{"url_path":"/sec/aixn/10-k/2026/item-7","section_key":"item-7","section_title":"Item 7 **","topic":"sec","document":{"doc_type":"10-K","doc_date":"2026-05-15","source_url":"https://www.sec.gov/Archives/edgar/data/835662/0001493152-26-023606-index.html","accession_number":"0001493152-26-023606","cik":"0000835662","ticker":"AIXN","issuer_name":"AiXin Life International, Inc.","edgar_url":"https://www.sec.gov/Archives/edgar/data/835662/0001493152-26-023606-index.html","primary_entity_key":"0000835662","primary_entity_name":"AiXin Life International, Inc."},"word_count":4506,"has_tables":true,"body_markdown":"**Item\n7**\n**Management’s\nDiscussion And Analysis Of Financial Condition And Results Of Operations**.\n\n \n\n*The\nfollowing discussion should be read in conjunction with our consolidated audited financial statements and related notes thereto and other\nfinancial information appearing elsewhere in this report. In addition to historical information, the following discussion contains forward-looking\nstatements. Where possible, we have tried to identify these forward-looking statements by using words such as “anticipate,”\n“believe,” “intends,” or similar expressions. Although we believe that the expectations reflected in these forward-looking\nstatements are reasonable, we cannot assure you that these expectations will prove to be correct. As a result of many factors, including\nthose factors set forth in the “Risk Factors” section of this report, our actual results could differ materially from the\nresults described in or implied by the forward-looking statements contained in this report.*\n\n \n\n**Overview**\n\n \n\nIn\nDecember 2017, we completed a “reverse” acquisition whereby we acquired all of the outstanding shares of AiXin (BVI) International\nGroup Co., Ltd. a British Virgin Islands corporation (“AiXin BVI”). As a result, AiXin BVI became our wholly-owned subsidiary,\nand through AiXin BVI we now own all of the outstanding shares of HK AiXin International Group Co., Limited, a Hong Kong limited company\n(“AiXin HK”), which in turn owns all of the outstanding shares of Chengdu AiXinZhongHong Biological Technology Co., Ltd.,\na Chinese limited company (“AiXinZhongHong”), which began distributing nutritional products in 2013.\n\n \n\nIn\nSeptember 2021, we completed the acquisition of nine pharmacies located in Chengdu by acquiring the entities which owned the pharmacies. We currently operate pharmacies at 8 locations.\n\n \n\nOn\nSeptember 30, 2022, we acquired all of the outstanding equity of Yunnan Runcangsheng Technology Co., Ltd\n(“Runcangsheng”). Runcangsheng was established in\nApril 2020, and is headquartered in Luquan Yi and Miao Autonomous County, Kunming City, Yunnan Province.\n\n \n\nRuncangsheng\noperates a 2,946 square meter production facility, which houses R&D centers, extraction facilities, preparation workshops and a\nwarehouse. Runcangsheng has more than 30 sub brands and is focused on promoting a healthy lifestyle through the use of foods believed\nto promote well-being, health foods, modernized versions of traditional Chinese medical products and plant extracts. Runcangsheng cultivates\nmany of the raw materials used in its products, compounds the materials into easy to transport and use pre-packaged foods and distributes\nthe products at the wholesale level. As life-styles in China evolve, work pressures increase and the ingestion of meats and other western\nstyle foods increases, Runcangsheng seeks to design and market products intended to combat the increase in obesity, hypertension, insomnia\nand physical ailments associated with such changes. The acquisition of Runcangsheng will enable us to operate as a vertically integrated\ncompany, capable of formulating the kinds of health foods and other nutritional products and supplements suitable for our clients and\nmarketing those products through our distribution channels.\n\n \n\nIn\naddition to our acquisitions in the health and nutritional sector, in July 2021, we completed the acquisition of a hotel located in the\nJinniu District, Chengdu City, by acquiring the entity which operated the hotel. Effective March 31, 2024, we terminated our lease for\nthis hotel. In the termination agreement we and the landlord agreed to release each other from any claims and the landlord agreed to\nreturn the security deposit.