

degree in marketing management.

Wang was appointed director on April 9, 2021.

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State of New York and a seasoned executive with over 30 years of professional experience in auditing, financial reporting and business

Chan is the Chief Financial Officer of Sharing Services Global Corporation (OTC:

SHRG) and President of CA Global Consulting

Inc., a company he co-founded in February 2014.

Since February 2020, he has been serving as the Director of Assurance and Advisory Services

at Wei, Wei & Co., LLP., a full-service CPA firm registered with the PCAOB.

Chan is the Chief Operating Officer of Alset Inc.

Financial Officer of Sharing Services Global Corporation (OTC:

SHRG) and President of CA Global Consulting Inc., a company he co-founded

in February 2014.

Since February 2020, he has been serving as the Director of Assurance and Advisory Services at Wei, Wei & Co., LLP.,

a full-service CPA firm registered with the PCAOB.

From July 2019 to January 2020, Mr.

Chan served as the

Chief Financial Officer of SPI Energy Co.

Chan served as the Chief Financial Officer of SPI

SPI), a Nasdaq-listed green energy solutions company.

From October 2017 to March

Chan served as the Chief Financial Officer of Helo Corp.

HLOC), a technology company with shares traded on the OTC

From October 2017 to March 2019, Mr.

Chan served as the

Chief Financial Officer of Helo Corp.

HLOC), a wellness technology company.

From September 2013 to November 2015, Mr.

Chan served as an Executive Vice President, Director and Acting CFO of Sino-Global

Shipping America, Ltd.

SINO), a logistics and shipping company with operations in China, Australia and Hong Kong.

From February

2005 to August 2013, Mr.

Chan was a partner at three full-service CPA firms in New York, including UHY LLP (from September 2012 to August

2013), Friedman LLP (from September 2011 to July 2012) and Berdon LLP (from February 2005 to August 2011).

Prior to that, he had held

executive and professional positions at various U.S.-based companies including Primedia Inc, National Broadcasting Company, Arthur Anderson,

KPMG, and PwC.

Chan holds an MBA in Finance and Investments from Baruch College of the City University of New York, and a Bachelor

of Arts in Accounting and Economics from Queens College of the City University of New York.

served as an Executive Vice President, Director and Acting CFO of Sino-Global Shipping America, Ltd.

SINO), a logistics and shipping

company with operations in China, Australia and Hong Kong.

From February 2005 to August 2013, Mr.

Chan was a partner at three full-service

CPA firms in New York, including UHY LLP (from September 2012 to August 2013), Friedman LLP (from September 2011 to July 2012) and Berdon

LLP (from February 2005 to August 2011).

Prior to that, he had held executive and professional positions at various U.S.-based companies

including Primedia Inc, National Broadcasting Company, Arthur Anderson, KPMG, and PwC.

Chan holds an MBA in Finance and Investments

from Baruch College of the City University of New York, and a Bachelor of Arts in Accounting and Economics from Queens College of the

City University of New York.

Chen was appointed director on April 9, 2021.

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of the copies of the forms received by us and written representations from certain reporting persons that they have complied with the

relevant filing requirements, we believe that, during the year ended December 31, 2021, all of our executive officers, directors

and greater-than-ten percent stockholders complied with all Section 16(a) filing requirements.

relevant filing requirements, we believe that, during the year ended December 31, 2021, all of our executive officers, directors and

greater-than-ten percent stockholders complied with all Section 16(a) filing requirements.

board of directors has reviewed the independence of our directors, applying the NASDAQ independence standards.

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business and ethical principles that govern all aspects of our business.

A copy of the code of ethics is attached as Exhibit 14.1

to this Annual Report.

A copy of the code of ethics is attached as Exhibit 14.1 to

this Annual Report.

in Certain Legal Proceedings

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Chief Financial Officer, Treasurer and Director

Kaihong Lin was appointed by the Board to serve as the Chief Financial Officer, Treasurer and a director of the Company on December

Agreements with Named Executive Officers

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currently do not have an equity compensation plan.

Directors’ compensation $84,587

was paid for directors’ services during the years ended December 31, 2021 and $nil was paid during the year

compensation $119,682 was paid for directors’ services during the year ended December 31, 2022 and $84,587 was paid during the year

ended December 31, 2021.

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Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters

following table sets forth certain information, regarding the beneficial ownership of the Company’s common stock as of March 31, 2022 by (i) each shareholder known by the Company to be the beneficial owner of 5% or more of its common stock, (ii) by each director

following table sets forth certain information, regarding the beneficial ownership of the Company’s common stock as of March 31,

2023 by (i) each shareholder known by the Company to be the beneficial owner of 5% or more of its common stock, (ii) by each director

and executive officer of the Company and (iii) by all executive officers and directors of the Company as a group.

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Kaihong Lin (2)

Minghua Cheng (3)

Chaoping Chen

Ramesh Ruben Louis

All officers and directors as a group (ten persons)

All officers and directors as a group (eight persons)

5% Shareholders

China Kaipeng Group Co., Ltd.

Minghua Cheng (4)

Gaosheng Group Co., Ltd.

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and 2,775 were issued on August 7, 2019 in private placements.

of (i) 515,732 shares of the Company’s common stock Mr.

Minghua Cheng holds directly, of which approximately 487,431 shares

were issued to Mr.

Cheng on June 28, 2018 in a private placement, 27,800 shares were issued on April 3, 2019 in a private placement,

and 500 shares were issued on August 10, 2016 in a private placement and (ii) 6,435,180 shares held through China Kaipeng Group Co.,

Ltd, a company Mr.

Cheng owns 84.12% who may be deemed to have the voting and dispositive power of such shares.

Cheng and Yumin Lin holds 84.12% and 15.88% of China Kaipeng Group Co., Ltd, respectively, and are deemed to hold the voting and

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is Second Floor, Capital City Independence Avenue Mahe Victoria, Seychelles.

Consists of (i) 515,732 shares of the Company’s common stock Mr.

Minghua Cheng holds directly, of which approximately 487,431 shares were issued to Mr.

Cheng on June 28, 2018 in a private placement,

27,800 shares were issued on April 3, 2019 in a private placement, and 500 shares were issued on August 10, 2016 in a private placement

and (ii) 6,435,180 shares held through China Kaipeng Group Co., Ltd, a company Mr.

Cheng owns 84.12% who may be deemed to have the voting

and dispositive power of such shares.

Lin is a 100% shareholder of Gaosheng Group Co., Ltd.

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Certain Relationships, Related Transactions and Director Independence

from related parties mainly consists of funds advanced to related parties as borrowings or funds advanced to pay off the Company’s

The balances are unsecured, non-interest bearing.

During the year ended December 31, 2021, the Company advanced $nil

to its related parties, and collected $614,275 repayments.

to related parties mainly consists of borrowings for working capital purpose, the balances are unsecured, non-interest bearing and due

During the year ended December 31, 2021, the Company borrowed $464,958 from these related parties, and repaid $684,784.

addition, during the year ended December 31, 2021, these related parties paid expenses on the Company’s behalf in an amount of

Company sold its wine and liquor products to Mr.

Kaihong Lin, the Chief Financial Officer, Treasurer and a director of the Company, in

the amounts of $407 and $51 for the years ended December 31, 2021 and 2020, respectively.

During the year ended December 31, 2021

the outstanding receivables due from Mr.

Kaihong Lin is $nil.

As of December 31, 2020, the outstanding receivables due from Mr.

Kaihong Lin was in the amounts of $215,973, the amount due is unsecured and non-interest bearing.

As of the reporting date, the amount

due from the director is $0.

December 16, 2020, Mr.

Yumin Lin, our Chairman, Chief Executive Officer, President and Secretary, made working capital advances and loans

to the Company for an aggregate amount of $796,116.

On the same day, the board of directors of the Company approved to issue an aggregate

of 485,439 shares of common stock of the Company, par value $0.001 per share (the “Conversion Shares”), to him in lieu of

the full payment of the outstanding balance payable to him in cash.

And the Company sold its wine and liquor products to Mr.

in the amount of $389 for the year ended December 31, 2021.

As of December 31, 2021, the amount due to

Yumin Lin was $344,218, the amount due is unsecured and non-interest bearing.

As of the reporting date, the amount due

from the director is $0.

The Company has two operating lease agreements with

related parties:

Qingmei Lin, operating lease for the premises in Dongguan City, PRC.

The agreement covers the period from January

1, 2019 to April 30, 2027.

The monthly rent expense is RMB10,000 (approximately $1,450).

Ye Hongwei, operating lease for the

premises in Dongguan City, PRC.

The agreement covers the period from September 27, 2020 to September 30, 2023.

The monthly rent expense

is RMB960 (Approximately $148).

more related party transactions, see Note 9 of the accompanying consolidated financial statements.

As of December 31, 2022 and

2021, the Company had accounts receivable from related parties in amounts of $146,087 and $57,609, prepayments to related parties in the

amounts of $1,102,861 and $1,813,904, deposits to related parties in the amounts of $758,445 and $1,596,075, and accounts payable to related

parties in amounts of $80,426 and $17,789, respectively.

As of December 31, 2022 and

2021, the Company had outstanding receivables due from a related party in the amounts of $nil and $26,364, respectively, which mainly

consisted of funds advanced to a related party as borrowings or funds advances to pay off the Company’s expenses.

The balance was

unsecured and non-interest bearing.

As of December 31, 2022 and

2021, the Company had outstanding payables due to its related parties in the amounts of $565,675 and $683,981, respectively, which mainly

consisted of borrowings for working capital purpose.

The balances were unsecured, non-interest bearing and due on demand.

During the years ended December

31, 2022 and 2021, the Company’s related parties paid expenses on behalf of the Company in the amounts of $135,774 and $344,218,

respectively.

During the years ended December

31, 2022 and 2021, the Company sold products to its related parties in the amounts of $238,824 and $684,862, respectively, purchased goods

from its related parties in the amounts of $1,309,553 and $729,302, and incurred cost of revenues from related parties in the amounts

of $1,302,498 and $707,322, respectively.

During the years ended December

31, 2022 and 2021, the rental expenses to related parties were $20,736 and $32,677, respectively.

Our related parties are primarily those who are significantly influenced

by the Company based on our common business relationships.

For more related party transactions, see Note 8 to the accompanying consolidated

financial statements.

Principal Accountant Fees and Services

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above audit services were pre-approved by the Audit Committee of the Board of Directors for the fiscal years ended December 31, 2022

2021 and 2020, which concluded that the provision of such services by MaloneBailey, LLP was compatible with maintenance of the firm’s independence in the conduct of its audits.

Foreign Companies Accountable Act (HFCAA)

common stock may be prohibited from trading on a national exchange or “over-the-counter” markets under the HFCAA if

the PCAOB determines it is unable to inspect or investigate completely our auditors for three consecutive years beginning

Furthermore, on June 22, 2021, the U.S.

Senate passed the Accelerating Holding Foreign Companies Accountable Act (“AHFCAA”),

which, if signed into law, would amend the HFCAA and require the SEC to prohibit an issuer’s securities from trading on any U.S.

stock exchanges if its auditor is not subject to PCAOB inspections for two consecutive years instead of three consecutive years.

to the HFCAA, the PCAOB issued a Determination Report on December 16, 2021 which found that the PCAOB is unable to inspect or investigate

completely registered public accounting firms headquartered in:

(1) mainland China and (2) Hong Kong.

In addition, the PCAOB’s

report identified the specific registered public accounting firms which are subject to these determinations.

auditor, MaloneBailey, LLP, is headquartered in Houston, Texas, with offices in Beijing and Shenzhen.

and has been inspected by the PCAOB

on a regular basis.

