AIXIN LIFE INTERNATIONAL, INC. Management report and analysis of the financial situation and operating results. (Form 10-Q)

The following discussion of our financial condition and results of operations
should be read in conjunction with the unaudited financial statements and the
notes to those statements included elsewhere in this Form 10-Q and with the
audited financial statements and the notes thereto included in our Annual Report
on Form 10-K for the year ended December 31, 2021 (the "2021 Form 10-K"). This
discussion contains forward-looking statements that involve risks and
uncertainties. You should specifically consider the various risk factors
identified in our 2021 Form 10-K, that could cause actual results to differ
materially from those anticipated in these forward-looking statements.



Overview



We are focused on the consumer healthcare market in China. We market and sell
premium-quality healthcare, nutritional products and supplements. We also
provide advertising and marketing services to clients which engage us to
distribute their products. We offer our products and those of our clients
through our pharmacies and sales offices, and through exhibition events we
organize and sponsor, and person-to-person marketing. Our marketing business
mainly focuses on proactively approaching customers such as by hosting events
for clients, which we believe is ideally suited to marketing our products and
those of our clients for which we perform advertising services because sales of
healthcare, nutritional products and supplements are strengthened by ongoing
personal contact and support, coaching and education among the Company and our
clients towards how to achieve a healthy and active lifestyle.



In September 2021, we completed the acquisition of nine pharmacies located in
Chengdu by acquiring the entities which owned the pharmacies for an aggregate
purchase price of RMB 34,635,845, or approximately US$5.31 million.



In July 2021, we completed the acquisition of Aixin Shangyan Hotel. Shangyan
Hotel Company owns and operates a hotel located in the Jinniu District, Chengdu
City. The hotel covers more than 8,000 square meters and has a large restaurant
that can accommodate 600 people, 6 luxury dining rooms, a 200 square meter music
tea house, 13 private tea rooms, 108 guest rooms and other supporting
facilities. We acquired the hotel through an acquisition of the outstanding
equity of Aixin Shangyan Hotel for a purchase price of RMB 7,598,887, or
approximately $1.16 million.



In July 2022we have entered into a capital transfer agreement (the “Transfer Agreement”) with Yunnan Sheng Shengyan Technology Co., Ltd. and Chen Yun (collectively, the “Sellers”), the holders of all outstanding equity of
Yunnan Runcansheng Technology Co.,Ltd (“Yunnan Runcansheng”).



Pursuant to the Transfer Agreement, we have agreed to purchase all of the
outstanding equity of Yunnan Runcansheng from the Sellers for RMB 45,082,600
(approximately USD$6.68 million), subject to adjustment as provided in the
Equity Transfer Agreement. Upon execution of the Transfer Agreement, we paid the
Sellers a deposit of 5,000,000 RMB which is refundable under certain conditions
as provided in the Transfer Agreement. In addition to payment of the deposit,
upon signing of the Transfer Agreement we deposited 15,000,000 RMB
(approximately USD$2.3 million) in a bank account controlled by us which is not
to be used by us until completion of the registration of the transfer of the
equity of Yunnan Runcansheng to us in accordance with applicable regulations or
the termination of the Transfer Agreement by either us or the Sellers.



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



In March 2020, the World Health Organization announced that infections caused by
the coronavirus disease of 2019 ("COVID-19") had become pandemic and national,
provincial and local authorities in China, including those whose jurisdictions
include Chengdu, where our offices, hotel and pharmacies are located, adopted
various regulations and orders, including "shelter in place" rules, restrictions
on travel, mandates on the number of people that may gather in one location and
closing non-essential businesses. Many of these measures have been relaxed from
time to time in various localities due to the decrease in the prevalence of
COVID-19. However, beginning in the second half of 2021 and continuing to date,
the number of COVID-19 cases has fluctuated and increased again in many cities
of China, including Sichuan Province, where we are located. As a result, the
authorities in Chengdu from time to time have reinstituted short-term lockdowns
and restrictions on travel and the number of people that could gather at any
location. During the three and six months ended June 30, 2022, all of our
operations were materially adversely impacted by the measures and restrictions
taken to limit the spread of the disease in China and Sichuan Province. We
implemented procedures to promote employee and customer safety. These measures
will not significantly increase our operating costs. However, we cannot predict
with certainty what measures may be taken by the authorities in Chengdu, our
suppliers and customers and the impact these measures may have on our financial
results for 2022.



