UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the Quarterly Period Ended September 30, ~~2022~~2023

☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from _________ to _________

Commission File Number ~~001-38308~~000-55555

Fortune Valley Treasures, Inc.

(Exact name of registrant issuer as specified in its charter)

Nevada

32-0439333

(State or other jurisdiction
of incorporation or organization)

(I.R.S. Employer

Identification No.)

B1601 DonogfangYinxiang Building

No. 139 Liansheng Road, Humen Town

Dongguan, Guangdong,, China 523000

(Address of principal executive offices, including zip code)

Registrant’s phone number, including area code (86(86)) 769-85729133

Securities registered pursuant to Section 12(b) of the Act: None

Securities registered pursuant to Section 12(g) of the Act: Common stock, par value $0.001 per share

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the issuer was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.

Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).

Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer	☐	Accelerated filer	☐
Non-accelerated filer	☒	Smaller reporting company	☒
		Emerging growth company	☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

Yes ☐ No ☒

As of November ~~14, 2022,~~13, 2023, there were 15,655,038 shares, par value $0.001, of the registrant’s common stock outstanding.

TABLE OF CONTENTS

		Page

PART I	FINANCIAL INFORMATION	3

ITEM 1.	CONDENSED CONSOLIDATED FINANCIAL STATEMENTS:	3

	Condensed Consolidated Balance Sheets as of September 30, ~~2022~~2023 (Unaudited) and December 31, ~~2021~~2022	3

	Condensed Consolidated Statements of Operations and Comprehensive Income (Loss) for the Three and Nine Months Ended September 30, ~~2022~~2023 and ~~2021~~2022 (Unaudited)	4

	Condensed Consolidated Statements of Changes in Stockholders’ Equity for the Three and Nine Months Ended September 30, ~~2022~~2023 and ~~2021~~2022 (Unaudited)	5

	Condensed Consolidated Statements of Cash Flows for the Nine Months Ended September 30, ~~2022~~2023 and ~~2021~~2022 (Unaudited)	6

	Notes to Condensed Consolidated Financial Statements for the Three and Nine Months Ended September 30, ~~2022~~2023 and ~~2021~~2022 (Unaudited)	7

ITEM 2.	MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS	17

ITEM 3.	QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK	20

ITEM 4.	CONTROLS AND PROCEDURES	20

PART II	OTHER INFORMATION	22

ITEM 1	LEGAL PROCEEDINGS	22

ITEM 2	UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS	22

ITEM 3	DEFAULTS UPON SENIOR SECURITIES	22

ITEM 4	MINE SAFETY DISCLOSURES	22

ITEM 5	OTHER INFORMATION	22

ITEM 6	EXHIBITS	22

SIGNATURES		23

PART I - FINANCIAL INFORMATION

Item 1. Condensed Consolidated Financial Statements.

FORTUNE VALLEY TREASURES, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

AS OF SEPTEMBER 30, ~~2022~~2023 AND DECEMBER 31, ~~2021~~2022

	September 30, 2022			December 31, 2021			September 30, 2023			December 31, 2022
	(Unaudited)						(Unaudited)
Assets
Current assets
Cash and cash equivalents	$	239,443		$	123,163		$	13,276		$	165,685
Accounts receivable (including $116,995 and $43,477 from related parties as of September 30, 2022 and December 31, 2021, respectively)		3,650,531			2,662,168
Accounts receivable, net (including $69,746 and $146,087 from related parties as of September 30, 2023 and December 31, 2022, respectively)								4,303,366			4,797,564
Inventories		147,097			81,073			59,239			148,925
Prepayments and other current assets (including $1,957,201 and $1,813,904 to related parties as of September 30, 2022 and December 31, 2021, respectively)		2,507,504			2,176,713
Due from related party		-			26,364
Prepayments and other current assets, net (including $966,676 and $1,102,861 to related parties as of September 30, 2023 and December 31, 2022, respectively)								1,367,548			1,758,917
Total current assets		6,544,575			5,069,481			5,743,429			6,871,091

Non-current assets
Deposits paid (including $1,607,955 and $1,596,075 to related parties as of September 30, 2022 and December 31, 2021, respectively)		2,316,264			2,306,160
Deposits paid, net (including $523,296 and $758,445 to related parties as of September 30, 2023 and December 31, 2022, respectively)								605,609			1,121,302
Property and equipment, net		110,019			140,394			104,225			97,890
Operating lease right-of-use assets		317,612			385,896			229,526			297,232
Operating lease right-of-use assets, related parties		76,639			98,626			60,928			75,300
Operating lease right-of-use assets								60,928			75,300
Intangible assets, net		1,475,000			2,281,790			198,806			370,926
Goodwill		1,255,931			1,406,289			431,323			454,201
Total Assets	$	12,096,040		$	11,688,636		$	7,373,846		$	9,287,942

Liabilities and Stockholders’ Equity
Current liabilities
Operating lease obligations – current	$	110,896		$	133,586		$	98,336		$	110,201
Operating lease obligations, related parties - current		24,851			22,666			10,855			16,629
Accounts payable (including $3,629 and $17,789 to related parties as of September 30, 2022 and December 31, 2021, respectively)		155,039			239,492
Operating lease obligations, - current								10,855			16,629
Accounts payable (including $124,987 and $80,426 to related parties as of September 30, 2023 and December 31, 2022, respectively)								683,967			688,822
Accrued liabilities		131,363			128,343			625,189			502,389
Bank and other borrowings - current		413,207			101,207			451,119			422,653
Income tax payable		111,142			25,726			7,352			38,879
Customer advances		176,213			382,518			71,315			139,334
Due to related parties		596,006			683,981			723,488			565,675
Total current liabilities		1,718,717			1,717,519			2,671,621			2,484,582

Non-current liabilities
Operating lease obligations – non-current		202,180			240,611			138,263			189,957
Operating lease obligations, related parties – non-current		57,238			77,934			41,005			55,056
Operating lease obligations, – non-current								41,005			55,056
Bank and other borrowings		89,424			188,218			188,326			58,438
Total Liabilities		2,067,559			2,224,282			3,039,215			2,788,033

Stockholders’ Equity
Common stock (150,000,000 shares authorized, 15,655,038 shares issued and outstanding as of September 30, 2022 and December 31, 2021)		15,655			15,655
Common stock (150,000,000 shares authorized, 15,655,038 shares issued and outstanding as of September 30, 2023 and December 31, 2022)								15,655			15,655
Additional paid-in capital		11,061,233			11,061,233			11,061,233			11,061,233
Accumulated deficit and statutory reserves		(809,468	)		(2,561,681	)		(6,088,707	)		(4,504,404	)
Accumulated other comprehensive income (loss)		(679,256	)		544,305
Accumulated other comprehensive loss								(545,059	)		(180,826	)
Total Fortune Valley Treasures, Inc. stockholders’ equity		9,588,164			9,059,512			4,443,122			6,391,658
Noncontrolling interests		440,317			404,842			(108,491	)		108,251
Total Stockholders’ Equity		10,028,481			9,464,354			4,334,631			6,499,909

Total Liabilities and Stockholders’ Equity	$	12,096,040		$	11,688,636		$	7,373,846		$	9,287,942

See accompanying notes to the unaudited condensed consolidated financial statements.

FORTUNE VALLEY TREASURES, INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

AND COMPREHENSIVE INCOME (LOSS)

FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, ~~2022~~2023 AND ~~2021~~2022

(Unaudited)

2022 2021 2022 2021

Three months ended
September 30,

Nine months ended
September 30,

2022 2021 2022 2021

Net revenues (including $79,137 and $106,378 from related parties for the three months ended September 30, 2022 and 2021, respectively; $120,632 and $495,062 from related parties for the nine months ended September 30, 2022 and 2021, respectively) $ 2,915,303 $ 2,005,390 $ 6,513,572 $ 5,474,894

Cost of revenues (including $377,283 and $238,524 from related parties for the three months ended September 30, 2022 and 2021, respectively; $763,663 and $508,867 from related parties for the nine months ended September 30, 2022 and 2021, respectively) 1,400,522 875,418 3,018,507 2,402,685
Gross profit 1,514,781 1,129,972 3,495,065 3,072,209

Operating expenses:
Selling and distribution expenses 15,509 21,964 49,593 69,122
General and administrative expenses 472,131 499,928 1,347,074 1,431,377

Operating income 1,027,141 608,080 2,098,398 1,571,710

Other income (expense):
Other income 2,221 2,309 10,423 2,595
Interest income 114 203 207 851
Interest expense (10,388 ) (4,327 ) (21,077 ) (13,814 )
Other expense, net (8,053 ) (1,815 ) (10,447 ) (10,368 )

Income before income tax 1,019,088 606,265 2,087,951 1,561,342

Income tax expense 108,353 156,402 212,274 319,024

Net income $ 910,735 $ 449,863 $ 1,875,677 $ 1,242,318
Less: Net income attributable to noncontrolling interests 54,931 59,875 123,464 132,601
Net income attributable to Fortune Valley Treasures, Inc. 855,804 389,988 1,752,213 1,109,717

Other comprehensive income (loss):
Foreign currency translation income (loss) (719,949 ) 23,945 (1,311,550 ) 105,316

Total comprehensive income 190,786 473,808 564,127 1,347,634
Less: comprehensive income attributable to noncontrolling interests 10,749 63,637 35,475 143,831
Comprehensive income attributable to Fortune Valley Treasures, Inc. $ 180,037 $ 410,171 $ 528,652 $ 1,203,803

Earnings per share
Basic and diluted earnings per share* $ 0.05 $ 0.02 $ 0.11 $ 0.07
Basic and diluted weighted average shares outstanding* 15,655,038 15,655,038 15,655,038 15,655,038
* ~~Given effect of the Reverse Stock Split, see Note 9~~
2023 2022 2023 2022
Three months ended
September 30,
Nine months ended
September 30,

2023 2022 2023 2022

Net revenues (including $17,570 and $79,137 from related parties for the three months ended September 30, 2023 and 2022, respectively; $87,168 and $120,632 from related parties for the nine months ended September 30, 2023 and 2022, respectively) $ 909,719 $ 2,915,303 $ 3,817,605 $ 6,513,572

Cost of revenues (including $131,000 and $377,283 from related parties for the three months ended September 30, 2023 and 2022, respectively; $493,096 and $763,663 from related parties for the nine months ended September 30, 2023 and 2022, respectively) 593,294 1,400,522 1,923,459 3,018,507
Gross profit 316,425 1,514,781 1,894,146 3,495,065

Operating expenses:
Selling and distribution expenses 14,667 15,509 40,925 49,593
General and administrative expenses 1,523,598 472,131 3,502,565 1,347,074

Operating income (loss) (1,221,840 ) 1,027,141 (1,649,344 ) 2,098,398

Other income (expense):
Other income 7,466 2,221 15,676 10,423
Interest income 14 114 61 207
Interest expense (10,290 ) (10,388 ) (28,546 ) (21,077 )
Other expense, net (2,810 ) (8,053 ) (12,809 ) (10,447 )

Income (loss) before income tax (1,224,650 ) 1,019,088 (1,662,153 ) 2,087,951

Income tax expense (benefit) (1,906 ) 108,353 94,596 212,274

Net income (loss) $ (1,222,744 ) $ 910,735 $ (1,756,749 ) $ 1,875,677
Less: Net income (loss) attributable to noncontrolling interests (114,085 ) 54,931 (172,446 ) 123,464
Net income (loss) attributable to Fortune Valley Treasures, Inc. (1,108,659 ) 855,804 (1,584,303 ) 1,752,213

Other comprehensive income:
Foreign currency translation loss (31,568 ) (719,949 ) (408,529 ) (1,311,550 )

Total comprehensive income (loss) (1,254,312 ) 190,786 (2,165,278 ) 564,127
Less: Comprehensive income (loss) attributable to noncontrolling interests (117,184 ) 10,749 (216,742 ) 35,475
Comprehensive income (loss) attributable to Fortune Valley Treasures, Inc. $ (1,137,128 ) $ 180,037 $ (1,948,536 ) $ 528,652

Earnings (loss) per share
Basic and diluted earnings (loss) per share $ (0.07 ) $ 0.05 $ (0.10 ) $ 0.11
Basic and diluted weighted average shares outstanding $ 15,655,038 $ 15,655,038 $ 15,655,038 $ 15,655,038

See accompanying notes to the unaudited condensed consolidated financial statements.

