UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-K

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

FOR THE FISCAL YEAR ENDED DECEMBER 31, 20212023

Commission File Number: 000-17284

AIXIN LIFE INTERNATIONAL, INC.

(Exact name of registrant as specified in its charter)

Hongxing International Business Building 2, 14^th FL, No. 69 Qingyun South Ave., Jinjiang District

Chengdu City, Sichuan Province, China

(Address of principal executive offices)

86-313-6732526

(Registrant’s telephone number, including area code)

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

Securities registered pursuant to Section 12(g) of Thethe Act:

Common Stock, $0.00001 par value

(Title of class)

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes ☐ No ☒

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes ☐ No ☒

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. Yes ☒ No ☐

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 (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes ☐ No ☒

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. (Check one):

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) of the Securities Act. ☐

Indicate by check mark whether the registrant has filed a report on and attestation to its management’s assessment of the effectiveness of its internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public accounting firm that prepared or issued its audit report. ☐

If securities are registered pursuant to Section 12(b) of the Act, indicate by check mark whether the financial statements of the registrant included in the filing reflect the correction of an error to previously issued financial statements. ☐

Indicate by check mark whether any of those error corrections are restatements that required a recovery analysis of incentive-based compensation received by any of the registrant’s executive officers during the relevant recovery period pursuant to §240.10D-1(b). ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). Yes ☐ No No☒ ☒

As of June 30, 2021,2023, the aggregate market value of our common stock held by non-affiliates was $116,701,29425,656,989, based on 17,161,9558,580,933 shares of outstanding common stock held by non-affiliates, and a price of $6.80$2.99 per share, which was the last reported sale price of our common stock on OTC MarketOTCQB on that date.

As of March 31, 2022,29, 2024, we had outstanding 49,999,89124,999,945 shares of common stock.

DOCUMENTS INCORPORATED BY REFERENCE: None

AIXIN LIFE INTERNATIONAL, INC.

SPECIAL NOTE REGARDING FORWARD LOOKING STATEMENTS

This Annual Report on Form 10-K includes forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. These forward-looking 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:

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.

REVERSE STOCK SPLIT

WeOn February 17, 2023, we effected a 1 for 41-for-2 reverse split of our shares of common stock October 27, 2020. As a result of the reverse split and the elimination of fractional shares,reducing the number of shares of our outstanding common stock outstanding was reduced from 200,000,00049,999,891 to 49,999891. Unless explicitly stated29,999,842. Except as otherwise indicated, all share and per share numbers contained herein including those set forth in this Reportthe financial statements beginning on page F-1, have been adjusted to give effect to the 1-for-2 reverse stock split.

PART I

Overview

As used in this report, unless the context requires otherwise, all references to “AiXin Colorado” refer to AiXin Life International, Inc., a Colorado holding company, and references to “Aixin Life,” we,” “us,” “our,” the “Registrant,” the “Company” or “our Company” are to AiXin Colorado and its subsidiaries. 

We are a Colorado holding company and conduct substantially all of our operations through our operating companies established in the People’s Republic of China, or the PRC.* Our focus is on providing health and wellness products to the growing middle class in China. We currently develop, manufacture, market and sell premium-quality healthcare, nutritional consumer products in China. Originally, we offeredand wellness supplements, including herbs and greens, traditional Chinese remedies, functional products, such as weight management products, probiotics, foods and drinks. We also provide advertising and marketing services to clients which engage us to market and distribute their products. We offer our products and those of third partiesclients for which engaged us to marketwe provide marketing services, through a diversified, omni-channel business model which generates revenues through retail and sell their products directly to consumers at ourwholesale product sales, offices, through person—to-personcompany-owned pharmacies, direct marketing and at events we organize and sponsor, at which, on occasion, representatives of the manufacturers promote their products. In mid-2021 we acquired a chain of pharmacies which we will use to supplement our marketing efforts while maintaining their traditional retail businesses. As part of our direct marketing efforts, we rely on a portion of our clients who market and sell products to others. We offer discounts to distributors who purchase a sufficient quantity of products for the purpose of incentivizing them to distribute products to their friends, family members and others. We also offer clients who purchase significant quantities of products paid vacations, travel and other benefits. Products we sell can now be purchased at our pharmacies, online direct from our representatives, including at any of the sales offices we maintain in Chengdu and at marketing events held by us.activities.

Before promotingThrough our subsidiary, AixinZhonghong, we offer nutritional products through a product,direct marketing team, at large scale entertainment style events which we research itorganize for the benefit of our clients and its manufacturermore recently, through online activities. AixinZhonghong also provides marketing and distribution services to determine the manufacturer’s reputationother manufacturers and suppliers of healthcare products. We have a proactive approach to marketing, reaching out to customers to provide information as to whether it delivers unadulterated products, and whether there ishow to live a basis for claiming the product can deliver the benefits claimed. As part of this effort, a group of our employees use the products and provide feedback based upon their personal experiences. We base our evaluation of products on the assessments received from our employees. We also review and to the extent feasible confirm information and reports received from the manufacturer and distributor. We do not rely upon any other third-parties to independently test products to determine their efficacy.

Once we determine to offer a product we seek to purchase large quantities, enabling us to acquire products at prices we believe are below those available to the many smaller distributors that operate in Chengdu.

We offer our clients personalized services, including educating them through seminars on the benefits of the products we distribute, maintaining sales offices at which our clients can engage in recreational and social activities where the products we offer are prominently displayed and can be picked up, conducting promotions with representatives of the manufacturers of the products, and encouraging customer loyalty with incentives such as rewards and discounts based upon the quantities of products purchased for individual use or sold to others.healthy lifestyle. We believe ourthis approach is ideally suited to marketing strategy which emphasizeshealth and wellness products as sales of these products are strengthened by ongoing personal contact and support, coaching and educating oureducation of clients, as to the benefits of a healthy and active lifestyle.

In September 2021 we completed the productsacquisition of nine pharmacies located in Chengdu. Since that time we have added additional pharmacies and currently operate 25 pharmacies. We utilize these pharmacies to distribute is ideally suited for selling nutritionalour health and wellness products and builds confidence in us and customer loyalty to us and the products we sell. We believe this is particularly the case in China where the middle class is growing in size yet, due to lax enforcement and limited laws and regulations, many manufacturers and distributors, particularly those of new and innovative products, are not trusted by consumers. Thus, although our focus isserve as learning centers for our clients along with their traditional business. We intend to seek to continue to expand our chain of pharmacies and to use these outlets as part of our overall marketing strategy. As part of our marketing efforts, we will educate the manufacturers weemployees at our pharmacies as to the benefits of our health and wellness products so they can closely work with getour clients.

In September 2022, we acquired Yunnan Runcangsheng which engages in the benefitresearch, development, manufacture and wholesale distribution of health and wellness products. Yunnan Runcangsheng operates a 13,000 square meter production facility, including, R&D centers, extraction facilities, preparation workshops and a warehouse. Yunnan Runcangsheng has more than 30 brand names under which it distributes products and maintains and operates planting facilities where it grows some of the trust our clients have placedkey ingredients used in us. Consequently, although certainits products. Many of the products it has developed are specifically targeted to alleviate ailments associated with the increasingly competitive and pressured lifestyle of Chinese people, such as hypertension and obesity, which result from a more pressured yet sedentary lifestyle, symptoms associated with changing eating habits and the presence of environmental toxins that are becoming more widespread through the use of western style pesticides and fertilizers. When we entered into the agreement to acquire Yunnan Runcangsheng we began to distribute are produced by a variety of manufacturers, we require the manufacturer or distributor from which we purchase a productits products through our distribution channels and continue to provide us with exclusive distribution rights for an agreed upon time period within a prescribed territory or package the product so that while we are offering a product, it is distinct from products sold to our competitors.do so.

In addition to distributingour acquisitions in the health and nutritional products,sector, in July 2021, we also operate acquired Chengdu AiXin Shangyan Hotel Management Co., Ltd (“AiXin Shangyan Hotel”). Until the end of March 2024, AiXin Shangyan Hotel operatedthe Shangyan Hotel located in the Jinniu District, Chengdu City. TheWe terminated the lease for the Shangyan Hotel effective March 31, 2024, and entered into a 30-year lease for a hotel covers more than 8,000 square metersin the Xindu District of Chengdu. While we will continue the hotel’s pre-acquisition business, we intend to use the hotel to host events at which we educate our team members and hascustomers as to the benefits of 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 roomshealthy lifestyle, introduce new products and other supporting facilities. The hotel is equipped with all modern facilities, including central air conditioning. To accommodate businesses, the banquet hall is equipped with advanced audio-visual equipment and dedicated high-speed wireless Internet to facilitate large group presentations. The staff includes a professional banquet team to ensure the success of any private function or business gathering. A full range of catering services, including Chinese-style boutique Sichuan cuisine are provided in a stylish environment.offer our complete product line for sale.

In additionWe intend to our ongoing operations,look for additional opportunities to profit from the growing healthcare market in China. Though currently we are seekingnot party to acquire interestsany agreements, we will explore, among other opportunities, expanding our product line through internal research and acquiring complementary products from third parties, acquiring additional pharmacies and other retail outlets and operating nursing homes and possibly clinics which provide medical care to clients.

* Our “Chinese Operating Companies” are Chengdu AiXinZhonghong Biological Technology Co., Ltd, (“AiXinZhonghong”), AiXin Shangyan Hotel Management Co. Ltd. (“AiXin Hotel”), Chengdu Aixintang Haichuan Pharmacy (which together with certain affiliated entities is referred to as “Chengdu Aixintang Pharmacies”), and Yunnan Runcangsheng Technology Co., Ltd. (“Runcangsheng).” The Chinese Operating Companies are wholly owned through an intermediary company established in additional businesses through opportunities locatedHong Kong named HK AiXin International Group Co., Limited (“AiXin HK” and collectively with our Chinese Operating Companies our “PRC Subsidiaries”), which is owned by our management or presented by persons or firms which desire to take advantage ofan intermediary company (AiXin (BVI) International Group, Ltd., “AiXin BVI”) established in the perceived advantages of an Exchange Act registered corporation.British Virgin Islands. We are not restrictinga Chinese operating company. We are a holding company and do not directly own any substantive business operations in China. Therefore, you will not directly hold any equity interests in our search to any specific business, industry,Chinese Operating Companies, AiXin BVI or geographical location and may participate in a business venture of virtually any kind or nature.AiXin HK.

Business Objectives

ItKey elements of our strategy are detailed below:

Leading brand of nutritional supplements. Our primary goal is to develop recognized brand names with a reputation as a provider of quality health and wellness products which deliver demonstrable benefits to our customers. Our objective is to provide members of the growing Chinese middle class with the information necessary to maintain a healthy lifestyle and to offer them a broad and deep mix of products whether the customer is looking to treat a specific health-related issue, maintain their overall wellness or improve their performance. Our premium, value-added offerings will include both proprietary branded products and other branded products provided by third parties to meet needs not met by our in-house products.

We believe that by offering a variety of branded exclusive products and a wide range of merchandise, and close customer support and services, we will be able to differentiate our Company from competitors and effectively compete against other food, drug and mass channel players, specialty stores, independent vitamin, supplement and natural food shops and online retailers. We further believe that if we succeed in developing and maintaining a positive reputation, we will be able to offer additional products and services to our clients.

Product development and innovation. With the acquisition of Yunnan Runcangsheng we have the facilities and, more importantly, knowledgeable, experienced personnel, to develop high-quality, innovative health foods and nutritional supplements that will be offered by our direct marketing team and available through our company-owned pharmacies, our website and, as demand grows other, select marketplaces and wholesale partners. To the extent desirable we will grow some of the key ingredients in our products. When we choose to use ingredients of third parties, they will be rigorously tested before they are added to our products, undergoing multiple quality checks to ensure that they meet our high standards for purity, composition and absence of contaminants.

We believe our capability to innovate and respond to customer needs by designing new products gives us a significant competitive advantage. At Yunnan Runcangsheng we directly employ scientists, nutritionists, formulators, and quality control experts who work at our research and manufacturing facilities.

A differentiated customer experience. One of the key differentiators to our marketing strategy is the goalcontinued development of well-trained team members that work closely with customers. We will provide our team members with training and education focused on the benefits of a healthy lifestyle, the advantages of our management,products and solution-based selling. We will also maintain and make available to our team members data bases of our customers purchasing patterns. With their knowledge of the available products our team members can engage customers in particular,conversation, access the customer’s purchasing history through our Chairman, Quanzhong Lin,data base, share product information and testimonials and recommend solutions and help customers add complimentary products and build wellness regimens. We operate in a highly personalized, aspirational sector and believe that health food and nutritional supplement consumer often desires and seeks out product expertise and knowledgeable customer service.

We have developed loyalty programs to reward customers and incentivize them to introduce our products to their friends. A number of our customers in fact act as independent marketers, buying products from us and distributing them to others at a profit. We intend to continue to use loyalty programs to develop and maintain a large and loyal customer base, provide targeted offers and information, and connect with our customers on a regular basis. We will harness data generated by these programs to better understand customers’ buying behaviors and needs, so we can deliver a more rewarding experience, encourage our customers to introduce our products to their friends and make well-informed decisions about the direction of our business.

As we grow and develop our businesscustomer base, we can use our hotel as a site for educational seminars, conferences and marketing events featuring well known experts in the wellness sector. These events can be used to increase customer loyalty and to modify its capital structureeducate our team members as to the benefits of a healthy life style and our products so they can better serve our customers by guiding them to products that meet their needs.

Omni-channel development. We believe our diversified, omni-channel model, which includes company-owned offices open to clients, pharmacies, direct marketing by our team members, individually and at large scale company sponsored marketing events, wholesale locations and online activities, can differentiate us from many of our competitors, particularly those that rely exclusively on online marketing efforts. Our strategy is to give consumers a seamless, integrated experience across digital, mobile and in-store channels and in orderevery interaction with us and our products.

Through our website and in conversations with our well-trained team members, customers can research our products and purchase them online or at one of our local pharmacies or sales offices. We believe our physical store base provides a competitive advantage, allowing customers 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 businessesexperience our products and to modifyget expert advice from our capital structure as necessary to meet the requirements of the exchange to which we apply for a listing.team members.

Our executive officesomni-channel model can enhance the customer experience and increase the value of a customer to us and we will implement strategies to blend our digital, online and in-store platforms, always stressing the availability and benefits of a conversation with one of our team members. These initiatives will include increased cross-channel marketing, online and in-store subscription services, giving customers the option of picking up online purchases at our stores, delivering products purchased via e-commerce directly from stores, and providing educational content, information and advice online, at our pharmacies or through a personal visit by one of our team members.

Vertical Integration. We believe that our multi-channel distribution model, combined with our research, development and manufacturing capabilities offers us a unique advantage over our competitors. The daily feedback received from interactions between our team members and customers will be monitored to recognize what our customers want and rapidly develop products to meet their desires. Instead of simply responding to trends in the market, we will seek to bring new topical products to the market before they are at Hongxing International Business Building 2, 14^th FL, No. 69 Qingyun South Ave., Jinjiang District, Chengdu City, Sichuan Province, China, and our telephone number is +86-28-8669-1072.generally available.

Products

Our pharmacies offer a wide variety of personal healthcare products and traditional Chinese remedies in addition to our health and wellness products. They began to carry the products developed by Yunnan Runcanscheng prior to completion of that acquisition. The primary products currently distributed by us, including those of Yunnan Runcangsheng, include rhino king, colostrum powder derived from goat’s milk, tong li ke, gammaoling granules, amoxicillin capsules, loratadine tablets, and fuyang granules.

Marketing

Our target customer is the growing population of middle- and upper-class Chinese who are willing to devote increasing amounts to healthcare products as their incomes grow. We Offerbelieve that as this group grows, becomes more affluent and adopts a more western sedentary life-style and diet, it will experience obesity, hypertension, heart disease, back pain and some of the negative symptoms common in developed countries. Our marketing efforts include proactively approaching these customers through person-to-person marketing and by hosting educational and informative events, which we believe is ideally suited to marketing our products and those of our clients for which we perform advertising services because sales of health and wellness products and supplements are strengthened by ongoing personal contact and support, coaching and education towards how to achieve a healthy and active lifestyle.

We offer a variety of nutritional products and supplements on behalf of our Company and our marketing clients, which change over time in response to the consumer market. We source and purchase all ofcurrently market our products through third party distributorsour pharmacies, at large scale marketing events which feature popular local entertainers, at our offices which customers are encouraged to use for social gatherings, at wholesale and manufacturers which we carefully research before determining to distribute a product.

Marketing and Sales Strategy

We market and sell the products we offer directlyonline. Key to our clients on-line and off-line through our direct marketing efforts through our chain of retail pharmacies and through thoseare the members of our clientsmarketing team who act as resellers. Wemake themselves available to individual customers and work with such customers to develop a healthy well balanced dietary regimen. As part of our educational efforts, we distribute informational videos to our clients on lineon-line and make multiple posts on social media daily. Off-line, in addition to distributing products through our pharmacies, we utilize person-to-person marketing to promote and sell products. These personal marketing efforts include hosting educational events and allowing customers to utilize our facilities for social gatherings. We believe our marketing strategy is effective because:

In addition to the retailour marketing efforts, through our loyalty program we encourage our customers who frequent our pharmacies, we market the products we offer to clients who buy our products directly from us for personal or family consumption and clients who buy, use and distribute our products to others.

We offer our clients high-quality, innovative products that provide demonstrable benefits. We attempt to obtain detailed personal information about each of our clients so that we can direct each of them to products that best suit their needs and distribute new products that will appeal to our existing clients. We track the purchases made by every individual who purchases products directly from us. Based upon their purchasing history, we believe a significant majority of our clients purchase the products we sell primarily for personal or family consumption and are not actively pursuing the opportunity we offer to generate income by marketing and reselling products.

Our strategyprogram for increasing the number of clients interested in reselling the products we offer and for developing new clients who demonstrate the ability to sell our products to others, is to provide them with compensation, in the form of quantity purchase discounts and other incentives, such as free meals, travel or vacations. We track the amount of products purchased and frequency of purchases by those clients who sell our products to others and reward them when we think it is appropriate

We offer our clients a customer satisfaction guarantee. 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 can exchange a product for another of the same value.

Because of restrictions on direct selling and multi-level market in Mainland China, we structured our business model to avoid being placed in either category based on the guidance we received from government officials, our interpretation of applicable regulations, our understanding

Manufacturing

As a result of the practicesacquisition of international direct selling companies operatingYunnan Runcangsheng, we now have a 13,000 square meter manufacturing center inclusive of office space, R&D centers, extraction workshops, preparation workshops, traditional Chinese medicine decoction pieces workshops and storage areas. The activities include research and development, extraction and intensive processing of traditional Chinese medicines and processing to incorporate active ingredients into tablets, capsules, granules and pills according to market demand and product attributes. The facility was designed and constructed and is operated in Mainland China,compliance with applicable national health food and pharmaceutical standards (GMP), and has achieved ISO quality system certification and HACCP food safety system certification.

Raw Materials

The raw materials used in products we manufacture are generally readily available, subject to fluctuations in price due to supply and demand issues. We do not look to enter into long term contracts with any of our understandingsuppliers as the materials we need shifts as demand for our products changes.

Intellectual Property

We believe that we need to how regulatorsdevelop well recognized brand names and, when possible, obtain patents covering products we develop, their formulae or the processes by which they are interpretingmanufactured. Runcangsheng has received patents on certain manufacturing processes and enforcinghas used multiple brand names for its products. Given the regulations.early stage of Runcangsheng’s development and the limited historical operations of AiXinZhonghong, our products and brand names have yet to achieve the widespread recognition we envision. See, “Item 1A. Risk Factors – Risks Associated with Our Company -, Our ability to adequately protect our trade names, trademarks and patents could have an impact on our brand images and ability to penetrate new markets.”

Competition

Products

The category of nutritional products is very competitive and there are various channels through which such products are marketed to consumers, including direct selling, through the internet, through specialty retailers, pharmacies and discount channels of food, drug and mass merchandisers. We seek to differentiate ourselves by being familiar with our clients and providing a personalized sales experience and focusing on after-sale services where sales employees focus on the consultative sales process through product education and the frequent contact and support that many sales employees have with the clients. From a competitive standpoint, there are many providers and sales outlets of nutritional products in China. We believe that none have effectively combined the product, personal coaching, education and the product access provided by our sales employees and, further, that these efforts are compounded by the peer pressure our clients generate through our organized group sales presentations.

Our Competitive Advantages / StrengthsEmployees

Client Base

We have clients who primarily join for a discount on products they consume and introductions to new products they might desire, along with clients who also choose to profit by reselling our products. We currently have around 100,000 clients nation-wide in China. The majority purchase products for personal and family use, while others purchase products for their own use and for distribution to others.

When customers purchaseAs of April 1, 2024, we had approximately 207 employees allocated amongst the products we offer, information such as the customer’s name and the products purchased, is entered into our computer system, enabling us to develop a profile of more active customers. We do not initially identify a new customer as a preferred client or client distributor but monitor each member’s purchase patterns over time in order to match products to their desires and, eventually, categorize them as a preferred customer or distributor.

We do not pay salaries or commissions to client distributors. It is our practice to offer client distributors discounts on quantity purchases and to reward them through incentives, such as free meals, travel or vacations.,

People become our clients for a number of reasons. Many first start out as consumers looking to improve their health through better nutrition and join simply to receive a better price on products they and their families consume and enjoy, while others join so they can resell our products and generate income.

Competitive Advantagesfunctions set forth below.

Our Strategies

Seasonality

In general, there is no seasonality in the sale of nutritional products.We believe that we maintain a good working relationship with our employees, and to date we have not experienced any significant labor disputes.

RegulationGovernment Regulations

General

TheWe are subject to numerous regulations applicable to businesses generally, including regulations relating to working conditions, employee compensation and the maintenance of welfare plans, environmental regulation and truth in advertising. In addition, the manufacture and distribution of nutritional products is subject to many laws, governmental regulations, administrative determinations and guidance. Such laws, regulations and other constraints exist at the national, provincial and local levels, including regulations pertaining to: (1) the formulation, manufacturing, packaging, labeling, distribution, importation, sale and storage of products; (2) product claims and advertising, including direct claims and advertising by us, as well as claims and advertising by manufacturers and distributors of the products we offer, for which we may be held responsible; and (3) taxes. As a distributor, we are subject to only a portion of these laws and regulations. We believe that we are fully compliant with those applicable to our activities.