\n\n \n\nOn\nFebruary 6, 2024, we entered into a lease with respect to a hotel located in Bandzhuyuan Town, Xindu District, Chengdu City. The term\nof the lease commenced February 29, 2024 and expires April 15, 2034. The Lease grants us the right to occupy various areas within the\nhotel, covering approximately 18,000 square meters, including the first-floor lobby, external shops (subject to the rights of the current\noccupants), the second and third floors, portions of the fourth floor including the restaurant and tea shop, and the fifth through eighteenth\nfloors comprised mainly of guest rooms, underground and ground-level parking lots, and all hotel facilities and equipment. References\nto hotel revenues and operating costs below are with respect to the hotel we previously occupied in the Jinniu District of Chengdu.\n\n \n\n35\n\n \n\n \n\nWe\nintend to look for additional opportunities to profit from the growing healthcare market in China. Though currently we are not party\nto any agreements, we will explore, among other opportunities, expanding our product line through internal research and acquiring complementary\nproducts from third parties, acquiring additional pharmacies and other retail outlets and operating nursing homes and possibly clinics\nwhich provide medical care to clients.\n\n \n\n**Going\nConcern**\n\n \n\nThe\naccompanying consolidated financial statements have been prepared on a going concern basis, which contemplates the realization of assets\nand the satisfaction of liabilities in the normal course of business. The realization of assets and the satisfaction of liabilities in\nthe normal course of business are dependent on, among other things, our ability to operate profitably, to generate cash flows from operations,\nand to pursue financing arrangements to support its working capital requirements.\n\n \n\nWe incurred a net loss of $2,042,463 and $2,768,341 for the years ended December 31, 2025 and 2024, respectively, and used net cash\nin operating activities of $2,034,331 and $1,628,834 for the years ended December 31, 2025 and 2024, respectively. We had\na working capital deficit of $7,476,418 as of December 31, 2025. These facts and conditions raise substantial doubt about our ability\nto continue as a going concern. From January 1, 2025 through December 31, 2025, our cash and cash equivalents decreased from $62,310\nto $20,751 mainly due to cash outflows from operating activities.\n\n \n\nWe\nbelieve that we have developed a liquidity plan, summarized below, that, if executed successfully, should provide sufficient liquidity\nto meet our obligations as they become due for a reasonable period of time, and allow the development of our core business. The plan\nincludes:\n\n \n\n●\nGaining positive cash-inflow from operating activities through continuous cost reductions and the sales of higher margin products.\n\n \n\n●\nRaising cash through loans from related parties and potential equity offerings.\n\n \n\nWhile\nour management believes that the measures in our liquidity plan including those described above will be adequate to satisfy our liquidity\nrequirements for the twelve months after the date of the financial statements contained in this Report are issued, there is no assurance\nthat the liquidity plan will be successfully implemented. Failure to successfully implement the liquidity plan may have a material adverse\neffect on our business, results of operations and financial position, and may adversely affect our ability to continue as a going concern.\nThe consolidated financial statements included in this Report do not include any adjustments related to the recoverability and classification\nof recorded assets or the amounts and classification of liabilities or any other adjustments that might be necessary should the Company\nbe unable to continue as a going concern.\n\n \n\n**Our\nBusiness**\n\n \n\nWe\nare focused on providing health and wellness products to the growing middle class in China. We currently develop, manufacture, market\nand sell premium-quality healthcare, nutritional products and wellness supplements, including herbs and greens, traditional Chinese remedies,\nfunctional products, such as weight management tools, probiotics, foods and drinks. We offer products manufactured by us and those purchased\nfrom third parties through a diversified, omni-channel business model which generates revenues through retail and wholesale product sales,\nthrough company-owned pharmacies, direct marketing and e-commerce. Our marketing approach emphasizes proactively approaching customers\nsuch as by hosting marketing events for clients, which we believe is ideally suited to marketing the products we offer because sales\nof healthcare, nutritional products and supplements are strengthened by ongoing personal contact and support, coaching and education\namong the Company and our clients towards how to achieve a healthy and active lifestyle.