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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C.20549
FORM
(Mark one)
| QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For
the quarterly period ended
| TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
Commission
file number
(Exact name of registrant as specified in its charter)
(State or other jurisdiction of incorporation or organization) |
(IRS Employer Identification No.) |
(Address of principal executive offices)
(Issuer’s telephone number)
Securities Registered Pursuant to Section 12(g) of the Act:
| Title of Each Class | Trading Symbol(s) | Name of each Exchange on which Registered | ||
| OTCQX |
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 registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).
Yes
☐
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company.
| Large accelerated filer | ☐ | Accelerated filer | ☐ | |
| ☐ | (Do not check if a smaller reporting company) | 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 7(a)(2)(B) ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).
Yes
☐
Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practical date: As of May 13, 2022, there were outstanding shares of the registrant’s common stock.
AIXIN LIFE INTERNATIONAL, INC.
FORM 10-Q
March 31, 2022
INDEX
| 2 |
SPECIAL NOTE REGARDING FORWARD LOOKING STATEMENTS
This report contains forward-looking statements. These statements involve known and unknown risks, uncertainties and other factors which may cause our actual results, performance or achievements to be materially different from any future results, performances or achievements expressed or implied by the forward-looking statements. In some cases, you can identify forward-looking statements by terms such as “anticipates,” “believes,” “could,” “estimates,” “expects,” “intends,” “may,” “plans,” “potential,” “predicts,” “projects,” “should,” “would” and similar expressions intended to identify forward-looking statements. Forward-looking statements reflect our current views with respect to future events and are based on assumptions and are subject to risks and uncertainties. Given these uncertainties, you should not place undue reliance on forward-looking statements. Forward-looking statements include, among other things, statements relating to:
| ● | our goals and strategies; | |
| ● | our future business development, financial condition and results of operations; | |
| ● | our expectations regarding demand for, and market acceptance of, our products; | |
| ● | our expectations regarding keeping and strengthening our relationships with merchants, manufacturers and end-users; and | |
| ● | general economic and business conditions in the regions where we provide our services. |
Also, forward-looking statements represent our estimates and assumptions only as of the date of this report. You should read this report and the documents that we reference and filed as exhibits to the report completely and with the understanding that our actual future results may be materially different from what we expect. Except as required by law, we assume no obligation to update any forward-looking statements publicly, or to update the reasons actual results could differ materially from those anticipated in any forward-looking statements, even if new information becomes available in the future.
Use of Certain Defined Terms
Except where the context otherwise requires and for the purposes of this report only:
the “Company,” “we,” “us,” and “our” refer to AiXin Life International., Inc. (“AiXin”) and its subsidiaries.
“Exchange Act” refers to the Securities Exchange Act of 1934, as amended;
“Hong Kong” refers to the Hong Kong Special Administrative Region of the People’s Republic of China;
“PRC,” “China,” and “Chinese,” refer to the People’s Republic of China (excluding Hong Kong and Taiwan);
“Renminbi” and “RMB” refer to the legal currency of China;
“Securities Act” refers to the Securities Act of 1933, as amended; and
“US dollars,” “dollars” and “$” refer to the legal currency of the United States.
| 3 |
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
AIXIN LIFE INTERNATIONAL, INC.
CONSOLIDATED BALANCE SHEETS
| March 31, 2022 | December 31, 2021 | |||||||
| (Unaudited) | ||||||||
| Assets | ||||||||
| Current assets | ||||||||
| Cash and cash equivalents | $ | $ | ||||||
| Restricted cash | ||||||||
| Accounts receivable, net | ||||||||
| Other receivables and prepaid expenses | ||||||||
| Advances to suppliers | ||||||||
| Inventory | ||||||||
| Advances to related parties | ||||||||
| Total current assets | ||||||||
| Property and equipment, net | ||||||||
| Intangible asset, net | ||||||||
| Deferred tax asset | ||||||||
| Security deposit | ||||||||
| Operating lease right-of-use assets | ||||||||
| Total assets | $ | $ | ||||||
| Liabilities and stockholders’ equity | ||||||||
| Current liabilities | ||||||||
| Accounts payable | $ | $ | ||||||
| Unearned revenue | ||||||||
| Taxes payable | ||||||||
| Accrued liabilities and other payables | ||||||||
| Loan from third parties | ||||||||
| Operating lease liabilities | ||||||||
| Advance from related parties | ||||||||
| Total current liabilities | ||||||||
| Operating lease liabilities - non-current | ||||||||
| Total liabilities | ||||||||
| Stockholders’ equity | ||||||||
| Undesignated preferred stock, $ par value, shares authorized, issued and outstanding | ||||||||
| Common stock, par value $ per share, shares authorized; shares issued and outstanding as of March 31, 2022 and December 31, 2021 | ||||||||
| Additional paid in capital | ||||||||
| Statutory reserve | ||||||||
| Accumulated deficit | ( | ) | ( | ) | ||||
| Accumulated other comprehensive income | ||||||||
| Total stockholders’ equity | ||||||||
| Total liabilities and stockholders’ equity | $ | $ | ||||||
The accompanying notes are an integral part of these consolidated financial statements.
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AIXIN LIFE INTERNATIONAL, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME (LOSS)
(UNAUDITED)
| Three Months Ended March 31, | ||||||||
| 2022 | 2021 | |||||||
| Sales revenue: | ||||||||
| Products | $ | $ | ||||||
| Advertising | ||||||||
| Room revenues | ||||||||
| Food and beverage revenues | ||||||||
| Others | ||||||||
| Total revenue, net | ||||||||
| Operating costs and expenses | ||||||||
| Cost of goods sold | ||||||||
| Hotel operating costs | ||||||||
| Selling | ||||||||
| General and administrative | ||||||||
| Provision for bad debts | ||||||||
| Stock-based compensation | ||||||||
| Total operating costs and expenses | ||||||||
| (Loss) income from operations | ( | ) | ||||||
| Non-operating income (expenses) | ||||||||
| Interest income | ||||||||
| Other income | ||||||||
| Other expenses | ( | ) | ( | ) | ||||
| Total non-operating income (expenses), net | ( | ) | ||||||
| (Loss) income before income tax | ( | ) | ||||||
| Income tax expense | ||||||||
| Net (loss) income | ( | ) | ||||||
| Other comprehensive items | ||||||||
| Foreign currency translation adjustment | ( | ) | ||||||
| Comprehensive (loss) income | $ | ( | ) | $ | ||||
| (Loss) income per share - basic and diluted | $ | ( | ) | $ | ||||
| Weighted average shares outstanding | ||||||||
The accompanying notes are an integral part of these consolidated financial statements.
| 5 |
AIXIN LIFE INTERNATIONAL, INC.
CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY
(UNAUDITED)
| Common Stock | Additional paid in | Statutory | Accumulated | Accumulated other comprehensive | ||||||||||||||||||||||||
| Shares | Amount | capital | reserves | deficit | income | Total | ||||||||||||||||||||||
| Balance at December 31, 2021 | $ | $ | $ | $ | ( | ) | $ | $ | ||||||||||||||||||||
| Stock-based compensation | - | |||||||||||||||||||||||||||
| Net loss | - | ( | ) | ( | ) | |||||||||||||||||||||||
| Foreign currency translation | - | |||||||||||||||||||||||||||
| Balance at March 31, 2022 | $ | $ | $ | $ | ( | ) | $ | $ | ||||||||||||||||||||
| Balance at December 31, 2020 | $ | $ | $ | $ | ( | ) | $ | $ | ||||||||||||||||||||
| Stock-based compensation | - | |||||||||||||||||||||||||||
| Net income | - | |||||||||||||||||||||||||||
| Foreign currency translation | - | ( | ) | ( | ) | |||||||||||||||||||||||
| Balance at March 31, 2021 | $ | $ | $ | $ | ( | ) | $ | $ | ||||||||||||||||||||
The accompanying notes are an integral part of these consolidated financial statements.
| 6 |
AIXIN LIFE INTERNATIONAL, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
| For the Three Months Ended March 31, | ||||||||
| 2022 | 2021 | |||||||
| CASH FLOWS FROM OPERATING ACTIVITIES: | ||||||||
| Net (loss) income | $ | ( | ) | $ | ||||
| Adjustments required to reconcile net income to net cash provided by (used in) operating activities: | ||||||||
| Depreciation and amortization | ||||||||
| Provision for bad debts | - | |||||||
| Operating lease expense | ||||||||
| Stock based compensation | ||||||||
| Deferred tax | - | |||||||
| Changes in assets and liabilities: | ||||||||
| Accounts receivable | ( | ) | - | |||||
| Other receivables and prepaid expenses | ( | ) | ( | ) | ||||
| Advances to suppliers | ( | ) | ||||||
| Inventory | ( | ) | ( | ) | ||||
| Accounts payable | - | |||||||
| Unearned revenue | ||||||||
| Taxes payable | ( | ) | ||||||
| Payment of lease liability | ( | ) | ( | ) | ||||
| Accrued liabilities and other payables | ( | ) | ||||||
| Net cash (used in) provided by operating activities | ( | ) | ||||||
| CASH FLOWS FROM FINANCING ACTIVITIES: | ||||||||
| Change in advance from related parties | ( | ) | ||||||
| Net cash provided by (used in) financing activities | ( | ) | ||||||
| EFFECT OF EXCHANGE RATE CHANGE CASH AND CASH EQUIVALENTS AND RESTRICTED CASH | ( | ) | ||||||
| NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS AND RESTRICTED CASH | ( | ) | ||||||
| CASH AND CASH EQUIVALENTS AND RESTRICTED CASH, BEGINNING OF PERIOD | ||||||||
| CASH AND CASH EQUIVALENTS AND RESTRICTED CASH, END OF PERIOD | $ | $ | ||||||
| Supplemental Cash flow data: | ||||||||
| Income tax paid | $ | $ | ||||||
| Interest paid | $ | $ | ||||||
The accompanying notes are an integral part of these consolidated financial statements.
| 7 |
AIXIN
LIFE INTERNATIONAL, INC.