Products

Prior to commencing manufacture or distribution of a product, the manufacturer or distributor may be required to obtain an approval, license or certification from the national, provincial or local government in China. Although we attempt to determine whether all regulatory requirements have been met, we cannot monitor the manufacture of products we acquire for distribution from third parties and cannot be certain that all applicable regulations are satisfied. Moreover, even if we were to determine that a manufacturer or distributor had the requisite license or certification at the beginning of a relationship, we might not become aware if it were to forfeit any regulatory approvals or fail to adhere to applicable requirements.

Regulation of Nutritional Products.

Dietary supplements are subject to regulation by the China Food and Drug Administration. Mainland China has highly restrictive nutritional supplement product regulations. Products marketed as “health foods” are subject to extensive laboratory and clinical analysis by government authorities, and the product registration process in Mainland China generally takes one to two years, but may be substantially longer. We market both “health foods” and “general foods” in Mainland China. As a secondary distributor,foods.” For products we distribute on behalf of or acquired from others, we are not in a position to obtain any required license, though we may be held liable if we were to distribute a product which had not been properly tested and registered with the authorities. There is some risk associated with the common practice in Mainland China of marketing a product as a “general food” while seeking “health food” classification. If government officials feel the categorization of a product distributed by us is inconsistent with product claims, ingredients or function, this could end or limit our ability to market such products.

As the middle class has grown, the number of manufacturers and distributors of nutritional supplements in China has dramatically increased. Many of these enterprises have often ignored applicable laws and distributed adulterated or inferior products. We believe this has created a marketing opportunity which we have tried to exploit as a trusted source of products on which our clients can rely. To the extent our reputation results from reviewing and testing products prior to distributing them, and then distributing only products determined to be safe, it is incumbent upon us to ensure that the manufacturers and distributors upon which we rely are trustworthy. A failure by any of these third parties could cause substantial damage to our reputation, business and financial results.

Direct Selling and Multi-Level Marketing Regulations

Direct selling and multi-level marketing are two forms of marketing regulated by various national, provincial and local government agencies in China. These laws and regulations are generally intended to prevent fraudulent or deceptive schemes, including “pyramid” schemes, which compensate participants primarily for recruiting additional participants without significant emphasis on product sales to consumers.

Under PRC regulations, “direct selling” refers to a type of business mode in which a company recruits door-to-door salesmen to sell products directly to ultimate consumers outside the companies’ fixed places of business. Businesses engaged in “direct selling” are required to obtain a license from the PRC government. A direct selling company is required to provide vocational training for, and conduct an examination of, any sales promoter it recruits, and obtain a certificate for each sales promoter after the sales promoter has passed the examination. A direct selling company is also required, when commencing operations, to deposit RMB 20RMB20 million ($2.9 million) in a special account with a designated bank, which deposit is adjusted on a monthly basis to equal 15% of the operator’s sales from direct selling products up to RMB 0.1RMB0.1 billion ($14.5 million).

We do not engage in direct selling activities subject to regulations prevalent in China since we do not employeeemploy sales personnel engaged in door-to-door sales outside our place of business.

Under PRC regulations, “multi-level marketing” refers to marketing, promotional and sales activities whereby organizers or operators take in new members and compensate each member based upon the number of new members introduced by such member, directly or indirectly, or based upon the level of sales generated by the members introduced by such member. The regulations also prohibit an organizer from requiring new members to deposit a sum of money as a condition to membership or requiring that members recruit additional members to establish a multi-level relationship. PRC regulations distinguish direct selling from multi-level marketing in that all direct sellers are normally trained by the direct selling company and any direct seller is not allowed to develop new followers or form multiple levels.

We are not in the direct selling category or multi-level marketing category since (i) we do not pay salaries or commissions to our member distributors, who decide as a matter of personal preference whether to introduce our products to relatives or friends based on their own personal experience of usage and/or trust of our company’s products; (ii) we do not require individuals to deposit a sum of money to become a member; and (iii) we do not pay members to recruit individuals to join in or to form a multi-level relationship.

Nevertheless, the laws and regulations governing direct selling and multi-level marketing may be modified or reinterpreted from time to time, which may cause us to change our business model. Regulations are subject to discretionary interpretation by regulators and governmental authorities. There is often ambiguity and uncertainty with respect to the implication of direct selling and anti-pyramiding laws and regulations.

Employees

As of March 15, 2022, we had approximately 217 full-time employees, of which approximately 18 were in management and administration, 62 were sales and service personnel, 53 were in public relations and sales support, 40 were in retail at the pharmacies and 44 were in management and staffing at the Shangyan Hotel.

Corporate History

We were incorporated under the laws of the State of Colorado on December 30, 1987.

In February 2017, Mr. Quanzhong Lin, our President, purchased approximately 65% of our then outstanding shares of common stock. In December 2017, we issued additional shares of our common stock to Mr. Lin, the sole stockholder of AiXin BVI, for all of the outstanding shares of AiXin BVI, pursuant to a share exchange agreement. Mr. Lin then owned approximately 80.8% of our outstanding shares.

Effective February 1, 2018, we changed our name to AiXin Life International., Inc. (“AiXin”).

An investment in our common stock involves a high degree of risk. You should carefully consider the risks described below, together with all of the other information included in this report, before making an investment decision. If any of the following risks actually occurs, our business, financial condition or results of operations could suffer. In that case, the trading price of our common stock could decline, and you may lose all or part of your investment.

Risks Related toAssociated with Our BusinessCompany

Covid – 19 Pandemic

In March 2020, the World Health Organization announced that infections caused by the coronavirus disease of 2019 (“COVID-19”) had become pandemic. Economies throughout the world, including that of China, have been severely disrupted by the effects of the pandemic and the quarantines, stay at home orders, business closures and the reluctance of individuals to leave their homes resulting from the outbreak of the Covid-19 Pandemic. China adopted and continues to rely uponWe operate in a “zero-tolerance” policy pursuant to which it has declared a number of total and partial lockdowns in cities throughout China, including Chengdu. These lockdowns and any accompanying travel restrictions have adversely impacted many industries in China. As a company which does business exclusively in Chengdu, a city in Western China, our business has been adversely impacted by the outbreak of Covid-19, travel restrictions and lockdowns in Chengdu. These impacts included difficulty in obtaining adequate quantities from our suppliers, lower occupancy rates at our hotel and decreased sales of certain products. We cannot forecast with any certainty whether the disruptions caused by the COVID-19 pandemic will increase, or the extent to which our business may be negatively impacted by an increase in cases as a result of the spread of a new variant and restrictions imposed by the Chinese governments in response to any such increase. Any such disruption may materially impact our businesshighly competitive industry and our consolidated financial position, results of operations,failure to compete effectively could adversely affect our market share, revenues and cash flows.

The Russian invasion of Ukraine and the retaliatory measures imposed by the United States, United Kingdom, European Union and other countries and the responses of Russia to such measures have caused significant disruptions to domestic and foreign economies.growth prospects.

The invasionmarket for health and wellness products is large, highly fragmented and intensely competitive. Current and prospective participants include specialty retailers, supermarkets, drugstores, mass merchants, multi-level marketing organizations, online merchants, mail-order companies and a variety of Ukraineother smaller participants. The market is also highly sensitive to the introduction of new products, which may rapidly gain consumer acceptance. We compete for sales with heavily advertised brands manufactured by the Russian Federation had an immediate impact on the global economy resulting in higher prices for oillarge pharmaceutical and food companies, as well as other brands, some of which have greater market presence, name recognition and financial, marketing and other commodities.resources, including some competitors that may spend more aggressively on advertising and promotional activities than we do. Further, the ability of consumers to compare prices on a real-time basis through the use of smartphones and digital technology puts additional pressure on us to maintain competitive pricing. We compete in multiple product categories and sales channels, including pharmaceutical stores, wholesale to specialty store formats, direct marketing and increasingly internet-based and direct-sell retailers and vendors. Many factors affect the extent to which competition could affect our results, including as it relates to pricing, quality, assortment, marketing, promotions and advertising, service, locations, capital expenditures, category share and reputation, any of which could have a material effect on our results of operations. If we fail to compete effectively, we may lose business to other retailers.

We have a limited operating history on which to judge our performance and assess our prospects for future success.

We first entered the health and wellness business in December 2017 when we acquired AiXin BVI, which at that time owned all of the equity of AiXin Zhonghong, then engaged in the distribution of health and wellness foods. Consequently, we have a limited operating history on which to evaluate our prospects in the health and wellness industry. We may fail to continue our growth. You should not consider our historical growth and expansion of our business through acquisitions as indicative of our ability to grow in the future.

Our acquisition of Yunnan Runcangsheng is subject to uncertainties and risks.

There is no assurance that we will realize the benefits anticipated from our acquisition of Yunnan Runcangsheng. The United States, United Kingdom, European Unionprocess of combining the operations of Yunnan Runcangsheng with our existing operations could have a material adverse effect on us and our financial condition.

Our future expansion plans are subject to uncertainties and risks.

We intend to seek to expand our operations through acquisitions. The implementation of such plan requires us to integrate any newly acquired business and its management teams. If we fail to effectively and efficiently implement our plan for acquisitions, we may not be successful in achieving profitable results. Even if we effectively and efficiently implement our future plans, there may be other countries respondedunexpected events or factors that prevent us from achieving success. Our management has limited experience in effecting a rapid expansion and in managing larger operations. Our business, financial condition, results of operations and growth prospects may be materially and adversely affected if our future expansion plans fail to Russia’s invasion of Ukraine by imposing various economic sanctionsachieve positive results.

Failure to effectively anticipate consumer preferences could negatively impact the demand for our products and bans. Russia has responded with its own retaliatory measures. These measures have impactedour ability to generate revenues and the availability andmarket price of certain raw materials. The invasionour common stock.

Our success depends on our ability to anticipate and retaliatory measures also disrupted economic markets. The global impact of these measures is continually evolvingrespond in a timely manner to changing consumer demand, consumer preferences, and shopping patterns regarding health and wellness products. Consumer preferences cannot be predicted with certainty and there is no assurance that Russia’s invasionare subject to continual change and evolution. Additionally, our customers may have expectations about how they shop in stores or through online activities or more generally engage with businesses across different channels or media (through online and other digital or mobile channels or particular forms of Ukraine and responses thereto will not further disrupt the global economy and supply chain. Further, there is no assurance that even when the invasion of Ukraine ceases, that nations will not continuesocial media), which may change over time which may make it more difficult for us to impose sanctions and bans on other nations.adapt to rapid changes in consumer preferences.

While these eventsOur sales may decline significantly if we misjudge the market for our new products, which may result in significant inventory markdowns and lower margins, missed opportunities for other products, or inventory write-downs, and could have not interrupteda negative impact on our operations or materially impacted our ability to obtain raw materials, these or future developments resulting from the invasion of Ukraine could make it difficult for or increase the cost of certain raw materials, or make it difficult to access debtreputation and equity capital on attractive terms, if at all, and impact our ability to fund business activities and repay debt on a timely basis.

In reading the remaining risk factors set forth below, in each case, consider the additional uncertainties caused by Global events such as COVID-19 and the war in Ukraine.profitability.

We require significant investmentResources devoted to expand or maintain the current level of our business.product innovation may not yield new products that achieve commercial success.

We will require significant expenditures in the future to fund future growth. We intend to fund our growth out of internal sources of liquidity or through additional financing from external sources, including our principal stockholder. Given our recent results of operations, we cannot rely upon internally generated cash to significantly expand our current level of operations. Our ability to obtain external financing in the future at a reasonable cost is subjectdevelop new and innovative products or identify and acquire new and innovative products from third-party vendors, depends on, among other factors, our ability to a variety of uncertainties, including:

understand evolving market trends and translate our insights into identifying, and then designing and manufacturing or otherwise obtaining, commercially successful new products. If we require additional fundsare unable to do so, our customer relationships and cannot obtain them on acceptable terms when requiredproduct sales could be harmed significantly. The health and wellness industry is characterized by rapid and frequent changes in demand for products. Our failure to accurately predict these trends could harm our customer relationships and cause us to fail to grow our revenues. The development of new and innovative products requires significant investment in research and development and testing of new ingredients, formulas and possibly new production processes. The research and development process entails considerable uncertainty. Products may appear promising in development but fail to reach market within the expected time frame, or at all, weall. Further, products also may fail to achieve commercial success. There is no guarantee that our development teams will be unableable to fulfill our working capital needs, upgrade our existing facilities or expand our business, and may havesuccessfully respond to reduce the levelcompetitive products that could render some of our operations. These factors may also prevent us from entering into transactions that would otherwise benefit our business or implementing our future strategies. Any of these factors may have a material adverse effect on our business, financial condition and results of operations.offerings obsolete.

We face intense competition, and ifIf we do not compete successfully against existingdevelop and new competitors, we may lose market share and suffer losses.

We face intense competition. We believemaintain a robust omni-channel experience for our ability to compete depends upon many factors both within and beyond our control. Some of our current and potential competitors may have greater financial, marketing, user traffic and other resources than we have. Certain of our competitors may be able to devote greater resources to marketing and promotional campaigns and devote substantially more resources to website and system development than us. Increased competition may reduce our market share and require us to increase our marketing and promotional efforts, which could negatively affect our operating margins or force us to incur losses. There can be no assurance that we will be able to compete successfully against current and future competitors, and competitive pressures may have a material adverse effect oncustomers, our business prospects, financial condition and results of operations.

We may have difficulty in managing our future growth and any associated increased scale of our operations.

We expect to expand through both organic growth and acquisitions. Our future expansion may place a significant strain on our managerial, operational, technical and financial resources. In order to better allocate our resources to manage our growth, we must hire, recruit and manage our workforce effectively and implement adequate internal controls in a timely manner. If we are unable to effectively manage our growth and the associated increased scale of our operations, our business, financial condition and results of operations could be materially and adversely affected.

Omni-channel retailing where customers are accessed through various coordinated channels, is rapidly evolving, and we must keep pace with changing customer expectations and new developments by our competitors. The growing middle class in China is increasingly seeking relevant information regarding healthy lifestyles and products that promote a healthy life. In addition, customers are increasingly shopping for products online instead of in traditional brick-and-mortar shopping centers and retail locations. As part of our omni-channel strategy, we anticipate the need to continue making investments in technology and to provide ready means for our customers to access the information and products they want in a comfortable environment. If we are unable to make, improve, or develop relevant channels to interact with customers in a timely manner, our ability to compete and our business and results of operations could be materially and adversely affected. In addition, if our online activities or our other customer-facing technology systems do not function as designed or we are unable to effectively blend our digital, online and in-store platforms, we may experience a loss of customer confidence, lost sales, or data security breaches, any of which could materially and adversely affect our business and results of operations.

The operation of our hotel is subject to the business, financial and operating risks inherent to the hospitality industry, any of which could reduce the revenues derived at our hotel.

The operation of a hotel is subject to a number of business, financial and operating risks inherent to the hospitality industry. These include significant competition from multiple hospitality providers in which compete for the business of our guests; the financial condition of the owner of the property on which our hotel is situated; decreases in business and leisure travel; changes in operating costs, including employee compensation and benefits, energy, insurance, food and beverage and other supplies; increases in costs due to inflation or other factors that may not be fully offset by increases in revenues in our business, as well as increases in overall prices and the prices of our offerings due to inflation, which could weaken consumer demand for travel and the products and services we offer and adversely affect our revenues; changes in taxes and governmental regulations that influence or increase our operating costs; the costs and administrative burdens associated with complying with applicable laws and regulations; significant increases in cost for health care coverage for employees and potential government regulation with respect to health care coverage; shortages of labor or labor disruptions; changes in the desirability of the region in which our hotel is located; changes in the supply and demand for hotel services, including rooms, food and beverage and other products and services; and the costs required for climate change initiatives, including those resulting from regulatory changes or stakeholder or customer expectations.

Any damageof these factors could increase our costs or limit or reduce the prices we are able to charge hotel customers for hospitality products and services, or otherwise affect our reputation orability to maintain our hotel. As a result, any of these factors can reduce our revenues and limit opportunities for growth.

Our efforts to utilize our hotel in Chengdu City to conduct marketing events for customers and training sessions for our employees may not anticipated benefits.

We envision using the hotel we acquired in Chengdu City to conduct marketing events for our customers and training sessions for our personnel. These efforts may not result in increased sales and may not improve our ability to train our personnel.

The failure to enhancemaintain permits and licenses could adversely impact our recognitionoperations.

The manufacture and distribution of food products, and the sale of food and beverages at our hotel, as well as other aspects of our business, require that we maintain various permits and licenses and conduct our operations in accordance with applicable safety requirements and other regulations. Should we be unable to renew any of our licenses and permits, it could have a material adverse effect on our results of operations and the profitability of our business, even if the disruption is for only a limited period of time.

We may incur material product liability claims, or experience product recalls, which could increase our costs and adversely affect our sales and margin, reputation, revenues and operating income.

As a retailer, distributor and manufacturer of products for human consumption, we are subject to product liability claims if the use of our products is alleged to result in injury. The products that we sell consist of minerals, herbs, supplements and other ingredients that are classified as foods or dietary supplements. The products that we sell could contain contaminated substances, and some of the products we sell contain ingredients that do not have long histories of human consumption. Previously unknown adverse reactions resulting from human consumption of these ingredients could occur.

In addition, third-party manufacturers produce many of the products we sell. We rely on these manufacturers to ensure the integrity of their ingredients and formulations. As a distributor of quality nutritional products manufactured by third parties, we may also be liable for various product liability claims for products we do not manufacture. Our ultimate liability for these products that are manufactured by third parties depends on a number of factors, including our contractual relationship with the vendor, the creditworthiness of the vendor and any insurance that we have. Therefore, we may be unable to adequately protect ourselves against claims with respect to products manufactured by a third-party.

We may be subject to product liability claims, including, among others, that our products include inadequate instructions for use or inadequate warnings concerning possible side effects and interactions with other substances. Product liability claims could significantly damage our reputation and consumer confidence in our products, regardless of the merits or outcomes of such claims. Our litigation expenses could increase as well, which also could have a material adverse effect on our results of operations even if a product liability claim is unsuccessful or is not fully pursued.

We may be subject to product recalls, withdrawals or seizures if any of the products we manufacture or sell are believed to be adulterated, cause injury or illness or if we are alleged to have violated governmental regulations in the manufacturing, labeling, promotion, sale or distribution of such products. A significant recall, withdrawal or seizure of any of the products may require significant management attention, would likely result in substantial and unexpected costs and may materially and adversely affect our business, financial condition andor results of operations. Furthermore, a recall, withdrawal or seizure of any of the products that we sell may adversely affect consumer confidence in our brands and thus decrease consumer demand for such products.

If we fail to develop and protect our brand names and reputation, we may not attract and retain new customers, which could adversely affect our revenues and financial performance.

We will invest significant resources to promote our brand names to obtain favorable public recognition for us and our products. If we do not achieve the reputation we envision, we may not be able to attract and retain a significant customer base, which could in turn adversely affect our revenues, profitability and the market price of our common stock.

Our ability to adequately protect our trade names and trademarks could have an impact on our brand images and ability to penetrate new markets.

We believe that trade names and trademarks will be an important aspect of our business and an essential element of our strategy. We have applied for the registration of many of our trade names, trademarks and patents in China. Some of these applications have been granted and some of these registrations are currently pending approval from the corresponding departments. There can be no assurance that we will obtain such registrations or that the registrations we obtain will prevent the imitation of our products or infringement of our intellectual property rights by others. In particular, the laws of the PRC may not protect proprietary rights to the same extent as the laws of the U.S. Claims that others are infringing our intellectual property would be costly and would divert the attention of management and key personnel. Our failure to successfully protect our trademarks could diminish the value and effectiveness of our past and future marketing efforts and could cause customer confusion. This could in turn adversely affect our revenues, profitability and the market recognition and reputation we achieved have significantly contributed to the successprice of our business. Maintaining and enhancing our reputation is critical to our success and ability to compete. Many factors, some of which are beyond our control, may negatively impact our reputation, such as:common stock.

Changes in economic conditions andUnfavorable publicity about us or consumer confidence in China may influenceperception of our products, , including the market for nutritional products, consumer preferences and spending patterns.

Our business and revenue growth primarily depend on the size of the market for nutritional products in China. As a result, our revenue and profitability may be negatively affected by changes in national, regional or local economic conditions and consumer confidence in China. In particular, as we focus on our expansion in metropolitan markets, where living standards and consumer purchasing power are relatively high, we are especially susceptible to changes in economic conditions, consumer confidence and customer preferences of the urban Chinese population. External factors beyond our control that affect consumer confidence include unemployment rates, levels of personal disposable income, national, regional or local economic conditions, and acts of war or terrorism. Changes in economic conditions and consumer confidence could adversely affect consumer preferences, purchasing power and spending patterns. A decrease in overall consumer spending as a result of changes in economic conditions could adversely affect our sales of nutritional supplements we distribute, the ingredients they contain and negatively impactany similar products distributed by other companies could cause fluctuations in our profitability. In addition, acts of war or terrorism may cause damage to our facilities, disrupt the supply of the products we marketoperating results and sell or adversely impact consumer demand. Any of these factors could have a material adverse effect on our business, financial conditionreputation, the demand for our products and resultsour ability to generate revenues and the market price of operations.

We may not be able to timely identify or otherwise effectively respond to changing customer preferences, and we may fail to optimize our product offering and inventory position.common stock.

The market for nutritional products in China is rapidly evolvingWe are highly dependent upon consumer perception of the safety and is subject to rapidly changing customer preferences that are difficult to predict. Our success depends on our ability to anticipate and identify customer preferences and adapt our product selection to meet these preferences. In particular, we must optimize our product selection and inventory positions based on sales trends. We cannot provide assurance that our product selection will accurately reflect customer preferences at any given time. If we fail to accurately anticipate either the market forquality of our products, including our nutritional supplements, and the ingredients they contain, as well as that of similar products distributed by other companies. Consumer perception of products and the ingredients they contain can be significantly influenced by scientific research, national media attention and other publicity, including that generated via social media. A research report or customers’ purchasing habits or fail to respond to customers’ changing preferences promptly and effectively, we may not be able to adapt our product selection to customer preferences or make appropriate adjustmentspublicity related to our inventory positions, whichproducts and the ingredients they contain that is perceived by our consumers as less favorable or that questions earlier favorable research or publicity could significantly reduce our revenue and have a material adverse effect on our business, financial conditionability to generate revenues. . Adverse publicity, in the form of published scientific research or otherwise, whether or not accurate, that associates consumption of our products or the ingredients they contain or similar products distributed by other companies with illness or other adverse effects, that questions the benefits of our or similar products, or that claims that such products are ineffective could have a material adverse effect on our reputation, the demand for our products, our ability to generate revenues and the market price of our common stock.

We may be subject to health or advertising claims related to our customers.