4

FORTUNE VALLEY TREASURES, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY
FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, ~~2022~~2023 AND ~~2021~~2022
(Unaudited)

Number of shares Amount
Paid-in
Capital

Comprehensive
Income (Loss)
Statutory
Reserves
controlling
Interests
Stockholders’
Equity
Common Stock Additional
Accumulated
Other

Accumulated
Deficit and
Non Total
Number of shares Amount
Paid-in
Capital

Comprehensive
Income (Loss)
Statutory
Reserves
controlling
Interests
Stockholders’
Equity
Balance as of December 31, 2021 15,655,038 $ 15,655 $ 11,061,233 $ 544,305 $ (2,561,681 ) $ 404,842 $     9,464,354
Net income - - - - 148,676 27,283 175,959
Foreign currency translation adjustment - - - 8,972 - 1,748 10,720
Balance as of March 31, 2022 15,655,038 $ 15,655 $ 11,061,233 $ 553,277 $ (2,413,005 ) $ 433,873 $ 9,651,033
Net income - - - - 747,733 41,250 788,983
Foreign currency translation adjustment - - - (556,766 ) - (45,555 ) (602,321 )
Balance as of June 30, 2022 15,655,038 $ 15,655 $ 11,061,233 $ (3,489 ) $ (1,665,272 ) $ 429,568 $ 9,837,695
Net income - - - - 855,804 54,931 910,735
Foreign currency translation adjustment - - - (675,767 ) - (44,182 ) (719,949 )
Balance as of September 30, 2022 15,655,038 $ 15,655 $ 11,061,233 $ (679,256 ) $ (809,468 ) $ 440,317 $ 10,028,481
Common Stock * Additional
Accumulated
Other

Accumulated
Deficit and
Non Total
Number of shares Amount
Paid-in
Capital*

Comprehensive
Income
Statutory
Reserves
controlling
Interests
Stockholders’
Equity
Balance as of December 31, 2020* 15,655,038 $ 15,655 $ 11,061,233 $ 300,265 $ (4,341,417 ) $ 195,915 $     7,231,651
Net income -
-
- - 305,254 30,320 335,574
Foreign currency translation adjustment - - - (6,067 ) - (603 ) (6,670 )
Balance as of March 31, 2021* 15,655,038 $ 15,655 $ 11,061,233 $ 294,198 $ (4,036,163 ) $ 225,632 $ 7,560,555
Net income - - - - 414,475 42,406 456,881
Foreign currency translation adjustment - - - 79,970 - 8,071 88,041
Balance as of June 30, 2021* 15,655,038 $ 15,655 $ 11,061,233 $ 374,168 $ (3,621,688 ) $ 276,109 $ 8,105,477
Beginning balance ^* 15,655,038 $ 15,655 $ 11,061,233 $ 374,168 $ (3,621,688 ) $ 276,109 $ 8,105,477
Net income - - - - 389,988 59,875 449,863
Foreign currency translation adjustment - - - 20,183 - 3,762 23,945
Balance as of September 30, 2021* 15,655,038 $ 15,655 $ 11,061,233 $ 394,351 $ (3,231,700 ) $ 339,746 $ 8,579,285
Ending balance ^* 15,655,038 $ 15,655 $ 11,061,233 $ 394,351 $ (3,231,700 ) $ 339,746 $ 8,579,285

Number
of shares
Amount Paid-in
Capital Comprehensive
Loss Statutory
Reserves controlling
Interests Stockholders’
Equity
Common Stock Additional Accumulated
Other Accumulated
Deficit and Non Total

Number
of shares
Amount Paid-in
Capital Comprehensive
Loss Statutory
Reserves controlling
Interests Stockholders’
Equity
Balance as of December 31, 2022 15,655,038 $ 15,655 $ 11,061,233 $ (180,826 ) $ (4,504,404 ) $ 108,251 $     6,499,909
Net loss - - - - (88,819 ) (357 ) (89,176 )
Foreign currency translation adjustment - - - 45,290 - 182 45,472
Balance as of March 31, 2023 15,655,038 $ 15,655 $ 11,061,233 $ (135,536 ) $ (4,593,223 ) $ 108,076 $ 6,456,205
Net loss - - - - (386,825 ) (58,004 ) (444,829 )
Foreign currency translation adjustment - - - (381,054 ) - (41,379 ) (422,433 )
Balance as of June 30, 2023 15,655,038 $ 15,655 $ 11,061,233 $ (516,590 ) $ (4,980,048 ) $ 8,693 $ 5,588,943
Net loss - - - - (1,108,659 ) (114,085 ) (1,222,744 )
Foreign currency translation adjustment - - - (28,469 ) -
(3,099
) (31,568 )
Balance as of September 30, 2023 15,655,038 $ 15,655 $ 11,061,233 $ (545,059 ) $ (6,088,707 ) $ (108,491 ) $ 4,334,631

* ~~Given effect of the Reverse Stock Split, see Note 9~~
Common Stock Additional Accumulated
Other Accumulated
Deficit and Non Total
Number of shares Amount Paid-in
Capital Comprehensive
Income (Loss) Statutory
Reserves controlling
Interests Stockholders’
Equity
Balance as of December 31, 2021 15,655,038 $ 15,655 $ 11,061,233 $ 544,305 $ (2,561,681 ) $ 404,842 $    9,464,354
Net income - - - - 148,676 27,283 175,959
Foreign currency translation adjustment - - - 8,972 - 1,748 10,720
Balance as of March 31, 2022 15,655,038 $ 15,655 $ 11,061,233 $ 553,277 $ (2,413,005 ) $ 433,873 $ 9,651,033
Net income - - - - 747,733 41,250 788,983
Foreign currency translation adjustment - - - (556,766 ) - (45,555 ) (602,321 )
Balance as of June 30, 2022 15,655,038 $ 15,655 $ 11,061,233 $ (3,489 ) $ (1,665,272 ) $ 429,568 $ 9,837,695
Balance 15,655,038 $ 15,655 $ 11,061,233 $ (3,489 ) $ (1,665,272 ) $ 429,568 $ 9,837,695
Net income - - - - 855,804 54,931 910,735
Net income (loss) - - - - 855,804 54,931 910,735
Foreign currency translation adjustment - - - (675,767 ) - (44,182 ) (719,949 )
Balance as of September 30, 2022 15,655,038 $ 15,655 $ 11,061,233 $ (679,256 ) $ (809,468 ) $ 440,317 $ 10,028,481
Balance 15,655,038 $ 15,655 $ 11,061,233 $ (679,256 ) $ (809,468 ) $ 440,317 $ 10,028,481

See accompanying notes to the unaudited condensed consolidated financial statements.

5

FORTUNE VALLEY TREASURES, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE NINE MONTHS ENDED SEPTEMBER 30, ~~2022~~2023 AND ~~2021~~2022
(Unaudited)

2022 2021 2023 2022
Nine months ended September 30, Nine months ended September 30,
2022 2021 2023 2022
Cash flows from operating activities
Net income $ 1,875,677 $ 1,242,318
Adjustments to reconcile net income to net cash provided by (used in) operating activities:
Net income (loss) $ (1,756,749 ) $ 1,875,677
Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities:
Depreciation and amortization expense 648,740 638,099 183,809 648,740
Non-cash lease expense 122,069 83,211 103,902 122,069
Allowance for credit losses 2,175,928 -
Loss on disposal of intangible asset 1,999 -
Changes in operating assets and liabilities
Accounts receivable (1,374,495 ) 494,352
Accounts receivable, net (274,184 ) (1,374,495 )
Inventories (80,648 ) (206,348 ) 85,143 (80,648 )
Prepayments and other current assets (608,448 ) (1,956,481 )
Due from related party 25,423 -
Deposits paid (277,134 ) (1,198,351 )
Prepayments and other current assets, net (838,488 ) (608,448 )
Due from related parties - 25,423
Deposits paid, net (12,147 ) (277,134 )
Accounts payable (63,540 ) 66,530 30,908 (63,540 )
Due to related parties (177,253 ) - 72,627 (177,253 )
Customer advances (178,597 ) (48,514 ) (63,197 ) (178,597 )
Accrued liabilities 153,158 373,916 153,430 153,158
Income tax payable 95,197 (103,180 ) (30,633 ) 95,197
Operating lease obligations (111,705 ) (97,752 ) (105,292 ) (111,705 )
Net cash provided by (used in) operating activities 48,444 (712,200 ) (272,944 ) 48,444

Cash flows from investing activities
Repayment of advance to related parties - 3,642,059
Advance to related parties - (3,136,194 )
Purchase of property and equipment - (119,446 )
Purchase of intangible assets - (23,488 )
Net cash provided by investing activities - 362,931
Acquisition of property and equipment (4,786 ) -
Acquisition of intangible asset (702 ) -
Net cash used in investing activities (5,488 ) -

Cash flows from financing activities
Borrowings from related parties - 1,867,770
Borrowings from and repayments to revolving credit lines, net 148,606 (33,112 ) 141,967 148,606
Borrowings from bank loans 135,499 - 138,834 135,499
Borrowings from a third party 80,338 - - 80,338
Repayments to related parties (154,510 ) (1,622,380 ) - (154,510 )
Repayments to bank loans (28,053 ) -
Repayments of bank loans (90,578 ) (28,053 )
Repayments to a third party (73,878 ) - (28,888 ) (73,878 )
Net cash provided by financing activities 108,002 212,278 161,335 108,002

Effect of exchange rate changes on cash and cash equivalents (40,166 ) 37,343 (35,312 ) (40,166 )
Net changes in cash and cash equivalents 116,280 (99,648 ) (152,409 ) 116,280
Cash and cash equivalents–beginning of the period 123,163 249,837 165,685 123,163

Cash and cash equivalents–end of the period $ 239,443 $ 150,189 $ 13,276 $ 239,443

Supplementary cash flow information:
Interest paid $ 21,077 $ 13,814 $ 28,546 $ 21,077
Income taxes paid $ 126,858 $ 446,755 $ 171,532 $ 126,858

Non-cash investing and financing activities
Expenses paid by related parties on behalf of the Company $ 135,081 $ 532,912 $ - $ 135,081
Remeasurement of operating lease obligation and right-of-use asset due to lease termination $ - $ 40,888
Operating lease right-of-use assets obtained in exchange for operating lease obligations $ 74,588 $ 307,550 $ 58,249 $ 74,588
Remeasurement of operating lease liabilities and right-of-use assets due to lease modifications $ 22,035 $ -
Liabilities assumed in connection with purchase of property and equipment $ 28,234 $ -

See accompanying notes to the unaudited condensed consolidated financial statements.

6

FORTUNE VALLEY TREASURES, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, ~~2022~~2023 AND ~~2021~~2022
(Unaudited)

NOTE 1 - ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Fortune Valley Treasures, Inc. (formerly Crypto-Services, Inc.) (“FVTI” or the “Company”) was incorporated in the State of Nevada on March 21, 2014. The Company’s current primary business operations of wholesale distribution and retail sales of alcoholic beverages of wine and distilled liquors, and drinking water distribution and delivery are conducted through its subsidiaries in the People’s Republic of China (“PRC”).

On April 11, 2018, the Company entered into a share exchange agreement by and among DaXingHuaShang Investment Group Limited (“DIGLS”) and its shareholders: 1.) Yumin Lin, 2.) Gaosheng Group Co., Ltd. and 3.) China Kaipeng Group Co., Ltd. whereby the Company newly issued 15,000,000 shares ~~(given effect of the Reverse Stock Split, see Note 9)~~ 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%~~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 9)~~ 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 9)~~ 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.
7
Basis of presentation

The accompanying unaudited condensed consolidated financial statements as of September 30, ~~2022~~2023 and for the three and nine months ended September 30, ~~2022~~2023 and ~~2021,~~2022, have been prepared pursuant to the rules and regulations of the Securities and Exchange Commission (the “SEC”) that permit reduced disclosure for interim periods. Certain information and footnote disclosures normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”) have been condensed or omitted. In the opinion of management, all adjustments consisting of normal recurring entries considered necessary for a fair presentation have been included. The results of operations for these periods are not necessarily comparable to, or indicative of, results of any other interim period or for the fiscal year taken as a whole. The condensed consolidated balance sheet information as of December 31, ~~2021~~2022 was derived from the Company’s audited consolidated financial statements included in the Company’s Annual Report on Form 10-K, for the year ended December 31, ~~2021,~~2022, filed with the SEC on ~~April 1, 2022~~March 31, 2023 (the “report”). These unaudited condensed consolidated financial statements should be read in conjunction with the report.

Basis of consolidation

The unaudited condensed consolidated financial statements include the accounts of the Company and its subsidiaries. All intercompany accounts and transactions have been eliminated. The results of subsidiaries acquired during the respective periods are included in the consolidated statements of operations from the effective date of acquisition or up to the effective date of disposal, as appropriate. The portion of the income or loss applicable to noncontrolling interests in subsidiaries is reflected in the unaudited condensed consolidated statements of operations.

