Fortune Valley Treasures, Inc. 10-K

Item 9A. Controls and Procedures Evaluation of Disclosure Control and Procedures We conducted an evaluation under the supervision and with the participation of our management, including our Chief Executive Officer and Chief Financial Officer, of the effectiveness of the design and operation of our disclosure controls and procedures. The term “disclosure controls and procedures”, as defined in Rules 13a-15(e) and 15d-15(e) under the Securities and Exchange Act of 1934, as amended (“Exchange Act”), means controls and other procedures of a company that are designed to ensure that information required to be disclosed by the company in the reports it files or submits under the Exchange Act is recorded, processed, summarized and reported, within the time periods specified in the Securities and Exchange Commission’s rules and forms. Disclosure controls and procedures also include, without limitation, controls and procedures designed to ensure that information required to be disclosed by a company in the reports that it files or submits under the Exchange Act is accumulated and communicated to the company’s management, including its principal executive and principal financial officers, or persons performing similar functions, as appropriate, to allow timely decisions regarding required disclosure. Based on this evaluation, our Chief Executive Officer and Chief Financial Officer concluded as of December 31, 2022, that our disclosure controls and procedures were not effective. The 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. 93 Management’s Report on Internal Control over Financial Reporting Our management is responsible for establishing and maintaining adequate internal control over financial reporting. Internal control over financial reporting is defined in Rule 13a-15(f) or 15d-15(f) promulgated under the Exchange Act as a process designed by, or under the supervision of, the Company’s principal executive and principal financial officers and effected by the board of directors (the “Board”), management and other personnel, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with accounting principles generally accepted in the United States (“GAAP”) and includes those policies and procedures that: ● Apply to the maintenance of records that in reasonable detail accurately and fairly reflect the transactions and dispositions of the assets of the company ● Provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with GAAP and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and ● Provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of the company’s assets that could have a material effect on the financial statements. Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate. All internal control systems, no matter how well designed, have inherent limitations. Therefore, even those systems determined to be effective can provide only reasonable assurance with respect to financial statement preparation and presentation. Because of the inherent limitations of internal control, there is a risk that material misstatements may not be prevented or detected on a timely basis by internal control over financial reporting. However, these inherent limitations are known features of the financial reporting process. Therefore, it is possible to design into the process safeguards to reduce, though not eliminate, this risk. We carried out an assessment, under the supervision and with the participation of our management, including our Chief Executive Officer and Chief Financial Officer, of the effectiveness of our internal controls over financial reporting, as defined in Rules 13a-15(e) and 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, 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: ● We have increased our personnel resources and technical accounting expert within the accounting function and intend to hire additional accounting expert for the function due to continuously increasing of turnover. ● We have established an audit committee to oversee accounting controls consistent with control objectives. This Annual Report does not include an attestation report of the Company’s registered public accounting firm regarding internal control over financial reporting. The Management’s report was not subject to attestation by the Company’s registered public accounting firm pursuant to rules of the Securities and Exchange Commission that permit the Company to provide only management’s report in this Annual Report. Changes in Internal Control over Financial Reporting There 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. Item 9B. Other Information None. Item 9C. Disclosure Regarding Foreign Jurisdictions that Prevent Inspections. Not applicable. 94 PART III Item 10. Directors, Executive Officers and Corporate Governance The following table sets forth information regarding our executive officers and directors as of the date of this Annual Report. Name Age Position with the Company Yumin Lin 54 Chairman of the Board, Chief Executive Officer, President and Secretary Kaihong Lin 49 Chief Financial Officer, Treasurer and Director Bulin Wang (2)(3) 61 Independent Director Jianwei Lin (1) 39 Independent Director Bin Li (2)(3) 55 Independent Director Anthony Chan (1)(2) 58 Independent director Chaoping Chen (3) 52 Independent Director Louis, Ramesh Ruben (1) 45 Independent Director (1) Member of the Audit Committee. (2) Member of the Compensation Committee. (3) Member of the Nominating and Corporate Governance Committee. Yumin Lin has serves as the Chairman of the Board, Chief Executive Officer, President and a director of the Company since December 2016. Mr. Lin has over 30 years of experience in business management. He has also been serving as chairman to FVTL since May 2011, the executive director of DILHK since June 2016, the executive director or QHDX since November 2016, the executive director of Shenzhen Xinghuashang Industrial Group Co., Ltd., a consulting company in China, since December 2019 and the director of Huashang Industrial Group Co., Ltd., a business consulting company in China, since October 2019. From April 1999 to May 2011, he was the general manager of Dongguan Saite Building Material Co., Ltd., a building material supplier in China. Kaihong Lin has served as the Chief Financial Officer, Treasurer and Director of the Company since December 2019. In addition, he has been the head of the finance department of QHDX since March 2019. Prior to that, he was the head of the finance department of Guangdong Minche New Energy Automobile Co., Ltd., a new energy automobile company, from June 2018 to March 2019. He served as financial director in Guangdong Duncheng Environmental Protection Technology Co., Ltd., an environmental engineering company in China, from June 2017 to May 2018. From October 2015 to May 2017, Mr. Lin was the head of the finance department and a member of the board of Guangzhou Jingcheng Inspection Technology Co., Ltd., a company specialized in testing and assessment across various industries, including environment, construction, electronics, food safety and so on. From January 1997 to October 2015, he was the head of the finance department of Guangdong Provincial Expressway Development Co., Ltd. (SHE: 000429), a construction and maintenance company for highways and bridges. Mr. Lin received a bachelor’s degree in human resources from Peking University, a bachelor’s degree in accounting from Jinan University, and a master’s degree in software engineering with a concentration in financial informatics from Tianjin University. Bulin Wang was appointed director on April 9, 2021. Mr. Wang is a partner of Guangzhou Kingpound Law Firm where he has practiced law for over 18 years. His extensive experience include representing clients in commercial disputes, labor and employment disputes, real estate disputes, and maritime disputes, as well as serving as a defense counsel in criminal cases. He has also counseled clients on non-litigation matters, such as mergers and acquisitions and due diligence investigations, among others. In addition, he also serves as a legal adviser for a number of Chinese companies. Mr. Wang received an MBA from Jinan University, Guangzhou, China and a Bachelor’s degree in Management from Shanghai Maritime University, China. 95 Jianwei Lin was appointed director on April 9, 2021. Mr. Lin is a member of the Australia Financial Complaint Authority (AFCA) and the Financial Broker Association of Australia (FBAA). Mr. Lin has over 10 years of experience in finance, accounting, marketing and management. He started his career at Investnet Australia Pty Ltd, a leading building material suppliers in Australia, first as a Marketing Manager and was then later as Vice General Manager. Mr. Lin established his own financial mortgage business in 2016 that provides financing consulting services for businesses and individuals. Mr. Lin graduated from Swinburne University of Technology, Australia, with a Bachelor of Business and a Master of Accounting degrees. Bin Li was appointed director on April 9, 2021. Dr. Li is a director and the General Manager of Shenzhen Xiejin Education Technology Co., Ltd. where he is responsible for all aspects of the company’s corporate strategic planning and management and has held that position since October 2018. Previously Dr. Li served as the president of Shenzhen Qianhai Daoyi Investment Management Co., Ltd from July 2015 to October 2018. Dr. Li is a member of the China New Economic and Cultural Commission. He received his Bachelor of Engineering from Wuhan University, EMBA from Cheung Kong Graduate School of Business, Beijing, and Doctorate in Business Administration from the University of Nice, France. Anthony S. Chan was appointed as an Independent Director on October 26, 2021. Mr. Chan is a certified public accountant registered with the State of New York and a seasoned executive with over 30 years of professional experience in auditing, financial reporting and business advisory. Mr. Chan is the Chief Operating Officer of Alset Inc. (Nasdaq: AEI), 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. From July 2019 to January 2020, Mr. Chan served as the Chief Financial Officer of SPI Energy Co. Ltd (Nasdaq: SPI), a Nasdaq-listed green energy solutions company. From October 2017 to March 2019, Mr. Chan served as the Chief Financial Officer of Helo Corp. (OTC Pink: 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. (Nasdaq: 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. Mr. 