Our products do are not medical treatments and we do not provide or medical advice, and we do not engage physicians or nurses to monitor the progress of our customers. A customer who uses our products and experiences health problems could allege or bring a lawsuit against us on the basis that those problems were caused or worsened by using our products. Further, customers who allege that they were deceived by any statements that we made in advertising or labeling could bring a lawsuit against us under consumer protection laws. We may ultimately be unsuccessful in defending ourselves against such claims. Also, defending ourselves against such claims, regardless of their merit and ultimate outcome, may be lengthy and costly, and could adversely affect our brand image, customer loyalty and results of operations.

We market a relatively fewrely on third parties to provide us with nutritional products from a limited numbersupplements, fulfillment, customer service and Internet and networking services, the loss of manufacturers.any of which could cause our revenue, earnings or reputation to suffer.

In addition to the nutritional supplements we manufacture, we rely on third-parties to supply us with additional manufacturer the nutritional supplements we sell. We currently mainly offerdo not know if our vendors vendor directly sells the same product under a limited numberdifferent brand or provides their supplements to other parties under private label brands. In each of nutritionalthese instances, sales of the same product under different brands could cause us to lose revenues and health productsadversely impact our abilities to market our products. While we believe we could locate replacement suppliers for all supplements we acquire from third parties, it would likely take time to engage replacement suppliers which could adversely impact our revenues during such transition period and there are no assurances our costs would not increase to a limited numberlevel which makes the product unattractive to our customers.

We depend on the services of manufacturers. Unless we are able to significantly increase the number of nutritionalkey executives and other products we market and sell and the number of manufacturers who distribute their products through our distribution channel, we will be unable to increase our revenues.

Our business depends substantially on the continuing efforts of our executive officers and key employees,skilled professionals and our ability to attract, train and retain highly qualified associates. Any failure to attract or retain such individuals could affect our business may be severely disrupted if we lose their services.strategy and adversely impact our performance and results of operations.

We currently depend onOur senior executives are instrumental in setting our strategic direction, operating our business, identifying, recruiting and training personnel, identifying opportunities, designing new products and arranging necessary financing. In addition, other key employees below the continued services and performance of the key membersexecutive level, with deep knowledge of our management team, in particular Mr. Quanzhong Lin, our Presidentbusiness, are critical to the execution and Chief Executive Officer (“CEO”). Mr. Lin is our founder and his leadership has played an integral role in our growth. Our future success depends substantially on the continued efforts of our executive officersstrategy. We must attract, train and key employees. If one or moreretain a growing number of qualified individuals.

Losing the services of any of these groups of individuals could adversely affect our executive officers or key employees werebusiness and we may be unable or unwilling to continue their service, we might not be able to replace them easily,identify candidates of sufficient experience and capabilities in a timely manner,fashion or at all, andwhich could negatively impact our business may be severely disrupted,and operations. Further, our financial conditionsability to control labor and results of operations may be materiallybenefit costs is subject to numerous external factors, including regulatory changes, prevailing wage rates, and adversely affectedhealthcare and we may incur additional expenses to recruit, trainother insurance costs. We compete with other retail and retain personnel.

Our current management may have no experiencenon-retail businesses for these store and field associates and invest significant resources in operating businesses we may acquire.

If we acquire a new business, it may be in an industry in which our management has no experience. In such event, we may need to engage new management personnel to manage such business.training and motivating them. There is no assurance that we will be able to retain the services of qualified individuals or that they will be able to integrate with our current management and successfully operate our new business and that our current management will not be distracted from operating our current businesses. Any failure to attract new or retain key these individualsqualified store and field associates in the future, which could have a material adverse effect on our business, financial condition and results of operations.

There are risks associatedCompliance with offering new products.and existing laws and governmental regulations could increase our costs significantly and adversely affect our results of operations.

The processing, formulation, safety, manufacturing, packaging, labeling, advertising and distribution of our products are subject to numerous Chinese laws and regulations as well as laws and regulations imposed by provincial and local governments and agencies. Government regulations may prevent or delay the introduction, or require the reformulation, of newour products, typically carries risks associated with determining whether there will be consumer acceptancewhich could result in lost revenues and increased costs to us. Manufacturers and distributors of health and wellness products and dietary supplements and dietary ingredients are prohibited from marketing products that are adulterated or misbranded, and the appropriate pricing strategygoverning agencies may take enforcement action against any adulterated or misbranded health and wellness product or dietary supplement on the establishmentmarket. If we violate applicable regulatory requirements, we may be subject to enforcement actions against us, which could have a material adverse effect on our business, prospects, financial condition, and results of reliable sourcesoperations. The government may not accept the evidence of supply. In addition,safety for any new product or ingredient we may wish to market, may determine that a particular product or ingredient presents an unacceptable health risk based on reported serious adverse events or other information, and may determine that a particular claim or statement of efficacy or nutritional value that we use to support the marketing of a product is not substantiated, or is an unauthorized version of a “health claim.” Any of these actions could prevent us from marketing particular products or making certain claims or statements with respect to those products. We could also be required to remove a particular product from the market. Any future recall or removal would result in costs to us, including lost revenues from any products that we are required to remove from the market, any of which could be material. Any product recalls or removals could also lead to an increased risk of litigation and liability, substantial costs, and reduced growth prospects.

Additional or more stringent laws and regulations of health and wellness products have been considered from time to time. These developments could require reformulation of some products to meet new standards, recalls or discontinuance of some products not able to be reformulated, additional record-keeping requirements, increased documentation of the properties of some products, additional or different labeling, additional scientific substantiation, or other new requirements. Any of these developments could increase our costs significantly. In addition, regulators’ evolving interpretation of existing laws could have similar effects.

We depend upon a limited number of suppliers for certain raw materials and any disruption to our timely receipt of raw materials and inventory could adversely impact sales and operations or increase our transportation costs, which would decrease our profits.

We depend upon a limited number of suppliers for the raw materials necessary to produce certain of our products. Unexpected delays in the deliveries of raw materials from our vendors or inventories or increases in transportation costs (including through increased fuel costs) could significantly decrease our ability to make sales and earn profits. We must maintain sufficient levels of raw materials and inventories to operate our business successfully. However, we also must guard against accumulating excess inventory. If we fail to gain acceptance after significant expenditures are made. Ifanticipate accurately either the market for the merchandise we are unsuccessful in identifying new products that appealoffer or our customers’ purchasing habits, we may be forced to our clients, thenrely on markdowns or promotional sales to dispose of excess or slow moving inventory, which could have a material adverse effect on our business, financial condition, and results of operations.

In addition, sales of adulterated products received from third parties could result in a product liability judgment or a widespread product recall that may negatively impact our sales and profitability for a period of time depending on product availability, competition reaction and consumer attitudes. Even if the product liability claim is unsuccessful or is not fully pursued, the negative publicity surrounding any assertions could adversely impact our reputation with existing and potential customers and our brand image.

Natural disasters (whether or not caused by climate change), unusually adverse weather conditions, pandemic outbreaks and terrorist acts in China and the response of the Chinese governments to such occurrences, could impair our ability to purchase, receive or replenish inventory or raw materials or cause customer traffic to decline, all of which could result in lost sales and otherwise adversely affect our financial performance.

The occurrence of one or more natural disasters, such as hurricanes, fires, floods and earthquakes (whether or not caused by climate change), unusually adverse weather conditions, pandemic outbreaks (including the outbreak of the coronavirus, or COVID-19) or terrorist acts in China and the response of the Chinese government to such occurrences, could adversely affect our operations and financial performance. To the extent these events result in the closure of one or more of our pharmacies, manufacturing facility or our corporate headquarters, or impact one or more of our key suppliers, our operations and financial performance could be materially adversely affected through lost sales. Such events could also cause a disruption in travel making it difficult for consumers to order our products, such as has happened as a result of recent lock-downs in Chengdu. In addition, these events could result in increases in fuel (or other energy) prices or a fuel shortage, the temporary lack of an adequate work force in a market, the temporary or long-term disruption in the supply of products from some suppliers, the temporary disruption in the transport of goods, the temporary reduction in the availability of products in our stores, expiration of inventory and disruption to our information systems.

We rely on third parties for the vast majority of our computing, storage, and other services related to our business. Any disruption of or interference with our use of the services of these third parties would negatively affect our operations and could seriously harm our business.

We rely upon third parties, including cloud based platforms and services, to process and store information and for online interactions with our customers. Any transition of the cloud services currently provided by the parties we rely upon to other platforms or to another cloud provider could be difficult to implement and would cause us to incur significant time and expense. Given this, any significant disruption of or interference with the cloud based services utilized by us, whether temporary, regular, or prolonged, would negatively impact our operations and our business would be seriously harmed.

As we increase the amount of personal and user data we store and process, we may become subject to complex and evolving laws, regulations, executive actions, rules, contractual obligations, policies, and other obligations regarding privacy, data protection, content, and other matters. Many of these obligations are subject to change and uncertain interpretations.

Currently, we collect, store, and use limited amounts of personal data and other sensitive information. As our business grows and we increase the amount of such data collect, store and use, we will become subject to a variety of laws, regulations, industry standards, policies, contractual requirements, executive actions, and other obligations relating to privacy, security, and data protection which are becoming increasingly stringent and subject to rapid change and uncertain interpretation. Preparing for and complying with these obligations could require us to devote significant resources. These obligations may necessitate changes to our services, information technologies, systems, and practices. In addition, these obligations may require us to change our business model.

Cyber-attacks could have a disruptive effect on our business.

From time to time we and our third-party service providers experience cyber-attacks, attempted and actual breaches of our or their information technology systems and networks or similar events, which could result in a loss of sensitive business or customer information, systems interruption or the disruption of our operations. The techniques that are used to obtain unauthorized access, disable or degrade service or sabotage systems change frequently and may be difficult to detect for long periods of time, we are accordingly unable to anticipate and prevent all data security incidents.

Even if we are fully compliant with legal standards and contractual or other requirements, we still may not be able to prevent security breaches involving sensitive data. The sophistication of efforts by hackers to gain unauthorized access to information systems has continued to increase in recent years and may continue to do so. Breaches, thefts, losses or fraudulent uses of customer, employee or company data could cause consumers to lose confidence in the security of our websites, mobile applications, point of sale systems and other information technology systems and, as a result of this loss in confidence, choose not to purchase from us. Such security breaches also could expose us to risks of data loss, business disruption, litigation, fines, regulatory charges and other costs or liabilities, any of which could adversely affect our business.

Our business may be materially adversely affected by global geopolitical conditions resulting from the ongoing Russia-Ukraine conflict and the Israel-Hamas conflict.

Global markets are experiencing volatility and disruption as a result of the geopolitical instability resulting from the ongoing Russia-Ukraine conflict and the Israel-Hamas conflict. The invasion of Ukraine by Russia and the Israel-Hamas conflict and the resulting measures that have been taken, and could be taken in the future, by NATO, the United States, the United Kingdom, the European Union, Israel and other countries have created global security concerns that could have a lasting impact on regional and global economies. Although the length and impact of the ongoing conflicts are highly unpredictable, they could lead to market disruptions, including significant volatility in commodity prices, credit and capital markets, as well as supply chain interruptions. Additionally, any resulting sanctions could adversely affect the global economy and financial markets and lead to instability and lack of liquidity in capital markets.

Any of the abovementioned factors, or any other negative impact on the global economy, capital markets or other geopolitical conditions resulting from the Russian invasion of Ukraine, the Israel-Hamas conflict and subsequent sanctions or related actions, could adversely affect our business. The extent and duration of the ongoing conflicts, resulting sanctions and any related market disruptions are impossible to predict, but could be substantial, particularly if current or new sanctions continue for an extended period of time or if geopolitical tensions result in expanded military operations on a global scale. Any such disruptions may also have the effect of heightening many of the other risks described in this section. If these disruptions or other matters of global concern continue for an extensive period of time, our business may be materially adversely affected.

We may be impacted by our ability to attract, develop and retain qualified associates and manage labor-related costs.

We believe one of our competitive advantages is providing a positive, engaging and satisfying experience for each customer, which requires us to have highly trained and engaged associates. Our success depends in part upon our ability to attract, develop and retain a sufficient number of qualified associates to enable us to grow our customer base. The turnover rate in the health and wellness industry is generally high, and qualified individuals of the requisite caliber and number needed may be in short supply. Competition for such qualified individuals or changes in labor laws could require us to incur higher labor costs. Our inability to recruit a sufficient number of qualified individuals may delay the expansion of our customer base and our growth. Significant increases in associate turnover rates or significant increases in labor-related costs could have a material adverse effect on our results of operations, financial condition and cash flows.

Large and similar sized competitors could steal our market share by offering lower prices.

We endeavor to provide high quality service to our clients at the best possible price, however, large and similar sized competitors might steal some of our market share by offering lower prices, causing us to lose some of our clients which could have a material adverse effect on our results of operations, financial condition and cash flows.

Our insurance may not be sufficient.

We carry insurance that we consider adequate in regard to the nature of the covered risks and the costs of coverage. We are not fully insured against all possible risks, nor are all such risks insurable.

Our business depends on the continued contributions made by Mr. Quanzhong Lin, our key executive officer. The loss of his services may result in a severe impediment to our business.

Our success is dependent upon the continued contributions made by our CEO and President, Mr. Quanzhong Lin. The Company has no “Key Man” insurance to cover the resulting losses in the event that any of our officer or directors should die or resign.

If Mr. Lin cannot serve the Company or is no longer willing to do so, the Company may not be able to find alternatives in a timely manner or at all. This would likely result in a severe damage to our business operations and would have an adverse material impact on our financial position and operational results. To continue as a viable operation, the Company may have to recruit and train replacement personnel at a higher cost.

Our key executive does not devote his full business time to our operationsoperations..

Mr. Quanzhong Lin, ourOur President and Chief Executive Officer, Mr. Quanzhong Lin, is involved in a number of businesses and does not devote all of his working time to our operations.business. Our positive reputation in Chengdu is derived from the standing of Mr. Lin’s business success and standingLin in the Chengdu business community. If Mr. Lin does not devote sufficient attentiontime to our business, our operations could suffer andwhich would have an adverse material impact on our financial conditionsposition and results of operations may be materially and adversely affected. If Mr. Lin’s other businesses should fail or if his reputation in the community should be impaired, our business could suffer and our financial conditions and results of operations may be materially and adversely affected.operational results.

Some of the other businesses operatedengaged in by Mr. Lin or his affiliates maycould be deemed competitorscompetitive with aspects of ours.

Mr. Quanzhong Lin is engaged in other businesses.our business. Should such other businesses prove more successful than ours, Mr. Lin could choose to focus his attention on such businesses which could cause him to fail to devote sufficient attention to our business and our operations could suffer and our financial conditions and results of operations may be materially and adversely affected

Our principal shareholder is not familiar with American business practices.

Mr. Quanzhong Lin, our founder and principal shareholder, is a citizen of the PRC and an active entrepreneur in Chengdu. Mr. Lin is not familiar with American business practices and is heavily influenced by the business culture in the PRC. Certain governmental entities pay bonuses or subsidies to individuals in China whose companies become publicly traded in America and thereThere is a certain level of respect and prestige associated with being the Chinese principal of a company which is publicly traded in the U.S. Mr. Lin’s motivation for causing the business of AiXinZhongdong to become a part of a U.S. publicly-traded company may differ from those of American entrepreneurs and his values may cause him to operate the business differently than would an American entrepreneur.entrepreneur which could have a material adverse effect on our results of operations, financial condition and cash flows

We may be adversely impacted by certain compliance or legal matters.

We, along with third parties with which we do business, are subject to complex compliance and litigation risks. The cost of defending against claims that might be brought against us or the ultimate resolution of such claims, whether by settlement or adverse court decision, may harm our business. Further, potential claimants may be encouraged to bring lawsuits based on a settlement from us or adverse court decisions against us. We cannot currently assess the likely outcome of such suits, but if the outcome were negative, it could have a material adverse effect on our reputation, results of operations, financial condition and cash flows.

In addition, we may be impacted by litigation trends, including class action lawsuits involving consumers and shareholders, that could have a material adverse effect on our reputation, the market price of our common stock, results of operations, financial condition and cash flows.

Failure to make adequate contributions to various employee benefits plans as required by PRC regulations may subject us to penalties.

Companies operating in China are required to participate in various government sponsored employee benefit plans, including certain social insurance, housing funds and other welfare-oriented payment obligations, and contribute to the plans in amounts equal to certain percentage of salaries, including bonuses and allowances, of employees up to a maximum amount specified by the local government from time to time at locations where they operate their businesses. The requirement of employee benefit plans has not been implemented consistently by the local governments in China given the different levels of economic development in different locations. Employers that fail to make adequate social insurance and housing provident fund contributions may be subject to late payment fees, fines and sanctions. If the relevant PRC authorities determine that we need to make supplemental contributions or that we are subject to late payment fees, fines or other legal sanctions, such as order of timely rectification, in relation to our failure to make social insurance and housing fund contributions in full for our employees, our business and financial condition may be adversely affected.

Our common stock may be delisted under the Holding Foreign Companies Accountable Act if the PCAOB is unable to attract, train and retain qualified personnel,inspect our businessauditors. The delisting of our common stock or the threat of their being delisted, may be materially and adversely affected.affect the value of your investment.

The HFCAA was enacted on December 18, 2020. The HFCAA, as amended, states if the SEC determines that a company has filed audit reports issued by a registered public accounting firm that has not been subject to inspection by the PCAOB for two consecutive years beginning in 2021, the SEC shall prohibit the securities of such company from being traded on a national securities exchange or in the over the counter trading market in the U.S. On June 22, 2021, the U.S. Senate passed the Accelerating Holding Foreign Companies Accountable Act which, if enacted, would amend the HFCAA and require the SEC to prohibit an issuer’s securities from trading on any U.S. stock exchange if its auditor is not subject to PCAOB inspections for two consecutive years instead of three.

On March 24, 2021, the SEC adopted interim final rules relating to the implementation of certain disclosure and documentation requirements of the HFCAA. A company will be required to comply with these rules if the SEC identifies it as having a “non-inspection” year under a process to be subsequently established by the SEC. The SEC is assessing how to implement other requirements of the HFCAA, including the listing and trading prohibition requirements described above. On September 22, 2021, the PCAOB adopted a final rule implementing the HFCAA, which provides a framework for the PCAOB to use when determining whether the PCAOB is unable to inspect or investigate completely registered public accounting firms located in a foreign jurisdiction because of a position taken by one or more authorities in that jurisdiction.

On December 2, 2021, the SEC issued amendments to finalize rules implementing the submission and disclosure requirements in the HFCAA. The rules apply to registrants that the SEC identifies as having filed an annual report with an audit report issued by a registered public accounting firm that is located in a foreign jurisdiction and that PCAOB is unable to inspect or investigate completely because of a position taken by an authority in foreign jurisdictions. On December 16, 2021, the PCAOB issued a Determination Report which found that the PCAOB is unable to inspect or investigate completely registered public accounting firms headquartered in: (i) China, and (ii) Hong Kong. On August 26, 2022, the CSRC, the Ministry of Finance of the PRC, and the PCAOB signed a Statement of Protocol, or the Protocol, governing inspections and investigations of audit firms based in China and Hong Kong. Pursuant to the Protocol, the PCAOB shall have independent discretion to select any issuer audits for inspection or investigation and has the unfettered ability to transfer information to the SEC. Notwithstanding the foregoing, if the PCAOB is not able to inspect and investigate completely our auditor’s work papers in China, you may be deprived of the benefits of such inspection which could result in limitation or restriction to our access to the U.S. capital markets and trading of our securities may be prohibited under the HFCAA and the Nasdaq may determine to delist our securities if the PCAOB determines that it cannot inspect or investigate completely our auditor under the HFCAA.

Our future success depends,auditor is not headquartered in China or Hong Kong and was not identified in this report as a firm subject to the PCAOB’s determination.

The SEC may propose additional rules or guidance that could impact us if our auditor is not subject to PCAOB inspection. For example, on August 6, 2020, the President’s Working Group on Financial Markets, or the PWG, issued the Report on Protecting United States Investors from Significant Risks from Chinese Companies to the then President of the United States. This report recommended the SEC implement five recommendations to address companies from jurisdictions that do not provide the PCAOB with sufficient access to fulfil its statutory mandate. Some of the concepts of these recommendations were implemented with the enactment of the HFCAA. However, some of the recommendations were more stringent than the HFCAA. For example, if a significant extent,company’s auditor was not subject to PCAOB inspection, the report recommended that the transition period before a company would be delisted would end on our abilityJanuary 1, 2022.

The SEC has announced that the SEC staff is preparing a consolidated proposal for the rules regarding the implementation of the HFCAA and to attract, trainaddress the recommendations in the PWG report. The implications of possible additional regulation in addition to the requirements of the HFCAA and retain qualified personnel, particularly management, technicalwhat was recently adopted on December 2, 2021 are uncertain. While we understand that there has been dialogue among the CSRC, the SEC and marketing personnelthe PCAOB regarding the inspection of PCAOB-registered accounting firms in China, there can be no assurance that we will be able to comply with expertise in nutritional products. Our sales and customer service teams are critical to maintainingrequirements imposed by U.S. regulators. Such uncertainty could cause the qualitymarket price of our services as they frequently interact with our clients. We must continuecommon stock to attract qualified personnel at a fast pace to increase the number of our clients and products we distribute. As we are still a relatively young company, our ability to train and integrate new employees into our operations may not meet the growing demands of our business. If we are unable to attract, train, and retain qualified personnel, our business may be materially and adversely affected.

Our business, financial condition and results of operations, as well as our ability to obtain financing, may be adversely affectedA joint statement by the downturn inSEC and the globalPublic Company Accounting Oversight Board (United States), or Chinese economy.the “PCAOB,” the newly enacted “Holding Foreign Companies Accountable Act” and the “Accelerating Holding Foreign Companies Accountable Act” all call for additional and more stringent criteria to be applied to emerging market companies upon assessing the qualification of their auditors, especially the non-U.S. auditors who are not inspected by the PCAOB. These developments could add uncertainties to the market for our common stock.

It is unclear whetherOn April 21, 2020, the Chinese economy will resume its high growth rate afterSEC and the impactPCAOB released a joint statement highlighting the risks associated with investing in companies based in or having substantial operations in emerging markets including China. The joint statement emphasized the risks associated with lack of Covid-19 dissipates. There is considerable uncertainty overaccess for the long-term effects of the expansionary monetaryPCAOB to inspect auditors and fiscal policies that have been adopted by the central banks and financial authorities of some of the world’s leading economies, including the United States. Economic conditionsaudit work papers in China are sensitive to global economic conditions, as well as changesand higher risks of fraud in domestic economic and political policies and the expected or perceived overall economic growth rate in China.emerging markets.

