In
this annual report on Form 10-K we use the terms “Company,” “we,” “us,” and “our”
to refer to Mercari Communications Group, Ltd. We refer to our $.00001 par value common stock as our common stock.
Except
for historical information, the following description of our business may contain forward-looking statements, which involve risks
and uncertainties. Our actual results could differ materially from those set forth in these forward-looking statements as a result
of a number of factors, including those set forth under Item 1A. Risk Factors in this report.
Business
We
are a “shell company” as defined in Rule 12b-2 under the Securities Exchange Act of 1934, as amended (the “Exchange
Act”), because we have no or nominal assets (other than cash) and no or nominal operations.
We
intend to seek, investigate and, if such investigation warrants, engage in a business combination which may take the form of a
“reverse merger” with a private entity whose business presents an opportunity for our stockholders. Our objectives
discussed below are extremely general and are not intended to restrict our discretion. This discussion of the proposed business
is not meant to be restrictive of our virtually unlimited discretion to search for and enter into potential business opportunities.
We
have not yet entered into any definitive agreement, nor do we have any binding commitment or understanding to enter into or become
engaged in a transaction.
We
are not restricting our search for business combination candidates to any particular industry and will not restrict our potential
candidate target companies to any specific business, industry or geographical location and, thus, may acquire any type of business.
Further, we may acquire a venture which is in its preliminary or development stage, one which is already in operation, or in a
more mature stage of its corporate existence. Accordingly, business opportunities may be available in many different industries
and at various stages of development, all of which will make the task of comparative investigation and analysis of such business
opportunities difficult and complex.
We
believe that there are numerous businesses seeking the perceived benefits of a publicly registered corporation. These benefits
are commonly thought to include the following: (i) the ability to use registered securities to acquire assets or businesses; (ii)
increased visibility in the marketplace; (iii) ease of borrowing from financial institutions; (iv) improved stock trading efficiency;
(v) shareholder liquidity; (vi) greater ease in subsequent capital raising; (vii) compensation of key employees through stock
options; (viii) enhanced corporate image; and (ix) a presence in the United States capital market. We have not conducted market
research and are not aware of statistical data to support the perceived benefits of a merger or acquisition transaction for the
owners of a business opportunity.
Target
companies interested in a business combination with our company may include the following: (i) a company for whom a primary purpose
of becoming public is the use of its securities for the acquisition of other assets or businesses; (ii) a company which is unable
to find an underwriter of its securities or is unable to find an underwriter of securities on terms acceptable to it; (iii) a
company which desires to become public with less dilution of its common stock than would occur upon an underwriting; (iv) a company
which believes that it will be able to obtain investment capital on more favorable terms after it has become public; (v) a foreign
company which may wish an initial entry into the United States securities market; or (vi) a company seeking one or more of the
other mentioned perceived benefits of becoming a public company.
We
anticipate seeking out a target business through solicitation. Such solicitation may include personal contacts, newspaper or magazine
advertisements, mailings and other distributions to law firms, accounting firms, investment bankers, financial advisors and similar
persons, the use of one or more World Wide Web sites and similar methods. No estimate can be made as to the number of persons
who will be contacted or solicited. Such persons will have no relationship to our management.
The
analysis of new business opportunities will be undertaken by or under the supervision of our executive officers and directors,
none of whom is a business analyst and it is not anticipated that outside consultants or advisors will be utilized to assist us
in the analysis of qualified target companies.
A
decision to participate in a specific business opportunity will be made based upon our analysis of the quality of the prospective
business opportunity’s management and personnel, assets, the anticipated acceptability of products or marketing concepts,
the merit of a proposed business plan, and numerous other factors which are difficult, if not impossible, to analyze using any
objective criteria. We have unrestricted flexibility in seeking, analyzing and participating in potential business opportunities.
In
our efforts to analyze potential acquisition targets, we will consider, among others, the following kinds of factors: (i) potential
for growth, indicated by new technology, anticipated market expansion or new products; (ii) competitive position as compared to
other firms of similar size and experience within the industry segment as well as within the industry as a whole; (iii) strength
and diversity of management, either in place or scheduled for recruitment; (iv) capital requirements and anticipated availability
of required funds, to be provided by our company or from operations, through the sale of additional securities, through joint
ventures or similar arrangements or from other sources; (v) the cost of participation by our company as compared to the perceived
tangible and intangible values and potentials; (vi) the extent to which the business opportunity can be advanced; and (vii) the
accessibility of required management expertise, personnel, raw materials, services, professional assistance and other required
items.
