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China SXT Pharmaceuticals, Inc.

China SXT Pharmaceuticals, Inc.SXTCEarnings & Financial Report

Nasdaq · Health Care · Pharmaceutical Preparations

China SXT Pharmaceuticals, Inc. is a pharmaceutical company focused on the Chinese domestic market. It engages in the research, development, production and distribution of traditional Chinese medicine-based prescription drugs, over-the-counter medications, and nutritional health products, serving both clinical medical institutions and consumer health markets.

What changed in China SXT Pharmaceuticals, Inc.'s 20-F — 2023 vs 2024

Top changes in China SXT Pharmaceuticals, Inc.'s 2024 20-F

243 paragraphs added · 250 removed · 171 edited across 5 sections

Item 3. Legal Proceedings

Legal Proceedings — active lawsuits and investigations

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See more detailed discussion of this risk factor on page 5 of this annual report. ● Our significant business lines have a limited operating history, which makes it difficult to evaluate our future prospects and results of operations.
See a more detailed discussion of this risk factor on page 5 of this annual report. ● Our significant business lines have a limited operating history, which makes it difficult to evaluate our future prospects and results of operations.
See more detailed discussion of this risk factor on page 7 of this annual report. ● Our dependence on a small number of customers could adversely affect our business or results of operations.
See a more detailed discussion of this risk factor on page 7 of this annual report. ● Our dependence on a small number of customers could adversely affect our business or results of operations.
See more detailed discussion of this risk factor on page 8 of this annual report. ● Our business requires a number of permits and licenses in order to carry on their business.
See a more detailed discussion of this risk factor on page 8 of this annual report. ● Our business requires a number of permits and licenses in order to carry on their business.
See more detailed discussion of this risk factor on page 17 of this annual report. ● As a foreign private issuer, we are not subject to certain U.S. securities law disclosure requirements that apply to a domestic U.S. issuer, and are permitted to adopt certain home country practices in relation to corporate governance matters that differ significantly from the NASDAQ Stock Market corporate governance listing standards.
See a more detailed discussion of this risk factor on page 17 of this annual report. ● As a foreign private issuer, we are not subject to certain U.S. securities law disclosure requirements that apply to a domestic U.S. issuer, and are permitted to adopt certain home country practices in relation to corporate governance matters that differ significantly from the NASDAQ Stock Market corporate governance listing standards.
If the PRC government exerts more oversight and control over offerings that are conducted overseas and/or foreign investment in China-based issuers and we were to be subject to such oversight and control, it may result in a material adverse change to our business operations, significantly limit or completely hinder our ability to offer or continue to offer securities to investors, and cause the ordinary shares to significantly decline in value or become worthless.
If the PRC government exerts more oversight and control over offerings that are conducted overseas and/or foreign investment in China-based issuers and we were to be subject to such oversight and control, it may result in a material adverse change to our business operations, significantly limit or completely hinder our ability to offer or continue to offer securities to investors, and cause the ordinary shares to significantly decline in value or become worthless.
See more detailed discussion of this risk factor on page 10 of this annual report. 3 Risks Related to Our Corporate Structure We are also subject to risks and uncertainties related to our corporate structure, including, but are not limited to, the following: ● We do not have direct ownership of our operating entities in China and rely on VIE Agreements with the VIE for our business operations, which may not be as effective in providing operational control or enabling us to derive benefits as through ownership of controlling equity interests.
See a more detailed discussion of this risk factor on page 10 of this annual report. 3 Risks Related to Our Corporate Structure We are also subject to risks and uncertainties related to our corporate structure, including, but are not limited to, the following: ● We do not have direct ownership of our operating entities in China and rely on VIE Agreements with the VIE for our business operations, which may not be as effective in providing operational control or enabling us to derive benefits as through ownership of controlling equity interests.
See more detailed discussion of this risk factor on page 11 of this annual report. ● Contractual arrangements in relation to our variable interest entity may be subject to scrutiny by the PRC tax authorities and they may determine that we or our PRC variable interest entity owe additional taxes, which could negatively affect our results of operations and the value of your investment.
See a more detailed discussion of this risk factor on page 11 of this annual report. ● Contractual arrangements in relation to our variable interest entity may be subject to scrutiny by the PRC tax authorities and they may determine that we or our PRC variable interest entity owe additional taxes, which could negatively affect our results of operations and the value of your investment.
See more detailed discussion of this risk factor on page 16 of this annual report. ● For as long as we are an emerging growth company, we will not be required to comply with certain reporting requirements, including those relating to accounting standards and disclosure about our executive compensation, that apply to other public companies.
See a more detailed discussion of this risk factor on page 16 of this annual report. ● For as long as we are an emerging growth company, we will not be required to comply with certain reporting requirements, including those relating to accounting standards and disclosure about our executive compensation, that apply to other public companies.
See more detailed discussion of this risk factor on page 12 of this annual report. ● The approval of the China Securities Regulatory Commission and other compliance procedures may be required in connection with this offering, and, if required, we cannot predict whether we will be able to obtain such approval.
