Company: LHI
Filing Date: 2025-02-14
Form Type: DRS/A
Source: 0001213900-25-014190
Chunk: 38

Company: Living Homeopathy International Ltd.
Filing Date: 2025-02-14
Form: DRS/A
Chunk 38
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 the scope of Pyramid Schemes, there will be more pressure on our compliance cost, managerial resources, and business, and our business, financial conditions, and results of operations will be materially and adversely affected.

We carry out our sales and marketing activities through, among others, our extensive mentor-mentee network. Customers who have bought our products may participate in our mentor-mentee program can become mentees or mentors who are further classified into different levels. Mentors and mentees are entitled to sale discounts and commissions of different levels.

We structure our mentor-mentee program and
set up mentor-mentee program related code of conduct to prevent the mentor-mentee program from becoming a pyramid structure as pyramid
schemes are prohibited in Hong Kong pursuant to the Pyramid Schemes Prohibition Ordinance (Cap. 617, Laws of Hong Kong). See “Business
– Marketing” on page 87 of the prospectus for details. It is an offence for a person to participate in a pyramid scheme. A
person who knowingly promotes a pyramid scheme also commits an offence. The Pyramid Schemes Prohibition Ordinance that
came into effect on January 1, 2012 provides for a broad definition of “Pyramid Scheme.” See “Regulation - Regulations
Related to our Business Operation in Hong Kong” on page 90 of this prospectus for more details. The Pyramid Schemes Prohibition
Ordinance defines a pyramid scheme as a scheme in which: (1) new participants must provide a participation payment to a participant or
promoter of the scheme; (2) the participation payment is entirely or substantially induced by the prospect that the new participant will
be entitled to a recruitment payment; and (3) the recruitment payment is entirely or substantially derived from the introduction to the
scheme of a further new participant.

The broad definition of “Pyramid Scheme” may enhance compliance and regulatory risks for genuine multi-level marketing schemes for legitimate business, which may become more susceptible to frivolous claims and more exposed to litigations, which may potentially increase legal and compliance cost and distract managerial attention from business operations and growth. Consequentially, our business, financial condition and results of operations will be adversely affected. If we are guilty of knowingly promoting a pyramid scheme, not only may the relevant contracts be rendered void through illegality, but pecuniary penalties or imprisonment sentences may be imposed. In addition, we may be required to make changes to our business model including the mentor-mentee program and aspects of our sales compensation plan