The saleOn December 18, 2020, the HFCAA was signed and became law. This legislation requires certain issuers of nutritional productssecurities to establish that they are not owned or controlled by a foreign government. Specifically, an issuer must make this certification if the PCAOB is unable to audit specified reports because the issuer has retained a foreign public accounting firm not subject to inspection by the PCAOB. Furthermore, if the PCAOB is unable to inspect the issuer’s public accounting firm for three consecutive years, the issuer’s securities are banned from trading on a national exchange or through other methods. On December 29, 2022, the AHFCAA was enacted, which amended the HFCAA by decreasing the number of non-inspection years from three years to two, thus reducing the time period before our common stock may be affectedprohibited from trading or delisted if the PCAOB were to determine that it could not inspect our auditor.

On March 24, 2021, the SEC announced that it had adopted interim final amendments to implement congressionally mandated submission and disclosure requirements of the HFCAA. The interim final amendments will apply to registrants that the SEC identifies as having filed an annual report on Forms 10-K, 20-F, 40-F or N-CSR with an audit report issued by economic downturns. Our productsa registered public accounting firm that is located in a foreign jurisdiction and that the PCAOB has determined it is unable to inspect or investigate completely because of a position taken by an authority in that jurisdiction. The SEC will implement a process for identifying such a registrant and any such identified registrant will be required to submit documentation to the SEC establishing that it is not owned or controlled by a governmental entity in that foreign jurisdiction, and will also require disclosure in the registrant’s annual report regarding the audit arrangements of, and governmental influence on, such a registrant.

On September 22, 2021, the PCAOB adopted rules to create a framework for the PCAOB to use when determining, as contemplated under the HFCAA, whether it is unable to inspect or investigate completely registered public accounting firms located in a foreign jurisdiction because of a position taken by one or more authorities in that jurisdiction.

On December 2, 2021, the SEC issued amendments to finalize the interim final rules previously adopted in March 2021 to implement the submission and disclosure requirements in the HFCAA. The rules apply to registrants that the SEC identifies as having filed an annual report with an audit report issued by a registered public accounting firm that is located in a foreign jurisdiction and that the PCAOB is unable to inspect or investigate completely because of a position taken by an authority in a foreign jurisdiction.

On December 16, 2021, the PCAOB issued a Determination Report which found that the PCAOB was then unable to inspect or investigate completely registered public accounting firms headquartered in: (1) mainland China of the People’s Republic of China, because of a position taken by one or more authorities in mainland China; and (2) Hong Kong, a Special Administrative Region and dependency of the PRC, because of a position taken by one or more authorities in Hong Kong. The PCAOB has made such designations as mandated under the HFCAA. Pursuant to each annual determination by the PCAOB, the SEC will, on an annual basis, identify issuers that have used non-inspected audit firms and thus are at risk of such suspensions in the future.

On August 26, 2022, the CSRC, the Ministry of Finance of the PRC, and the PCAOB signed a Statement of Protocol, or the Protocol, governing inspections and investigations of audit firms based in China and Hong Kong. Pursuant to the Protocol, the PCAOB shall have independent discretion to select any issuer audits for inspection or investigation and has the unfettered ability to transfer information to the SEC. On December 15, 2022, the PCAOB determined that the PCAOB was able to secure complete access to inspect and investigate registered public accounting firms headquartered in mainland China and Hong Kong and voted to vacate its previous determinations to the contrary. However, should PRC authorities obstruct or otherwise fail to facilitate the PCAOB’s access in the future, the PCAOB will consider the need to issue a new determination. Notwithstanding the foregoing, if the PCAOB is not able to inspect and investigate completely our auditor’s work papers in China, you may be vieweddeprived of the benefits of such inspection which could result in limitation or restriction to our access to the U.S. capital markets and trading of our securities may be prohibited under the HFCAA.

Our auditor, KCCW Accountancy Corp. (“KCCW CPA”), an independent public accounting firm registered with the PCAOB, and an auditor of publicly traded companies in the U.S., is subject to laws in the U.S. pursuant to which the PCAOB conducts regular inspections to assess its compliance with the applicable professional standards. Our auditor is based in the United States and has been inspected by the PCAOB on a regular basis, with the last inspection in 2022. Our auditor is not headquartered in mainland China or Hong Kong and was not identified as discretionarya firm subject to the determinations announced by the PCAOB on December 16, 2021. Nevertheless, should the PCAOB be unable to fully conduct inspection of our clients, whoauditor’s work papers in China, it will make it difficult to evaluate the effectiveness of our auditor’s audit procedures or equity control procedures. Investors may chooseconsequently lose confidence in our reported financial information and procedures or quality of the financial statements, which would adversely affect us and our securities. Moreover, if trading in our securities is prohibited under the HFCAA in the future because the PCAOB determines that it cannot inspect or fully investigate our auditor at such future time, if our securities were then traded on an exchange, that exchange may determine to discontinuedelist our securities.

There are uncertainties under the PRC Securities Law relating to the procedures and requisite timing for the U.S. securities regulatory agencies to conduct investigations and collect evidence within the territory of the PRC.

On December 28, 2019, the newly amended Securities Law of the PRC (the “PRC Securities Law”) was promulgated, which became effective on March 1, 2020. According to Article 177 of the PRC Securities Law (“Article 177”), the securities regulatory authority of the State Council may establish a regulatory cooperation mechanism with securities regulatory authorities of another country or reduce spendingregion for the implementation of cross-border supervision and administration. Article 177 further provides that overseas securities regulatory authorities shall not engage in activities pertaining to investigations or evidence collection directly conducted within the territories of the PRC, and that no Chinese entities or individuals shall provide documents and information in connection with securities business activities to any organizations and/or persons aboard without the prior consent of the securities regulatory authority of the State Council and the competent departments of the State Council. As of the date of this prospectus, we are not aware of any implementing rules or regulations which have been published regarding application of Article 177.

Article 177 is only applicable where the activities of overseas authorities constitute a direct investigation or evidence collection by such authorities within the territory of the PRC. Our principal business operation is conducted in the PRC. In the event that the U.S. securities regulatory agencies carry out an investigation on us such products duringas an economic downturn.enforcement action by the Department of Justice, the SEC or other authorities, such agencies’ activities will constitute conducting an investigation or collecting evidence directly within the territory of the PRC and accordingly fall within the scope of Article 177. In that case, the U.S. securities regulatory agencies may have to consider establishing cross-border cooperation with the securities regulatory authority of the PRC by way of judicial assistance, diplomatic channels or establishing a regulatory cooperation mechanism with the securities regulatory authority of the PRC. However, there is no assurance that the U.S. securities regulatory agencies will succeed in establishing such an event, our abilitycross-border cooperation in this particular case and/or establish such cooperation in a timely manner.

Furthermore, there have not been implementing rules or regulations regarding the application of Article 177, and it remains unclear as to retain existing clients and increase or maintain our saleshow it will be adversely affected,interpreted, implemented or applied by the Chinese Securities Regulatory Commission or other relevant government authorities. As such, there are uncertainties as to the procedures and requisite timing for the U.S. securities regulatory agencies to conduct investigations and collect evidence within the territory of the PRC. If the U.S. securities regulatory agencies are unable to conduct such investigations, there exists a risk that they may determine to suspend or de-register our registration with the SEC and may also delist our securities from any applicable trading market within the US.

We could be subject to conflicting demands placed upon us by regulatory authorities in the United States and the PRC which could result in disciplinary actions if not resolved.

Article 26 of the Trial Measures issued by the CSRC on February 17, 2023 came into effect on March 31, 2023. Article 26 provides that if an overseas securities regulatory agency intends to conduct an investigation and collect evidence regarding an overseas offering or listing activities by a domestic company, and request assistance of the CSRC under relevant cross-border securities regulatory cooperation agreements, the CSRC may provide necessary assistance in accordance with the laws of the PRC. Any domestic entity or individual intending to provide documents and materials requested by an overseas securities regulatory agency in connection with an investigation may not provide such information without prior approval from the CSRC and competent authorities under the State Council. In addition, Article 11 of the Provisions on Strengthening Confidentiality and Archives Administration in Respect of Overseas Issuance and Listing of Securities by Domestic Enterprises which was jointly issued by the CSRC, the Ministry of Finance, the State Secrecy Administration and the State Archives Bureau on February 24, 2023 came into effect on March 31, 2023, and provides that, when an overseas securities regulator and the relevant competent authorities intends to conduct inspections or investigations to collect evidence from a domestic enterprise and any domestic securities firms and securities service agencies providing services regarding the overseas offering and listing activities of the domestic enterprise, the inspection or investigation shall be carried out under the appropriate cross-border regulatory cooperation agreement, and the CSRC or the relevant authorities shall provide the requisite assistance pursuant to the bilateral and multilateral cooperation mechanism. Further, any domestic company, securities firm and securities service agency shall obtain the consent of the CSRC or the relevant administrative authorities prior to cooperating in an inspection or investigation carried out by an overseas securities regulator or relevant administrative authorities or providing documents and materials for cooperating in the inspection or investigation.

As this regulation has recently been adopted, clarifying regulations have not been issued and companies in China and their counsel generally have little experience in assessing when permission must be obtained before releasing information to a foreign regulatory agency. If the Company were to provide information to any securities regulatory agency in violation of Article 26 or Article 11, it would be subject to fines and, if the information were deemed a state secret, government work secret or might jeopardize the national security of China or the public interest, as provided in turn negatively impactthe Confidentiality and Archives Provisions, it could cause the Company or the individuals responsible for the disclosure to be subject to criminal investigation. Likewise, if the Company refuses to provide information requested by any U.S. securities regulatory agency in circumstances that the Company believes would have caused it to violate Article 26 or Article 11, it will be subject in the United States to fines, penalties. While detailed interpretation of or implementation rules under Article 177, of Article 26 and Article 11 have yet to be promulgated, the inability of an overseas securities regulator to directly conduct an investigation or evidence collection activities within China may further increase difficulties that you may face in protecting your interests.

We are exposed to liabilities relating to environmental protection and safety laws and regulations.

Our operations are subject to comprehensive and frequently changing laws and regulations relating to environmental protection and health and safety. The discharge of waste and pollutants from our manufacturing operations into the environment may give rise to liabilities that may require us to incur costs to remedy such discharge. If we violate such laws or regulations, we may be required to implement corrective actions and could be subject to civil or criminal fines or penalties or other sanctions.

However, we cannot assure you that any environmental laws adopted in the future will not materially increase our operating costs and other expenses. We cannot assure you that we will not have to make significant capital or operating expenditures in the future in order to comply with existing or new laws and regulations or that we will comply with applicable environmental laws at all times. Such violations or liability could have a material adverse effect on our business, financial condition and results of operations.

Moreover, a slowdown or disruption in the global or China’s economyWe may have a materialrequire additional financing and adverse impact onour operations could be curtailed if we are unable to obtain required additional financing available to us. There is a risk that our business, results of operations and prospects would be materially and adversely affected by any global economic downturn or disruption or slowdown of China’s economy.

Future strategic alliances or acquisitions may have a material and adverse effect on our business, reputation and results of operations.when needed.

We may need to obtain additional debt or equity financing to fund the immediate development of Yunnan Runcangsheng and future capital expenditures. While we do not anticipate seeking additional financing in the immediate future, enter into strategic alliances with various third partiesany the issuance of additional equity securities may result in dilution to furtherthe holders of our outstanding shares of capital stock. Additional debt financing may include conditions that would restrict our freedom to operate our business, purposes from time to time. Strategic alliances with third parties could subject us to a number of risks, including risks associated with sharing proprietary information, non-performance by the counter-party, and an increase in expenses incurred in establishing new strategic alliances, any of which may materially and adversely affect our business. In addition, to the extent the strategic partner suffers negative publicity or harm to their reputation from events relating to their business, we may also suffer negative publicity or harm to our reputation by virtue of our association with such third parties, and we may have little ability to control or monitor their actions.as conditions that:

In addition, althoughWe cannot guarantee that we have no current acquisition plans, if we are presented with appropriate opportunities, we may acquirewill be able to obtain any additional assets, products, technologies or businessesfinancing on terms that are complementaryacceptable to our existing business, including businesses that are ownedus, or controlled by Mr. Lin or his affiliates. Future acquisitions and the subsequent integration of new assets and businesses into our own would require significant attention from our management and could result in a diversion of resources from our existing business, which in turn could have an adverse effect on our business operations. Acquired assets or businesses may not generate the financial results we expect. Furthermore, acquisitions could result in the use of substantial amounts of cash, potentially dilutive issuances of equity securities, the occurrence of significant goodwill impairment charges, amortization expenses for other intangible assets and exposure to potential unknown liabilities of the acquired business. Moreover, the costs of identifying and consummating acquisitions may be significant. In addition to possible shareholders’ approval, we may also have to obtain approvals and licenses from the relevant government authorities in the PRC for the acquisitions and to comply with any applicable PRC laws and regulations, which could result in increased costs and delay.

If we or our PRC subsidiaries acquire any domestic companies in China, such acquisition will be subject to PRC laws and regulations on foreign investment. We and our PRC subsidiaries are restricted or prohibited from directly acquiring interests in companies in certain industries under PRC laws and regulations. Our consolidated affiliated entities outside of the PRC are not subject to PRC laws and regulations on foreign investment and may acquire PRC companies operating in industries where foreign investments are restricted or prohibited. However, there are uncertainties with respect to the interpretation and application of PRC laws and regulations regarding indirect foreign investments in such industries.

We have limited business insurance coverage.

Insurance companies in China currently do not offer as extensive an array of insurance products as insurance companies do in more developed economies. We do not have any business liability or disruption insurance to cover our operations. We have determined that the costs of insuring for these risks and the difficulties associated with acquiring such insurance on commercially reasonable terms make it impractical for us to have such insurance. Any uninsured occurrence of business disruption may result in our incurring substantial costs and the diversion of resources, which could have an adverse effect on our results of operations and financial condition.at all.

General Risks Related to DoingAssociated with Business Operations in China

The PRC government exerts substantial influencehas significant oversight and discretion over the mannerconduct of a PRC company’s business operations or to exert control over any offering of securities conducted overseas and/or foreign investment in which we must conductChina-based issuers, and may intervene with or influence our business activities.operations, may limit or completely hinder our ability to offer or continue to offer securities to investors, and may cause the value of such securities to significantly decline or become worthless, as the government deems appropriate to further regulatory, political and societal goals.

The PRC government may intervene or influence our operations at any time, which could result in a material change in our operations and/or the value of our common stock. For example, the PRC government has exercisedrecently published new policies that significantly affected certain industries such as the education and continuesinternet industries, and we cannot rule out the possibility that the PRC government will release regulations or policies regarding any industry that could adversely affect the business, financial condition and results of operations of our company. Furthermore, the PRC government has also recently indicated an intent to exercise substantialexert more oversight and control over virtually every sector ofsecurities offerings and other capital markets activities that are conducted overseas and foreign investment in China-based companies. Any such action, once taken by the Chinese economy through regulation and state ownership. OurPRC government, could significantly limit or completely hinder our ability to operate in China may be harmed by changes in its laws and regulations, including those relating to taxation, import and export tariffs, environmental regulations, land use rights, property and other matters. We believe our operations in China are in material compliance with all applicable legal and regulatory requirements. However, the centraloffer or local governments of the jurisdictions in which we operate may impose new, stricter regulations or interpretations of existing regulations that would require additional expenditures and efforts on our part to ensure our compliance with such regulations or interpretations. Accordingly, government actions in the future, including any decision not to continue to support recent economic reformsoffer securities to investors and cause the value of such securities to return to a more centrally planned economysignificantly decline or regional or local variations in the implementation of economic policies, could have a significant effect on economic conditions in China or particular regions thereof.extreme cases, become worthless.

In addition, theThe PRC government through its variousinitiated a series of regulatory actions and statements to regulate business operations in China with little advance notice, including cracking down on illegal activities in the securities market, enhancing supervision over China-based companies listed overseas using variable interest entity (“VIE”) structures, adopting new measures to extend the scope of cybersecurity reviews and expanding anti-monopoly enforcement efforts. These statements and regulatory actions have yet to have an impact on our daily business operations, the ability to accept foreign investments or list our securities on a U.S. or other foreign exchange. Since these statements and regulatory actions are new, it is highly uncertain how soon legislative or administrative regulation making bodies will respond and what existing or new laws or regulations or detailed implementations and interpretations will be modified or promulgated, if any, and the potential impact such modified or new laws and regulations will have on our daily business operation, the ability to accept foreign investments and list our securities on an U.S. or other foreign exchange.

The CSRC has released draft rules for China-based companies seeking to conduct initial public offerings in foreign markets. The Chinese government agenciesmay exert more oversight and industry associations, is accumulating vast amounts of data into huge data bases intended to enable it to tighten control over its residents. As a resultofferings that are conducted overseas and foreign investment in China-based issuers, which could significantly limit or completely hinder our ability to offer or continue to offer our common stock to investors and could cause the value of a social credit system designedour common stock to significantly decline or become worthless.

On December 24, 2021, the CSRC released the Administrative Provisions of the State Council Regarding the Overseas Issuance and Listing of Securities by Domestic Enterprises (Draft for Comments) (the “Administrative Provisions”) and the PRC governmentMeasures for the Overseas Issuance of Securities and Listing Record-Filings by Domestic Enterprises (Draft for Comments) (the “Measures”). The Administrative Provisions and Measures lay out the filing regulation arrangement for both direct and indirect overseas listing and clarify the determination criteria for indirect overseas listing in overseas markets. The Administrative Provisions and Measures, if enacted, may subject us to reward or punish business enterprises, foreign and domestic,additional compliance requirement in the conductfuture. Any failure of their activities within the PRC, the PRC government is capable of exerting enormous influence over thoseus to fully comply with new regulatory requirements may significantly limit or completely hinder our ability to offer or continue to offer our common stock, cause significant disruption to our business enterprises,operations, and severely damage our reputation, which couldwould materially and adversely affect theirour financial condition and results of operations and financial condition.cause our common stock shares to significantly decline in value or become worthless.

UncertaintiesThe CSRC has released the Trial Measures requiring Chinese domestic companies to complete filings with the CSRC if they complete an overseas offering and listing of their securities.

The Trial Measures, regulations for the filing-based administration of direct and indirect overseas securities offerings and listings by domestic companies incorporated in Mainland China went into effect on March 31, 2023. We anticipate that as a domestic Chinese operating company with securities listed in the U. S., we will be required to make filings pursuant to the Trial Measures. Any filings we make in accordance with the Trial Measures will provide the Chinese Government with information regarding our operations. Reviewing information we provide may cause the PRC government to exert oversight and control over our operations, securities offerings and other capital markets activities. Any such action could significantly limit or completely hinder our ability to offer or continue to offer securities to investors and cause the value of such securities to significantly decline or in extreme cases, become worthless.

The CSRC has released Provisions on Strengthening the Confidentiality and Archives Administration Related to the Overseas Securities Offering and Listing by Domestic Enterprises which may limit the activities of or disclosures made by companies in the PRC which, directly or indirectly, list their securities overseas.

The Confidentiality and Archives Provisions, which went into effect March 31, 2023, require, among other items, that PRC domestic enterprises seeking to offer and list securities in overseas markets, establish an archival system which will maintain the confidentiality of information in accordance with applicable laws and regulations. Further, if a PRC domestic enterprise plans, directly or indirectly, to release documents or provide material that contain state secrets or government work secrets, or that will jeopardize national security or the public interest, it must strictly comply with all relevant governmental procedures and obtain approval of the appropriate regulatory before doing so. Although we are subject to the Confidentiality and Archives Provisions, we believe that none of the documents or materials we intend to provide to parties outside of the PRC contains materials that would require us to make any filing or obtain any approval of a Chinese regulatory authority. Nevertheless, the determination of whether information contains state secrets, government work secrets or jeopardizes national security or the public interest is subjective and any failure or perceived failure by us or our subsidiaries to comply with the confidentiality and archive administration requirements under the Confidentiality and Archives Provisions could cause us to be referred for criminal investigation and held liable for such violations by the authorities in China. Further, PRC regulatory authorities could use these regulations to limit our disclosures or interfere with our operations. Any determination that we have violated the Confidentiality and Archives Provisions or use of these provisions to limit our disclosures could cause the value of our common stock to significantly decline in value or become worthless.

You may have difficulty in effecting service of legal process or bringing actions in China against us or our management based on foreign laws.

We are a Colorado holding company which conducts our operations in China through wholly owned subsidiaries with direct equity ownership and most of our assets are and will be located outside the United States. Almost all of our operations will be conducted in China. In addition, nearly all of our officers and directors, including Quanzhong Lin, Huiliang Jiao and Tianfeng Li are PRC nationals and residents of China and all of their assets are located outside the United States. In addition, Yao-Te Wang is a resident of Taiwan and resides in Taiwan. Christopher Lee, our remaining director, resides outside of the United States for a significant portion of time. As a result, it may be difficult for you to effect service of process upon us or our directors and officers inside China or to bring actions against us or our management in China.

Shareholder claims that are common in the United States, including securities law class actions and fraud claims, generally are difficult to pursue as a matter of law or practicality in China. For example, in China, there are significant legal and other obstacles to obtaining information needed for shareholder investigations or litigation outside China or otherwise with respect to foreign entities. Although the local authorities in China may establish a regulatory cooperation mechanism with the securities regulatory authorities of another country or region to implement cross-border supervision and administration, such regulatory cooperation with the securities regulatory authorities in the Unities States have not been efficient in the absence of mutual and practical cooperation mechanism. According to Article 177 of the PRC Securities Law which became effective in March 2020, no overseas securities regulator is allowed to directly conduct an investigation or evidence collection activities within the territory of the PRC. Accordingly, without the consent of the competent PRC securities regulators and relevant authorities, no organization or individual may provide the documents and materials relating to securities business activities to overseas parties outside of the PRC.

You may have difficulty in enforcing foreign judgements in China against us or our management.

China does not have treaties providing for the reciprocal recognition and enforcement of judgments of courts with the United States and many other countries and regions. Even judgements from countries that have an enforcement treaty with China are often not enforceable in China. Therefore, recognition and enforcement in China of judgments of a court in any non-PRC jurisdiction in relation to any matter not subject to a binding arbitration provision may be difficult or impossible. It may also be difficult for you to enforce U.S. courts judgments based on violations of the civil liability provisions of the U.S. federal securities laws against us and our officers and directors, since most of them are residents of the PRC and those who are not residents of the PRC reside outside of the United States for all or a significant portion of time. In addition, there is uncertainty as to whether the courts of China would recognize or enforce judgments of U.S. courts.

