| SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES | 2.
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Basis
of Presentation The
accompanying consolidated financial statements are prepared in conformity with U.S. Generally Accepted Accounting Principles (“US
GAAP”). The functional currency of AiXinZhonghong, Aixin Shangyan Hotel and Aixintang Pharmacies is Chinese Renminbi (“RMB”).
The accompanying consolidated financial statements are translated from RMB and presented in U.S. dollars (“USD”). The
consolidated financial statements include the accounts of the Company and its current wholly owned subsidiaries, AiXin HK, AiXinZhonghong,
Aixin Shangyan Hotel and Aixintang Pharmacies. Intercompany transactions and accounts were eliminated in consolidation. Reclassification Certain
prior period amounts have been reclassified to conform to the current period presentation and had no effect on previously reported consolidated
net income (loss) or accumulated deficit. Covid
– 19 On
March 11, 2020, the World Health Organization announced that infections caused by the corona virus disease of 2019 (“COVID-19”)
had become pandemic. The Government of China has adopted various regulations and orders, including mandatory quarantines, limits on the
number of people that may gather in one location, closing non-essential businesses and travel bans to limit the spread of the disease.
Many of these measures have been relaxed 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 the Company is located, and the Company does not expect that the increase will impact the Company’s
operations. Financial
impacts related to COVID-19, including the Company’s actions and costs incurred in response to the pandemic, were not material
to the Company’s financial position, results of operations or cash flows for the year ended December 31, 2021. The Company has
implemented procedures to promote employee and customer safety. These measures will not significantly increase its operating costs. However,
the Company cannot predict with certainty what measures may be taken by its suppliers and customers and the impact these measures may
have on its future financial position, results of operations or cash flows. Use
of Estimates In
preparing consolidated financial statements in conformity with US GAAP, management makes estimates and assumptions that affect the reported
amounts of assets and liabilities and disclosures of contingent assets and liabilities at the dates of the consolidated financial statements,
as well as the reported amounts of revenues and expenses during the reporting period. Significant
estimates, required by management, include the recoverability of long-lived assets, allowance for doubtful accounts, and the reserve
for obsolete and slow-moving inventories. Actual results could differ from those estimates. Cash
and Cash Equivalents For
financial statement purposes, the Company considers all highly liquid investments with an original maturity of three months or less to
be cash and cash equivalents. Restricted
Cash The
restricted cash was for the temporary frozen of bank accounts held by Aixintang Pharmacy Co., Ltd. (“Aixintang Pharmacy”)
and its branches by the court for a complaint against the Aixintang Pharmacy while Aixintang Pharmacy is the process of appeal (see Note
17 – litigation). Accounts
Receivable The
Company’s policy is to maintain an allowance for potential credit losses on accounts receivable. Management reviews the composition
of accounts receivable and analyzes historical bad debts, customer concentrations, customer credit worthiness, current economic trends
and changes in customer payment patterns to evaluate the adequacy of these reserves. As of December 31, 2021 and 2020, the bad debt allowance
was $ 213,787 148,520 Inventories Inventories
mainly consists of health supplements, drugs, pharmaceutical and nutritional products, food and beverage, hotel supplies and consumables.