Our acquisitions of pharmacies, the hotel and Yunnan Runcangsheng should serve
to offset the impact which the restrictions imposed in response to COVID-19 have
had on our traditional direct marketing business. Nevertheless, there is no
assurance that the acquisitions of these businesses will enable us to return to
profitable operations in the immediate future.



In addition to our ongoing operations, we seek to acquire interests in
additional businesses through opportunities found by our management or presented
by persons or firms which desire to take advantage of the perceived advantages
of an Exchange Act registered corporation. We do not restrict our search to any
specific business, industry, or geographical location and may participate in a
business venture of virtually any kind or nature.



It is the goal of our management, in particular, our Chairman, Quanzhong Lin to
grow our business and to modify its capital structure in order to qualify for a
listing on NASDAQ or the NYSE-American exchange. As part of this effort, we will
continue to seek to acquire more businesses and to modify our capital structure
as necessary to meet the requirements of the exchange to which we apply for a
listing. As part of this effort, Mr. Lin transferred to our Company 35,049,685
shares of our common stock for cancellation.



26






Results of Operations


Three months completed June 30, 2022 and 2021



The following table sets forth the results of our operations for the periods
indicated as a percentage of net revenue, certain columns may not add due to
rounding:



                                                  Three Months Ended June 30,
                                            2022                                2021
                                    $           % of Revenue            $           % of Revenue
Revenue                        $   420,887                100 %    $   852,768                100 %
Operating costs and expenses     1,160,125                276 %        384,264                 45 %
Income (loss) from
operations                        (739,238 )             (176 )%       468,504                 55 %
Non-operating income
(expenses), net                     11,442                  3 %         (3,767 )             (0.4 )%
Income (loss) before income
tax                               (727,796 )             (173 )%       464,737                 55 %
Income tax expense                     473                0.1 %        218,052                 26 %
Net income (loss)              $  (728,269 )             (173 )%   $   246,685                 29 %



The following table presents our activities by business segment for the three months ended June 30, 2022 and 2021.


                                        For the Three Months Ended June 30,
                                            2022                     2021
Net revenue
Advertising and products             $            16,591       $        852,768
Pharmacies                                       194,045                      -
Hotel                                            210,251                      -
Total revenues, net                  $           420,887       $        852,768

Operating costs and expenses
Advertising and products
Cost of goods sold                   $             3,735       $         25,021
Operating expenses                               362,219                359,243
Pharmacies
Cost of goods sold                               150,263                      -
Operating expenses                               153,842                      -
Hotel
Hotel operating costs                            418,100                      -
Operating expenses                                71,966                      -
Total operating costs and expenses   $         1,160,125       $        384,264

Income (loss) from operations
Advertising and products             $          (349,363 )     $        468,504
Pharmacies                                      (110,060 )                    -
Hotel                                           (279,815 )                    -
Income (loss) from operations        $          (739,238 )     $        468,504




Revenue


Revenue was $420,887 in the three months ending June 30, 2022, compared to
$852,768 in the same period of 2021, a decrease of $431,881 or 51%. The decrease
in revenue was mainly due to decreases in direct sales of our nutritional
products and advertising revenues as due to COVID-19 restrictions, we were not
able to host the types of events at which we market nutritional products, partly
offset by revenues from our pharmacies and hotel which we did not own in the
second quarter of 2021. For three months ended of June 30, 2022, we had $0
advertising revenue and $210,636 product revenues (of which $16,591 were from
direct sales and $194,045 represented sales at our pharmacies), and hotel
revenue of $210,251. For three months ended June 30, 2021, we had $802,817 of
advertising revenue and $49,951 of product revenue from our direct sales
activities and no revenues from our pharmacies and hotel as the acquisitions
were not completed until the third quarter of 2021.



27






Operation Costs and Expenses



Cost of Goods Sold



Cost of goods sold was $153,998 for the three months ended June 30, 2022,
compared to $25,021 for the three months ended June 30, 2021, an increase of
$128,977 or 515%. The increase in our cost of goods sold is attributable to
pharmacy product sales partly offset by decreased direct product sales. The cost
of goods sold for our direct product sales as a percentage of sales was 27% in
2022, compared to 50% for 2021. The cost of goods sold for products sold through
our pharmacies as a percentage of pharmacy product sales was 77% in 2022, and no
comparable costs were incurred in the three months ended June 30, 2021 as the
acquisition was completed in the third quarter of 2021.