MaloneBailey, LLP is a firm registered with the PCAOB and is required by the laws of the U.S.

to undergo regular

inspections by the PCAOB to assess its compliance with the laws of the U.S.

and professional standards.

MaloneBailey, LLP has been subject

to PCAOB inspections, and is not among the PCAOB-registered public accounting firms headquartered in the PRC or Hong Kong that are subject

to PCAOB’s determination on December 16, 2021 of having been unable to inspect or investigate completely.

Notwithstanding

the foregoing, in the future, if it is determined that the PCAOB is unable to inspect or investigate our auditor completely, or if

there is any regulatory change or step taken by PRC regulators that does not permit MaloneBailey, LLP to provide audit documentations

located in China or Hong Kong to the PCAOB for inspection or investigation, or the PCAOB expands the scope of the Determination

so that we are subject to the HFCAA, as the same may be amended, you may be deprived of the benefits of such inspection.

reports not issued by auditors that are completely inspected or investigated by the PCAOB, or a lack of PCAOB inspections of audit work

undertaken in China that prevents the PCAOB from regularly evaluating our auditors’ audits and their quality control procedures,

could result in a lack of assurance that our financial statements and disclosures are adequate and accurate.

which could result in

limitation or restriction to our access to the U.S.

capital markets and trading of our securities, including trading on the national

exchange and trading on “over-the-counter” markets, may be prohibited under the HFCAA.

See “Risk Factors — Our

shares may be delisted under the Holding Foreign Companies Accountable Act if the PCAOB is unable to inspect our auditors for three consecutive

years beginning in 2021, or for two consecutive years if the Accelerating Holding Foreign Companies Accountable Act becomes law;

the delisting of our shares, or the threat of their being delisted, may materially and adversely affect the value of your investment”

and “Risk Factors — Newly enacted Holding Foreign Companies Accountable Act, recent regulatory actions taken by the

SEC and the Public Company Accounting Oversight Board, and proposed rule changes submitted by Nasdaq calling for additional and more

stringent criteria to be applied to China-based public companies could add uncertainties to our capital raising activities and compliance

costs” for more information.

and 2021, which concluded that the provision of such services by MaloneBailey, LLP was compatible with maintenance of the firm’s

independence in the conduct of its audits.

Exhibits and Financial Statement Schedules

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Certificate of Change (incorporated by reference to Exhibit 3.1 to the Company’s Current Report on Form 8-K filed with the SEC on October 21, 2021)

of securities registered pursuant to Section 12 of the Securities Exchange Act of 1934, as amended

Description of securities registered pursuant to Section 12 of the Securities Exchange Act of 1934, as amended

Employment Agreement, dated as of December 20, 2019, by and between Fortune Valley Treasures, Inc.

and Kaihong Lin (incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K filed with the SEC on December 20, 2019)

Agreement to Equity Interest Transfer Agreement, dated January 6, 2021, by and among DaXingHuaShang Investment (Hong Kong) Ltd, Valley

Holdings Limited, Angel International Investment Holdings Limited and Fortune Valley Treasures, Inc.

(incorporated by reference

to Exhibit 10.6 to the Company’s Annual Report on Form 10-K filed with the SEC on April 26, 2021)

of Ethics (incorporated by reference to Exhibit 14.1 to the Company’s Annual Report on Form 10-K filed with the SEC on

April 26, 2021)

of the registrant

Certification

of Chief Executive Officer pursuant to Securities Exchange Act of 1934 Rule 13a-14(a) or 15d-14(a).

Certification

of Chief Financial Officer pursuant to Securities Exchange Act of 1934 Rule 13a-14(a) or 15d-14(a).

Certification

of Chief Executive Officer pursuant to Securities Exchange Act of 1934 Rule 13a-14(b) or 15d-14(b) and 18 U.S.C.

Section 1350, as

adopted pursuant to Section 906 of the Sarbanes- Oxley Act of 2002.

Certification

of Chief Financial Officer pursuant to Securities Exchange Act of 1934 Rule 13a-14(b) or 15d-14(b) and 18 U.S.C.

Section 1350, as

adopted pursuant to Section 906 of the Sarbanes- Oxley Act of 2002.

Supplemental Agreement to Equity Interest Transfer Agreement, dated January 6, 2021, by and among DaXingHuaShang Investment (Hong Kong) Ltd, Valley Holdings Limited, Angel International Investment Holdings Limited and Fortune Valley Treasures, Inc.

(incorporated by reference to Exhibit 10.6 to the Company’s Annual Report on Form 10-K filed with the SEC on April 26, 2021)

Code of Ethics (incorporated by reference to Exhibit 14.1 to the Company’s Annual Report on Form 10-K filed with the SEC on April 26, 2021)

Subsidiaries of the registrant

Certification of Chief Executive Officer pursuant to Securities Exchange Act of 1934 Rule 13a-14(a) or 15d-14(a).

Certification of Chief Financial Officer pursuant to Securities Exchange Act of 1934 Rule 13a-14(a) or 15d-14(a).

Certification of Chief Executive Officer pursuant to Securities Exchange Act of 1934 Rule 13a-14(b) or 15d-14(b) and 18 U.S.C.

Section 1350, as adopted pursuant to Section 906 of the Sarbanes- Oxley Act of 2002.

Certification of Chief Financial Officer pursuant to Securities Exchange Act of 1934 Rule 13a-14(b) or 15d-14(b) and 18 U.S.C.

Section 1350, as adopted pursuant to Section 906 of the Sarbanes- Oxley Act of 2002.

XBRL Instance Document

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Consolidated Balance Sheets

Statements of Operations and Comprehensive Income (Loss)

Consolidated Statements of Changes in Equity (Deficit)

Consolidated Statements of Operations and Comprehensive Income (Loss)

Consolidated Statements of Stockholders’ Equity

Consolidated Statements of Cash Flows

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OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

the Shareholders and Board of Directors of

Valley Treasures, Inc.

on the Financial Statements

have audited the accompanying consolidated balance sheet of Fortune Valley Treasures, Inc.

and its subsidiaries (the “Company”)

as of December 31, 2021 and 2020, and the related consolidated statements of operations and comprehensive income (loss), stockholders’

equity, and cash flows for the years then ended, and the related notes (collectively referred to as the “financial statements”).

In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of December

31, 2021 and 2020, and the results of their operations and their cash flows for the years then ended, in conformity with accounting principles

generally accepted in the United States of America.

financial statements are the responsibility of the Company’s management.

Our responsibility is to express an opinion on the Company’s

financial statements based on our audits.

We are a public accounting firm registered with the Public Company Accounting Oversight Board

(United States) (“PCAOB”) and are required to be independent with respect to the Company in accordance with the U.S.

securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

conducted our audits in accordance with the standards of the PCAOB.

Those standards require that we plan and perform the audit to obtain

reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud.

is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting.

As part of our audits

we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion

on the effectiveness of the Company’s internal control over financial reporting.

To the Shareholders and Board of Directors of

Fortune Valley Treasures, Inc.

Opinion on the Financial Statements

We have audited the accompanying consolidated balance

sheets of Fortune Valley Treasures, Inc.

and its subsidiaries (the “Company”) as of December 31, 2022 and 2021, and the related

consolidated statements of operations and comprehensive income (loss), stockholders’ equity, and cash flows for the years then ended,

and the related notes (collectively referred to as the “financial statements”).

In our opinion, the financial statements present

fairly, in all material respects, the financial position of the Company as of December 31, 2022 and 2021, and the results of their operations

and their cash flows for the years then ended, in conformity with accounting principles generally accepted in the United States of America.

Basis for Opinion

These financial statements are the responsibility

of the Company’s management.

Our responsibility is to express an opinion on the Company’s financial statements based on our

We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (“PCAOB”)

and are required to be independent with respect to the Company in accordance with the U.S.

federal securities laws and the applicable

rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audits in accordance with the standards

of the PCAOB.

Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements

are free of material misstatement, whether due to error or fraud.

The Company is not required to have, nor were we engaged to perform,

an audit of its internal control over financial reporting.

As part of our audits we are required to obtain an understanding of internal

control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control

over financial reporting.

Accordingly, we express no such opinion.

audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error

or fraud, and performing procedures that respond to those risks.

Such procedures included examining, on a test basis, evidence regarding

the amounts and disclosures in the financial statements.

Our audits also included evaluating the accounting principles used and significant

estimates made by management, as well as evaluating the overall presentation of the financial statements.

We believe that our audits

provide a reasonable basis for our opinion.

Audit Matters

audit matters are matters arising from the current period audit of the financial statements that were communicated or required to be

communicated to the audit committee and that:

(1) relate to accounts or disclosures that are material to the financial statements and

(2) involved our especially challenging, subjective, or complex judgments.

We determined that there are no critical audit matters.

Our audits included performing procedures to assess

the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond

to those risks.

Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements.

Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating

the overall presentation of the financial statements.

We believe that our audits provide a reasonable basis for our opinion.

Critical Audit Matter

The critical audit matter communicated below is a

matter arising from the current period audit of the financial statements that was communicated or required to be communicated to the audit

committee and that:

(1) relates to accounts or disclosures that are material to the financial statements and (2) involved our especially

challenging, subjective, or complex judgments.

The communication of critical audit matter does not alter in any way our opinion on the

financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion

on the critical audit matter or on the accounts or disclosures to which it relates.

Impairment of Intangible Asset and Goodwill

Description of the Matter

As discussed in Note 2 to the consolidated financial

statements, the Company reviews its long-lived assets for impairment and performs a goodwill impairment assessment on an annual basis

or more frequently whenever events or changes in circumstances indicate that an impairment may exist.

The Company had a goodwill balance

of $1.4 million and an intangible asset balance, in the form of distribution channel, of $2.3 million as of December 31, 2021 related

to the acquisition of 90% equity interest of Dongguan Xixingdao Technology Co., Ltd.

(“Xixingdao”) in 2020.

During the year

ended December 31, 2022, the Company recognized a non-cash impairment loss of $1.0 million on distribution channel and a non-cash impairment

loss of $0.9 million on goodwill.

The evaluation of the intangible asset and goodwill

involves the comparison of the fair values of the distribution channel and the reporting unit, respectively, to their carrying values.

The fair values were calculated based upon valuation techniques under income approach with the assistance of a specialist engaged by the

Company, which required management to make significant estimates and assumptions related to forecasted revenues and cash flows, and the

discount rates.

We identified the evaluation of the intangible

asset and goodwill impairment analysis as a critical audit matter.

A high degree of subjective auditor

judgment was required in performing procedures and evaluating audit evidence relating to the valuation techniques and significant assumptions

used by management in determining the fair values .

How We Addressed the Matter in Our Audit

Our audit procedures related to the intangible asset

and goodwill impairment analysis included the following, among others:

1) We obtained an understanding of the work of the Company’s

specialist and the management’s controls over the intangible asset and goodwill impairment assessment process;

2) We compared management’s

forecasted revenues and cash flows to the actual results;

3) We tested the completeness, accuracy and relevance of the underlying data

used in the valuation models;

4) With the assistance of valuation professionals with specialized skills and knowledge, we evaluated the

appropriateness of the valuation methods, the reasonableness of significant inputs and assumptions used;

and 5) We evaluated the adequacy

of the Company’s disclosures related to the intangible asset and goodwill impairment.

MaloneBailey, LLP

1 unchanged sentence

have served as the Company’s auditor since 2021.

Shenzhen, China

Valley Treasures, Inc.