In
applying the foregoing criteria, no one of which will be controlling, management will attempt to analyze all factors and circumstances
and make a determination based upon reasonable investigative measures and available data. Potentially available business opportunities
may occur in many different industries, and at various stages of development, all of which will make the task of comparative investigation
and analysis of such business opportunities extremely difficult and complex. Due to our limited capital available for investigation,
we may not discover or adequately evaluate adverse facts about the opportunity to be acquired.
In
implementing a structure for a particular business acquisition, we may become a party to a merger, consolidation, reorganization,
joint venture, or licensing agreement with another entity. We also may acquire stock or assets of an existing business. On the
consummation of a transaction it is probable that the present management and stockholders of our company will no longer be in
control of the company. In addition, our officers and directors, as part of the terms of the acquisition transaction, likely will
be required to resign and be replaced by one or more new officers and directors without a vote of our stockholders.
It
is anticipated that any securities issued in any such reorganization would be issued in reliance upon exemption from registration
under applicable federal and state securities laws. In some circumstances, however, as a negotiated element of a transaction,
we may agree to register all or a part of such securities immediately after the transaction is consummated or at specified times
thereafter. The issuance of substantial additional securities and their potential sale into any trading market which may develop
in our securities may have a depressive effect on that market.
While
the actual terms of a transaction to which we may be a party cannot be predicted, it may be expected that the parties to the business
transaction will find it desirable to avoid the creation of a taxable event and thereby structure the acquisition as a “tax-free”
reorganization under Sections 351 or 368 of the Internal Revenue Code of 1986, as amended.
With
respect to any merger or acquisition, negotiations with target company management are expected to focus on the percentage of our
company which the target company stockholders would acquire in exchange for all of their shareholdings in the target company.
Depending upon, among other things, the target company’s assets and liabilities, our stockholders will in all likelihood
hold a substantially lesser percentage ownership interest in our company following any merger or acquisition. The percentage ownership
may be subject to significant reduction in the event we acquire a target company with substantial assets. Any merger or acquisition
effected by us can be expected to have a significant dilutive effect on the percentage of shares held by our stockholders at such
time.
We
will participate in a business opportunity only after the negotiation and execution of appropriate agreements. Although the terms
of such agreements cannot be predicted, generally such agreements will require certain representations and warranties of the parties
thereto, will specify certain events of default, will detail the terms of closing and the conditions which must be satisfied by
the parties prior to and after such closing, will outline the manner of bearing costs, including costs associated with our attorneys
and accountants.
On
the date we consummate a merger or acquisition with a target business we must file a Current Report on Form 8-K with the Securities
and Exchange Commission (the “SEC”) including information required by a registration statement on Form 10 under the
Securities Exchange Act of 1934, as amended (the “Exchange Act”) containing information concerning the acquired business,
including audited financial statements of the target business. If such audited financial statements are not available at closing,
or within time parameters necessary to ensure our compliance with the requirements of the Exchange Act, or if the audited financial
statements provided do not conform to the representations made by the target company, the closing documents may provide that the
proposed transaction will be voidable at the discretion of our present management.
It
is anticipated that the investigation of specific business opportunities and the negotiation, drafting and execution of relevant
agreements, disclosure documents and other instruments will require substantial management time and attention and substantial
costs for accountants, attorneys and others. If a decision is made not to participate in a specific business opportunity, the
costs theretofore incurred in the related investigation would not be recoverable. Furthermore, even if an agreement is reached
for the participation in a specific business opportunity, the failure to consummate that transaction may result in the loss to
the Registrant of the related costs incurred.
Many
states have enacted statutes, rules and regulations limiting the sale of securities of “blank check” companies in
their respective jurisdictions. Management does not intend to undertake any efforts to cause a market to develop in our securities,
either debt or equity, until we have successfully concluded a business combination. We intend to comply with the periodic reporting
requirements of the Exchange Act for so long as we are subject to those requirements.