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. Chaoping Chen was appointed director on April 9, 2021. Ms. Chen has served as the Secretary General of the Guangdong Wine and Spirits Industry Association, Wine Division since February 2010 and manages all aspects of the day-to-day operations of the association. She is a member of the China National Wine Technical Committee and the Global Wine China Tasting System Committee. She is an expert on food and beverage industry administration and governance. She received her MBA from Sun Yat-Sen University School of Management in Guangzhou, China. She also studied at the University of Milan on planting and brewing and at the Culinary Institute of America on wine serving. Ramesh Ruben Louis was appointed director on April 9, 2021. Mr. Louis is a Chartered Accountant of the Malaysian Institute of Accountants (MIA), a fellow member of Association of Chartered Certified Accountants (FCCA), a chartered member of the Institute of Internal Auditors, as well as a Certified Financial Planner. Mr. Louis has over 20 years of experience in accounting, auditing and risk management ranging from large public listed companies to multinational corporations, government agencies as well as SMEs in a spectrum of industries including plantation, property development, manufacturing, trading, IT, shipping and retailing, among others. He started his career at Arthur Andersen from December 1996 to 1997, and subsequently moved to BDO from April 2000 to 2004 and from 2005 to 2006, respectively. He also has experience in corporate finance with Southern Investment Bank Berhad for a year from 2004 to 2005. Mr. Louis has hands-on experience on other corporate exercises such as due diligence, IPOs, debt issuances, corporate and debt restructuring and investigative audits. His training and advisory experience includes topics on Internal & Statutory Auditing, Public Sector/Government Audits, Value-for-Money Audits, ISQC 1, Risk Management & Internal Controls, Review and Assurance Engagements such as Financial Due Diligence, Forecasts & Projections, Forensic & Fraud Accounting/Auditing, as well as practical application of International Financial Reporting Standards (“IFRS”), Reporting Standards for SMEs (MPERS/PERS) and public sector accounting (MPSAS). He has facilitated training and provided advisory for public accountants across the Asia Pacific region, and multinationals and public sector institutions. Mr. Louis is a certified trainer by the Human Resource Development Fund (HRDF), Ministry of Human Resources Malaysia. Mr. Louis serves as an independent director of Greenpro Capital Corp. (NASDAQ: GRNQ). Mr. Louis received his Bachelor of Accounting from National University of Malaysia and MBA from University of Strathclyde, UK. He is a Fellow of the Association of Chartered Certified Accountants (ACCA). Family Relationships There are no family relationships, or other arrangements or understandings between or among any of the directors or executive officer. Board of Directors All directors hold office until the next annual meeting of shareholders and until their successors have been duly elected and qualified. Directors are elected at the annual meetings to serve for one-year terms. Officers are elected by, and serve at the discretion of, the board of directors. Our board of directors shall hold meetings on at least a quarterly basis. The board of directors has determined to comply with the NASDAQ Listing Rules with respect to certain corporate governance matters. As a smaller reporting company, under the NASDAQ rules we are only required to maintain a board of directors composed of at least 50% independent directors, and an audit committee of at least two members, composed solely of independent directors who also meet the requirements of Rule 10A-3 under the Securities Exchange Act of 1934. Delinquent Section 16(a) Reports Section 16(a) of the Exchange Act requires that our executive officers and directors, and persons who own more than ten percent of a registered class of our equity securities, file reports of ownership and changes in ownership with the SEC. Executive officers, directors and greater-than-ten percent stockholders are required by SEC regulations to furnish us with all Section 16(a) forms they file. Based solely on our review 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. 96 Director Independence The board of directors has reviewed the independence of our directors, applying the NASDAQ independence standards. Based on this review, the board of directors determined that each of Bulin Wang, Chaoping Chen, Bin Lin, Anthony S. Chan, Ramesh Ruben Louis and Jianwei Lin are independent within the meaning of the NASDAQ rules. In making this determination, our board of directors considered the relationships that each of these non-employee directors has with us and all other facts and circumstances our board of directors deemed relevant in determining their independence. As required under applicable NASDAQ rules, we anticipate that our independent directors will meet on a regular basis as often as necessary to fulfill their responsibilities, including at least annually in executive session without the presence of non-independent directors and management. Board Committees Our board of directors has established standing committees in connection with the discharge of its responsibilities. These committees include an Audit Committee, a Compensation Committee and a Nominating and Corporate Governance Committee. Our board of directors has adopted written charters for each of these committees. Our board of directors may establish other committees as it deems necessary or appropriate from time to time. Audit Committee Our Audit Committee was established on April 9, 2021 and is composed of three of our independent directors: Jianwei Lin (Chairman until October 26, 2021, remains as member of Audit Committee), Anthony Chan (Chairman since October 26, 2021) and Ramesh Ruben Louis. Anthony Chan qualifies as the Audit Committee financial expert as defined in Item 407(d)(5) of Regulation S-K promulgated under the Securities Act. According to its charter, the Audit Committee consists of at least three members, each of whom shall be a non-employee director who has been determined by the Board to meet the independence requirements of NASDAQ, and also Rule 10A-3(b)(1) of the SEC, subject to the exemptions provided in Rule 10A-3(c). The Audit Committee Charter describes the primary functions of the Audit Committee, including the following: ● Oversee the company’s accounting and the financial reporting processes; ● Oversee audits of the Company’s financial statements; ● Review and discuss with management the Company’s audited financial statements and review with management and the Company’s independent registered public accounting firm the Company’s financial statements prior to the filing with the SEC of any report containing such financial statements. ● Discuss policies with respect to risk assessment and risk management, and discuss the Company’s major financial risk exposures and the steps management has taken to monitor and control such exposures; ● Review major changes to the Company’s auditing and accounting principles and practices as suggested by the Company’s independent registered public accounting firm, internal auditors or management; and ● Take, or recommend that the board take, appropriate action to oversee and ensure the independence of the Company’s independent registered public accounting firm. Compensation Committee Our Compensation Committee was established on April 9, 2021. The Compensation Committee is responsible for, among other matters: ● reviewing and approving employment agreements and other similar arrangements between us and our executive officers; ● reviewing and approving, or recommending to the board of directors to approve the compensation of our CEO and other executive officers and directors reviewing key employee compensation goals, policies, plans and programs; and ● appointing and overseeing any compensation consultants or advisors 97 Corporate Governance and Nominating Committee Our Corporate Governance and Nominating Committee was established on April 9, 2021. The Corporate Governance and Nominating Committee is responsible for, among other matters: ● reviewing and making recommendations regarding the structure and composition of our board and the board committees; ● evaluating the independence of directors and director nominees; ● developing and recommending to the board corporate governance principles and practices; ● reviewing and monitoring the Company’s Code of Business Conduct and Ethics; and ● overseeing the evaluation of the Company’s management. Code of Ethics We have adopted a code of ethics that applies to all of our executive officers, directors and employees. The code of ethics codifies the 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. Involvement in Certain Legal Proceedings To our knowledge, there are no material proceedings to which any of our directors, officers or affiliates of the Company is a party adverse to the Company or has a material interest adverse to the Company. Section 16(a) Beneficial Ownership Reporting Compliance Section 16(a) of the Exchange Act requires that our executive officers and directors, and persons who own more than ten percent of a registered class of our equity securities, file reports of ownership and changes in ownership with the SEC. Executive officers, directors and greater-than-ten percent stockholders are required by SEC regulations to furnish us with all Section 16(a) forms they file. Based solely on our review 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, 2022, all of our executive officers, directors and greater-than-ten percent stockholders complied with all Section 16(a) filing requirements. Item 11. Executive Compensation The following table sets forth the compensation paid or accrued by us to our Chief Executive Officer and Chief Financial Officer for the years ended December 31, 2022 and 2021. Name and principal position Year Salary ($) Bonus ($) Stock awards ($) Option awards ($) Nonequity incentive plan compensation ($) Nonqualified deferred compensation earnings ($) All other compensation ($) Total ($) Yumin