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
1. ORGANIZATION AND DESCRIPTION OF BUSINESS
Aixin
Life International, Inc. (the “Company” or “Aixin Life” or “we”) was incorporated under the laws
of the State of Colorado on December 30, 1987 under the name Mercari Communications Group, Ltd (“Mercari”). On February 2,
2017, Mr. Quanzhong Lin (Mr. Lin) purchased shares of the Company’s common stock, % of its outstanding shares from
China Concentric Capital Group for $
On December 12, 2017, the Company issued shares of common stock to Mr. Lin, the sole stockholder of AiXin (BVI) International Group Co., Ltd. a British Virgin Islands corporation (“AiXin BVI”), for his shares of AiXin BVI, pursuant to a Share Exchange Agreement.
As a result of the Share Exchange, AiXin BVI became the Company’s wholly-owned subsidiary, and the Company now owns all of the outstanding shares of HK AiXin International Group Co., Limited, a Hong Kong limited company (“AiXin HK”), which in turn owns all of the outstanding shares of Chengdu AiXinZhonghong Biological Technology Co., Ltd., a Chinese limited company (“AiXinZhonghong”), which markets and sells premium-quality nutritional products in China.
AiXin BVI was incorporated on September 21, 2017 as a holding company and AiXin HK was established in Hong Kong on February 25, 2016 as an intermediate holding company. AiXinZhonghong was established in the People’s Republic of China (“PRC”) on March 4, 2013, and on May 27, 2017, the local government of the PRC issued a certificate of approval regarding the foreign ownership of AiXinZhonghong by AiXin HK. Neither AiXin BVI nor AiXin HK had operations prior to December 12, 2017.
For accounting purposes, the acquisition of AiXin BVI was accounted for as a reverse acquisition and treated as a recapitalization of the Company effected by a share exchange, with AiXin BVI as the accounting acquirer. Since neither AiXin BVI nor AiXin HK had operations prior to December 12, 2017, the historical consolidated financial statements of AiXinZhonghong are now the historical consolidated financial statements of the Company. The assets and liabilities of AiXinZhonghong were brought forward at their book value and no goodwill was recognized.
Effective February 1, 2018, the Company changed its name to AiXin Life International, Inc. (“Aixin Life”).
The Company, through its indirectly owned AiXinZhonghong subsidiary, develops and distributes consumer products by offering a line of nutritional products. The Company sells the products through exhibition events, conferences, and person-to-person marketing. Beginning in 2019, the Company began to provide advertising services to clients who engaged the Company to help distribute their products. The Company’s business mainly focuses on a proactive approach to its customers such as hosting events for clients, which it believes is ideally suited to marketing its products because sales of nutrition products are strengthened by ongoing personal contact and support, coaching and education of its clients, as to the benefits of a healthy and active lifestyle.
On
May 25, 2021, AiXin HK entered into an Equity Transfer Agreement (the “Hotel Purchase Agreement”) with Chengdu Aixin
Shangyan Hotel Management Co., Ltd (“Aixin Shangyan Hotel”), and its two shareholders Quanzhong Lin and Yirong Shen (“Transferor”).
Pursuant to the Hotel Purchase Agreement, Aixin Life purchased
| 8 |
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of Presentation
The accompanying consolidated financial statements are prepared in conformity with U.S. Generally Accepted Accounting Principles (“US GAAP”). The functional currency of AiXinZhonghong, Aixin Shangyan Hotel and Aixintang Pharmacies is Chinese Renminbi (“RMB”). The accompanying consolidated financial statements are translated from RMB and presented in U.S. dollars (“USD”).
The consolidated financial statements include the accounts of the Company and its current wholly owned subsidiaries, AiXin HK, AiXinZhonghong, Aixin Shangyan Hotel and Aixintang Pharmacies. Intercompany transactions and accounts were eliminated in consolidation.
Unaudited Interim Financial Information
These unaudited interim financial statements have been prepared in accordance with GAAP for interim financial reporting and the rules and regulations of the Securities and Exchange Commission that permit reduced disclosure for interim periods. Therefore, certain information and footnote disclosures normally included in financial statements prepared in accordance with GAAP have been condensed or omitted. In the opinion of management, all adjustments of a normal recurring nature necessary for a fair presentation of the financial position, results of operations and cash flows for the periods presented have been made. The results of operations for the interim periods presented are not necessarily indicative of the results to be expected for the year ending December 31, 2022.
The balance sheets and certain comparative information as of December 31, 2021 are derived from the audited financial statements and related notes for the year ended December 31, 2021, included in the Company’s 2021 Annual Report on Form 10-K. These unaudited interim financial statements should be read in conjunction with the annual consolidated financial statements and the accompanying notes contained in our Annual Report on Form 10-K for the year ended December 31, 2021.
Covid – 19; The Invasion of Ukraine
On March 11, 2020, the World Health Organization announced that infections caused by the corona virus disease of 2019 (“COVID-19”) had become pandemic. In furtherance of its zero tolerance policy, the Government of China has adopted various regulations and orders, including mandatory quarantines, limits on the number of people that may gather in one location, closing non-essential businesses and travel bans to limit the spread of the disease. Many of these measures have been relaxed from time to time in various localities. However, beginning in the second half of 2021 and continuing to date, the rate of COVID-19 cases has fluctuated in China and has increased in many provinces and cities including in Sichuan Province, where the Company is located. As a result of such increases there have been periodic short-term lockdowns and restrictions on travel in Sichuan Province. All of the Company’s operations, in particular its direct sales business and hotel, have been adversely impacted by the travel and work restrictions imposed on a temporary basis in China and Chengdu to limit the spread of COVID-19.
In response to COVID-19, the Company has implemented procedures to promote employee and customer safety. These measures will not significantly increase its operating costs. However, the Company cannot predict with certainty what measures may be taken by its suppliers and customers and the impact these measures may have on its future financial position, results of operations or cash flows.
The invasion of Ukraine by the Russian Federation had an immediate impact on the global economy resulting in higher prices for oil and other commodities. The United States, United Kingdom, European Union and other countries responded to Russia’s invasion of Ukraine by imposing various economic sanctions and bans. Russia has responded with its own retaliatory measures. These measures have disrupted financial and economic markets. The global impact of these measures is continually evolving and cannot be predicted with certainty and there is no assurance that Russia’s invasion of Ukraine and responses thereto will not further disrupt the global economy and financial markets.
While the invasion of Ukraine and responses thereto have not interrupted the Company’s operations, these or future developments resulting from the invasion of Ukraine could make it difficult to access debt and equity capital on attractive terms, if at all, and impact the Company’s ability to fund business activities, including proposed acquisitions.
| 9 |
Use of Estimates
In preparing consolidated financial statements in conformity with US GAAP, management makes estimates and assumptions that affect the reported amounts of assets and liabilities and disclosures of contingent assets and liabilities at the dates of the consolidated financial statements, as well as the reported amounts of revenues and expenses during the reporting period.
Significant estimates, required by management, include the recoverability of long-lived assets, allowance for doubtful accounts, and the reserve for obsolete and slow-moving inventories. Actual results could differ from those estimates.
Reclassification
Certain prior period amounts have been reclassified to conform to the current period presentation and had no effect on previously reported consolidated net income (loss) or accumulated deficit.
Cash and Cash Equivalents
For financial statement purposes, the Company considers all highly liquid investments with an original maturity of three months or less to be cash and cash equivalents.
Restricted Cash
The restricted cash was for the temporary frozen of bank accounts held by Aixintang Pharmacy Co., Ltd. (“Aixintang Pharmacy”) and its branches by the court for a complaint against the Aixintang Pharmacy while Aixintang Pharmacy is in the process of appeal (see Note 16 – litigation).
Accounts Receivable
The
Company’s policy is to maintain an allowance for potential credit losses on accounts receivable. Management reviews the composition
of accounts receivable and analyzes historical bad debts, customer concentrations, customer credit worthiness, current economic trends
and changes in customer payment patterns to evaluate the adequacy of these reserves. As of March 31, 2022 and December 31, 2021, the
bad debt allowance was $
Inventories
Inventories
mainly consists of health supplements, drugs, pharmaceutical and nutritional products, food and beverage, hotel supplies and consumables.