Inventories are valued at the lower of average cost or market, cost being determined on a moving weighted average method at the end of
the month. Management compares the cost of inventories with the net realizable value and an allowance is made for writing down inventories
to market value, if lower. The Company recorded no In
July 2015, the FASB issued Accounting Standards Update (“ASU”) 2015-11, “Inventory (Topic 330) - Simplifying the Measurement
of Inventory,” which requires that inventory within the scope of the guidance be measured at the lower of cost and net realizable
value. Net realizable value is the estimated selling prices in the ordinary course of business, less reasonably predictable costs of
completion, disposal, and transportation. Property
and Equipment Property
and equipment are stated at cost, less accumulated depreciation, and impairment losses, if any. Major repairs and betterments that significantly
extend original useful lives or improve productivity are capitalized and depreciated over the period benefited. Maintenance and repairs
are expensed as incurred. When property and equipment are retired or otherwise disposed of, the related cost and accumulated depreciation
are removed from the respective accounts, and any gain or loss is included in operations. Depreciation of property and equipment is provided
using the straight-line method for substantially all assets with 5 SCHEDULE
OF PROPERTY AND EQUIPMENT ESTIMATED LIVES
Office furniture 5
Electronic equipment 2 3
Machinery 3
Leasehold improvements 3
Vehicles 5 Impairment
of Long-Lived Assets Long-lived
assets, which include property and equipment and intangible assets, are reviewed for impairment whenever events or changes in circumstances
indicate that the carrying amount of an asset may not be recoverable, but at least annually. Recoverability
of long-lived assets to be held and used is measured by comparing the carrying amount of an asset to the estimated undiscounted future
cash flows expected to be generated by it. If the carrying amount of an asset exceeds its estimated undiscounted future cash flows, an
impairment charge is recognized by the amount by which the carrying amount of the asset exceeds its fair value. Fair value is generally
determined using the asset’s expected future discounted cash flows or market value, if readily determinable. Based on its review,
the Company believes that, as of December 31, 2021 and 2020, there were no Income
Taxes Income
taxes are accounted for using an asset and liability method. Under this method, deferred income taxes are recognized for the tax consequences
in future years of differences between the tax bases of assets and liabilities and their financial reporting amounts at each period end
based on enacted tax laws and statutory tax rates, applicable to the periods in which the differences are expected to affect taxable
income. Valuation allowances are established, when necessary, to reduce deferred tax assets to the amount expected to be realized. The
Company follows Accounting Standards Codification (“ASC”) Topic 740, which prescribes a more-likely-than-not threshold for
financial statement recognition and measurement of a tax position taken or expected to be taken in a tax return. ASC Topic 740 also provides
guidance on recognition of income tax assets and liabilities, classification of current and deferred income tax assets and liabilities,
accounting for interest and penalties associated with tax positions, accounting for income taxes in interim periods, and income tax disclosures. Under
ASC Topic 740, when tax returns are filed, it is likely that some positions taken would be sustained upon examination by the taxing authorities,
while others are subject to uncertainty about the merits of the position taken or the amount of the position that would be ultimately
sustained. The benefit of a tax position is recognized in the consolidated financial statements in the period during which, based on
all available evidence, management believes it is more likely than not that the position will be sustained upon examination, including
the resolution of appeals or litigation processes, if any. Tax positions taken are not offset or aggregated with other positions. Tax
positions that meet the more-likely-than-not recognition threshold are measured as the largest amount of tax benefit that is more than
50% likely of being realized upon settlement with the applicable taxing authority. The portion of the benefits associated with tax positions
taken that exceeds the amount measured as described above is reflected as a liability for unrecognized tax benefits in the accompanying
balance sheets along with any associated interest and penalties that would be payable to the taxing authorities upon examination. Interest
associated with unrecognized tax benefits is classified as interest expense and penalties are classified in selling, general and administrative
expenses in the statement of income. At
December 31, 2021 and 2020, the Company did no Revenue
Recognition ASU
No. 2014-09 Revenue from Contracts with Customers Topic
606. Topic 605,
Revenue Recognition Revenue
from sale of goods under Topic 606
● executed
contract(s) with customers that the Company believes is legally enforceable;
● identification
of performance obligation in the respective contract;
● determination
of the transaction price for each performance obligation in the respective contract;
● allocation
of the transaction price to each performance obligation; and
● recognition
of revenue only when the Company satisfies each performance obligation. The
Company’s revenue recognition policies for its various operating segments are as follows: Advertising
and Products Advertising
Revenue Commencing
in the third quarter of 2019, AiXin Zhonghong began to provide advertising services to its clients. Advertising contracts are signed
to establish the price and advertising services to be provided. Pursuant to the advertising contracts, the Company provides advertising
and marketing services to its clients through exhibition events, conferences, and person-to-person marketing. The Company performs a
credit assessment of the customer to assess the collectability of the contract price prior to entering into contracts. Most
of the advertisement contracts designated that the Company perform such advertising services for its clients through exhibition events,
conferences, and person-to-person marketing during the contracted period, regardless of the number of such events. As such, the Company
determined that the performance obligation is satisfied over time during the contracted period and revenue is recognized accordingly.