See a more detailed discussion of this risk factor on page 12 of this annual report. ● The approval of the China Securities Regulatory Commission and other compliance procedures may be required in connection with this offering, and, if required, we cannot predict whether we will be able to obtain such approval.
The PRC government has significant authority to intervene or influence the China operations of an offshore holding company at any time, which could result in a material adverse change to our operations and the value of the ordinary shares. 21 Furthermore, given recent statements by the Chinese government indicating an intent to exert more oversight and control over offerings that are conducted overseas, although we are currently not required to obtain permission from any of the PRC federal or local government and has not received any denial to list on the U.S. exchange, it is uncertain whether or when we might be required to obtain permission from the PRC government to list on U.S. exchanges in the future.
The PRC government has significant authority to intervene or influence the China operations of an offshore holding company at any time, which could result in a material adverse change to our operations and the value of the ordinary shares. 20 Furthermore, given recent statements by the Chinese government indicating an intent to exert more oversight and control over offerings that are conducted overseas, although we are currently not required to obtain permission from any of the PRC federal or local government and has not received any denial to list on the U.S. exchange, it is uncertain whether or when we might be required to obtain permission from the PRC government to list on U.S. exchanges in the future.
See more detailed discussion of this risk factor on page 17 of this annual report. ● If we fail to establish and maintain proper internal financial reporting controls, our ability to produce accurate financial statements or comply with applicable regulations could be impaired.
See a more detailed discussion of this risk factor on page 17 of this annual report. ● If we fail to establish and maintain proper internal financial reporting controls, our ability to produce accurate financial statements or comply with applicable regulations could be impaired.
See more detailed discussion of this risk factor on page 13 of this annual report. ● Uncertainties exist with respect to the interpretation and implementation of the Foreign Investment Law and how it may impact the viability of our current corporate structure, corporate governance and business operations.
See a more detailed discussion of this risk factor on page 13 of this annual report. ● Uncertainties exist with respect to the interpretation and implementation of the Foreign Investment Law and how it may impact the viability of our current corporate structure, corporate governance and business operations.
These factors could also make it more difficult for us to attract and retain qualified members of our board of directors, particularly to serve on our audit committee and compensation committee, and qualified executive officers. We do not intend to pay dividends for the foreseeable future.
These factors could also make it more difficult for us to attract and retain qualified members of our board of directors, particularly to serve on our audit committee and compensation committee, and qualified executive officers. 18 We do not intend to pay dividends for the foreseeable future.
If a domestic company fails to complete required filing procedures or conceals any material fact or falsifies any major content in its filing documents, such domestic company may be subject to administrative penalties, such as an order to rectify, warnings, fines, and its controlling shareholders, actual controllers, the person directly in charge and other directly liable persons may also be subject to administrative penalties, such as warnings and fines. 22 According to the CSRC Notice, the domestic companies that have already been listed overseas before the effective date of the Trial Measures (namely, March 31, 2023) shall be deemed as existing issuers (the “Existing Issuers”).
If a domestic company fails to complete required filing procedures or conceals any material fact or falsifies any major content in its filing documents, such domestic company may be subject to administrative penalties, such as an order to rectify, warnings, fines, and its controlling shareholders, actual controllers, the person directly in charge and other directly liable persons may also be subject to administrative penalties, such as warnings and fines. 21 According to the CSRC Notice, the domestic companies that have already been listed overseas before the effective date of the Trial Measures (namely, March 31, 2023) shall be deemed as existing issuers (the “Existing Issuers”).
However, should PRC authorities obstruct or otherwise fail to facilitate the PCAOB’s access in the future, the PCAOB Board will consider the need to issue a new determination. Delisting of our Ordinary Shares would force holders of our Ordinary Shares to sell their Ordinary Shares.
Should PRC authorities obstruct or otherwise fail to facilitate the PCAOB’s access in the future, the PCAOB Board will consider the need to issue a new determination. Delisting of our Ordinary Shares would force holders of our Ordinary Shares to sell their Ordinary Shares.
See more detailed discussion of this risk factor on page 17 of this annual report. ● We may lose our foreign private issuer status in the future, which could result in significant additional costs and expenses.
See a more detailed discussion of this risk factor on page 17 of this annual report. ● We may lose our foreign private issuer status in the future, which could result in significant additional costs and expenses.
See more detailed discussion of this risk factor on page 10 of this annual report. ● Any disruption in the supply chain of raw materials and our products could adversely impact our ability to produce and deliver products.
See a more detailed discussion of this risk factor on page 10 of this annual report. ● Any disruption in the supply chain of raw materials and our products could adversely impact our ability to produce and deliver products.
In addition, any administrative and court proceedings in China may be protracted, resulting in substantial costs and diversion of resources and management attention. 23 If the PRC government determines that the contractual arrangements constituting part of the VIE structure do not comply with PRC regulations, or if these regulations change or are interpreted differently in the future, we may be unable to assert our contractual rights over the assets of the VIE, and our Ordinary Shares may decline in value or become worthless.
In addition, any administrative and court proceedings in China may be protracted, resulting in substantial costs and diversion of resources and management attention. 22 If the PRC government determines that the contractual arrangements constituting part of the VIE structure do not comply with PRC regulations, or if these regulations change or are interpreted differently in the future, we may be unable to assert our contractual rights over the assets of the VIE, and our Ordinary Shares may decline in value or become worthless.