\n\n \n\nWe\nbelieve the competitive strengths that will enable us to grow in the health and wellness market include our ability to design and manufacture\nproducts that are responsive to consumers’ needs as the life style of China’s middle class evolves, our coordinated omni-channel\ndistribution network where we enable consumers to obtain the information they need to improve their lifestyle on our website, at our\npharmacies and through individual meetings with our team members.\n\n \n\n36\n\n \n\n \n\nOur\nability to operate profitably and generate positive cash flow will be determined by our ability to attract a large and loyal customer\nbase and provide the information and products they need cost effectively. Our revenue will largely be determined by our ability to achieve\nand maintain a strong brand name and company image, the volume of products we sell and the prices we can charge for such products, which\nwill require that we compete effectively. Our costs will largely be determined by the cost of raw materials and acquired inventory, the\nlabor used to design and manufacture products, and the costs incurred to deliver these products to the consumer.\n\n \n\nWe\nintend to build a reputation as a provider of premium health and wellness products that seeks to improve our customers health and well-being.\nOur objective is to offer a broad and deep mix of products for consumers interested in living well, whether they are looking to treat\na health-related issue or simply maintain their overall wellness. Our premium, value-added offerings include both proprietary products\ndeveloped and manufactured by us as well as products acquired from or sold on behalf of third parties. We believe our range of products\nand ability to develop new products, combined with the customer support and service we offer, differentiate us and allow us to effectively\ncompete against food, drug and mass channel players, specialty stores, independent vitamin, supplement and natural food shops and online\nretailers. There is no assurance that we will achieve our business objectives.\n\n \n\n**Segment Information**\n\n \n\nWe operate as four operating and reporting segments.\nOperating segments are defined as components of a business that can earn revenue and incur expenses and for which discrete financial information\nis evaluated regularly by the chief operating decision maker (CODM) in deciding how to allocate resources and assess performance. Our\nCODM, our Chief Executive Officer, allocates resources and assesses performance based upon the performance of each of the operating segments\ndiscussed below which are differentiated based upon the nature of the products and services offered, whether the segment manufactures\nproducts and the manner in which its products are offered to third parties.\n\n \n\n**Results\nof Operations**\n\n \n\n*Years\nended December 31, 2025 and 2024*\n\n \n\nThe\nfollowing table sets forth the results of our operations for the periods indicated as a percentage of net revenue, certain columns may\nnot add due to rounding:\n\n \n\n  \nYears Ended December 31, \n\n  \n2025  \n2024 \n\n  \n$  \n\n**%\nof**\n\n**Revenue**\n  \n$  \n\n**%\nof**\n\n**Revenue**\n \n\nRevenue \n$1,489,427  \n 100% \n$3,824,301  \n 100%\n\nOperating costs and expenses \n 4,009,977  \n 269% \n 6,412,492  \n 168%\n\nLoss from operations \n (2,520,550) \n (169)% \n (2,588,191) \n (68)%\n\nNon-operating (expenses) income, net \n 478,478  \n 32% \n (179,622) \n (5)%\n\nLoss before income tax \n (2,042,072) \n (137)% \n (2,767,813) \n (72)%\n\nIncome tax expense \n 391  \n -% \n 528  \n -%\n\nNet loss \n$(2,042,463) \n (137)% \n$(2,768,341) \n (72)%\n\n \n\nThe\nfollowing table shows the Company’s operations by business segment for the years ended December 31, 2025 and 2024.