| SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES | 2.
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Basis
of Presentation and Consolidation 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, Aixintang Pharmacies, and Runcangsheng is the 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 wholly owned subsidiaries, AiXin HK, AiXinZhonghong,
Aixin Shangyan Hotel, Aixintang Pharmacies, and Runcangsheng. Intercompany transactions and accounts were eliminated in consolidation. Going
Concern The
accompanying consolidated financial statements have been prepared on a going concern basis, which contemplates the realization of assets
and the satisfaction of liabilities in the normal course of business. The realization of assets and the satisfaction of liabilities in
the normal course of business are dependent on, among other things, the Company’s ability to operate profitably, to generate cash
flows from operations, and to pursue financing arrangements to support its working capital requirements. The
Company has suffered net losses of $ 2,090,694 6,369,245 1,392,259 1,624,565 17,220,392 510,128 443,758 Management
believes that it has developed a liquidity plan, summarized below, that, if executed successfully, should provide sufficient liquidity
to meet the Company’s obligations as they become due for a reasonable period of time, and allow the development of its core business.
The plan includes: ●
Gaining positive cash-inflow from operating activities through continuous cost reductions and the sales of higher margin products. ●
Raising cash through loans from related parties and potential equity offerings. While
the Company’s management believes that the measures in its liquidity plan including those described above will be adequate to satisfy
its liquidity requirements for the twelve months after the date that these financial statements are issued, there is no assurance that
the liquidity plan will be successfully implemented. Failure to successfully implement the liquidity plan may have a material adverse
effect on its business, results of operations and financial position, and may adversely affect its ability to continue as a going concern.
These consolidated financial statements do not include any adjustments related to the recoverability and classification of recorded assets
or the amounts and classification of liabilities or any other adjustments that might be necessary should the Company be unable to continue
as a going concern. Global
Uncertainties The
Company’s liquidity may be adversely impacted by various risks and uncertainties, including, but not limited to future and current
impacts of global events such as a widespread health crisis, the continuation of the war in the Ukraine or the conflict in Palestine,
the outbreak of another conflict or the expansion of the conflict in Palestine to other countries, the ongoing tensions between the United
States and China, the Russian Federation and certain countries in the Middle East, increases in inflation, and other risks detailed in
in the Company’s Annual Report on Form 10-K or other reports filed with the Securities and Exchange Commission. While
the invasion of Ukraine, the conflict in Palestine and responses thereto have not interrupted the Company’s operations, these or
future developments which disrupt the international financial markets could make it difficult to access debt and equity capital on attractive
terms, if at all, and impact the Company’s ability to fund business activities, including proposed acquisitions. Use
of Estimates In
preparing consolidated financial statements in conformity with US GAAP, management makes estimates and assumptions that affect the reported
amounts of assets and liabilities and disclosures of contingent assets and liabilities at the dates of the consolidated financial statements,
as well as the reported amounts of revenues and expenses during the reporting period. Significant
estimates required by management, include the recoverability of long-lived assets, allowance for doubtful accounts, and the reserve for
obsolete and slow-moving inventories. Actual results could differ from those estimates. Reclassification Certain
prior period amounts have been reclassified to conform to the current period presentation and had no effect on previously reported consolidated
net income (loss) or accumulated deficit. Cash
and Cash Equivalents For
financial statement purposes, the Company considers all highly liquid investments with an original maturity of three months or less to
be cash and cash equivalents. Restricted
Cash The
restricted cash was cash maintained in temporarily frozen bank accounts held by Aixintang Pharmacy and its branches by the court for
a judgement against Aixintang Pharmacy (see Note 18 – 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, 2023 and 2022, the bad debt allowance
was $ 80,640 272,550 The
following table summarizes the activity related to the Company’s accounts receivable allowance for doubtful accounts for the years
ended December 31, 2023 and 2022: SCHEDULE
OF ACCOUNTS RECEIVABLE ALLOWANCE FOR DOUBTFUL ACCOUNTS
2023 2022
For the years ended December 31,
2023 2022
Beginning balance $ 272,550 $ 213,787
(Reversal of) provision for bad debts (47,762 ) 45,953
Acquisition of subsidiary - 196,164
Recoveries/Write offs (135,589 ) (165,227 )
Effect of translation (8,559 ) (18,127 )
Ending balance $ 80,640 $ 272,550 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 provision for inventory reserve of $ 7,770 54,899 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 years
Electronic equipment 2 3
Machinery 3 years
Leasehold improvements 3 years
Vehicles 5 years 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, 2023 and 2022, there were no significant impairments of its long-lived assets. Goodwill The
Company evaluates goodwill for impairment annually or more frequently when an event occurs or circumstances change that indicate the
carrying value may not be recoverable. In testing goodwill for impairment, the Company may elect to utilize a qualitative assessment
to evaluate whether it is more likely than not that the fair value of a reporting unit is less than its carrying amount. If the qualitative
assessment indicates that goodwill impairment is more likely than not, the Company performs a two-step impairment test. The Company tests