Foreign exchange fluctuations may affect our business.

The functional currency utilized by our PRC Subsidiaries is the RMB and we accept payment for our products in RMB. Therefore, foreign exchange fluctuations may influence our business in unpredictable ways.

The value of the Renminbi against the U.S. dollar and other currencies may fluctuate and is affected by, among other things, changes in political and economic conditions and the foreign exchange policy adopted by the PRC government. For instance, in August 2015, the People’s Bank of China, or PBOC, changed the way it calculates the mid-point price of Renminbi against the U.S. dollar, requiring the market-makers who submit for reference rates to consider the previous day’s closing spot rate, foreign-exchange demand and supply as well as changes in major currency rates. In fiscal year 2019 and 2020, the value of the Renminbi depreciated by approximately 6.9% and 5.5% against the U.S. dollar, respectively. In fiscal year 2021 and 2022 the value of the Renminbi appreciated by approximately 7.4% and 3.2% against the U.S. dollar. It is difficult to predict how market forces or PRC or U.S. government policy, including any interest rate increases by the Federal Reserve, may impact the exchange rate between the Renminbi and the U.S. dollar in the future. There remains significant international pressure on the PRC government to adopt a more flexible currency policy, including from the U.S. government, which has threatened to label China as a “currency manipulator,” which could result in greater fluctuation of the Renminbi against the U.S. dollar.

A substantial percentage of our revenues and costs are denominated in Renminbi, and a significant portion of our assets are also denominated in Renminbi. We are a holding company and we rely on dividends, loans and other distributions on equity paid by our operating subsidiaries in China. Any significant fluctuations in the value of the Renminbi may materially and adversely affect our liquidity and cash flows. Appreciation of the U.S. dollar against the Renminbi would have a negative effect on the U.S. dollar amount we would receive. Conversely, to the extent that we need to convert U.S. dollars into Renminbi for our operations, appreciation of the Renminbi against the U.S. dollar would have an adverse effect on the Renminbi amount we would receive.

Inflation could pose a risk to our business.

Inflation is an important factor that must be considered as we move forward. A change in the rate of inflation could influence the profits that we generate from our business. When the rate of inflation rises, the operational costs of running our company would increase, such as labor costs, raw materials and public utilities, affecting our ability to provide our services at competitive prices. An increase in the rate of inflation would force our clients to search for other service providers, causing us to lose business and revenue.

Changes in the policies, regulations, rules and the enforcement of laws of the PRC government may be quick with little advance notice and could have a significant impact upon the business we may be able to conduct in the PRC and the profitability of such business.

The PRC’s economy is in a transition from a planned economy to a market oriented economy subject to five-year and annual plans adopted by the central government that set national economic development goals. Policies of the PRC government can have significant effects on the economic conditions of the PRC. The PRC government has confirmed that economic development will follow the model of a market economy. Under this direction, we believe that the PRC will continue to strengthen its economic and trading relationships with foreign countries and business development in the PRC will follow market forces. While we believe that this trend will continue, we cannot assure you that this will be the case. Changes in policies, regulations, rules and the enforcement of laws by the PRC government, which changes may be quick with little advance notice, could adversely affect our interests by. Although the PRC government has been pursuing economic reform policies for more than two decades, we cannot assure you that the government will continue to pursue such policies or that such policies may not be significantly altered, especially in the event of a change in leadership, social or political disruption, or other circumstances affecting the PRC’s political, economic and social environment.

There are uncertainties regarding the interpretation and enforcement of PRC laws, rules and regulations could limit the legal protections available to you and us.regulations.

Most of our operations are conducted in the PRC and are governed by PRC laws, rules and regulations. Our PRC Subsidiaries are subject to laws, rules and regulations applicable to foreign investment in China. The PRC legal system is a civil law system based on written statutes. Unlike the common law systems, it is a system, in which legal casesprior court decisions may be cited for reference but have limited value as precedents. precedential value.

In the late 1970s,1979, the PRC government began to promulgate a comprehensive system of laws, rules and regulations governing economic matters in general. The overall effectHowever, China has not developed a fully integrated legal system, and recently enacted laws, rules and regulations may not sufficiently cover all aspects of legislation over the past three decades has significantly increased the protections afforded to various forms of foreigneconomic activities in China or private-sector investment in China. Our PRC subsidiary ismay be subject to lawssignificant degree of interpretation by PRC regulatory agencies and regulations applicable to various PRC laws and regulations generally applicable to companies in China. However, sincecourts. In particular, because these laws, rules and regulations are relatively new, and because of the PRC legal system continueslimited number of published decisions and the non-precedential nature of these decisions, and because the laws, rules and regulations often give the relevant regulator significant discretion in how to rapidly evolve,enforce them, the interpretations of many laws, regulations and rules are not always uniforminterpretation and enforcement of these laws, rules and regulations involve uncertainties and can be inconsistent and unpredictable. Therefore, it is possible that our existing operations may be found not to be in full compliance with relevant laws and regulations. In addition, the PRC legal system is based in part on government policies and internal rules, some of which are not published on a timely basis or at all, and which may have a retroactive effect. As a result, we may not be aware of our violation of these policies and rules involve uncertainties.until after the occurrence of the violation.

From time to time, we may have to resort toAny administrative and court proceedings to enforce our legal rights. However, sincein China may be protracted, resulting in substantial costs and diversion of resources and management attention. Since PRC administrative and court authorities have significant discretion in interpreting and implementing statutory and contractual terms, it may be more difficult to evaluate the outcome of administrative and court proceedings and the level of legal protection we enjoy than in more developed legal systems. Furthermore,These uncertainties may impede our ability to enforce the PRC legal system is based in part on government policiescontracts we have entered into and internal rules (some of which are not published in a timely manner or at all) that may have retroactive effect. As a result, we may not be aware of our violation of these policies and rules until sometime after the violation. Such uncertainties, including uncertainty over the scope and effect of our contractual, property (including intellectual property) and procedural rights, and any failure to respond to changes in the regulatory environment in China could materially and adversely affect our business, financial condition and impede our ability to continue ourresults of operations.

ChangesPRC regulations regarding acquisitions impose significant regulatory approval and review requirements, which could make it more difficult for us to pursue growth through acquisitions.

Under the PRC Anti-Monopoly Law, companies undertaking acquisitions relating to businesses in China’s economic, politicalChina must notify the anti-monopoly enforcement agency in advance of any transaction where the parties’ revenues in the China market exceed certain thresholds and the buyer would obtain control of, or social conditionsdecisive influence over, the other party. In addition, on August 8, 2006, six PRC regulatory agencies, including the MOFCOM, the State-Owned Assets Supervision and Administration Commission, the State Administration of Taxation, the SAIC, the China Securities Regulatory Commission, or the CSRC, and the State Administration of Foreign Exchange, or SAFE, jointly adopted Regulations on Mergers and Acquisitions of Domestic Enterprises by Foreign Investors, or the M&A Rules, which came into effect on September 8, 2006 and was amended on June 22, 2009. Under the M&A Rules, the approval of MOFCOM must be obtained in circumstances where overseas companies established or controlled by PRC enterprises or residents acquire domestic companies affiliated with such PRC enterprises or residents. Applicable PRC laws, rules and regulations also require certain merger and acquisition transactions to be subject to security review.

Our business may be subject to a variety of PRC laws and other obligations regarding cybersecurity and data protection.

Our business may be subject to PRC laws relating to the collection, use, sharing, retention, security, and transfer of confidential and private information, such as personal information and other data. These laws continue to develop, and the PRC government policiesmay adopt other rules and regulations in the future. Non-compliance could result in penalties or other significant legal liabilities.

Pursuant to the PRC Cybersecurity Law, which was promulgated by the Standing Committee of the National People’s Congress on November 7, 2016 and took effect on June 1, 2017, personal information and important data collected and generated by a critical information infrastructure operator in the course of its operations in China must be stored in China, and if a critical information infrastructure operator purchases internet products and services that affects or may affect national security, it should be subject to cybersecurity review by the Cyberspace Administration of China (“CAC”). Due to the lack of further interpretations, the exact scope of “critical information infrastructure operator” remains unclear.

On December 28, 2021, twelve Chinese government agencies jointly promulgated the Measures for Cybersecurity Review, which became effective February 15, 2022, set forth the cybersecurity review mechanism for critical information infrastructure operators, and provided that critical information infrastructure operators who intend to purchase internet products and services that affect or may affect national security shall be subject to a cybersecurity review. On June 10, 2021, the Standing Committee of the National People’s Congress promulgated the PRC Data Security Law, which took effect in September 2021. The Data Security Law provides for a security review procedure for data activities that may affect national security. Moreover, the State Internet Information Office issued the Measures of Cybersecurity Review (Revised Draft for Comments, not yet effective) on July 10, 2021, which requires operators with personal information of more than 1 million users who want to list abroad to file a cybersecurity review with the CAC. Furthermore, the General Office of the Central Committee of the Communist Party of China and the General Office of the State Council jointly issued the Opinions on Severe and Lawful Crackdown on Illegal Securities Activities, which was available to the public on July 6, 2021. These opinions emphasized the need to strengthen the administration over illegal securities activities and the supervision of overseas listings by China-based companies. These opinions proposed to take effective measures, such as promoting the construction of relevant regulatory systems, to deal with the risks and incidents facing China-based overseas-listed companies and the demand for cybersecurity and data privacy protection. As these laws, opinions and the draft measures were recently issued, official guidance and interpretation of these remain unclear in several respects at this time, and the PRC government authorities have wide discretion in the interpretation and enforcement of these laws, opinions and draft measures. Therefore, it is uncertain whether the future regulatory changes would impose additional restrictions on our business

The Data Security Law also sets forth the data security protection obligations for entities and individuals handling personal data, including that no entity or individual may acquire such data by stealing or other illegal means, and the collection and use of such data should not exceed the necessary limits. The costs of compliance with, and other burdens imposed by, PRC Cybersecurity Law and any other cybersecurity and related laws may limit the utility of our internet sales channel of distribution and could have an adverse impact on our business. Further, if the enacted version of the Measures for Cybersecurity Review mandates clearance of cybersecurity review and other specific actions to be completed by companies like us, we face uncertainties as to whether such clearance can be timely obtained, or at all.

There remains uncertainty as to how the Draft Measures will be interpreted or implemented and whether the PRC regulatory agencies, including the CAC, may adopt new laws, regulations, rules, or detailed implementation and interpretation related to the Draft Measures. If any such new laws, regulations, rules, or implementation and interpretation comes into effect, we will take all reasonable measures and actions to comply and to minimize the adverse effect of such laws on us.

We cannot assure you that PRC regulatory agencies, including the CAC, would take the same view as we do, and there is no assurance that we can fully or timely comply with such laws. In the event that we are subject to any mandatory cybersecurity review and other specific actions required by the CAC, we face uncertainty as to whether any clearance or other required actions can be timely completed, or at all. Given such uncertainty, we may be further required to shut down our website, or face other penalties, which could materially and adversely affect our business, financial condition, and results of operations.

PRC regulations relating to investments in offshore companies by PRC residents may subject our PRC-resident beneficial owners or our PRC Subsidiaries to liability or penalties, limit our ability to inject capital into our PRC Subsidiaries or limit our PRC Subsidiaries’ ability to increase their registered capital or distribute profits.

SAFE promulgated the Circular on Relevant Issues Concerning Foreign Exchange Control on Domestic Residents’ Offshore Investment and Financing and Roundtrip Investment through Special Purpose Vehicles, or SAFE Circular 37, on July 4, 2014, which replaced the former circular commonly known as “SAFE Circular 75.” SAFE Circular 37 requires PRC residents to register with local branches of SAFE in connection with their direct establishment or indirect control of an offshore entity, for the purpose of overseas investment and financing, with such PRC residents’ legally owned assets or equity interests in domestic enterprises or offshore assets or interests, referred to in SAFE Circular 37 as a “special purpose vehicle.” SAFE Circular 37 further requires amendment to the registration in the event of any significant changes with respect to the special purpose vehicle, such as changes in capital contributed by PRC individuals, share transfers or exchanges, mergers, divisions or other material events. In the event that a PRC shareholder holding interests in a special purpose vehicle fails to fulfill the required SAFE registration, the PRC Subsidiaries of that special purpose vehicle may be prohibited from making profit distributions to the offshore parent and from carrying out subsequent cross-border foreign exchange activities, and the special purpose vehicle may be restricted in its ability to contribute additional capital into its PRC Subsidiaries. Moreover, failure to comply with the various SAFE registration requirements could result in liability under PRC law for evasion of foreign exchange controls.

As we have little control over the registration procedures, we cannot assure you of the outcome of such registration, and we cannot assure you that any of our shareholders who are PRC residents will submit the required registration or amend or update their registration as required under Circular 37 and the Notice of the State Administration of Foreign Exchange on Further Simplifying and Improving the Foreign Exchange Administration Policies for Direct Investment [Hui Fa (2015) No.13] issued by SAFE with effect from June 1, 2015, or SAFE Notice 13, in a timely manner or at all. In addition, we may not be aware of the identities of all of our beneficial owners who are PRC residents. We do not have control over our beneficial owners and cannot assure you that all of our PRC-resident beneficial owners will comply with SAFE Circular 37 and subsequent implementation rules. The failure of our current and future beneficial owners who are PRC residents to register or amend their SAFE registrations in a timely manner pursuant to SAFE Circular 37 and subsequent implementation rules, may subject the beneficial owners or our PRC Subsidiaries to fines and legal sanctions. On February 13, 2015, SAFE promulgated a Notice on Further Simplifying and Improving Foreign Exchange Administration Policy on Direct Investment, or SAFE Notice 13, which became effective on June 1, 2015. Pursuant to SAFE Notice 13, entities and individuals are required to apply for foreign exchange registration of foreign direct investment and overseas direct investment, including those required under the SAFE Circular 37, with designated domestic banks, instead of SAFE. The designated domestic banks will directly review the applications and conduct the registration.

Furthermore, since it is unclear how the new SAFE regulations, and any future regulation concerning offshore or cross-border transactions, will be interpreted, amended and implemented by the relevant PRC government authorities, we cannot predict how these regulations will affect our business operations or future strategy. Failure to register or comply with relevant requirements may also limit our ability to contribute additional capital to our PRC Subsidiaries and limit our PRC Subsidiaries’ ability to distribute dividends to our company. These risks may have a material adverse effect on our business, and operations.

All of our assets and clients are in China. Accordingly, our business, financial condition, results of operations and prospects may be influenced to a significant degree by political, economic and social conditions in China generally and by continued economic growth in China as a whole.

China’s economy differs from the economies of most developed countries in many respects, including the level of government involvement, level of development, growth rate, control of foreign exchange and allocation of resources. Although the PRC government has implemented measures since the late 1970s emphasizing the utilization of market forces for economic reform, the reduction of state ownership of productive assets, and the establishment of improved corporate governance in business enterprises, a substantial portion of productive assets in China is still owned by the PRC government. In addition, the PRC government continues to play a significant role in regulating industry development by imposing industrial policies. The PRC government also exercises significant control over the PRC economic growth through allocating resources, controlling payment of foreign currency-denominated obligations, setting monetary policy, and providing preferential treatment to particular industries or companies.

While China’s economy has experienced significant growth over the past decades, growth has been uneven, both geographically and among various sectors of the economy, and may slow down in the future. Some of the government measures may benefit the overall Chinese economy but, may have a negative effect on us. For example, our financial condition and results of operations may be adversely affected by government control over capital investments or changes in tax regulations. Any stimulus measures designed to boost the Chinese economy may contribute to higher inflation, which could adversely affect our results of operations and financial condition. For example, certain operating costs and expenses, such as employee compensation and office operating expenses, may increase as a result of higher inflation.

As exemplified by the outbreak of Covid-19, natural disasters, public health crises, political crises, and other catastrophic events or other events outside of our control may adversely impact our business, the welfare of our customers or the operations of third parties on which we depend and could impact consumer spending.

Our business and operating results are subject to, and can suffer from, the adverse effects of natural disasters, such as earthquakes, tsunamis, power shortages or outages, floods or monsoons, public health crises, such as pandemics and epidemics, political crises, such as terrorism, war, political instability or other conflict, or other events outside of our control. Such conditions can also impact the facilities and business operations of our suppliers, third-party service providers or customers which, in turn, could adversely affect our business operations. Moreover, these types of events could negatively impact consumer spending in the impacted regions or depending upon the severity, globally, which could adversely impact our operating results. For example, in December 2019, an outbreak of a new strain of coronavirus, COVID-19, emerged in Wuhan, China. Within weeks, despite efforts to contain the virus in China that included widespread shutdowns of cities and businesses, the number of those infected grew significantly, and beyond China’s borders. The spread of the virus has adversely affected businesses, supply chains, business travel, commodity prices, consumer confidence and business sentiment throughout China and elsewhere. At this point, the full extent to which the coronavirus may impact our results remains uncertain.

If relations between the United States and China worsen, investorsWe may be unwilling to hold or buy our stock and our stock price may decrease, and the Chinese economy may be negatively impacted.

At various times during recent years, the United States (“U.S.”) and China have had significant disagreements over political and economic issues. Most recently, a dispute has erupted over the outbreak of COVID-19 in Wuhan, China, and the initial disclosures made by the Chinese government with respect to the outbreak. Controversies may arise in the future between these two countries. Any political or trade controversies between the United States and China, whether or not directly related to our business, could reduce the price of our common stock.

The outbreak of Covid-19 has caused many politicians in the United States to question its dependence upon Chinatreated as a source of certain products. Wereresident enterprise for PRC tax purposes under the United StatesPRC Enterprise Income Tax Law, and we may therefore be subject to adopt a policy intended to establish sources for certain products in the United States or otherwise outside of China, it could negatively impact the Chinese economy and demand for our products.

The slowing economic growth in China may assert a negative impactPRC income tax on our operation and financial results.

After experiencing rapid growth for more than a decade, China’s economy has been hit by shrinking foreign and domestic demand, weak investment, factory overcapacity and oversupply in the property market, and has experienced a painful slowdown in the last two years, exacerbated by the outbreak of Covid-19. As the government tries to shift the growth engine away from manufacturing and debt-fueled investment toward the services sector and consumer spending, the outlook of the Chinese economy is uncertain.

Under the EIT Law, we may be classified as a PRC “resident enterprise” for PRC enterprise income tax purposes. Such classification would likely result in unfavorable tax consequences to us and our non-PRC shareholders and have a material adverse effect on our results of operations and the value of your investment.global income.

Under the PRC Enterprise Income Tax Law or the EIT Law, that became effectiveand its implementing rules, both of which came into effect on January 1, 2008, an enterpriseenterprises established under the laws of jurisdictions outside the PRCof China with “de facto management bodies” withinlocated in China may be considered PRC tax resident enterprises for tax purposes and may be subject to the PRC is considered a “resident enterprise” for PRC enterprise income tax purposes and is generally subject to a uniformat the rate of 25% enterprise income tax rate on its worldwidetheir global income. Under the implementation rules to the EIT Law, a “de“De facto management body” is defined asrefers to a managing body that has materialexercises substantive and overall management and control over the manufacturingproduction and business, operations, personnel, accounting books and human resources, finances and propertiesassets of an enterprise. In addition, a circular, known as SAT Circular 82, issued in April 2009 and amended in January 2014 by theThe State Administration of Taxation orissued the SAT, specifies that certain offshore incorporated enterprises controlled by PRC enterprises or PRC enterprise groups will be classifiedNotice Regarding the Determination of Chinese-Controlled Offshore-Incorporated Enterprises as PRC resident enterprises ifTax Resident Enterprises on the following are locatedbasis of de facto management bodies, or resident in the PRC: senior management personnel and departments that are responsible for daily production, operation and management; financial and personnel decision making bodies; key properties, accounting books, company seal, and minutes of board meetings and shareholders’ meetings; and half or more of the senior management or directors having voting rights. Further to SAT Circular 82, the SAT issued a bulletin, known as SAT Bulletin 45, which took effect in September 2011, to provide more guidance on the implementation of SATApril 22, 2009. Circular 82 and clarifyprovides certain specific criteria for determining whether the reporting and filing obligations“de facto management body” of such “Chinese-controlled offshore incorporated resident enterprises.” SAT Bulletin 45 provides procedures and administrative details for the determination of resident status and administration on post-determination matters.a Chinese-controlled offshore-incorporated enterprise is located in China. Although both SAT Circular 82 and SAT Bulletin 45 only applyapplies to offshore enterprises controlled by PRC enterprises, or PRC enterprise groups, not those controlled by PRC individualsforeign enterprises or foreign individuals, the determining criteria set forth in SAT Circular 82 and SAT Bulletin 45 may reflect the SAT’sState Administration of Taxation’s general position on how the “de facto management body” test should be applied in determining the tax resident status of offshore enterprises, regardless of whether they are controlled by PRC enterprises, PRC enterprise groups or by PRC or foreign individuals.

We are subject to the 25% enterprise income tax. However, since all of our activities are in China,enterprises. If we, do not believe AiXinZhonghong or our Company meet all of the conditionsAiXin Colorado and AiXin BVI, were to be classified as a PRC resident enterprise., However, if we engage in activities outside of Mainland China, the PRC tax authorities may classify AiXinZhonghong or our company asconsidered a PRC resident enterprise, whichwe would result in a number of unfavorable PRC tax consequences. First, we or our offshore subsidiaries will be subject to the uniform 25% enterprise income tax on our world-wide income, which could materially reduce our net income. In addition, we will also be subject to PRC enterprise income tax reporting obligations.

Furthermore, although dividends paid by one PRC tax resident enterprise to an offshore incorporatedat the rate of 25% on our global income. In such case, our profitability and cash flow may be materially reduced as a result of our global income being taxed under the Enterprise Income Tax Law. We believe that none of our entities outside of China is a PRC resident enterprise controlled byfor PRC enterprises or PRCtax purposes. However, the tax resident status of an enterprise groups should qualify as “tax-exempt income” under the EIT Law and Bulletin 45, we cannot assure you that dividends paid by our PRC subsidiary to AiXin HK will not beis subject to a 10% withholding tax, as the PRC foreign exchange control authorities, which enforce the withholding tax on dividends, anddetermination by the PRC tax authorities have not yet issued guidanceand uncertainties remain with respect to the processinginterpretation of outbound remittances to entities that are treated as resident enterprises for PRC enterprise income tax purposes but not controlled by PRC enterprises or PRC enterprise groups.the term “de facto management body.”

Finally, dividends payable by us to our investors and gains on the sale of our shares may be become subject to PRC withholding tax.

WeRestrictions on currency exchange may not be ablelimit our ability to obtain certain benefits under the relevant tax treaty on dividends paid byutilize our PRC subsidiaries to us through AiXin HK.revenue effectively.