Inventories are valued at the lower of average cost or market, cost being determined on a moving weighted average method at the end of
the month. Management compares the cost of inventories with the net realizable value and an allowance is made for writing down inventories
to market value, if lower. The Company recorded
| 10 |
In July 2015, the FASB issued Accounting Standards Update (“ASU”) 2015-11, “Inventory (Topic 330) - Simplifying the Measurement of Inventory,” which requires that inventory within the scope of the guidance be measured at the lower of cost and net realizable value. Net realizable value is the estimated selling prices in the ordinary course of business, less reasonably predictable costs of completion, disposal, and transportation.
Property and Equipment
Property
and equipment are stated at cost, less accumulated depreciation, and impairment losses, if any. Major repairs and betterments that significantly
extend original useful lives or improve productivity are capitalized and depreciated over the period benefited. Maintenance and repairs
are expensed as incurred. When property and equipment are retired or otherwise disposed of, the related cost and accumulated depreciation
are removed from the respective accounts, and any gain or loss is included in operations. Depreciation of property and equipment is provided
using the straight-line method for substantially all assets with
| Office furniture | ||||
| Electronic equipment | ||||
| Machinery | ||||
| Leasehold improvements | ||||
| Vehicles |
Impairment of Long-Lived Assets
Long-lived assets, which include property and equipment and intangible assets, are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable, but at least annually.
Recoverability
of long-lived assets to be held and used is measured by comparing the carrying amount of an asset to the estimated undiscounted future
cash flows expected to be generated by it. If the carrying amount of an asset exceeds its estimated undiscounted future cash flows, an
impairment charge is recognized by the amount by which the carrying amount of the asset exceeds its fair value. Fair value is generally
determined using the asset’s expected future discounted cash flows or market value, if readily determinable. Based on its review,
the Company believes that, as of March 31, 2022 and December 31, 2021, there were
Income Taxes
Income taxes are accounted for using an asset and liability method. Under this method, deferred income taxes are recognized for the tax consequences in future years of differences between the tax bases of assets and liabilities and their financial reporting amounts at each period end based on enacted tax laws and statutory tax rates, applicable to the periods in which the differences are expected to affect taxable income. Valuation allowances are established, when necessary, to reduce deferred tax assets to the amount expected to be realized.
The Company follows Accounting Standards Codification (“ASC”) Topic 740, which prescribes a more-likely-than-not threshold for financial statement recognition and measurement of a tax position taken or expected to be taken in a tax return. ASC Topic 740 also provides guidance on recognition of income tax assets and liabilities, classification of current and deferred income tax assets and liabilities, accounting for interest and penalties associated with tax positions, accounting for income taxes in interim periods, and income tax disclosures.
| 11 |
Under ASC Topic 740, when tax returns are filed, it is likely that some positions taken would be sustained upon examination by the taxing authorities, while others are subject to uncertainty about the merits of the position taken or the amount of the position that would be ultimately sustained. The benefit of a tax position is recognized in the consolidated financial statements in the period during which, based on all available evidence, management believes it is more likely than not that the position will be sustained upon examination, including the resolution of appeals or litigation processes, if any. Tax positions taken are not offset or aggregated with other positions. Tax positions that meet the more-likely-than-not recognition threshold are measured as the largest amount of tax benefit that is more than 50% likely of being realized upon settlement with the applicable taxing authority. The portion of the benefits associated with tax positions taken that exceeds the amount measured as described above is reflected as a liability for unrecognized tax benefits in the accompanying balance sheets along with any associated interest and penalties that would be payable to the taxing authorities upon examination. Interest associated with unrecognized tax benefits is classified as interest expense and penalties are classified in selling, general and administrative expenses in the statement of income.
At March 31, 2022 and December 31, 2021, the Company did not take any uncertain positions that would necessitate recording a tax related liability.
Revenue Recognition
ASU No. 2014-09, Revenue from Contracts with Customers (“Topic 606”), became effective for the Company on January 1, 2018. The Company’s revenue recognition disclosure reflects its updated accounting policies that are affected by this new standard. The Company applied the “modified retrospective” transition method for open contracts for the implementation of Topic 606. As revenues are and have been primarily from the delivery of products and the performance of services, and the Company has no significant post-delivery obligations, this did not result in a material recognition of revenue on the Company’s accompanying consolidated financial statements for the cumulative impact of applying this new standard. The Company made no adjustments to its previously-reported total revenues, as those periods continue to be presented in accordance with its historical accounting practices under Topic 605, Revenue Recognition.
Revenue from sale of goods under Topic 606 is recognized in a manner that reasonably reflects the delivery of the Company’s products and services to customers in return for expected consideration and includes the following elements:
| ● | executed contract(s) with customers that the Company believes is legally enforceable; | |
| ● | identification of performance obligation in the respective contract; | |
| ● | determination of the transaction price for each performance obligation in the respective contract; | |
| ● | allocation of the transaction price to each performance obligation; and | |
| ● | recognition of revenue only when the Company satisfies each performance obligation. |
The Company’s revenue recognition policies for its various operating segments are as follows:
Advertising and Products
Advertising Revenue
Commencing in the third quarter of 2019, AiXin Zhonghong began to provide advertising services to its clients. Advertising contracts are signed to establish the price and advertising services to be provided. Pursuant to the advertising contracts, the Company provides advertising and marketing services to its clients through exhibition events, conferences, and person-to-person marketing. The Company performs a credit assessment of the customer to assess the collectability of the contract price prior to entering into contracts.
| 12 |
Most
of the advertisement contracts designated that the Company perform such advertising services for its clients through exhibition events,
conferences, and person-to-person marketing during the contracted period, regardless of the number of such events. As such, the Company
determined that the performance obligation is satisfied over time during the contracted period and revenue is recognized accordingly.
Such advertising revenue amounted to $
All
of the advertising revenue is subject to the PRC VAT of
Products Revenue
The Company’s revenue from sale of products is recognized when goods are delivered to the customer and no other obligation exists. The Company does not provide unconditional return or other concessions to the customer. The Company’s sales policy allows for the return of unopened products for cash after deducting certain service and transaction fees. As an alternative to the product return option, the customers have options of asking for an exchange for products with the same value.
Sales
revenue of AiXin Zhonghong represents the invoiced value of goods, net of value-added taxes (“VAT”). All of the Company’s
products sold in China are subject to the PRC VAT of
Hotel
Hotel
revenues are primarily derived from the rental of rooms, food and beverage sales and other ancillary goods and services, including but
not limited to souvenir, parking and conference reservation. Each of these products and services represents a distinct performance obligation
and, in exchange for these services, the Company receives fixed amounts based on published rates or negotiated contracts. Payment is
due in full at the time when the services are rendered or the goods are provided. Room rental revenue is recognized on a daily basis
when rooms are occupied. Food and beverage revenue and other goods and services revenue are recognized when they have been delivered
or rendered to the guests as the respective performance obligations are satisfied. All of the hotel’s goods sold in China are subject
to the PRC VAT of
Pharmacies
The
Company’s retail drugstores (Aixintang Pharmacies) recognize revenue at the time the customer takes possession of the merchandise.
For pharmacy sales, each prescription claim is its own arrangement with the customer and is a performance obligation. Aixintang Pharmacies
generally receives payments from customers as it satisfies its performance obligations. The Company records a receivable when it has
an unconditional right to receive payment and only the passage of time is required before payment is due. Sales revenue represents the
invoiced value of goods, net of VAT. All of Aixintang Pharmacies’ products sold in China are eligible for the PRC VAT of
Unearned Revenue
The Company’s unearned revenue primarily consists of advances received from customers for the rental of hotel rooms prior to the delivery of service. The room rental services are delivered (normally within one year) based upon contract terms and customer demand.
Concentration of Credit Risk
The operations of the Company are in the PRC. Accordingly, the Company’s business, financial condition, and results of operations may be influenced by the political, economic, and legal environments in the PRC, and by the general state of the PRC economy.
| 13 |
The
Company has cash on hand and demand deposits in accounts maintained with state-owned banks within the PRC. Cash in state-owned banks
is covered by insurance up to RMB
During the three Months ended March 31, 2022, the Company had no customer that accounted for over 10% of its total revenue.
During the three months ended March 31, 2021, the Company had two major customers accounted for over 10% of its total revenue.
| Customer | Net sales for the three months ended March 31, 2021 | % of total revenue | ||||||
| A* | $ | % | ||||||
| B | % | |||||||
| * |
During the three months ended March 31, 2022, the Company had no supplier that accounted for over 10% of its total purchases.
During the three months ended March 31, 2021, the Company had one major supplier accounted for over 10% of its total purchase.
| Supplier | Net purchase for the three months ended March 31, 2021 | % of total purchase | ||||||
| C | $ | % | ||||||
Leases
The Company determines if an arrangement is a lease at inception under FASB ASC Topic 842, Right of Use Assets (“ROU”) and lease liabilities are recognized at commencement date based on the present value of remaining lease payments over the lease term. For this purpose, the Company considers only payments that are fixed and determinable at the time of commencement. As most of its leases do not provide an implicit rate, it uses its incremental borrowing rate based on the information available at commencement date in determining the present value of lease payments. The Company’s incremental borrowing rate is a hypothetical rate based on its understanding of what its credit rating would be. The ROU assets include adjustments for prepayments and accrued lease payments. The ROU asset also includes any lease payments made prior to commencement and is recorded net of any lease incentives received. The Company’s lease terms may include options to extend or terminate the lease when it is reasonably certain that it will exercise such options.