Such advertising revenue amounted to $ 1,944,811 1,863,785 A
smaller proportion of the Company’s advertising revenue is generated from services to its clients through exhibition events, conferences,
and person-to-person marketing, and charges based on the number of promotional products sold. Such advertising revenue amounted to $ 0
and $ 6,558
for the years ended
December 31, 2021 and 2020, respectively. All
of the advertising revenue is subject to the PRC VAT of 6 Products
Revenue The
Company’s revenue from sale of products is recognized when goods are delivered to the customer and no other obligation exists.
The Company does not provide unconditional return or other concessions to the customer. The Company’s sales policy allows for the
return of unopened products for cash after deducting certain service and transaction fees. As an alternative to the product return option,
the customers have options of asking for an exchange for products with the same value. Sales
revenue of AiXin Zhonghong represents the invoiced value of goods, net of value-added taxes (“VAT”). All of the Company’s
products sold in China are subject to the PRC VAT of 13 Hotel Hotel
revenues are primarily derived from the rental of rooms, food and beverage sales and other ancillary goods and services, including but
not limited to souvenir, parking and conference reservation. Each of these products and services represents a distinct performance obligation
and, in exchange for these services, the Company receives fixed amounts based on published rates or negotiated contracts. Payment is
due in full at the time when the services are rendered or the goods are provided. Room rental revenue is recognized on a daily basis
when rooms are occupied. Food and beverage revenue and other goods and services revenue are recognized when they have been delivered
or rendered to the guests as the respective performance obligations are satisfied. All of the hotel’s goods sold in China are subject
to the PRC VAT of 6 Pharmacies The
Company’s retail drugstores (Aixintang Pharmacies) recognize revenue at the time the customer takes possession of the merchandise.
For pharmacy sales, each prescription claim is its own arrangement with the customer and is a performance obligation. Aixintang Pharmacies
generally receives payments from customers as it satisfies its performance obligations. The Company records a receivable when it has
an unconditional right to receive payment and only the passage of time is required before payment is due. Sales revenue represents the
invoiced value of goods, net of VAT. All of Aixintang Pharmacies’ products sold in China are eligible for the PRC VAT of 0 Unearned
Revenue The
Company’s unearned revenue primarily consists of advances received from customers for the rental of hotel rooms prior to the delivery
of service. The room rental services are delivered (normally within one year) based upon contract terms and customer demand. Concentration
of Credit Risk The
operations of the Company are in the PRC. Accordingly, the Company’s business, financial condition, and results of operations may
be influenced by the political, economic, and legal environments in the PRC, and by the general state of the PRC economy. The
Company has cash on hand and demand deposits in accounts maintained with state-owned banks within the PRC. Cash in state-owned banks
is covered by insurance up to RMB 500,000 72,500 During
the year ended December 31, 2021, the Company had two major customers that accounted for over 10% of its total revenue. SCHEDULE
OF CONCENTRATION OF RISK BY RISK FACTORS
Customer Net
sales for the %
of total revenue
A* $ 1,286,792 42 %
B 658,018 21 % During
the year ended December 31, 2020, the Company had one major customer that accounted for over 10% of its total revenue.
Customer Net
sales for the %
of total revenue
A* $ 1,863,785 76 % During
the year ended December 31, 2021, the Company had one major supplier that accounted for over 10% of its total purchases.
Supplier Net
purchases for the year ended %
of total purchase
C $ 233,187 40 % During
the year ended December 31, 2020, the Company had three major suppliers that accounted for over 10% of its total purchases.
Supplier Net
purchase for the year ended %
of total purchase
A* $ 110,037 55 %
D 27,225 14 %
E 20,000 10 %
* Represented
advertising revenues from this customer during the years ended December 31, 2021 and 2020. The Company also purchased inventory from
this customer during the years ended December 31, 2021 and 2020. Leases The
Company adopted FASB Accounting Standards Codification, Topic 842, Leases (“ASC 842”) using the modified retrospective approach,
electing the practical expedient that allows the Company not to restate prior to the adoption of the standard on January 1, 2019. The
Company applied the following practical expedients in the transition to the new standard allowed under ASC 842:
Practical
Expedient Description
Reassessment
of expired or existing contracts The
Company elected not to reassess, at the application date, whether any expired or existing contracts contained leases, the lease classification
for any expired or existing leases, and the accounting for initial direct costs for any existing leases.