\n\n \n\n  \nFor the Years Ended December 31, \n\n  \n2025  \n2024 \n\nNet revenue \n    \n   \n\nDirect sales \n$171,949  \n$504,097 \n\nPharmacy \n 107,198  \n 822,958 \n\nHotel \n 408,581  \n 585,634 \n\nManufacture and sale \n 801,699  \n 1,911,612 \n\nTotal revenues, net \n$1,489,427  \n$3,824,301 \n\n  \n    \n   \n\nOperating costs and expenses \n    \n   \n\nDirect sales \n    \n   \n\nCost of sales \n$44,101  \n$173,950 \n\nOperating expenses \n 962,910  \n 1,815,052 \n\nPharmacy \n    \n   \n\nCost of sales \n 59,085  \n 262,276 \n\nOperating expenses \n 287,428  \n 366,707 \n\nHotel \n    \n   \n\nHotel operating costs \n 1,082,538  \n 1,447,599 \n\nOperating expenses \n 315,370  \n 272,153 \n\nManufacture and sale \n    \n   \n\nCost of sales \n 764,635  \n 1,331,138 \n\nOperating expenses \n 493,910  \n 743,617 \n\nTotal operating costs and expenses \n$4,009,977  \n$6,412,492 \n\n  \n    \n   \n\nIncome (loss) from operations \n    \n   \n\nDirect sales \n$(835,062) \n$(1,484,905)\n\nPharmacy \n (239,315) \n 193,976 \n\nHotel \n (989,327) \n (1,134,119)\n\nManufacture and sale \n (456,846) \n (163,143)\n\nLoss from operations \n$(2,520,550) \n$(2,588,191)\n\n \n\n37\n\n \n\n \n\n*Revenue*\n\n \n\nRevenue\nwas $1,489,427 in the year ended December 31, 2025, compared to $3,824,301 in 2024, a decrease of $2,334,874 or 61%. For the year ended\nDecember 31, 2025, we had $1,080,846 in product revenues, a decrease of $2,157,821 from 2024 in which product revenues were $3,238,667.\nOf our product revenues in 2025, $171,949 were from direct sales, a decrease of $332,148 or 66% from 2024, $107,198 were from sales at\nour pharmacies, a decrease of $715,760 or 87% from 2024, and $801,699 from sales by manufacture and sales, a decrease of $1,109,913 or\n58% from 2024. In 2025, we had hotel revenue of $408,581, a decrease of $177,053 or 30% from 2024.\n\n \n\n*Direct\nSales*\n\n \n\nOur\ndirect products sales revenue was $171,949 for the year ended December 31, 2025, compared with $504,097 in the same period of 2024, representing\na decrease of $332,148 or 66%. Our direct sales revenue as a percentage of our total revenue was 12% for 2025, compared to 13% for 2024.\nThe decrease in direct sales revenue was mainly due to the economic downturn as marketing and promotional activities became more challenging\ncompared to last year.\n\n \n\n*Pharmacy*\n\n \n\nOur\npharmacy revenue was $107,198 for the year ended December 31, 2025, compared with $822,958 in the same period of 2024, representing\na decrease of $715,760 or 87%. Our pharmacy revenue as a percentage of our total revenue was 7% for 2025, compared to 22% for 2024.\nThe decrease in revenue was mainly due to the economic downturn as marketing and that promotional activities did not generate\nanticipated revenues, as well as the convenience of online shopping leading to decreased sales in physical stores.\n\n \n\n*Hotel*\n\n \n\nOur\nhotel revenue was $408,581 for the year ended December 31, 2025, compared with $585,634 for the same period of 2024, representing a decrease\nof $177,053 or 30%. Our hotel revenue as a percentage of our total revenue was 27% for 2025, compared to 15% for 2024. Our hotel revenue\ndecreased by $177,053 due to the economic downturn and the slowdown in the catering industry.\n\n \n\n*Manufacture\nand Sale*\n\n \n\nOur\nmanufacture and sales revenues were $801,699 for the year ended December 31, 2025, compared with $1,911,612 for the same period of 2024,\nrepresenting a decrease of $1,109,913 or 58%. Our manufacture and sales revenue as a percentage of total revenue was 54% for the year\nended December 31, 2025, compared to 50% for the same period of 2024. The decrease in manufacture and sales revenue was mainly due to\nthe economic downturn as marketing and promotional activities become more challenging compared to last year.\n\n \n\n38\n\n \n\n \n\n*Operating\nCosts and Expenses*\n\n \n\n*Cost\nof Sales*\n\n \n\nCost\nof sales was $867,821 for the year ended December 31, 2025, compared to $1,767,364 for 2024, a decrease of $899,543 or 51%. The decrease\nin cost of sales was attributable to the decrease in sales.\n\n \n\n*Direct\nsales*\n\n \n\nThe\ncost of sales for our direct sales was $44,101 for 2025, compared with $173,950 for 2024, representing a decrease of $129,849 or 75%.\nThe cost of sales for direct sales as a percentage of our direct sales was 26% for the year ended December 31, 2025, compared to 35%\nfor the same period of 2024. The decrease in cost of sales was attributable to the decrease in sales.