Competition
We
will remain an insignificant participant among the firms which engage in the acquisition of business opportunities. There are
many established venture capital and financial concerns which have significantly greater financial and personnel resources and
technical expertise than us. In view of our limited financial resources and limited management availability, we may be at a competitive
disadvantage compared to our competitors.
Employees
We
presently have no employees. Quanzhong Lin, our Chief Executive Officer and President, is engaged in outside business activities
and anticipates that he will devote to our business a limited time until the acquisition of a successful business opportunity
has been identified. We expect no significant changes in the number of our employees other than such changes, if any, incident
to a business combination.
Our
Principal Office
Our
principal office is located at 1120 Avenue of the Americas, 4
th
floor, New York,, NY 10036.
Company
History
We
were incorporated under the laws of the State of Colorado on December 30, 1987. From 1987 until early in 1990, we were engaged
in the business of providing educational products, counseling, seminar programs, and publications such as newsletters to adults
aged 30 to 50. Our business failed in early 1990. We ceased all operating activities during the period from June 1, 1990 to August
31, 2001 and were considered dormant.
During
2001, we were reactivated and sought to merge with another company which had assets and an active business. From November 30,
2001 to March 1, 2004, we were in the development stage. During each of the years since we were reactivated, we have had no revenue
and have had losses approximately equal to the expenditures required to reactivate and comply with filing and reporting obligations.
We do not expect any revenue unless and until a business acquisition transaction is completed. Expenditures have been paid by
us from capital contributions and loans made to us by our principal stockholders and entities controlled by our directors.
On
November 9, 2009, we entered into a Stock Purchase Agreement (the “Stock Purchase Agreement”) with Algodon Wines &
Luxury Development Group, Inc. or “Algodon” (formerly Diversified Private Equity Corporation or “DPEC”),
a then privately-held Delaware corporation, and Kanouff, LLC (“KLLC”) and Underwood Family Partners, Ltd. (the “Partnership”),
of which KLLC and the Partnership were our majority stockholders (the “Stock Purchase”). In connection with the Stock
Purchase, Algodon purchased and we sold, an aggregate of 43,822,001 shares of common stock for a purchase price of $43,822, or
$0.001 per share. In addition, Algodon purchased 200 shares of common stock from KLLC and 200 shares of common stock from the
Partnership for a purchase price of $180,000 payable to each selling shareholder, of which $105,000 was paid at closing and $75,000
had previously been paid in connection with a letter of intent and related amendments. Immediately following the closing of the
Stock Purchase Agreement, there were 45,411,400 shares of common stock issued and outstanding. Immediately following the closing
of the Stock Purchase Agreement, Algodon owned an aggregate of 43,822,401 shares of our common stock out of the total of 45,411,400
shares of common stock issued and outstanding at the closing, or approximately 96.5% of the Company’s issued and outstanding
shares.
On
January 20, 2017, Algodon sold all 43,822,401 shares of our common stock owned by it, representing approximately 96.5% of our
outstanding shares of common stock as part of the transactions described below, which resulted in a change in control of our company.
Recent
Developments
Change
in Control
On
February 2, 2017, Quanzhong Lin, an entrepreneur resident in the People’s Republic of China, purchased 29,521,410 shares
of our common stock, representing approximately 65% of the outstanding shares of the Company’s common stock, for a purchase
price of $300,000, from China Concentric Capital Group Ltd., a British Virgin Islands company (“China Concentric”),
pursuant to a Stock Purchase Agreement dated December 21, 2016. China Concentric had purchased 43,822,001 share of our common
stock, representing approximately 96.5%, of our outstanding shares of common stock, from Algodon on January 20, 2017, for a total
purchase price of $260,000 pursuant to a Stock Purchase Agreement dated December 20, 2016, as amended. Algodon also assigned to
China Concentric all its right, title and interest to amounts payable to Algodon for non-interest bearing advances to our company,
which advances, as of January 20, 2017 were in the aggregate amount of $150,087, and any additional advances made to our company
up until the closing date as set forth in the Stock Purchase Agreement.