We are a holding company incorporatedwith no material operations of our own. We conduct substantially all of our operations through the operating companies established in the PRC. Substantially all of our revenue is denominated in Renminbi. The Renminbi is currently convertible under the laws of Colorado“current account,” which includes dividends, trade and as such rely on dividendsservice-related foreign exchange transactions, but requires approval from or registration with appropriate government authorities or designated banks under the “capital account,” which includes foreign direct investment and other distributions on equityloans, including loans we may secure from our onshore subsidiaries. The relevant PRC subsidiaries to satisfy part of our liquidity requirements. Pursuant to the EIT Law, a withholding tax rate of 10% currently applies to dividends paid by a PRC “resident enterprise” to a foreign enterprise investor, unless any such foreign investor’s jurisdiction of incorporation has a tax treaty with China that provides for preferential tax treatment. Pursuant to a Notice 112 issued by the SAT in January 2008 and the Arrangement between the Mainland China and the Hong Kong Special Administrative Region on the Avoidance of Double Taxation and Prevention of Fiscal Evasion,governmental authorities or the Double Taxation Arrangement (Hong Kong), such withholding tax ratelocal bank may be loweredlimit or eliminate our ability to 5% if the PRC enterprise is at least 25% held by a Hong Kong enterprise at all times within the 12-month period immediately prior to distribution of the dividends and is determined by the relevant PRC tax authority to have satisfied other conditions and requirements under the Double Tax Avoidance Arrangement (Hong Kong) and other applicable PRC laws. Pursuant to a SAT Circular 601 issued by the SAT in October 2009, non-resident enterprises that cannot provide valid supporting documents as “beneficial owners” may not be approved to enjoy tax treaty benefits, and “beneficial owners” refers to individuals, enterprises or other organizations which are normally engaged in substantive operations. These rules also set forth certain adverse factors on the recognition of a “beneficial owner”. Specifically, they expressly exclude a “conduit company,” or any company established for the purposes of avoiding or reducing tax obligations or transferring or accumulating profits and not engaged in actual operations such as manufacturing, sales or management, from being a “beneficial owner.” Whether a non-resident company may obtain tax benefits under the relevant tax treaty will be subject to approval of the relevant PRC tax authority and will be determined by the PRC tax authority on a case-by-case basis. In June 2012, the SAT further provides in an announcement that a comprehensive analysis should be made when determining the beneficial owner status based on various factors supported by documents including the articles of association, financial statements, records of cash movements, board meeting minutes, board resolutions, staffing and materials, relevant expenditures, functions and risk assumption as well as relevant contracts and other information. Our Hong Kong subsidiary has not applied for the approval for a withholding tax rate of 5% from the local tax authority as our PRC subsidiaries have not paid dividends due to their loss-making status in the past and will not be able to pay dividendspurchase foreign currencies in the future until they have achieved accumulated profits.We plan to have our Hong Kong subsidiary assume some managerial and administrative functions, as well as conduct other business functions in the future. Once we implement such a plan, we do not believe that our Hong Kong subsidiary will be considered a conduit company as defined under SAT Circular 601. However, our Hong Kong subsidiary as currently situated may be considered a conduit company and we cannot assure you that the relevant PRC tax authority will agree with our view when our Hong Kong subsidiary applies to obtain tax benefits under the relevant tax treaty in the future. As a result, although our PRC subsidiary is currently wholly owned by our Hong Kong subsidiary, we may not be able to enjoy the preferential withholding tax rate of 5% under the Double Taxation Arrangement (Hong Kong) and therefore be subject to withholding tax at a rate of 10% with respect to dividends to be paid by our PRC subsidiary to AiXin HK.

Enhanced scrutiny over acquisition transactions by the PRC tax authorities may have a negative impact on potential acquisitions we may pursue in the future.for current account transactions.

In connection with the EIT Law, the MinistrySince 2016, PRC governmental authorities have imposed more stringent restrictions on outbound capital flows, including heightened scrutiny over “irrational” overseas investments for certain industries, as well as over four kinds of Finance and the SAT jointly issued a SAT Circular 59 in April 2009, and the SAT issued a SAT Circular 698 in December 2009. Both SAT Circular 59 and Circular 698 became effective retroactively on January 1, 2008.“abnormal” offshore investments, which are:

According to SAT Circular 698, where a non-resident enterprise transfers the equity interests of a PRC “resident enterprise” indirectly by disposition of the equity interests of an overseas holding company, or an Indirect Transfer, and the overseas holding company is located in a tax jurisdiction that: (1) has an effective tax rate less than 12.5% or (2) does not tax foreign income of its residents, the non-resident enterprise, being the transferor, must report to the relevant tax authority of the PRC “resident enterprise” this Indirect Transfer. Using a “substance over form” principle, the PRC tax authority may disregard the existence of the overseas holding company if it lacks a reasonable commercial purpose and was● investments through enterprises established for the purpose of reducing, avoiding or deferring PRC tax. Asonly a result, gains derived from such Indirect Transfer may be subject to PRC withholding tax at up to 10%. SAT Circular 698 also provides that, where a non-PRC resident enterprise transfers its equity interests in a PRC “resident enterprise” to its related parties at a price lower than the fair market value, the relevant tax authority has the power to make a reasonable adjustment to the taxable income of the transaction. In addition, the PRC “resident enterprise” is supposed to provide necessary assistance to support the enforcement of SAT Circular 698.few months without substantive operation;

There is little guidance● investments with amounts far exceeding the registered capital of the onshore parent and practical experience as to the application of SAT Circular 698, and it is possible that the PRC tax authorities would pursue our offshore shareholders to conduct a filing regarding our offshore restructuring transactions where non-resident investors were involved and would request our PRC subsidiary to assist in providing such disclosures. In addition, if our offshore subsidiaries are deemed to lack substance they could be disregardednot supported by the PRC tax authorities. As a result, we and our non-resident investors may become at risk of being taxed under SAT Circular 698 and may be required to expend valuable resources to comply with SAT Circular 698 or to establish that we should not be taxed under SAT Circular 698, which may have a material adverse effectits business performance shown on our financial condition and results of operations or the non-resident investors’ investments in us.statements;

By promulgating● investments in targets which are unrelated to an onshore parent’s main business; and implementing these circulars, the PRC tax authorities have enhanced their scrutiny over the direct or indirect transfer of equity interests in a PRC resident enterprise by a non-resident enterprise. The PRC tax authorities have the discretion under SAT Circular 59 and SAT Circular 698 to make adjustments to the taxable capital gains based on the difference between the fair value of the equity interests transferred and the cost of investment. Although we currently have no confirmed plans to pursue any acquisitions in China or elsewhere in the world, we may pursue acquisitions in the future that may involve complex corporate structures. If we are considered a non-resident enterprise under the EIT Law and if the PRC tax authorities make adjustments under SAT Circular 59 or SAT Circular 698, our income tax costs associated with such potential acquisitions will be increased, which may have an adverse effect on our financial condition and results of operations.

PRC regulations establish complex procedures for some acquisitions of PRC companies by foreign investors, which could make it more difficult for us to pursue growth through acquisitions in China.

Six PRC regulatory agencies promulgated regulations effective on September 8, 2006 that are commonly referred to as the M&A Rules. The M&A Rules establish procedures and requirements that could make some acquisitions● investments with abnormal sources of PRC companies by foreign investors more time-consuming and complex, including requirements in some instances that the Ministry of Commerce be notified in advance of any change-of-control transaction in which a foreign investor takes control of a PRC domestic enterprise. In addition, national security review rules issued by the PRC governmental authorities in 2011 require acquisitions by foreign investors of domestic companies engaged in military-related or certain other industries that are crucial to national securityRenminbi funding suspected to be subject to prior security review. Moreover, the Anti-Monopoly Law requires that the Ministryinvolved in illegal transfer of Commerce shall be notified in advanceassets or illegal operation of any concentration of undertaking if certain thresholds are triggered. We may expand our business in part by acquiring complementary businesses. Complying with the requirements of the M&A Rules, security review rules and other PRC regulations to complete such transactions could be time-consuming, and any required approval processes, including obtaining approval from the Ministry of Commerce, may delay or inhibit our ability to complete such transactions, which could affect our ability to expand our business or maintain our market share.underground banking.

PRC regulations relatingOn January 26, 2017, SAFE promulgated the Circular on Further Improving Reform of Foreign Exchange Administration and Optimizing Genuineness and Compliance Verification, which tightened the authenticity and compliance verification of cross-border transactions and cross-border capital flow, including requiring banks to verify board resolutions, tax filing forms and audited financial statements before wiring foreign invested enterprises’ foreign exchange dividend distribution of over US$50,000. In addition, the Outbound Investment Sensitive Industry Catalogue (2018) lists certain sensitive industries that are subject to NDRC pre-approval requirements prior to remitting investment funds offshore, investment activities by PRC residents may limitwhich subjects us to increased approval requirements and restrictions should we have overseas investments. Since a significant amount of our PRC subsidiaries’ ability to increase their registered capital or distribute profits to us,revenue is denominated in Renminbi, any existing and future restrictions on currency exchange may limit our ability to inject capital intoutilize revenue generated in Renminbi to fund our PRC subsidiaries, or otherwise expose us to liability and penalties under PRC law.

The PRC State Administrationbusiness activities outside of Foreign Exchange, or the SAFE, promulgated in October 2005 a SAFE Circular 75 that requires PRC citizens or residents to register with SAFE or its local branch in connection with their establishment or control of an offshore entity established for the purpose of overseas equity financing involving a roundtrip investment whereby the offshore entity acquires or controls onshore assets or equity interests held by the PRC, citizens or residents. In addition, such PRC citizens or residents must update their SAFE registrations when the offshore special purpose vehicle undergoes material events relating to increases or decreases in investment amount, transfers or exchanges of shares, mergers or divisions, long-term equity ormake investments, service any debt investments, external guarantees, or other material events that do not involve roundtrip investments. Subsequent regulations further clarified that PRC subsidiaries of an offshore company governed by the SAFE regulations are required to coordinate and supervise the filing of SAFE registrations in a timely manner by the offshore holding company’s shareholders who are PRC citizens or residents. If these shareholders fail to comply, the PRC subsidiaries are required to report to the local SAFE branches. If our shareholders who are PRC citizens or residents do not complete their registration with the local SAFE branches, our PRC subsidiary may be prohibited from distributing its profits and proceeds from any reduction in capital, share transfer or liquidation to us, and we may be restricted in our ability to contribute additional capital to our PRC subsidiary. Moreover, failure to comply with the various SAFE registration requirements described above could result in liabilities for our PRC subsidiary under PRC laws for evasionincur outside of applicable foreign exchange restrictions, including (1) the requirement by SAFE to return the foreign exchange remitted overseas within a period specified by SAFE, with a fine of up to 30% of the total amount of foreign exchange remitted overseas and deemed to have been evasive and (2) in circumstances involving serious violations, a fine of no less than 30% of and up to the total amount of remitted foreign exchange deemed evasive. Furthermore, the persons-in-charge and other persons at our PRC subsidiary who are held directly liable for the violations may be subject to criminal sanctions.

These foreign exchange regulations provide that PRC residents include both PRC citizens, meaning any individual who holds a PRC passport or resident identification card, and individuals who are non-PRC citizens but primarily reside in the PRC due to their economic ties to the PRC. We have requested PRC residents holding direct or indirect interest in our company to our knowledge to make the necessary applications, filings and amendments as required under SAFE Circular 75 and other related rules. However, we cannot assure you that all of our shareholders who are PRC citizens and hold interests in us have registered with the local SAFE branch as required under SAFE Circular 75. In addition, we may not be informed of the identities of all the PRC residents holding direct or indirect interest in our company, and we cannot provide any assurances that these PRC residents will comply with our request to make or obtain any applicable registrations or comply with other requirements required by SAFE Circular 75 or other related rules. A failure by our PRC resident shareholders or future PRC resident shareholders to comply with the SAFE regulations, if SAFE requires it, could subject us to fines or other legal sanctions, restrict our cross-border investment activities, limit our PRC subsidiary’s ability to make distributionsChina or pay dividends or affect our ownership structure, which could adversely affect our business and prospects.

Furthermore, it is unclear how these regulations, and any future regulation concerning offshore or cross-border transactions, will be interpreted, amended and implemented by the relevant government authorities. We cannot predict how these regulations will affect our business operations or future strategy. For example, we may be subject to a more stringent review and approval process with respect to our foreign exchange activities, such as remittance of dividends and foreign-currency-denominated borrowings, which may adversely affect our financial condition and results of operations. In addition, if we decide to acquire a PRC domestic company, either we or the owners of such company, as the case may be, may not be able to obtain the necessary approvals or complete the necessary filings and registrations required by the foreign exchange regulations. This may restrict our ability to implement our acquisition strategy and could adversely affect our business and prospects.

Fluctuations in exchange rates could have a material adverse effect on our results of operations and the value of your investment.

Substantially all of our revenues and expenditures are denominated in RMB. As the functional currency for our PRC subsidiary and consolidated affiliated entities is RMB, fluctuations in the exchange rate may cause us to incur foreign exchange losses on any foreign currency holdings they may have. If we decide to convert our RMB into U.S. dollars for the purpose of making payments for dividends on our ordinary shares or for other business purposes, appreciation of the U.S. dollar against the RMB would have a negative effect on the U.S. dollar amount available to us.

The value of the Renminbi against the U.S. dollar and other currencies is affected by, among other things, changes in China’s political and economic conditions and China’s foreign exchange policies. On July 21, 2005, the PRC government changed its decade-old policy of pegging the value of the RMB to the U.S. dollar, and the Renminbi appreciated more than 20% against the U.S. dollar over the following three years. It is difficult to predict how long the current situation may last and when and how it may change again. There remains significant international pressure on the PRC government to adopt a substantial liberalization of its currency policy, which could result in a further and more significant appreciation in the value of the Renminbi against the U.S. dollar. Significant revaluation of the Renminbi may have a material and adverse effect on your investment. For example, to the extent that we need to convert U.S. dollars we receive from securities offerings outside of China into Renminbi for our operations, appreciation of the Renminbi against the U.S. dollar would have an adverse effect on the Renminbi amount we would receive from the conversion. Conversely, if we decide to convert our Renminbi into U.S. dollars for the purpose of making payments for dividends on our common stock or for other business purposes, appreciation of the U.S. dollar against the Renminbi would have a negative effect on the U.S. dollar amount available to us. In August 2015, the PRC Government devalued its currency by approximately 3%, representing the largest yuan depreciation in 20 years. Concerns remain that China’s slowing economy, and in particular its exports, will need a stimulus that can only come from further cuts in the exchange rate.

Recently, as part of the trade war between the two countries, the United States imposed tariffs on a large number of products exported from China to the United States. Subsequently, the RMB depreciated relative to the U. S. dollar causing the United States to consider what further actions it could take to address the situation.

Appreciation or depreciation in the value of the Renminbi relative to the U.S. dollar would affect our financial results reported in U.S. dollar terms without giving effect to any underlying change in our business or results of operations. The income statements of our operations are translated into U.S. dollars at the average exchange rates in each applicable period. To the extent the U.S. dollar strengthens against foreign currencies, the translation of these foreign currencies denominated transactions results in reduced revenue, operating expenses and net income for our international operations. Similarly, to the extent the U.S. dollar weakens against foreign currencies, the translation of these foreign currency denominated transactions results in increased revenue, operating expenses and net income for our international operations. We are also exposed to foreign exchange rate fluctuations as we convert the financial statements of our foreign subsidiaries into U.S. dollars in consolidation. If there is a change in foreign currency exchange rates, the conversion of the foreign subsidiaries’ financial statements into U.S. dollars will lead to a translation gain or loss, which is recorded as a component of other comprehensive income. Very limited hedging transactions are available in China to reduce our exposure to exchange rate fluctuations. To date, we have not entered into any hedging transactions. While we may enter into hedging transactions in the future, the availability and effectiveness of these transactions may be limited, and we may not be able to successfully hedge our exposure at all.

Fluctuation in the value of RMB may have a material adverse effect on your investment.

The value of RMB against the U.S. dollar and other currencies may fluctuate and is affected by, among other things, changes in political and economic conditions. Our revenues, costs, and financial assets are denominated in RMB, while our reporting currency is the U.S. dollar. Accordingly, this may result in gains or losses from currency translation on our financial statements. We rely entirely on dividends from our operating subsidiary in China. Therefore, any significant fluctuation in the value of RMB may materially and adversely affect our cash flows, revenues, earnings, financial position, and the value of, and any dividends payable on, our stock in U.S. dollars. For example, an appreciation of RMB against the U.S. dollar would, to the extent that we need to convert U.S. dollars into RMB for such purposes, make any new RMB denominated investments or expenditures more costly to us. An appreciation of RMB against the U.S. dollar would result in foreign currency translation gains for financial reporting purposes when we translate our RMB denominated financial assets into U.S. dollars, as the U.S. dollar is our reporting currency.

Dividends we receive from our subsidiaries located in the PRC may be subject to PRC withholding tax.

The EIT Law provides that a maximum income tax of 20% is applicable to dividends payable to non-PRC investors that are “non-resident enterprises,” to the extent such dividends are derived from sources within the PRC. However, the State Council has reduced such rate to ten percent (10%) through the implementation regulations. We are a Colorado holding company and all of our income is derived from our AiXinZhonghong subsidiary located in the PRC. Therefore, dividends paid to us from China may be subject to the 10% income tax if we are considered a “non-resident enterprise” under the EIT Law. If we are required under the EIT Law and its implementation regulations to pay income tax for any dividends we receive from our PRC subsidiaries, it may have a material and adverse effect on our net income and materially reduce the amount of dividends, if any, we may pay to our shareholders.

WeFluctuations in foreign exchange rates will impact our reported results.

The functional currency utilized by our PRC Subsidiaries is the RMB. Our financial results are reported in U.S. Dollars. Therefore, foreign exchange fluctuations will impact the reporting of our financial results and significant fluctuations in the value of the RMB relative to the U.S. Dollar may be exposedmaterially and adversely affect our financial results as reported in our filings with the SEC. Such variations in our perceived operating results may increase the volatility in the market for our common stock.

The disclosures in our reports and other filings with the SEC and our other public pronouncements are not subject to liabilities under the Foreign Corrupt Practices Act and Chinese anti-corruption laws, andscrutiny of any determination that we violated these laws could have a material adverse effect on our business.regulatory bodies in the PRC.

We are subject to the Foreign Corrupt Practice Act, or FCPA,regulations of the SEC and our reports and other laws that prohibit improper payments or offers of paymentsfilings with the SEC are subject to foreign governmentsSEC review in accordance with the rules and their officials and political parties by U.S. persons and issuers as definedregulations promulgated by the statute,SEC under the Securities Act and the Exchange Act. Our SEC reports and other disclosure and public pronouncements are not subject to the review or scrutiny of any PRC regulatory authority. For example, the disclosure in our SEC reports and other filings are not subject to the review by China Securities Regulatory Commission, a PRC regulator that is responsible for oversight of the purposecapital markets in China. Accordingly, you should review our SEC reports, filings and our other public pronouncements with the understanding that no local regulator has done any review of obtainingus, our SEC reports, other filings or retaining business. We have operations, agreements with third parties and we make the majorityany of our sales in China. PRC also strictly prohibits bribery of government officials. Our activities in China create the risk of unauthorized payments or offers of payments by the employees, consultants, sales agents or distributors of our Company, even though they may not always be subject to our control. It is our policy to implement safeguards to discourage these practices by our employees. However, our existing safeguards and any future improvements may prove to be less than effective, and the employees, consultants, sales agents or distributors of our Company may engage in conduct for which we might be held responsible. Violations of the FCPA or Chinese anti-corruption laws may result in severe criminal or civil sanctions, and we may be subject to other liabilities, which could negatively affect our business, operating results and financial condition. In addition, the U.S. government may seek to hold our Company liable for successor liability FCPA violations committed by companies in which we invest or that we acquire.public pronouncements.

Uncertainties with respectIntroduction of new laws or changes to existing laws by the PRC legal system could limit the legal protections available to you and us.government may adversely affect our business.

We conduct all of our business through AiXinZhonghong, our subsidiary in the PRC. AiXinZhonghong is subject to laws and regulations applicable to foreign investments in China and, in particular, laws applicable to foreign-invested enterprises. The PRC legal system is based ona codified legal system made up of written statutes,laws, regulations, circulars, administrative directives and prior court decisionsinternal guidelines. Unlike common law jurisdictions like the U.S., decided cases (which may be cited for reference buttaken as reference) do not form part of the legal structure of the PRC and thus have limited precedential value. Since 1979,no binding effect on subsequent cases with similar issues and fact patterns. Furthermore, in line with its transformation from a seriescentrally-planned economy to a more free market-oriented economy, the PRC government is still in the process of newdeveloping a comprehensive set of laws and regulations. As the legal system in the PRC is still evolving, laws and regulations have significantly enhancedor the protections affordedinterpretation of the same may be subject to various formsfurther changes. For example, the PRC government may impose more stringent environmental regulations which would affect our ability to comply with, or our costs to comply with, such regulations. Such changes, if implemented, may adversely affect our business operations and may reduce our profitability.

Risks Relating to Our Holding Company Structure

Substantial uncertainties exist with respect to the interpretation and implementation of the newly enacted Foreign Investment Law and how it may impact the viability of our current corporate structure, corporate governance and business operations.

On March 15, 2019, the PRC National People’s Congress approved the Foreign Investment Law, which came into effect on January 1, 2020 and replaced existing laws regulating foreign investment in the PRC and become the legal foundation for foreign investment in the PRC. Meanwhile, the Implementation Regulation of the Foreign Investment Law and the Measures for Reporting of Information on Foreign Investment came into effect as of January 1, 2020, which clarified and elaborated the relevant provisions of the Foreign Investment Law. The Foreign Investment Law sets out the basic regulatory framework for foreign investments and proposes to implement a system of pre-entry national treatment with a restricted list for foreign investments, pursuant to which (i) foreign entities and individuals are prohibited from investing in the areas that are not open to foreign investments, (ii) foreign investments in China. However, since the PRCrestricted industries must satisfy certain requirements under the law, and (iii) foreign investments in business sectors outside of the restricted list will be treated equally with domestic investments. The Foreign Investment Law also sets forth necessary mechanisms to facilitate, protect and manage foreign investments and proposes to establish a foreign investment information reporting system, through which foreign investors or foreign-invested enterprises are required to submit initial report, report of changes, report of deregistration and annual report relating to their investments to the Ministry of Commerce, or MOFCOM, or its local branches.