7
As of September 30, ~~2022,~~2023, details of the Company’s major subsidiaries were as follows:

SCHEDULE OF ENTITIES AND ITS SUBSIDIARIES
Entity Name
Date of
Incorporation

Parent
Entity

Nature of
Operation

Place of
Incorporation
DIGLS July 4, 2016 FVTI Investment holding Republic of Seychelles
DILHK June 22, 2016 DIGLS Investment holding Hong Kong, PRC
QHDX November 3, 2016 DILHK Investment holding PRC
FVTL May 31, 2011 QHDX Trading of food and platform PRC
JJGS August 17, 2017 FVTI Investment holding Republic of Seychelles
JJHK August 24, 2017 JJGS Investment holding Hong Kong, PRC
JJSZ November 16, 2018 JJHK Trading of food PRC
Xixingdao August 28, 2019 QHDX Drinking water distribution and delivery PRC
Dongguan City Fu La Tu Trade Ltd (“FLTT”) September 27, 2020 FVTL Trading of alcoholic beverages PRC
Dongguan City Fu Xin Gu Trade Ltd (“FXGT”) December 2, 2020 FVTL Trading of alcoholic beverages PRC
Dongguan City Fu Xin Technology Ltd (“FXTL”) November 12, 2020 Xixingdao Drinking water distribution and delivery PRC
Dongguan City Fu Guan Healthy Industry Technology Ltd (“FGHL”) December 21, 2020 Xixingdao Drinking water distribution and delivery PRC
Dongguan City Fu Jing Technology Ltd (“FJTL”)) November 17, 2020 Xixingdao Drinking water distribution and delivery PRC
Dongguan City Fu Xiang Technology Ltd (“FGTL”) November 16, 2020 Xixingdao Drinking water distribution and delivery PRC
Dongguan City Fu Ji Food & Beverage Ltd (“FJFL”) November 9, 2020 Xixingdao Drinking water distribution and delivery PRC
Dongguan City Fu Lai Food Ltd (“FLFL”) September 27, 2020 Xixingdao Drinking water distribution and delivery PRC
Dongguan City Fu Yi Beverage Ltd (“FYBL”) November 12, 2020 Xixingdao Drinking water distribution and delivery PRC
Dongguan City Fu Xi Drinking Water Company Ltd (“FXWL”) March 17, 2021 Xixingdao ~~Sales~~Drinking water distribution and delivery, sales of ~~agriculture products, household electric appliances~~alcoholic beverages and ~~plastic products~~water purifier PRC
Dongguan City Fu Jia Drinking Water Company Ltd (“FJWL”) March 29, 2021 Xixingdao ~~Sales~~Drinking water distribution and delivery, sales of ~~agriculture products, household electric appliances and food~~water purifier PRC
Dongguan City Fu Sheng Drinking Water Company Ltd (“FSWL”) March 29, 2021 Xixingdao ~~Sales~~Drinking water distribution and delivery, sales of ~~agriculture products, household electric appliances and food~~water purifier PRC
Shenzhen Fu Jin Trading Technology Company Ltd (“FJSTL”) June 7, 2021 Xixingdao ~~Trading~~Drinking water distribution and delivery, sales of ~~primary agricultural products, household appliances and plastic products~~water purifier PRC
Dongguan City Fu Li Trading Ltd (“FLTL”) September 10, 2021 Xixingdao ~~Sales~~Drinking water distribution and delivery, sales of ~~agriculture products, household electric appliances and plastic products~~water purifier PRC
Guangdong Fu Gu Supply Chain Group Ltd (“FGGC”) September 13, 2021 QHDX ~~Supply chain service, sales~~Trading of ~~food and health products, machinery, plastic products, and investment holding~~alcoholic beverages PRC
Dongguan City Fu Zhi Gu Trading Ltd (“FZGTL”) September 9, 2022 FVTL ~~Sales~~Trading of ~~pre-packaged food, office equipment, electronic product and consultancy service~~alcoholic beverages PRC
Dongguan City Chang Fu Trading Ltd (“CFTL”) September 9, 2022 FVTL ~~Sales~~Trading of ~~pre-packaged food, office equipment, electronic product and consultancy service~~alcoholic beverages PRC
Dongguan City La Tong Trading Ltd (“LTTL”) August 8, 2022 FVTL ~~Sales~~Trading of ~~pre-packaged food, office equipment, electronic product and consultancy service~~alcoholic beverages PRC
Dongguan City Kai Fu Trading Ltd (“KFTL”) September 8, 2022 FVTL ~~Sales~~Trading of ~~pre-packaged food, office equipment, electronic product and consultancy service~~alcoholic beverages PRC

8
Going concern
The accompanying unaudited condensed consolidated financial statements have been prepared assuming that the Company will continue as a going concern, which contemplates the realization of assets and fulfillment of obligations in the normal course of business. The realization of assets and fulfillment of obligations in the normal course of business is dependent on, among other things, the Company’s ability to generate sufficient cash flows from operations, and the Company’s ability to arrange adequate financing arrangements. As of September 30, 2023, the Company had a working capital of $3,071,808, including cash and cash equivalents of $13,276, and accumulated deficit and statutory reserves of $6,088,707. For the nine months ended September 30, 2023, the Company incurred net loss of $1,756,749 and had net cash outflows of $272,944 from operating activities.
The Company may need additional capital in the future to fund the continued operations of the Company. If the Company is unable to obtain additional equity or debt financing as required, the business operations and prospects of the Company may suffer.

Use of estimates

The preparation of financial statements in conformity with USU.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,~~credit losses, allowance of deferred tax asset and uncertain tax position, implicit interest rate of operating leases, useful lives and impairment of long-lived assets, and impairment of goodwill. Actual results may differ from these estimates.
~~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
2023 2022

As of and for the nine months ended
September 30,
As of and for the
nine months ended September 30,
2022 2021 2023 2022
Period-end RMB:US$1 exchange rate 0.14053 0.15512 0.13745 0.14053
Period-average RMB:US$1 exchange rate 0.15174 0.15452 0.14239 0.15174

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.
9

Impairment of long-lived assets other than goodwill

The Company reviews its long-lived assets for impairment whenever events or changes in circumstances indicate that the carrying amount of assets may not be recoverable. Impairment may be the result of becoming obsolete from a change in the industry or new technologies. Impairment is present if the carrying amount of an asset is less than its undiscounted cash flows to be generated.

If an asset is considered impaired, a loss is recognized based on the amount by which the carrying amount exceeds the fair market value of the asset. Assets to be disposed of are reported at the lower of the carrying amount or fair value less costs to sell.

The Company did not recognize any impairment of long-lived assets during the nine months ended September 30, ~~2022~~2023 and ~~2021.~~2022.

Goodwill

Goodwill represents the excess of the purchase price over the fair value of the net identifiable assets acquired in a business combination. In accordance with FASB ASC Topic 350, “Intangibles-Goodwill and Others”, goodwill is subject to at least an annual assessment for impairment or more frequently if events or changes in circumstances indicate that an impairment may exist, applying a fair-value based test. Fair value is generally determined using a discounted cash flow analysis. The Company would recognize an impairment charge for the amount by which the carrying amount of a reporting unit exceeds its fair value up to the amount of goodwill allocated to that reporting unit.

During the nine months ended September 30, ~~2022~~2023 and ~~2021,~~2022, the Company did notnot record any impairment of goodwill.
9

Revenue recognition

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

1. Identify the contract(s) with a customer;
2. Identify the performance obligations in the contract;
3. Determine the transaction price;
4. Allocate the transaction price to the performance obligations in the contract; and
5. Recognize revenue when (or as) the entity satisfies a performance obligation.

Under Topic 606, revenues are recognized when the promised products have been confirmed of delivery or services have been transferred to the consumers in amounts that reflect the consideration the customer expects to be entitled to in exchange for those services. The Company presents value added taxes (“VAT”) as reductions of revenues. The Company recognizes revenues net of value added taxes (“VAT”) and relevant charges.

We generate revenue primarily from the sales of ~~wine,~~liquor, water, ~~oil~~water purifier and ~~water purifier~~other products directly to agents, wholesalers and end ~~users.~~users, with majority of sales transactions were conducted offline. We recognize product revenue at a point in time when the control of the products has been transferred to customers. The transfer of control is considered complete when products have been picked up by or delivered to our customers. We account for shipping and handling fees as a fulfillment cost.

The following table provides information about disaggregated revenue based on revenue by product types:
SCHEDULE OF DISAGGREGATION REVENUE
2023 2022 2023 2022
Three months ended
September 30, Nine months ended
September 30, Three months ended
September 30, Nine months ended
September 30,
2022 2021 2022 2021 2023 2022 2023 2022
Sales of wine $ 1,582,829 $ 639,635 $ 3,416,775 $ 2,036,423
Sales of liquor $ 664,492 $ 1,582,829 $ 2,447,164 $ 3,416,775
Sales of water 1,005,738 1,099,586 2,343,830 2,827,732 160,260 1,005,738 793,462 2,343,830
Sales of oil - 14 - 217,131
Sales of water purifier 245,581 220,861 641,129 348,314 62,016 245,581 429,853 641,129
Others 81,155 45,294 111,838 45,294 22,951 81,155 147,126 111,838
Total $ 2,915,303 $ 2,005,390 $ 6,513,572 $ 5,474,894 $ 909,719 $ 2,915,303 $ 3,817,605 $ 6,513,572

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,~~liquors, water and other products prior to them taking possession of the Company’s products. The Company records these receipts as customer advances until the control of the products has been transferred the customers. As of September 30, ~~2022~~2023 and December 31, ~~2021,~~2022, the Company had customer advances of $~~176,213~~71,315 and $~~382,518~~139,334, respectively. During the nine months ended September 30, ~~2022,~~2023, the Company recognized $~~322,084~~68,717 of customer advances in the opening balance.

Related party transaction

Transactions involving related parties cannot be presumed to be carried out on an arm’s-length basis, as the requisite conditions of competitive, free market dealings may not exist. Representations about transactions with related parties, if made, shall not imply that the related party transactions were consummated on terms equivalent to those that prevail in arm’s-length transactions unless such representations can be substantiated.

Recently adopted accounting pronouncements
In June 2016, the FASB issued Accounting Standards Update (“ASU”) No. 2016-13, Financial Instruments – Credit Losses (Topic 326), Measurement of Credit Losses on Financial Instruments. ASU No. 2016-13 was further amended in November 2020 by ASU No. 2020-10, Financial Instruments – Credit Losses (Topic 326), Derivatives and Hedging (Topic 815), and Leases (Topic 842). As a result, ASC Topic 326, Financial Instruments – Credit Losses is effective for smaller reporting companies for fiscal years beginning after December 15, 2022, including interim periods within those fiscal years. The Company adopted ASU No. 2016-13 on January 1, 2023 and the adoption did not have a material impact on the Company’s unaudited condensed consolidated financial statements.
In October 2021, the FASB issued ASU No. 2021-08, Business Combinations (Topic 805), Accounting for Contract Assets and Contract Liabilities from Contracts with Customers. This ASU clarifies that an acquirer of a business should recognize and measure contract assets and contract liabilities in a business combination in accordance with ASC Topic 606, “Revenue from Contracts with Customers”. This ASU is expected to improve comparability for both the recognition and measurement of acquired revenue contracts with customers at the date of and after a business combination. The new guidance is effective for fiscal years beginning after December 15, 2022, including interim periods within those fiscal years. The Company adopted ASU No. 2021-08 on January 1, 2023 and the adoption did not have a material impact on the Company’s unaudited condensed consolidated financial statements.
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NOTE 2 – ACCOUNTS RECEIVABLE, NET
Accounts receivable consisted of the following as of September 30, 2023 and December 31, 2022:
SCHEDULE OF ACCOUNTS RECEIVABLE
September 30,
2023 December 31,
2022
Accounts receivable (including $70,777 and $146,087 from related parties as of September 30, 2023 and December 31, 2022, respectively) $ 4,820,610 $ 4,797,564
Less: Doubtful allowance (including $1,031 and $nil from related parties as of September 30, 2023 and December 31, 2022, respectively) (517,244 ) -
Accounts receivable, net $ 4,303,366 $ 4,797,564
Allowance for doubtful accounts movement is as follows:
SCHEDULE OF ALLOWANCE FOR DOUBTFUL ACCOUNTS RECEIVABLE
September 30,
2023 December 31,
2022
Beginning balance $ - $ -
Additions to allowance 535,862 -
Foreign currency translation adjustment (18,618 ) -
Ending balance $ 517,244 $ -
NOTE 3 – PREPAYMENTS AND OTHER CURRENT ASSETS, NET

Prepayments and other current assets consisted of the following as of September 30, ~~2022~~2023 and December 31, ~~2021~~2022::
SCHEDULE OF ~~PREPAYMENTS~~PREPAYMENT AND OTHER CURRENT ASSETS

September 30,
2022 December 31,
2021
Prepayments (including $1,957,201 and $1,813,904 to related parties as of September 30, 2022 and December 31, 2021, respectively) $ 2,484,824 $ 2,169,095
Other current assets 22,680 7,618
Prepayments and other current assets $ 2,507,504 $ 2,176,713
September 30,
2023 December 31,
2022
Prepayments (including $2,749,621 and $2,255,288 to related parties as of September 30, 2023 and December 31, 2022, respectively) $ 3,657,518 $ 3,001,866
Other current assets 6,919 4,631
Total prepayments and other current assets 3,664,437 3,006,497
Less: Allowance for doubtful accounts (including $1,782,945 and $1,152,427 to related parties as of September 30, 2023 and December 31, 2022, respectively) (2,296,889 ) (1,247,580 )
Prepayments and other current assets, net $ 1,367,548 $ 1,758,917

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
September 30,
2023 December 31,
2022
Beginning balance $ 1,247,580 $ -
Additions to allowance 1,152,172 1,284,005
Foreign currency translation adjustment (102,863 ) (36,425 )
Ending balance $ 2,296,889 $ 1,247,580
NOTE 4 – DEPOSITS PAID, NET
Deposits paid consisted of the following as of September 30, 2023 and December 31, 2022:
SCHEDULE OF DEPOSITS PAID
September 30,
2023 December 31,
2022
Deposits paid (including $1,557,900 and $1,628,511 to related parties as of September 30, 2023 and December 31, 2022, respectively) $ 2,258,234 $ 2,365,652
Less: Allowance for doubtful accounts (including $1,034,604 and $870,066 to related parties as of September 30, 2023 and December 31, 2022, respectively) (1,652,625 ) (1,244,350 )
Deposits paid, net $ 605,609 $ 1,121,302
Allowance for doubtful accounts movement is as follows:
SCHEDULE OF ALLOWANCE FOR DOUBTFUL ACCOUNTS OF DEPOSITS PAID
September 30,
2023 December 31,
2022
Beginning balance $ 1,244,350 $ -
Additions to allowance 487,894 1,280,681
Foreign currency translation adjustment (79,619 ) (36,331 )
Ending balance $ 1,652,625 $ 1,244,350
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NOTE 35 – PROPERTY AND EQUIPMENT, NET

Property and equipment consisted of the following as of September 30, ~~2022~~2023 and December 31, ~~2021~~:2022:
SCHEDULE OF PROPERTY AND EQUIPMENT

September 30,
2022 December 31,
2021 September 30,
2023 December 31,
2022
Office equipment $ 116,447 $ 113,995 $ 116,520 $ 116,520
Leasehold improvement 126,386 126,386 126,386 126,386
Vehicle 31,599 -
Property and equipment 242,833 240,381 274,505 242,906
Less: Accumulated depreciation (132,814 ) (99,987 ) (170,280 ) (145,016 )
Property and equipment, net $ 110,019 $ 140,394 $ 104,225 $ 97,890

Depreciation expense, which was included in general and administrative expenses, for the nine months ended September 30, ~~2022~~2023 and ~~2021~~2022 was $~~32,829~~26,168 and $~~14,017~~32,829, respectively.