On
February 2, 2017, in conjunction with the closing of the sale to Mr. Lin, our then Board of Directors elected Mr. Lin as a director,
Chairman of the Board, President and Chief Executive Officer of our company, effective upon the closing, and Ethan Chuang, who
had served as President of our company since January 20, 2017, as our Vice President. Mr. Chuang, who was elected to our Board
on January 20, 2017, continues to serve as a director of our company. Mr. Chuang was elected Secretary of our corporation on July
18, 2017.
Reincorporation
Merger
On
July 21, 2017, we entered into an Agreement and Plan of Merger (the “Merger Agreement”) pursuant to which we would
be merged with and into our newly-formed wholly-owned subsidiary, AiXin Life International, Inc., a Nevada corporation (“AiXin”
or “AiXin Life”), as a result of which our state of incorporation will be changed from Colorado to Nevada (the “Reincorporation
Merger”). The Merger Agreement and the Reincorporation Merger was approved by unanimous written consent in lieu of a meeting
of our Board of Directors and by written consent of stockholders in lieu of a meeting of stockholders owning in the aggregate
96.50% of our outstanding voting shares. The Merger is subject to approval by the Financial Regulatory Authority.
Reason
for the Reincorporation Merger
Our
Board of Directors believes that a change in our state of incorporation from Colorado to Nevada will meet our business needs and
that the Colorado Business Corporations Act (“CBCA”) does not offer corporate law advantages comparable to those provided
by the laws of the State of Nevada. Reincorporation from Colorado to Nevada also may make it easier to attract future candidates
willing to serve on our board of directors.
The
Reincorporation Merger is not being effected to prevent a change in control, nor is it in response to any present attempt known
to our Board of Directors to acquire control of the Company or obtain representation on our Board. Nevertheless, certain effects
of the proposed reincorporation may be considered to have anti-takeover implications simply by virtue of being subject to Nevada
law. For example, in responding to an unsolicited bidder, the Nevada Revised Statutes authorizes directors to consider not only
the interests of stockholders, but also the interests of employees, suppliers, creditors, customers, the economy of the state
and nation, the interests of the community and society in general, and the long-term as well as short-term interests of the corporation
and its stockholders, including the possibility that these interests may be best served by the continued independence of the corporation.
For a discussion of these and other differences between the laws of Colorado and Nevada, see the Information Statement filed with
the SEC and available on its website at sec.gov and distributed to our stockholders on July 24, 2017 )the “Information Statement”)
under the caption “Reincorporation Merger – Reason for the Reincorporation Merger —Significant Differences between
Colorado and Nevada Law.”
Consequences
of the Reincorporation Merger
The
Reincorporation Merger will effect a change in our legal domicile from Colorado to Nevada, a change in our name to AiXin Life
International, Inc. and other changes of a legal nature, the most significant of which are described under the caption in the
Information Statement “Reincorporation Merger – Reason for the Reincorporation Merger —Significant Differences
between Colorado and Nevada Law.” However, the Reincorporation Merger will not result in any change in headquarters, business,
management, location of our offices, assets, liabilities or net worth, other than as a result of the costs incident to the Reincorporation
Merger. Our management, including all directors and officers, will remain the same in connection with the Reincorporation Merger
and will assume identical positions with AiXin Life. There will be no employment agreements for executive officers or other direct
or indirect interest of the current directors or executive officers of our company in the Reincorporation Merger as a result of
the reincorporation. Upon the effective time of the Reincorporation Merger, your shares of Mercari common stock will be converted
into an equal number of shares of common stock of AiXin Life.
The
authorized capital stock of Mercari consists of 20,000,000 shares of preferred stock, par value $0.001 per share, and 950,000,000
shares of common stock, par value $0.00001 per share. The authorized capital stock of AiXin Life will consist of 1,000,000 shares
of preferred stock, par value $0.001 per share, and 500,000,000 shares of common stock, par value $0.001 per share. Holders of
AiXin Life common stock will be entitled to equal voting rights, consisting of one vote per share on all matters submitted to
a stockholder vote. Holders of AiXin Life common stock will not have cumulative voting rights. Therefore, holders of a majority
of the shares of AiXin Life common stock voting for the election of directors will be able to elect all of the directors. The
presence, in person or by proxy, of the holders of a majority of the outstanding shares of AiXin Life stock entitled to vote will
be required to constitute a quorum at any meeting of AiXin Life stockholders. A vote by the holders of a majority of AiXin Life’s
outstanding shares will be required to effectuate certain fundamental corporate changes such as liquidation, merger or an amendment
to our articles of incorporation. In the event of liquidation, dissolution or winding up of our company, either voluntarily or
involuntarily, each outstanding share of AiXin Life common stock will be entitled to share equally in the assets of AiXin Life.