Lin 2021 23,248 - - - - - - 23,248 Chairman of the Board, Chief Executive Officer, President and Secretary 2022 26,858 26,858 Kaihong Lin (1) 2021 33,442 - - - - - 33,442 Chief Financial Officer, Treasurer and Director 2022 32,221 32,221 Employment Agreements with Named Executive Officers On December 20, 2019, the Company and Mr. Kaihong Lin entered into an employment agreement (the “Employment Agreement”) setting forth the terms and conditions of Mr. Lin’s employment as Chief Financial Officer and Treasurer. Pursuant to the Employment Agreement, Mr. Lin will serve as the Chief Financial Officer and Treasurer for a term of one year, subject to automatic renewal for successive one-year terms, unless either party gives 60-day prior notice of non-renewal. Mr. Lin is entitled to an annual base salary of $25,676 for his services and participation in all compensation and employee benefit plans. Should Mr. Lin be terminated for cause, or by reason of death or disability, or resign without good reason (as such terms are defined in the Employment Agreement), Mr. Lin shall be entitled to receive his base salary and benefits through the end of his employment and such other compensation and benefits as may be provided in applicable plans and programs of the Company. In the case of termination by death, Mr. Lin is entitled to receive the portion of stock option to the extent vested prior to the end of his employment. Should Mr. Lin be terminated without cause (other than due to death or disability) or resign for good reason, he shall be entitled to receive any accrued and unpaid base salary, benefits and the stock option to the extent vested through the end of his employment, as well as continuation of his base salary for three months following of the end of his employment. Outstanding Equity Awards There were no outstanding equity awards, as of December 31, 2022. Equity Compensation Plan Information We currently do not have an equity compensation plan. Director Compensation Directors’ 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. Compensation Committee Interlocks and Insider Participation None of our executive officers currently serves, or has served during the last completed fiscal year, on the compensation committee or board of directors of any other entity (other than a subsidiary or consolidated affiliate of the Company) that has one or more executive officers serving as a member of our Board or Compensation Committee. 98 Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters The 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. Each of the persons named in the table has sole voting and investment power with respect to common stock beneficially owned. The information presented below regarding beneficial ownership of our voting securities has been presented in accordance with the rules of the Securities and Exchange Commission and is not necessarily indicative of ownership for any other purpose. Under these rules, a person is deemed to be a “beneficial owner” of a security if that person has or shares the power to vote or direct the voting of the security or the power to dispose or direct the disposition of the security. A person is deemed to own beneficially any security as to which such person has the right to acquire sole or shared voting or investment power within sixty (60) days through the conversion or exercise of any convertible security, warrant, option, or other right. More than one (1) person may be deemed to be a beneficial owner of the same securities. The percentage of beneficial ownership by any person as of a particular date is calculated by dividing the number of shares beneficially owned by such person, which includes the number of shares as to which such person has the right to acquire voting or investment power within sixty (60) days, by the sum of the number of shares outstanding as of such date. Consequently, the denominator used for calculating such percentage may be different for each beneficial owner. Except as otherwise indicated below and under applicable community property laws, we believe that the beneficial owners of our common stock listed below have sole voting and investment power with respect to the shares shown. The column entitled “Percentage of Shares Beneficially Owned” is based on a total of 15,655,038 shares of our common stock outstanding as of March 31, 2023. The business address of each directors and officers listed below is B1601 Oriental Impression Building 2, No. 139 Liansheng Road, Humen Town, Dongguan, Guangdong, China 523900. Name of Beneficial Owner Number of Shares Beneficially Owned Percentage of Shares Beneficially Owned Directors and Officers Yumin Lin (1) 6,501,708 41.53 % Kaihong Lin (2) 3,588 * Bulin Wang - - Anthony S. Chan - - Jianwei Lin - - Bin Li - - Chaoping Chen - - Ramesh Ruben Louis - - All officers and directors as a group (eight persons) 13,456,208 85.95 % 5% Shareholders China Kaipeng Group Co., Ltd. (3) 7,650,000 48.87 % Minghua Cheng (4) 6,950,912 44.40 % Gaosheng Group Co., Ltd. (5) 4,362,616 27.87 % * Less than one percent. (1) Consists of (i) 900,000 shares of the Company’s common stock Mr. Yumin Lin holds directly, which shares were issued to Mr. Lin in our acquisition of DIGLS on April 23, 2018, (ii) approximately 4,362,616 shares held by Gaosheng Group Co., Ltd., which is solely owned by Mr. Lin who may be deemed to have the voting and dispositive power of such shares, (iii) 1,214,820 shares held by China Kaipeng Group Co., Ltd, a company Mr. Lin owns 15.88% who may be deemed to have the voting and dispositive power of such shares, and (iv) approximately 24,272 shares issued to him on December 16, 2020 in lieu of the full payment of the working capital advances and loans he made to the Company. (2) Consists of 3,588 shares of the Company’s common stock Mr. Kaihong Lin holds directly, of which 813 shares were issued on July 19, 2019 and 2,775 were issued on August 7, 2019 in private placements. (3) Minghua 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 dispositive power over the Company’s common stock held by China Kaipeng Group Co., Ltd. The business address of this company is Second Floor, Capital City Independence Avenue Mahe Victoria, Seychelles. (4) 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. (5) Yumin Lin is a 100% shareholder of Gaosheng Group Co., Ltd. and is deemed to hold the voting and dispositive power over the Company’s common stock held by Gaosheng Group Co., Ltd. The business address of this company is Second Floor, Capital City Independence Avenue Mahe Victoria, Seychelles. The Company does not know any arrangements which may result in a change in control of the Company at a subsequent date. 99 Item 13. Certain Relationships, Related Transactions and Director Independence 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. Item 14. Principal Accountant Fees and Services The following table shows the fees that we paid or accrued for the audit and other services provided by our independent registered public accounting firm for the fiscal years ended December 31, 2022 and 2021. Fee Category Fiscal Year Ended December 31, 2022 Fiscal Year Ended December 31, 2021 Audit Fees (1) $ 534,550 $ 395,000 Audit-Related Fees (2) $ $ - Tax Fees (3) $ $ - All Other Fees (4) $ $ - (1) This category consists of fees for professional services rendered by our principal independent registered public accountants for the audit of our annual financial statements, review of financial statements included in our quarterly reports and services that are normally provided by the independent registered public accounting firms in connection with statutory and regulatory filings or engagements for those fiscal years. (2) This category consists of fees for assurance and related services by our independent registered public accountant that are reasonably related to the performance of the audit or review of our financial statements and are not reported above under “Audit Fees.” The services for the fees disclosed under this category include consultations concerning financial accounting and reporting standards. (3) This category consists of fees for professional services rendered by our independent registered public accountant for tax compliance, tax advice, and tax planning. 100 (4) This category consists of fees for services provided by our independent registered public accountants other than the services described above. All above audit services were pre-approved by the Audit Committee of the Board of Directors for the fiscal years ended December 31, 2022 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. Item 15. Exhibits and Financial Statement Schedules (a) Documents filed as part of this Annual Report (1) All Financial Statements The consolidated financial statements as listed in the accompanying “Index to Consolidated Financial Statements” are filed as part of this Annual Report on Form 10-K. (2) Financial Statement Schedules All financial statement schedules have been omitted, since the required information is not applicable or is not present in amounts sufficient to require submission of the schedule, or because the information required is included in the consolidated financial statements and notes thereto included in this Form 10-K. 101 (3) Exhibits Number Description 3.1 Articles of Incorporation (incorporated by reference to Exhibit 3.1 to the Company’s Registration Statement on Form S-1 as amended filed with the SEC on December 5, 2014) 3.2 Bylaws (incorporated by reference to Exhibit 3.2 the Company’s Registration Statement on Form S-1 as amended filed with the SEC on December 5, 2014). 3.3 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) 4.1* Description of securities registered pursuant to Section 12 of the Securities Exchange Act of 1934, as amended 10.1 + 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) 10.2 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) 14.1 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) 21.1* Subsidiaries of the registrant 31.1* Certification of Chief Executive Officer pursuant to Securities Exchange Act of 1934 Rule 13a-14(a) or 15d-14(a). 31.2* Certification of Chief Financial Officer pursuant to Securities Exchange Act of 1934 Rule 13a-14(a) or 15d-14(a). 32.1** 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. 32.2** 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. 