NOTE 46 – INTANGIBLE ASSETS, NET

Intangible assets and related accumulated amortization were as ~~follows~~follows:
:
SCHEDULE OF INTANGIBLE ASSETS
September 30,
2023 December 31,
2022

September 30,
2022

December 31,
2021

Distributor channel $ 3,027,016 $ 3,389,404
Distribution channel $ 2,960,608 $ 3,117,635
Others 27,418 22,299 25,138 27,809
Total intangible assets 3,054,434 3,411,703 2,985,746 3,145,444
Less: Accumulated amortization (1,579,434 ) (1,129,913 ) (1,883,226 ) (1,822,875 )
Total $ 1,475,000 $ 2,281,790
Less: Accumulated impairment (903,714 ) (951,643 )
Intangible assets, net $ 198,806 $ 370,926

Amortization expense for the nine months ended September 30, ~~2022~~2023 and ~~2021~~2022 was $~~615,911~~157,641 and $~~624,082~~615,911, respectively, included in cost of revenues and general and administrative expenses.

As of September 30,~~, 2022,~~ 2023, the future estimated amortization costs for intangible assets are as follows:

SCHEDULE OF FUTURE AMORTIZATION EXPENSES FOR ~~INTANGIBLE ASSETS~~DISTRIBUTION CHANNELS

Year ending December 31,
2022 (remaining) $ 190,559
2023 762,238
2023 (remaining) $ 50,886
2024 509,986 136,911
2025 5,484 4,962
2026 5,484 4,962
Thereafter 1,249
2027 1,085
Total $ 1,475,000 $ 198,806
NOTE 5-7 - RELATED PARTY TRANSACTIONS

Amounts due ~~from~~to related ~~party~~parties as of September 30, ~~2022~~2023 and December 31, ~~2021~~2022 are as follows:
SCHEDULE OF AMOUNT DUE FROM AND DUE TO RELATED PARTIES

September 30,
2022

December 31,
2021
September 30,
2023 December 31,
2022
Mr. Yumin Lin President, Chief Executive Officer, Secretary, Director and majority shareholder $ 454,645 $ 389,051
Ms. Xiulan Zhou Manager of a subsidiary, Mr. Yumin Lin’s wife 1,670 508
Mr. Huagen Li Manager of a subsidiary 2,199 2,316
Mr. Guodong Jia Manager of a subsidiary 5,900 2,342
Mr. Hongwei Ye Manager of a subsidiary, Shareholder 15 16
Mr. Anping Chen Manager of a subsidiary 9,442 1,290
Mr. Jiangwei Jia Manager of a subsidiary 7,977 3,678
Mr. Yuwen Li Vice President 100,416 64,924
Ms. Lihua Li Manager of a subsidiary 7,082 -
Shenzhen DaXingHuaShang Industrial Group Ltd. (fka Shenzhen DaXingHuaShang Industry Development Ltd.) Mr. Yumin Lin is the supervisor of Shenzhen DaXingHuaShang Industrial Group Ltd. 82,468 86,842
Ms. Chunxiang Zhang Manager of a subsidiary 4,294 998
Mr. Meng Xue Manager of a subsidiary 7,398 5,449
Ms. Shuqin Chen Manager of a subsidiary 8,949 1,358
Mr. Zhipeng Zuo Manager of a subsidiary 459 59
Mr. Deqin Ke Manager of a subsidiary $  - $ 26,364 Manager of a subsidiary - 724
Due from related parties $        - $ 26,364
Mr. Aisheng Zhang Manager of a subsidiary 23,633 2,320
Mr. Zhihua Liao Manager of a subsidiary 6,941 3,800
$ 723,488 $ 565,675

12
~~Amounts due to related parties as of~~ ~~September 30, 2022 and December 31, 2021~~ ~~are as follows:~~

September 30,
2022
December 31,
2021
Mr. Yumin Lin President, Chief Executive Officer, Secretary, Director $ 441,365 $ 344,218
Ms. Xiulan Zhou Manager of a subsidiary 1,708 1,157
Mr. Huagen Li Manager of a subsidiary 2,248 2,518
Mr. Guodong Jia Manager of a subsidiary 385 944
Mr. Minghua Cheng Former director and majority shareholder - 157,353
Mr. Hongwei Ye Manager of a subsidiary, Shareholder 15 17
Mr. Anping Chen Manager of a subsidiary 2,129 6,924
Mr. Jiangwei Jia Manager of a subsidiary 2,289 787
Ms. Xiuyun Wang Manager of a subsidiary - 6,020
Mr. Yuwen Li Vice President 48,525 70,745
Shenzhen DaXingHuaShang Industry Development Ltd. Mr. Yumin Lin is the supervisor of Shenzhen DaXingHuaShang Industry Development Ltd. 84,318 93,298
Mr. Deqin Ke Manager of a subsidiary 703 -
Mr. Zhihua Liao Manager of a subsidiary 2,588 -
Ms. Chunxiang Zhang Manager of a subsidiary 2,925 -
Mr. Xue Meng Manager of a subsidiary 4,156 -
Ms. Shuqin Chen Manager of a subsidiary 1,910 -
Mr. Zhipeng Zuo Manager of a subsidiary 742 -
Due to related parties $ 596,006 $ 683,981
Revenues generated from related parties during the nine months ended September 30, ~~2022~~2023 and ~~2021~~2022 are as follows:
SCHEDULE OF REVENUE GENERATED FROM RELATED PARTIES
2022 2021 2023 2022

For the nine months ended
September 30,
Nine months ended September 30,
2022 2021 2023 2022
Mr. Kaihong Lin Chief Financial Officer and Treasurer $ 697 $ 391 Chief Financial Officer and Treasurer $ 342 $ 697
Mr. Yumin Lin President, Chief Executive Officer, Secretary, Director 438 302 President, Chief Executive Officer, Secretary, Director and majority shareholder - 438
Mr. Zihao Ye Manager of a subsidiary 262 108 Manager of a subsidiary - 262
Mr. Naiyong Luo Manager of a subsidiary - 5,742
Mr. Hongwei Ye Manager of a subsidiary, Shareholder - 6,451
Ms. Xiulan Zhou Manager of a subsidiary, Mr. Yumin Lin’s wife - 52 Manager of a subsidiary, Mr. Yumin Lin’s wife 14 -
Dongguan City Chashan Pingfeng Cigarette and Wine Store Co., Ltd. Mr. Taiping Deng, a manager of a subsidiary, is the controlling shareholder of Dongguan City Chashan Pingfeng Cigarette and Wine Store Co., Ltd. - 104,351
Dongguan Zhengui Reality Co., Ltd. Mr. Naiyong Luo, a manager of a subsidiary, is the controlling shareholder of Dongguan Zhengui Reality Co., Ltd. - 132,341
Dongguan Huanhai Trading Co., Ltd. Mr. Hongwei Ye, a shareholder of the Company and a manager of a subsidiary, is the controlling shareholder of Dongguan Huanhai Trading Co., Ltd. 49,676 54,568 Mr. Hongwei Ye, a shareholder of the Company and a manager of a subsidiary, is the controlling shareholder of Dongguan Huanhai Trading Co., Ltd. 21,644 49,676
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. 12,639 100,490 Mr. Naiyong Luo, a manager of a subsidiary, is the controlling shareholder of Guangdong Yuexin Jiaotong Construction Co., Ltd. 14,420 12,639
Dongguan City Hualianguan Chemical Co., Ltd. Mr. Hongwei Ye, a shareholder of the Company and a manager of a subsidiary, is the controlling shareholder of Dongguan City Hualianguan Chemical Co., Ltd. 56,920 19,560 Mr. Hongwei Ye, a shareholder of the Company and a manager of a subsidiary, is the controlling shareholder of Dongguan City Hualianguan Chemical Co., Ltd. 14,808 56,920
Dongguan City Daying Internet Technology Co., Ltd. Mr. Minghua Cheng, a former director and majority shareholder of the Company, is the controlling shareholder of Dongguan City Daying Internet Technology Co., Ltd. - 57,500
Dongguan Tailai Trading Co., Ltd. Significantly influenced by the Company - 13,206
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 35,619 -
Mr. Yuwen Li Vice President 321 -
Revenues generated from related parties $ 120,632 $ 495,062 $ 87,168 $ 120,632

Cost of revenues from related parties during the nine months ended September 30, ~~2022~~2023 and ~~2021~~2022 is as follows:
SCHEDULE OF COST OF REVENUES FROM RELATED PARTIES
2023 2022
Nine months ended September 30,
2023 2022
Dongguan Baxi Food Distribution Co., Ltd. Significantly influenced by the Company $ 83,891 $ 27,916
Dongguan Dalingshan Xinwenhua Drinking Water Store Significantly influenced by the Company 27,658 78,474
Dongguan Pengqin Drinking Water Co., Ltd. Significantly influenced by the Company 24,481 63,429
Dongguan Dengqinghu Drinking Water Store Significantly influenced by the Company 2,934 2,043
Dongguan Tailai Trading Co., Ltd. Significantly influenced by the Company 76,224 60,614
Dongguan Anxiang Technology Co., Ltd. Significantly influenced by the Company 63,754 95,045
Guangdong Jiaduonuo Shengshi Trading Co., Ltd. Significantly influenced by the Company 112,233 112,598
Dongguan Dalingshan Runxin Drinking Water Store Significantly influenced by the Company 12,386 26,174
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. 89,535 297,370
Cost of revenues from related parties $ 493,096 $ 763,663

2022 2021

For the nine months ended
September 30,

2022 2021
Dongguan Baxi Food Distribution Co., Ltd. Significantly influenced by the Company $ 27,916 $ 56,588
Dongguan Dalingshan Xinwenhua Drinking Water Store Significantly influenced by the Company 78,474 45,701
Dongguan Pengqin Drinking Water Co., Ltd. Significantly influenced by the Company 63,429 44,047
Dongguan Dengqinghu Drinking Water Co., Ltd. Significantly influenced by the Company 2,043 7,758
Dongguan Tailai Trading Co., Ltd. Significantly influenced by the Company 60,614 51,943
Dongguan Anxiang Technology Co., Ltd. Significantly influenced by the Company 95,045 140,043
Guangdong Jiaduonuo Shengshi Trading Co., Ltd. Significantly influenced by the Company 112,598 115,077
Dongguan Dalingshan Runxin Drinking Water Store Significantly influenced by the Company 26,174 23,070
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. 297,370 24,640
Cost of revenues from related parties $ 763,663 $ 508,867

Purchases from related parties during the nine months ended September 30, ~~2022~~2023 and ~~2021~~2022 are as follows:
SCHEDULE OF PURCHASES FROM RELATED PARTIES
2022 2021

For the nine months ended
September 30,

2022 2021
Dongguan Baxi Food Distribution Co., Ltd. Significantly influenced by the Company $ 31,360 $ 73,366
Dongguan Dalingshan Xinwenhua Drinking Water Store Significantly influenced by the Company 90,930 39,794
Dongguan Pengqin Drinking Water Co., Ltd. Significantly influenced by the Company 66,659 39,679
Dongguan Dengqinghu Drinking Water Store Significantly influenced by the Company 2,217 8,857
Dongguan Tailai Trading Co., Ltd. Significantly influenced by the Company 59,449 59,133
Dongguan Anxiang Technology Co., Ltd. Significantly influenced by the Company 96,341 145,545
Guangdong Jiaduonuo Shengshi Trading Co., Ltd. Significantly influenced by the Company 117,062 141,278
Dongguan Dalingshan Runxin Drinking Water Store Significantly influenced by the Company 26,122 32,040
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. 279,247 35,803
Purchase from related party $ 769,387 $ 575,495
13
~~Due from related party mainly consists of funds advanced to a related party as borrowings or funds advanced to pay off the Company’s expenses. The balance is unsecured, non-interest bearing.~~
2023 2022
Nine months ended September 30,
2023 2022
Dongguan Baxi Food Distribution Co., Ltd. Significantly influenced by the Company $ 85,268 $ 31,360
Dongguan Dalingshan Xinwenhua Drinking Water Store Significantly influenced by the Company 28,869 90,930
Dongguan Pengqin Drinking Water Co., Ltd. Significantly influenced by the Company 26,317 66,659
Dongguan Dengqinghu Drinking Water Store Significantly influenced by the Company 3,124 2,217
Dongguan Tailai Trading Co., Ltd. Significantly influenced by the Company 77,746 59,449
Dongguan Anxiang Technology Co., Ltd. Significantly influenced by the Company 63,654 96,341
Guangdong Jiaduonuo Shengshi Trading Co., Ltd. Significantly influenced by the Company 112,306 117,062
Dongguan Dalingshan Runxin Drinking Water Store Significantly influenced by the Company 13,329 26,122
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. 87,351 279,247
Purchase from related party $ 497,964 $ 769,387

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 nine months ended September 30, 2022 and 2021, these related parties paid expenses on the Company’s behalf in an amount of $135,081~~ ~~and $532,912, 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 2, 73, 4, 9 and 810 for more transactions with related parties.
13
NOTE 68 - 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%~~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%~~8.25% on assessable profits up to HK$2,000,000 (approximately $~~289,855~~255,112), and ~~16.5%~~16.5% on any part of assessable profits over HK$2,000,000. For the nine months ended September 30, ~~2022~~2023 and ~~2021,~~2022, 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 periods reported.

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%~~25% with the following exceptions.