Although our operating structure is legal system continues to evolve rapidly,and permissible under the interpretations of many laws,current Chinese law and regulations, and rules are not always uniform and enforcement of these laws, regulations and rules involves uncertainties,including the Foreign Investment Law, Chinese regulatory authorities could disallow our operating structure, which may limit legal protections available to you and us. In addition, any litigation in China may be protracted andwould likely result in substantial costs and diversion of resources and management attention. In addition, alla material change in our operations and/or could cause the value of our executive officers and all of our directors are residents of China and not of the U.S., and substantially all the assets of these persons are located outside the U.S. As a result, it could be difficult for investorscommon stock to effect service of process in the U.S.significantly decline or to enforce a judgment obtained in the U.S. against our Chinese operations, subsidiary and affiliate.become worthless.

YouWe may rely on dividends and other distributions on equity paid by our PRC Subsidiaries to fund any cash and financing requirements we may have, difficulty enforcing judgments against us.and any limitation on the ability of our PRC Subsidiaries to make payments to us could have a material and adverse effect on our ability to conduct our business.

We are a Colorado holding company but AiXin BVI is a British Virgin Islands corporation, AiXin HK is a Hong Kong company, and we rely on dividends and other distributions on equity paid by our operating subsidiary AiXinZhonghong, is located in the PRC. Virtually all of our assets are located outside the U.S.PRC Subsidiaries and all of our current operations are conducted in the PRC. In addition, all of our directors and officers, with the exception of our newest director, Christopher Lee, are residents of China. Substantially all of the assets of these persons are located outside the U.S. As a result, it may be difficult for you to effect service of process within the U.S. upon these persons. It may also be difficult for you to enforce in U.S. courts judgments predicated on the civil liability provisions of the U.S. federal securities laws againstloans between us and our officersPRC Subsidiaries to fund any cash and directors. In addition, there is uncertainty as to whether the courtsfinancing requirements we or any of theour PRC would recognize or enforce judgments of U.S. courts. The recognition and enforcement of foreign judgments are provided for under the PRC Civil Procedures Law. Courts in ChinaSubsidiaries may recognize and enforce foreign judgments in accordance with the requirements of the PRC Civil Procedures Law based on treaties between China and the country where the judgment is made or on reciprocity between jurisdictions. China does not have, any treaties or other arrangements that provideincluding for the reciprocal recognition and enforcementpayment of foreign judgments withdividends to our investors, the U.S. In addition, accordingshareholders of AiXin Colorado. Any limitation on the ability of our PRC Subsidiaries to the PRC Civil Procedures Law, courts in the PRC will not enforce a foreign judgment againstmake payments to or transfer funds to us or our directorsother PRC Subsidiaries could have a material and officers if they decide that the judgment violates basic principles of PRC law or national sovereignty, security or the public interest. So it is uncertain whether a PRC court would enforce a judgment rendered by a court in the U.S.

Future inflation in China may inhibitadverse effect on our ability to conduct our business in China.

In recent years,and the Chinese economy has experienced periods of rapid expansion and highly fluctuating rates of inflation. During the past ten years, the rate of inflation in China has been as high as 20.7% and as low as -2.2%. These factors have led to the adoption by the Chinese government, from time to time, of various corrective measures designed to restrict the availability of credit or regulate growth and contain inflation. High inflation may in the future cause the Chinese government to impose controls on credit and/or prices, or to take other action, which could inhibit economic activity in China, and thereby harm the market for our products and our company.

Risks Relating to Our Common Stock and Our Status as a Public Company

Our common stock is quoted on OTCQX which may have an unfavorable impact on our stock price and liquidity.

Our common stock is quoted on OTCQX under the symbol “AXIN”. The trading market for securities of companies quoted on OTCQX or other quotation systems is substantially less liquid than the average trading market for companies listed on a national securities exchange. The quotationability of our shares on OTCQXPRC Subsidiaries to conduct their respective businesses. If our PRC Subsidiaries incur debt, the instruments governing the debt may result in a less liquid market available for existing and potential stockholders to trade shares of our common stock, could depress the market price of our common stock and could have a long-term adverse impact on ourrestrict their ability to raise capital in the future.

Our Chief Executive Officer who is our principal stockholder has substantial influence over our Company, and his interests may not be aligned with the interests of ourpay dividends or make other stockholders.

Quanzhong Lin, our President and Chief Executive Officer, owns substantially in excess of a majority of our outstanding shares. As a result, Mr. Lin has significant influence over our business, including decisions regarding acquisitions, mergers, consolidations, the sale of all or substantially all of our assets, election of directors and other significant corporate actions, including potential transactions in which he may have a conflict of interest. As a result of this concentration of ownership, you and our other stockholders, acting alone, may not have the abilitydistributions to determine the outcome of matters requiring stockholder approval, including the election of our directors or significant corporate transactions. In addition, this concentration of ownership, which is not subject to any voting restrictions, may discourage, delay or thwart efforts by third parties to take-over or effect a change in control of our company which could deprive our stockholders of an opportunity to receive a premium for their shares as part of a sale of our company, and may limit the price that investors are willing to pay for our common stock.

Our management is not familiar with the United States securities laws.

Our management, with the exception of our newest Director, Christopher Lee, is generally unfamiliar with the requirements of the U.S. securitiesus. Under PRC laws and regulations, our PRC Subsidiaries may not appreciate the need to devote the resources necessary to comply with such laws. A failure to adequately respond to applicable securities laws could lead to investigations by the SEC and other regulatory authorities that could be costly, divert management’s attention and disrupt our business.

Our accounting personnel who are primarily responsible for the preparation and supervisionpay dividends only out of the preparation of our financial statements under generally accepted accounting principles in the U.S. have had no education or training in U.S. GAAP and SEC rules and regulations pertaining to financial reporting, which could impact our ability to prepare our financial statements and convert our books and records to U.S. GAAP.

We maintain our books and recordstheir respective accumulated profits as determined in accordance with generally acceptedPRC accounting principles in the PRC, or PRC GAAP. Our accounting personnel in the PRC who have the primary responsibilities of preparing and supervising the preparation of financial statements under U.S. GAAP have had no education or training in U.S. GAAP and related SEC rulesstandards and regulations. As such, they may be unable to identify potential accounting and disclosure issues that may arise upon the conversionIn addition each of our books and records from PRC GAAPSubsidiaries is required to U.S. GAAP, which could affect our abilityset aside at least 10% of its accumulated after-tax profits each year, if any, to prepare our financial statements in accordance with U.S. GAAP. We have taken stepsfund a certain statutory reserve fund, until the aggregate amount of such fund reaches 50% of its registered capital. Such reserve funds cannot be distributed to ensure that our financial statements are in accordance with U.S. GAAP, including our hiringus as dividends. At its discretion, each of a U.S. accounting firm to work with our PRC Subsidiaries may allocate a portion of its after-tax profits based on PRC accounting personnel and managementstandards to convert our books and records to U.S. GAAP and prepare our financial statements. However, the measures we have taken may not be sufficient to mitigate the foregoing risks. Furthermore, the need to comply with U.S. GAAP may require us to expend substantial amounts of resources and time that could divert our management’s attention and disrupt our business.

We will incur significant costs as a result of operating as a public company, and our management will be required to devote substantial time to new compliance requirements, including establishing and maintaining internal controls over financial reporting, and we may be exposed to potential risks if we are unable to comply with these requirements.

As a public company we will incur significant legal, accounting and other expenses under the Sarbanes-Oxley Act of 2002 (the “Sarbanes-Oxley Act”), together with rules implemented by the Securities and Exchange Commission and applicable market regulators. These rules impose various requirements on public companies, including requiring certain corporate governance practices. Our management and other personnel will need to devote a substantial amount of time to these requirements. These rules will increase our legal and financial costs and will make some activities more time-consuming and costly.

PRC companies have historically not adopted a Western style of management and financial reporting concepts and practices, which include strong corporate governance, internal controls and, computer, financial and other control systems. Most of our middle and top management staff are not educated and trained in the Western system, and we may have difficulty hiring new employees in the PRC with such training. As a result of these factors, we may experience difficulty in establishing management, legal and financial controls, collecting financial data and preparing financial statements, books of account and corporate records and instituting business practices that meet Western standards.

The Sarbanes-Oxley Act requires, among other things, that we maintain effective internal controls for financial reporting and disclosure controls and procedures. In particular, we must perform system and process evaluations and testing of our internal controls over financial reporting to allow management to report on the effectiveness of our internal controls over financial reporting, as required by Section 404 of the Sarbanes-Oxley Act. Compliance with Section 404 may require that we incur substantial accounting expenses and expend significant management efforts. When we completed the acquisition of AiXin BVI, we adopted the financial reporting controls and disclosure controls and procedures of AiXinZhonghong. The financial controls and disclosure controls and procedures of AiXinZhonghong are not adequate for a public company. Among others weaknesses, the lack of familiarity of our accounting staff with U.S. GAAP constitutes a material weakness in our controls for financial reporting. We have taken steps to rectify this weakness, including hiring a U.S. accounting firm to work with our management and accounting personnel. There is no assurance, however, that the steps taken to date will be sufficient to rectify this material weakness. In the event that we fail to remedy the weaknesses in our controls over financial reporting and adopt appropriate disclosure controls and procedures, our financial reporting may be deficient and we may fail to comply with the reporting requirements of the Securities Exchange Act and other U.S. securities laws, in which event, the market price of our common stock could decline if investors and others lose confidence in the reliability of our financial statements and we could be subject to sanctions or investigations by the SEC or other applicable regulatory authorities.

If we become directly subject to the scrutiny, criticism and negative publicity involving U.S. publicly-traded Chinese companies, we may have to expend significant resources to investigate and resolve the matter which could harm our business operations, stock price and reputation and could result in a loss of your investment in our stock, especially if such matter cannot be addressed and resolved favorably.

U.S. public companies that have substantially all of their operations in China, particularly companies that completed reverse merger transactions, have been the subject of intense scrutiny, criticism and negative publicity by investors, financial commentators and regulatory agencies, such as the SEC. Much of the scrutiny, criticism and negative publicity have focused on financial and accounting irregularities and mistakes, a lack of effective internal controls over financial accounting, inadequate corporate governance policiesan enterprise expansion fund, or a lack of adherence theretostaff welfare and in many cases, allegations of fraud. As a result of the scrutiny, criticism and negative publicity, the publicly traded stock of many Chinese companies has sharply decreased in value and, in some cases, has become virtually worthless. Many of these companies are now subject to stockholder lawsuits, SEC enforcement actions and are conducting internal and external investigations into the allegations. It is not clear what affect this sector-wide scrutiny, criticism and negative publicity will have on our company, our business and our stock price. If we become the subject of any unfavorable allegations, whether such allegations are proven to be true or untrue, we will have to expend significant resources to investigate such allegations and/or defend our company. This situation will be costly and time consuming and distract our management from growing our company. If such allegations are not proven to be groundless, our company and business operations will be severely impacted and your investment in our stock could be rendered worthless.

Techniques employed by manipulative short sellers in Chinese small-cap stocks may drive down the market price of our common stock.

Short selling is the practice of selling securities that the seller does not own but rather has borrowed from a third party with the intention of buying identical securities back at a later date to return to the lender. The short seller hopes to profit from the difference in the sale price of the borrowed securities and the purchase price of the replacement shares. As it is therefore in the short seller’s best interests for the price of the stock to decline, there have been incidents of short sellers publishing, or arranging to publish negative opinions in order to create negative market momentum. While traditionally these disclosed shorts have been limited in their ability to access mainstream business media or to otherwise create negative market rumors, the rise of the Internet and technological advancements regarding document creation, videotaping and publication by weblog (“blogging”) have allowed many disclosed shorts to publicly attack a company’s credibility, strategy and veracity by means of so-called research reports that mimic the type of investment analysis performed by large Wall Street firms and independent research analysts. These short attacks have, in the past, resulted in the selling of shares in the market, on occasion on a large scale and broad base. Issuers with business operations based in the PRC, that have limited trading volumes and that are susceptible to higher volatility levels than U.S. domestic large-cap stocks can be particularly vulnerable to such short attacks.

These short seller publications are not regulated by any governmental, self-regulatory organization or other official authority in the U.S., are not subject to the certification requirements imposed by the SEC in Regulation Analyst Certification and, accordingly, the opinions they express may be based on distortion of the actual facts or, in some cases, fabrication of the facts. In light of the limited risks involved in publishing such information, and the enormous profit that can be made from running just one successful short attack, unless the short sellers become subject to significant penalties, it is more likely than not that disclosed shorts will continue to issue such reports.

While we intend to strongly defend our public filings against any such short seller attacks, oftentimes we are constrained, either by principles of freedom of speech, applicable state law (often called Anti-SLAPP statutes), or issues of commercial confidentiality, in the manner in which we can proceed against the relevant short seller. You should be aware that in light of the relative freedom to operate that such persons enjoy – oftentimes blogging from outside the U.S. with little or no assets or identity requirements – should we be targeted for such an attack and the rumors not dismissed by market participants, our stock will likely suffer from a temporary, or possibly long term, decline in market price.

Because we do not intend to pay any cash dividends on our common stock, our stockholders will not be able to receive a return on their shares unless they sell them.bonus fund.

We have not declaredhad no transactions that involved the transfer of cash or paidassets throughout our corporate structure. None of our Chinese Operating Companies has distributed any cash or other assets to AiXin HK, including by way of dividends onor interest payments and AiXin Colorado has not transferred any cash or other assets to any of our common stock nor do we anticipate paying anyPRC Subsidiaries. No transfers, dividends or distributions have been made to our investors. To the extent our cash or other assets is in one of our Chinese Operating Companies or AiXin HK, the foreseeable future. Furthermore, we expectfunds or assets may not be available to retain any future earnings to finance ourfund operations and expansion. Theor for use outside of mainland China or Hong Kong including for the payment of dividends to the shareholders of AiXin Life, due to interventions by the governments of PRC or Hong Kong, or the imposition of restrictions and limitations on the ability of the PRC Subsidiaries to use such cash dividends inor assets imposed by the future will be at the discretiongovernment of our Board of Directors and will depend upon our earnings levels, capital requirements, any restrictive loan covenants and other factors the Board considers relevant.mainland China or Hong Kong.

Unless weThe PRC government may continue to strengthen its capital controls, and more restrictions and substantial vetting processes may be put forward by SAFE for cross-border transactions falling under both the current account and the capital account. Any limitation on the ability of our PRC Subsidiaries to pay dividends or make other kinds of payments to us could materially and adversely limit our stockholdersability to grow, make investments or acquisitions that could be beneficial to our business, pay dividends, or otherwise fund and conduct our business.

Except for such limitations on our Company’s ability to transfer cash and other assets among our entities currently or hereafter imposed by the governments of the PRC and Hong Kong, there are no limitations on our Company’s ability to transfer cash and other assets through our corporate structure. Our Company does not have any cash management policies with respect to the transfer of cash among our entities other than requirements for the approval of management for transfers in excess of specified amounts and none of our entities is currently party to any debenture, loan or other agreement which imposes restrictions or otherwise limits our Company’s ability to transfer our cash and other assets and we have not adopted any policies that dictate how funds are transferred other than as necessary to comply with applicable laws.

In addition, the Enterprise Income Tax Law and its implementation rules provide that a withholding tax rate of up to 10% will be applicable to dividends payable by Chinese companies to non-PRC-resident enterprises unless otherwise exempted or reduced according to treaties or arrangements between the PRC central government and governments of other countries or regions where the non-PRC-resident enterprises are incorporated.

PRC regulation of loans to and direct investment in PRC entities by offshore holding companies and governmental control of currency conversion may delay or prevent us from making loans or additional capital contributions to our PRC Subsidiaries, which could materially and adversely affect our liquidity and our ability to fund and expand our business.

We are an offshore holding company conducting our operations in China through our PRC Subsidiaries. We may make loans or provide guarantees for the benefit of our PRC Subsidiaries subject to the approval of or registration with governmental authorities and limitations of the amount, or we may make additional capital contributions to our PRC Subsidiaries. Any loans to our PRC Subsidiaries, which are treated as foreign-invested enterprises under PRC law, are subject to foreign exchange loan registrations. In addition, a foreign-invested enterprise, or FIE, shall use its capital pursuant to the principle of authenticity and self-use within its business scope. The capital of an FIE shall not be used for the following purposes: (i) directly or indirectly for payments beyond the business scope of the enterprise or payments prohibited by relevant laws and regulations; (ii) directly or indirectly for investments in securities or investments other than in banks’ principal-secured products unless otherwise provided by relevant laws and regulations; (iii) the granting of loans to non-affiliated enterprises, except where it is expressly permitted in the business license; and (iv) paying the expenses related to the purchase of real estate that is not for self-use (except for foreign-invested real estate enterprises).

In light of the requirements imposed by PRC regulations on loans to and direct investments in PRC entities by offshore holding companies, we cannot assure you that we will be able to complete the necessary government registrations or obtain the necessary government approvals on a timely basis, if at all, with respect to future loans by us to our PRC Subsidiaries or with respect to future capital contributions by us to our PRC Subsidiaries. If we fail to complete such registrations or obtain such approvals, our ability to capitalize or otherwise fund our PRC operations may be negatively affected, which could materially and adversely affect our liquidity and our ability to fund and expand our business.

Risks Related to our Common Stock

There is a limited public market for our common stock and you may not be able to receiveresell our shares at or above the price you paid or at all.

There is a return on theirlimited public market for our common stock in the OTCQB. On many days during the years ended December 31, 2022, and 2023, and to date in 2024, no shares unless they sell them.were traded. We cannot assure you that an active public market for our common stock will develop or that you will be able to sell shares when you desire to do so.

Chinese companies are undergoing heightened scrutiny by US regulatory authorities.

It appears that US regulatory authorities, including the SEC and the exchanges on which our common stock might trade, are subjecting Chinese companies to heightened scrutiny and review. This had made it more difficult for certain Chinese companies to complete public offerings of their securities or list their shares for trading on securities markets in the US. Such activities could impact our ability to uplistresell our shares at or raise capital inabove the public markets which may materially impact our business and our consolidated financial position, results of operations, and cash flows.

price you paid or at all.

The market price of our common stock can becomeshares is likely to be highly volatile, leadingwhich could result in substantial losses to the possibility of its value being depressed at a time when you may want to sell your holdings.investors.

The markettrading price of our common stock can become volatile. Numerousmay be volatile and could fluctuate widely due to factors many of which are beyond our control,control. The trading price for our common stock varied during the twelve-month period ended December 31, 2023, between a high of $11.00 on April 13, 2023 and a low of $1.00 on November 20, 2023. The last reported trade in our common stock on March 21, 2024, was $0.27. Our stock price is likely to continue to be volatile and subject to significant price and volume fluctuations. This may causehappen because of the broad market and industry factors, like the performance and fluctuation of the market prices of other companies with business operations located mainly in China that have securities publicly traded in the United States. The securities of some companies with operations in China and securities publicly traded in the United States have experienced significant volatility, including price declines in connection with their initial public offerings. The trading performance of these Chinese companies’ securities after their offerings may affect the attitudes of investors toward Chinese companies publicly traded in the United States, including those of investors based in China, in general and consequently may impact the trading performance of our common stock, regardless of our actual operating performance. Such volatility in the price of our common stock including any stock-run up, may be unrelated to fluctuate significantly. Theseour actual or expected operating performance and financial condition or prospects, making it difficult for prospective investors to assess the rapidly changing value of our common stock.

In addition to market and industry factors, include:the trading price and volume of our common stock may be highly volatile due to factors specific to our operations, including the following:

Securities class action litigation is often instituted against companies following periods of volatility in their stock price. Should this type of litigation be instituted against us, it could result in substantial costs to us and divert our management’s attention and resources.

Moreover, securities markets may from time-to-time experience significant price and volume fluctuations for reasons unrelated to the operating performance of particular companies. These market fluctuations may adversely affect the price of our common stock and other interests in our Company at a time when you want to sell your interest in us.

If we fail to develop and maintain an effective system of internal controls, we may not be able to accurately report our financial results or prevent fraud, as a result, current and potential stockholders could lose confidence in our financial reports, which could harm our business and the trading price of our common stock.

Effective internal controls are necessary for us to provide reliable financial reports and effectively prevent fraud. Section 404 of the Sarbanes-Oxley Act of 2002 requires us to evaluate and report on our internal controls over financial reporting. Compliance with Section 404 requires that we strengthen, assess and test our system of internal controls to provide the basis for our report. The process of strengthening our internal controls and complying with Section 404 is expensive and time consuming and requires significant management attention. We cannot be certain that the measures we undertake will ensure that we will maintain adequate controls over our financial processes and reporting in the future. Furthermore, if we are able to rapidly grow our business, the internal controls that we will need will become more complex, and significantly more resources will be required to ensure our internal controls remain effective. Failure to implement required controls, or difficulties encountered in their implementation, could harm our operating results or cause us to fail to meet our reporting obligations. If we discover a material weakness in our internal controls, the disclosure of that fact, even if the weakness is quickly remedied, could diminish investors’ confidence in our financial statements and harm our stock price. In addition, non-compliance with Section 404 could subject us to a variety of administrative sanctions, including the suspension of trading, ineligibility for listing on the OTC Markets, and the inability of registered broker-dealers to make a market in our common stock, which would further reduce our stock price.

There is no active trading market for our shares of common stock.

There is no active trading market for our common stock. There can be no assurance that a regular trading market for our securities will develop, or that if one develops, that it will be sustained. The trading price of our securities could be subject to wide fluctuations, in response to announcements by us or others, developments affecting us, and other events or factors. In addition, the stock market has experienced extreme price and volume fluctuations in recent years. These fluctuationsthat have had a substantial effect on the market prices for many companies, often been unrelated or disproportionate to the operating performance of suchparticular companies. Securities class action litigation has often been instituted against companies following periods of volatility in the overall market and in the market price of a company’s securities. This litigation, if instituted against us, could result in very substantial costs, divert our management’s attention and resources, and harm our business, operating results and financial condition. In addition, recent fluctuations in the financial and capital markets have resulted in volatility in securities prices.

Military or other conflicts in Ukraine, the Middle East or elsewhere may lead to increased volume and price volatility for publicly traded securities which could adversely impact the price of our common stock.

Military or other conflicts in Ukraine, the Middle East or elsewhere may lead to increased volume and price volatility for publicly traded securities, or affect the operations or financial condition of companies, and maylead to national, regional or international economic disruptions and economic uncertainty, any of which could adversely impact the price of our common stock.

The sale or availability for sale of substantial amounts of our common stock could adversely affect its market price.