101.INS* Inline XBRL Instance Document 101.SCH* Inline XBRL Taxonomy Extension Schema Document 101.CAL* Inline XBRL Taxonomy Extension Calculation Linkbase Document 101.DEF* Inline XBRL Taxonomy Extension Definition Document 101.LAB* Inline XBRL Taxonomy Extension Label Linkbase Document 101.PRE* Inline XBRL Taxonomy Extension Presentation Linkbase Document 104 Cover Page Interactive Data File (embedded within the Inline XBRL document) * Filed herewith ** Furnished herewith + Management contract or compensatory plan Item 16. Form 10–K Summary None. 102 SIGNATURES Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. FORTUNE VALLEY TREASURES, INC. Date: March 31, 2023 By : /s/ Yumin Lin Name: Yumin Lin Title: Chief Executive Officer, President and Secretary (Principal Executive Officer) By : /s/ Kaihong Lin Name: Kaihong Lin Title: Chief Financial Officer and Treasurer (Principal Financial and Accounting Officer) 103 Fortune Valley Treasures, Inc. Consolidated Financial Statements For the Years Ended December 31, 2022 and 2021 Contents Page Report of Independent Registered Public Accounting Firm (PCAOB ID 206 ) F-1 Consolidated Balance Sheets F-2 Consolidated Statements of Operations and Comprehensive Income (Loss) F-3 Consolidated Statements of Stockholders’ Equity F-4    Consolidated Statements of Cash Flows F-5 Notes to Financial Statements F-6 to F-18 104 REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM 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 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. 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. 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. /s/ MaloneBailey, LLP www.malonebailey.com We have served as the Company’s auditor since 2021. Shenzhen, China March 31, 2023 F- 1 Fortune Valley Treasures, Inc. Consolidated Balance Sheets As of December 31, 2022 and 2021 2022 2021 Assets Current assets Cash and cash equivalents $ 165,685 $ 123,163 Accounts receivable (including $ 146,087 and $ 57,609 from related parties as of December 31, 2022 and 2021, respectively) 4,797,564 2,662,168 Inventories 148,925 81,073 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) 1,758,917 2,176,713 Due from related party - 26,364 Total current assets 6,871,091 5,069,481 Non-current assets Deposits paid, net (including $ 758,445 and $ 1,596,075 to related parties as of December 31, 2022 and 2021, respectively) 1,121,302 2,306,160 Property and equipment, net 97,890 140,394 Operating lease right-of-use assets 297,232 385,896 Operating lease right-of-use assets, related parties 75,300 98,626 Intangible assets, net 370,926 2,281,790 Goodwill 454,201 1,406,289 Total Assets $ 9,287,942 $ 11,688,636 Liabilities and Stockholders’ Equity Current liabilities Operating lease obligations - current $ 110,201 $ 133,586 Operating lease obligations, related parties - current 16,629 22,666 Accounts payable (including $ 80,426 and $ 17,789 to related parties as of December 31, 2022 and 2021, respectively) 688,822 239,492 Accrued liabilities 502,389 128,343 Bank and other borrowings - current 422,653 101,207 Income tax payable 38,879 25,726 Customer advances 139,334 382,518 Due to related parties 565,675 683,981 Total current liabilities 2,484,582 1,717,519 Non-current liabilities Operating lease obligations – non-current 189,957 240,611 Operating lease obligations, related parties – non-current 55,056 77,934 Bank and other borrowings 58,438 188,218 Total Liabilities 2,788,033 2,224,282 Stockholders’ Equity Common stock ( 150,000,000 shares authorized, 15,655,038 shares issued and outstanding as of December 31, 2022 and 2021) 15,655 15,655 Additional paid-in capital 11,061,233 11,061,233 Accumulated deficit and statutory reserves ( 4,504,404 ) ( 2,561,681 ) Accumulated other comprehensive income (loss) ( 180,826 ) 544,305 Total Fortune Valley Treasures, Inc. stockholders’ equity 6,391,658 9,059,512 Noncontrolling interests 108,251 404,842 Total Stockholders’ Equity 6,499,909 9,464,354 Total Liabilities and Stockholders’ Equity $ 9,287,942 $ 11,688,636 See accompanying notes to the consolidated financial statements F- 2 Fortune Valley Treasures, Inc. Consolidated Statements of Operations and Comprehensive Income (Loss) For the Years ended December 31, 2022 and 2021 2022 2021 Net revenues (including $ 238,824 and $ 684,862 from related parties for the years ended December 31, 2022 and 2021, respectively) $ 9,234,079 $ 8,021,823 Cost of revenues (including $ 1,302,498 and $ 707,322 from related parties for the years ended December 31, 2022 and 2021, respectively) 4,593,405 3,659,805 Gross profit 4,640,674 4,362,018 Operating expenses: Selling and distribution expenses 61,047 89,416 General and administrative expenses 4,685,932 2,095,488 Impairment loss on intangible asset 979,428 - Impairment loss on goodwill 863,833 - Operating income (loss) ( 1,949,566 ) 2,177,114 Other income (expense): Other income 10,551 52,025 Interest income 260 983 Interest expense ( 31,444 ) ( 17,816 ) Other income (expense), net ( 20,633 ) 35,192 Income (loss) before income tax ( 1,970,199 ) 2,212,306 Income tax expense 186,480 248,837 Net income (loss) $ ( 2,156,679 ) $ 1,963,469 Less: Net income (loss) attributable to noncontrolling interests ( 213,956 ) 183,733 Net income (loss) attributable to Fortune Valley Treasures, Inc. ( 1,942,723 ) 1,779,736 Other comprehensive income (loss): Foreign currency translation gain (loss) ( 807,766 ) 269,234 Total comprehensive income (loss) ( 2,964,445 ) 2,232,703 Less: comprehensive income (loss) attributable to noncontrolling interests ( 296,591 ) 208,927 Comprehensive income (loss) attributable to Fortune Valley Treasures, Inc. $ ( 2,667,854 ) $ 2,023,776 Earnings (loss) per share Basic and diluted earnings (loss) per share * $ ( 0.12 ) $ 0.11 Basic and diluted weighted average shares outstanding * 15,655,038 15,655,038 * Given effect of the Reverse Stock Split, see Note 11 See accompanying notes to the consolidated financial statements F- 3 Fortune Valley Treasures, Inc. Consolidated Statements of Stockholders’ Equity For the Years ended December 31, 2022 and 2021 * * No. of Common Additional Paid-in Accumulated Deficit and Statutory Accumulated Other Comprehensive Non controlling Total Stockholders’ Shares* Stock* Capital* Reserves Income (Loss) Interests Equity Balance as of December 31, 2020 * 15,655,038 $ 15,655 $ 11,061,233 $ ( 4,341,417 ) $ 300,265 $ 195,915 $ 7,231,651 Foreign currency translation adjustment - - - - 244,040 25,194 269,234 Net income - - - 1,779,736 - 183,733 1,963,469 Balance as of December 31, 2021 15,655,038 $ 15,655 $ 11,061,233 $ ( 2,561,681 ) $ 544,305 $ 404,842 $ 9,464,354 Foreign currency translation adjustment - - - - ( 725,131 ) ( 82,635 ) ( 807,766 ) Net loss - - - ( 1,942,723 ) - ( 213,956 ) ( 2,156,679 ) Net income (loss) - - - ( 1,942,723 ) - ( 213,956 ) ( 2,156,679 ) Balance as of December 31, 2022 15,655,038 $ 15,655 $ 11,061,233 $ ( 4,504,404 ) $ ( 180,826 ) $ 108,251 $ 6,499,909 * Given effect of the Reverse Stock Split, see Note 11 See accompanying notes to the consolidated financial statements F- 4 Fortune Valley Treasures, Inc. Consolidated Statements of Cash Flows For the Years ended December 31, 2022 and 2021 2022 2021 Cash flows from operating activities Net income (loss) $ ( 2,156,679 ) $ 1,963,469 Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities: Depreciation and amortization expense 852,883 869,407 Non-cash lease expense 172,314 117,824 Allowance for doubtful accounts 2,564,686 - Impairment loss on intangible asset 979,428 - Impairment loss on goodwill 863,833 - Changes in operating assets and liabilities Accounts receivable ( 2,417,438 ) ( 124,843 ) Inventories ( 76,524 ) 66,424 Prepayments and other current assets, net ( 1,033,644 ) ( 1,755,603 ) Due from related parties 24,958 356,225 Deposits paid, net ( 251,545 ) ( 1,591,577 ) Accounts payable 482,213 ( 18,632 ) Due to related parties ( 162,018 ) 118,009 Customer advances ( 218,717 ) ( 210,259 ) Accrued liabilities 531,332 189,812 Income tax payable 15,660 ( 300,140 ) Operating lease obligations ( 163,815 ) ( 137,258 ) Cash provided by (used in) operating activities 6,927 ( 457,142 ) Cash flows from investing activities Acquisition of intangible asset ( 7,511 ) ( 28,008 ) Repayment of advance to related parties - 614,275 Purchase of property and equipment ( 2,599 ) ( 117,077 ) Net cash provided by (used in) investing activities ( 10,110 ) 469,190 Cash flows from financing activities Borrowings from related parties - 464,958 Borrowings from a revolving credit line 148,606 - Borrowings from bank loans 135,499 77,609 Borrowings from a third party 80,338 - Repayments to related parties ( 154,510 ) ( 684,784 ) Repayments to bank loans ( 61,184 ) - Repayments to a third party ( 82,629 ) ( 49,817 ) Net cash provided by (used in) financing activities 66,120 ( 192,034 ) Effect of exchange rate changes on cash and cash equivalents ( 20,415 ) 53,312 Net changes in cash and cash equivalents 42,522 ( 126,674 ) Cash and cash equivalents–beginning of the year 123,163 249,837 Cash and cash equivalents–end of the year $ 165,685 $ 123,163 Supplementary cash flow information: Interest paid $ 31,444 $ 17,816 Income taxes paid $ 166,516 $ 444,376 Non-cash investing and financing activities Expenses paid by related parties on behalf of the Company $ 135,774 $ 344,218 Remeasurement of the operating lease obligation and right-of-use asset due to lease modification $ - $ 41,010 Operating lease right-of-use assets obtained in exchange for operating lease obligations $ 94,285 $ 319,092 See accompanying notes to the consolidated financial statements F- 5 NOTE 1 - ORGANIZATION AND DESCRIPTION OF BUSINESS Fortune Valley Treasures, Inc. (formerly Crypto-Services, Inc.) (“FVTI” or the “Company”) was incorporated in the State of Nevada on March 21, 2014. The Company’s primary business operations of wholesale distribution and retail sales of alcoholic beverages of wine and distilled liquors, and drinking water distribution and delivery are conducted through its subsidiaries in the People’s Republic of China (“PRC”). On April 11, 2018, the Company entered into a share exchange agreement by and among DaXingHuaShang Investment Group Limited (“DIGLS”) and its shareholders: 1.) Yumin Lin, 2.) Gaosheng Group Co., Ltd. and 3.) China Kaipeng Group Co., Ltd. whereby the Company newly issued 15,000,000 shares (given effect of the Reverse Stock Split, see Note 11) of its common stock in exchange for all the outstanding shares in DIGLS. This transaction has been accounted for as a reverse takeover transaction and a recapitalization of the Company whereby the Company, the legal acquirer, is the accounting acquiree, and DIGLS, the legal acquiree, is the accounting acquirer; accordingly, the Company’s historical statement of stockholders’ equity has been retroactively restated to the first period presented. On March 1, 2019, the Company entered into a sale and purchase agreement (the “SP Agreement”) to acquire 100% of the shares of Jiujiu Group Stock Co., Ltd. (“JJGS”), a company incorporated under the laws of the Republic of Seychelles. The transaction closed on March 1, 2019. Pursuant to the SP Agreement, the Company issued 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. (“JJSZ”). 