ROU assets are reviewed for impairment when indicators of impairment are present. ROU assets from operating and finance leases are subject to the impairment guidance in ASC 360, Property, Plant, and Equipment, as ROU assets are long-lived nonfinancial assets.
ROU assets are tested for impairment individually or as part of an asset group if the cash flows related to the ROU asset are not independent from the cash flows of other assets and liabilities. An asset group is the unit of accounting for long-lived assets to be held and used, which represents the lowest level for which identifiable cash flows are largely independent of the cash flows of other groups of assets and liabilities. The Company recognized no impairment of ROU assets as of March 31, 2022 and December 31, 2021. Operating leases are included in operating lease ROU and operating lease liabilities (current and non-current), on the consolidated balance sheets.
| 14 |
Statement of Cash Flows
In accordance with ASC Topic 230, “Statement of Cash Flows,” cash flows from the Company’s operations are calculated based on the local currencies using the average translation rates. As a result, amounts related to assets and liabilities reported on the consolidated statements of cash flows will not necessarily agree with changes in the corresponding balances on the consolidated balance sheets.
Fair Value of Financial Instruments
The carrying amounts of certain of the Company’s financial instruments, including cash and equivalents, accrued liabilities and accounts payable, approximate their fair value due to their short maturities. FASB ASC Topic 825, “Financial Instruments,” requires disclosure of the fair value of financial instruments held by the Company. The carrying amounts reported in the consolidated balance sheets for current liabilities each qualify as financial instruments and are a reasonable estimate of their fair value because of the short period of time between the origination of such instruments and their expected realization and the current market rate of interest.
Fair Value Measurements and Disclosures
ASC Topic 820, “Fair Value Measurements and Disclosures,” defines fair value, and establishes a three-level valuation hierarchy for disclosures of fair value measurement that enhances disclosure requirements for fair value measures. The three levels are defined as follow:
| ● | Level 1 inputs to the valuation methodology are quoted prices (unadjusted) for identical assets or liabilities in active markets. | |
| ● | Level 2 inputs to the valuation methodology include quoted prices for similar assets and liabilities in active markets, and inputs that are observable for the asset or liability, either directly or indirectly, for substantially the full term of the financial instrument. | |
| ● | Level 3 inputs to the valuation methodology are unobservable and significant to the fair value measurement. |
As of March 31, 2022 and December 31, 2021, the Company did not identify any assets and liabilities that are required to be presented on the balance sheet at fair value.
Foreign Currency Translation and Comprehensive Income (Loss)
The functional currency of the Company is RMB. For financial reporting purposes, RMB is translated into USD as the reporting currency. Assets and liabilities are translated at the exchange rate in effect at the balance sheet dates. Revenues and expenses are translated at the average rate of exchange prevailing during the reporting period.
Translation adjustments arising from the use of different exchange rates from period to period are included as a component of stockholders’ equity as “Accumulated other comprehensive income”. Gains and losses resulting from foreign currency transactions are included in income. There was no significant fluctuation in the exchange rate for the conversion of RMB to USD after the balance sheet date.
The Company uses FASB ASC Topic 220, “Comprehensive Income”. Comprehensive loss is comprised of net loss and all changes to the statements of stockholders’ equity, except those due to investments by stockholders, changes in paid-in capital and distributions to stockholders. Comprehensive income (loss) for the three months ended March 31, 2022 and 2021 consisted of net income (loss) and foreign currency translation adjustments.
Basic income (loss) per share is computed on the basis of the weighted average number of common shares outstanding during the period.
Dilution is computed by applying the treasury stock method for options and warrants. Under this method, options and warrants are assumed to be exercised at the beginning of the period (or at the time of issuance, if later), and as if funds obtained thereby were used to purchase common stock at the average market price during the period.
| 15 |
As of March 31, 2022 and December 31, 2021, the Company did not have any potentially dilutive instruments.
Stock-Based Compensation
The Company periodically grants stock options, warrants and awards to employees and non-employees in non-capital raising transactions as compensation for services rendered. The Company accounts for stock option, stock warrant and stock award grants to employees based on the authoritative guidance provided by the FASB where the value of the award is measured on the date of grant and recognized over the vesting period. The Company accounts for stock option, stock warrant and stock award grants to non-employees in accordance with the authoritative guidance of the FASB where the value of the stock compensation is determined based upon the measurement date at either a) the date at which a performance commitment is reached, or b) at the date at which the necessary performance to earn the equity instruments is complete. Stock-based compensation charges generally are amortized over the vesting period on a straight-line basis. In certain circumstances where there are no future performance requirements by the employees and non-employees, option, warrant and award grants are immediately vested and the total stock-based compensation charge is recorded in the period of the measurement date.
Segment Reporting
ASC Topic 280, “Segment Reporting,” requires use of the “management approach” model for segment reporting. The management approach model is based on the way a company’s chief operating decision maker organizes segments within the Company for making operating decisions assessing performance and allocating resources. Reportable segments are based on products and services, geography, legal structure, management structure, or any other manner in which management disaggregates a company.
The Company manages its business as three operating segments, advertising and products, pharmacies, and hotels, all of which are located in the PRC. All of its revenues are derived in the PRC. All long-lived assets are located in PRC.
The following table shows the Company’s operations by business segment for the three months ended March 31, 2022 and 2021. Revenues and expenses for the Pharmacies and Hotel segments commenced as of the respective dates of the completion of their acquisitions:
| For the Three Months Ended March 31, | ||||||||
| 2022 | 2021 | |||||||
| Net revenue | ||||||||
| Advertising and products | $ | $ | ||||||
| Pharmacies | ||||||||
| Hotel | ||||||||
| Total revenues, net | $ | $ | ||||||
| Operating costs and expenses | ||||||||
| Advertising and products | ||||||||
| Cost of goods sold | $ | $ | ||||||
| Operating expenses | ||||||||
| Pharmacies | ||||||||
| Cost of goods sold | ||||||||
| Operating expenses | ||||||||
| Hotel | ||||||||
| Hotel operating costs | ||||||||
| Operating expenses | ||||||||
| Total operating costs and expenses | $ | $ | ||||||
| (Loss) income from operations | ||||||||
| Advertising and products | $ | ( | ) | $ | ||||
| Pharmacies | ( | ) | ||||||
| Hotel | ( | ) | ||||||
| (Loss) income from operations | $ | ( | ) | $ | ||||
| Segment assets | As of March 31, 2022 | As of December 31, 2021 | ||||||
| Advertising and products | $ | $ | ||||||
| Pharmacies | ||||||||
| Hotel | ||||||||
| Total assets | $ | $ | ||||||
| 16 |
New Accounting Pronouncements
In June 2016, the FASB issued ASU No. 2016-13, Financial Instruments-Credit Losses (Topic 326), which requires entities to measure all expected credit losses for financial assets held at the reporting date based on historical experience, current conditions, and reasonable and supportable forecasts. This replaces the existing incurred loss model and is applicable to the measurement of credit losses on financial assets measured at amortized cost. This guidance is effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2022. Early application will be permitted for all entities for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2018. The Company is currently evaluating the impact that the standard will have on its consolidated financial statements.
In January 2017, the FASB issued ASU No. 2017-04, Simplifying the Test for Goodwill Impairment. The guidance removes Step 2 of the goodwill impairment test, which requires a hypothetical purchase price allocation. A goodwill impairment will now be the amount by which a reporting unit’s carrying value exceeds its FV, not to exceed the carrying amount of goodwill. The guidance should be adopted on a prospective basis. As a smaller reporting company, the standard will be effective for the Company for interim and annual reporting periods beginning after December 15, 2022, with early adoption permitted. The Company is currently evaluating the impact of adopting this standard on the Company’s consolidated financial statements presentation or disclosures.
In August 2020, the FASB issued ASU 2020-06, Debt - Debt with Conversion and Other Options (Subtopic 470- 20) and Derivatives and Hedging - Contracts in Entity’s Own Equity (Subtopic 815-40): Accounting for Convertible Instruments and Contracts in an Entity’s Own Equity (“ASU 2020-06”), which simplifies the accounting for certain financial instruments with characteristics of liabilities and equity. This ASU (1) simplifies the accounting for convertible debt instruments and convertible preferred stock by removing the existing guidance in ASC 470-20, Debt: Debt with Conversion and Other Options, that requires entities to account for beneficial conversion features and cash conversion features in equity, separately from the host convertible debt or preferred stock; (2) revises the scope exception from derivative accounting in ASC 815-40 for freestanding financial instruments and embedded features that are both indexed to the issuer’s own stock and classified in stockholders’ equity, by removing certain criteria required for equity classification; and (3) revises the guidance in ASC 260, Earnings Per Share, to require entities to calculate diluted earnings per share (EPS) for convertible instruments by using the if-converted method. In addition, entities must presume share settlement for purposes of calculating diluted EPS when an instrument may be settled in cash or shares. For SEC filers, excluding smaller reporting companies, ASU 2020-06 is effective for fiscal years beginning after December 15, 2021 including interim periods within those fiscal years. Early adoption is permitted, but no earlier than fiscal years beginning after December 15, 2020. For all other entities, ASU 2020-06 is effective for fiscal years beginning after December 15, 2023, including interim periods within those fiscal years. Entities should adopt the guidance as of the beginning of the fiscal year of adoption and cannot adopt the guidance in an interim reporting period. The adoption of ASU 2020-06 is not expected to have any impact on the Company’s consolidated financial statements presentation or disclosures.