Use
of hindsight The
Company elected to use hindsight in determining the lease term (that is, when considering options to extend or terminate the lease
and to purchase the underlying asset) and in assessing impairment of right-to-use assets.
Reassessment
of existing or expired land easements The
Company elected not to evaluate existing or expired land easements that were not previously accounted for as leases under ASC 840,
as allowed under the transition practical expedient. Going forward, new or modified land easements will be evaluated under ASU No.
2016-02.
Separation
of lease and non-lease components Lease
agreements that contain both lease and non-lease components are generally accounted for separately.
Short-term
lease recognition exemption The
Company also elected the short-term lease recognition exemption and will not recognize ROU assets or lease liabilities for leases
with a term less than 12 months. The
Company determines if an arrangement is a lease at inception under FASB ASC Topic 842, Right of Use Assets (“ROU”) and lease
liabilities are recognized at commencement date based on the present value of remaining lease payments over the lease term. For this
purpose, the Company considers only payments that are fixed and determinable at the time of commencement. As most of its leases do not
provide an implicit rate, it uses its incremental borrowing rate based on the information available at commencement date in determining
the present value of lease payments. The Company’s incremental borrowing rate is a hypothetical rate based on its understanding
of what its credit rating would be. The ROU assets include adjustments for prepayments and accrued lease payments. The ROU asset also
includes any lease payments made prior to commencement and is recorded net of any lease incentives received. The Company’s lease
terms may include options to extend or terminate the lease when it is reasonably certain that it will exercise such options. ROU
assets are reviewed for impairment when indicators of impairment are present. ROU assets from operating and finance leases are subject
to the impairment guidance in ASC 360, Property, Plant, and Equipment, as ROU assets are long-lived nonfinancial assets. ROU
assets are tested for impairment individually or as part of an asset group if the cash flows related to the ROU asset are not independent
from the cash flows of other assets and liabilities. An asset group is the unit of accounting for long-lived assets to be held and used,
which represents the lowest level for which identifiable cash flows are largely independent of the cash flows of other groups of assets
and liabilities. The Company recognized no impairment of ROU assets as of December 31, 2021 and 2020. Operating leases are included in
operating lease ROU and operating lease liabilities (current and non-current), on the consolidated balance sheets. Statement
of Cash Flows In
accordance with ASC Topic 230, “Statement of Cash Flows,” Fair
Value of Financial Instruments The
carrying amounts of certain of the Company’s financial instruments, including cash and equivalents, accrued liabilities and accounts
payable, approximate their fair value due to their short maturities. FASB ASC Topic 825, “Financial Instruments,” requires
disclosure of the fair value of financial instruments held by the Company. The carrying amounts reported in the consolidated balance
sheets for current liabilities each qualify as financial instruments and are a reasonable estimate of their fair value because of the
short period of time between the origination of such instruments and their expected realization and the current market rate of interest. Fair
Value Measurements and Disclosures ASC
Topic 820, “Fair Value Measurements and Disclosures,” defines fair value, and establishes a three-level valuation hierarchy
for disclosures of fair value measurement that enhances disclosure requirements for fair value measures. The three levels are defined
as follow:
● Level
1 inputs to the valuation methodology are quoted prices (unadjusted) for identical assets or liabilities in active markets.
● Level
2 inputs to the valuation methodology include quoted prices for similar assets and liabilities in active markets, and inputs that
are observable for the asset or liability, either directly or indirectly, for substantially the full term of the financial instrument.