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. On June 22, 2020, the Company entered into a sale and purchase agreement along with Qianhai DaXingHuaShang Investment (Shenzhen) Co., Ltd., a company incorporated in China and a wholly-owned subsidiary of FVTI (“QHDX”), to acquire 90 % of the shares of Dongguan Xixingdao Technology Co., Ltd. (“Xixingdao”), a company incorporated in the PRC, from certain shareholders of Xixingdao in exchange for 243,134 shares (given effect of the 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. 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 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. On February 28, 2021, FVTI, QHDX and the original shareholders of Foshan BaiTaFeng Beverage Development Co., Ltd. (“BTF”) signed a termination agreement, pursuant to which the parties mutually agreed to terminate the original equity interest transfer agreement signed on December 31, 2019 (“BTF Agreement”). The BTF Agreement was terminated effective February 28, 2021 and the parties have no further rights or obligations under the BTF Agreement. The parties further agreed to waive their rights to any claims that may arise under the BTF Agreement. As of the date of the termination agreement, no equity interest of BTF had been transferred to QHDX. F- 6 NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Basis of presentation These consolidated financial statements, accompanying notes, and related disclosures have been prepared pursuant to the rules and regulations of the U.S. Securities and Exchange Commission (“SEC”). These financial statements have been prepared using the accrual basis of accounting in accordance with the generally accepted accounting principles in the United States (“U.S. GAAP”). The Company’s fiscal year end is December 31. The Company’s financial statements are presented in U.S. dollars. Basis of consolidation The consolidated financial statements include the accounts of the Company and its subsidiaries. All intercompany accounts and transactions have been eliminated. The results of subsidiaries acquired during the respective periods are included in the consolidated statements of operations from the effective date of acquisition or up to the effective date of disposal, as appropriate. The portion of the income or loss applicable to noncontrolling interests in subsidiaries is reflected in the consolidated statements of operations. As of December 31, 2022, details of the Company’s major subsidiaries were as follows: SCHEDULE OF ENTITIES AND ITS SUBSIDIARIES Entity Name Date of Incorporation Parent Entity Nature of Operation Place of Incorporation DIGLS July 4, 2016 FVTI Investment holding Republic of Seychelles DILHK June 22, 2016 DIGLS Investment holding Hong Kong, PRC QHDX November 3, 2016 DILHK Investment holding PRC FVTL May 31, 2011 QHDX Trading of food and platform PRC JJGS August 17, 2017 FVTI Investment holding Republic of Seychelles JJHK August 24, 2017 JJGS Investment holding Hong Kong, PRC JJSZ November 16, 2018 JJHK Trading of food PRC Xixingdao August 28, 2019 QHDX Drinking water distribution and delivery PRC Dongguan City Fu La Tu Trade Ltd (“FLTT”) September 27, 2020 FVTL Trading of alcoholic beverages PRC Dongguan City Fu Xin Gu Trade Ltd (“FXGT”) December 2, 2020 FVTL Trading of alcoholic beverages PRC Dongguan City Fu Xin Technology Ltd (“FXTL”) November 12, 2020 Xixingdao Drinking water distribution and delivery PRC Dongguan City Fu Guan Healthy Industry Technology Ltd (“FGHL”) December 21, 2020 Xixingdao Drinking water distribution and delivery PRC Dongguan City Fu Jing Technology Ltd (“FJTL”) November 17, 2020 Xixingdao Drinking water distribution and delivery PRC Dongguan City Fu Xiang Technology Ltd (“FGTL”) November 16, 2020 Xixingdao Drinking water distribution and delivery PRC Dongguan City Fu Ji Food & Beverage Ltd (“FJFL”) November 9, 2020 Xixingdao Drinking water distribution and delivery PRC Dongguan City Fu Lai Food Ltd (“FLFL”) September 27, 2020 Xixingdao Drinking water distribution and delivery PRC Dongguan City Fu Yi Beverage Ltd (“FYBL”) November 12, 2020 Xixingdao Drinking water distribution and delivery PRC Dongguan City Fu Xi Drinking Water Company Ltd (“FXWL”) March 17, 2021 Xixingdao Drinking water distribution and delivery, sales of alcoholic beverages and water purifier PRC Dongguan City Fu Jia Drinking Water Company Ltd (“FJWL”) March 29, 2021 Xixingdao Drinking water distribution and delivery, sales of water purifier PRC Dongguan City Fu Sheng Drinking Water Company Ltd (“FSWL”) March 29, 2021 Xixingdao Drinking water distribution and delivery, sales of water purifier PRC Shenzhen Fu Jin Trading Technology Company Ltd (“FJSTL”) June 7, 2021 Xixingdao Drinking water distribution and delivery, sales of water purifier PRC Dongguan City Fu Li Trading Ltd (“FLTL”) September 10, 2021 Xixingdao Drinking water distribution and delivery, sales of water purifier PRC Dongguan City Fu Gu Supply Chain Group Ltd (“FGGC”) September 13, 2021 QHDX Sales of alcoholic beverages PRC Dongguan City Fu Zhi Gu Trading Ltd (“FZGTL”) September 9, 2022 FVTL Trading of alcoholic beverages PRC Dongguan City Chang Fu Trading Ltd (“CFTL”) September 9, 2022 FVTL Trading of alcoholic beverages PRC Dongguan City La Tong Trading Ltd (“LTTL”) August 8, 2022 FVTL Trading of alcoholic beverages PRC Dongguan City Kai Fu Trading Ltd (“KFTL”) September 8, 2022 FVTL Trading of alcoholic beverages PRC F- 7 Use of estimates The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions relating to the reporting of assets and liabilities and the disclosure of contingent liabilities at the date of the financial statements, and the reported amounts of revenues and expenses during the reporting period. Significant accounting estimates include certain assumptions related to going concern, allowance of 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 estimates. Reclassification Certain prior year amounts have been reclassified to conform to the current period presentation. These reclassifications had no impact on net earnings and financial position. Foreign currency translation and re-measurement The Company translates its foreign operations to the U.S. dollar in accordance with ASC 830, “ Foreign Currency Matters ”. The reporting currency for the Company and its subsidiaries is the U.S. dollar. The Company, DIGLS, DILHK, JJGS and JJHK’s functional currency is the U.S. dollar; QHDX, JJSZ and their subsidiaries which are incorporated in PRC use the Chinese Renminbi (“RMB”) as their functional currency. The Company’s subsidiaries, whose records are not maintained in that company’s functional currency, re-measure their records into their functional currency as follows: ● Monetary assets and liabilities at exchange rates in effect at the end of each period ● Nonmonetary assets and liabilities at historical rates ● Revenue and expense items at the average rate of exchange prevailing during the period Gains and losses from these re-measurements were not significant and have been included in the Company’s results of operations. The Company’s subsidiaries, whose functional currency is not the U.S. dollar, translate their records into the U.S. dollar as follows: ● Assets and liabilities at the rate of exchange in effect at the balance sheet date ● Equities at the historical rate ● Revenue and expense items at the average rate of exchange prevailing during the period Translation of amounts from the local currencies of the Company into US$ has been made at the following exchange rates for the respective periods: SCHEDULE OF FOREIGN CURRENCY EXCHANGE RATE TRANSLATION 2022 2021 As of and for the year ended December 31, 2022 2021 Period-end RMB:US$1 exchange rate 0.14474 0.15735 Period-average RMB:US$1 exchange rate 0.14896 0.15499 F- 8 The RMB is not freely convertible into foreign currency and all foreign exchange transactions must take place through authorized institutions. No representation is made that the RMB amounts could have been, or could be, converted into U.S. dollars at the rates used in translation. Cash and cash equivalents Cash and cash equivalents consist of cash on hand, demand deposits placed with banks or other financial institutions and have original maturities of less than three months. The Company’s primary bank deposits are located in the PRC. Accounts receivable and allowance for doubtful accounts Accounts receivable are stated at the customer obligations due under normal trade terms net of allowance for doubtful accounts. The Company maintains an allowance for doubtful accounts which reflects its best estimate of amounts that potentially will not be collected. The Company determines the allowance for doubtful accounts taking into consideration various factors including but not limited to historical collection experience and credit-worthiness of the customers as well as the age of the individual receivables balance. Additionally, the Company makes specific bad debt provisions based on any specific knowledge the Company has acquired that might indicate that an account is uncollectible. The facts and circumstances of each account may require the Company to use substantial judgment in assessing its collectability. 