See more detailed discussion of this risk factor on page 18 of this annual report. ● We do not intend to pay dividends for the foreseeable future. See more detailed discussion of this risk factor on page 19 of this annual report.
See a more detailed discussion of this risk factor on page 18 of this annual report. ● We do not intend to pay dividends for the foreseeable future. See a more detailed discussion of this risk factor on page 19 of this annual report.
See more detailed discussion of this risk factor on page 9 of this annual report. ● Price control regulations in the PRC may decrease our profitability.
See a more detailed discussion of this risk factor on page 9 of this annual report. ● Price control regulations in the PRC may decrease our profitability.
We only started to produce Directly-Oral traditional Chinese medicine pieces products (the “Directly-Oral-TCMP”) and After-soaking-oral TCMP products (the “After-Soaking-Oral-TCMP”) as our principal products four years ago. As a result, our past operating results are not an accurate indication of the lines of business we are principally engaged in currently.
We only started to produce Directly-Oral traditional Chinese medicine pieces products (the “Directly-Oral-TCMP”) and After-soaking-oral TCMP products (the “After-Soaking-Oral-TCMP”) as our principal products six years ago. As a result, our past operating results are not an accurate indication of the lines of business we are principally engaged in currently.
On September 22, 2021, the PCAOB adopted a final rule implementing the Accelerating HFCA Act, which provides a framework for the PCAOB to use when determining, as contemplated under the Accelerating HFCA Act, whether the Board is unable to inspect or investigate completely registered public accounting firms located in a foreign jurisdiction because of a position taken by one or more authorities in that jurisdiction.
On September 22, 2021, the PCAOB adopted a final rule implementing the HFCA Act, which provides a framework for the PCAOB to use when determining, as contemplated under the HFCA Act, whether the board of directors of a company is unable to inspect or investigate completely registered public accounting firms located in a foreign jurisdiction because of a position taken by one or more authorities in that jurisdiction.
See more detailed discussion of this risk factor on page 15 of this annual report.
See a more detailed discussion of this risk factor on page 15 of this annual report.
See more detailed discussion of this risk factor on page 24 of this annual report. ● It may be difficult for overseas shareholders and/or regulators to conduct investigation or collect evidence within China. See more detailed discussion of this risk factor on page 24 of this annual report. ● We face exposure to foreign currency exchange rate fluctuations.
See a more detailed discussion of this risk factor on page 23 of this annual report. ● It may be difficult for overseas shareholders and/or regulators to conduct investigation or collect evidence within China. See a more detailed discussion of this risk factor on page 23 of this annual report. ● We face exposure to foreign currency exchange rate fluctuations.
See more detailed discussion of this risk factor on page 21 of this annual report. 4 ● The uncertainties with respect to the Chinese legal system, including uncertainties regarding the enforcement of laws, and sudden or unexpected changes in laws and regulations in China with little advance notice could adversely affect us and limit the legal protections available to you and us.
See a more detailed discussion of this risk factor on page 20 of this annual report. ● The uncertainties with respect to the Chinese legal system, including uncertainties regarding the enforcement of laws, and sudden or unexpected changes in laws and regulations in China with little advance notice could adversely affect us and limit the legal protections available to you and us.
See more detailed discussion of this risk factor on page 26 of this annual report. Risks Related to Our Ordinary Shares In addition to the risks described above, we are subject to general risks and uncertainties relating to our ordinary shares, including, but not limited to, the following: ● The market price for our ordinary shares may be volatile.
See a more detailed discussion of this risk factor on page 24 of this annual report. 4 Risks Related to Our Ordinary Shares In addition to the risks described above, we are subject to general risks and uncertainties relating to our ordinary shares, including, but not limited to, the following: ● The market price for our ordinary shares may be volatile.
Pursuant to the fact sheet with respect to the Protocol disclosed by the SEC, the PCAOB shall have independent discretion to select any issuer audits for inspection or investigation and has the unfettered ability to transfer information to the SEC.
Pursuant to the fact sheet with respect to the SOP Agreements disclosed by the SEC, the PCAOB shall have independent discretion to select any issuer audits for inspection or investigation and has the unfettered ability to transfer information to the SEC.
If we do not obtain adequate capital on a timely basis and on satisfactory terms, our revenues and operations and the value of our Ordinary Shares and Ordinary Share equivalents would be materially negatively impacted and we may cease our operations. 6 Although we were incorporated 17 years ago, our significant business lines have a limited operating history, which makes it difficult to evaluate our future prospects and results of operations.
If we do not obtain adequate capital on a timely basis and on satisfactory terms, our revenues and operations and the value of our Ordinary Shares and Ordinary Share equivalents would be materially negatively impacted and we may cease our operations. 6 Although our operation began 19 years ago, our significant business lines have a limited operating history, which makes it difficult to evaluate our future prospects and results of operations.
See more detailed discussion of this risk factor on page 23 of this annual report. ● We may have difficulty in enforcing any rights we may have under the VIE Agreements in PRC.