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Cash and cash equivalents

Accounts receivable (including $ 43,477 and $ 239,468 from

related parties as of December 31, 2021 and 2020, respectively)

Prepayments and other current assets (including $ 1,813,904 and $ 298,383

to related parties as of December 31, 2021 and 2020, respectively)

Due from related parties

Accounts receivable (including $ 146,087 and

$ 57,609 from related parties as of December 31, 2022 and 2021, respectively)

Prepayments and other current assets, net (including

$ 1,102,861 and $ 1,813,904 to related parties as of December 31, 2022 and 2021, respectively)

Due from related party

Total current assets

Non-current assets

Deposits paid (including $ 1,596,075 and $ 526,101 to

related parties as of December 31, 2021 and 2020, respectively)

Deposits paid, net (including $ 758,445 and $ 1,596,075

to related parties as of December 31, 2022 and 2021, respectively)

Property and equipment, net

Operating lease right-of-use assets

Operating lease right-of use assets, related parties

Operating lease right-of-use assets, related

Intangible assets, net

1 unchanged sentence

Current liabilities

Operating lease obligations - current

Operating lease obligations, related parties - current

Accounts payable (including $ 17,789 and $ 87,469 to related parties as of

December 31, 2021 and 2020, respectively)

Operating lease obligations

Operating lease obligations, related parties

Accounts payable (including $ 80,426 and $ 17,789

to related parties as of December 31, 2022 and 2021, respectively)

Accrued liabilities

1 unchanged sentence

Income tax payable

Customer advances (including $ nil and $ 15,011 from related party as of

December 31, 2021 and 2020, respectively)

Customer advances

Due to related parties

2 unchanged sentences

Operating lease obligations – non-current

Operating lease obligations, related parties – non-current

Operating lease obligations, related parties

– non-current

Bank and other borrowings

1 unchanged sentence

Stockholders’ Equity

Common stock ( 150,000,000

shares authorized, 15,655,038

shares issued and outstanding as of December 31, 2021 and 2020) *

Common stock ( 150,000,000 shares authorized, 15,655,038 shares issued

and outstanding as of December 31, 2022 and 2021)

Additional paid-in capital

2 unchanged sentences

( 2,561,681 )

Accumulated other comprehensive income

Accumulated other comprehensive

income (loss)

Total Fortune Valley Treasures, Inc.

stockholders’ equity

stockholders’

Noncontrolling interests

Total Stockholders’ Equity

Total Liabilities and Stockholders’ Equity

effect of the Reverse Stock Split, See Note 12

Total Stockholders’

Total Liabilities and

Stockholders’ Equity

accompanying notes to the consolidated financial statements

2 unchanged sentences

the Years ended December 31, 2022 and 2021

Net revenues (including $ 495,330 and $ 843,828

from related parties for the years ended December 31, 2021 and 2020, respectively)

Cost of revenues (including $ 663,976 and $ 308,381

from related parties for the years ended December 31, 2021 and 2020, respectively)

Other operating income

Net revenues (including $ 238,824

and $ 684,862 from related parties for the years ended December 31, 2022 and 2021, respectively)

Cost of revenues (including

$ 1,302,498 and $ 707,322 from related parties for the years ended December 31, 2022 and 2021, respectively)

Operating expenses:

1 unchanged sentence

General and administrative expenses

Other operating expenses

Impairment loss on intangible asset

Impairment loss on goodwill

2 unchanged sentences

Other income (expense):

Loss from conversion of related party loan

Interest income

Interest expense

Other income (expense), net

Other income (expense),

Income (loss) before income tax

3 unchanged sentences

$ ( 2,156,679 )

Net income (loss) attributable to noncontrolling interests

Net income (loss) attributable to Fortune Valley Treasures, Inc.

Net income (loss)

attributable to noncontrolling interests

Net income (loss) attributable

to Fortune Valley Treasures, Inc.

( 1,942,723 )

Other comprehensive income:

Foreign currency translation gain

Other comprehensive income (loss):

currency translation gain (loss)

Total comprehensive income (loss)

( 2,964,445 )

comprehensive income (loss)

attributable to noncontrolling interests

Comprehensive income (loss)

attributable to Fortune Valley Treasures, Inc.

comprehensive

income (loss) attributable to noncontrolling interests

Comprehensive income

(loss) attributable to Fortune Valley Treasures, Inc.

$ ( 2,667,854 )

Earnings (loss) per share

Basic and diluted earnings (loss)

Basic and diluted weighted average shares outstanding*

Given effect of the Reverse Stock Split, see Note 12

Basic and diluted earnings

(loss) per share *

Basic and diluted weighted average shares

outstanding *

effect of the Reverse Stock Split, see Note 11

accompanying notes to the consolidated financial statements

Valley Treasures, Inc.

Statements of Stockholders’ Equity (Deficit)

Statements of Stockholders’ Equity

the Years ended December 31, 2022 and 2021

Deficit and Statutory

Other Comprehensive

Comprehensive

Non controlling

Stockholders’ Equity

Stockholders’

Income (Loss)

Balance as of December 31, 2020 *

$ ( 4,341,417 )

$ ( 760,504 )

Shares issued for conversion of related party loan*

Shares issued for acquisition of subsidiary*

Noncontrolling interests arising from acquisition of subsidiary

( 3,255,564 )

( 3,647,353 )

Foreign currency translation adjustment

2 unchanged sentences

Foreign currency translation adjustment

( 1,942,723 )

( 2,156,679 )

Net income (loss)

( 1,942,723 )

( 2,156,679 )

Balance as of December 31, 2022

$ ( 4,504,404 )

Given effect of the Reverse Stock Split, see Note 12

$ ( 180,826 )

effect of the Reverse Stock Split, see Note 11

accompanying notes to the consolidated financial statements

2 unchanged sentences

the Years ended December 31, 2022 and 2021

Cash flows from operating activities

Cash flows from operating

Net income (loss)

$ ( 2,156,679 )

Adjustments to reconcile net income (loss) to net cash

provided by (used in) operating activities:

Depreciation and amortization expense

Adjustments to reconcile

net income (loss) to net cash provided by (used in) operating activities:

Depreciation and amortization

Non-cash lease expense

Allowance for doubtful accounts

Impairment loss on intangible asset

Impairment loss on goodwill

Loss from conversion of related party loan

Changes in operating assets and liabilities

Changes in operating assets

and liabilities

Accounts receivable

( 2,417,438 )

Prepayments and other current assets

Prepayments and other current

( 1,033,644 )

( 1,755,603 )

Due from related parties

Deposits paid

Deposits paid, net

( 1,591,577 )

4 unchanged sentences

Income tax payable

Operating lease obligations

Cash provided by

(used in) operating activities

Cash flows from investing activities

Acquisition of intangible asset

Advance to related parties

Proceeds from acquisition of subsidiary

Repayment of advance to related parties

Purchase of property and equipment

Net cash provided by (used in) investing activities

Cash flows from financing activities

lease obligations

provided by (used in) operating activities

Cash flows from investing

Acquisition of intangible

Repayment of advance to

related parties

of property and equipment

cash provided by (used in) investing activities

Cash flows from financing

Borrowings from related

Borrowings from a revolving credit line

Borrowings from bank loans

Borrowings from a third

Repayments to related parties

to bank loans

Repayments to a third party

Borrowings from related parties

Borrowings from a third party

Proceeds from bank borrowings, net

Net cash used in financing activities

Effect of exchange rate changes on cash and cash equivalents

Net changes in cash and cash equivalents

Cash and cash equivalents–beginning of the year

Cash and cash equivalents–end of the year

Supplementary cash flow information:

Interest paid

Income taxes paid

Non-cash investing and financing activities

Expenses paid by related parties on behalf of the Company

Remeasurement of

the operating lease obligation and right-of-use asset due to lease modification

Operating lease right-of-use assets obtained in exchange for operating lease obligations

Shares issued for acquisition of subsidiary

Related party loan settled with issuance of shares

cash provided by (used in) financing activities

of exchange rate changes on cash and cash equivalents

Net changes in cash and

cash equivalents

and cash equivalents–beginning of the year

and cash equivalents–end of the year

Supplementary cash flow

Non-cash investing and financing

paid by related parties on behalf of the Company

Remeasurement

of the operating lease obligation and right-of-use asset due to lease modification

lease right-of-use assets obtained in exchange for operating lease obligations

accompanying notes to the consolidated financial statements

3 unchanged sentences

of Nevada on March 21, 2014.

The Company’s current primary business operations of wholesale distribution and retail sales of alcoholic

The Company’s primary business operations of wholesale distribution and retail sales of alcoholic

beverages of wine and distilled liquors, and drinking water distribution and delivery are conducted through its subsidiaries in the People’s

Republic of China (“PRC”).

January 5, 2018, the Company changed its fiscal year end from August 31 to December 31.

January 29, 2018, the Company filed a Certificate of Amendment with the State of Nevada to increase its authorized shares to 3,000,000,000 .

April 11, 2018, the Company entered into a share exchange agreement by and among DaXingHuaShang Investment Group Limited (“DIGLS”)

1 unchanged sentence

1.) Yumin Lin, 2.) Gaosheng Group Co., Ltd.

and 3.) China Kaipeng Group Co., Ltd whereby the Company newly issued

300,000,000 shares of its common stock in exchange for all the outstanding shares in DIGLS.

This transaction has been accounted for as

a reverse takeover transaction and a recapitalization of the Company whereby the Company, the legal acquirer, is the accounting acquiree,

and DIGLS, the legal acquiree, is the accounting acquirer;

accordingly, the Company’s historical statement of stockholders’

equity has been retroactively restated to the first period presented.

was incorporated with limited liability in the Republic of Seychelles on July 4, 2016, with share capital of $ 100,000 divided into 250,000,000

ordinary shares with $ 0.0004 par value.

DIGLS wholly owns DaXingHuaShang Investment (Hong Kong) Limited (“DILHK”).

was incorporated in Hong Kong on June 22, 2016 as an investment holding company with limited liability.

DILHK was previously wholly owned

On November 11, 2016, Mr.

Yumin Lin, transferred 100 % of his ownership in DILHK to DIGLS.

DILHK wholly owns Qianhai

DaXingHuaShang Investment (Shenzhen) Co.

(“QHDX”) which was incorporated with limited liability on November 3, 2016

in the PRC as a wholly foreign-owned enterprise.

QHDX wholly owns Dongguan City France Vin Tout Ltd.

FTVL was incorporated

on May 31, 2011 in the PRC with limited liability.

FTVL was previously owned and controlled by Mr.

FTVL has a license to sell

foods up through September 10, 2022.

On November 20, 2016, Mr.

Yumin Lin transferred his ownership in FTVL to QHDX for nominal consideration.

The share transfers detailed above by and among Mr.

Yumin Lin, DIGLS, DILHK, QHDX, and FVTL have been accounted for as a series of business

combinations of entities under common control;

accordingly, the values in these financial statements reflect the carrying values of those

entities, and no goodwill was recorded as a result of these transactions.

March 1, 2019, the Company entered into a sale and purchase agreement (the “SP Agreement”) to acquire 100% of the equity

interest of Jiujiu Group Stock Co., Ltd.

and 3.) China Kaipeng Group Co., Ltd.

whereby the Company newly issued

15,000,000 shares (given effect of the Reverse Stock Split, see Note 11) of its common stock in exchange for all the outstanding shares

This transaction has been accounted for as a reverse takeover transaction and a recapitalization of the Company whereby the

Company, the legal acquirer, is the accounting acquiree, and DIGLS, the legal acquiree, is the accounting acquirer;

accordingly, the

Company’s historical statement of stockholders’ equity has been retroactively restated to the first period presented.