\n\n \n\n*Pharmacy*\n\n \n\nThe\ncost of sales at our pharmacies was $59,085 for 2025, compared with $262,276 for 2024, representing a decrease of $203,191 or 77%. The\ncost of sales at our pharmacies as a percentage of pharmacy product sales was 55% for the year ended December 31, 2025, compared to 32%\nfor the same period of 2024. The decrease in cost of sales was mainly due to the decrease in sales. Moreover, certain promotional activities,\nsuch as price discounts, caused an increase in percentage of our revenues represented by the cost of goods sold.\n\n \n\n*Manufacture\nand Sale*\n\n \n\nThe\ncost of sales at our manufacture and sales segment was $764,635 for 2025, compared with $1,331,138 for 2024, representing a decrease\nof $566,503 or 43%. The cost of sales for our manufacture and sale segment as a percentage of sales was 95% for 2025, compared to 70%\nfor 2024. The primary reason for the decrease in cost of sales was due to decreased sales.\n\n \n\n*Hotel\nOperating Costs*\n\n \n\nHotel\noperating costs were $1,082,538 and $1,447,599 for the years ended December 31, 2025 and 2024, respectively, representing a decrease\nof $365,061 or 25%. The primary reason for the decrease in hotel operating costs was due to decreased revenue.\n\n \n\n*Operating\nExpenses*\n\n \n\nOperating\nexpenses were $2,059,618 for the year ended December 31, 2025, compared to $3,197,529 for 2024, a decrease of $1,137,911 or 36%.\n\n \n\nThe\ndecrease in operating expenses was primarily attributable to the decrease in general and administrative expenses during the year ended\nDecember 31, 2025, was primarily due to stock compensation expense decreased by $301,127, decreased R&D expense by $266,412, decreased\nprofessional expense by $231,738, decreased payroll expense by $89,128, which was partly offset by increased bad debts expense by $40,841.\n\n \n\nThe\ndecrease in selling expenses during the year ended December 31, 2025 was primarily due to decreased travel cost by $181,900, decreased\nrent expense by $38,986 and decreased payroll expense by $63,257.\n\n \n\n39\n\n \n\n \n\n*Loss\nfrom Operations*\n\n \n\nLoss\nfrom operations was $2,520,550 in the year ended December 31, 2025, compared to $2,588,191 in 2024, a decrease of $67,641 or 3%. The\ndecrease in our loss from operations for 2025 was due to the decreased loss in direct sales of $649,843 and in our hotel segment of\n$144,791, partially offset by the increased loss in in our manufacture and sales segment of $293,704 and our pharmacy segment of by\n$433,290.\n\n \n\n*Non-operating\nIncome (Loss)*\n\n \n\nNon-operating\nincome was $478,478 for the year ended December 31, 2025, compared to a non-operating loss of $179,622 for 2024. For the year ended\nDecember 31, 2025, we had gains from forgiveness of other payable of $467,695 and other income of $29,372, partly offset by interest\nexpense of $18,589. For the year ended December 31, 2024, we had interest expense of $76,613 and other expenses of\n$103,009.\n\n \n\n*Income\nTax Expense*\n\n \n\nIncome\ntax expense was $391 and $528 for the years ended December 31, 2025 and 2024, respectively\n\n \n\n*Net\nLoss*\n\n \n\nOur\nnet loss for the year ended December 31, 2025 was $2,042,463, compared to a net loss of $2,768,341 for 2024, a decrease of $725,878 or\n26%. The decrease in our net loss was mainly due to decreased operating costs and expenses, which was partly offset by decreased sales,\nas described above.\n\n \n\n**Liquidity,\nCapital Resources**\n\n \n\nDuring\nthe year ended December 31, 2025, we used $2,034,331 in operations. As of December 31, 2025, cash and cash equivalents were $20,751,\ncompared to $62,310 as of December 31, 2024. At December 31, 2025, we had a working capital deficit of $7,476,418.\n\n \n\nThe\nfollowing is a summary of cash provided by or used in each of the indicated types of activities during the years ended December 31, 2025\nand 2024, respectively.