Holders
of AiXin Life common stock will not have pre-emptive rights or conversion rights and there will be no redemption provisions applicable
to AiXin Life common stock. Holders of AiXin Life common stock will be entitled to receive dividends when and as declared by AiXin
Life’s board, out of funds legally available therefor.
The
articles of incorporation of AiXin Life, like the articles of incorporation of Mercari, gives the Board of Directors the power
to issue shares of preferred stock in one or more series without stockholder approval. The board of directors has the discretion
to determine the rights, preferences, privileges and restrictions, including voting rights, dividend rights, conversion rights,
redemption privileges and liquidation preferences, of each series of preferred stock. The purpose of authorizing the board of
directors to issue preferred stock and determine its rights and preferences is to eliminate delays associated with a stockholder
vote on specific issuances. The issuance of preferred stock, while providing desirable flexibility in connection with possible
acquisitions and other corporate purposes, could have the effect of making it more difficult for a third party to acquire, or
could discourage a third party from acquiring, a majority of a corporation’s outstanding voting stock. AiXin Life has no
present plans to issue any shares of preferred stock.
Operating
as a Nevada corporation will not interfere with, or differ substantially from, our present corporate activities. As a Nevada corporation,
we will be governed by Nevada corporate law, while the Company is presently governed by Colorado law. Nevada law may constitute
a comprehensive, flexible legal structure under which to operate. However, because of differences in the laws of these states,
the rights of our shareholders will change in several material respects as a result of the reincorporation, the most significant
of which are described in our Information Statement under the caption “Reincorporation Merger – Reason for the Reincorporation
Merger —Significant Differences between Colorado and Nevada Law.”
The
purchase of our common stock involves a very high degree of risk.
In
evaluating us and our business, you should carefully consider the risks and uncertainties described below and the other information
and our consolidated financial statements and related notes included herein. The risks provided below may not be all the risks
we face. If any of events described in the risks below actually occurs, our financial condition or operating results may be materially
and adversely affected, the price of our common stock may decline, perhaps significantly, and you could lose all or a part of
your investment.
An
investment in our common stock involves a high degree of risk. You should carefully consider the following risk factors before
deciding to invest in our company. If any of the following risks actually occur, our business, financial condition, results of
operations and prospects for growth would likely suffer. As a result, you may lose all or part of your investment in our company.
We
may require financing to acquire businesses and implement our business plan.
We
may require financing to acquire businesses and to implement our business plan. We cannot assure you that we will be successful
in obtaining financing or acquiring businesses, or in operating those acquired businesses in a profitable manner.
We
expect losses in the future because we have no revenue.
As
we have no current revenue, we are expecting losses over the next 12 months because we do not yet have any revenues to offset
the expenses associated with operating our company. We are not currently engaged in any revenue generating activities and cannot
guarantee that we will ever be successful in generating revenues in the future. We recognize that if we are unable to generate
revenues, we will not be able to earn profits or continue operations. There is no history upon which to base any assumption as
to the likelihood that we will prove successful, and we can provide investors with no assurance that we will generate any operating
revenues or ever achieve profitable operations.
If
our business plans are not successful, we may not be able to continue operations as a going concern and our stockholders may lose
their entire investment in us.
We
have no revenues. We had a net loss of $78,310 for the year ended May 31, 2017, and a stockholders’ deficit of $204,905
at May 31, 2017. The report of our independent registered public accountants on our financial statements for the year ended May
31, 2017 states that these conditions, among others, raise substantial doubt about our ability to continue as a going concern.
Our ability to continue as a going concern is dependent upon our continued operations, which is dependent in turn upon our ability
to meet our financial requirements, raise additional capital, and the success of our future operations.