March 1, 2019, the Company entered into a sale and purchase agreement (the “SP Agreement”) to acquire 100% of the shares

of Jiujiu Group Stock Co., Ltd.

(“JJGS”), a company incorporated under the laws of the Republic of Seychelles.

transaction closed on March 1, 2019.

Pursuant to the SP Agreement, the Company issued 100 shares of its common stock to JJGS to acquire

100 % of the shares of JJGS for a cost of $ 150 .

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

all of the equity interest of Jiujiu (HK) Industry Limited (“JJHK”) and Jiujiu (Shenzhen) Industry Co., Ltd.

JJGS, JJHK and JJSZ did not have any material assets or liabilities as of December 31, 2019, and they did not have any substantial operations

or active business during the year ended December 31, 2019.

July 13, 2019, FVTI and QHDX entered into an equity interest transfer agreement (the “Makaweng Agreement”), which was later

amended on September 12, 2019, with Xingwen Wang, a shareholder and legal representative of Yunnan Makaweng Wine & Spirits Co., Ltd.

(“Makaweng”), a PRC limited liability company formed in 2015.

Pursuant to the Makaweng Agreement, QHDX agreed to purchase

51 % of Makaweng’s equity interest from Xingwen Wang in exchange for shares of FVTI’s common stock.

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 Xingwen Wang.

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

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.

The transaction

closed on March 1, 2019.

Pursuant to the SP Agreement, the Company issued 5 shares (given effect of the Reverse Stock Split, see Note

11) of its common stock to JJGS to acquire 100 % of the shares of JJGS for a cost of $ 150 .

After the closing, JJGS became the Company’s

wholly owned subsidiary.

JJGS owns all of the equity interest of Jiujiu (HK) Industry Limited (“JJHK”) and Jiujiu (Shenzhen)

Industry Co., Ltd.

JJGS, JJHK and JJSZ did not have any material assets or liabilities as of December 31, 2019,

and they did not have any substantial operations or active business during the year ended December 31, 2019.

June 22, 2020, the Company entered into a sale and purchase agreement along with Qianhai DaXingHuaShang Investment (Shenzhen) Co., Ltd.,

a company incorporated in the PRC and a wholly-owned subsidiary of FVTI (“QHDX”), to acquire 90 % of the equity interest of

Dongguan Xixingdao Technology Co., Ltd.

(“Xixingdao”), a company incorporated in the PRC, in exchange for 4,862,681 shares

of the Company’s common stock.

The Company obtained the control of Xixingdao on August 31, 2020, the shares were issued on December

Xixingdao became the Company’s subsidiary since August 31, 2020.

On January 6, 2021,

FVTI, JJGS, Valley Holding Limited (“Valley Holdings”) and Angel International Investment Holdings Limited (the “Valley

Holdings Seller”) signed a termination agreement, pursuant to which the parties mutually agreed to terminate the original equity

interest transfer agreement signed on March 16, 2020.

On the same date, FVTI, DILHK, Valley Holdings and the Valley Holdings Seller entered

into a new equity interest transfer agreement, pursuant to which DILHK agreed to purchase 70 % of Valley Holdings’ equity interest

(the “Valley Holdings Equity Transfer”) from the Valley Holdings seller in consideration of FVTI’s common shares valued

at $ 12 million (subject to adjustments in the event Valley Holdings’ net income 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).

As of the date of this

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

On February 28, 2021,

FVTI, QHDX and the original shareholders of Foshan BaiTaFeng Beverage Development Co., Ltd.

(“BTF”) signed a termination

agreement, pursuant to which the parties mutually agreed to terminate the original equity interest transfer agreement signed on December

31, 2019 (“BTF Agreement”).

The BTF Agreement was terminated effective February 28, 2021 and the parties have no further

rights or obligations under the BTF Agreement.

The parties further agreed to waive their rights to any claims that may arise under the

BTF Agreement.

a company incorporated in China and a wholly-owned subsidiary of FVTI (“QHDX”), to acquire 90 % of the shares of Dongguan

Xixingdao Technology Co., Ltd.

(“Xixingdao”), a company incorporated in the PRC, from certain shareholders of Xixingdao in

exchange for 243,134 shares (given effect of the Reserve Stock Split, see Note 11) of the Company’s common stock.

The Company obtained

the control of Xixingdao on August 31, 2020, the shares were issued on December 28, 2020.

Xixingdao became the Company’s subsidiary

since August 31, 2020.

January 6, 2021, FVTI, JJGS, Valley Holding Limited (“Valley Holdings”) and Angel International Investment Holdings Limited

(the “Valley Holdings Seller”) signed a termination agreement, pursuant to which the parties mutually agreed to terminate

the original equity interest transfer agreement signed on March 16, 2020.

On the same date, FVTI, DILHK, Valley Holdings and the Valley

Holdings Seller entered into a new equity interest transfer agreement, pursuant to which DILHK agreed to purchase 70 % of Valley Holdings’

equity interest from the Valley Holdings seller (the “Valley Holdings Agreement”).

On July 8, 2022, FVTI, DILHK, Valley Holdings

and the Valley Holdings Seller signed a termination agreement, pursuant to which the parties mutually agreed to terminate the Valley

Holdings Agreement signed on March 16, 2020.

The Valley Holdings Agreement was terminated effective July 8, 2022 and the parties have

no further rights or obligations under the Valley Holdings Agreement.

The parties further agreed to waive their rights to any claims

that may arise under the Valley Holdings Agreement.

As of the date of the termination agreement, no equity interest of Valley Holdings

had been transferred to FVTI, DILHK or Valley Holdings.

February 28, 2021, FVTI, QHDX and the original shareholders of Foshan BaiTaFeng Beverage Development Co., Ltd.

(“BTF”) signed

a termination agreement, pursuant to which the parties mutually agreed to terminate the original equity interest transfer agreement signed

on December 31, 2019 (“BTF Agreement”).

The BTF Agreement was terminated effective February 28, 2021 and the parties have

no further rights or obligations under the BTF Agreement.

The parties further agreed to waive their rights to any claims that may arise

under the BTF Agreement.

As of the date of the termination agreement, no equity interest of BTF had been transferred to QHDX.

1 unchanged sentence

of presentation

consolidated financial statements, accompanying notes, and related disclosures have been prepared pursuant to the rules and regulations

Securities and Exchange Commission (“SEC”).

These financial statements have been prepared using the accrual basis

of accounting in accordance with the generally accepted accounting principles in the United States (“U.S.

The Company’s

fiscal year end is December 31.

The Company’s financial statements are presented in U.S.

The accompanying consolidated

financial statements have been prepared assuming that the Company will continue as a going concern, which contemplates the realization

of assets and fulfillment of obligations in the normal course of business.

The realization of assets and fulfillment of obligations in

the normal course of business is dependent on, among other things, the Company’s ability to generate sufficient cash flows from

operations, and the Company’s ability to arrange adequate financing arrangements.

Historically, the Company

had recurring net losses and negative operating cash flows that raised substantial doubt about its ability to continue as a going concern.

The Company has been improving its operations subsequent to the acquisition of Xixingdao in August 2020.

In assessing its going concern

in the next twelve months following the issuance of the financial statements for the year ended December 31, 2021, management considered

the projected revenues and expenses for the next twelve months.

Although the Company has generated a negative operating cash flow of

$ 457,142 during the year ended December 31, 2021, it has reported a net income of $ 1,963,469 .

In addition, the Company had a working

capital of $ 3,351,962 as of December 31, 2021.

Based on the Company’s efforts in improving its operations and the significant working

capital increase as of December 31, 2021, the management believes that the substantial doubt has been alleviated.

These consolidated financial statements, accompanying

notes, and related disclosures have been prepared pursuant to the rules and regulations of the U.S.

Securities and Exchange Commission

These financial statements have been prepared using the accrual basis of accounting in accordance with the generally

accepted accounting principles in the United States (“U.S.

The Company’s fiscal year end is December 31.

Company’s financial statements are presented in U.S.

of consolidation

consolidated financial statements include the accounts of the Company and its subsidiaries.

All intercompany accounts and transactions

have been eliminated.

The results of subsidiaries acquired during the respective periods are included in the consolidated statements

of operations from the effective date of acquisition or up to the effective date of disposal, as appropriate.

The portion of the income

or loss applicable to noncontrolling interests in subsidiaries is reflected in the consolidated statements of operations.

As of December 31, 2021, details of the Company’s

major subsidiaries were as follows:

The consolidated financial statements

include the accounts of the Company and its subsidiaries.

All intercompany accounts and transactions have been eliminated.

of subsidiaries acquired during the respective periods are included in the consolidated statements of operations from the effective date

of acquisition or up to the effective date of disposal, as appropriate.

The portion of the income or loss applicable to noncontrolling

interests in subsidiaries is reflected in the consolidated statements of operations.

of December 31, 2022, details of the Company’s major subsidiaries were as follows:

SCHEDULE OF ENTITIES AND ITS SUBSIDIARIES

of Incorporation

Incorporation

of Seychelles

18 unchanged sentences

water distribution and delivery

City Fu Yi Beverage Ltd (“FYDL”)

water distribution and delivery

City Fu Tai Food Trade Ltd (“FTFL”)

City Fu Yi Beverage Ltd (“FYBL”)

water distribution and delivery

City Fu Jia Drinking Water Ltd (“FJDL”)

of agriculture products, household electric appliances and food

City Fu Sheng Drinking Water Ltd (“FSDL”)

of agriculture products, household electric appliances and food

City Fu Xi Drinking Water Ltd (“FXDL”)

of agriculture products, household electric appliances and plastic products

City Fu Jin Trading Technology Ltd (“FJSTL”)

of agriculture products, household electric appliances, plastic products and software development

City Fu Xi Drinking Water Company Ltd (“FXWL”)

Drinking water distribution and delivery, sales of alcoholic beverages

and water purifier

City Fu Jia Drinking Water Company Ltd (“FJWL”)

Drinking water distribution and delivery, sales of water purifier

City Fu Sheng Drinking Water Company Ltd (“FSWL”)

Drinking water distribution and delivery, sales of water purifier

Fu Jin Trading Technology Company Ltd (“FJSTL”)

Drinking water distribution and delivery, sales of water purifier

City Fu Li Trading Ltd (“FLTL”)

of agriculture products, household electric appliances and plastic products

Fu Gu Supply Chain Group Ltd (“FGGC”)

chain service, sales of food and health products, machinery, plastic products, and investment holding

preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires

management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent

assets and liabilities at the date of the financial statements.

The estimates and judgments will also affect the reported amounts for

certain revenues and expenses during the reporting period.

Certain significant accounting policies that contain subjective management

estimates and assumptions include those related to going concern, allowance of doubtful accounts, allowance of deferred tax asset, useful

lives and impairment of long-lived assets, valuation of intangible assets acquired and impairment of goodwill.

Actual results may materially

differ from these estimates.

Drinking water distribution and delivery, sales of water purifier

City Fu Gu Supply Chain Group Ltd (“FGGC”)

Sales of alcoholic beverages

City Fu Zhi Gu Trading Ltd (“FZGTL”)

Trading of alcoholic beverages

City Chang Fu Trading Ltd (“CFTL”)

Trading of alcoholic beverages

City La Tong Trading Ltd (“LTTL”)

Trading of alcoholic beverages

City Kai Fu Trading Ltd (“KFTL”)

Trading of alcoholic beverages

preparation of financial statements in conformity with U.S.