\n\n \n\n  \nDecember 31, 2025  \nDecember 31, 2024 \n\nNet cash used in operating activities \n$(2,034,331) \n$(1,628,834)\n\nNet cash used in investing activities \n$(13,045) \n$(195,235)\n\nNet cash provided by financing activities \n$1,994,344  \n$1,426,442 \n\n \n\n*Net\ncash used in operating activities*\n\n \n\nFor\nthe year ended December 31, 2025, net cash used in operating activities was $2,034,331. This reflects our net loss of $2,042,463,\nadjusted by non-cash related expenses including depreciation and amortization expense of $156,830, a bad debt provision of $18,724,\nloss on disposal of fixed assets of $86,522, a reversal of inventory of $14,223, gain from sale of leasehold improvement of $\n467,695, and operating lease expenses of $298,778, and then decreased by a net change in working capital of $70,804. The cash\noutflow from changes in working capital items mainly resulted from an increase in advances to suppliers from related party of\n$11,057, an increase in payments of accounts payable including payment to related party of $299,605, a decrease in outstanding taxes\npayable of $68,331, a decrease in outstanding accrued liabilities and other payables of $19,947, payments of lease liabilities of\n$216,631, and payment of lease liabilities to related party of $7,943, partly offset by cash inflow from a decrease in accounts\nreceivables of $76,491, a decrease in accounts receivables from related party of $212,843, a decrease in other receivables and\nprepaid expenses of $24,214, a decrease in advance to suppliers of $34,371, a decrease in inventory of $110,187, a decrease in\nsecurity deposit of 2,883, an increase in unearned revenue of $ 53,925 and an increase in unearned revenue from related party of\n$37,796.\n\n \n\n40\n\n \n\n \n\nFor\nthe year ended December 31, 2024, net cash used in operating activities was $1,628,834. This reflects our net loss of $2,768,341, adjusted\nby non-cash related expenses including depreciation and amortization expense of $321,282, a bad debt reversal of $22,415, an inventory\nimpairment of $12,229, operating lease expenses of $542,675, a loss on disposal of fixed assets of $63,105, interest income of $24,867\nand stock-based compensation of $301,127, and then decreased by a net change in working capital of $53,629. The cash outflow from changes\nin working capital items mainly resulted from an increase in accounts receivables from related parties of $431,703, an increase in inventory\nof $88,249, a decrease in unearned revenue of $40,971, payments of lease liabilities of $395,878, and payment of lease liability related\nparties of $7,959, partly offset by cash inflows from accounts receivable of $226,110, a reduction in from advances to suppliers of $112,748,\na reduction in security deposits of $79,274, cash inflow from other receivables and prepaid expense of $38,729, increases in accrued\nliabilities and other payables of $28,304,an increase in taxes payable of $22,730, and an increase in accounts payable (including accounts\npayable to related parties) of $403,236.\n\n \n\n*Net\ncash used in investing activities*\n\n \n\nFor\nthe years ended December 31, 2025 and 2024, net cash used in investing activities was $13,045 and $195,235, respectively. For the year\nended December 31, 2025, net cash used in investing activities included $13,045 for the purchase of fixed assets. For the year ended\nDecember 30, 2024, net cash used in investing activities included $241,661 for the purchase of fixed assets, and $2,779 purchase of an\nintangible asset, which was partly offset by cash received on disposal of fixed assets of $24,338 and repayment received from loans to\nthird party of $24,867.\n\n \n\n*Net\ncash provided by financing activities*\n\n \n\nFor\nthe years ended December 31, 2025 and 2024, net cash provided by financing activities was $1,994,344 and $1,426,442, respectively. For\nthe year ended December 31, 2025, net cash provided by financing activities was the result of proceeds from advances from related parties\nof $3,748,205 and proceeds from loan of $83,478, which was partly offset by repayments of loans due related parties of $1,092,205 and\nrepayment of a government grant of $745,134. For the year ended December 31, 2024, net cash provided by financing activities was the\nresult of proceeds from advances from related parties of $2,347,095, which was partly offset by repayments of loans due related parties\nof $753,991 and repayment of a government grant of $166,662.