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 and 2021. Inventories Inventories consisting of finished goods are stated at the lower of cost or market value. The Company used the weighted average cost method of accounting for inventory. Inventories on hand are evaluated on an on-going basis to determine if any items are obsolete, spoiled, or in excess of future demand. The Company provides impairment that is charged directly to cost of 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 tends to increase over time, however, there are circumstances where alcoholic beverages may be subject to spoilage if stored for prolong periods of time. Property and equipment , net Property and equipment is carried at cost less accumulated depreciation. Depreciation is provided over their estimated useful lives, using the straight-line method. Estimated useful lives of the property and equipment are as follows: SCHEDULE OF ESTIMATED USEFUL LIVES OF EQUIPMENT Categories Estimated useful life Office equipment 3 - 20 years Leasehold improvements 3 years The cost of maintenance and repairs is charged to expenses as incurred, whereas significant renewals and betterments are capitalized. Intangible assets, net Intangible 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. Amortization is calculated on the straight-line basis over the following estimated useful lives: SCHEDULE OF ESTIMATED USEFUL LIVES OF AMORTIZATION Categories Estimated useful life Distribution channel 4 years Others 5 years Operating leases The Company recognizes its leases in accordance with ASC 842 - Leases. Under ASC 842, operating lease right-of-use (“ROU”) assets and liabilities are recognized at commencement date based on the present value of lease payments over the lease term. ROU assets represent our right to use an underlying asset for the lease term and lease liabilities represent our obligation to make lease payments arising from the lease. The initial lease liability is equal to the future fixed minimum lease payments discounted using the Company’s incremental borrowing rate, on a secured basis. The lease term includes option renewal periods and early termination payments when it is reasonably certain that the Company will exercise those rights. The initial measurement of the ROU asset is equal to the initial lease liability plus any initial direct costs and prepayments, less any lease incentives. The Company elected the short-term lease exemption for contracts with lease terms of 12 months or less. The Company accounts for the lease and non-lease components of its leases as a single lease component. Lease expense is recognized on a straight-line basis over the lease term. Impairment of long-lived assets other than goodwill The Company reviews its long-lived assets for impairment whenever events or changes in circumstances indicate that the carrying amount of assets may not be recoverable. Impairment may be the result of becoming obsolete from a change in the industry or new technologies. Impairment is present if the carrying amount of an asset is less than its undiscounted cash flows to be generated. F- 9 If an asset is considered impaired, a loss is recognized based on the amount by which the carrying amount exceeds the fair market value of the asset. Assets to be disposed of are reported at the lower of the carrying amount or fair value less costs to sell. The Company did not recognize any impairment of long-lived assets during the 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 Goodwill represents the excess of the purchase price over the fair value of the net identifiable assets acquired in a business combination. In accordance with FASB ASC Topic 350, “Intangibles-Goodwill and Others”, goodwill is subject to at least an annual assessment for impairment or more frequently if events or changes in circumstances indicate that an impairment may exist, applying a fair-value based test. Fair value is generally determined using a discounted cash flow analysis. The Company would recognize an impairment charge for the amount by which the carrying amount of a reporting unit exceeds its fair value up to the amount of goodwill allocated to that reporting unit. During the 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 event. 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. As a result, the impairment loss on goodwill of $ 863,833 was recognized during the year ended December 31, 2022. As of December 31, 2022, the balance of goodwill is $ 454,201 . Revenue recognition The Company follows the guidance of ASC 606, revenue from contracts with customers is recognized using the following five steps: 1. Identify the contract(s) with a customer; 2. Identify the performance obligations in the contract; 3. Determine the transaction price; 4. Allocate the transaction price to the performance obligations in the contract; and 5. Recognize revenue when (or as) the entity satisfies a performance obligation. Under Topic 606, revenues are recognized when the promised products have been confirmed of delivery or services have been transferred to the consumers in amounts that reflect the consideration the customer expects to be entitled to in exchange for those services. The Company presents value added taxes (“VAT”) as reductions of revenues. The Company recognizes revenues net of value added taxes (“VAT”) and relevant charges. We generate revenue primarily from the sales of liquor, water, water purifier and other products directly to agents, wholesalers and end users, with majority of sales transactions were conducted offline. We recognize product revenue at a point in time when the control of the products has been transferred to customers. The transfer of control is considered complete when products have been picked up by or delivered to our customers. We account for shipping and handling fees as a fulfillment cost. F- 10 The following table provides information about disaggregated revenue based on revenue by product types: SCHEDULE OF DISAGGREGATION REVENUE 2022 2021 For the year ended December 31, 2022 2021 Sales of liquor $ 3,875,500 $ 3,098,070 Sales of water 3,743,146 3,653,171 Sales of water purifier 1,197,942 673,536 Others 417,491 597,046 Total $ 9,234,079 $ 8,021,823 Contract liabilities Contract liabilities consist mainly of customer advances. On certain occasions, the Company may receive prepayments from downstream retailers or wholesales customers for wines, water and other products prior to them taking possession of the Company’s products. The Company records these receipts as customer advances until the control of the products has been transferred the customers. As of December 31, 2022 and December 31, 2021, the Company had customer advances of $ 139,334 and $ 382,518 , respectively. During the years ended December 31, 2022 and 2021, the Company recognized $ 332,806 and $ 580,151 , respectively, of customer advances in the opening balance. Sales and distribution expenses Sales and distribution expenses amounted to $ 61,047 and $ 89,416 for the years ended December 31, 2022 and 2021, respectively. Selling and distribution costs are expensed as incurred and included in selling expenses. General and administrative expenses General and administrative expenses consist primarily of salary and welfare for general and administrative personnel, rental expenses, entertainment expenses, general office expenses and professional service fees. Value-added taxes Revenue is recognized net of value-added taxes (“VAT”). The VAT is based on gross sales price and VAT rates applicable to the Company is 13 %. 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. 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. Income taxes The Company followed the liability method of accounting for income taxes in accordance with ASC 740, Income Taxes, or ASC 740. Under this method, deferred tax assets and liabilities are determined based on the difference between the financial reporting and tax bases of assets and liabilities using enacted tax rates that will be in effect in the period in which the differences are expected to reverse. The Company recorded a valuation allowance to offset deferred tax assets if based on the weight of available evidence, it is more-likely-than-not that some portion, or all, of the deferred tax assets will not be realized. The effect on deferred taxes of a change in tax rate is recognized in tax expense in the period that includes the enactment date of the change in tax rate. The Company accounted for uncertainties in income taxes in accordance with ASC 740. Interest and penalties related to unrecognizable tax benefit recognized in accordance with ASC 740 are classified in the consolidated statements of comprehensive income as income tax expense. Statutory reserves Statutory reserves are referring to the amount appropriated from the net income in accordance with laws or regulations, which can be used to recover losses and increase capital, as approved, and are to be used to expand production or operations. PRC laws prescribe that an enterprise operating at a profit must appropriate and reserve, on an annual basis, an amount equal to 10 % 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. Earnings (loss) per share The 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. Potential common shares that have an anti-dilutive effect (i.e. those that increase income per share or decrease loss per share) are excluded from the calculation of diluted EPS. Financial instruments The Company accounts for financial instruments in accordance to ASC Topic 820, “Fair Value Measurements and Disclosures,” which requires disclosure of the fair value of financial instruments held by the Company and ASC Topic 825, “Financial Instruments,” which defines fair value, and establishes a three-level valuation hierarchy for disclosures of fair value measurement that enhances disclosure requirements for fair value measures. The carrying amounts reported in the consolidated balance sheets for financial assets and liabilities, which primarily consist of cash and cash equivalents, accounts receivable, inventories, prepayments and other current assets, accounts payable, accrued liabilities, income tax payable, customer advances, are a reasonable estimate of their fair values because of the short period of time between the origination of such instruments and their expected realization and their current market rate of interest. The three levels of valuation hierarchy are defined as follows: ● Level 1 inputs to the valuation methodology are quoted prices for identical assets or liabilities in active markets. ● Level 2 inputs to the valuation methodology include quoted prices for similar assets and liabilities in active markets, and inputs that