GAAP requires management to make estimates and assumptions relating to the

reporting of assets and liabilities and the disclosure of contingent liabilities at the date of the financial statements, and the

reported amounts of revenues and expenses during the reporting period.

Significant accounting estimates include certain assumptions

related to going concern, allowance of doubtful accounts, allowance of deferred tax asset and uncertain tax position, implicit interest rate of operating

leases, useful lives and impairment of long-lived assets, and impairment of goodwill.

Actual results may differ from these

Reclassification

22 unchanged sentences

and expense items at the average rate of exchange prevailing during the period

arising from such translations are included in accumulated other comprehensive income in stockholders’ equity.

of amounts from the local currencies of the Company into US$ has been made at the following exchange rates for the respective periods:

SCHEDULE OF FOREIGN CURRENCY EXCHANGE RATE TRANSLATION

December 31, 2021

December 31,2020

USD exchange rate

of and for the year ended

Period-end RMB:US$1 exchange rate

Period-average RMB:US$1

exchange rate

RMB is not freely convertible into foreign currency and all foreign exchange transactions must take place through authorized institutions.

No representation is made that the RMB amounts could have been, or could be, converted into US dollars at the rates used in translation.

No representation is made that the RMB amounts could have been, or could be, converted into U.S.

dollars at the rates used in translation.

and cash equivalents

1 unchanged sentence

of less than three months.

The Company’s primary bank deposits are located in the Hong Kong and the PRC.

The Company’s primary bank deposits are located in the PRC.

receivable and allowance for doubtful accounts

7 unchanged sentences

The facts and circumstances of each account may require the Company to use substantial judgment in assessing its collectability.

As of December 31, 2022 and 2021, the Company has

no allowance for doubtful accounts.

There are no activities in the allowance for doubtful accounts for the year ended December 31, 2022

consisting of finished goods are stated at the lower of cost or market value.

3 unchanged sentences

future demand.

The Company provides impairment that is charged directly to cost of revenues when is has been determined the product

is obsolete, spoiled, and the Company will not be able to sell it at a normal profit above its carrying cost.

The Company provides impairment that is charged directly to cost of revenues when it has been determined the product is

obsolete, spoiled, and the Company will not be able to sell it at a normal profit above its carrying cost.

The Company’s primary

products are alcoholic beverages and water.

The selling price of alcoholic beverages tend to increase over time, however, there are circumstances

The selling price of alcoholic beverages tends to increase over time, however, there are circumstances

where alcoholic beverages may be subject to spoilage if stored for prolong periods of time.

and equipment

and equipment , net

and equipment is carried at cost less accumulated depreciation.

3 unchanged sentences

SCHEDULE OF ESTIMATED USEFUL LIVES OF EQUIPMENT

Estimated useful life

cost of maintenance and repairs is charged to expenses as incurred, whereas significant renewals and betterments are capitalized.

assets with definite lives are stated at cost less accumulated amortization and consist mainly of distribution channel that was acquired

in the acquisition of Xixingdao.

assets with definite lives are stated at cost less accumulated amortization and impairment, and consist mainly of distribution channel

that was acquired in the acquisition of Xixingdao.

is calculated on the straight-line basis over the following estimated useful lives:

25 unchanged sentences

Assets to be disposed of are reported at the lower of the carrying amount or fair value less costs to sell.

Company did not recognize any impairment of long-lived assets during the years ended December 31, 2021 and 2020.

represents the excess of the purchase price over the fair value of the net identifiable assets acquired in a business combination.

accordance with FASB ASC Topic 350, “Intangibles-Goodwill and Others”, goodwill is subject to at least an annual assessment

for impairment or more frequently if events or changes in circumstances indicate that an impairment may exist, applying a fair-value

Fair value is generally determined using a discounted cash flow analysis.

January 2017, the FASB issued Accounting Standards Update No.

2017-04, Intangibles - Goodwill and Other (Topic 350):

Simplifying the

Test for Goodwill Impairment (ASU 2017-04), which eliminates step two from the goodwill impairment test.

Under ASU 2017-04, an entity

should recognize an impairment charge for the amount by which the carrying amount of a reporting unit exceeds its fair value up to the

amount of goodwill allocated to that reporting unit.

ASU 2017-04 is effective for annual and interim reporting periods beginning after

December 15, 2022 for smaller reporting companies.

The Company has early adopted ASU 2017-04 on January 1, 2020.

the years ended December 31, 2021 and 2020, the Company has recorded impairment of goodwill in the amount of $ nil

and $ 5,594,692 ,

respectively .

The Company did not recognize any impairment of

long-lived assets during the year ended December 31, 2021.

During the year ended December 31, 2022, the Company recognized an

impairment loss on an intangible asset, distribution channel, in the amount of $ 979,428

related to Xixingdao in view of its inability to generate sufficient operating cash flows as expected.

The Company used the

income approach with the multi-period excess earnings valuation method with the assistance of a third-party valuation appraiser to

estimate fair value, which requires management to make significant estimates and assumptions related to forecasted revenues and cash

flows and the discount rate.

Goodwill represents the excess of the purchase price

over the fair value of the net identifiable assets acquired in a business combination.

In accordance with FASB ASC Topic 350, “Intangibles-Goodwill

and Others”, goodwill is subject to at least an annual assessment for impairment or more frequently if events or changes in circumstances

indicate that an impairment may exist, applying a fair-value based test.

Fair value is generally determined using a discounted cash flow

The Company would recognize an impairment charge for the amount by which the carrying amount of a reporting unit exceeds its

fair value up to the amount of goodwill allocated to that reporting unit.

During the year ended December 31, 2022, the Company

directly performed a quantitative assessment for goodwill impairment by comparing the fair value of Xixingdao to its carrying value, taking into account of the impairment of intangible asset as a triggering

Company used the income approach with the discounted cash flow valuation method with the assistance of a third-party valuation appraiser

to estimate fair value, which requires management to make significant estimates and assumptions related to forecasted revenues and cash

flows and the discount rate.

As a result, the impairment loss on goodwill of $ 863,833 was recognized during the year ended December 31, 2022.

December 31, 2022, the balance of goodwill is $ 454,201 .

Company follows the guidance of ASC 606, revenue from contracts with customers is recognized using the following five steps:

9 unchanged sentences

and relevant charges.

generate revenue primarily from the sales of wine, water and oil directly to agents, wholesalers and end users.

We recognize product

revenue at a point in time when the control of the products has been transferred to customers.

The transfer of control is considered

complete when products have been picked up by or delivered to our customers.

We account for shipping and handling fees as a fulfillment

generate revenue primarily from the sales of liquor, water, water purifier and other products directly to agents, wholesalers and end users, with majority of sales transactions were conducted offline.

We recognize product revenue at a point in time when the control of the products has been transferred to customers.

The transfer of

control is considered complete when products have been picked up by or delivered to our customers.

We account for shipping and

handling fees as a fulfillment cost.

following table provides information about disaggregated revenue based on revenue by product types:

SCHEDULE OF DISAGGREGATION REVENUE

For the years ended

December 31, 2021

December 31, 2020

Sales of wine

the year ended

Sales of liquor

Sales of water

liabilities consist mainly of advances from customers including related party customers.

On certain occasions, the Company may receive prepayments from

downstream retailers or wholesales customers for wines, water and other products prior to them taking possession of the Company’s

The Company records these receipts as customer advances until the control of the products has been transferred the customers.

As of December 31, 2021 and 2020, the Company had customer advances of $ 382,518

Sales of water purifier

liabilities consist mainly of customer advances.

On certain occasions, the Company may receive prepayments from downstream retailers

or wholesales customers for wines, water and other products prior to them taking possession of the Company’s products.

Company records these receipts as customer advances until the control of the products has been transferred the customers.

December 31, 2022 and December 31, 2021, the Company had customer advances of $ 139,334

and $ 382,518 ,

1 unchanged sentence

During the years ended December 31, 2022 and 2021, the Company recognized $ 332,806

respectively, of customer advances in the opening balance.

and $ 580,151 , respectively, of customer advances in the opening balance.

and distribution expenses

7 unchanged sentences

The VAT is based on gross sales price and VAT rates applicable to the Company

for the period from the beginning of 2018 till the end of April 2018, then changed to 16 %

from May 2018 to the end of March 2019, and changed to 13 %

from April 2019.

Entities that are VAT general taxpayers are allowed to offset qualified input VAT paid to suppliers against their output

VAT liabilities.

Net VAT balance between input VAT and output VAT is recorded as VAT payable if output VAT is larger than input VAT and

is recorded as VAT recoverable if input VAT is larger than output VAT.

For entities that are VAT small taxpayers, VAT rate applicable

for the period from the beginning of 2018, then during the COVID-19, the small taxpayers are allowed to enjoy the preferred tax policy,

tax rate from 3 %

for the period from March 1, 2020 to December 31, 2021.

All of the VAT returns filed by the Company’s subsidiaries in the

PRC, have been and remain subject to examination by the PRC tax authorities for five years from the date of filing.

VAT payables are

included in accrued liabilities.

Entities that are VAT general taxpayers are allowed to offset qualified input VAT paid to suppliers against their output VAT liabilities.

Net VAT balance between input VAT and output VAT is recorded as VAT payable if output VAT is larger than input VAT and is recorded as

VAT recoverable if input VAT is larger than output VAT.

For entities that are qualified for VAT small taxpayers, entities are allowed

to enjoy preferential tax rate from 3 % to 1 % for the period from January 1, 2022 to March 31, 2022 and preferential tax rate from 3 %

to 0 % for the period from April 1, 2022 to December 31, 2022.

of the VAT returns filed by the Company’s subsidiaries in the PRC, have been and remain subject to examination by the PRC tax authorities

for five years from the date of filing.

VAT payables are included in accrued liabilities.

Company followed the liability method of accounting for income taxes in accordance with ASC 740, Income Taxes, or ASC 740.

7 unchanged sentences

Interest and penalties related to unrecognizable tax

benefit recognized in accordance with ASC 740 are classified in the consolidated statements of comprehensive income as income

benefit recognized in accordance with ASC 740 are classified in the consolidated statements of comprehensive income as income tax expense.

Statutory reserves

reserves are referring to the amount appropriated from the net income in accordance with laws or regulations, which can be used to recover

1 unchanged sentence

PRC laws prescribe that an enterprise

operating at a profit must appropriate and reserve, on an annual basis, an amount equal to 10 %

of its profit.

Such an appropriation is necessary until the reserve reaches a maximum that is equal to 50 %

of the enterprise’s PRC registered capital.

The Company had $ 636,898 and $ nil to statutory reserves as of December

31, 2021 and 2020, respectively, which were included in accumulated deficit and statutory reserves in the Company’s consolidated balance sheets.

operating at a profit must appropriate and reserve, on an annual basis, an amount equal to 10 % of its profit.

Such an appropriation is

necessary until the reserve reaches a maximum that is equal to 50 % of the enterprise’s PRC registered capital.

The Company had

$ 1,047,959 and $ 636,898 to statutory reserves as of December 31, 2022 and 2021, respectively, which were included in accumulated deficit

and statutory reserves in the Company’s consolidated balance sheets.

(loss) per share

Company computes earnings (loss) per share (“EPS”) in accordance with ASC Topic 260, “Earnings per share”.

Basic EPS is measured as the income or loss available to common shareholders divided by the weighted average common shares outstanding

for the period.

Diluted EPS is similar to basic EPS but presents the dilutive effect on a per share basis of potential common shares

(e.g., convertible securities, options, and warrants) as if they had been converted at the beginning of the periods presented, or issuance

date, if later.