See a more detailed discussion of this risk factor on page 22 of this annual report. ● We may have difficulty in enforcing any rights we may have under the VIE Agreements in PRC.
Therefore, our auditor is not currently subject to the determinations announced by the PCAOB on December 16, 2021, and it is currently subject to the PCAOB inspections. 20 While our auditor is based in the U.S. and is registered with the PCAOB and has been inspected by the PCAOB on a regular basis, in the event it is later determined that the PCAOB is unable to inspect or investigate completely our auditor because of a position taken by an authority in a foreign jurisdiction, then such lack of inspection could cause trading in the our securities to be prohibited under the HFCA Act, and ultimately result in a determination by a securities exchange to delist our securities.
While our auditor is based in the U.S. and is registered with the PCAOB and has been inspected by the PCAOB on a regular basis, in the event it is later determined that the PCAOB is unable to inspect or investigate completely our auditor because of a position taken by an authority in a foreign jurisdiction, then such lack of inspection could cause trading in the our securities to be prohibited under the HFCA Act, and ultimately result in a determination by a securities exchange to delist our securities.
On December 28, 2021, the Cyberspace Administration of China, or the “CAC”, together with 12 other governmental departments of the PRC, jointly promulgated the Cybersecurity Review Measures, which became effective on February 15, 2022.
On December 28, 2021, the Cyberspace Administration of China, or the “CAC”, together with 12 other governmental departments of the PRC, jointly promulgated the “CAC Revised Measures” , which became effective on February 15, 2022.
We cannot assure you that we are adequately protected from the effects of fire, floods, typhoons, earthquakes, power loss, telecommunications failures, break-ins, war, riots, terrorist attacks, or similar events.
We are also vulnerable to natural disasters and other calamities. We cannot assure you that we are adequately protected from the effects of fire, floods, typhoons, earthquakes, power loss, telecommunications failures, break-ins, war, riots, terrorist attacks, or similar events.
An aggregate of 14,138,349 Ordinary Shares are outstanding as of the date of this annual report. If our existing shareholders sell, or indicate an intent to sell, substantial amounts of our Ordinary Shares in the public market, the market price of our Ordinary Shares could fall.
An aggregate of 3,476,091 Ordinary Shares are outstanding as of the date of August 7, 2024. If our existing shareholders sell, or indicate an intent to sell, substantial amounts of our Ordinary Shares in the public market, the market price of our Ordinary Shares could fall.
See more detailed discussion of this risk factor on page 14 of this annual report. ● Uncertainties exist with respect to the interpretation and implementation of the PRC Foreign Investment Law and how it may impact the viability of our current corporate structure and business operations. ● We have not received or been denied any permission from the PRC authorities to list on U.S. stock exchanges.
See a more detailed discussion of this risk factor on page 14 of this annual report. ● Uncertainties exist with respect to the interpretation and implementation of the PRC Foreign Investment Law and how it may impact the viability of our current corporate structure and business operations.
We derive a substantial portion of our revenue from a relatively small number of customers. Suxuantang had three significant customers which accounted for 30.26%, 20.02%, and 13.87% of our total revenue during the year ended March 31, 2023, respectively.
We derive a substantial portion of our revenue from a relatively small number of customers. Suxuantang had two significant customers which accounted for 45.65% and 16.92% of our total revenue during the year ended March 31, 2024, respectively.
See more detailed discussion of this risk factor on page 19 of this annual report. ● The PRC government has significant authority to intervene or influence the China operations of an offshore holding company, such as ours, at any time. The PRC government may exert more control over offerings conducted overseas and/or foreign investment in China-based issuers.
These developments could add uncertainties to our offerings. See a more detailed discussion of this risk factor on page 19 of this annual report. ● The PRC government has significant authority to intervene or influence the China operations of an offshore holding company, such as ours, at any time.
Since January 2023 and as of the date of this annual report, the lockdown and mass testing policies had been lifted, since December 2022 and the operations of our suppliers and clients are gradually recovering.
Since January 2023 and as of the date of this annual report, the lockdown and mass testing policies had been lifted, since December 2022 and the operations of our suppliers and clients are gradually recovering. For the year ended March 31, 2024, the Company’s operations and those of our suppliers and clients were not materially impacted by the COVID-19.
The SOP Agreement, together with two protocol agreements (collectively, “SOP Agreements”), governs inspections and investigations of audit firms based in mainland China and Hong Kong, taking the first step toward opening access for the PCAOB to inspect and investigate registered public accounting firms headquartered in mainland China and Hong Kong.
On August 26, 2022, the CSRC, China’s Ministry of Finance, and the PCAOB signed the SOP Agreements governing inspections and investigations of audit firms based in mainland China and Hong Kong, taking the first step toward opening access for the PCAOB to inspect and investigate registered public accounting firms headquartered in mainland China and Hong Kong.
On December 15, 2022, the PCAOB Board determined that the PCAOB was able to secure complete access to inspect and investigate registered public accounting firms headquartered in mainland China and Hong Kong and voted to vacate its previous determinations to the contrary.