Hotel Operating Costs



Hotel operating costs were $418,100 for the three months ended June 30, 2022.
There were no comparable costs in the three months ended June 30, 2021 as the
acquisition was completed in the third quarter of 2021.



Operating Expenses


Operating costs and expenses were $588,027 for the three months ended June 30,
2022, compared to $359,243 for the same period of 2021, an increase of $228,784
or 64%. The increase in operating expenses was mainly due to the inclusion of
the operating expenses of our pharmacies and hotel.



Operating income (loss)

Loss from operations was $739,238 in the three months ended June 30, 2022,
compared to income of $468,504 in the same period of 2021, a decrease of
$1,207,742 or 258%. The decrease in our income from operations for 2022 was due
to the loss incurred from our direct sales activities and the inclusion of the
losses incurred by our pharmacies and hotel. All of our operations and in
particular our direct marketing activities were materially adversely impacted by
travel and work restrictions and limits on the number of people that might
gather in one place, imposed on a temporary basis in China and Chengdu to limit
the spread of COVID-19.


Non-operating income (expenses)

Non-operating income was $11,442 for the three months ended June 30, 2022,
compared to non-operating expenses of $3,767 for the three months ended June 30,
2021. For the three months ended June 30, 2022, we had interest income of $1,284
and other income of $10,221, partly offset by other expenses of $63. For the
three months ended June 30, 2021, we had interest income of $1,271 and other
income of $1, partly offset by other expense $5,039.



Income tax expense



Income tax expense was $473 and $218,052 for the three months ended June 30,
2022 and 2021, respectively, a decrease of $217,579 or 100% for the three months
ended June 30, 2022 compared with the same period of 2021.



Net Income (Loss)



Our net loss for the three months ended June 30, 2022 was $728,269, compared to
net income of $246,685 in the same period of 2021, a decrease of $974,954 or
395%. The decrease income in the three months ended June 30, 2022 was mainly due
to decreased sales and increased operating costs and expense as explained above.



28





Six months ended June 30, 2022 and 2021



The following table sets forth the results of our operations for the periods
indicated as a percentage of net revenue, certain columns may not add due to
rounding:



                                                    Six Months Ended June 30,
                                            2022                                 2021
                                    $            % of Revenue            $           % of Revenue
Revenue                        $    839,565                100 %    $ 1,550,926                100 %
Operating costs and expenses      2,350,957                280 %        860,252                 55 %
Income (loss) from
operations                       (1,511,392 )             (180 )%       690,674                 45 %
Non-operating income
(expenses), net                      32,007                  4 %         (4,235 )             (0.3 )%
Income (loss) before income
tax                              (1,479,385 )             (176 )%       686,439                 44 %
Income tax expense                      965                  - %        218,052                 14 %
Net income (loss)              $ (1,480,350 )             (176 )%   $   468,387                 30 %



The following table presents our activities by business segment for the six months ended June 30, 2022 and 2021.


                                         For the Six Months Ended June 30,
                                            2022                    2021
Net revenue
Advertising and products             $           32,689       $      1,550,926
Pharmacies                                      352,939                      -
Hotel                                           453,937                      -
Total revenues, net                  $          839,565       $      1,550,926

Operating costs and expenses
Advertising and products
Cost of goods sold                   $            8,418       $        160,680
Operating expenses                              660,261                699,572
Pharmacies
Cost of goods sold                              270,104                      -
Operating expenses                              323,151                      -
Hotel
Hotel operating costs                           929,719                      -
Operating expenses                              159,304                      -
Total operating costs and expenses   $        2,350,957       $        860,252

(Loss) income from operations
Advertising and products             $         (635,990 )     $        690,674
Pharmacies                                     (240,316 )                    -
Hotel                                          (635,086 )                    -
(Loss) income from operations        $       (1,511,392 )     $        690,674




Revenue



Revenue was $839,565 in the six months ending June 30, 2022, compared to
$1,550,926 in the same period of 2021, a decrease of $711,361 or 46%. The
decrease in revenue was mainly due to decreases in direct sales of our
nutritional products and advertising revenues as due to COVID-19 restrictions we
were not able to host the types of events at which we market nutritional
products, which were partly offset by revenues from our pharmacies and hotel
which we did not own in the first half year of 2021. For the six months ended of
June 30, 2022, we had $0 advertising revenue and $385,628 product revenues (of
which $32,689 were from direct sales and $352,939 represented sales at our
pharmacies), and hotel revenue of $453,937. For the six months ended June 30,
2021, we had $1,297,681 of advertising revenue and $253,245 of product revenue
from our direct sales activities and no revenues from our pharmacies and hotel
as the acquisitions were not completed until the third quarter of 2021.



29






Operation Costs and Expenses



Cost of Goods Sold



Cost of goods sold was $278,522 for the six months ended June 30, 2022, compared
to $160,680 for the six months ended June 30, 2021, an increase of $117,842 or
73%. The increase in our cost of goods sold is attributable to pharmacy products
sales partly offset by decrease in direct product sales. The cost of goods sold
for our direct product sales as a percentage of sales was 26% in 2022, compared
to 63% for 2021. The cost of goods sold for products sold through our pharmacies
as a percentage of pharmacy product sales was 77% in 2022, and no comparable
costs were incurred in the six months ended June 30, 2021 as the acquisition was
completed in the third quarter of 2021.



Hotel Operating Costs


The running costs of the hotel were $929,719 for the six months ended June 30, 2022. There were no comparable costs in the six months ended June 30, 2021 as the acquisition was finalized in the third quarter of 2021.


Operating Expenses


Operating costs and expenses were $1,142,716 for the six months ended June 30,
2022, compared to $699,572 for the same period of 2021, an increase of $443,144
or 63%. The increase in operating expenses was mainly due to the inclusion of
the operating expenses of our pharmacies and hotel.



Operating income (loss)

Loss from operations was $1,511,392 in the six months ended June 30, 2022,
compared to income of $690,674 in the same period of 2021, a decrease of
$2,202,066 or 319%. The decrease in our income from operations for 2022 was due
to the loss incurred from our direct sales activities and the inclusion of the
losses incurred by our pharmacies and hotel. All of our operations and in
particular our direct marketing activities were materially adversely impacted by
travel and work restrictions and limits on the number of people that might
gather in one place imposed on a temporary basis in China and Chengdu to limit
the spread of COVID-19.


Non-operating income (expenses)



Non-operating income was $32,007 for the six months ended June 30, 2022,
compared to non-operating expense of $4,235 for the six months ended June 30,
2021. For the six months ended June 30, 2022, we had interest income of $2,612
and other income of $29,655, partly offset by other expenses of $260. For the
six months ended June 30, 2021, we had interest income of $2,489 and other
income of $161, partly offset by other expenses of $6,885.



Income tax expense


Income tax expense was $965 and $218,052 for the six months ended June 30, 2022
and 2021, respectively, a decrease of $217,087 or 100% for the six months ended
June 30, 2022 compared with the same period of 2021.



Net Income (Loss)



Our net loss for the six months ended June 30, 2022 was $1,480,350, compared to
net income of $468,387 in the same period of 2021, a decrease of $1,948,737 or
416%. The decrease in the six months ended June 30, 2022 was mainly due to
decreased sales and increased operating costs and expense as explained above.



Cash and capital resources



During the six months ended of June 30, 2022, we used $771,496 in operations. As
of June 30, 2022, cash and cash equivalents were $8,129,696 (excluding $61,588
of restricted cash), compared to $8,556,642 (excluding $44,211 of restricted
cash) as of December 31, 2021. At June 30, 2022, we had working capital of
$3,602,854 compared to $4,753,390 at December 31, 2021.



30





The following is a summary of the cash provided by or used in each of the types of business indicated during the six months ended June 30, 2022 and 2021, respectively.



                                                       June 30, 2022       June 30, 2021
Net cash (used in) provided by operating activities   $      (771,496 )   $

439,801

Net cash (used in) provided by investing activities   $             -     $    (4,494,966 )
Net cash (used in) provided by financing activities   $       779,015     $
     (444,754 )



Net cash provided by (used in) operating activities



For the six months ended June 30, 2022, net cash used in operating activities
was $771,496. This reflects our net loss of $1,480,350, adjusted by non-cash
related expenses including depreciation and amortization expense of $57,219, the
change in deferred tax of $965, bad debt expense of $47,857, operating lease
expense of $449,445 and stock-based compensation of $185,770, and then decreased
by changes in working capital of $32,402. The cash outflow from changes in
working capital mainly resulted from an increase in accounts receivable of
$65,284, payments of lease liabilities of $418,711, a change in inventory of
$72,168, unearned revenue of $10,099 and taxes payable of $7,034, which was
partly offset by cash inflow from accrued liability and other payables of
$346,883, other receivable and prepaid expense of $92,619, accounts payable of
$89,349 and advances to suppliers of $12,043.



For the six months ended June 30, 2021, net cash provided by operating
activities was $439,801. This was primarily due to our net income of $468,387,
adjusted by non-cash related expenses including depreciation of $10,870,
operating lease expense of $56,253 and stock-based compensation of $185,770, and
then decreased by changes in working capital of $281,479. The cash outflow from
changes in working capital mainly resulted from inventory purchase of $88,863;
payment of advances to suppliers of $113,556; payment of lease liability of
$56,253 and tax payments of $47,058, which was partly offset by cash inflow from
accrued liability and other payables of $22,326 and unearned revenue of $2,787.



Net cash provided by (used in) investing activities

For the six months ended June 30, 2022 and 2021, net cash used in investing
activities was $0 and $4,494,966, respectively. For the six months ended June
30, 2021, net cash used in investing activities was $4,494,966, mainly for the
prepayment for the acquisition of a hotel and pharmacies from our major
shareholder.



Net cash provided by (used in) financing activities

For the six months ended June 30, 2022net cash provided by financing activities increased advances from related parties by $779,015.

For the six months ended June 30, 2021net cash used in financing activities corresponded to the net repayments of advances from related parties of $444,754.

Of the $8,129,696 in cash and cash equivalents on hand as of June 30, 2022, we
anticipate using approximately $7 million to complete the acquisition of Yunnan
Runcangsheng. Should we continue to incur operating losses and incur negative
cash flow after completing such acquisition, we may have to seek to raise
capital. We may also have to raise additional financing as our working capital
requirements are expected to increase in line with the growth of our business as
a result of our acquisition of Yunnan Runcangsheng. In the past we have funded
our operations through the proceeds from private placements of equity and
advances from our principal shareholder. Should we require capital to fund our
business, we intend to finance our business by raising additional capital or,
when available, borrowing additional funds. Additional issuances of equity or
convertible debt securities will result in dilution to our current shareholders
and could cause the price of our common stock to decrease. Further, such
securities might have rights, preferences or privileges senior to our common
stock. Additional financing may not be available upon acceptable terms, or at
all. If adequate funds are not available or are not available on acceptable
terms, we may not be able to take advantage of prospective new business
endeavors or opportunities, which could significantly and materially restrict
our business operations.



Our ability to obtain funds through the issuance of debt or equity is dependent
upon the state of the financial markets at such time as we may seek to raise
funds. The state of the capital market markets may be adversely impacted by
various risks and uncertainties, including, but not limited to future and
current impacts of global events such as COVID-19 and the war in the Ukraine,
increases in inflation and other risks detailed in our 2021 Annual Report on
Form 10K.



Impact of Inflation


Our results of operations may be affected by inflation, particularly rising
prices for products and other operating costs if we cannot pass such increases
along to our customers in the form of higher prices for our products and
services. Generally, we are not party to long term contracts and our inventory
turns multiple times per year and we anticipate that we will be able to increase
prices on products to reflect increases in the cost of inventory.



Contractual Obligations


We have no fixed long-term contractual obligations or commitments other than our agreement to acquire Yunnan Runcangsheng.


31






Contingencies



Our operations are conducted in the PRC and are subject to specific
considerations and significant risks not typically associated with companies in
North America and Western Europe. These include risks associated with, among
others, the political, economic and legal environments in China and foreign
currency exchange rates. Our results may be adversely affected by changes in PRC
government policies with respect to laws and regulations, anti-inflationary
measures, currency conversion and remittance abroad and rates and methods of
taxation, among other things. In particular, China continues to maintain a zero
COVID-19 policy which has caused government agencies from time to time to impose
strict lockdowns and limits on the number of people that may gather in one place
at any time. Certain of these measures have had a material adverse impact on our
business and may continue to do so is they are imposed in the future.



Our sales, purchases and expense transactions in China are denominated in RMB
and all of our assets and liabilities in China are also denominated in RMB. The
RMB is not freely convertible into foreign currencies under the current PRC law.
In China, foreign exchange transactions are required by law to be transacted
only by authorized financial institutions. Remittances in currencies other than
RMB may require certain supporting documentation in order to affect the
remittance.



Significant Accounting Policies



Our management's discussion and analysis of our financial condition and results
of operations are based on our consolidated financial statements, which were
prepared in accordance with accounting principles generally accepted in the
United States of America ("US GAAP"). The preparation of these financial
statements requires us to make estimates and assumptions that affect the
reported amounts of assets and liabilities and the disclosure of contingent
assets and liabilities at the date of the financial statements as well as the
reported net sales and expenses during the reporting periods. On an ongoing
basis, we evaluate our estimates and assumptions. We base our estimates on
historical experience and various other factors that we believe are reasonable
under the circumstances, the results of which form the basis for making
judgments about the carrying value of assets and liabilities that are not
readily apparent from other sources. Actual results may differ from these
estimates under different assumptions or conditions.



Although our significant accounting policies are described in more detail in Note 2 of our consolidated financial statements, we believe that the following accounting policies are the most important to help you fully understand and evaluate this MD&A.


Basis of Presentation


The accompanying financial statements are prepared in conformity with U.S.
Generally Accepted Accounting Principles ("US GAAP"). The functional currency of
AiXinZhongHong, Aixin Shangyan Hotel and Aixintang Pharmacies is Chinese
Renminbi ("RMB"). The accompanying financial statements are translated from RMB
and presented in U.S. dollars ("USD").



Use of Estimates



In preparing financial statements in conformity with US GAAP, management makes
estimates and assumptions that affect the reported amounts of assets and
liabilities and disclosures of contingent assets and liabilities at the dates of
the financial statements, as well as the reported amounts of revenues and
expenses during the reporting period.



Significant estimates, required by management, include the recoverability of
long-lived assets, allowance for doubtful accounts, and the reserve for obsolete
and slow-moving inventories. Actual results could differ from those estimates.



Accounts Receivable



We maintain an allowance for potential credit losses on accounts receivable.
Management reviews the composition of accounts receivable and analyzes
historical bad debts, customer concentrations, customer credit worthiness,
current economic trends and changes in customer payment patterns to evaluate the
adequacy of these reserves. As of June 30, 2022 and December 31, 2021, the bad
debt allowance was $249,711 and $213,787, respectively.



32






Revenue Recognition



ASU No. 2014-09, Revenue from Contracts with Customers ("Topic 606"), became
effective for us on January 1, 2018. Our revenue recognition disclosure reflects
updated accounting policies that are affected by this new standard. We applied
the "modified retrospective" transition method for open contracts for the
implementation of Topic 606. As revenues are and have been primarily from the
delivery of products and the performance of services, and we have no significant
post-delivery obligations, this did not result in a material recognition of
revenue on the accompanying consolidated financial statements for the cumulative
impact of applying this new standard. We made no adjustments to
previously-reported total revenues, as those periods continue to be presented in
accordance with our historical accounting practices under Topic 605, Revenue
Recognition.


Revenue from the sale of goods under Topic 606 is recognized in a manner that reasonably reflects the delivery of our products and services to customers in exchange for the expected consideration and includes the following:

? signed contract(s) with customers that we believe are legally enforceable;

? identification of the performance obligation in the respective contract;

? determination of the transaction price for each performance obligation in

    respective contract;

  ? allocation of the transaction price to each performance obligation; and

? revenue recognition only when we satisfy each performance obligation.

Our revenue recognition policies for our operating segments are as follows:

Advertising and Products



Advertising Revenue



Commencing in the third quarter of 2019 we began to provide advertising services
to our clients. Advertising contracts are signed to establish the price and
advertising services to be provided. Pursuant to the advertising contracts, we
provided advertising and marketing services to clients through exhibition
events, conferences, and person-to-person marketing. We perform a credit
assessment of each customer to assess the collectability of the contract price
prior to entering into contracts.



Most of the advertisement contracts designated that we perform advertising
services for the client through exhibition events, conferences, and
person-to-person marketing during the contracted period, regardless of the
number of such events. As such, we determined that the performance obligation is
satisfied over time during the contracted period and revenue is recognized
accordingly. Such advertising revenue amounted to $0 and $802,817 for the three
months ended June 30, 2022 and 2021, respectively. Such advertising revenue
amounted to $0 and $1,297,681 for the six months ended June 30, 2022 and 2021,
respectively.


A smaller proportion of our advertising revenue is generated from services to
clients through exhibition events, conferences, and person-to-person marketing,
and our compensation is based on the number of products sold. Such advertising
revenue amounted to $0 and $0 for the three and six months ended June 30, 2022
and 2021, respectively.


All advertising revenue is subject to 6% PRC VAT. This VAT may be offset against the VAT paid by us for raw materials and other materials purchased in
China.



Products Revenue



Our revenue from sales of products is recognized when goods are delivered to the
customer and no other obligation exists. We do not provide unconditional return
or other concessions to customers. Our sales policy allows for the return of
unopened products for cash after deducting certain service and transaction fees.
As an alternative to returning a product, customers may request an exchange for
products with the same value.



33






Product sales revenue represents the invoiced value of goods, net of value-added
taxes ("VAT"). All of our products sold in China are subject to the PRC VAT of
17% of the gross sales price prior to May 1, 2018, 16% since May 1, 2018 and 13%
since April 1, 2019. This VAT may be offset by VAT paid by for raw materials and
other materials purchased in China. We record VAT payables and VAT receivables
net of payments in the financial statements. The VAT tax return is filed
offsetting the payables against the receivables. Sales and purchases are
recorded net of VAT collected and paid as we act as an agent for the government.



Pharmacies



Our retail drugstores recognize revenue at the time the customer takes
possession of the merchandise. For pharmacy sales, each prescription claim is
its own arrangement with the customer and is a performance obligation. We
generally receive payment from pharmacy customers we satisfy our performance
obligations. We record a receivable when we have an unconditional right to
receive payment and only the passage of time is required before payment is due.
Sales revenue represents the invoiced value of goods, net of VAT. All of the
products sold in our pharmacies are exempt from VAT as the pharmacies qualify
for a small business exemption.



Hotel



Hotel revenues are primarily derived from the rental of rooms, food and beverage
sales and other ancillary goods and services, including but not limited to
souvenir, parking and conference reservations. Each of these products and
services represents a distinct performance obligation and, in exchange for these
services, we receive fixed amounts based on published rates or negotiated
contracts. Payment is due in full at the time when the services are rendered or
the goods are provided. Room rental revenue is recognized on a daily basis when
rooms are occupied. Food and beverage revenue and other goods and services
revenue are recognized when they have been delivered or rendered to the guests
as the respective performance obligations are satisfied. All of the hotel's
goods sold in China are subject to the PRC VAT of 6%. This VAT may be offset by
VAT paid by on raw materials and other materials purchased in China.



Foreign currency translation and comprehensive income (loss)



The functional currency of our business operations is RMB. For financial
reporting purposes, RMB is translated into USD as the reporting currency. Assets
and liabilities are translated at the exchange rate in effect at the balance
sheet dates. Revenues and expenses are translated at the average rate of
exchange prevailing during the reporting period.



Translation adjustments arising from the use of different exchange rates from
period to period are included as a component of stockholders' equity as
"Accumulated other comprehensive income". Gains and losses resulting from
foreign currency transactions are included in income. There was no significant
fluctuation in the exchange rate for the conversion of RMB to USD after the
balance sheet date.



We use FASB ASC Topic 220, "Comprehensive Income". Comprehensive income (loss)
is comprised of net income (loss) and all changes to the statements of
stockholders' equity, except those due to investments by stockholders, changes
in paid-in capital and distributions to stockholders. Comprehensive loss for the
three and six months ended June 30, 2022 and 2021 consisted of net loss and
foreign currency translation adjustments.

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