EPS is measured as the income or loss available to common shareholders divided by the weighted average common shares outstanding for

Diluted EPS is similar to basic EPS but presents the dilutive effect on a per share basis of potential common shares (e.g.,

convertible securities, options, and warrants) as if they had been converted at the beginning of the periods presented, or issuance date,

Potential common shares that have an anti-dilutive effect (i.e.

those that increase income per share or decrease loss

per share) are excluded from the calculation of diluted EPS.

those that increase income per share or decrease loss per share)

are excluded from the calculation of diluted EPS.

Company accounts for financial instruments in accordance to ASC Topic 820, “Fair Value Measurements and Disclosures,” which

10 unchanged sentences

are observable for the asset or liability, either directly or indirectly, for substantially the full term of the financial instrument.

Level 3 inputs to the valuation methodology are unobservable and significant to the fair value measurement.

3 inputs to the valuation methodology are unobservable and significant to the fair value measurement.

and contingencies

2 unchanged sentences

Comprehensive

income (loss)

Comprehensive

income is defined to include all changes in equity except those resulting from investments by owners and distributions to owners.

other disclosures, all items that are required to be recognized under current accounting standards as components of comprehensive income

are required to be reported in a financial statement that is presented with the same prominence as other financial statements.

The Company’s

current component of other comprehensive income includes the foreign currency translation adjustment.

income (loss) is defined to include all changes in equity except those resulting from investments by owners and distributions to owners.

Among other disclosures, all items that are required to be recognized under current accounting standards as components of comprehensive

income (loss) are required to be reported in a financial statement that is presented with the same prominence as other financial statements.

The Company’s current component of other comprehensive income (loss) includes the foreign currency translation adjustment.

Company reports each material operating segment in accordance with ASC 280, “Segment Reporting”.

22 unchanged sentences

Bank failure is uncommon

in the PRC and the Company believes that those Chinese banks that hold the Company’s cash and cash equivalents are financially sound based on public available information.

in the PRC and the Company believes that those Chinese banks that hold the Company’s cash and cash equivalents are financially

sound based on public available information.

than the deposit insurance mechanism in the PRC mentioned above, the Company’s bank accounts are not insured by Federal Deposit

8 unchanged sentences

no significant credit risk exists as these financial institutions have high credit quality.

Company also exposures to credit risk associated with its trading and other activities is measured on an individual

counterparty basis, as well as by group of counterparties that share similar attributes.

Concentrations of credit risk can be

affected by changes in political, industry, or economic factors.

To reduce the potential for risk concentration, the Company

generally requires payment after delivery of the goods within 60 to 90 days.

Credit limits are established and exposure is monitored

in light of changing counterparty and market conditions.

For the years ended December 31, 2021 and 2020, no customer

accounted for more than 10% of the Company’s total revenues or accounts receivable.

For the year ended December 31, 2021,

the Company had one supplier that accounted for more than 10 %

of the Company’s total purchases and accounts payable.

The Company had other two suppliers accounted for more than 10 %

of the Company’s accounts payable.

For the year ended December 31, 2020, the Company had one supplier that accounted for more

of the Company’s total purchases and accounts payable.

The Company had other three suppliers, including one related party, accounted for more than 10 %

Company also exposures to credit risk associated with its trading and other activities is measured on an individual counterparty

basis, as well as by group of counterparties that share similar attributes.

Concentrations of credit risk can be affected by changes

in political, industry, or economic factors.

To reduce the potential for risk concentration, the Company generally requires payment

after delivery of the goods within 90 to 120 days.

Credit limits are established and exposure is monitored in light of changing

counterparty and market conditions.

For the years ended December 31, 2022 and 2021, no customer accounted for more than 10% of the

Company’s total revenues or accounts receivable.

For the year ended December 31, 2022, the Company had two suppliers that

accounted for more than 10 %

of the Company’s accounts payable and no supplier that accounted for more than 10% of the Company’s total purchases.

the year ended December 31, 2021, the Company had one supplier that accounted for more than 10 %

of the Company’s total purchases and accounts payable and other two suppliers accounted for more than 10 %

of the Company’s accounts payable.

14 unchanged sentences

can be substantiated.

purchase price of an acquisition is measured as the aggregate of the fair value of the consideration transferred.

The purchase price

is allocated to the fair values of the tangible and intangible assets acquired and liabilities assumed, with any excess recorded as goodwill.

These fair value determinations require judgment and may involve the use of significant estimates and assumptions.

The purchase price

allocation may be provisional during a measurement period of up to one year to provide reasonable time to obtain the information necessary

to identify and measure the assets acquired and liabilities assumed.

Any such measurement period adjustments are recognized in the period

in which the adjustment amount is determined.

Transaction costs associated with the acquisition are expensed as incurred.

accounting pronouncements adopted

In December 2020, the FASB

issued ASU 2019-12, Income Taxes (Topic 740) Simplifying the Accounting for Income Taxes.

The ASU removes certain exceptions to the general

principles in Topic 740 and improves consistent application of and simplifies GAAP for other areas of Topic 740 by clarifying and amending

existing guidance.

On January 1, 2021, the Company adopted ASU 2019-12 on a prospective basis.

The adoption did

not have a material impact on the Company’s consolidated financial statements.

3 - ACCOUNTS RECEIVABLE, NET

receivable consisted of the following as of December 31, 2021 and 2020:

SCHEDULE OF ACCOUNTS RECEIVABLE

Accounts receivable (including $ 43,477 and $ 239,468 from

related parties as of December 31, 2021 and 2020, respectively)

Allowance for doubtful accounts

Account receivable, net

4 – PREPAYMENTS AND OTHER CURRENT ASSETS

Accounting Pronouncement

In June 2016, the FASB issued Accounting Standards

Update (“ASU”) No.

2016-13, Financial Instruments – Credit Losses (Topic 326), Measurement of Credit Losses on Financial

2016-13 was further amended in November 2020 by ASU No.

2020-10, Financial Instruments – Credit Losses (Topic

326), Derivatives and Hedging (Topic 815), and Leases (Topic 842).

As a result, ASC Topic 326, Financial Instruments – Credit Losses

is effective for smaller reporting companies for fiscal years beginning after December 15, 2022, including interim periods within those

fiscal years.

The Company adopted ASU No.

2016-13 on January 1, 2023 and the adoption did not have a material impact on the Company’s

consolidated financial statements.

3 – PREPAYMENTS AND OTHER CURRENT ASSETS , NET

and other current assets consisted of the following as of December 31, 2022 and 2021:

OF PREPAYMENTS AND OTHER CURRENT ASSETS

Prepayments (including $ 1,813,904 and $ 298,383 to related parties

as of December 31, 2021 and 2020, respectively)

SCHEDULE OF PREPAYMENTS AND OTHER CURRENT ASSETS

Prepayments (including $ 2,255,288

and $ 1,813,904 to related parties as of December 31, 2022 and 2021, respectively)

Other current assets

Total prepayments and other current assets

Allowance for doubtful accounts (including $ 1,152,427 and $ nil to related parties as of December 31, 2022 and 2021, respectively)

Prepayments and other

current assets

of prepayments represented the advanced payments

to suppliers including related party suppliers.

current assets, net

of prepayments represented the advanced payments to suppliers including related party suppliers.

for doubtful accounts movement is as follows:

FOR DOUBTFUL ACCOUNTS

Beginning balance

Additions to allowance

Foreign currency translation adjustment

Ending balance

4 – DEPOSITS PAID, NET

Deposits paid consisted of the following as of December 31, 2022 and 2021:

OF DEPOSITS PAID

Deposits paid (including $ 1,628,511 and $ 1,596,075 to related parties as of December 31, 2022 and 2021, respectively)

Allowance for doubtful accounts (including $ 870,066 and $ nil to related

parties as of December 31, 2022 and 2021, respectively)

( 1,244,350 )

Deposits paid, net

for doubtful accounts movement is as follows:

FOR DOUBTFUL ACCOUNTS

Beginning balance

Additions to allowance

Foreign currency translation adjustment

Ending balance

5 – PROPERTY AND EQUIPMENT, NET

5 unchanged sentences

Accumulated depreciation

Property and equipment, net

Property and equipment,

expense, which was included in general and administrative expenses, for the years ended December 31, 2022 and 2021 was

and $ 22,590 ,

respectively.

6 – BUSINESS COMBINATION AND GOODWILL

August 31, 2020, FVTI completed the acquisition of 90 % equity interest of Xixingdao.

The Company aimed to enter the service of drinking

water distribution and delivery market in Dongguan City, Guangdong Province through this acquisition.

The purchase consideration is $ 9,773,989 ,

consists of 4,862,681 shares of the Company’s common stock issued to Xixingdao’s original owner fair valued at the acquisition

These shares were issued on December 28, 2020.

The Company accounted for the acquisition using the purchase method of accounting

for business combination under ASC 805.

The total purchase price was allocated to the tangible and identifiable intangible assets acquired

and liabilities based on their estimated fair values as of the acquisition date.

determination of fair values involves the use of significant judgment and estimates and in the case of Xixingdao, this is with specific

reference to acquired intangible asset.

The judgments used to determine the estimated fair value assigned to assets acquired and liabilities

assumed, as well as the intangible asset life and the expected future cash flows and related discount rate, can materially impact the

Company’s consolidated financial statements.

Significant inputs and assumptions used for the model included the amount and timing

of expected future cash flows and discount rate.

The Company utilized the assistance of a third-party valuation appraiser to determine

the fair value as of the date of acquisition.

purchase price was allocated on the acquisition date of Xixingdao as follows:

OF RECOGNIZED IDENTIFIED ASSETS ACQUIRED AND LIABILITIES ASSUMED

Account and other receivables

Other net assets

Distribution channel

Due to related party

Noncontrolling interest

Total purchase price

results of operations, financial position, and cash flows of Xixingdao have been included in the Company’s consolidated financial

statements since the date of acquisition.

Goodwill arising from this business combination is not tax deductible.

following unaudited pro forma information presents the combined results of operations for the years ended December 31, 2020 and 2019

as if the acquisition of Xixingdao had occurred as of January 1, 2020 and May 31, 2019, the inception date of Xixingdao.

These unaudited

pro forma results are presented for informational purpose only and are not necessarily indicative of what the actual results of operations

of the combined company would have been if the Company consummated the acquisition on January 1, 2020 or May 31, 2019, nor are they indicative

of future results of operations:

OF BUSINESS ACQUISITION PRO FORMA INFORMATION

For the years ended December 31

Pro forma net revenues

Pro forma net loss

Pro forma net loss attributable to Fortune Valley Treasures, Inc.

Company’s policy is to perform its annual impairment testing on goodwill for its reporting unit on December 31, of each fiscal

year or more frequently if events or changes in circumstances indicate that an impairment may exist.

During the year ended December

31, 2020, the Company’s evaluation of goodwill for impairment involves the comparison of the fair value of Xixingdao to its

carrying value.

The Company used the income approach with the discounted cash flow valuation method with the assistance of a third-party

valuation appraiser to estimate fair value, which requires management to make significant estimates and assumptions related to forecasted

revenues and cash flows and the discount rate.

The impairment loss on goodwill of $ 5,594,692 ,

was recognized during the year ended December 31, 2020.

As of December 31, 2020, the balance of goodwill is $ 1,368,915 .

During the year ended

December 31, 2021, the Company performed a qualitative assessment by taking into consideration the industry and market conditions, overall

financial performance of the reporting unit, and other specific information related to the operations.