\n\n \n\nRuncangsheng\ngenerated $28,207 in income for the year ended December 31, 2025. It is likely that we will require additional capital to achieve\nits short-term operational goals and long-range business plans. Further, we may need additional capital to maintain our other\nbusinesses. We may also have to raise additional financing as our working capital requirements are expected to increase in line with\nthe growth of our business. In the past we have funded our operations through proceeds from private placements of equity and\nadvances from our principal shareholder. Should we require capital to fund our business, we intend to finance our business by\nraising additional capital or, when available, borrowing additional funds. Additional issuances of equity or convertible debt\nsecurities will result in dilution to our current shareholders and could cause the price of our common stock to decrease. Further,\nsuch securities might have rights, preferences or privileges senior to our common stock. Additional financing may not be available\nupon acceptable terms, or at all. If adequate funds are not available or are not available on acceptable terms, we may not be able\nto take advantage of prospective new business endeavors or opportunities, which could significantly and materially restrict our\nbusiness operations.\n\n \n\nWe\nare subject to all of the substantial risks inherent in the development of a new business enterprise within extremely competitive industries.\nDue to the absence of a long-standing operating history and the emerging nature of the markets in which we compete, we anticipate operating\nlosses until we can successfully implement our business strategy. Our revenue model is new and evolving, and we cannot be certain that\nit will be successful. The potential profitability of our business model is unproven. We may never achieve profitable operations. Our\nfuture operating results depend on many factors, including demand for our products, the level of competition, and the ability of our\nofficers to manage our business and growth. As a result of the emerging nature of the market in which we compete, we may incur operating\nlosses until such time as we can develop a substantial and stable revenue base. Additional development expenses may delay or negatively\nimpact our ability to generate profits. Accordingly, we cannot assure you that our business model will be successful or that we can sustain\nrevenue growth, achieve or sustain profitability, or continue as a going concern.\n\n \n\n41\n\n \n\n \n\nOur\nability to obtain funds through the issuance of debt or equity is dependent upon the state of the financial markets at such time as we\nmay seek to raise funds. The state of the capital market markets may be adversely impacted by various risks and uncertainties, including,\nbut not limited to future and current impacts of global events such as pandemics, the war in the Ukraine, the conflict in Palestine,\nshifts in international alliances and actions by certain governments, such as the imposition of tariffs, and the responses of other governments\nthereto, increases in inflation and other risks detailed herein.\n\n \n\n**Impact\nof Inflation**\n\n \n\nOur\nresults of operations may be affected by inflation, particularly rising prices for products and other operating costs if we cannot pass\nsuch increases along to our customers in the form of higher prices for our products and services. Generally, we are not party to long\nterm contracts and our inventory turns multiple times per year and we anticipate that we will be able to increase prices on products\nto reflect increases in the cost of inventory.\n\n \n\n**Contractual\nObligations**\n\n \n\nWe\nhave no long-term fixed contractual obligations or commitments other than leases that are disclosed in the notes to our consolidated\nfinancial statements.\n\n \n\n**Contingencies**\n\n \n\nOur\noperations are conducted in the PRC and are subject to specific considerations and significant risks not typically associated with companies\nin North America and Western Europe. These include risks associated with, among others, the political, economic and legal environments\nin China and foreign currency exchange rates. Our results may be adversely affected by changes in PRC government policies with respect\nto laws and regulations, anti-inflationary measures, currency conversion and remittance abroad and rates and methods of taxation, among\nother things.\n\n \n\nOur\nsales, purchases and expense transactions in China are denominated in RMB and all of our assets and liabilities in China are also denominated\nin RMB. The RMB is not freely convertible into foreign currencies under the current PRC law. In China, foreign exchange transactions\nare required by law to be transacted only by authorized financial institutions. Remittances in currencies other than RMB may require\ncertain supporting documentation in order to affect the remittance.\n\n \n\n42"}