● Level
3 inputs to the valuation methodology are unobservable and significant to the fair value measurement. As
of December 31, 2021 and 2020, the Company did not identify any assets and liabilities that are required to be presented on the balance
sheet at fair value. Foreign
Currency Translation and Comprehensive Income (Loss) The
functional currency of the Company is RMB. For financial reporting purposes, RMB is translated into USD as the reporting currency. Assets
and liabilities are translated at the exchange rate in effect at the balance sheet dates. Revenues and expenses are translated at the
average rate of exchange prevailing during the reporting period. Translation
adjustments arising from the use of different exchange rates from period to period are included as a component of stockholders’
equity as “Accumulated other comprehensive income”. Gains and losses resulting from foreign currency transactions are included
in income. There was no significant fluctuation in the exchange rate for the conversion of RMB to USD after the balance sheet date. The
Company uses FASB ASC Topic 220, “Comprehensive Income”. Comprehensive loss is comprised of net loss and all changes to the
statements of stockholders’ equity, except those due to investments by stockholders, changes in paid-in capital and distributions
to stockholders. Comprehensive income (loss) for the year ended December 31, 2021 and 2020 consisted of net income (loss) and foreign
currency translation adjustments. Earnings
per Share Basic
income (loss) per share is computed on the basis of the weighted average number of common shares outstanding during the period. Dilution
is computed by applying the treasury stock method for options and warrants. Under this method, options and warrants are assumed to be
exercised at the beginning of the period (or at the time of issuance, if later), and as if funds obtained thereby were used to purchase
common stock at the average market price during the period. As
of December 31, 2021 and 2020, the Company did no Stock-Based
Compensation The
Company periodically grants stock options, warrants and awards to employees and non-employees in non-capital raising transactions as
compensation for services rendered. The Company accounts for stock option, stock warrant and stock award grants to employees based on
the authoritative guidance provided by the FASB where the value of the award is measured on the date of grant and recognized over the
vesting period. The Company accounts for stock option, stock warrant and stock award grants to non-employees in accordance with the authoritative
guidance of the FASB where the value of the stock compensation is determined based upon the measurement date at either a) the date at
which a performance commitment is reached, or b) at the date at which the necessary performance to earn the equity instruments is complete.
Stock-based compensation charges generally are amortized over the vesting period on a straight-line basis. In certain circumstances where
there are no future performance requirements by the employees and non-employees, option, warrant and award grants are immediately vested
and the total stock-based compensation charge is recorded in the period of the measurement date. Segment
Reporting ASC
Topic 280, “Segment Reporting,” requires use of the “management approach” model for segment reporting. The management
approach model is based on the way a company’s chief operating decision maker organizes segments within the Company for making
operating decisions assessing performance and allocating resources. Reportable segments are based on products and services, geography,
legal structure, management structure, or any other manner in which management disaggregates a company. The
Company manages its business as three operating segments, advertising and products, pharmacies, and hotels, all of which are located
in the PRC. All of its revenues are derived in the PRC. All long-lived assets are located in PRC. The
following table shows the Company’s operations by business segment for the year ended December 31, 2021 and 2020. Revenues and
expenses for the Pharmacies and Hotel segments commenced as of the respective dates of the completion of their acquisitions: SCHEDULE
OF INFORMATION SEGMENTS
2021 2020
Net revenue
Advertising
and products $ 2,406,988 $ 2,451,055
Pharmacies 280,447 -
Hotel 378,798 -
Total revenues, net $ 3,066,233 $ 2,451,055
Operating costs and expenses
Advertising and products
Cost of goods sold $ 316,750 $ 224,675
Operating expenses 1,344,543 1,431,920
Pharmacies
Cost of goods sold 218,735 -
Operating expenses 252,513 -
Hotel
Hotel operating costs 744,594 -
Operating
expenses 216,036 -
Total operating costs
and expenses $ 3,093,171 $ 1,656,595
Income (loss) from operations
Advertising and products $ 745,695 $ 794,460
Pharmacies (190,801 ) -
Hotel (581,832 ) -
Income (loss) from operations $ (26,938 ) $ 794,460
Segment
assets As
of As
of
Advertising
and products $ 8,914,211 $ 8,093,818
Pharmacies 931,706 -
Hotel 1,814,429 -
Total assets $ 11,660,346 $ 8,093,818 New
Accounting Pronouncements In
June 2016, the FASB issued ASU No. 2016-13, Financial Instruments-Credit Losses (Topic 326), which requires entities to measure all expected
credit losses for financial assets held at the reporting date based on historical experience, current conditions, and reasonable and
supportable forecasts. This replaces the existing incurred loss model and is applicable to the measurement of credit losses on financial