On December 15, 2022, the PCAOB determined that the PCAOB was able to secure complete access to inspect and investigate registered public accounting firms headquartered in mainland China and Hong Kong and voted to vacate its previous determinations to the contrary. 19 Our auditor, ZH CPA, LLC, is headquartered in Denver, Colorado, not mainland China or Hong Kong and was not identified in this report as a firm subject to the PCAOB’s determination.
On December 16, 2021, the PCAOB issued a Determination Report which found that the PCAOB is unable to inspect or investigate completely registered public accounting firms headquartered in: (1) mainland China of the PRC, and (2) Hong Kong. In addition, the PCAOB’s report identified the specific registered public accounting firms which are subject to these determinations.
On December 16, 2021, the PCAOB issued a report on its determinations that it is unable to inspect or investigate completely PCAOB-registered public accounting firms headquartered in mainland China and in Hong Kong because of positions taken by PRC and Hong Kong authorities in those jurisdictions.
As of March 31, 2023, we had cash and cash equivalents and restricted cash of $17,368,478, total current assets of $19,521,247 and total current liabilities of $14,496,938. As of March 31, 2022, we had cash and cash equivalents of $15,524,322, total current assets of $22,451,855 and total current liabilities of $17,121,565.
As of March 31, 2024, we had cash and cash equivalents and restricted cash of $12,077,187, total current assets of $14,233,359 and total current liabilities of $8,901,944. As of March 31, 2023, we had cash and cash equivalents and restricted cash of $17,368,478, total current assets of $19,521,247 and total current liabilities of $14,496,938.
As a result, both you and us face uncertainty about future actions by the PRC government that could significantly affect our financial performance and the enforceability of the VIE Agreements. See more detailed discussion of this risk factor on page 13 of this annual report. ● PRC laws and regulations governing our current business operations are sometimes vague and uncertain.
As a result, both you and us face uncertainty about future actions by the PRC government that could significantly affect our financial performance and the enforceability of the VIE Agreements.
If such claims are successful, our business and operating results could be harmed, and even if the claims do not result in litigation or are resolved in our favor, these claims, and the time and resources necessary to resolve them, could divert the resources of our management and adversely affect our business, brand and reputation and results of operations. 18 We also expect that being a public company and these new rules and regulations will make it more expensive for us to obtain director and officer liability insurance, and we may be required to accept reduced coverage or incur substantially higher costs to obtain coverage.
If such claims are successful, our business and operating results could be harmed, and even if the claims do not result in litigation or are resolved in our favor, these claims, and the time and resources necessary to resolve them, could divert the resources of our management and adversely affect our business, brand and reputation and results of operations.
The U.S. regulators may consider cross-border cooperation with securities regulatory authority of the PRC by way of judicial assistance, diplomatic channels or regulatory cooperation mechanism established with the securities regulatory authority of the PRC.
The U.S. regulators may consider cross-border cooperation with securities regulatory authority of the PRC by way of judicial assistance, diplomatic channels or regulatory cooperation mechanism established with the securities regulatory authority of the PRC. 23 We face exposure to foreign currency exchange rate fluctuations, and such fluctuations could adversely affect our business, results of operations and financial condition.
House of Representatives passed the HFCA Act on December 2, 2020, and the HFCA Act was signed into law on December 18, 2020. Additionally, in July 2020, the U.S.
If the PCAOB is unable to inspect the company’s auditors for three consecutive years, the issuer’s securities are prohibited to trade on a national exchange. On December 2, 2020, the U.S. House of Representatives approved the HFCA Act. On December 18, 2020, the HFCA Act was signed into law.
Removed
Risks Related to Doing Business in China We face risks and uncertainties relating to doing business in the PRC in general, including, but not limited to, the following: ● Although the audit report included in this annual report is prepared by an auditor who are currently inspected by the Public Company Accounting Oversight Board (the “PCAOB”), there is no guarantee that future audit reports will be prepared by auditors inspected by the PCAOB and, as such, in the future investors may be deprived of the benefits of such inspection.
Added
See a more detailed discussion of this risk factor on page 13 of this annual report. ● PRC laws and regulations governing our current business operations are sometimes vague and uncertain.
Removed
Furthermore, trading in our securities may be prohibited under the Holding Foreign Companies Accountable Act (the “HFCA Act”) if the SEC subsequently determines our audit work is performed by auditors that the PCAOB is unable to inspect or investigate completely, and as a result, U.S. national securities exchanges, such as Nasdaq, may determine to delist our securities.
Added
See a more detailed discussion of this risk factor on page 15 of this annual report. ● We have not received or been denied any permission from the PRC authorities to list on U.S. stock exchanges.
Removed
Furthermore, on December 29, 2022, the Consolidated Appropriations Act, was signed into law by President Biden. The Consolidated Appropriations Act contained, among other things, an identical provision to Accelerating HFCA Act, which reduce the number of consecutive non-inspection years required for triggering the prohibitions under the HFCA Act from three years to two.
Added
Risks Related to Doing Business in China We face risks and uncertainties relating to doing business in the PRC in general, including, but not limited to, the following: ● Joint statement by the SEC and the PCAOB, rule changes by Nasdaq, and the HFCA Act all call for additional and more stringent criteria to be applied to emerging market companies upon assessing the qualification of their auditors, especially the non-U.S. auditors who are not inspected by the PCAOB.