On ~~January 17, 2019,~~April 2, 2021, 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~~SAT”) [2021] No.12 ~~provides~~to provide 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~~,RMB1,000,000, approximately $~~142,209~~,$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~~,RMB1,000,000, approximately $~~142,209~~,$144,482, but less than ~~RMB3,000,000~~,RMB3,000,000, approximately $~~426,627~~,$433,445, 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.~~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

Nine months ended September 30,
Nine Months Ended
September 30, 2022 Nine Months Ended
September 30, 2021 2023 2022
Current:
– United States of America $ 105,074 $ 154,485 $ 31,761 $ 105,074
– Seychelles - - - -
– Hong Kong - - - -
– The PRC 107,200 164,539 62,835 107,200
Current income tax expense
Deferred
– United States of America - - - -
– Seychelles - - - -
– Hong Kong - - - -
– The PRC - - - -
Deferred income tax expense
Total $ 212,274 $ 319,024 $ 94,596 $ 212,274

The effective tax rate was ~~10.2%~~-5.7% and ~~20.4%~~10.2% for the nine months ended September 30, ~~2022~~2023 and ~~2021,~~2022, respectively.
14
NOTE 79 - OPERATING LEASES

As of September 30, ~~2022,~~2023, the Company has ~~twenty one~~twenty-one separate operating lease agreements for three office spaces, one warehouse and seventeen stores in PRC with remaining lease terms of from 21 month to 43 months ~~to 55 months.~~.

Two of ~~these~~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 RMB10,000 (approximately $~~1,517~~1,424). 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 RMB960 (approximately $~~146~~138).
The ~~Company terminated an operating~~ lease ~~agreement~~term has been extended to September 30, 2026 with ~~a subsidiary of Shenzhen DaXingHuaShang Industry Development Ltd., a related party, for the premises in Shenzhen City, PRC on February 28, 2021. The monthly rent expense for this lease was RMB30,000~~ ~~(approximately $4,552~~).all other terms unchanged.

The components of lease expense and supplemental cash flow information related to leases for the nine months ended September 30, ~~2022~~2023 and ~~2021~~2022 are as follows:
SCHEDULE OF COMPONENTS OF LEASE EXPENSE AND SUPPLEMENTAL CASH FLOW INFORMATION
2022 2021
Operating lease cost (included in general and administrative expenses in the Company’s unaudited condensed consolidated statements of operations) For the nine months ended
September 30, Nine months ended
September 30,
2022 2021 2023 2022

Related parties $ 16,132 $ 27,944 $ 14,046 $ 16,132
Non-related parties 109,050 79,471 97,288 109,050
Total $ 125,182 $ 107,415 $ 111,334 $ 125,182

Other information for the nine months ended
September 30,
2022

September 30,
2021
September 30,
2023 September 30,
2022
Cash paid for amounts included in the measurement of lease obligations $ 110,768 $ 101,203 $ 116,743 $ 110,768
Weighted average remaining lease term (in years) 3.31 3.92 2.61 3.31
Weighted average discount rate 3.23 % 3.23 % 3.23 % 3.23 %

Maturities of the Company’s lease obligations as of September 30, ~~2022~~2023 are as follows:
SCHEDULE OF MATURITIES OF LEASE OBLIGATIONS
Year ending December 31,
2022 (remaining) $ 46,458
2023 130,694
2023 (remaining) $ 27,008
2024 102,573 118,512
2025 92,635 105,405
2026 41,462 47,012
Thereafter 5,621
2027 5,498
Total lease payment 419,443 303,435
Less: Imputed interest (24,278 ) (14,976 )
Operating lease obligations $ 395,165 $ 288,459

NOTE 810 – BANK AND OTHER BORROWINGS

In August 2020, the Company obtained a revolving credit line in the principal amount of RMB910,000 (approximately $139,000 when borrowed) from China Construction Bank, which bears interest at ~~the base Loan Prime Rate of 3.85% plus 0.4%~~4.10%. The credit line is guaranteed by Xiulan Zhou, a related party, and pledged bywith her property. The ~~maturity date is on~~ ~~July 21, 2023~~.
~~In December 2020, the Company obtained a loan in the principal amount of RMB750,000~~ ~~(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~~credit line was fully repaid ~~in June 2022.~~on the maturity date of August 7, 2023.

In November 2021, the Company obtained a bank loan in the principal amount of RMB500,000 (approximately $79,000 when borrowed) from Shenzhen Qianhai Webank Co., Ltd. (“WeBank”), which bears interest at ~~3.6%~~3.6%. The maturity date is on December 11, ~~2021~~.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 RMB500,750 (approximately $79,000 when borrowed) reflecting the accrued interest. The loan is guaranteed by Yumin Lin and bears interest at ~~10.71%~~10.71%.

In May 2022, the Company obtained a revolving credit line in the principal amount of RMB1,000,000 (approximately $149,000 when borrowed) from China Construction Bank, which bears interest at ~~4.45%~~4.45%. The credit line is guaranteed by Xiulan Zhou, a related ~~party, and pledged by her property.~~party. The credit line was fully repaid on the maturity date ~~is on~~of May 26, ~~2023~~.2023.
15

In May 2022, the Company obtained a loan in the principal amount of RMB161,000 (approximately $24,000 when borrowed) from Huaneng Guicheng Trust Co., Ltd. (“Huaneng Guicheng”), which bears interest at ~~11.34%~~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 RMB69,000 (approximately $10,000 when borrowed) from WeBank, which bears interest at ~~11.34%~~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 RMB99,000 (approximately $15,000 when borrowed) and RMB231,000 (approximately $34,000 when borrowed) from WeBank and Guangdong Nanyue Bank Co., Ltd. (“Nanyue Bank”), respectively, which bear interest at ~~14.4%~~14.4%. The loans are guaranteed by Kaihong Lin. The maturity date is on July 8, ~~2024.~~2024.
15

In July 2022, the Company obtained two loans in the principal amount of RMB153,000 (approximately $23,000 when borrowed) and RMB357,000 (approximately $53,000 when borrowed) from WeBank and Nanyue Bank, respectively, which bear interest at ~~14.4%~~14.4%. The loans are guaranteed by Falan Zhou, a manager of subsidiaries. The maturity date is on July 13, 2024.

OnIn July ~~21,~~ 2022, the Company obtained a loan in the principal amount of RMB380,000 (approximately $57,000 when borrowed) from Huaneng Guicheng, which bears interest at ~~12.6%~~12.6%. The loan is guaranteed by Yumin Lin. The maturity date is on July 21, ~~2024.~~2024.
In February 2023, the Company obtained a revolving credit line in the principal amount of RMB465,000 (approximately $68,000 when borrowed) from China Construction Bank, which bears interest at 4.00%. The loan is guaranteed by Shuqin Chen, a related party. The maturity date is on February 11, 2024.
In April 2023, the Company obtained two bank loans in the principal amount of RMB224,000 (approximately $31,000 when borrowed) and RMB96,000 (approximately $13,000 when borrowed) from Bank of Ningbo and WeBank, respectively, which bear interest at 12.24%. The loans are guaranteed by Falan Zhou, a manager of subsidiaries. The maturity date is on April 7, 2025.
In April 2023, the Company obtained a mortgage loan in the principal amount of RMB195,415 (approximately $27,000 when borrowed) from WeBank, which bears interest at 6.54%. The loan is pledged with a vehicle of the Company. The maturity date is on April 10, 2028.
In May 2023, the Company obtained a revolving credit line in the principal amount of RMB1,050,000 (approximately $146,000 when borrowed), with Yumin Lin as a co-borrower, from China Construction Bank, which bears interest at 4.20%. The maturity date is on May 26, 2024.
In July 2023, the Company obtained two bank loans in the principal amount of RMB57,000 (approximately $8,000 when borrowed) and RMB133,000 (approximately $18,000 when borrowed) from WeBank and Nanyue Bank, respectively, which bear interest at 10.44%. The loans are guaranteed by Falan Zhou, a manager of subsidiaries. The maturity date is on July 13, 2025.
In July 2023, the Company obtained a revolving credit line in the principal amount of RMB1,040,000 (approximately $143,000 when borrowed) from China Construction Bank, which bears interest at 3.70%. The credit line is guaranteed by Xiulan Zhou, a related party, and pledged with her property. The maturity date is on July 17, 2026.
In July 2023, the Company obtained a revolving credit line in the principal amount of RMB817,000 (approximately $114,000 when borrowed), with Yumin Lin as a co-borrower from China Construction Bank, which bears interest at 3.85%. The maturity date is on July 22, 2024.

The balance of the loans borrowed as of September 30, ~~2022~~2023 and December 31, ~~2021~~2022 were as follows:
SCHEDULE OF BALANCE OF LOAN BORROWED UNDER CREDIT LINES
September 30,
2022 December 31,
2021 September 30,
2023 December 31,
2022
Loan from a trust in PRC $ 67,804 $ 67,438
Loans from a trust in PRC $ 29,139 $ 60,049
China Construction Bank 268,413 143,192 463,471 276,447
WeBank 90,668 78,795 70,508 77,220
Nanyue Bank 75,746 -
Guangdong Nanyue Bank 51,954 67,375
Bank of Ningbo 24,373 -
Aggregate outstanding principal balances $ 502,631 $ 289,425 639,445 481,091
Less: current portion 413,207 101,207 451,119 422,653
Non-current portion $ 89,424 $ 188,218 $ 188,326 $ 58,438

The total interest expense was $~~21,077~~28,546 and $~~13,814~~21,077 for the nine months ended September 30, ~~2022~~2023 and ~~2021,~~2022, respectively.

Future minimum loan payments as of September 30, ~~2022~~2023 are as follows:
SCHEDULE OF FUTURE MINIMUM LOAN PAYMENTS
Year ending December 31,
2023 (remaining) $ 44,254
2024 418,306
2025
21,406

2026 148,317
2027 5,372
Thereafter 1,790
Total $ 639,445

Year ending December 31,
2022 (remaining) $ 35,384
2023 410,509
2024 56,738
Thereafter -
Total $ 502,631
~~NOTE 9 –~~ ~~COMMON STOCK~~
16
~~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, 2021, 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.

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations.

The information contained in this Form 10-Q is intended to update the information contained in our Annual Report on Form 10-K for the year ended December 31, ~~2021~~2022 filed with the Securities and Exchange Commission on ~~April 1, 2022~~March 31, 2023 (the “Form 10-K”) and presumes that readers have access to, and will have read, the “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and other information contained in such Form 10-K. The following discussion and analysis also should be read together with our financial statements and the notes to the financial statements included elsewhere in this Form 10-Q.

The following discussion contains certain statements that may be deemed “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. Such statements appear in a number of places in this Report, including, without limitation, “Management’s Discussion and Analysis of Financial Condition and Results of Operations.” These statements are not guaranteed of future performance and involve risks, uncertainties and requirements that are difficult to predict or are beyond our control. Forward-looking statements speak only as of the date of this quarterly report. You should not put undue reliance on any forward-looking statements. We strongly encourage investors to carefully read the factors described in our Form 10-K in the section entitled “Risk Factors” for a description of certain risks that could, among other things, cause actual results to differ from these forward-looking statements. We assume no responsibility to update the forward-looking statements contained in this quarterly report on Form 10-Q. The following should also be read in conjunction with the unaudited Financial Statements and notes thereto that appear elsewhere in this report.

Overview

Fortune Valley Treasures, Inc. (the “Company,” “we,” “our” or “us”) was incorporated in the State of Nevada on March 21, 2014. We were initially incorporated to offer users with up-to-date information on digital currencies. We engage in the food supply chain operations and management through a service platform. Through various acquisitions of high-quality upstream and downstream companies in the industry, the Company creates a complete industrial chain to reduce costs and enhance competitiveness. The company mainly focuses on online and offline sales targeting regional wholesalers, retailers, supermarkets and major food and beverage (“F&B”) chains.

During the nine months ended September 30, ~~2022,~~2023, the Company conducted its business in one revenue stream: product sales – ~~wine,~~liquor, water, water purifier and other F&B products.

Results of Operations

Three ~~Months Ended~~months ended September 30, ~~2022~~2023 and ~~2021~~2022

Three Months Ended
September 30,
Three months ended September 30,
2022 2021 Change 2023 2022 Change
Net revenues $ 2,915,303 $ 2,005,390 $ 909,913 $ 909,719 $ 2,915,303 $ (2,005,584 )
Cost of revenues (1,400,522 ) (875,418 ) (525,104 ) (593,294 ) (1,400,522 ) 807,228
Gross profit 1,514,781 1,129,972 384,809 316,425 1,514,781 (1,198,356 )

Operating expense (487,640 ) (521,892 ) 34,252 (1,538,265 ) (487,640 ) (1,050,625 )
Other income 2,335 2,512 (177 ) 7,466 2,221 5,245
Other expense (10,388 ) (4,327 ) (6,061 )
Income taxes (108,353 ) (156,402 ) 48,049
Net income 910,735 449,863 460,872
Net income attributable to noncontrolling interests 54,931 59,875 (4,944 )
Net income attributable to Fortune Valley Treasures, Inc. $ 855,804 $ 389,988 $ 465,816
Interest income 14 114 (100 )
Interest expense (10,290 ) (10,388 ) 98
Income taxes benefit (expense) 1,906 (108,353 ) 110,259
Net income (loss) (1,222,744 ) 910,735 (2,133,479 )
Net income (loss) attributable to noncontrolling interests (114,085 ) 54,931 (169,016 )
Net income (loss) attributable to Fortune Valley Treasures, Inc. $ (1,108,659 ) $ 855,804 $ (1,964,463 )
Nine ~~Months Ended~~months ended September 30, ~~2022~~2023 and ~~2021~~2022

Nine Months Ended
September 30,
Nine months ended September 30,
2022 2021 Change 2023 2022 Change
Net revenues $ 6,513,572 $ 5,474,894 $ 1,038,678 $ 3,817,605 $ 6,513,572 $ (2,695,967 )
Cost of revenues (3,018,507 ) (2,402,685 ) (615,822 ) (1,923,459 ) (3,018,507 ) 1,095,048
Gross profit 3,495,065 3,072,209 422,856 1,894,146 3,495,065 (1,600,919 )