Based on the assessment, the Company

determined that it was not necessary to perform a quantitative goodwill impairment test and concluded that no impairment indicators on

its goodwill were noted as of December 31, 2021.

As of December 31, 2021, the balance of goodwill is $ 1,406,289 .

6 – INTANGIBLE ASSETS

5 unchanged sentences

( 1,822,875 )

( 1,129,913 )

Impairment loss

expense for the years ended December 31, 2022 and 2021 was $ 806,539

and $ 844,907 ,

respectively, included in cost of revenues.

of December 31, 2021, the future estimated amortization costs for distribution channel are as follows:

respectively, included in cost of revenues and general and administrative expenses.

During the years ended December 31, 2022 and 2021, the Company recognized impairment

loss of $ 979,428

respectively.

of December 31, 2022, the future estimated amortization costs for intangible assets are as follows:

OF FUTURE AMORTIZATION EXPENSES FOR DISTRIBUTION CHANNELS

2 unchanged sentences

Company is registered in the State of Nevada and is subject to United States of America tax law.

The U.S federal income tax rate is 21 %.

federal income tax rate is 21 % .

the current laws of the Seychelles, DIGLS and JJGS are registered as an international business company which governed by the International

7 unchanged sentences

January 17, 2019, the State Taxation Administration issued the notice on the scope of small-scale and low-profit corporate income tax

preferential policies of the Ministry of Finance and the State Administration of Taxation, [2019] No.

13 for small-scale and low-profit

enterprises whose annual taxable income is less than RMB1,000,000 (including RMB1,000,000), approximately $ 142,209 , their income is reduced

by 25 % to the taxable income, and enterprise income tax is paid at 20 % tax rate, which is essentially resulting in a favorable income

tax rate of 5%.

While for the portion of annual taxable income exceeding RMB 1,000,000 , approximately $ 142,209 , but not more than RMB 3,000,000 ,

approximately $ 426,627 , the income is reduced by 50% to the taxable income, and enterprise income tax is paid at 20% tax rate, which

is essentially resulting in a favorable income tax rate of 10 %.

The qualifications of small-scale and low-profit enterprises were examined

annually by the Tax Bureau.

All of the Company’s PRC subsidiaries met the criteria of small-scale and low-profit enterprises .

preferential policies of the Ministry of Finance and the State Administration of Taxation, [2019] No.13 for small-scale and low-profit

enterprises whose annual taxable income is less than RMB1,000,000 (including RMB1,000,000), approximately $142,209, their income

is reduced by 25% to the taxable income, and enterprise income tax is paid at 20% tax rate, which is essentially

resulting in a favorable income tax rate of 5%.

While for the portion of annual taxable income exceeding RMB1,000,000, approximately

$142,209, but not more than RMB3,000,000, approximately $426,627, the income is reduced by 50% to the taxable income, and enterprise

income tax is paid at 20% tax rate, which is essentially resulting in a favorable income tax rate of 10%.

[2021] No.12 provides an enterprise income tax rate of 2.5% on small-scale and low-profit enterprises whose annual taxable

income is less than RMB1,000,000, approximately $142,209, from January 1, 2021 to December 31, 2022.

MOF and SAT [2022] No.13 also provides

an enterprise income tax rate of 5% on small-scale and low-profit enterprises whose annual taxable income is more than RMB1,000,000,

approximately $142,209, but less than RMB3,000,000, approximately $426,627, from January 1, 2022 to December 31, 2024.

The qualifications

of small-scale and low-profit enterprises were examined annually by the Tax Bureau.

All of the Company’s PRC subsidiaries met the

criteria of small-scale and low-profit enterprises, except for Xixingdao, FVT Supply Chain and FLTT.

components of the income tax provision are as follows:

1 unchanged sentence

– United States of America

Current income tax expense

– United States of America

Deferred income tax expense

summary of United States and foreign income (loss) before income taxes was composed of the following:

SCHEDULE OF UNITED STATES AND FOREIGN INCOME LOSS BEFORE INCOME TAXES

Income (loss) attributed to PRC operations

Income (loss) attributed to PRC

$ ( 766,083 )

Income (loss) attributed to Seychelles and Hong Kong

Loss attributed to Seychelles and

Loss attributed to U.S.

Income (loss) before tax

( 1,204,097 )

difference between the U.S.

Income (loss) before

$ ( 1,970,199 )

The difference between the U.S.

federal statutory income tax rate and the Company’s effective tax rate was as follows for the years

2 unchanged sentences

federal statutory income tax rate

Higher rates in PRC, net

Reconciling items, net operating losses in PRC and other jurisdictions, election to not recognize tax asset

Income tax difference under different tax jurisdictions

1 unchanged sentence

Valuation allowance on deferred income tax assets

Amortization of intangible asset and impairment of goodwill not deductible for tax purposes

Amortization and impairment loss not deductible for tax

Expenses not deductible for tax purpose

Impact of GILTI

The Company’s effective tax rate

effective tax rate in the years presented is the result of the mix of income earned in various tax jurisdictions that apply a broad range

effective tax rate in the years presented is the result of the mix of income and loss recognized in various tax jurisdictions that apply a broad range

of income tax rates.

1 unchanged sentence

OF COMPONENTS OF DEFERRED TAX ASSETS

December 31, 2021

December 31, 2020

Deferred tax assets:

3 unchanged sentences

valuation allowance

Total deferred tax assets, net

Total deferred tax assets,

8 - RELATED PARTY TRANSACTIONS

During the year ended

December 31, 2021, the Company identified certain of its customers and suppliers to be related parties as the Company can exercise significant

influence over those parties.

To conform to the current year presentation, the balances and transactions of those related parties in

prior year have been reclassified.

due from related parties as of December 31, 2021 and 2020 are as follows:

Amounts due from related parties as of December 31,

2022 and 2021 are as follows:

OF AMOUNT DUE FROM AND DUE TO RELATED PARTIES

President, Chief Executive Officer, Secretary, Director

Chief Financial Officer and Treasurer

Manager of a subsidiary, Mr.

Yumin Lin’s wife

Manager of a subsidiary

due to related parties as of December 31, 2022 and 2021 are as follows:

President, Chief Executive Officer, Secretary, Director

President, Chief Executive Officer, Secretary, Director and majority shareholder

Manager of a subsidiary

2 unchanged sentences

Minghua Cheng

Director and majority shareholder

of the Company

Former director and majority shareholder

Manager of a subsidiary, Shareholder

of the Company

Manager of a subsidiary

4 unchanged sentences

Yumin Lin is the supervisor of Shenzhen DaXingHuaShang Industry Development Ltd.

Yuwen Li’s wife

Chunxiang Zhang

Manager of a subsidiary

2 unchanged sentences

Manager of a subsidiary

Aisheng Zhang

3 unchanged sentences

OF REVENUE GENERATED FROM RELATED PARTIES

Vice President

Chief Financial Officer and Treasurer

President, Chief Executive Officer, Secretary, Director

President, Chief Executive Officer, Secretary, Director and majority shareholder

Manager of a subsidiary, Mr.

3 unchanged sentences

Manager of a subsidiary, Shareholder

Shenzhen DaXingHuaShang Industry Development Ltd

Yumin Lin is the supervisor of Shenzhen DaXingHuaShang Industry Development Ltd.

Shenzhen DaXingHuaShang Supplychain Service

Subsidiary of Shenzhen DaXingHuaShang

Industry Development Ltd.

Guangdong Shuiyijia Distribution Co.,

Lihua Li is the supervisor of this company

Dongguan Chashan Pingfeng Cigarate

and Wine Co., Ltd.

Taiping Deng, a manager of a subsidiary,

is the controlling shareholder of Dongguan ChaShan Pingfeng Cigarate and Wine Co.

Huanhai Trading Co., Ltd.

Weihong Ye, a manager of a subsidiary,

is the controlling shareholder of Dongguan Huanhai Trading Co., Ltd.

Dongguan Hualian Guanhua Gong Co., Ltd.

Weihong Ye, a manager of a subsidiary,

is the controlling shareholder of Dongguan Hualian Guanhua Gong Co., Ltd.

Dongguan Daying Internet Technology

Minghua Cheng, a director of the

Company, is the controlling shareholder of Dongguan Daying Internet Technology Co., Ltd.

Jianglong Xiong

Manager of a subsidiary

Dongguan Humen Shuiyan Drinking Water Store

Shuiyan Li, a shareholder of the Company, is the controlling shareholder

of Dongguan Humen Shuiyan Drinking Water Store

Guangdong Shuiyijia Distribution Co., Ltd.

Lihua Li, Mr.

Yuwen Li’s wife, is the supervisor of Guangdong Shuiyijia Distribution Co.,

Dongguan Chashan Pingfeng Cigarette and Wine Co., Ltd.

Taiping Deng, a manager of a subsidiary, is the controlling shareholder of Dongguan ChaShan Pingfeng Cigarette and Wine Co.

Dongguan Huanhai Trading Co., Ltd.

Weihong Ye, a manager of a subsidiary, is the controlling shareholder of Dongguan Huanhai Trading Co., Ltd.

Dongguan Hualianguan Chemical Co., Ltd.

Weihong Ye, a manager of a subsidiary, is the controlling shareholder of Dongguan Hualian Guanhua Gong Co., Ltd.

Dongguan Daying Internet Technology Co., Ltd.

Minghua Cheng, a former director of the Company, is the controlling shareholder of

Dongguan Daying Internet Technology Co., Ltd.

Dongguan Zhengui Reality Co., Ltd.

Naiyong Luo, a manager of a subsidiary,

is the controlling shareholder of Dongguan Zhengui Reality Co., Ltd.

Guangdong Yuexin Jiaotong Construction

Naiyong Luo, a manager of a subsidiary,

is the controlling shareholder of Guangdong Yuexin Jiaotong Construction Co., Ltd.

Dongguan Dalingshan Runxin Drinking

Significantly influenced by the Company

Dongguan Anxiang Technology Co., Ltd.

Significantly influenced by the Company

Guangdong Jiaduonuo Shengshi Trading

Significantly influenced by the Company

Dongguan Dalingshan Xinwenhua Drinking

Naiyong Luo, a manager of a subsidiary, is the controlling shareholder of Dongguan Zhengui Reality Co., Ltd.

Guangdong Yuexin Jiaotong Construction Co., Ltd.

Naiyong Luo, a manager of a subsidiary, is the controlling shareholder of Guangdong Yuexin Jiaotong Construction Co., Ltd.

Dongguan Tailai Trading Co., Ltd.

Significantly influenced by the Company

Dongguan Tailai

Trading Co., Ltd.

Significantly

influenced by the Company

Revenues generated from

related parties

of revenues from related parties during the years ended December 31, 2022 and 2021 is as follows:

3 unchanged sentences

Significant influenced by the Company

Guangfong Jiaduonuo Shengshi Tradong Co., Ltd.

Guangdong Jiaduonuo Shengshi Trading Co., Ltd.

Significant influenced by the Company

9 unchanged sentences

Significant influenced by the Company

Dongguan Dengqinghu Drinking Water Store

Significant influenced by the Company

Dongguan City Yijia Trading Co., Ltd.

Yongming Li, a shareholder

of the Company, is the controlling shareholder of Dongguan City Yijia Trading Co., Ltd.

Cost of revenues from

related parties

from related parties during the years ended December 31, 2022 and 2021 are as follows:

SCHEDULE OF PURCHASES

FROM RELATED PARTIES

SCHEDULE OF PURCHASES FROM RELATED PARTIES

Dongguan Anxiang Technology Co., Ltd.

Significant influenced by the Company

Guangfong Jiaduonuo Shengshi Tradong Co., Ltd.