Removed
If there is not a material recovery in the COVID-19 situation, or the situation further deteriorates in China, our business, results of operations and financial condition could be materially and adversely affected.
Added
The PRC government may exert more control over offerings conducted overseas and/or foreign investment in China-based issuers.
Removed
While the potential downturn brought by and the duration of the COVID-19 outbreak is difficult to assess or predict and the full impact of the virus on our operations will depend on many factors beyond our control.
Added
We may be unable to continue as a going concern. Our audited financial statements have been prepared on a going concern basis under which an entity is considered to be able to realize its assets and satisfy its liabilities in the ordinary course of business.
Removed
Our business, results of operations, financial condition and prospects could be materially adversely affected to the extent that COVID-19 persists in China or harms the Chinese and global economy in general. We are also vulnerable to natural disasters and other calamities.
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The assessment of our ability to continue as a going concern and to raise sufficient funds to pay for our ongoing operating expenditures and meet our liabilities for the ensuing year involves significant judgment based on historical experience and other factors, including expectation of future events that are believed to be reasonable under the circumstances.
Removed
Risks Related to Doing Business in China Although the audit report included in this annual report is prepared by an auditor who are currently inspected by the Public Company Accounting Oversight Board (the “PCAOB”), there is no guarantee that future audit reports will be prepared by auditors inspected by the PCAOB and, as such, in the future investors may be deprived of the benefits of such inspection.
Added
Our future operations are dependent upon the identification and successful completion of equity or debt financings and the achievement of profitable operations at an indeterminate time in the future. There can be no assurances that we will be successful in completing equity or debt financings or in achieving profitability.
Removed
Furthermore, trading in our securities may be prohibited under the Holding Foreign Companies Accountable Act (the “HFCA Act”) if the SEC subsequently determines our audit work is performed by auditors that the PCAOB is unable to inspect or investigate completely, and as a result, U.S. national securities exchanges, such as Nasdaq, may determine to delist our securities.
Added
We also expect that being a public company and these new rules and regulations will make it more expensive for us to obtain director and officer liability insurance, and we may be required to accept reduced coverage or incur substantially higher costs to obtain coverage.
Removed
Furthermore, on December 29, 2022, the Consolidated Appropriations Act, was signed into law by President Biden. The Consolidated Appropriations Act contained, among other things, an identical provision to the Accelerating HFCA Act, which reduce the number of consecutive non-inspection years required for triggering the prohibitions under the HFCA Act from three years to two.
Added
Risks Related to Doing Business in China Joint statement by the SEC and the PCAOB, rule changes by Nasdaq, and the HFCA Act all call for additional and more stringent criteria to be applied to emerging market companies upon assessing the qualification of their auditors, especially the non-U.S. auditors who are not inspected by the PCAOB.
Removed
As an auditor of companies that are registered with the SEC and publicly traded in the United States and a firm registered with the PCAOB, our auditor is required under the laws of the United States to undergo regular inspections by the PCAOB to assess their compliance with the laws of the United States and professional standards. 19 Although we operate through the VIE and its subsidiaries substantially in mainland China, a jurisdiction where the PCAOB is currently unable to conduct inspections without the approval of the Chinese government authorities, our auditor, the independent registered public accounting firm that issues the audit report included elsewhere in this annual report, is subject to laws in the United States pursuant to which the PCAOB conducts regular inspections to assess our auditor’s compliance with the applicable professional standards.
Added
These developments could add uncertainties to our offerings. On May 20, 2020, the U.S. Senate passed the HFCA Act requiring a foreign company to certify it is not owned or controlled by a foreign government if the PCAOB is unable to audit specified reports because the company uses a foreign auditor not subject to PCAOB inspection.
Removed
Inspections of other auditors conducted by the PCAOB outside mainland China have at times identified deficiencies in those auditors’ audit procedures and quality control procedures, which may be addressed as part of the inspection process to improve future audit quality.
Added
Therefore, our auditor was not subject to the determinations announced by the PCAOB on December 16, 2021, and it is currently subject to the PCAOB inspections.
Removed
The lack of PCAOB inspections of audit work undertaken in mainland China prevents the PCAOB from regularly evaluating auditors’ audits and their quality control procedures. As a result, if there is any component of our auditor’s work papers become located in mainland China in the future, such work papers will not be subject to inspection by the PCAOB.
Added
The conversion of Renminbi into foreign currencies, including the USD, is based on rates set by the People’s Bank of China. The Renminbi has fluctuated against the USD and other currencies, at times significantly and unpredictably.
Removed
As a result, investors would be deprived of such PCAOB inspections, which could result in limitations or restrictions to our access of the U.S. capital markets.
Added
The value of Renminbi against the USD and other currencies is affected by changes in China’s political and economic conditions and by China’s foreign exchange policies, among other things. We cannot assure you that Renminbi will not appreciate or depreciate significantly in value against the USD and other currencies in the future.
Removed
As part of a continued regulatory focus in the United States on access to audit and other information currently protected by national law, in particular mainland China’s, in June 2019, a bipartisan group of lawmakers introduced bills in both houses of the U.S.