Our
principal business objective for the next twelve months will be to seek, investigate and, if such investigation warrants, engage
in a business combination with a private entity whose business presents an opportunity for our stockholders. We cannot assure
you that we can identify a suitable business opportunity and consummate a business combination.
We
do not have any agreement for a business combination or other transaction
.
We
have not yet entered into any definitive agreement, nor do we have any binding commitment or understanding to enter into or become
engaged in a merger with, joint venture with or acquisition of, a private or public entity. We cannot assure you that we will
successfully identify and evaluate suitable business opportunities or that we will conclude a business combination. We cannot
guarantee that we will be able to negotiate a business combination on favorable terms, and there is consequently a risk that future
funds allocated to the purchase of our shares will not be invested in a company with active business operations.
Our
future success is highly dependent on the ability of management to locate and attract a suitable acquisition
.
The
success of our proposed plan of operation will depend to a great extent on the operations, financial condition and management
of the identified target company. While business combinations with entities having established operating histories are preferred,
there can be no assurance that we will be successful in locating candidates meeting such criteria. The decision to enter into
a business combination will likely be made without detailed feasibility studies, independent analysis, market surveys or similar
information which, if we had more funds available to us, would be desirable. In the event we complete a business combination the
success of our operations will be dependent upon management of the target company and numerous other factors beyond our control.
We cannot assure you that we will identify a target company and consummate a business combination.
There
is competition for those private companies suitable for a merger transaction of the type contemplated by management.
We
are in a highly competitive market for a limited number of business opportunities which could reduce the likelihood of consummating
a successful business combination. We are and will continue to be an insignificant participant in the business of seeking mergers
with, joint ventures with and acquisitions of small private and public entities. A large number of established and well-financed
entities, including small public companies and venture capital firms, are active in mergers and acquisitions of companies that
may be desirable target candidates for us. Nearly all these entities have significantly greater financial resources, technical
expertise and managerial capabilities than we do; consequently, we will be at a competitive disadvantage in identifying possible
business opportunities and successfully completing a business combination. These competitive factors may reduce the likelihood
of our identifying and consummating a successful business combination.
We
have not conducted market research to identify business opportunities, which may affect our ability to identify a business to
merge with or acquire.
We
have neither conducted nor have others made available to us results of market research concerning prospective business opportunities.
Therefore, we have no assurances that market demand exists for a merger or acquisition as contemplated by us. It may be expected
that any target business or transaction will present a level of risk that conventional private or public offerings of securities
or conventional bank financing will not be available. There is no assurance that we will be able to acquire a business opportunity
on terms favorable to us. Decisions as to which business opportunity to participate in will be unilaterally made by our management,
which may act without the consent, vote or approval of our stockholders.
Management
intends to devote only a limited amount of time to seeking a target company which may adversely impact our ability to identify
a suitable acquisition candidate.
While
seeking a business combination, Quanzhong Lin, our Chief Executive Officer and President, anticipates devoting a limited time
to our affairs. This limited commitment may adversely impact our ability to identify and consummate a successful business combination.
We
are dependent on the services of Quanzhong Lin, our Chief Executive Officer and President, to obtain capital required to implement
our business plan and for identifying, investigating, negotiating and integrating potential acquisition opportunities. The loss
of the services of Quanzhong Lin could have a substantial adverse effect on us.
Our
ability to acquire an operating business will be largely contingent on our ability to retain Quanzhong Lin, our Chief Executive
Officer and President, upon whom we will rely to obtain capital required to implement our business plan and for identifying, investigating,
negotiating and integrating potential acquisition candidates and to attract and retain a highly qualified corporate and operations
level management team. The loss of the services of Quanzhong Lin could have a substantial adverse effect on us.
The
time and cost of preparing a private company to become a public reporting company may preclude us from entering into a merger
or acquisition with the most attractive private companies.
Target
companies that fail to comply with SEC reporting requirements may delay or preclude acquisition. Sections 13 and 15(d) of the
Exchange Act require reporting companies to provide certain information about significant acquisitions, including audited financial
statements for the company acquired. The time and additional costs that may be incurred by some target entities to prepare these
statements may significantly delay or essentially preclude consummation of an acquisition. Otherwise suitable acquisition prospects
that do not have or are unable to obtain the required audited statements may be inappropriate for acquisition so long as the reporting
requirements of the Exchange Act are applicable.