Operating expense (1,396,667 ) (1,500,499 ) 103,832 (3,543,490 ) (1,396,667 ) (2,146,823 )
Other income 10,630 3,446 7,184 15,676 10,423 5,253
Other expense (21,077 ) (13,814 ) (7,263 )
Income taxes (212,274 ) (319,024 ) 106,750
Net income 1,875,677 1,242,318 633,359
Net income attributable to noncontrolling interests 123,464 132,601 (9,137 )
Net income attributable to Fortune Valley Treasures, Inc. $ 1,752,213 $ 1,109,717 $ 642,496
Interest income 61 207 (146 )
Interest expense (28,546 ) (21,077 ) (7,469 )
Income taxes expense (94,596 ) (212,274 ) 117,678
Net income (loss) (1,756,749 ) 1,875,677 (3,632,426 )
Net income (loss) attributable to noncontrolling interests (172,446 ) 123,464 (295,910 )
Net income (loss) attributable to Fortune Valley Treasures, Inc. $ (1,584,303 ) $ 1,752,213 $ (3,336,516 )

17

Net Revenues

Net revenues were ~~$2,915,303 for three months ended September 30, 2022, reflecting an increase of $909,913, or 45%, from $2,005,390~~$909,719 for the three months ended September 30, ~~2021.~~2023, reflecting a decrease of $2,005,584, or 69%, from $2,915,303 for the three months ended September 30, 2022. The ~~increase~~decrease in net revenues was mainly due to the ~~increase~~lower product sales volume than the same period of the prior year and to a lesser extent, the lower unit sales prices of wine products. The decrease in product sales was resulted from a decline in market demand resulting from the ~~product sale as a result of~~ ~~a newly launched distribution channel via a WeChat App~~.
~~Net revenues were $6,513,572 for nine months ended September 30, 2022, reflecting an increase of $1,038,678, or 19%, from $5,474,894 for nine months ended September 30, 2021. The increase~~sluggish economic environment and slow recovery in ~~net revenues was mainly attributable to the increase in the product sale as a result of~~ ~~the improved market condition with the impact of COVID-19,~~China’s economy as compared to the same period of the prior ~~year~~year. And in order to attract new customers, the Company has lowered the unit sales prices of wine products beginning in April 2023..
Net revenues were $3,817,605 for the nine months ended September 30, 2023, reflecting a decrease of $2,695,967, or 41%, from $6,513,572 for the nine months ended September 30, 2022. The decrease in net revenues was mainly due to the lower product sales volume than the same period of the prior year and to a lesser extent, the lower unit sales prices of wine products. The decrease in product sales reflected a decline in market demand resulting from the sluggish economic environment and slow recovery in China’s economy as compared to the same period of the prior year. And in order to attract new customers, the Company has lowered the unit sales prices of wine products since April 2023.
Cost of Revenues
Cost of revenues was $593,294 for the three months ended September 30, 2023, reflecting a decrease of $807,228, or 58%, from $1,400,522 for the three months ended September 30, ~~2022, reflecting an increase of $525,104, or 60%, from $875,418 for the three months ended September 30, 2021.~~2022. The ~~increase~~decrease in cost of ~~revenue~~revenues was mainly due to the ~~higher~~lower product sales volume in line with our ~~revenue increase.~~ net revenues decrease and to a lesser extent, the lower unit sales prices of wine products, which led to a lesser decrease in cost of revenues comparing to net revenues.
Cost of revenues was $1,923,459 for the nine months ended September 30, 2023, reflecting a decrease of $1,095,048, or 36%, from $3,018,507 for the nine months ended September 30, 2022. The decrease in cost of revenues was due to the lower product sales volume in line with our net revenues decrease.
Gross Profit
Gross profit was $316,425 and $1,514,781 for the three months ended September 30, 2023 and 2022, respectively, reflecting ~~an increase~~a decrease of ~~$615,822,~~$1,198,356, or ~~26%, from $2,402,685~~79%. The decrease in gross profit was mainly due to the decrease in the net revenues.
Gross profit was $1,894,146 and $3,495,065 for the nine months ended September 30, ~~2021.~~2023 and 2022, respectively, reflecting a decrease of $1,600,919, or 46%. The ~~increase~~decrease in ~~cost of revenue~~gross profit was mainly due to the ~~higher product sales volume~~decrease in ~~line with our revenue increase.~~the net revenues.
~~Gross Profit~~Operating Expenses
~~Gross profit was $1,514,781 and $1,129,972~~Operating expenses were $1,538,265 for the three months ended September 30, ~~2022 and 2021, respectively,~~2023, reflecting an increase of ~~$384,809,~~$1,050,625, or ~~34%. The increase in gross profit~~ ~~was due to the increase in the net revenues~~.
Gross profit was $3,495,065 and $3,072,209 for the nine months ended September 30, 2022 and 2021, respectively, reflecting an increase of $422,856, or 14%. The increase in gross profit was due to the increase in the net revenues.
~~Operating Expenses~~
~~Operating expense was~~215%, from $487,640 for the three months ended September 30, ~~2022, reflecting a slight decrease of $34,252, or 7%, from $521,892~~2022. The increase in operating expenses was mainly due to the increase in professional service fees and credit loss expenses.
Operating expenses were $3,543,490 for the nine months ended September 30, ~~2021.~~
~~Operating expense was~~2023, reflecting an increase of $2,146,823, or 154%, from $1,396,667 for the nine months ended September 30, ~~2022, reflecting a slight decrease of $103,832, or 7%, from $1,500,499 for~~2022. The increase in operating expenses was mainly due to the ~~nine months ended September 30, 2021.~~increase in professional service fees and credit loss expenses.
Net Income (Loss)
For the three months ended September 30, ~~2022,~~2023, our net ~~income~~loss was ~~$910,735,~~$1,222,744, compared to a net income of ~~$449,863~~$910,735 for the three months ended September 30, ~~2021.~~2022. The ~~increase~~decrease in net income was a result of the factors described above.
For the nine months ended September 30, ~~2022,~~2023, our net ~~income~~loss was ~~$1,875,677,~~$1,756,749, compared to a net income of ~~$1,242,318~~$1,875,677 for the nine months ended September 30, ~~2021.~~2022. The ~~increase~~decrease in net income was a result of the factors described above.
Net ~~income attributable~~Income (Loss) Attributable to ~~noncontrolling interests~~Noncontrolling Interests
The Company records net income (loss) attributable to noncontrolling interests in the unaudited condensed consolidated statements of operations for any noncontrolling interests of consolidated subsidiaries.
For the three months ended September 30, ~~2022~~2023 and ~~2021,~~2022, the Company recorded a net loss attributable to noncontrolling interests of $114,085 and a net income attributable to noncontrolling interests of $54,931, ~~and $59,875,~~ respectively.
For the nine months ended September 30, ~~2022~~2023 and ~~2021,~~2022, the Company recorded a net loss attributable to noncontrolling interests of $172,446 and a net income attributable to noncontrolling interests of $123,464, ~~and $132,601,~~ respectively.

18

Liquidity and Capital Resources

Working Capital

September 30, 2022
December 31, 2021 Change September 30,
2023 December 31,
2022 Change
Total current assets $ 6,544,575 $ 5,069,481 $ 1,475,094 $ 5,743,429 $ 6,871,091 $ (1,127,662 )
Total current liabilities 1,718,717 1,717,519 1,198 2,671,621 2,484,582 187,039
Working capital $ 4,825,858 $ 3,351,962 $ 1,473,896 $ 3,071,808 $ 4,386,509 $ (1,314,701 )

As of September 30, ~~2022,~~2023, we had working capital of ~~$4,825,858,~~$3,071,808, as compared to working capital of ~~$3,351,962~~$4,386,509 as of December 31, ~~2021.~~2022. We had total current assets of ~~$6,544,575,~~$5,743,429, consisting of cash and cash equivalents of ~~$239,443,~~$13,276, inventories of ~~$147,097,~~$59,239, prepayments and other current assets of ~~$2,507,504, and~~$1,367,548, accounts receivable of ~~$3,650,531,~~$4,303,366 compared to total current assets of ~~$5,069,481~~$6,871,091 as of December 31, ~~2021.~~2022. The decrease in total current assets was mainly due to the decrease in accounts receivable, prepayments and other current assets, and cash and cash equivalents. We had current liabilities of $2,671,621, consisting of operating lease obligations - current of $109,191, accounts payable of $683,967, accrued liabilities of $625,189, bank and other borrowing - current of $451,119, customer advances of $71,315, income tax payable of $7,352 and due to related parties of $723,488. The increase in total current liabilities was mainly due to the increase in cash and cash equivalents, account receivable, and prepayment and other current assets. We had current liabilities of $1,718,717, consisting of operating lease obligations of $135,747, accounts payable of $155,039,the accrued liabilities ~~of $131,363, bank~~ and ~~other borrowing of $413,207, customer advances of $176,213, income tax payable of $111,142 and~~the amount due to related parties, ~~of $596,006. The balance of total current liabilities is comparable with~~and offset by the ~~balance as of December 31, 2021.~~decrease in customer advances and income tax payable.
Our cash and cash equivalents balance ~~increased~~decreased to ~~$239,443~~$13,276 as of September 30, ~~2022,~~2023, from ~~$123,163 at~~$165,685 as of December 31, ~~2021.~~2022. We estimate the Company currently has sufficient ~~cash available to meet its anticipated~~ working capital ~~requirements~~to support its daily operations for the next twelve months, without raising additional capital. The Company is continuing to look for different financing opportunities in order to increase working capital and improve liquidity.

Despite the ~~increased~~positive working capital of the Company, no assurance can be given that any future financing, if needed, will be available or, if available, that it will be on terms that are satisfactory to the Company. Even if the Company is able to obtain additional financing, if needed, it may contain undue restrictions on its operations, in the case of debt financing, or cause substantial dilution for its shareholders, in the case of equity financing.

Cash Flows

Nine Months Ended
September 30,
Nine months ended September 30,
2022 2021 Change 2023 2022 Change
Cash Flows provided by (used in) Operating Activities $ 48,444 $ (712,200 ) $ 760,644 $ (272,944 ) $ 48,444 $ (321,388 )
Cash Flows provided by Investing Activities - 362,931 (362,931 )
Cash Flows used in Investing Activities (5,488 ) - (5,488 )
Cash Flows provided by Financing Activities 108,002 212,278 (104,276 ) 161,355 108,002 53,353
Effect of exchange rate changes (40,166 ) 37,343 (77,509 ) (35,312 ) (40,166 ) 4,854
Net Changes in Cash and Cash Equivalents $ 116,280 $ (99,648 ) $ 215,928 $ (152,409 ) $ 116,280 $ (268,689 )

Cash Flow from Operating Activities

Net cash used in operating activities for the nine months ended September 30, 2023 was $272,944, as compared to the amount of $48,444 provided by operating activities for the nine months ended September 30, 2022, ~~was $48,444, as compared to the amount~~reflecting a decrease of ~~$712,200 used in operating activities for the nine months ended September 30, 2021, reflecting an increase of $760,644.~~$321,388. The cash ~~provided by~~used in operating activities during the nine months ended September 30, ~~2022~~2023 was mainly resulted from the net ~~income~~loss of ~~$1,875,677~~$1,756,749 and ~~depreciation and amortization expenses of $648,740, offset by~~ the increase in ~~accounts receivable of $1,374,495, increase in the~~ prepayments and other current assets of ~~$608,448, increase in deposits paid to vendors~~$838,488, offset by the allowance for credit losses of ~~$277,134, and decrease in customer advances of $178,597.~~$2,175,928.

Cash Flow from Investing Activities

Net cash used in investing activities was ~~nil~~$5,488 for the nine months ended September 30, ~~2022,~~2023, compared to net cash ~~provided by~~used in investing activities of ~~$362,931~~$nil for the nine months ended September 30, ~~2021.~~2022. The cash used in investing activities during the nine months ended September 30, 2023 was mainly for the purchase of a vehicle in April 2023 for daily operating use.

Cash Flow from Financing Activities

Net cash provided by financing activities was ~~$108,002~~$161,335 for the nine months ended September 30, ~~2022,~~2023, compared to net cash provided by financing activities of ~~$212,278~~$108,002 for the nine months ended September 30, ~~2021.~~2022. The cash provided by financing activities for the nine months ended September 30, ~~2022~~2023 was mainly resulted from the net proceeds from revolving credit lines of ~~$148,606 and the proceeds from bank loans of $135,499, offset by the repayments to related parties of $154,510.~~
$141,967.

~~Critical Accounting Policy~~
In the ordinary course of business, we make a number of estimates and assumptions relating to the reporting of results of operations and financial condition in the preparation of our financial statements in conformity with U.S. generally accepted accounting principles. We base our estimates on historical experience, when available, and on other various assumptions that are believed to be reasonable under the circumstances. Actual results could differ significantly from those estimates under different assumptions and conditions.
~~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.
19
Critical Accounting Policies and Estimates

~~We generate revenue primarily from the sales~~The discussion and analysis of ~~wine, water, oil~~our financial condition and ~~water purifier directly to agents, wholesalers and end users. We recognize product revenue at a point in time when the control~~results of ~~the products has been transferred to customers. The transfer of control is considered complete when products~~operations are based upon our financial statements, which have been ~~picked up by~~prepared in accordance with the accounting principles generally accepted in the United States. The preparation of financial statements requires management to make estimates and assumptions that affect the amounts reported and disclosed in our financial statements and the accompanying notes. Actual results could differ materially from these estimates under different assumptions or ~~delivered~~conditions. We identified no critical accounting estimates in the current period.
As described in our Annual Report on Form 10-K for the fiscal year ended December 31, 2022, we consider our critical accounting policies to be those related to revenue recognition, allowance of doubtful accounts and impairment of intangible assets and goodwill. There have been no material changes to our ~~customers. We account~~critical accounting policies as disclosed in our Annual Report on Form 10-K for ~~shipping and handling fees as a fulfillment cost.~~the fiscal year ended December 31, 2022.