Added
It is difficult to predict how market forces or PRC or U.S. government policy may impact the exchange rate between Renminbi and USD in the future. Significant revaluation of the Renminbi may have a material and adverse effect on your investment.
Removed
Congress which, if passed, would require the SEC to maintain a list of issuers for which PCAOB is not able to inspect or investigate the audit work performed by a foreign public accounting firm completely.
Added
For example, to the extent we need to convert USD we received from our IPO into Renminbi for our operations, appreciation of the Renminbi against the USD would have an adverse effect on the Renminbi amount we would receive from the conversion.
Removed
The proposed Ensuring Quality Information and Transparency for Abroad-Based Listings on our Exchanges Act prescribes increased disclosure requirements for these issuers and, beginning in 2025, the delisting from U.S. national securities exchanges such as Nasdaq of issuers included on the SEC’s list for three consecutive years. It is unclear if this proposed legislation will be enacted.
Added
Conversely, if we decide to convert our Renminbi into USD for the purpose of making payments for dividends on our Ordinary Shares or for other business purposes, appreciation of the USD against the Renminbi would have a negative effect on the USD amount available to us.
Removed
Furthermore, there have been recent deliberations within the U.S. government regarding potentially limiting or restricting China-based companies from accessing U.S. capital markets. On May 20, 2020, the U.S.
Added
Very limited hedging options are available in China to reduce our exposure to exchange rate fluctuations. As of the date of this annual report, we have not entered into any hedging transactions in an effort to reduce our exposure to foreign currency exchange risk.
Removed
Senate passed the Holding Foreign Companies Accountable Act (the “HFCA Act”), which includes requirements for the SEC to identify issuers whose audit work is performed by auditors that the PCAOB is unable to inspect or investigate completely because of a restriction imposed by a non-U.S. authority in the auditor’s local jurisdiction. The U.S.

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Item 4. Mine Safety Disclosures

Mine Safety Disclosures — required of mining issuers

34 edited+15 added−12 removed231 unchanged
The Guidance supplies critical information to TCMP manufacturers regarding origin of ingredients, description, identification, processing, assay, property and flavor, meridian tropism, actions, indications, administration and dosage, precautions and warnings and storage.
The Guidance supplies critical information to TCMP manufacturers regarding origin of ingredients, description, identification, processing, assay, property and flavor, meridian tropism, actions, indications, administration and dosage, precautions and warnings and storage.
Instead, WFOE, Taizhou Suxuantang and its shareholders entered into a series of contractual arrangements, also known as VIE Agreements, pursuant to which, we are regarded as the primary beneficiary of Taizhou Suxuantang for accounting purpose, and, therefore, we are able to consolidate the financial results of Taizhou Suxuantang in our consolidated financial statements in accordance with U.S. GAAP.
Instead, WFOE, Taizhou Suxuantang and its shareholders entered into a series of contractual arrangements, also known as VIE Agreements, pursuant to which, we are regarded as the primary beneficiary of Taizhou Suxuantang for accounting purpose, and, therefore, we are able to consolidate the financial results of Taizhou Suxuantang in our consolidated financial statements in accordance with U.S. GAAP.
Such failure has not occurred in the past, and we generally do not anticipate that it will occur in the future, but no assurance can be given in this regard. 39 Manufacturing Regularly, raw materials used in the production of TCMP, primarily medicinal plants, first go through a purifying process, during which raw materials are selected, cut, rinsed and dried.
Such failure has not occurred in the past, and we generally do not anticipate that it will occur in the future, but no assurance can be given in this regard. Manufacturing Regularly, raw materials used in the production of TCMP, primarily medicinal plants, first go through a purifying process, during which raw materials are selected, cut, rinsed and dried.
During the fiscal years ended March 31, 2023 and 2022, cash transfers and transfers of other assets between our Company, SXT HK, WFOE, and the VIE were as follows: For the Year Ended March 31, 2023 No.
During the fiscal years ended March 31, 2024, 2023, and 2022 cash transfers and transfers of other assets between our Company, SXT HK, WFOE, and the VIE were as follows: For the Year Ended March 31, 2024 No.
Our major customers are hospitals, especially TCM hospitals primarily in the Jiangsu and Liaoning provinces in China and pharmaceutical wholesalers. The wholesalers distribute our products to hospitals and other healthcare distributors such as Jiuzhoutong Pharmaceutical Co. Ltd.
Our major customers are hospitals, especially TCM hospitals primarily in the Jiangsu provinces in China and pharmaceutical wholesalers. The wholesalers distribute our products to hospitals and other healthcare distributors such as Jiuzhoutong Pharmaceutical Co. Ltd.
Like Directly-Oral-TCMP, our After-Soaking-Oral-TCMP provide the special features of being non-decocting, such as keeping NMPA-recognized TCM theoretic fundamental principles, preserving the quality of TCM original ingredients, increasing aqueous extracts to improve bioavailability for bioactive constitutes, and being easy to use and store. Fine TCMP We currently produce 5 Fine TCMP products for drug stores and hospitals.