goodwill for impairment under the two-step impairment test by first comparing the book value of net assets to the fair value of the reporting
units. If the fair value is determined to be less than the book value or qualitative factors indicate that it is more likely than not
that goodwill is impaired, a second step is performed to compute the amount of impairment as the difference between the estimated fair
value of goodwill and the carrying value. The Company estimates the fair value of the reporting units using discounted cash flows. Forecasts
of future cash flows are based on our best estimate of future net sales and operating expenses, based primarily on expected category
expansion, pricing, market segment share, and general economic conditions. The
Company completed the required testing of goodwill for impairment as of December 31, 2022, and determined that goodwill was impaired
because of the current financial condition of the Company and the Company’s inability to generate future operating income without
substantial sales volume increases, which are highly uncertain. Furthermore, the uncertainty of the future cash flows indicates that
the recoverability of goodwill is not reasonably assured. The
goodwill write-down was reflected as an impairment loss, $ 3,823,770 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, 2023 and 2022, the Company did not take any uncertain positions that would necessitate recording a tax related liability. 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: Products The
Company’s revenue from sales 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 the option 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 Manufacture
and Sale The
Company’s new subsidiary Runcangsheng recognizes revenue at the time products are shipped as this satisfies its performance obligation.
The Company records a receivable for its sales 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 value-added taxes (“VAT”). All
of the Company’s products sold in China are subject to the PRC VAT of 13 Unearned
Revenue The
Company’s unearned revenue primarily consists of advances received from customers for the purchase of products prior to the delivery
of goods, and for the rental of hotel rooms prior to the delivery of service. The delivery of products and room rental services is based upon contract terms and customer demand, normally within one year. 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 years ended December 31, 2023 and 2022, the Company had no customer that accounted for over 10 During
the year ended December 31, 2023, the Company had two suppliers that accounted for over 10% of its total purchases. SCHEDULE
OF CONCENTRATION OF RISK BY RISK FACTORS
Supplier Net purchases for the % of total purchase
A $ 250,999 14 %
B 195,202 11 % During
the year ended December 31, 2022, the Company had two major suppliers that accounted for over 10% of its total purchases.
Supplier Net
purchases for the %
of total purchase
B $ 189,150 14 %
C
(1) 149,806 11 %
(1) The
Company purchased inventory from this supplier, Runcansheng, in the year ended December 31, 2022. The Company acquired all of the
outstanding equity of Runcangsheng on September 30, 2022 (see Note 19). Leases The
Company determines if an arrangement is a lease at inception under FASB ASC Topic 842, Right of Use Assets (“ROU”) and lease
liabilities are recognized at commencement date based on the present value of remaining lease payments over the lease term. For this
purpose, the Company considers only payments that are fixed and determinable at the time of commencement. As most of its leases do not
provide an implicit rate, it uses its incremental borrowing rate based on the information available at commencement date in determining
the present value of lease payments. The Company’s incremental borrowing rate is a hypothetical rate based on its understanding
of what its credit rating would be. The ROU assets include adjustments for prepayments and accrued lease payments. The ROU asset also
includes any lease payments made prior to commencement and is recorded net of any lease incentives received. The Company’s lease
terms may include options to extend or terminate the lease when it is reasonably certain that it will exercise such options. ROU
assets are reviewed for impairment when indicators of impairment are present. ROU assets from operating and finance leases are subject
to the impairment guidance in ASC 360, Property, Plant, and Equipment, as ROU assets are long-lived nonfinancial assets. ROU
assets are tested for impairment individually or as part of an asset group if the cash flows related to the ROU asset are not independent
from the cash flows of other assets and liabilities. An asset group is the unit of accounting for long-lived assets to be held and used,
which represents the lowest level for which identifiable cash flows are largely independent of the cash flows of other groups of assets
and liabilities. The Company recognized no impairment of ROU assets as of December 31, 2023 and 2022. 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 cash 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, 2023 and 2022, 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, 2023 and 2022 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, 2023 and 2022, the Company did not have any potentially dilutive instruments. Stock-Based
Compensation The
Company periodically grants stock options, warrants and awards to employees and non-employees in non-capital raising transactions as
compensation for services rendered. The Company accounts for stock option, stock warrant and stock award grants to employees based on
the authoritative guidance provided by the FASB where the value of the award is measured on the date of grant and recognized over the
vesting period. The Company accounts for stock option, stock warrant and stock award grants to non-employees in accordance with the authoritative
guidance of the FASB where the value of the stock compensation is determined based upon the measurement date at either a) the date at
which a performance commitment is reached, or b) at the date at which the necessary performance to earn the equity instruments is complete.