Off-Balance Sheet Arrangements

We do not have any off-balance sheet arrangements that have or are reasonably likely to have a current or future effect on our financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures, or capital resources that is material to investors.
Related Party Transactions

As of September 30, ~~2022~~2023 and December 31, ~~2021,~~2022, the Company had accounts receivable from related parties in the amounts of ~~$116,995~~$69,746 and ~~$43,477,~~$146,087, prepayments to related parties in the amounts of ~~$1,957,201~~$966,676 and ~~$1,813,904,~~$1,102,861, deposits to related parties in the amounts of ~~$1,607,955~~$523,296 and ~~$1,596,075,~~$758,445, and accounts payable to related parties in amounts of ~~$3,629~~$124,987 and ~~$17,789,~~$80,426, respectively.

As of September 30, ~~2022~~2023 and December 31, 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 September 30,~~ 2022, ~~and December 31, 2021,~~ the Company had outstanding payables due to its related parties in the amounts of ~~$596,006~~$723,488 and ~~$683,981,~~$565,675, respectively, which mainly consisted of borrowings for working capital purpose. The balances were unsecured, non-interest bearing and due on demand.

During the nine months ended September 30, 2023 and 2022, ~~and 2021,~~ the ~~Company’s~~Company sold products to its related parties ~~paid expenses on behalf of the Company~~ in the amounts of ~~$135,081~~$87,168 and ~~$532,912,~~$120,632, respectively, purchased goods from its related parties in the amounts of $497,964 and $769,387, and incurred the costs of revenues from related parties in the amounts of $493,096 and $763,663, respectively.

During the nine months ended September 30, ~~2022~~2023 and 2021, the Company sold products to its related parties in the amounts of $120,632 and $495,062, respectively, purchased goods from its related parties in the amounts of $769,387 and $575,495, and incurred cost of revenues from related parties in the amounts of $763,663 and $508,867, respectively.
~~During the nine months ended September 30,~~ 2022, ~~and 2021,~~ the rental expenses to related parties were ~~$16,132~~$14,046 and ~~$27,944,~~$16,132, respectively.

Our related parties are primarily those who are significantly influenced by the Company based on our common business relationships. Refer to Note 57 to the unaudited condensed consolidated financial statements for additional details regarding the related party transactions.

Item 3. Quantitative and Qualitative Disclosures About Market Risk.

As a “smaller reporting company” as defined by Rule 12b-2 of the Securities Exchange Act of 1934, the Company is not required to provide the information under this item.

Item 4. Controls and Procedures.

Evaluation of Disclosure Controls 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 September 30, ~~2022,~~2023, 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.
20

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.

20
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 September 30, ~~2022.~~2023. 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 September 30, ~~2022,~~2023, our internal control over financial reporting was not effective 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:

● We have increased our personnel resources and technical accounting expertise within the accounting function and intend to hire one or more additional personnel for the function due to turnover.

● We ~~will create a position to segregate duties consistent with control objectives.~~
● We plan to prepare written policies and procedures for operating, accounting and financial reporting to establish a formal process to close our books monthly on an accrual basis and account for all transactions, including equity and debt transactions.
● We plan to test our updated controls and remediate our deficiencies inat the ~~year 2022.~~end of 2023.

Changes in Internal Control over Financial Reporting
T~~here~~There have been no changes in our internal controls over financial reporting that occurred during the period covered by this Report, which has materially affected, or is reasonably likely to materially affect, our internal controls over financial reporting.
21
PART II — OTHER INFORMATION

Item 1. Legal Proceedings.

We know of no material, active or pending legal proceedings against us, nor are we involved as a plaintiff in any material proceedings or pending litigation. There are no proceedings in which any of our directors, officers or affiliates, or any beneficial shareholder are an adverse party or has a material interest adverse to us.

Item 1A. Risk Factors.

Not applicable to a smaller reporting company

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.

None.
Item 3. Defaults Upon Senior Securities.

None.

Item 4. Mine Safety Disclosures.

Not applicable.

Item 5. Other Information.

None.

Item 6. Exhibits

Exhibit No. Description
31.1 Rule 13(a)-14(a)/15(d)-14(a) Certification of principal executive officer
31.2 Rule 13(a)-14(a)/15(d)-14(a) Certification of principal financial officer
32.1 Section 1350 Certification of principal executive officer
32.2 Section 1350 Certification of principal financial officer and principal accounting officer
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 Linkbase 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)

22

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: November ~~14, 2022~~13, 2023 By: /s/ Yumin Lin
Yumin Lin
President and Chief Executive Officer
(Principal Executive Officer)

Date: November ~~14, 2022~~13, 2023 By: /s/ Kaihong Lin
Kaihong Lin
Chief Financial Officer and Treasurer
(Principal Financial and Accounting Officer)

23

	2022			2021			2022			2021
	Three months ended September 30,						Nine months ended September 30,
	2022			2021			2022			2021

Net revenues (including $79,137 and $106,378 from related parties for the three months ended September 30, 2022 and 2021, respectively; $120,632 and $495,062 from related parties for the nine months ended September 30, 2022 and 2021, respectively)	$	2,915,303		$	2,005,390		$	6,513,572		$	5,474,894

Cost of revenues (including $377,283 and $238,524 from related parties for the three months ended September 30, 2022 and 2021, respectively; $763,663 and $508,867 from related parties for the nine months ended September 30, 2022 and 2021, respectively)		1,400,522			875,418			3,018,507			2,402,685
Gross profit		1,514,781			1,129,972			3,495,065			3,072,209

Operating expenses:
Selling and distribution expenses		15,509			21,964			49,593			69,122
General and administrative expenses		472,131			499,928			1,347,074			1,431,377

Operating income		1,027,141			608,080			2,098,398			1,571,710

Other income (expense):
Other income		2,221			2,309			10,423			2,595
Interest income		114			203			207			851
Interest expense		(10,388	)		(4,327	)		(21,077	)		(13,814	)
Other expense, net		(8,053	)		(1,815	)		(10,447	)		(10,368	)

Income before income tax		1,019,088			606,265			2,087,951			1,561,342

Income tax expense		108,353			156,402			212,274			319,024

Net income	$	910,735		$	449,863		$	1,875,677		$	1,242,318
Less: Net income attributable to noncontrolling interests		54,931			59,875			123,464			132,601
Net income attributable to Fortune Valley Treasures, Inc.		855,804			389,988			1,752,213			1,109,717

Other comprehensive income (loss):
Foreign currency translation income (loss)		(719,949	)		23,945			(1,311,550	)		105,316

Total comprehensive income		190,786			473,808			564,127			1,347,634
Less: comprehensive income attributable to noncontrolling interests		10,749			63,637			35,475			143,831
Comprehensive income attributable to Fortune Valley Treasures, Inc.	$	180,037		$	410,171		$	528,652		$	1,203,803

Earnings per share
Basic and diluted earnings per share*	$	0.05		$	0.02		$	0.11		$	0.07
Basic and diluted weighted average shares outstanding*		15,655,038			15,655,038			15,655,038			15,655,038

	2023			2022			2023			2022
	Three months ended September 30,						Nine months ended September 30,
	2023			2022			2023			2022

Net revenues (including $17,570 and $79,137 from related parties for the three months ended September 30, 2023 and 2022, respectively; $87,168 and $120,632 from related parties for the nine months ended September 30, 2023 and 2022, respectively)	$	909,719		$	2,915,303		$	3,817,605		$	6,513,572

Cost of revenues (including $131,000 and $377,283 from related parties for the three months ended September 30, 2023 and 2022, respectively; $493,096 and $763,663 from related parties for the nine months ended September 30, 2023 and 2022, respectively)		593,294			1,400,522			1,923,459			3,018,507
Gross profit		316,425			1,514,781			1,894,146			3,495,065

Operating expenses:
Selling and distribution expenses		14,667			15,509			40,925			49,593
General and administrative expenses		1,523,598			472,131			3,502,565			1,347,074

Operating income (loss)		(1,221,840	)		1,027,141			(1,649,344	)		2,098,398

Other income (expense):
Other income		7,466			2,221			15,676			10,423
Interest income		14			114			61			207
Interest expense		(10,290	)		(10,388	)		(28,546	)		(21,077	)
Other expense, net		(2,810	)		(8,053	)		(12,809	)		(10,447	)

Income (loss) before income tax		(1,224,650	)		1,019,088			(1,662,153	)		2,087,951

Income tax expense (benefit)		(1,906	)		108,353			94,596			212,274

Net income (loss)	$	(1,222,744	)	$	910,735		$	(1,756,749	)	$	1,875,677
Less: Net income (loss) attributable to noncontrolling interests		(114,085	)		54,931			(172,446	)		123,464
Net income (loss) attributable to Fortune Valley Treasures, Inc.		(1,108,659	)		855,804			(1,584,303	)		1,752,213

Other comprehensive income:
Foreign currency translation loss		(31,568	)		(719,949	)		(408,529	)		(1,311,550	)

Total comprehensive income (loss)		(1,254,312	)		190,786			(2,165,278	)		564,127
Less: Comprehensive income (loss) attributable to noncontrolling interests		(117,184	)		10,749			(216,742	)		35,475
Comprehensive income (loss) attributable to Fortune Valley Treasures, Inc.	$	(1,137,128	)	$	180,037		$	(1,948,536	)	$	528,652

Earnings (loss) per share
Basic and diluted earnings (loss) per share	$	(0.07	)	$	0.05		$	(0.10	)	$	0.11
Basic and diluted weighted average shares outstanding	$	15,655,038		$	15,655,038		$	15,655,038		$	15,655,038

	Number of shares		Amount		Paid-in Capital		Comprehensive Income (Loss)			Statutory Reserves			controlling Interests			Stockholders’ Equity
	Common Stock				Additional		Accumulated Other			Accumulated Deficit and			Non			Total
	Number of shares		Amount		Paid-in Capital		Comprehensive Income (Loss)			Statutory Reserves			controlling Interests			Stockholders’ Equity
Balance as of December 31, 2021		15,655,038	$	15,655	$	11,061,233	$	544,305		$	(2,561,681	)	$	404,842		$	9,464,354
Net income		-		-		-		-			148,676			27,283			175,959
Foreign currency translation adjustment		-		-		-		8,972			-			1,748			10,720
Balance as of March 31, 2022		15,655,038	$	15,655	$	11,061,233	$	553,277		$	(2,413,005	)	$	433,873		$	9,651,033
Net income		-		-		-		-			747,733			41,250			788,983
Foreign currency translation adjustment		-		-		-		(556,766	)		-			(45,555	)		(602,321	)
Balance as of June 30, 2022		15,655,038	$	15,655	$	11,061,233	$	(3,489	)	$	(1,665,272	)	$	429,568		$	9,837,695
Net income		-		-		-		-			855,804			54,931			910,735
Foreign currency translation adjustment		-		-		-		(675,767	)		-			(44,182	)		(719,949	)
Balance as of September 30, 2022		15,655,038	$	15,655	$	11,061,233	$	(679,256	)	$	(809,468	)	$	440,317		$	10,028,481

	Common Stock *				Additional		Accumulated Other			Accumulated Deficit and			Non			Total
	Number of shares		Amount		Paid-in Capital*		Comprehensive Income			Statutory Reserves			controlling Interests			Stockholders’ Equity
Balance as of December 31, 2020*		15,655,038	$	15,655	$	11,061,233	$	300,265		$	(4,341,417	)	$	195,915		$	7,231,651
Net income		-		-		-		-			305,254			30,320			335,574
Foreign currency translation adjustment		-		-		-		(6,067	)		-			(603	)		(6,670	)
Balance as of March 31, 2021*		15,655,038	$	15,655	$	11,061,233	$	294,198		$	(4,036,163	)	$	225,632		$	7,560,555
Net income		-		-		-		-			414,475			42,406			456,881
Foreign currency translation adjustment		-		-		-		79,970			-			8,071			88,041
Balance as of June 30, 2021*		15,655,038	$	15,655	$	11,061,233	$	374,168		$	(3,621,688	)	$	276,109		$	8,105,477
Beginning balance ^*		15,655,038	$	15,655	$	11,061,233	$	374,168		$	(3,621,688	)	$	276,109		$	8,105,477
Net income		-		-		-		-			389,988			59,875			449,863
Foreign currency translation adjustment		-		-		-		20,183			-			3,762			23,945
Balance as of September 30, 2021*		15,655,038	$	15,655	$	11,061,233	$	394,351		$	(3,231,700	)	$	339,746		$	8,579,285
Ending balance ^*		15,655,038	$	15,655	$	11,061,233	$	394,351		$	(3,231,700	)	$	339,746		$	8,579,285