are observable for the asset or liability, either directly or indirectly, for substantially the full term of the financial instrument. ● Level 3 inputs to the valuation methodology are unobservable and significant to the fair value measurement. F- 11 Commitments and contingencies Liabilities for loss contingencies arising from claims, assessments, litigation, fines and penalties and other sources are recorded when it is probable that a liability has been incurred and the amount of the assessment can be reasonably estimated. Comprehensive income (loss) Comprehensive 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. Segment reporting The Company reports each material operating segment in accordance with ASC 280, “Segment Reporting”. Operating segments are defined as components of an enterprise about which separate financial information is available that is evaluated regularly by the chief operating decision maker in deciding how to allocate resources and in assessing performance. The Company’s chief operating decision maker is the chief executive officer. The Company has determined that it has only one operating segment. Significant risk Currency risk A majority of the Company’s expense transactions are denominated in RMB and a significant portion of the Company and its subsidiaries’ assets and liabilities are denominated in RMB. RMB is not freely convertible into foreign currencies. In the PRC, certain foreign exchange transactions are required by law to be transacted only by authorized financial institutions at exchange rates set by the People’s Bank of China (“PBOC”). Remittances in currencies other than RMB by the Company in the PRC must be processed through the PBOC or other Company foreign exchange regulatory bodies which require certain supporting documentation in order to affect the remittance. The Company maintains certain bank accounts in the PRC. On May 1, 2015, the PRC’s new Deposit Insurance Regulation came into effect, pursuant to which banking financial institutions, such as commercial banks, established in the PRC are required to purchase deposit insurance for deposits in RMB and in foreign currency placed with them. Such Deposit Insurance Regulation would not be effective in providing complete protection for the Company’s accounts, as its aggregate deposits are much higher than the compensation limit, which is RMB 500,000 for one bank. However, the Company believes that the risk of failure of any of these Chinese banks is remote. 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. Other than the deposit insurance mechanism in the PRC mentioned above, the Company’s bank accounts are not insured by Federal Deposit Insurance Corporation insurance or other insurance. Concentration and credit risk Financial instruments that potentially subject the Company to the concentration of credit risks consist of cash and short-term investments. The maximum exposures of such assets to credit risk are their carrying amounts as of the balance sheet dates. The Company deposits its cash and cash equivalents with financial institutions located in jurisdictions where the subsidiaries are located. The Company believes that no significant credit risk exists as these financial institutions have high credit quality. The Company 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. 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 and other two suppliers accounted for more than 10 % of the Company’s accounts payable. Interest rate risk Fluctuations in market interest rates may negatively affect our financial condition and results of operations. The Company is exposed to floating interest rate risk on cash deposit and floating rate borrowings, and the risks due to changes in interest rates is not material. The Company has not used any derivative financial instruments to manage our interest risk exposure. Related party transaction A related party is generally defined as (i) any person that holds 10% or more of the Company’s securities and their immediate families, (ii) the Company’s management, (iii) someone that directly or indirectly controls, is controlled by or is under common control with the Company, or (iv) anyone who can significantly influence the financial and operating decisions of the Company. A transaction is considered to be a related party transaction when there is a transfer of resources or obligations between related parties. Transactions involving related parties cannot be presumed to be carried out on an arm’s-length basis, as the requisite conditions of competitive, free market dealings may not exist. Representations about transactions with related parties, if made, shall not imply that the related party transactions were consummated on terms equivalent to those that prevail in arm’s-length transactions unless such representations can be substantiated. Recent 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 Instruments. ASU No. 2016-13 was further amended in November 2020 by ASU No. 2020-10, Financial Instruments – Credit Losses (Topic 326), Derivatives and Hedging (Topic 815), and Leases (Topic 842). As a result, ASC Topic 326, Financial Instruments – Credit Losses is effective for smaller reporting companies for fiscal years beginning after December 15, 2022, including interim periods within those fiscal years. The Company adopted ASU No. 2016-13 on January 1, 2023 and the adoption did not have a material impact on the Company’s consolidated financial statements. NOTE 3 – PREPAYMENTS AND OTHER CURRENT ASSETS , NET Prepayments and other current assets consisted of the following as of December 31, 2022 and 2021: SCHEDULE OF PREPAYMENTS AND OTHER CURRENT ASSETS 2022 2021 Prepayments (including $ 2,255,288 and $ 1,813,904 to related parties as of December 31, 2022 and 2021, respectively) $ 3,001,866 $ 2,169,095 Other current assets 4,631 7,618 Total prepayments and other current assets 3,006,497 2,176,713 Less: Allowance for doubtful accounts (including $ 1,152,427 and $ nil to related parties as of December 31, 2022 and 2021, respectively) ( 1,247,580 ) - Prepayments and other current assets, net $ 1,758,917 $ 2,176,713 Balance of prepayments represented the advanced payments to suppliers including related party suppliers. Allowance for doubtful accounts movement is as follows: SCHEDULE OF ALLOWANCE FOR DOUBTFUL ACCOUNTS 2022 2021 Beginning balance $ - $ - Additions to allowance 1,284,005 - Foreign currency translation adjustment ( 36,425 ) - Ending balance $ 1,247,580 $ - NOTE 4 – DEPOSITS PAID, NET Deposits paid consisted of the following as of December 31, 2022 and 2021: SCHEDULE OF DEPOSITS PAID 2022 2021 Deposits paid (including $ 1,628,511 and $ 1,596,075 to related parties as of December 31, 2022 and 2021, respectively) $ 2,365,652 $ 2,306,160 Less: 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 $ 1,121,302 $ 2,306,160 Allowance for doubtful accounts movement is as follows: SCHEDULE OF ALLOWANCE FOR DOUBTFUL ACCOUNTS 2022 2021 Beginning balance $ - $ - Additions to allowance 1,280,681 - Foreign currency translation adjustment ( 36,331 ) - Ending balance $ 1,244,350 $ - NOTE 5 – PROPERTY AND EQUIPMENT, NET Property and equipment consisted of the following as of December 31, 2022 and 2021: SCHEDULE OF PROPERTY AND EQUIPMENT 2022 2021 Office equipment $ 116,520 $ 113,995 Leasehold improvement 126,386 126,386 Property and equipment 242,906 240,381 Less: Accumulated depreciation ( 145,016 ) ( 99,987 ) Property and equipment, net $ 97,890 $ 140,394 Depreciation expense, which was included in general and administrative expenses, for the years ended December 31, 2022 and 2021 was $ 46,344 and $ 24,500 , respectively. F- 12 NOTE 6 – INTANGIBLE ASSETS Intangible assets and related accumulated amortization were as follows: SCHEDULE OF INTANGIBLE ASSETS 2022 2021 Distributor channel $ 3,117,635 $ 3,389,404 Others 27,809 22,299 Total intangible assets 3,145,444 3,411,703 Less: Accumulated amortization ( 1,822,875 ) ( 1,129,913 ) Less: Impairment loss ( 951,643 ) - Total $ 370,926 $ 2,281,790 Amortization expense for the years ended December 31, 2022 and 2021 was $ 806,539 and $ 844,907 , 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 and $ nil , respectively. As of December 31, 2022, the future estimated amortization costs for intangible assets are as follows: SCHEDULE OF FUTURE AMORTIZATION EXPENSES FOR DISTRIBUTION CHANNELS 2023 $ 213,983 2024 144,510 2025 5,562 2026 5,562 Thereafter 1,309 Total $ 370,926 NOTE 7 - INCOME TAXES United States of America The 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 % . Seychelles Under the current laws of the Seychelles, DIGLS and JJGS are registered as an international business company which governed by the International Business Companies Act of Seychelles and there is no income tax charged in Seychelles. Hong Kong From year of assessment of 2018/2019 onwards, Hong Kong profit tax rates are 8.25 % on assessable profits up to HK$ 2,000,000 (approximately $ 289,855 ), and 16.5 % on any part of assessable profits over HK$ 2,000,000 . For the years ended December 31, 2022 and 2021, the Company did not have any assessable profits arising in or derived from Hong Kong, therefore no provision for Hong Kong profits tax was made in the year. The PRC The Company’s subsidiaries are incorporated in the PRC, and are subject to the PRC Enterprise Income Tax Laws (“EIT Laws”) with the statutory income tax rate of 25 % with the following exceptions. F- 13 On 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 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%. MOF and SAT [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. The components of the income tax provision are as follows: SCHEDULE OF COMPONENTS OF INCOME TAX PROVISION 2022 2021 Current: – United States of America $ ( 41,444 ) $ 20,071 – Seychelles - - – Hong Kong - - – The PRC 227,924 228,766 Current income tax expense Deferred – United States of America - - – Seychelles - - – Hong Kong - - – The PRC - - Deferred income tax expense Total $ 186,480 $ 248,837 A 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 2022 2021 Income (loss) attributed to PRC operations $ ( 766,083 ) $ 3,109,080 Loss attributed to Seychelles and Hong Kong ( 19 ) ( 444 ) Loss attributed to U.S. ( 1,204,097 ) ( 896,330 ) Income (loss) before tax $ ( 1,970,199 ) $ 2,212,306 The difference between the U.S. federal statutory income tax rate and the