We
may be subject to further government regulation which would adversely affect our operations.
Although
we will be subject to the reporting requirements under the Exchange Act, management believes we will not be subject to regulation
under the Investment Company Act of 1940, as amended (the “Investment Company Act”), since we will not be engaged
in the business of investing or trading in securities. If we engage in business combinations which result in our holding passive
investment interests in a number of entities, we could be subject to regulation under the Investment Company Act. If so, we would
be required to register as an investment company and could be expected to incur significant registration and compliance costs.
We have obtained no formal determination from the SEC as to our status under the Investment Company Act and, consequently, violation
of the Investment Company Act could subject us to material adverse consequences.
Any
potential acquisition or merger with a foreign company may subject us to additional risks.
If
we enter into a business combination with a foreign concern, we will be subject to risks inherent in business operations outside
of the United States. These risks include, for example, currency fluctuations, regulatory problems, punitive tariffs, unstable
local tax policies, trade embargoes, risks related to shipment of raw materials and finished goods across national borders and
cultural and language differences. Foreign economies may differ favorably or unfavorably from the United States economy in growth
of gross national product, rate of inflation, market development, rate of savings, and capital investment, resource self-sufficiency
and balance of payments positions, and in other respects.
If
we fail to develop and maintain an effective system of internal controls, we may not be able to accurately report our financial
results or prevent fraud, as a result, current and potential stockholders could lose confidence in our financial reports, which
could harm our business and the trading price of our common stock.
Effective
internal controls are necessary for us to provide reliable financial reports and effectively prevent fraud. Section 404 of the
Sarbanes-Oxley Act of 2002 requires us to evaluate and report on our internal controls over financial reporting. Compliance with
Section 404 requires that we strengthen, assess and test our system of internal controls to provide the basis for our report.
The process of strengthening our internal controls and complying with Section 404 is expensive and time consuming, and requires
significant management attention. We cannot be certain that the measures we undertake will ensure that we will maintain adequate
controls over our financial processes and reporting in the future. Furthermore, if we are able to rapidly grow our business, the
internal controls that we will need will become more complex, and significantly more resources will be required to ensure our
internal controls remain effective. Failure to implement required controls, or difficulties encountered in their implementation,
could harm our operating results or cause us to fail to meet our reporting obligations. If we discover a material weakness in
our internal controls, the disclosure of that fact, even if the weakness is quickly remedied, could diminish investors’
confidence in our financial statements and harm our stock price. In addition, non-compliance with Section 404 could subject us
to a variety of administrative sanctions, including the suspension of trading, ineligibility for listing on the OTC Markets, and
the inability of registered broker-dealers to make a market in our common stock, which would further reduce our stock price.
Since
our principal stockholder beneficially owns approximately 65% of our outstanding of common stock, you will not have the ability
to determine the outcome of matters requiring stockholder approval, including the acquisition of a target business.
Our
principal stockholder owns approximately 65% of our outstanding shares of our common stock. As a result, you will not have the
ability to determine the outcome of matters requiring the approval of stockholders, including: (a) election of our board of directors;
(b) removal of any of our directors; (c) amendments to our Articles of Incorporation or bylaws; (d) adoption of measures that
could delay or prevent a change in control or impede a merger, takeover or other business combination involving us, or (e) other
significant corporate transactions, including the acquisition of a target business.
There
is no active trading market for our shares of common stock.
There
is no active trading market for our common stock. There can be no assurance that a regular trading market for our securities will
develop, or that if one develops, that it will be sustained. The trading price of our securities could be subject to wide fluctuations,
in response to announcements by us or others, developments affecting us, and other events or factors. In addition, the stock market
has experienced extreme price and volume fluctuations in recent years. These fluctuations have had a substantial effect on the
market prices for many companies, often unrelated to the operating performance of such companies, and may adversely affect the
market prices of the securities. Such risks could have an adverse effect on the stock’s future liquidity.