	Number of shares		Amount		Paid-in Capital		Comprehensive Loss			Statutory Reserves			controlling Interests			Stockholders’ Equity
	Common Stock				Additional		Accumulated Other			Accumulated Deficit and			Non			Total
	Number of shares		Amount		Paid-in Capital		Comprehensive Loss			Statutory Reserves			controlling Interests			Stockholders’ Equity
Balance as of December 31, 2022		15,655,038	$	15,655	$	11,061,233	$	(180,826	)	$	(4,504,404	)	$	108,251		$	6,499,909
Net loss		-		-		-		-			(88,819	)		(357	)		(89,176	)
Foreign currency translation adjustment		-		-		-		45,290			-			182			45,472
Balance as of March 31, 2023		15,655,038	$	15,655	$	11,061,233	$	(135,536	)	$	(4,593,223	)	$	108,076		$	6,456,205
Net loss		-		-		-		-			(386,825	)		(58,004	)		(444,829	)
Foreign currency translation adjustment		-		-		-		(381,054	)		-			(41,379	)		(422,433	)
Balance as of June 30, 2023		15,655,038	$	15,655	$	11,061,233	$	(516,590	)	$	(4,980,048	)	$	8,693		$	5,588,943
Net loss		-		-		-		-			(1,108,659	)		(114,085	)		(1,222,744	)
Foreign currency translation adjustment		-		-		-		(28,469	)		-			(3,099	)		(31,568	)
Balance as of September 30, 2023		15,655,038	$	15,655	$	11,061,233	$	(545,059	)	$	(6,088,707	)	$	(108,491	)	$	4,334,631

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	~~Sales~~Drinking water distribution and delivery, sales of ~~agriculture products, household electric appliances~~alcoholic beverages and ~~plastic products~~water purifier	PRC
Dongguan City Fu Jia Drinking Water Company Ltd (“FJWL”)	March 29, 2021	Xixingdao	~~Sales~~Drinking water distribution and delivery, sales of ~~agriculture products, household electric appliances and food~~water purifier	PRC
Dongguan City Fu Sheng Drinking Water Company Ltd (“FSWL”)	March 29, 2021	Xixingdao	~~Sales~~Drinking water distribution and delivery, sales of ~~agriculture products, household electric appliances and food~~water purifier	PRC
Shenzhen Fu Jin Trading Technology Company Ltd (“FJSTL”)	June 7, 2021	Xixingdao	~~Trading~~Drinking water distribution and delivery, sales of ~~primary agricultural products, household appliances and plastic products~~water purifier	PRC
Dongguan City Fu Li Trading Ltd (“FLTL”)	September 10, 2021	Xixingdao	~~Sales~~Drinking water distribution and delivery, sales of ~~agriculture products, household electric appliances and plastic products~~water purifier	PRC
Guangdong Fu Gu Supply Chain Group Ltd (“FGGC”)	September 13, 2021	QHDX	~~Supply chain service, sales~~Trading of ~~food and health products, machinery, plastic products, and investment holding~~alcoholic beverages	PRC
Dongguan City Fu Zhi Gu Trading Ltd (“FZGTL”)	September 9, 2022	FVTL	~~Sales~~Trading of ~~pre-packaged food, office equipment, electronic product and consultancy service~~alcoholic beverages	PRC
Dongguan City Chang Fu Trading Ltd (“CFTL”)	September 9, 2022	FVTL	~~Sales~~Trading of ~~pre-packaged food, office equipment, electronic product and consultancy service~~alcoholic beverages	PRC
Dongguan City La Tong Trading Ltd (“LTTL”)	August 8, 2022	FVTL	~~Sales~~Trading of ~~pre-packaged food, office equipment, electronic product and consultancy service~~alcoholic beverages	PRC
Dongguan City Kai Fu Trading Ltd (“KFTL”)	September 8, 2022	FVTL	~~Sales~~Trading of ~~pre-packaged food, office equipment, electronic product and consultancy service~~alcoholic beverages	PRC

	●	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

	●	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

					2023		2022
	As of and for the nine months ended September 30,				As of and for the nine months ended September 30,
	2022		2021		2023		2022
Period-end RMB:US$1 exchange rate		0.14053		0.15512		0.13745		0.14053
Period-average RMB:US$1 exchange rate		0.15174		0.15452		0.14239		0.15174

	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.

	September 30, 2023			December 31, 2022
Accounts receivable (including $70,777 and $146,087 from related parties as of September 30, 2023 and December 31, 2022, respectively)	$	4,820,610		$	4,797,564
Less: Doubtful allowance (including $1,031 and $nil from related parties as of September 30, 2023 and December 31, 2022, respectively)		(517,244	)		-
Accounts receivable, net	$	4,303,366		$	4,797,564

	September 30, 2023			December 31, 2022
Beginning balance	$	-		$	-
Additions to allowance		535,862			-
Foreign currency translation adjustment		(18,618	)		-
Ending balance	$	517,244		$	-


	September 30, 2022		December 31, 2021
Prepayments (including $1,957,201 and $1,813,904 to related parties as of September 30, 2022 and December 31, 2021, respectively)	$	2,484,824	$	2,169,095
Other current assets		22,680		7,618
Prepayments and other current assets	$	2,507,504	$	2,176,713

	September 30, 2023			December 31, 2022
Prepayments (including $2,749,621 and $2,255,288 to related parties as of September 30, 2023 and December 31, 2022, respectively)	$	3,657,518		$	3,001,866
Other current assets		6,919			4,631
Total prepayments and other current assets		3,664,437			3,006,497
Less: Allowance for doubtful accounts (including $1,782,945 and $1,152,427 to related parties as of September 30, 2023 and December 31, 2022, respectively)		(2,296,889	)		(1,247,580	)
Prepayments and other current assets, net	$	1,367,548		$	1,758,917

	September 30, 2023			December 31, 2022
Deposits paid (including $1,557,900 and $1,628,511 to related parties as of September 30, 2023 and December 31, 2022, respectively)	$	2,258,234		$	2,365,652
Less: Allowance for doubtful accounts (including $1,034,604 and $870,066 to related parties as of September 30, 2023 and December 31, 2022, respectively)		(1,652,625	)		(1,244,350	)
Deposits paid, net	$	605,609		$	1,121,302


Year ending December 31,
2022 (remaining)	$	190,559
2023		762,238
2023 (remaining)			$	50,886
2024		509,986		136,911
2025		5,484		4,962
2026		5,484		4,962
Thereafter		1,249
2027				1,085
Total	$	1,475,000	$	198,806

		September 30, 2022		December 31, 2021
Mr. Yumin Lin	President, Chief Executive Officer, Secretary, Director	$	441,365	$	344,218
Ms. Xiulan Zhou	Manager of a subsidiary		1,708		1,157
Mr. Huagen Li	Manager of a subsidiary		2,248		2,518
Mr. Guodong Jia	Manager of a subsidiary		385		944
Mr. Minghua Cheng	Former director and majority shareholder		-		157,353
Mr. Hongwei Ye	Manager of a subsidiary, Shareholder		15		17
Mr. Anping Chen	Manager of a subsidiary		2,129		6,924
Mr. Jiangwei Jia	Manager of a subsidiary		2,289		787
Ms. Xiuyun Wang	Manager of a subsidiary		-		6,020
Mr. Yuwen Li	Vice President		48,525		70,745
Shenzhen DaXingHuaShang Industry Development Ltd.	Mr. Yumin Lin is the supervisor of Shenzhen DaXingHuaShang Industry Development Ltd.		84,318		93,298
Mr. Deqin Ke	Manager of a subsidiary		703		-
Mr. Zhihua Liao	Manager of a subsidiary		2,588		-
Ms. Chunxiang Zhang	Manager of a subsidiary		2,925		-
Mr. Xue Meng	Manager of a subsidiary		4,156		-
Ms. Shuqin Chen	Manager of a subsidiary		1,910		-
Mr. Zhipeng Zuo	Manager of a subsidiary		742		-
Due to related parties		$	596,006	$	683,981

		2023		2022
		Nine months ended September 30,
		2023		2022
Dongguan Baxi Food Distribution Co., Ltd.	Significantly influenced by the Company	$	83,891	$	27,916
Dongguan Dalingshan Xinwenhua Drinking Water Store	Significantly influenced by the Company		27,658		78,474
Dongguan Pengqin Drinking Water Co., Ltd.	Significantly influenced by the Company		24,481		63,429
Dongguan Dengqinghu Drinking Water Store	Significantly influenced by the Company		2,934		2,043
Dongguan Tailai Trading Co., Ltd.	Significantly influenced by the Company		76,224		60,614
Dongguan Anxiang Technology Co., Ltd.	Significantly influenced by the Company		63,754		95,045
Guangdong Jiaduonuo Shengshi Trading Co., Ltd.	Significantly influenced by the Company		112,233		112,598
Dongguan Dalingshan Runxin Drinking Water Store	Significantly influenced by the Company		12,386		26,174
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.		89,535		297,370
Cost of revenues from related parties		$	493,096	$	763,663

		2022		2021
		For the nine months ended September 30,
		2022		2021
Dongguan Baxi Food Distribution Co., Ltd.	Significantly influenced by the Company	$	27,916	$	56,588
Dongguan Dalingshan Xinwenhua Drinking Water Store	Significantly influenced by the Company		78,474		45,701
Dongguan Pengqin Drinking Water Co., Ltd.	Significantly influenced by the Company		63,429		44,047
Dongguan Dengqinghu Drinking Water Co., Ltd.	Significantly influenced by the Company		2,043		7,758
Dongguan Tailai Trading Co., Ltd.	Significantly influenced by the Company		60,614		51,943
Dongguan Anxiang Technology Co., Ltd.	Significantly influenced by the Company		95,045		140,043
Guangdong Jiaduonuo Shengshi Trading Co., Ltd.	Significantly influenced by the Company		112,598		115,077
Dongguan Dalingshan Runxin Drinking Water Store	Significantly influenced by the Company		26,174		23,070
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.		297,370		24,640
Cost of revenues from related parties		$	763,663	$	508,867


					Nine months ended September 30,
	Nine Months Ended September 30, 2022		Nine Months Ended September 30, 2021		2023		2022
Current:
– United States of America	$	105,074	$	154,485	$	31,761	$	105,074
– Seychelles		-		-		-		-
– Hong Kong		-		-		-		-
– The PRC		107,200		164,539		62,835		107,200
Current income tax expense
Deferred
– United States of America		-		-		-		-
– Seychelles		-		-		-		-
– Hong Kong		-		-		-		-
– The PRC		-		-		-		-
Deferred income tax expense
Total	$	212,274	$	319,024	$	94,596	$	212,274

	2022		2021
Operating lease cost (included in general and administrative expenses in the Company’s unaudited condensed consolidated statements of operations)	For the nine months ended September 30,				Nine months ended September 30,
	2022		2021		2023		2022

Related parties	$	16,132	$	27,944	$	14,046	$	16,132
Non-related parties		109,050		79,471		97,288		109,050
Total	$	125,182	$	107,415	$	111,334	$	125,182

Other information for the nine months ended	September 30, 2022			September 30, 2021			September 30, 2023			September 30, 2022
Cash paid for amounts included in the measurement of lease obligations	$	110,768		$	101,203		$	116,743		$	110,768
Weighted average remaining lease term (in years)		3.31			3.92			2.61			3.31
Weighted average discount rate		3.23	%		3.23	%		3.23	%		3.23	%

Year ending December 31,
2022 (remaining)	$	46,458
2023		130,694
2023 (remaining)				$	27,008
2024		102,573			118,512
2025		92,635			105,405
2026		41,462			47,012
Thereafter		5,621
2027					5,498
Total lease payment		419,443			303,435
Less: Imputed interest		(24,278	)		(14,976	)
Operating lease obligations	$	395,165		$	288,459

Year ending December 31,
2023 (remaining)	$	44,254
2024		418,306
2025		21,406
2026		148,317
2027		5,372
Thereafter		1,790
Total	$	639,445

Year ending December 31,
2022 (remaining)	$	35,384
2023		410,509
2024		56,738
Thereafter		-
Total	$	502,631

	Three Months Ended September 30,									Three months ended September 30,
	2022			2021			Change			2023			2022			Change
Net revenues	$	2,915,303		$	2,005,390		$	909,913		$	909,719		$	2,915,303		$	(2,005,584	)
Cost of revenues		(1,400,522	)		(875,418	)		(525,104	)		(593,294	)		(1,400,522	)		807,228
Gross profit		1,514,781			1,129,972			384,809			316,425			1,514,781			(1,198,356	)

Operating expense		(487,640	)		(521,892	)		34,252			(1,538,265	)		(487,640	)		(1,050,625	)
Other income		2,335			2,512			(177	)		7,466			2,221			5,245
Other expense		(10,388	)		(4,327	)		(6,061	)
Income taxes		(108,353	)		(156,402	)		48,049
Net income		910,735			449,863			460,872
Net income attributable to noncontrolling interests		54,931			59,875			(4,944	)
Net income attributable to Fortune Valley Treasures, Inc.	$	855,804		$	389,988		$	465,816
Interest income											14			114			(100	)
Interest expense											(10,290	)		(10,388	)		98
Income taxes benefit (expense)											1,906			(108,353	)		110,259
Net income (loss)											(1,222,744	)		910,735			(2,133,479	)
Net income (loss) attributable to noncontrolling interests											(114,085	)		54,931			(169,016	)
Net income (loss) attributable to Fortune Valley Treasures, Inc.										$	(1,108,659	)	$	855,804		$	(1,964,463	)

	September 30, 2022		December 31, 2021		Change		September 30, 2023		December 31, 2022		Change
Total current assets	$	6,544,575	$	5,069,481	$	1,475,094	$	5,743,429	$	6,871,091	$	(1,127,662	)
Total current liabilities		1,718,717		1,717,519		1,198		2,671,621		2,484,582		187,039
Working capital	$	4,825,858	$	3,351,962	$	1,473,896	$	3,071,808	$	4,386,509	$	(1,314,701	)

	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.~~

	●	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.

	●	We have increased our personnel resources and technical accounting expertise within the accounting function and intend to hire one or more additional personnel for the function due to turnover.

	●	We ~~will create a position to segregate duties consistent with control objectives.~~

	●	We plan to prepare written policies and procedures for operating, accounting and financial reporting to establish a formal process to close our books monthly on an accrual basis and account for all transactions, including equity and debt transactions.

	●	We plan to test our updated controls and remediate our deficiencies inat the ~~year 2022.~~end of 2023.