Guangdong Jiaduonuo Shengshi Tradong Co., Ltd.

Significant influenced by the Company

11 unchanged sentences

Significant influenced by the Company

from related parties mainly consists of funds advanced to related parties as borrowings or funds advanced to pay off the Company’s

Dongguan City Yijia Trading Limited

Yongming Li, a shareholder

of the Company, is the controlling shareholder of Dongguan City Yijia Trading Co., Ltd.

Purchase from related

from related party mainly consists of funds advanced to related parties as borrowings or funds advanced to pay off the Company’s

The balances are unsecured, non-interest bearing.

to related parties mainly consists of borrowings for working capital purpose, the balances are unsecured, non-interest bearing and due

addition, during the years ended December 31, 2021 and 2020, these related parties paid expenses on the Company’s behalf

in an amount of $ 344,218 and $498,549, respectively .

Also see Note 3, 4, 10 and 11 for more transactions with related parties.

addition, during the years ended December 31, 2022 and 2021, these related parties paid expenses on the Company’s behalf in an

amount of $ 135,774 and $ 344,218 , respectively.

Yuwen Li, the Vice President of the Company, authorized

the Company to use trademarks that were owned by him for ten years from October 5, 2019 to October 4, 2029 at no cost.

see Note 3, 4, 9 and 10 for more transactions with related parties.

9 – OPERATING LEASES

of December 31, 2021, the Company has seventeen

separate operating lease agreements for three office spaces, one warehouse and thirteen stores in PRC with remaining lease terms

of from 9 months to 64 months .

of the leases described above were entered

with related parties.

The operating lease entered with Ms.

Qingmei Lin, a related party, is for the premises in

Dongguan City, PRC.

agreement covers the period from January 1, 2019 to April 30, 2027 with the monthly rent expense of RMB 10,000

(approximately $ 1,450 ).

The operating lease agreement entered with Mr.

Hongwei Ye, another related party, is for the premises in

Dongguan City, PRC.

agreement covers the period from September 27, 2020 to September 30, 2023 with

the monthly rent expense of RMB 960

(approximately $ 139 ).

of December 31, 2022, the Company has twenty separate operating lease agreements for three office spaces, one warehouse and sixteen

stores in PRC with remaining lease terms of from 3 months to 52 months.

Two of the leases described above were entered with related parties.

operating lease entered with Ms.

Qingmei Lin, a related party, is for the premises in Dongguan City, PRC.

The agreement covers the period

from January 1, 2019 to April 30, 2027 with the monthly rent expense of RMB 10,000 (approximately $ 1,490 ).

The operating lease agreement

entered with Mr.

Hongwei Ye, another related party, is for the premises in Dongguan City, PRC.

The agreement covers the period from September

27, 2020 to September 30, 2023 with the monthly rent expense of RMB 960 (approximately $ 143 ).

components of lease expense and supplemental cash flow information related to leases for the years ended December 31, 2022 and 2021 are

SCHEDULE OF COMPONENTS OF LEASE EXPENSE AND

SUPPLEMENTAL CASH FLOW INFORMATION

Operating lease cost (included in general and administrative expenses in the Company’s consolidated statements of operations) for the years ended

SCHEDULE OF COMPONENTS OF LEASE EXPENSE AND SUPPLEMENTAL CASH FLOW INFORMATION

Operating lease cost (included

in general and administrative expenses in the Company’s consolidated statements of operations) for the years ended

Related parties

Non-related parties

Other information for the years ended

Cash paid for amounts included in the measurement of lease obligations

Other information for the years

Cash paid for amounts included

in the measurement of lease obligations

Weighted average remaining lease term (in years)

6 unchanged sentences

Operating lease obligations

expenses were $ 150,992 and $ 115,499

the years ended December 31, 2021 and 2020, respectively.

expenses were $ 171,540 and $ 150,992 for the years ended December 31, 2022 and 2021, respectively.

10 – BANK AND OTHER BORROWINGS

July 2020, the Company obtained a loan from Hua Hui (Shenzhen) Education Management Ltd., which is a related party with Mr.

being the supervisor, who is also the manager of one of the Company’s subsidiaries, in the total principal amount of RMB 1,300,000

(approximately $ 199,000 ).

The loan bears interest at the rate of 0.7% per month.

In December 2020, the Company repaid the loan in full

as well as the interest expense of $ 12,789 .

August 2020, the Company obtained a revolving credit line in the principal amount of RMB 910,000 (approximately $ 139,000 ) from China Construction

Bank, which bears interest at the base Loan Prime Rate of 3.85% plus 0.4% .

August 2020, the Company obtained a revolving credit line in the principal amount of RMB 910,000 (approximately $ 139,000 when borrowed)

from China Construction Bank, which bears interest at 4.10% .

The credit line is guaranteed by Xiulan

Zhou, a related party, and pledged by her property.

The maturity date is on August 7, 2023 .

December 2020, the Company obtained a loan in the principal amount of RMB 750,000 (approximately $ 115,000 when borrowed) from Huaneng

Guicheng Trust Co., Ltd.

(“Huaneng Guicheng”), a financial institution in PRC, which bears interest at the base Loan Prime

Rate of 3.85% plus 8.75% .

The loan is guaranteed by Yumin Lin.

The maturity date is on December 21, 2022 .

The loan was fully repaid in

November 2021, the Company obtained a bank loan in the principal amount of RMB 500,000 (approximately $ 79,000 when borrowed) from Shenzhen

Qianhai Webank Co., Ltd.

(“WeBank”), which bears interest at 3.6% .

The maturity date is on December 11, 2021 .

11, 2021, the Company and WeBank agreed to extend the maturity date of the loan to December 21, 2023 and increase the principal amount

to RMB 500,750 (approximately $ 79,000 when borrowed) reflecting the accrued interest.

The loan is guaranteed by Yumin Lin and bears interest

May 2022, the Company obtained a revolving credit line in the principal amount of RMB 1,000,000 (approximately $ 149,000 when borrowed)

from China Construction Bank, which bears interest at 4.45% .

The credit line is guaranteed by Xiulan Zhou, a related party.

and pledged by her property.

The maturity date is on May 26, 2023 .

May 2022, the Company obtained a loan in the principal amount of RMB 161,000 (approximately $ 24,000 when borrowed) from Huaneng Guicheng,

which bears interest at 11.34% .

The loan is guaranteed by Yumin Lin.

The maturity date is on May 21, 2024 .

May 2022, the Company obtained a bank loan in the principal amount of RMB 69,000 (approximately $ 10,000 when borrowed) from WeBank, which

bears interest at 11.34% .

The loan is guaranteed by Yumin Lin.

The maturity date is on May 21, 2024 .

July 2022, the Company obtained two loans in the principal amount of RMB 99,000 (approximately $ 15,000 when borrowed) and RMB 231,000 (approximately

$ 34,000 when borrowed) from WeBank and Guangdong Nanyue Bank Co., Ltd.

(“Nanyue Bank”), respectively, which bear interest

The loans are guaranteed by Kaihong Lin.

The maturity date is on July 8, 2024 .

In December 2020, the Company obtained a loan

in the principal amount of RMB 750,000 (approximately $ 115,000 ) from Huaneng Guicheng Trust Co., Ltd, a financial institution in PRC,

which bears interest at the base Loan Prime Rate of 3.85% plus 8.75% .

The credit line is guaranteed by Yumin Lin.

The maturity date is

on December 21, 2022 .

In November 2021, the Company obtained a bank loan

in the principal amount of RMB 500,000 (approximately $ 79,000 ) from Shenzhen Qianhai Webank Co., Ltd.

(“WeBank”), which bears

interest at 3.6% .

The maturity date is on December 11, 2021 .

On December 11, 2021, the Company and WeBank agreed to extend the maturity

date of the loan to December 21, 2023 and increase the principal amount to RMB 500,750 (approximately $ 79,000 ) reflecting the accrued interest.

The loan is guaranteed by Yumin Lin and bears interest at 10.71% .

July 2022, the Company obtained two loans in the principal amount of RMB 153,000 (approximately $ 23,000 when borrowed) and RMB 357,000

(approximately $ 53,000 when borrowed) from WeBank and Nanyue Bank, respectively, which bear interest at 14.4% .

The loans are guaranteed

by Falan Zhou, a manager of subsidiaries.

The maturity date is on July 13, 2024 .

July 21, 2022, the Company obtained a loan in the principal amount of RMB 380,000 (approximately $ 57,000 when borrowed) from Huaneng Guicheng,

which bears interest at 12.6% .

The loan is guaranteed by Yumin Lin.

The maturity date is on July 21, 2024 .

balance of the loans borrowed as of December 31, 2022 and 2021 was as follows:

OF BALANCE OF LOAN BORROWED UNDER CREDIT LINES

loan from the trust in PRC

Construction Bank

outstanding principal balances

SCHEDULE OF BALANCE OF LOAN BORROWED UNDER CREDIT LINES

December 31, 2022

December 31, 2021

Bank loan from the trust in PRC

China Construction Bank

Guangdong NanYue Bank

Aggregate outstanding principal balances

current portion

total interest expense was $ 17,816 and

$ 14,325 (including $ 12,789

paid to a related party) for

the years ended December 31, 2021 and 2020, respectively.

Non-current portion

total interest expense was $ 31,444

for the years ended December 31, 2022 and 2021,

respectively.

Future minimum loan payments as of December 31, 2022 are as follows:

SCHEDULE OF FUTURE MINIMUM LOAN PAYMENTS

Year ending December 31,

11 – COMMON STOCK

on October 21, 2021, the Company has approved a reverse stock split of the Company’s authorized and issued and outstanding shares

of common stock, par value $ 0.001

per share, at a ratio of 1-for-20

(the “Reverse Stock Split”).

result of the Reverse Stock Split, the Company’s authorized shares of common stock became 150,000,000

of common stock, par value $ 0.001 per share, at a ratio of 1-for-20 (the “Reverse Stock Split”).

As a result of the Reverse

Stock Split, the Company’s authorized shares of common stock became 150,000,000 shares.

As of September 30, 2020 and immediately

prior to the Reverse Stock Split, there were 313,098,220

shares of common stock issued and outstanding.

As a result of the Reverse Stock Split, the Company has 15,655,038

shares of common stock issued and outstanding.

The par value remains unchanged at $ 0.001

per share, which resulted in a reclassification

of capital from par value to additional paid-in capital in excess of par value.

All share and per share amount in the accompanying

financial statement for the prior period have been retroactively adjusted to reflect the Reverse Stock Split.

13 - SUBSEQUENT EVENTS

the subsequent period through March 31, 2022, the Company advanced a total amount of $ 382,646 to a related party, and the related party

repaid the amount of $ 167,003

to the Company.

The balance of due from related

parties as of the filing date was $ 148,430 .

prior to the Reverse Stock Split, there were 313,098,220 shares of common stock issued and outstanding.

As a result of the Reverse Stock

Split, the Company has 15,655,038 shares of common stock issued and outstanding.

The par value remains unchanged at $ 0.001 per share,

which resulted in a reclassification of capital from par value to additional paid-in capital in excess of par value.

All share and per

share amount in the accompanying financial statement for the prior period have been retroactively adjusted to reflect the Reverse Stock

NOTE 12 - SUBSEQUENT EVENTS

In February 2023, the Company obtained a revolving credit line in the principal

amount of RMB 465,000 (approximately $ 67,000 when borrowed) from China Construction Bank, which bears interest at 4.00 %.

The maturity date

is on February 11, 2024 .

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 9A. Controls and Procedures