Stock-based compensation charges generally are amortized over the vesting period on a straight-line basis. In certain circumstances where
there are no future performance requirements by the employees and non-employees, option, warrant and award grants are immediately vested
and the total stock-based compensation charge is recorded in the period of the measurement date. Segment
Reporting ASC
Topic 280, “Segment Reporting,” requires use of the “management approach” model for segment reporting. The management
approach model is based on the way a company’s chief operating decision maker organizes segments within the Company for making
operating decisions assessing performance and allocating resources. Reportable segments are based on products and services, geography,
legal structure, management structure, or any other manner in which management disaggregates a company. The
Company manages its business as four operating segments, products, pharmacies, hotel, and manufacture and sales, 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 years ended December 31, 2023 and 2022. SCHEDULE
OF SEGMENTS INFORMATION
2023 2022
For the Years Ended December 31,
2023 2022
Net revenue
Products $ 1,159,134 $ 823,930
Pharmacies 937,655 789,347
Hotel 1,194,829 856,884
Manufacture and sale 798,181 238,399
Total revenues, net $ 4,089,799 $ 2,708,560
Operating costs and expenses
Products
Cost of goods sold $ 393,862 $ 171,345
Operating expenses 1,790,747 1,526,246
Pharmacies
Cost of goods sold 531,890 578,092
Operating expenses 455,906 622,835
Hotel
Hotel operating costs 1,811,065 1,739,948
Operating expenses 192,963 310,902
Manufacture and sale
Cost of goods sold 688,198 353,723
Operating expenses 723,975 (25,072 )
Total operating costs and expenses $ 6,588,606 $ 5,278,019
Loss from operations
Products $ (1,025,475 ) $ (873,661 )
Pharmacies (50,141 ) (411,580 )
Hotel (809,199 ) (1,193,966 )
Manufacture and sale (613,992 ) (90,252 )
Loss from operations $ (2,498,807 ) $ (2,569,459 )
Segment assets As of As of
Products $ 270,932 $ 410,754
Pharmacies 425,546 758,675
Hotel 1,654,165 970,385
Manufacture and sale 2,491,715 2,911,070
Total assets $ 4,842,358 $ 5,050,884 As
the acquisition of Runcangsheng was consummated as of September 30, 2022 (see Note 19), the revenues and operating results of the manufacture
and sale segment were included in the financial statements of the Company beginning on October 1, 2022. 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 adoption of ASU 2016-13 did not have any impact on the Company’s consolidated financial
statements presentation or disclosures. 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 fair value, 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 adoption of ASU 2017-04 did not have any impact on the Company’s consolidated
financial statements presentation or disclosures. In
August 2020, the FASB issued ASU 2020-06, Debt - Debt with Conversion and Other Options (Subtopic 470- 20) and Derivatives and Hedging
- Contracts in Entity’s Own Equity (Subtopic 815-40): Accounting for Convertible Instruments and Contracts in an Entity’s
Own Equity (“ASU 2020-06”), which simplifies the accounting for certain financial instruments with characteristics of liabilities
and equity. This ASU (1) simplifies the accounting for convertible debt instruments and convertible preferred stock by removing the existing
guidance in ASC 470-20, Debt: Debt with Conversion and Other Options, that requires entities to account for beneficial conversion features
and cash conversion features in equity, separately from the host convertible debt or preferred stock; (2) revises the scope exception
from derivative accounting in ASC 815-40 for freestanding financial instruments and embedded features that are both indexed to the issuer’s
own stock and classified in stockholders’ equity, by removing certain criteria required for equity classification; and (3) revises
the guidance in ASC 260, Earnings Per Share, to require entities to calculate diluted earnings per share (EPS) for convertible instruments
by using the if-converted method. In addition, entities must presume share settlement for purposes of calculating diluted EPS when an
instrument may be settled in cash or shares. For SEC filers, excluding smaller reporting companies, ASU 2020-06 is effective for fiscal
years beginning after December 15, 2021 including interim periods within those fiscal years. Early adoption is permitted, but no earlier
than fiscal years beginning after December 15, 2020. For all other entities, ASU 2020-06 is effective for fiscal years beginning after
December 15, 2023, including interim periods within those fiscal years. Entities should adopt the guidance as of the beginning of the
fiscal year of adoption and cannot adopt the guidance in an interim reporting period. The adoption of ASU 2020-06 is not expected to
have any impact on the Company’s consolidated financial statements presentation or disclosures. The
Company’s management does not believe that any other recently issued, but not yet effective, authoritative guidance, if currently
adopted, would have a material impact on the Company’s financial statement presentation or disclosures. |