assets measured at amortized cost. This guidance is effective for fiscal years, and interim periods within those fiscal years, beginning
after December 15, 2022. Early application will be permitted for all entities for fiscal years, and interim periods within those fiscal
years, beginning after December 15, 2018. The Company is currently evaluating the impact that the standard will have on its consolidated
financial statements. In
January 2017, the FASB issued ASU No. 2017-04, Simplifying the Test for Goodwill Impairment. The guidance removes Step 2 of the goodwill
impairment test, which requires a hypothetical purchase price allocation. A goodwill impairment will now be the amount by which a reporting
unit’s carrying value exceeds its FV, not to exceed the carrying amount of goodwill. The guidance should be adopted on a prospective
basis. As a smaller reporting company, the standard will be effective for the Company for interim and annual reporting periods beginning
after December 15, 2022, with early adoption permitted. The Company is currently evaluating the impact of adopting this standard on the
Company’s consolidated financial statements presentation or disclosures. In
August 2020, the FASB issued ASU 2020-06, Debt - Debt with Conversion and Other Options (Subtopic 470- 20) and Derivatives and Hedging
- Contracts in Entity’s Own Equity (Subtopic 815-40): Accounting for Convertible Instruments and Contracts in an Entity’s
Own Equity (“ASU 2020-06”), which simplifies the accounting for certain financial instruments with characteristics of liabilities
and equity. This ASU (1) simplifies the accounting for convertible debt instruments and convertible preferred stock by removing the existing
guidance in ASC 470-20, Debt: Debt with Conversion and Other Options, that requires entities to account for beneficial conversion features
and cash conversion features in equity, separately from the host convertible debt or preferred stock; (2) revises the scope exception
from derivative accounting in ASC 815-40 for freestanding financial instruments and embedded features that are both indexed to the issuer’s
own stock and classified in stockholders’ equity, by removing certain criteria required for equity classification; and (3) revises
the guidance in ASC 260, Earnings Per Share, to require entities to calculate diluted earnings per share (EPS) for convertible instruments
by using the if-converted method. In addition, entities must presume share settlement for purposes of calculating diluted EPS when an
instrument may be settled in cash or shares. For SEC filers, excluding smaller reporting companies, ASU 2020-06 is effective for fiscal
years beginning after December 15, 2021 including interim periods within those fiscal years. Early adoption is permitted, but no earlier
than fiscal years beginning after December 15, 2020. For all other entities, ASU 2020-06 is effective for fiscal years beginning after
December 15, 2023, including interim periods within those fiscal years. Entities should adopt the guidance as of the beginning of the
fiscal year of adoption and cannot adopt the guidance in an interim reporting period. The adoption of ASU 2020-06 is not expected to
have any impact on the Company’s consolidated financial statements presentation or disclosures. In
May 2021, the FASB issued ASU 2021-04, Earnings Per Share (Topic 260), Debt — Modifications and Extinguishments (Subtopic 470-50),
Compensation — Stock Compensation (Topic 718), and Derivatives and Hedging — Contracts in Entity’s Own Equity (Subtopic
815-40): Issuer’s Accounting for Certain Modifications or Exchanges of Freestanding Equity-Classified Written Call Options (“ASU
2021-04”). ASU 2021-04 provides guidance as to how an issuer should account for a modification of the terms or conditions or an
exchange of a freestanding equity-classified written call option (i.e., a warrant) that remains classified after modification or exchange
as an exchange of the original instrument for a new instrument. An issuer should measure the effect of a modification or exchange as
the difference between the fair value of the modified or exchanged warrant and the fair value of that warrant immediately before modification
or exchange and then apply a recognition model that comprises four categories of transactions and the corresponding accounting treatment
for each category (equity issuance, debt origination, debt modification, and modifications unrelated to equity issuance and debt origination
or modification). ASU 2021-04 is effective for all entities for fiscal years beginning after December 15, 2021, including interim periods
within those fiscal years. An entity should apply the guidance provided in ASU 2021-04 prospectively to modifications or exchanges occurring
on or after the effective date. Early adoption is permitted for all entities, including adoption in an interim period. If an entity elects
to early adopt ASU 2021-04 in an interim period, the guidance should be applied as of the beginning of the fiscal year that includes
that interim period. The adoption of ASU 2021-04 is not expected to have any impact on the Company’s consolidated financial statements
presentation or disclosures. The
Company’s management does not believe that any other recently issued, but not yet effective, authoritative guidance, if currently
adopted, would have a material impact on the Company’s financial statement presentation or disclosures. |