Our
common stock is subject to the “Penny Stock” Rules of the SEC and the trading market in our securities is limited,
which makes transactions in our stock cumbersome and may reduce the value of an investment in our stock.
The
Securities and Exchange Commission has adopted Rule 15g-9 which establishes the definition of a “penny stock,” for
the purposes relevant to us, as any equity security that has a market price of less than $5.00 per share or with an exercise price
of less than $5.00 per share, subject to certain exceptions. For any transaction involving a penny stock, unless exempt, the rules
require: (a) that a broker or dealer approve a person’s account for transactions in penny stocks; and (b) the broker or
dealer receive from the investor a written agreement to the transaction, setting forth the identity and quantity of the penny
stock to be purchased.
In
order to approve a person’s account for transactions in penny stocks, the broker or dealer must: (a) obtain financial information
and investment experience and objectives of the person; and (b) make a reasonable determination that the transactions in penny
stocks are suitable for that person and the person has sufficient knowledge and experience in financial matters to be capable
of evaluating the risks of transactions in penny stocks.
The
broker or dealer must also deliver, prior to any transaction in a penny stock, a disclosure schedule prescribed by the Commission
relating to the penny stock market, which, in highlight form: (a) sets forth the basis on which the broker or dealer made the
suitability determination; and (b) that the broker or dealer received a signed, written agreement from the investor prior to the
transaction. Generally, brokers may be less willing to execute transactions in securities subject to the “penny stock”
rules. This may make it more difficult for investors to dispose of our common shares and cause a decline in the market value of
our stock.
Disclosure
also has to be made about the risks of investing in penny stocks in both public offerings and in secondary trading and about the
commissions payable to both the broker-dealer and the registered representative, current quotations for the securities and the
rights and remedies available to an investor in cases of fraud in penny stock transactions. Finally, monthly statements have to
be sent disclosing recent price information for the penny stock held in the account and information on the limited market in penny
stocks.
Under
AiXin’s Articles of Incorporation, our Board of Directors has the authority, without stockholder approval, to issue preferred
stock with terms that may not be beneficial to common stock holders and with the ability to adversely affect stockholder voting
power and perpetuate the board’s control over our company.
Our
Board of Directors by resolution may authorize the issuance of up to 1,000,000 shares of preferred stock in one or more series
with such limitations and restrictions as it may determine, in its sole discretion, with no further authorization by security
holders required for the issuance of such shares. The Board may determine the specific terms of the preferred stock, including:
designations; preferences; conversions rights; cumulative, relative; participating; and optional or other rights, including: voting
rights; qualifications; limitations; or restrictions of the preferred stock.
The
issuance of preferred stock may adversely affect the voting power and other rights of the holders of common stock. Preferred stock
may be issued quickly with terms calculated to discourage, make more difficult, delay or prevent a change in control of our company
or make removal of management more difficult. As a result, the Board of Directors’ ability to issue preferred stock may
discourage the potential hostile acquirer, possibly resulting in beneficial negotiations. Negotiating with an unfriendly acquirer
may result in terms more favorable to us and our stockholders. Conversely, the issuance of preferred stock may adversely affect
the market price of, and the voting and other rights of the holders of the common stock. We presently have no plans to issue any
preferred stock.
We
may, in the future, issue additional shares of common stock, which would reduce investors’ percent of ownership and may
dilute our share value.
AiXin’s
Articles of Incorporation authorizes the issuance of 500 million shares of common stock. The future issuance of common stock may
result in substantial dilution in the percentage of our common stock held by our then existing stockholders. We may value any
common stock issued in the future on an arbitrary basis. The issuance of common stock for future services or acquisitions or other
corporate actions may have the effect of diluting the value of the shares held by our investors, and might have an adverse effect
on any trading market for our common stock.
Because
we do not intend to pay any cash dividends on our common stock, our stockholders will not be able to receive a return on their
shares unless they sell them.
We
intend to retain any future earnings to finance the development and expansion of our business. We do not anticipate paying any
cash dividends on our common stock in the foreseeable future. Unless we pay dividends, our stockholders will not be able to receive
a return on their shares unless they sell them. We cannot assure you that you will be able to sell shares when you desire to do
so.