The Company’s management does not believe that any other recently issued, but not yet effective, authoritative guidance, if currently adopted, would have a material impact on the Company’s financial statement presentation or disclosures.
3. OTHER RECEIVABLES AND PREPAID EXPENSES
Other receivables and prepaid expenses consisted of the following at March 31, 2022 and December 31, 2021:
| March 31, 2022 | December 31, 2021 | |||||||
| Deposits | $ | $ | ||||||
| Prepaid expenses | ||||||||
| Employees’ social insurance | ||||||||
| Others | ||||||||
| Total | $ | $ | ||||||
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4. ADVANCES TO SUPPLIERS
The
Company had advances to suppliers of $
5. INVENTORIES
Inventories consisted of the following at March 31, 2022 and December 31, 2021:
| March 31, 2022 | December 31, 2021 | |||||||
| Finished goods – health supplements | $ | $ | ||||||
| Drugs, pharmaceutical and nutritional products | ||||||||
| Food and beverage, hotel supplies and consumables | ||||||||
| Total | $ | $ | ||||||
6. PROPERTY AND EQUIPMENT, NET
Property and equipment consisted of the following at March 31, 2022 and December 31, 2021:
| March 31, 2022 | December 31, 2021 | |||||||
| Vehicles | $ | $ | ||||||
| Office furniture | ||||||||
| Electronic equipment | ||||||||
| Machinery | ||||||||
| Leasehold improvements | ||||||||
| Other | ||||||||
| Total | ||||||||
| Less: Accumulated depreciation | ( | ) | ( | ) | ||||
| Property and equipment, net | $ | $ | ||||||
Depreciation
expense for the three months ended March 31, 2022 and 2021 was $
7. INTANGIBLE ASSET, NET
Intangible asset consisted of the following at March 31, 2022 and December 31, 2021:
| March 31, 2022 | December 31, 2021 | |||||||
| Software | $ | $ | ||||||
| Less: Accumulated amortization | ( | ) | ( | ) | ||||
| Intangible asset, net | $ | $ | ||||||
Amortization
expense for the three months ended March 31, 2022 and 2021 was $
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8. TAXES PAYABLE
Taxes payable consisted of the following at March 31, 2022 and December 31, 2021:
| March 31, 2022 | December 31, 2021 | |||||||
| Value-added | $ | $ | ||||||
| Income | ||||||||
| City construction | ||||||||
| Education | ||||||||
| Other | ||||||||
| Taxes payable | $ | $ | ||||||
9. ACCRUED LIABILITIES AND OTHER PAYABLES
Accrued liabilities and other payables consisted of the following at March 31, 2022 and December 31, 2021:
| March 31, 2022 | December 31, 2021 | |||||||
| Accrued employees’ social insurance | $ | $ | ||||||
| Accrued payroll and commission | ||||||||
| Accrued rent expense | ||||||||
| Construction payable | ||||||||
| Accrued professional fees | ||||||||
| Deposit | ||||||||
| Other payables | ||||||||
| Total | $ | $ | ||||||
10. LOAN FROM THIRD PARTIES
As
of March 31, 2022 and December 31, 2021, the Company had advances from former shareholders and unrelated third parties of Aixin Shangyan
Hotel in an aggregate amount of $
11. LEASE
Concurrent
with the completion of the sale of its rights to a portion of a building completed in 2019, the Company entered into an agreement to
lease a portion of the building back from the buyer over a lease term of
The
Company also has operating leases for other sales locations under various operating lease arrangements. The leases have remaining lease
terms of approximately
Aixin
Shangyan Hotel leases its hotel premises under an operating lease arrangement. The lease has a remaining lease term of approximately
Aixintang
Pharmacies lease retail pharmacy stores under operating lease arrangements, with remaining lease terms of
| 19 |
Balance sheet information related to the Company’s leases is presented below:
| March 31, 2022 | December 31, 2021 | |||||||
| Operating Leases | ||||||||
| Operating lease right-of-use assets | $ | $ | ||||||
| Operating lease liabilities – current | $ | $ | ||||||
| Operating lease liability – non-current | ||||||||
| Total operating lease liabilities | $ | $ | ||||||
The following provides details of the Company’s lease expenses:
| Three Months Ended March 31, | ||||||||
| 2022 | 2021 | |||||||
| Operating lease expenses | $ | $ | ||||||
Other information related to leases is presented below:
| Three Months Ended March 31, | ||||||||
| 2022 | 2021 | |||||||
| Cash Paid For Amounts Included In Measurement of Liabilities: | ||||||||
| Operating cash flows from operating leases | $ | |||||||
| Weighted Average Remaining Lease Term: | ||||||||
| Operating leases | ||||||||
| Weighted Average Discount Rate: | ||||||||
| Operating leases | % | % | ||||||
Maturities of lease liabilities were as follows:
| For the year ending December 31: | ||||
| 2022 (excluding the three months ended March 31, 2022) | $ | |||
| 2023 | ||||
| 2024 | ||||
| 2025 | ||||
| 2026 | ||||
| Total lease payments | ||||
| Less: imputed interest | ( | ) | ||
| Total lease liabilities | ||||
| Less: current portion | ( | ) | ||
| Lease liabilities – non-current portion | $ |
12. RELATED PARTY TRANSACTIONS
Advance to related parties
Advance to related parties consisted of the following as of the periods indicated:
| March 31, 2022 | December 31, 2021 | |||||||
| Chengdu WenJiang Aixin Nanjiang Pharmacy Co., Ltd. | $ | $ | ||||||
| Sichuan Aixin Investment Co., Ltd | ||||||||
| Chengdu Fuxiang Tang Pharmacy Co., Ltd. | ||||||||
| Chengdu Lisheng Huiren Tang Pharmacy Co., Ltd. | ||||||||
| Total | $ | $ |
| 20 |
Advance from related parties
Advance from related parties consisted of the following as of the periods indicated:
| March 31, 2022 | December 31, 2021 | |||||||
| Quanzhong Lin | $ | $ | ||||||
| Yirong Shen | ||||||||
| Branch manager | ||||||||
| Chengdu Aixin E-Commerce Company Ltd. | ||||||||
| Chengdu Aixin International travel service Co, Ltd | ||||||||
| Aixin Life Beauty | ||||||||
| Total | $ | $ |
All the related party entities are controlled by Mr. Quanzhong Lin (the Chairman, President and major shareholder of Aixin Life). These advances to and from related parties were for working capital purpose, payable on demand, and bear no interest. Yirong Shen was a major shareholder of Aixin Shangyan Hotel prior to the closing of Hotel Purchase Agreement, and she serves as the supervisor of Aixin Shangyan Hotel.
Office lease from a Major Shareholder
In
May 2014, the Company entered a lease with its major shareholder for an office. The lease term was for
13. INCOME TAXES
The Company was incorporated in the United States of America (“USA”) and has operations in one tax jurisdiction, i.e. the PRC. The Company generated substantially all of its sales from its operations in the PRC for the quarters ended March 31, 2022 and 2021, and recorded income tax provision for the periods.
China
has a tax rate of
Uncertain Tax Positions
Interest
associated with unrecognized tax benefits are classified as income tax, and penalties are classified in selling, general and administrative
expenses in the statements of operations. For the quarters ended March 31, 2022 and 2021, the Company had
| 21 |
14. STOCKHOLDERS’ EQUITY
On
August 17, 2020, by unanimous written consent in lieu of a meeting, the Board adopted resolutions authorizing a
As of March 31, 2022 and December 31, 2021, the Company had common shares issued and outstanding.
In June 2020, shares owned by Quanzhong Lin (the Chairman, President and major shareholder of Aixin Life) were cancelled.
Stock Awards Issued for Services
On
October 22, 2019, the Company granted and issued shares to its employees and contractors under its 2019 Equity Incentive Plan.
The stock awards were valued at $
On
October 24, 2019, the Company granted and issued shares to its employees and contractors under its 2019 Equity Incentive Plan.
The stock awards were valued at $
The stock awards will vest over five () years from the grant date, and the grantee will forfeit a portion of the shares granted (“Shares Granted”) if the grantee is no longer employed by or contracted with the Company. Specifically,
For the three months ended March 31, 2022 and 2021, stock-based compensation expenses were $ each. As of March 31, 2022, unrecognized compensation expenses related to these stock awards are $. These expenses are expected to be recognized over years.
| 22 |
Forgiveness of shareholder’s loan
As
of December 31, 2021, the Company’s major shareholder Mr. Lin forgave his loan to the Company for $
Acquisition of Subsidiaries
As
of December 31, 2021, the Company completed the acquisitions of Aixin Shangyan Hotel and Aixintang Pharmacies (see Note 1). The acquisitions
were accounted for as acquisitions of entities under common control. In connection with the acquisitions, the Company made payments to
Mr. Lin in the aggregate amount of $
15. STATUTORY RESERVES
Pursuant to the PRC corporate law, the Company is now only required to maintain one statutory reserve by appropriating from its after-tax profit before declaration or payment of dividends. The statutory reserve represents restricted retained earnings.