Sales of substantial amounts of our common stock in the public market or the perception that these sales could occur, could adversely affect the market pricesprice of our common stock and could materially impair our ability to raise capital through equity offerings in the securities. Such risks couldfuture. Shares held by our existing shareholders may be sold in the public market in the future subject to the restrictions in Rule 144 under the Securities Act. We cannot predict what effect, if any, market sales of securities held by our significant shareholders or any other shareholder or the availability of these securities for future sale will have an adverse effect on the stock’s future liquidity.market price of our common stock.

OurIf securities or industry analysts do not publish research or reports about our business, or if they adversely change their recommendations regarding our common stock, is subject to the “Penny Stock” Rules of the SECmarket price for our common stock and the trading market in our securities is limited, which makes transactions in our stock cumbersome and may reduce the value of an investment in our stock.volume could decline.

The SEC has adopted Rule 15g-9 which establishestrading market for our common stock will be influenced by research or reports that industry or securities analysts publish about our business. If one or more analysts who cover us downgrade our common stock, the definition of a “penny stock,” for the purposes relevant to us, as any equity security that has a market price for our common stock would likely decline. If one or more of less than $5.00 per sharethese analysts cease to cover us or with an exercisefail to regularly publish reports on us, we could lose visibility in the financial markets, which in turn could cause the market price of less than $5.00 per share, subject to certain exceptions. For any transaction involving a penny stock, unless exempt, the rules require: (a) that a broker or dealer approve a person’s accounttrading volume for transactions in penny stocks; and (b) the broker or dealer receive from the investor a written agreement to the transaction, setting forth the identity and quantity of the pennyour common stock to be purchased.decline.

Because we do not expect to pay dividends in the foreseeable future, you must rely on price appreciation of our common stock for return on your investment.

In orderTo date, we have not paid dividends on our common stock. We currently intend to approve a person’s account for transactions in penny stocks, the broker or dealer must: (a) obtain financial information and investment experience and objectives of the person; and (b) make a reasonable determination that the transactions in penny stocks are suitable for that person and the person has sufficient knowledge and experience in financial matters to be capable of evaluating the risks of transactions in penny stocks.

The broker or dealer must also deliver, prior to any transaction in a penny stock, a disclosure schedule prescribed by the Commission relating to the penny stock market, which, in highlight form: (a) sets forth the basis on which the broker or dealer made the suitability determination; and (b) that the broker or dealer received a signed, written agreement from the investor prior to the transaction. Generally, brokers may be less willing to execute transactions in securities subject to the “penny stock” rules. This may make it more difficult for investors to disposeretain all of our common sharesavailable funds and causeany future earnings to fund the development and growth of our business. As a declineresult, we do not expect to pay any cash dividends in the market value offoreseeable future. Therefore, you should not rely on an investment in our stock.

Disclosure also has to be made about the risks of investing in penny stocks in both public offerings and in secondary trading and about the commissions payable to both the broker-dealer and the registered representative, current quotationscommon stock as a source for the securities and the rights and remedies available to an investor in cases of fraud in penny stock transactions. Finally, monthly statements have to be sent disclosing recent price information for the penny stock held in the account and information on the limited market in penny stocks.

Under our Articles of Incorporation, our Board of Directors has the authority, without stockholder approval, to issue preferred stock with terms that may not be beneficial to common stockholders and with the ability to adversely affect stockholder voting power and perpetuate the board’s control over our company.dividend income.

Our Boardboard of Directorsdirectors has complete discretion as to whether to distribute dividends. The timing, amount and form of future dividends, if any, will depend on, among other things, our future results of operations and cash flow, our capital requirements and surplus, the amount of distributions, if any, received by resolutionus from our subsidiaries, our financial condition, contractual restrictions and other factors deemed relevant by our board of directors. Accordingly, the return on your investment in our common stock will likely depend entirely upon any future price appreciation of our common stock. There is no guarantee that our common stock will appreciate in value or even maintain the price at which you purchased our common stock and you may authorize the issuance of preferred stock in one or more series with such limitations and restrictions as it may determine, in its sole discretion, with no further authorization by security holders required for the issuance of such shares. The Board may determine the specific terms of the preferred stock, including: designations; preferences; conversions rights; cumulative, relative; participating; and optional or other rights, including: voting rights; qualifications; limitations; or restrictions of the preferred stock.even lose your entire investment.

The issuance

Our CEO has substantial influence over our company. His interests may not be aligned with the interests of preferred stock may adversely affect the voting powerour other shareholders, and other rights of the holders of common stock. Preferred stock may be issued quickly with terms calculated to discourage, make more difficult, delayhe could prevent or preventcause a change inof control of our company or make removal of management more difficult. As a result, the Board of Directors’ ability to issue preferred stock may discourage the potential hostile acquirer, possibly resulting in beneficial negotiations. Negotiating with an unfriendly acquirer may result in terms more favorable to us and our stockholders. Conversely, the issuance of preferred stock may adversely affect the market price of, and the voting and other rights of the holders of the common stock. We presently have no plans to issue any preferred stock.

We may, in the future, issue additional shares of common stock, which would reduce investors’ percent of ownership and may dilute our share value.transactions.

Our ArticlesQuanzhong Lin, our Chairman of Incorporation authorizes the issuanceBoard of 500 million sharesDirectors and Chief Executive Officer, beneficially owns an aggregate of approximately 58% of our outstanding common stock. We currentlyAccordingly, Mr. Lin could have outstanding 49,999,891 sharessignificant influence in determining the outcome of common stock.any corporate transaction or other matter submitted to the shareholders for approval, including mergers, consolidations, the appointment of directors and other significant corporate actions. Mr. Lin will also have the power to prevent or cause a change in control. Without the consent of Mr. Lin, we may be prevented from entering into transactions that could be beneficial to us or our minority shareholders. In addition, Mr. Lin could violate his fiduciary duties by diverting business opportunities from us to himself or others. The future issuanceinterests of common stockMr. Lin may result in substantial dilutiondiffer from the interests of our other shareholders. The concentration in the percentageownership of our common stock held by our then existing stockholders. Weshares may value any common stock issuedcause a material decline in the future on an arbitrary basis. The issuance of common stock for future services or acquisitions or other corporate actions may have the effect of diluting the value of the shares held by our investors and might have an adverse effect on any trading market for our common stock.

No disclosure is required pursuant to this item.

We regularly review our cybersecurity defenses to assess our vulnerability to cybersecurity attacks from viruses, malware and more sophisticated and targeted cyber-related attacks such as hackers looking to demand ransomware or access our systems to obtain information and data, as well as our vulnerability to cybersecurity failures resulting from human error and technological errors. We rely upon internal IT personnel working in conjunction with specialized outside security consultants on a day to day basis to conduct reviews and upgrade our systems when determined to be necessary.

Our overall strategy in combatting cybersecurity risks includes a variety of measures, including:

We are not aware of any existent weakness in our systems or malware embedded in our systems that are likely to would materially affect, or are reasonably likely to materially affect, our operations.

Day-to day management of cybersecurity threats is conducted by our Information Technology department in conjunction with outside service providers, which is charged with identifying and reporting threats to senior management. On a quarterly basis, cybersecurity is reviewed by our Chief Executive Officer and Chief Financial Officer, who are expected to report to the Audit Committee.

Board Oversight

The Audit Committee of our Board of Directors, which is composed of all non-employee directors, is responsible for oversight of our efforts to eliminate cybersecurity risks. The Audit Committee meets regularly with our Chief Executive Officer and Chief Financial Officer and, in turn, reports its finding to the Board of Directors.

No disclosure is required pursuantWe currently operate 25 retail pharmacies in Chengdu. The pharmacies are operated subject to this item.short term leases at market rate rents. In addition to the pharmacies, we maintain our administrative offices in Chengdu.

Yunnan Runcangsheng operates a 13,000 square meter production facility, including, R&D centers, extraction facilities, preparation workshops and a warehouse. Yunnan Runcangsheng operates planting facilities where it grows some of the key ingredients used in its products. Runcangsheng acquired the right to use the production facility pursuant to a Development Agreement with the People’s Government of Luquan Li and Miao Autonomous County. The Development Agreement grants Ruuncangsheng the rights to use the facility for a period of five years ending November 25, 2025, provided Runcangsheng invests certain amounts in the development of the property and its business, including the construction of office space, manufacturing facilities and workshops. The governmental authorities appear to be satisfied with the progress Runcangsheng has made in the development of the property to date and have not expressed any intent to terminate the Agreement.

Effective March 31, 2024, we terminated our lease for the Shangyan Hotel. In the termination agreement we and the landlord agreed to release each other from any claims and the landlord agreed to return the security deposit.

On February 6, 2024, we entered into a lease with respect to a hotel located in Bandzhuyuan Town, Xindu District, Chengdu City. The term of the lease commenced February 29, 2024 and expires April 15, 2034. The lease provides for an annual rent of 1.2 million RMB and an annual property management fee of 400,000 RMB, which remains unchanged for the initial five-year term and are subject to a 5% annual increase thereafter. We have remitted to the landlord a deposit equal to two months’ rent and property management fee, refundable upon lease expiration or termination, less deductions for any outstanding payments, damages, or breaches of contract. The Lease grants us the right to occupy various areas within the hotel, covering approximately 18,000 square meters, including the first-floor lobby, external shops (subject to the rights of the current occupants), second to fourth floors, fifth to eighteenth floors (inclusive of meeting rooms and part of the dining rooms), underground and ground parking lots, and all hotel facilities and equipment.

From time to time, we may become involved in various lawsuits and legal proceedings which arise in the ordinary course of business. However, litigation is subject to inherent uncertainties and an adverse result in these or other matters may arise from time to time that may harm our business. We are currently not aware of any such legal proceedings or claims that we believe will have a material adverse effect on our business, financial condition or operating results.

In December 2020, Jian Yiao (the “Plaintiff”) filed a complaint against Chengdu Aixintang Pharmacy Co., Ltd. (“Aixintang Pharmacy”) in Zhangjiagang People’s Court in Jiangsu Province. The complaint alleges that Mr. Yiao is entitled to $392,305 (RMB2,500,000) from Aixintang Pharmacy for breaching a purchase agreement entered in March 2020 (the “Purchase Agreement”). Aixintang Pharmacy claimed that the Purchase Agreement was the result of a forgery by an employee, and that Aixintang Pharmacy did not enter the Purchase Agreement. The Court determined that Aixintang Pharmacy breached the Purchase Agreement by not delivering the products ordered and ordered Aixintang Pharmacy to pay $392,305 (RMB2,500,000) to the Plaintiff. In December 2020, Aixintang Pharmacy filed a motion in the Jiangsu Suzhou Intermediate People’s Court against the verdict.

In February 2021, the judge in the Jiangsu Suzhou Intermediate People’s Court denied Aixintang Pharmacy’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.

The incident which is the subject to the above lawsuit occurred before Aixintang Pharmacy was acquired by the Company. In November 2021, Mr. Lin agreed to indemnify the Company against any losses arising from this legal proceeding.

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.

Not applicable

PART II

Market Information

Our common stock is quoted on OTCQX Best MarketOTCQB under the symbol “AIXN.” From February 6, 2019 until January 22, 2021 until June 5, 2023, our common stock was quoted on the OTCQBOTCQX under the symbol “AIXN.”

There exists onlyTrading in stocks on the OTCQX and OTCQB is often thin and is characterized by wide fluctuations in trading prices due to many factors that may have little to do with a limited tradingcompany’s operations or business prospects. We cannot assure you that there will be a market for our common stock onin the OTCQX Best Market tier offuture.

The following table sets forth the OTC Markets (www.otcmarkets.com) with limited or no volume. The below table indicates, with respect to our common stock, the range of high and low trading prices of one share of our common stock for each full quarterly period withinfiscal quarter during the two most recent fiscal years. Over-the-counter market quotations reflect inter-dealer prices, without retail mark-up, mark-down or commission and may not necessarily represent actual transactions. Our common stock trades on a limited, sporadic and volatile basis. These high and low bid prices per share of common stock have been adjusted to give effect to the 1-for-2 reverse stock split of our common stock effected on February 17, 2023.

Holders

As of March 31, 2022, we had in excess of 70029, 2024, there were approximately 635 record holders of our common stock.

Dividends

Since inception we have not paid any dividends on our common stock. We currently do not anticipate paying any cash dividends in the foreseeable future on our common stock. Although we intend to retain our earnings, if any, to finance the exploration and growth of our business, our board of directors will have the discretion to declare and pay dividends in the future.

Payment of dividends in the future will depend upon our earnings, growth, capital requirements, and other factors, which our board of directors may deem relevant.

Issuer Purchases of Equity Securities

None.

Securities Authorized for Issuance under Equity Compensation Plans

The following table sets forth information about the common stock available for issuance under compensatory plans and arrangements as of December 31, 2021.2023.

On January 10, 2019, we adopted the 2019 Equity Incentive Plan (the “2019 Plan”) pursuant to which we registered up to 5,000,000625,000 shares of our common stock for issuance and delivery to employees, directors and consultants of the Company as additional incentives to attract and retain the best available personnel.

Penny Stock Regulations

The SEC has regulations which generally define so-called “penny stocks” to be equity securities that have a market price less than $5.00 per share or an exercise price of less than $5.00 per share, subject to certain exemptions. Our common stock is a “penny stock” and is subject to Rule 15g-9 under the Exchange Act, or the Penny Stock Rule. This rule imposes additional sales practice requirements on broker-dealers that sell such securities to persons other than established customers and “accredited investors” (generally, individuals with a net worth in excess of $1,000,000 or annual incomes exceeding $200,000, or $300,000 together with their spouses). For transactions covered by Rule 15g-9, a broker-dealer must make a special suitability determination for the purchaser and have received the purchaser’s written consent to the transaction prior to sale. As a result, this rule may affect the ability of broker-dealers to sell our securities and may affect the ability of purchasers to sell any of our securities in the secondary market, thus possibly making it more difficult for us to raise additional capital.

For any transaction involving a penny stock, unless exempt, the rules require delivery, prior to any transaction in penny stock, of a disclosure schedule required by the SEC relating to the penny stock market. Disclosure is also required to be made about sales commissions payable to both the broker-dealer and the registered representative and current quotations for the securities. Finally, monthly statements are required to be sent disclosing recent price information for the penny stock held in the account and information on the limited market in penny stock.

There can be no assurance that our common stock will qualify for exemption from the Penny Stock Rule. In any event, even if our common stock were exempt from the Penny Stock Rule, we would remain subject to Section 15(b)(6) of the Exchange Act, which gives the SEC the authority to restrict any person from participating in a distribution of penny stock, if the SEC finds that such a restriction would be in the public interest.

Recent Sales of Unregistered Equity Securities

During 2020 and 2021,the fourth quarter of 2023, 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.

The following discussion should be read in conjunction with our consolidated audited financial statements and related notes thereto and other financial information appearing elsewhere in this report. In addition to historical information, the following discussion contains forward-looking statements. Where possible, we have tried to identify these forward-looking statements by using words such as “anticipate,” “believe,” “intends,” or similar expressions. Although we believe that the expectations reflected in these forward-looking statements are reasonable, we cannot assure you that these expectations will prove to be correct. As a result of many factors, including those factors set forth in the “Risk Factors” section of this report, our actual results could differ materially from the results described in or implied by the forward-looking statements contained in this report.

Overview

In December 2017, we completed a “reverse” acquisition whereby we acquired all of the outstanding shares of AiXin (BVI) International Group Co., Ltd. a British Virgin Islands corporation (“AiXin BVI”). As a result, AiXin BVI became our wholly-owned subsidiary, and through AiXin BVI we now own 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 began distributing nutritional products in 2013.

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. Since that time, the number of our pharmacies has increased to 13.

Pursuant to an Equity Transfer Agreement (the “Transfer Agreement”), on September 30, 2022, we acquired all of the outstanding equity of Yunnan Runcangsheng Technology Co., Ltd (“Runcangsheng”) for RMB 31,557,820 (approximately USD$4.4 million), reduced by $116,802 the excess of the estimated net worth of Runcangsheng over its audited net worth as of December 31, 2021. In addition to transferring their respective equity interest in Runcangsheng, both Sellers agreed to forgive any loans due to them from Runcangsheng. Runcangsheng operates a 13,000 square meter production facility, which houses R&D centers, extraction facilities, preparation workshops and a warehouse. Runcangsheng has more than 30 sub brands and operates planting facilities where it grows some of the key ingredients used in its products. Many of the products it has developed are specifically targeted to alleviate symptoms associated with the increasingly competitive and pressured lifestyle of the Chinese middle class.

Runcangsheng. was established in April 2020, and is headquartered in Luquan Yi and Miao Autonomous County, Kunming City, Yunnan Province. It is focused on promoting a healthy lifestyle through the use of foods believed to promote well-being, health foods, modernized versions of traditional Chinese medical products and plant extracts. Runcangsheng cultivates many of the raw materials used in its products, compounds the materials into easy to transport and use pre-packaged foods and distributes the products at the wholesale level. As life-styles in China evolve, work pressures increase and the ingestion of meats and other western style foods increases, Runcangsheng seeks to design and market products intended to combat the increase in obesity, hypertension, insomnia and physical ailments associated with such changes. The acquisition of Runcangsheng will enable us to operate as a vertically integrated company, capable of formulating the kinds of health foods and other nutritional products and supplements suitable for our clients and marketing those products through our distribution channels.

In addition to our acquisitions in the health and nutritional sector, in July 2021, we completed the acquisition of Aixin Shangyan Hotel through which we owned and operated a hotel located in the Jinniu District, Chengdu City. Effective March 31, 2024, we terminated our lease for the Shangyan Hotel. In the termination agreement we and the landlord agreed to release each other from any claims and the landlord agreed to return the security deposit.

On February 6, 2024, we entered into a lease with respect to a hotel located in Bandzhuyuan Town, Xindu District, Chengdu City. The term of the lease commenced February 29, 2024 and expires April 15, 2034. The Lease grants us the right to occupy various areas within the hotel, covering approximately 18,000 square meters, including the first-floor lobby, external shops (subject to the rights of the current occupants), second to fourth floors, fifth to eighteenth floors (inclusive of meeting rooms and part of the dining rooms), underground and ground parking lots, and all hotel facilities and equipment. References to hotel revenues and operating costs below are with respect to the hotel we previously occupied in the Jinniu District of Chengdu.

We intend to look for additional opportunities to profit from the growing healthcare market in China. Though currently we are not party to any agreements, we will explore, among other opportunities, expanding our product line through internal research and acquiring complementary products from third parties, acquiring additional pharmacies and other retail outlets and operating nursing homes and possibly clinics which provide medical care to clients.

Our Business

We are focused on providing health and wellness products to the growing middle class in China. We currently develop, manufacture, market and sell consumerpremium-quality healthcare, nutritional products in China by offering premium-quality nutritional products.and wellness supplements, including herbs and greens, traditional Chinese remedies, functional products, such as weight management tools, probiotics, foods and drinks. We also offer products purchased from third parties and provide advertising and marketing services to clients which engage us to market and distribute their products. We offer our nutritional products and those of our clients for which we provide marketing services, through oura diversified, omni-channel business model which generates revenues through retail and wholesale product sales, offices, exhibition events we organizethrough company-owned pharmacies, direct marketing and sponsor, and person-to-person marketing.e-commerce. Our marketing business mainly focuses onapproach emphasizes proactively approaching customers such as by hosting marketing events for clients, which we believe is ideally suited to marketing ourthe products and those of our clients for which we perform advertising servicesoffer because sales of healthcare, nutritional products and supplements 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 believe the competitive strengths that will enable us to grow in the health and wellness market include our ability to design and manufacture products that are responsive to consumers’ needs as the life style of China’s middle class evolves, our coordinated omni-channel distribution network where we completedenable consumers to obtain the acquisition of nineinformation they need to improve their lifestyle on our website, at our 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 (“Transfer Price”). The Transfer Price will be reduced by an amount equal to any amounts paid or distributed by any of the entities to its shareholders after December 31, 2020 and increased by an amount contributed to any of the entities by its shareholders after such date. The pharmacies will be used to supplementthrough individual meetings with our efforts to distribute our nutritional products.team members.

In July we completed the acquisition of Aixin Shangyan Hotel. Shangyan Hotel Company ownsOur ability to operate profitably and operates a hotel located in the Jinniu District, Chengdu City. The hotel covers more than 8,000 square meters and hasgenerate positive cash flow will be determined by our ability to attract a large restaurantand loyal customer base and provide the information and products they need cost effectively. Our revenue will largely be determined by our ability to achieve and maintain a strong brand name and company image, the volume of products we sell and the prices we can charge for such products, which will require 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 (“Transfer Price”). The Transfer Pricewe compete effectively. Our costs will largely be reduced by an amount equal to any amounts paid or distributeddetermined by the hotelcost of raw materials and acquired inventory, the labor used to its shareholders after December 31, 2020design and will be increased by an amount equalmanufacture products, and the costs incurred to any amounts contributeddeliver these products to the hotel by its equity owners after December 31, 2020.

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, 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 due to the decrease in the prevalence of Covid-19 in China. However, since February 2022 to date, COVID-19 cases have increased again in many cities of China. There has been only a slight increase in the number of cases in Sichuan Province, the Province in which we are located, and we do not expect that the recent increase will materially impact our operations. During the years ended December 31, 2021 and 2020, the ongoing operations of our advertising and marketing business were not materially adversely impacted by the measures taken to limit the spread of the disease in China. Our hotel and pharmacies, however, experienced adverse impacts due to travel and work restrictions imposed on a temporary basis in Chengdu to limit the spread of COVID-19. 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.consumer.

In additionWe intend to build a reputation as a provider of premium health and wellness products that seeks to improve our ongoing operations,customers health and well-being. Our objective is to offer a broad and deep mix of products for consumers interested in living well, whether they are looking to treat a health-related issue or simply maintain their overall wellness, Our premium, value-added offerings include both proprietary products developed and manufactured by us as well as products acquired from or sold on behalf of third parties. We believe our range of products and ability to develop new products, combined with the customer support and service we seekoffer, differentiate us and allow us 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 locationeffectively compete against food, drug and may participate in a business venture of virtually any kind or nature.

Itmass channel players, specialty stores, independent vitamin, supplement and natural food shops and online retailers. There is the goal of our management, in particular, our Chairman, Quanzhong Lin to growno assurance that we will achieve 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. on June 8, 2020, Mr. Lin transferred to our Company35,049,685 shares of our common stock for cancellation.objectives.

Results of Operations

Years ended December 31, 2023 and 2022

The following table sets forth the results of our operations for the periods indicated as a percentage of net revenue, certainrevenue. Certain columns may not add due to rounding (In reviewing the tables below, please note that the operations of our pharmacies and our hotel are reflected in our financial results from August 2022, the dates as of which the acquisitions were completed):rounding: