Annual Report for Fiscal Year Ending DECEMBER 31, 2025 (Form 10-K)

Item 7

Management's Discussion And Analysis Of Financial Condition And Results Of Operations.

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

Overview

In December 2017, we completed a "reverse" acquisition whereby we acquired all of the outstanding shares of AiXin (BVI) International Group Co., Ltd. a British Virgin Islands corporation ("AiXin BVI"). As a result, AiXin BVI became our wholly-owned subsidiary, and through AiXin BVI we now own all of the outstanding shares of HK AiXin International Group Co., Limited, a Hong Kong limited company ("AiXin HK"), which in turn owns all of the outstanding shares of Chengdu AiXinZhongHong Biological Technology Co., Ltd., a Chinese limited company ("AiXinZhongHong"), which began distributing nutritional products in 2013.

In September 2021, we completed the acquisition of nine pharmacies located in Chengdu by acquiring the entities which owned the pharmacies. We currently operate pharmacies at 8 locations.

On September 30, 2022, we acquired all of the outstanding equity of Yunnan Runcangsheng Technology Co., Ltd ("Runcangsheng"). Runcangsheng was established in April 2020, and is headquartered in Luquan Yi and Miao Autonomous County, Kunming City, Yunnan Province.

Runcangsheng operates a 2,946 square meter production facility, which houses R&D centers, extraction facilities, preparation workshops and a warehouse. Runcangsheng has more than 30 sub brands and is focused on promoting a healthy lifestyle through the use of foods believed to promote well-being, health foods, modernized versions of traditional Chinese medical products and plant extracts. Runcangsheng cultivates many of the raw materials used in its products, compounds the materials into easy to transport and use pre-packaged foods and distributes the products at the wholesale level. As life-styles in China evolve, work pressures increase and the ingestion of meats and other western style foods increases, Runcangsheng seeks to design and market products intended to combat the increase in obesity, hypertension, insomnia and physical ailments associated with such changes. The acquisition of Runcangsheng will enable us to operate as a vertically integrated company, capable of formulating the kinds of health foods and other nutritional products and supplements suitable for our clients and marketing those products through our distribution channels.

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

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

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

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, our ability to operate profitably, to generate cash flows from operations, and to pursue financing arrangements to support its working capital requirements.

We incurred a net loss of $2,042,463 and $2,768,341 for the years ended December 31, 2025 and 2024, respectively, and used net cash in operating activities of $2,034,331 and $1,628,834 for the years ended December 31, 2025 and 2024, respectively. We had a working capital deficit of $7,476,418 as of December 31, 2025. These facts and conditions raise substantial doubt about our ability to continue as a going concern. From January 1, 2025 through December 31, 2025, our cash and cash equivalents decreased from $62,310 to $20,751 mainly due to cash outflows from operating activities.

We believe that we have developed a liquidity plan, summarized below, that, if executed successfully, should provide sufficient liquidity to meet our obligations as they become due for a reasonable period of time, and allow the development of our 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 our management believes that the measures in our liquidity plan including those described above will be adequate to satisfy our liquidity requirements for the twelve months after the date of the financial statements contained in this Report 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 our business, results of operations and financial position, and may adversely affect our ability to continue as a going concern. The consolidated financial statements included in this Report 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.

Our Business

We are focused on providing health and wellness products to the growing middle class in China. We currently develop, manufacture, market and sell premium-quality healthcare, nutritional products and wellness supplements, including herbs and greens, traditional Chinese remedies, functional products, such as weight management tools, probiotics, foods and drinks. We offer products manufactured by us and those purchased from third parties through a diversified, omni-channel business model which generates revenues through retail and wholesale product sales, through company-owned pharmacies, direct marketing and e-commerce. Our marketing approach emphasizes proactively approaching customers such as by hosting marketing events for clients, which we believe is ideally suited to marketing the products we offer 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.

We believe the competitive strengths that will enable us to grow in the health and wellness market include our ability to design and manufacture products that are responsive to consumers' needs as the life style of China's middle class evolves, our coordinated omni-channel distribution network where we enable consumers to obtain the information they need to improve their lifestyle on our website, at our pharmacies and through individual meetings with our team members.

Our ability to operate profitably and generate positive cash flow will be determined by our ability to attract a large and loyal customer base and provide the information and products they need cost effectively. Our revenue will largely be determined by our ability to achieve and maintain a strong brand name and company image, the volume of products we sell and the prices we can charge for such products, which will require that we compete effectively. Our costs will largely be determined by the cost of raw materials and acquired inventory, the labor used to design and manufacture products, and the costs incurred to deliver these products to the consumer.

We intend to build a reputation as a provider of premium health and wellness products that seeks to improve our customers health and well-being. Our objective is to offer a broad and deep mix of products for consumers interested in living well, whether they are looking to treat a health-related issue or simply maintain their overall wellness. Our premium, value-added offerings include both proprietary products developed and manufactured by us as well as products acquired from or sold on behalf of third parties. We believe our range of products and ability to develop new products, combined with the customer support and service we offer, differentiate us and allow us to effectively compete against food, drug and mass channel players, specialty stores, independent vitamin, supplement and natural food shops and online retailers. There is no assurance that we will achieve our business objectives.

Segment Information

We operate as four operating and reporting segments. Operating segments are defined as components of a business that can earn revenue and incur expenses and for which discrete financial information is evaluated regularly by the chief operating decision maker (CODM) in deciding how to allocate resources and assess performance. Our CODM, our Chief Executive Officer, allocates resources and assesses performance based upon the performance of each of the operating segments discussed below which are differentiated based upon the nature of the products and services offered, whether the segment manufactures products and the manner in which its products are offered to third parties.

Results of Operations

Years ended December 31, 2025 and 2024

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:

		Years Ended December 31,
		2025								2024
		$				% of Revenue				$				% of Revenue
Revenue		$	1,489,427				100	%		$	3,824,301				100	%
Operating costs and expenses			4,009,977				269	%			6,412,492				168	%
Loss from operations			(2,520,550	)			(169	)%			(2,588,191	)			(68	)%
Non-operating (expenses) income, net			478,478				32	%			(179,622	)			(5	)%
Loss before income tax			(2,042,072	)			(137	)%			(2,767,813	)			(72	)%
Income tax expense			391				-	%			528				-	%
Net loss		$	(2,042,463	)			(137	)%		$	(2,768,341	)			(72	)%

The following table shows the Company's operations by business segment for the years ended December 31, 2025 and 2024.

		For the Years Ended December 31,
		2025				2024
Net revenue
Direct sales		$	171,949			$	504,097
Pharmacy			107,198				822,958
Hotel			408,581				585,634
Manufacture and sale			801,699				1,911,612
Total revenues, net		$	1,489,427			$	3,824,301
Operating costs and expenses
Direct sales
Cost of sales		$	44,101			$	173,950
Operating expenses			962,910				1,815,052
Pharmacy
Cost of sales			59,085				262,276
Operating expenses			287,428				366,707
Hotel
Hotel operating costs			1,082,538				1,447,599
Operating expenses			315,370				272,153
Manufacture and sale
Cost of sales			764,635				1,331,138
Operating expenses			493,910				743,617
Total operating costs and expenses		$	4,009,977			$	6,412,492
Income (loss) from operations
Direct sales		$	(835,062	)		$	(1,484,905	)
Pharmacy			(239,315	)			193,976
Hotel			(989,327	)			(1,134,119	)
Manufacture and sale			(456,846	)			(163,143	)
Loss from operations		$	(2,520,550	)		$	(2,588,191	)

Revenue

Revenue was $1,489,427 in the year ended December 31, 2025, compared to $3,824,301 in 2024, a decrease of $2,334,874 or 61%. For the year ended December 31, 2025, we had $1,080,846 in product revenues, a decrease of $2,157,821 from 2024 in which product revenues were $3,238,667. Of our product revenues in 2025, $171,949 were from direct sales, a decrease of $332,148 or 66% from 2024, $107,198 were from sales at our pharmacies, a decrease of $715,760 or 87% from 2024, and $801,699 from sales by manufacture and sales, a decrease of $1,109,913 or 58% from 2024. In 2025, we had hotel revenue of $408,581, a decrease of $177,053 or 30% from 2024.

Direct Sales

Our direct products sales revenue was $171,949 for the year ended December 31, 2025, compared with $504,097 in the same period of 2024, representing a decrease of $332,148 or 66%. Our direct sales revenue as a percentage of our total revenue was 12% for 2025, compared to 13% for 2024. The decrease in direct sales revenue was mainly due to the economic downturn as marketing and promotional activities became more challenging compared to last year.

Pharmacy

Our pharmacy revenue was $107,198 for the year ended December 31, 2025, compared with $822,958 in the same period of 2024, representing a decrease of $715,760 or 87%. Our pharmacy revenue as a percentage of our total revenue was 7% for 2025, compared to 22% for 2024. The decrease in revenue was mainly due to the economic downturn as marketing and that promotional activities did not generate anticipated revenues, as well as the convenience of online shopping leading to decreased sales in physical stores.

Hotel

Our hotel revenue was $408,581 for the year ended December 31, 2025, compared with $585,634 for the same period of 2024, representing a decrease of $177,053 or 30%. Our hotel revenue as a percentage of our total revenue was 27% for 2025, compared to 15% for 2024. Our hotel revenue decreased by $177,053 due to the economic downturn and the slowdown in the catering industry.

Manufacture and Sale

Our manufacture and sales revenues were $801,699 for the year ended December 31, 2025, compared with $1,911,612 for the same period of 2024, representing a decrease of $1,109,913 or 58%. Our manufacture and sales revenue as a percentage of total revenue was 54% for the year ended December 31, 2025, compared to 50% for the same period of 2024. The decrease in manufacture and sales revenue was mainly due to the economic downturn as marketing and promotional activities become more challenging compared to last year.

Operating Costs and Expenses

Cost of Sales

Cost of sales was $867,821 for the year ended December 31, 2025, compared to $1,767,364 for 2024, a decrease of $899,543 or 51%. The decrease in cost of sales was attributable to the decrease in sales.

Direct sales

The cost of sales for our direct sales was $44,101 for 2025, compared with $173,950 for 2024, representing a decrease of $129,849 or 75%. The cost of sales for direct sales as a percentage of our direct sales was 26% for the year ended December 31, 2025, compared to 35% for the same period of 2024. The decrease in cost of sales was attributable to the decrease in sales.

Pharmacy

The cost of sales at our pharmacies was $59,085 for 2025, compared with $262,276 for 2024, representing a decrease of $203,191 or 77%. The cost of sales at our pharmacies as a percentage of pharmacy product sales was 55% for the year ended December 31, 2025, compared to 32% for the same period of 2024. The decrease in cost of sales was mainly due to the decrease in sales. Moreover, certain promotional activities, such as price discounts, caused an increase in percentage of our revenues represented by the cost of goods sold.

Manufacture and Sale

The cost of sales at our manufacture and sales segment was $764,635 for 2025, compared with $1,331,138 for 2024, representing a decrease of $566,503 or 43%. The cost of sales for our manufacture and sale segment as a percentage of sales was 95% for 2025, compared to 70% for 2024. The primary reason for the decrease in cost of sales was due to decreased sales.

Hotel Operating Costs

Hotel operating costs were $1,082,538 and $1,447,599 for the years ended December 31, 2025 and 2024, respectively, representing a decrease of $365,061 or 25%. The primary reason for the decrease in hotel operating costs was due to decreased revenue.

Operating Expenses

Operating expenses were $2,059,618 for the year ended December 31, 2025, compared to $3,197,529 for 2024, a decrease of $1,137,911 or 36%.

The decrease in operating expenses was primarily attributable to the decrease in general and administrative expenses during the year ended December 31, 2025, was primarily due to stock compensation expense decreased by $301,127, decreased R&D expense by $266,412, decreased professional expense by $231,738, decreased payroll expense by $89,128, which was partly offset by increased bad debts expense by $40,841.

The decrease in selling expenses during the year ended December 31, 2025 was primarily due to decreased travel cost by $181,900, decreased rent expense by $38,986 and decreased payroll expense by $63,257.

Loss from Operations

Loss from operations was $2,520,550 in the year ended December 31, 2025, compared to $2,588,191 in 2024, a decrease of $67,641 or 3%. The decrease in our loss from operations for 2025 was due to the decreased loss in direct sales of $649,843 and in our hotel segment of $144,791, partially offset by the increased loss in in our manufacture and sales segment of $293,704 and our pharmacy segment of by $433,290.

Non-operating Income (Loss)

Non-operating income was $478,478 for the year ended December 31, 2025, compared to a non-operating loss of $179,622 for 2024. For the year ended December 31, 2025, we had gains from forgiveness of other payable of $467,695 and other income of $29,372, partly offset by interest expense of $18,589. For the year ended December 31, 2024, we had interest expense of $76,613 and other expenses of $103,009.

Income Tax Expense

Income tax expense was $391 and $528 for the years ended December 31, 2025 and 2024, respectively

Net Loss

Our net loss for the year ended December 31, 2025 was $2,042,463, compared to a net loss of $2,768,341 for 2024, a decrease of $725,878 or 26%. The decrease in our net loss was mainly due to decreased operating costs and expenses, which was partly offset by decreased sales, as described above.

Liquidity, Capital Resources

During the year ended December 31, 2025, we used $2,034,331 in operations. As of December 31, 2025, cash and cash equivalents were $20,751, compared to $62,310 as of December 31, 2024. At December 31, 2025, we had a working capital deficit of $7,476,418.

The following is a summary of cash provided by or used in each of the indicated types of activities during the years ended December 31, 2025 and 2024, respectively.

		December 31, 2025				December 31, 2024
Net cash used in operating activities		$	(2,034,331	)		$	(1,628,834	)
Net cash used in investing activities		$	(13,045	)		$	(195,235	)
Net cash provided by financing activities		$	1,994,344			$	1,426,442

Net cash used in operating activities

For the year ended December 31, 2025, net cash used in operating activities was $2,034,331. This reflects our net loss of $2,042,463, adjusted by non-cash related expenses including depreciation and amortization expense of $156,830, a bad debt provision of $18,724, loss on disposal of fixed assets of $86,522, a reversal of inventory of $14,223, gain from sale of leasehold improvement of $ 467,695, and operating lease expenses of $298,778, and then decreased by a net change in working capital of $70,804. The cash outflow from changes in working capital items mainly resulted from an increase in advances to suppliers from related party of $11,057, an increase in payments of accounts payable including payment to related party of $299,605, a decrease in outstanding taxes payable of $68,331, a decrease in outstanding accrued liabilities and other payables of $19,947, payments of lease liabilities of $216,631, and payment of lease liabilities to related party of $7,943, partly offset by cash inflow from a decrease in accounts receivables of $76,491, a decrease in accounts receivables from related party of $212,843, a decrease in other receivables and prepaid expenses of $24,214, a decrease in advance to suppliers of $34,371, a decrease in inventory of $110,187, a decrease in security deposit of 2,883, an increase in unearned revenue of $ 53,925 and an increase in unearned revenue from related party of $37,796.

For the year ended December 31, 2024, net cash used in operating activities was $1,628,834. This reflects our net loss of $2,768,341, adjusted by non-cash related expenses including depreciation and amortization expense of $321,282, a bad debt reversal of $22,415, an inventory impairment of $12,229, operating lease expenses of $542,675, a loss on disposal of fixed assets of $63,105, interest income of $24,867 and stock-based compensation of $301,127, and then decreased by a net change in working capital of $53,629. The cash outflow from changes in working capital items mainly resulted from an increase in accounts receivables from related parties of $431,703, an increase in inventory of $88,249, a decrease in unearned revenue of $40,971, payments of lease liabilities of $395,878, and payment of lease liability related parties of $7,959, partly offset by cash inflows from accounts receivable of $226,110, a reduction in from advances to suppliers of $112,748, a reduction in security deposits of $79,274, cash inflow from other receivables and prepaid expense of $38,729, increases in accrued liabilities and other payables of $28,304,an increase in taxes payable of $22,730, and an increase in accounts payable (including accounts payable to related parties) of $403,236.

Net cash used in investing activities

For the years ended December 31, 2025 and 2024, net cash used in investing activities was $13,045 and $195,235, respectively. For the year ended December 31, 2025, net cash used in investing activities included $13,045 for the purchase of fixed assets. For the year ended December 30, 2024, net cash used in investing activities included $241,661 for the purchase of fixed assets, and $2,779 purchase of an intangible asset, which was partly offset by cash received on disposal of fixed assets of $24,338 and repayment received from loans to third party of $24,867.

Net cash provided by financing activities

For the years ended December 31, 2025 and 2024, net cash provided by financing activities was $1,994,344 and $1,426,442, respectively. For the year ended December 31, 2025, net cash provided by financing activities was the result of proceeds from advances from related parties of $3,748,205 and proceeds from loan of $83,478, which was partly offset by repayments of loans due related parties of $1,092,205 and repayment of a government grant of $745,134. For the year ended December 31, 2024, net cash provided by financing activities was the result of proceeds from advances from related parties of $2,347,095, which was partly offset by repayments of loans due related parties of $753,991 and repayment of a government grant of $166,662.

Runcangsheng generated $28,207 in income for the year ended December 31, 2025. It is likely that we will require additional capital to achieve its short-term operational goals and long-range business plans. Further, we may need additional capital to maintain our other businesses. 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. In the past we have funded our operations through 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.

We are subject to all of the substantial risks inherent in the development of a new business enterprise within extremely competitive industries. Due to the absence of a long-standing operating history and the emerging nature of the markets in which we compete, we anticipate operating losses until we can successfully implement our business strategy. Our revenue model is new and evolving, and we cannot be certain that it will be successful. The potential profitability of our business model is unproven. We may never achieve profitable operations. Our future operating results depend on many factors, including demand for our products, the level of competition, and the ability of our officers to manage our business and growth. As a result of the emerging nature of the market in which we compete, we may incur operating losses until such time as we can develop a substantial and stable revenue base. Additional development expenses may delay or negatively impact our ability to generate profits. Accordingly, we cannot assure you that our business model will be successful or that we can sustain revenue growth, achieve or sustain profitability, or continue as a going concern.

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 pandemics, the war in the Ukraine, the conflict in Palestine, shifts in international alliances and actions by certain governments, such as the imposition of tariffs, and the responses of other governments thereto, increases in inflation and other risks detailed herein.

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 long-term fixed contractual obligations or commitments other than leases that are disclosed in the notes to our consolidated financial statements.

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.

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.