Surplus reserve fund
The
Company is required to transfer
The
surplus reserve fund is non-distributable other than during liquidation and can be used to fund previous years’ losses, if any,
and may be utilized for business expansion or converted into share capital by issuing new shares to existing shareholders in proportion
to their shareholding or by increasing the par value of the shares currently held by them, provided that the remaining reserve balance
after such issue is not less than
Common welfare fund
Common
welfare fund is a voluntary fund to which the Company can elect to transfer
This fund can only be utilized on capital items for the collective benefit of the Company’s employees, such as construction of dormitories, cafeteria facilities, and other staff welfare facilities. This fund is non-distributable other than upon liquidation.
16. OPERATING CONTINGENCIES
The Company’s operations in the PRC are subject to specific considerations and significant risks not typically associated with companies in North America and Western Europe. These include risks associated with, among others, the political, economic and legal environments and foreign currency exchange. The Company’s results may be adversely affected by changes in governmental policies with respect to laws and regulations, anti-inflationary measures, currency conversion and remittance abroad, and rates and methods of taxation, among other things.
The Company’s sales, purchases and expenses are denominated in RMB and all of the Company’s assets and liabilities are also denominated in RMB. The RMB is not freely convertible into foreign currencies under the current law. In China, foreign exchange transactions are required by law to be transacted only by authorized financial institutions. Remittances in currencies other than RMB may require certain supporting documentation to affect the remittance.
| 23 |
Litigation
The Company is, from time to time, involved in litigation incidental to the conduct of its business regarding merchandise sold, employment matters, and litigation regarding intellectual property rights.
In
December 2020, Jian Yiao (the “Plaintiff”) filed a complaint against Chengdu Aixintang Pharmacy Co., Ltd. (“Aixintang
Pharmacy”, or the “Defendant”) in Zhangjiagang People’s Court in Jiangsu Province. The complaint alleges that
Jian Yiao is entitled to $
In February 2021, the judge in the Jiangsu Suzhou Intermediate People’s Court denied the Defendant’s motion and upheld the judgment from the first trial. In March 2021, Aixintang Pharmacy filed another motion to the Jiangsu High People’s Court on the basis that the Purchase Agreement was forged. In February 2022, Aixintang Pharmacy filed an appeal in Jiangsu High People’s Court against the judgment reached by Jiangsu Suzhou Intermediate People’s Court in February 2021. To date, this legal proceeding remains pending.
In November 2021, the Company and Mr. Quanzhong Lin agreed that Mr. Lin shall assume any losses arising from this legal proceeding. As such, the Company did not accrue contingent losses from this legal proceeding as of March 31, 2022.
The Company believes that current pending litigation will not have a material adverse effect on its consolidated financial position, results of operations or cash flows.
17. ACQUISITION OF SUBSIDIARIES
In July and September, 2021, the Company completed the required governmental procedures and obtained the documents necessary to consider the acquisitions of Aixin Shangyan Hotel and Aixintang Pharmacies completed.
Pursuant
to the Hotel Purchase Agreement, AiXin HK purchased all of the outstanding equity of Aixin Shangyan Hotel from Mr.
Lin and the other shareholder for a purchase price of RMB
Pursuant
to the Pharmacies Purchase Agreement, AiXin HK purchased
| 24 |
The acquisitions will be accounted for as acquisitions of entities under common control under ASC 805-50-15-6, and the assets and liabilities acquired will be measured and recorded at the carrying amount under ASC 805-50-30-5. The following condensed unaudited pro forma consolidated results of operations for the Company, Aixin Shangyan Hotel and Aixintang Pharmacies for the three months ended March 31, 2021 present the results of operations of the Company, Aixin Shangyan Hotel and Aixintang Pharmacies as if the acquisitions occurred on January 1, 2021, respectively. The pro forma results are not necessarily indicative of the actual results that would have occurred had the acquisitions been completed as of the beginning of the periods presented, nor are they necessarily indicative of future consolidated results.
| For the Three Months Ended March 31, 2021 | ||||
| Revenue | $ | |||
| Operating costs and expenses | ||||
| Loss from operations | ( | ) | ||
| Other income (expense) | ||||
| Income tax expense | ||||
| Net loss | $ | ( | ) |
18. SUBSEQUENT EVENT
The Company follows the guidance in FASB ASC 855-10 for the disclosure of subsequent events. The Company evaluated subsequent events through the date the financial statements were issued and determined the Company has no material subsequent events.
| 25 |
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations.
The following discussion of our financial condition and results of operations should be read in conjunction with the unaudited financial statements and the notes to those statements included elsewhere in this Form 10-Q and with the audited financial statements and the notes thereto included in our Annual Report on Form 10-K for the year ended December 31, 2021 (the “2021 Form 10-K”). This discussion contains forward-looking statements that involve risks and uncertainties. You should specifically consider the various risk factors identified in our 2021 Form 10-K, that could cause actual results to differ materially from those anticipated in these forward-looking statements.
Overview
We market and sell consumer products in China by offering premium-quality nutritional products. We also provide advertising and marketing services to clients which engage us to distribute their products. We offer our nutritional products and those of our clients through our sales offices, exhibition events we organize and sponsor, and person-to-person marketing. Our marketing business mainly focuses on proactively approaching customers such as by hosting events for clients, which we believe is ideally suited to marketing our products and those of our clients for which we perform advertising services because sales of nutritional products are strengthened by ongoing personal contact and support, coaching and education among the Company and our clients towards how to achieve a healthy and active lifestyle.
In September 2021, we completed the acquisition of nine pharmacies located in Chengdu by acquiring the entities which owned the pharmacies for an aggregate purchase price of RMB 34,635,845, or approximately US$5.31 million. The pharmacies will be used to supplement our efforts to distribute our nutritional products.
In July 2021, we completed the acquisition of Aixin Shangyan Hotel. Shangyan Hotel Company owns and operates a hotel located in the Jinniu District, Chengdu City. The hotel covers more than 8,000 square meters and has a large restaurant that can accommodate 600 people, 6 luxury dining rooms, a 200 square meter music tea house, 13 private tea rooms, 108 guest rooms and other supporting facilities. We acquired the hotel through an acquisition of the outstanding equity of Aixin Shangyan Hotel for a purchase price of RMB 7,598,887, or approximately $1.16 million..
In March 2020, the World Health Organization announced that infections caused by the coronavirus disease of 2019 (“COVID-19”) had become pandemic and national, provincial and local authorities in China, including those whose jurisdictions include Chengdu, where our offices, hotel and pharmacies are located, adopted various regulations and orders, including “shelter in place” rules, restrictions on travel, mandates on the number of people that may gather in one location and closing non-essential businesses. Many of these measures have been relaxed from time to time in various localities due to the decrease in the prevalence of Covid-19. However, beginning in the second half of 2021 and continuing to date, the number of COVID-19 cases has fluctuated and increased again in many cities of China, including Sichuan Province, where we are located. As a result, the authorities in Chengdu have reinstituted short-term lockdowns and restrictions on travel and the number of people that could gather at any location. During the three months ended Mach 31, 2022, all of our operations were materially adversely impacted by the measures and restrictions taken to limit the spread of the disease in China and Sichuan Province. We implemented procedures to promote employee and customer safety. These measures will not significantly increase our operating costs. However, we cannot predict with certainty what measures may be taken by our suppliers and customers and the impact these measures may have on our financial results for 2022.
In addition to our ongoing operations, we seek to acquire interests in additional businesses through opportunities found by our management or presented by persons or firms which desire to take advantage of the perceived advantages of an Exchange Act registered corporation. We do not restrict our search to any specific business, industry, or geographical location and may participate in a business venture of virtually any kind or nature.
It is the goal of our management, in particular, our Chairman, Quanzhong Lin to grow our business and to modify its capital structure in order to qualify for a listing on NASDAQ or the NYSE-American exchange. As part of this effort, we will continue to seek to acquire more businesses and to modify our capital structure as necessary to meet the requirements of the exchange to which we apply for a listing. As part of this effort, Mr. Lin transferred to our Company 35,049,685 shares of our common stock for cancellation.
| 26 |
Results of Operations
The following table sets forth the results of our operations for the periods indicated as a percentage of net revenue, certain columns may not add due to rounding:
| Three Months Ended March 31, | ||||||||||||||||
| 2022 | 2021 | |||||||||||||||
| $ | % of Revenue | $ | % of Revenue | |||||||||||||
| Revenue | $ | 418,678 | 100 | % | $ | 698,158 | 100 | % | ||||||||
| Operating costs and expenses | 1,190,832 | 284 | % | 475,988 | 68 | % | ||||||||||
| Income (loss) from operations | (772,154 | ) | (184 | )% | 222,170 | 32 | % | |||||||||
| Non-operating income (expenses), net | 20,565 | 4 | % | (468 | ) | - | % | |||||||||
| Income (loss) before income tax | (751,589 | ) | (180 | )% | 221,702 | 32 | % | |||||||||
| Income tax expense | 492 | - | % | - | - | % | ||||||||||
| Net income (loss) | $ | (752,081 | ) | (180 | )% | $ | 221,702 | 32 | % | |||||||
The following table shows our operations by business segment for the three Months ended March 31, 2022 and 2021.
| For the Three Months Ended March 31, | ||||||||
| 2022 | 2021 | |||||||
| Net revenue | ||||||||
| Advertising and products | $ | 16,098 | $ | 698,158 | ||||
| Pharmacies | 158,894 | - | ||||||
| Hotel | 243,686 | - | ||||||
| Total revenues, net | $ | 418,678 | $ | 698,158 | ||||
| Operating costs and expenses | ||||||||
| Advertising and products | ||||||||
| Cost of goods sold | $ | 4,683 | $ | 135,659 | ||||
| Operating expenses | 298,042 | 340,329 | ||||||
| Pharmacies | ||||||||
| Cost of goods sold | 119,841 | - | ||||||
| Operating expenses | 169,309 | - | ||||||
| Hotel | ||||||||
| Hotel operating costs | 511,619 | - | ||||||
| Operating expenses | 87,338 | - | ||||||
| Total operating costs and expenses | $ | 1,190,832 | $ | 475,988 | ||||
| Income (loss) from operations | ||||||||
| Advertising and products | $ | (286,627 | ) | $ | 222,170 | |||
| Pharmacies | (130,256 | ) | - | |||||
| Hotel | (355,271 | ) | - | |||||
| Income (loss) from operations | $ | (772,154 | ) | $ | 222,170 | |||
Revenue
Revenue was $418,678 in the three months ending March 31, 2022, compared to $698,158 in the same period of 2021, a decrease of $279,480 or 40%. The decrease in revenue was mainly due to decreases in direct sales of our nutritional products and advertising revenues as we were not able to host the types of events at which we market nutritional products, which were partly offset by revenues from our hotel and pharmacies which we did not own in the first quarter of 2021. For three months ended of March 31, 2022, we had $0 advertising revenue and $174,992 product revenues (of which $16,098 were from direct sales and $158,894 represented sales at our pharmacies), and hotel revenue of $243,686. For three months ended March 31, 2021, we had $494,864 of advertising revenue and $203,294 of product revenue from our direct sales activities and no revenues from the hotel and pharmacies as the acquisitions were not completed until the third quarter of 2021.
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Operation Costs and Expenses
Cost of Goods Sold
Cost of goods sold was $124,524 for the three months ended March 31, 2022, compared to $135,659 for the three months ended March 31, 2021, a decrease of $11,135 or 8%. The decrease in our cost of goods sold is attributable to the decrease in direct product sales not made through our pharmacies. The cost of goods sold for our direct product sales as a percentage of sales was 29% in 2022, compared to 19% for 2021. The cost of goods sold for products sold through our pharmacies as a percentage of pharmacy product sales was 75% in 2022, and no comparable costs were incurred in the three months ended March 31, 2021 as the acquisition was completed in the third quarter of 2021.
Hotel Operating Costs
Hotel operating costs were $511,619 for the three months ended March 31, 2022. There were no comparable costs in three months ended March 31, 2021 as the acquisition was completed in the third quarter of 2021.
Operating Expenses
Operating costs and expenses were $554,689 for the three months ended March 31, 2022, compared to $340,329 for the same period of 2021, an increase of $214,360 or 63%. The increase in operating expenses was mainly due to the inclusion of the operating expenses of the hotel and pharmacies.
Income (loss) from Operations
Loss from operations was $772,154 in the three months ended March 31, 2022, compared to income of $222,170 in the same period of 2021, a decrease of $994,324 or 448%. The decrease in our income from operations for 2022 was due to the loss incurred from our direct sales activities and the inclusion of the losses incurred by our pharmacies and hotel. All of our operations were materially adversely impacted by travel and work restrictions imposed on a temporary basis in China and Chengdu to limit the spread of COVID-19.
Non-operating Income (Expense)
Non-operating income was $20,565 for the three months ended March 31, 2022, compared to non-operating expense of $468 for the three months ended March 31, 2021. For the three months ended March 31, 2022, we had interest income of $1,328 and other income of $19,434, partly offset with other expenses of $197. For the three months ended March 31, 2021, we had interest income of $1,218 and other income $160, partly offset with other expense $1,846.
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Income tax expense
Income tax expense was $492 and $0 for the three months ended March 31, 2022 and 2021, respectively, an increase of $492 or 100% for the three months ended March 31, 2022 compared with the same period of 2021.
Net Income (Loss)
Our net loss for the three months ended March 31, 2022 was $752,081, compared to net income of $221,702 in the same period of 2021, a decrease of $973,783 or 439%. The decrease in the three months ended March 31, 2022 was mainly due to the decreased sales and increased operating costs and expense as explained above.
Liquidity and Capital Resources
During the three months ended of March 31, 2022, we used $503,520 in operations. As of March 31, 2022, cash and cash equivalents were $8,589,685 (excluding $58,650 of restricted cash), compared to $8,556,642 (excluding $44,211 of restricted cash) as of December 31, 2021. At March 31, 2022, we had working capital of $4,206,827 compared to $4,753,390 at December 31, 2021.
The following is a summary of cash provided by or used in each of the indicated types of activities during the three Months ended March 31, 2022 and 2021, respectively.
| March 31, 2022 | March 31, 2021 | |||||||
| Net cash (used in) provided by operating activities | $ | (503,520 | ) | $ | 141,844 | |||
| Net cash (used in) provided by investing activities | $ | - | $ | - | ||||
| Net cash (used in) provided by financing activities | $ | 504,629 | $ | (148,771 | ) | |||
Net cash provided by (used in) operating activities
For the three months ended March 31, 2022, net cash used in operating activities was $503,520. This reflects our net loss of $752,081, adjusted by non-cash related expenses including depreciation and amortization expense of $29,639, change in deferred tax of $492, bad debt expense of $27,422, operating lease expense of $229,242 and stock-based compensation of $92,885, and then decreased by changes in working capital of $131,119. The cash outflow from changes in working capital mainly resulted from an increase in accounts receivable of $52,174, payments of lease liabilities of $203,673, partly offset by cash inflow from accrued liability and other payables of $124,901.
For the quarter ended March 31, 2021, net cash provided by operating activities was $141,844. This was primarily due to our net income of $221,702, adjusted by non-cash related expenses including depreciation of $7,225, operating lease expense of $41,300, and stock-based compensation of $92,885, and then decreased by unfavorable changes in working capital of $221,268. The unfavorable changes in working capital mainly resulted from an increase in inventory of $102,826 and a decrease in taxes payable of $73,290 and payment for lease liabilities of $41,300.
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Net cash provided by (used in) investing activities
For the three months ended March 31, 2022 and 2021, net cash used in investing activities was $0.
Net cash provided by (used in) financing activities
For the quarter ended March 31, 2022, net cash provided by financing activities were increased advances from related parties of $504,629.
For the quarter ended March 31, 2021, net cash used in financing activities were net repayments to advances from related parties of $148,771.
Impact of Inflation
Our results of operations may be affected by inflation, particularly rising prices for products and other operating costs if we cannot pass such increases along to our customers in the form of higher prices for our products and services. Generally, we are not party to long term contracts and our inventory turns multiple times per year and we anticipate that we will be able to increase prices on products to reflect increases in the cost of inventory.
Contractual Obligations
We have no long-term fixed contractual obligations or commitments.
Contingencies
Our operations are conducted in the PRC and are subject to specific considerations and significant risks not typically associated with companies in North America and Western Europe. These include risks associated with, among others, the political, economic and legal environments in China and foreign currency exchange rates. Our results may be adversely affected by changes in PRC government policies with respect to laws and regulations, anti-inflationary measures, currency conversion and remittance abroad and rates and methods of taxation, among other things.
Our sales, purchases and expense transactions in China are denominated in RMB and all of our assets and liabilities in China are also denominated in RMB. The RMB is not freely convertible into foreign currencies under the current PRC law. In China, foreign exchange transactions are required by law to be transacted only by authorized financial institutions. Remittances in currencies other than RMB may require certain supporting documentation in order to affect the remittance.
Significant Accounting Policies
Our management’s discussion and analysis of our financial condition and results of operations are based on our consolidated financial statements, which were prepared in accordance with accounting principles generally accepted in the United States of America (“US GAAP”). The preparation of these financial statements requires us to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the financial statements as well as the reported net sales and expenses during the reporting periods. On an ongoing basis, we evaluate our estimates and assumptions. We base our estimates on historical experience and various other factors that we believe are reasonable under the circumstances, the results of which form the basis for making judgments about the carrying value of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions or conditions.
While our significant accounting policies are more fully described in Note 2 to our consolidated financial statements, we believe the following accounting policies are the most critical to assist you in fully understanding and evaluating this management discussion and analysis.
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Basis of Presentation
The accompanying financial statements are prepared in conformity with U.S. Generally Accepted Accounting Principles (“US GAAP”). The functional currency of AiXinZhonghong, Aixin Shangyan Hotel and Aixintang Pharmacies is Chinese Renminbi (“RMB”). The accompanying financial statements are translated from RMB and presented in U.S. dollars (“USD”).
Use of Estimates
In preparing financial statements in conformity with US GAAP, management makes estimates and assumptions that affect the reported amounts of assets and liabilities and disclosures of contingent assets and liabilities at the dates of the financial statements, as well as the reported amounts of revenues and expenses during the reporting period.
Significant estimates, required by management, include the recoverability of long-lived assets, allowance for doubtful accounts, and the reserve for obsolete and slow-moving inventories. Actual results could differ from those estimates.
Accounts Receivable
We maintain an allowance for potential credit losses on accounts receivable. Management reviews the composition of accounts receivable and analyzes historical bad debts, customer concentrations, customer credit worthiness, current economic trends and changes in customer payment patterns to evaluate the adequacy of these reserves. As of March 31, 2022 and December 31, 2021, the bad debt allowance was $242,390 and $213,787, respectively.
Revenue Recognition
ASU No. 2014-09, Revenue from Contracts with Customers (“Topic 606”), became effective for us on January 1, 2018. Our revenue recognition disclosure reflects updated accounting policies that are affected by this new standard. We applied the “modified retrospective” transition method for open contracts for the implementation of Topic 606. As revenues are and have been primarily from the delivery of products and the performance of services, and we have no significant post-delivery obligations, this did not result in a material recognition of revenue on the accompanying consolidated financial statements for the cumulative impact of applying this new standard. We made no adjustments to previously-reported total revenues, as those periods continue to be presented in accordance with our historical accounting practices under Topic 605, Revenue Recognition.
Revenue from sale of goods under Topic 606 is recognized in a manner that reasonably reflects the delivery of our products and services to customers in return for expected consideration and includes the following elements:
| ● | executed contract(s) with customers that we believe are legally enforceable; | |
| ● | identification of performance obligation in the respective contract; | |
| ● | determination of the transaction price for each performance obligation in the respective contract; | |
| ● | allocation of the transaction price to each performance obligation; and | |
| ● | recognition of revenue only when we satisfy each performance obligation. |
Our revenue recognition policies for our operating segments are as follows:
Advertising and Products
Advertising Revenue
Commencing in the third quarter of 2019 we began to provide advertising services to our clients. Advertising contracts are signed to establish the price and advertising services to be provided. Pursuant to the advertising contracts, we provided advertising and marketing services to clients through exhibition events, conferences, and person-to-person marketing. We perform a credit assessment of each customer to assess the collectability of the contract price prior to entering into contracts.
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Most of the advertisement contracts designated that we perform advertising services for the client through exhibition events, conferences, and person-to-person marketing during the contracted period, regardless of the number of such events. As such, we determined that the performance obligation is satisfied over time during the contracted period and revenue is recognized accordingly. Such advertising revenue amounted to $0 and $494,864 for the three months ended March 31, 2022 and 2021, respectively.
A smaller proportion of our advertising revenue is generated from services to clients through exhibition events, conferences, and person-to-person marketing, and our compensation is based on the number of products sold. Such advertising revenue amounted to $0 and $0 for the three months ended March 31, 2022 and 2021, respectively.
All of the advertising revenue is subject to the PRC VAT of 6%. This VAT may be offset by VAT paid by us for raw materials and other materials purchased in China.
Products Revenue
Our revenue from sales of products is recognized when goods are delivered to the customer and no other obligation exists. We do not provide unconditional return or other concessions to customers. Our sales policy allows for the return of unopened products for cash after deducting certain service and transaction fees. As an alternative to returning a product, customers may request an exchange for products with the same value.
Product sales revenue represents the invoiced value of goods, net of value-added taxes (“VAT”). All of our products sold in China are subject to the PRC VAT of 17% of the gross sales price prior to May 1, 2018, 16% since May 1, 2018 and 13% since April 1, 2019. This VAT may be offset by VAT paid by for raw materials and other materials purchased in China. We record VAT payables and VAT receivables net of payments in the financial statements. The VAT tax return is filed offsetting the payables against the receivables. Sales and purchases are recorded net of VAT collected and paid as we act as an agent for the government.
Hotel
Hotel revenues are primarily derived from the rental of rooms, food and beverage sales and other ancillary goods and services, including but not limited to souvenir, parking and conference reservations. Each of these products and services represents a distinct performance obligation and, in exchange for these services, we receive fixed amounts based on published rates or negotiated contracts. Payment is due in full at the time when the services are rendered or the goods are provided. Room rental revenue is recognized on a daily basis when rooms are occupied. Food and beverage revenue and other goods and services revenue are recognized when they have been delivered or rendered to the guests as the respective performance obligations are satisfied. All of the hotel’s goods sold in China are subject to the PRC VAT of 6%. This VAT may be offset by VAT paid by on raw materials and other materials purchased in China.
Pharmacies
Our retail drugstores recognize revenue at the time the customer takes possession of the merchandise. For pharmacy sales, each prescription claim is its own arrangement with the customer and is a performance obligation. We generally receive payment from pharmacy customers we satisfy our performance obligations. We record a receivable when we have an unconditional right to receive payment and only the passage of time is required before payment is due. Sales revenue represents the invoiced value of goods, net of VAT. All of the products sold in our pharmacies are exempt from VAT as the pharmacies qualify for a small business exemption.
Foreign Currency Translation and Comprehensive Income (Loss)
The functional currency of our business operations is RMB. For financial reporting purposes, RMB is translated into USD as the reporting currency. Assets and liabilities are translated at the exchange rate in effect at the balance sheet dates. Revenues and expenses are translated at the average rate of exchange prevailing during the reporting period.
Translation adjustments arising from the use of different exchange rates from period to period are included as a component of stockholders’ equity as “Accumulated other comprehensive income”. Gains and losses resulting from foreign currency transactions are included in income. There was no significant fluctuation in the exchange rate for the conversion of RMB to USD after the balance sheet date.
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We use FASB ASC Topic 220, “Comprehensive Income”. Comprehensive income (loss) is comprised of net income (loss) and all changes to the statements of stockholders’ equity, except those due to investments by stockholders, changes in paid-in capital and distributions to stockholders. Comprehensive loss for the three months ended March 31, 2022 and 2021 consisted of net loss and foreign currency translation adjustments.
Item 4. Controls and Procedures.
Disclosure Controls and Procedures
Management of AiXin Life International, Inc. is responsible for maintaining disclosure controls and procedures that are designed to ensure that information required to be disclosed in the reports that we file or submit under the Securities Exchange Act of 1934 (the “Exchange Act”) is recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission’s rules and forms. In addition, the disclosure controls and procedures must ensure that such information is accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer, as appropriate, to allow timely decisions regarding required financial and other required disclosures.
At March 31, 2022, an evaluation of the effectiveness of our disclosure controls and procedures (as defined in Rules 13(a)-15(e) and 15(d)-15(e) of the Exchange Act was carried out under the supervision and with the participation of our Chief Executive Officer and our Chief Financial Officer. Based on their evaluation of our disclosure controls and procedures, they concluded that at March 31, 2022, such disclosure controls and procedures were not effective. This was due to our limited resources, including the absence of a financial staff with accounting and financial expertise and deficiencies in the design or operation of our internal control over financial reporting that adversely affected our disclosure controls and that may be considered to be “material weaknesses.”
We plan to designate individuals responsible for identifying reportable developments and to implement procedures designed to remediate the material weakness by focusing additional attention and resources in our internal accounting functions. However, the material weakness will not be considered remediated until the applicable remedial controls operate for a sufficient period of time and management has concluded, through testing, that these controls are operating effectively.
Changes in Internal Control over Financial Reporting
There have not been any changes in our internal control over financial reporting, as such term is defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act, during our most recently completed fiscal quarter which is the subject of this report that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
PART II – OTHER INFORMATION
Item 1. Legal Proceedings
There is no pending litigation to which we are presently a party or to which our property is subject and management is not aware of any facts which are likely to result in litigation in the future.
Item 1A. Risk Factors
Reference is made to the risks and uncertainties disclosed in Item 1A (“Risk Factors”) of our 2021 Form 10-K, which are incorporated by reference into this report. Prospective investors are encouraged to consider the risks described in the 2021 Form 10-K, Management’s Discussion and Analysis of Financial Condition and Results of Operations contained in this report and other information publicly disclosed or contained in documents we file with the Securities and Exchange Commission before purchasing our securities.
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Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
During the quarter ended March 31, 2022, we did not have any sales of equity securities in transactions that were not registered under the Securities Act of 1933, as amended, that have not been previously reported in a report filed pursuant to the Exchange Act.
Item 3. Defaults Upon Senior Securities
None.
Item 5. Other Information
None
Item 6. Exhibits
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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.
| AIXIN LIFE INTERNATIONAL, INC. | ||
| Dated: May 16, 2022 | By: | /s/ Quanzhong Lin |
| Quanzhong Lin | ||
| President and Chief Executive Officer | ||
| (Principal Executive Officer) | ||
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