Company’s effective tax rate was as follows for the years ended December 31, 2022 and 2021: SCHEDULE OF EFFECTIVE INCOME TAX RATE 2022 2021 U.S. federal statutory income tax rate 21.0 % 21.0 % Income tax difference under different tax jurisdictions - 9.3 % 7.2 % PRC tax exemption for qualified small-scale and low-profit enterprises 52.5 % - 36.8 % Valuation allowance on deferred income tax assets - 3.1 % 2.5 % Amortization and impairment loss not deductible for tax purposes - 28.2 % 7.9 % Expenses not deductible for tax purpose - 27.3 % - % Impact of GILTI - 10.7 % 9.4 % Others - 4.4 % - % The Company’s effective tax rate - 9.5 % 11.2 % The 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. The significant components of deferred taxes of the Company are as follows: SCHEDULE OF COMPONENTS OF DEFERRED TAX ASSETS December 31, 2022 December 31, 2021 As of December 31, 2022 December 31, 2021 Deferred tax assets: Net operating loss carry forwards $ - $ - -United States - - -Hong Kong - - -PRC 61,762 55,457 Gross deferred tax assets 61,762 55,457 Less: valuation allowance ( 61,762 ) ( 55,457 ) Total deferred tax assets, net $ - $ - F- 14 NOTE 8 - RELATED PARTY TRANSACTIONS Amounts due from related parties as of December 31, 2022 and 2021 are as follows: SCHEDULE OF AMOUNT DUE FROM AND DUE TO RELATED PARTIES 2022 2021 Mr. Deqin Ke Manager of a subsidiary $ - $ 26,364 $ - $ 26,364 Amounts due to related parties as of December 31, 2022 and 2021 are as follows: 2022 2021 Mr. Yumin Lin President, Chief Executive Officer, Secretary, Director and majority shareholder $ 389,051 $ 344,218 Ms. Xiulan Zhou Manager of a subsidiary 508 1,157 Mr. Huagen Li Manager of a subsidiary 2,316 2,518 Mr. Guodong Jia Manager of a subsidiary 2,342 944 Mr. Minghua Cheng Former director and majority shareholder - 157,353 Mr. Hongwei Ye Manager of a subsidiary, Shareholder 16 17 Mr. Anping Chen Manager of a subsidiary 1,290 6,924 Mr. Jiangwei Jia Manager of a subsidiary 3,678 787 Ms. Xiuyun Wang Manager of a subsidiary - 6,020 Mr. Yuwen Li Vice President 64,924 70,745 Shenzhen DaXingHuaShang Industry Development Ltd. Mr. Yumin Lin is the supervisor of Shenzhen DaXingHuaShang Industry Development Ltd. 86,842 93,298 Ms. Chunxiang Zhang Manager of a subsidiary 998 - Mr. Meng Xue Manager of a subsidiary 5,449 - Ms. Shuqin Chen Manager of a subsidiary 1,358 - Mr. Zhipeng Zuo Manager of a subsidiary 59 - Mr. Deqin Ke Manager of a subsidiary 724 - Mr. Aisheng Zhang Manager of a subsidiary 2,320 - Mr. Zhihua Liao Manager of a subsidiary 3,800 - $ 565,675 $ 683,981 Revenues generated from related parties during the years ended December 31, 2022 and 2021 are as follows: SCHEDULE OF REVENUE GENERATED FROM RELATED PARTIES 2022 2021 Mr. Kaihong Lin Chief Financial Officer and Treasurer $ 777 $ 407 Mr. Yumin Lin President, Chief Executive Officer, Secretary, Director and majority shareholder 492 389 Ms. Xiulan Zhou Manager of a subsidiary, Mr. Yumin Lin’s wife 133 63 Mr. Zihao Ye Manager of a subsidiary 658 108 Mr. Naiyong Luo Manager of a subsidiary - 5,759 Mr. Hongwei Ye Manager of a subsidiary, Shareholder - 6,820 Mr. Jianglong Xiong Manager of a subsidiary 18 - Ms. Shuiyan Li Shareholder - 13,178 Dongguan Humen Shuiyan Drinking Water Store Ms. Shuiyan Li, a shareholder of the Company, is the controlling shareholder of Dongguan Humen Shuiyan Drinking Water Store 139,172 176,354 Guangdong Shuiyijia Distribution Co., Ltd. Ms. Lihua Li, Mr. Yuwen Li’s wife, is the supervisor of Guangdong Shuiyijia Distribution Co., Ltd. - 19,619 Dongguan Chashan Pingfeng Cigarette and Wine Co., Ltd. Mr. Taiping Deng, a manager of a subsidiary, is the controlling shareholder of Dongguan ChaShan Pingfeng Cigarette and Wine Co. Ltd. - 99,119 Dongguan Huanhai Trading Co., Ltd. Mr. Weihong Ye, a manager of a subsidiary, is the controlling shareholder of Dongguan Huanhai Trading Co., Ltd. 27,522 104,663 Dongguan Hualianguan Chemical Co., Ltd. Mr. Weihong Ye, a manager of a subsidiary, is the controlling shareholder of Dongguan Hualian Guanhua Gong Co., Ltd. 56,920 57,671 Dongguan Daying Internet Technology Co., Ltd. Mr. Minghua Cheng, a former director of the Company, is the controlling shareholder of Dongguan Daying Internet Technology Co., Ltd. - 132,737 Dongguan Zhengui Reality Co., Ltd. Mr. Naiyong Luo, a manager of a subsidiary, is the controlling shareholder of Dongguan Zhengui Reality Co., Ltd. - 54,730 Guangdong Yuexin Jiaotong Construction Co., Ltd. Mr. Naiyong Luo, a manager of a subsidiary, is the controlling shareholder of Guangdong Yuexin Jiaotong Construction Co., Ltd. 13,132 - Dongguan Tailai Trading Co., Ltd. Significantly influenced by the Company - 13,245 Revenues generated from related parties $ 238,824 $ 684,862 F- 15 Cost of revenues from related parties during the years ended December 31, 2022 and 2021 is as follows: SCHEDULE OF COST OF REVENUES FROM RELATED PARTIES 2022 2021 Dongguan Anxiang Technology Co., Ltd. Significant influenced by the Company $ 225,721 $ 56,598 Guangdong Jiaduonuo Shengshi Trading Co., Ltd. Significant influenced by the Company 305,645 109,936 Dongguan Baxi Food Distribution Co., Ltd. Significant influenced by the Company 40,931 124,896 Dongguan Dalingshan Xinwenhua Drinking Water Store Significant influenced by the Company 120,654 99,502 Dongguan Pengqin Drinking Water Co., Ltd. Significant influenced by the Company 124,502 89,475 Dongguan Tailai Trading Co., Ltd. Significant influenced by the Company 142,331 113,893 Dongguan Dalingshan Runxin Drinking Water Store Significant influenced by the Company 52,825 69,676 Dongguan Dengqinghu Drinking Water Store Significant influenced by the Company 2,799 - Dongguan City Yijia Trading Co., Ltd. Mr. Yongming Li, a shareholder of the Company, is the controlling shareholder of Dongguan City Yijia Trading Co., Ltd. 287,090 43,346 Cost of revenues from related parties $ 1,302,498 $ 707,322 Purchases from related parties during the years ended December 31, 2022 and 2021 are as follows: SCHEDULE OF PURCHASES FROM RELATED PARTIES 2022 2021 Dongguan Anxiang Technology Co., Ltd. Significant influenced by the Company $ 211,191 $ 184,099 Guangdong Jiaduonuo Shengshi Tradong Co., Ltd. Significant influenced by the Company 317,023 168,066 Dongguan Baxi Food Distribution Co., Ltd. Significant influenced by the Company 44,312 79,685 Dongguan Dalingshan Xinwenhua Drinking Water Store Significant influenced by the Company 134,021 63,483 Dongguan Pengqin Drinking Water Co., Ltd. Significant influenced by the Company 128,317 57,086 Dongguan Tailai Trading Co., Ltd. Significant influenced by the Company 144,264 72,664 Dongguan Dengqinghu Drinking Water Store Significantly influenced by the Company 3,000 9,483 Dongguan Dalingshan Runxin Drinking Water Store Significant influenced by the Company 53,782 44,454 Dongguan City Yijia Trading Limited Mr. Yongming Li, a shareholder of the Company, is the controlling shareholder of Dongguan City Yijia Trading Co., Ltd. 273,639 52,295 Purchase from related party $ 1,309,549 $ 731,315 Due from related party mainly consists of funds advanced to related parties as borrowings or funds advanced to pay off the Company’s expenses. The balances are unsecured, non-interest bearing. Due to related parties mainly consists of borrowings for working capital purpose, the balances are unsecured, non-interest bearing and due on demand. In 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. Mr. 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. Also see Note 3, 4, 9 and 10 for more transactions with related parties. F- 16 NOTE 9 – OPERATING LEASES As 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. The 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 ). The components of lease expense and supplemental cash flow information related to leases for the years ended December 31, 2022 and 2021 are as follows: 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 December 31, 2022 December 31, 2021 Related parties $ 20,736 $ 32,677 Non-related parties 150,804 118,315 Other information for the years ended December 31, 2022 December 31, 2021 Cash paid for amounts included in the measurement of lease obligations $ 172,425 $ 151,586 Weighted average remaining lease term (in years) 3.11 3.82 Weighted average discount rate 3.23 % 3.23 % Maturities of the Company’s lease obligations as of December 31, 2022 are as follows: SCHEDULE OF MATURITIES OF LEASE OBLIGATIONS Year ending December 31, 2023 $ 139,875 2024 110,420 2025 95,408 2026 42,703 2027 5,789 Thereafter - Total lease payment 394,195 Less: Imputed interest ( 22,352 ) Operating lease obligations $ 371,843 Lease expenses were $ 171,540 and $ 150,992 for the years ended December 31, 2022 and 2021, respectively. F- 17 NOTE 10 – BANK AND OTHER BORROWINGS In 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 . In 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 June 2022. 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 . 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 when borrowed) reflecting the accrued interest. The loan is guaranteed by Yumin Lin and bears interest at 10.71% . In 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. The maturity date is on May 26, 2023 . In 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 . In 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 . In 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 at 14.4% . The loans are guaranteed by Kaihong Lin. The maturity date is on July 8, 2024 . In 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 . On 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 . The balance of the loans borrowed as of December 31, 2022 and 2021 was as follows: SCHEDULE OF BALANCE OF LOAN BORROWED UNDER CREDIT LINES December 31, 2022 December 31, 2021 Bank loan from the trust in PRC $ 60,049 $ 67,438 China Construction Bank 276,447 143,192 Guangdong NanYue Bank 67,375 - WeBank 77,220 78,795 Aggregate outstanding principal balances 481,091 289,425 Less: current portion 422,653 101,207 Non-current portion $ 58,438 $ 188,218 The total interest expense was $ 31,444 and $ 17,816 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, 2023 $ 422,653 2024 58,438 Thereafter - Total $ 481,091 NOTE 11 – COMMON STOCK Effective 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”). 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. 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 . F- 18