Like Directly-Oral-TCMP, our After-Soaking-Oral-TCMP provide the special features of being non-decocting, such as keeping NMPA-recognized TCM theoretic fundamental principles, preserving the quality of TCM original ingredients, increasing aqueous extracts to improve bioavailability for bioactive constitutes, and being easy to use and store. Fine TCMP We currently have 5 Fine TCMP products for drug stores and hospitals.
Key Information—D. Risk Factors— Risks Related to Our Business—Our business requires a number of permits and licenses.” 30 We are currently not required to obtain permission from any of the PRC authorities for the listing or trading of Ordinary Shares in foreign stock exchanges.
Key Information-D. Risk Factors- Risks Related to Our Business-Our business requires a number of permits and licenses.” 30 We are currently not required to obtain permission from any of the PRC authorities for the trading of Ordinary Shares in foreign stock exchanges.
In China, the production of TCMP must comply with the “Pharmaceutical Administration Law of PRC (2019 Revision)”, “GMP for drugs”, and “Good Supply Practice (“GSP”) for drugs”. Companies manufacturing and selling TCMP products must have the License: “Pharmaceutical Manufacturing Permit” and “TCM an approval throughout GMP compliance-inspection”.
In China, the production of TCMP must comply with the “Pharmaceutical Administration Law of PRC (2020 Revision)”, “GMP for drugs”, and “Good Supply Practice (“GSP”) for drugs”. Companies manufacturing and selling TCMP products must have the License: “Pharmaceutical Manufacturing Permit” and “TCM an approval throughout GMP compliance-inspection”.
We believe our R&D team holds a leading position in the R&D field of Advanced TCMP products based on our market analysis of our [19] Advanced TCMP. We will continue to sharpen our advantages and expect to develop new Advanced TCMP products in the foreseeable future.
We believe our R&D team holds a leading position in the R&D field of Advanced TCMP products based on our market analysis of our 11 Advanced TCMP. We will continue to sharpen our advantages and expect to develop new Advanced TCMP products in the foreseeable future.
Recently, however, the General Office of the Central Committee of the Communist Party of China and the General Office of the State Council jointly issued the Opinions, which were made available to the public on July 6, 2021.
The General Office of the Central Committee of the Communist Party of China and the General Office of the State Council jointly issued the Opinions, which were made available to the public on July 6, 2021.
For more details, please see “—Regulations.” The VIE has obtained certificates, permits, and licenses required for the operation of a pharmaceutical enterprise and the manufacturing of pharmaceutical products in the PRC.
For more details, please see “Regulations.” The VIE has obtained certificates, permits, and licenses required for the operation of a pharmaceutical enterprise and the manufacturing of pharmaceutical products in the PRC.
Our research and development team has demonstrated its success in use of the sophisticated research strategies and modern technologies to develop TCMP products with innovative features that lend us an edge over our major competitors. We have established a strong research and development team of 15 dedicated researchers as of March 31, 2023.
Our research and development team has demonstrated its success in use of the sophisticated research strategies and modern technologies to develop TCMP products with innovative features that lend us an edge over our major competitors. We have established a strong research and development team of 13 dedicated researchers as of March 31, 2024.
We currently have 4 sales offices covering 10 of China’s major provinces/municipalities, including Jiangsu, Hubei, Shandong, Liaoning, Anhui, Henan, Jiangxi, Guangdong, Hebei and Fujian, and over 68 sales representatives who assist in managing our relationships with our existing distributors and developing future distributors.
We currently have 4 sales offices covering 12 of China’s major provinces/municipalities, including Jiangsu, Hubei, Shandong, Liaoning, Anhui, Henan, Jiangxi, Guangdong, Chongqing, Sichuan, Hebei and Fujian, and over 68 sales representatives who assist in managing our relationships with our existing distributors and developing future distributors.
Our Products We currently sell five types of TCMP products: Advanced TCMP, Fine TCMP, Regular TCMP, TCMHS Solid Beverages, and raw medicinal materials. 33 Advanced TCMP Advanced TCMP typically has the highest quality because it requires specialized equipment to manufacture and has to go through more manufacturing steps to produce than Fine TCMP and Regular TCMP.
Our Products We currently sell three types of TCMP products: Advanced TCMP, Fine TCMP and Regular TCMP, and raw medicinal materials. 33 Advanced TCMP Advanced TCMP typically has the highest quality because it requires specialized equipment to manufacture and has to go through more manufacturing steps to produce than Fine TCMP and Regular TCMP.
For the fiscal year ended March 31, 2023, Advanced TCMP accounted for 33.3% of the total revenue, whereas Fine TCMP and Regular TCMP contributed 5.8% and 35.4% of the total revenue, respectively.
For the fiscal year ended March 31, 2024, Advanced TCMP accounted for 49.1% of the total revenue, whereas Regular TCMP contributed 49.0% of the total revenue, respectively. For the fiscal year ended March 31, 2023, Advanced TCMP accounted for 33.3% of the total revenue, whereas Fine TCMP and Regular TCMP contributed 5.8% and 35.4% of the total revenue, respectively.
Transfer From Transfer To Approximate Value ($) Note 1 SXT HK WFOE 3,469,975 2 The Company VIE 2,204,727 3 WFOE VIE 452,323 For the Year Ended March 31, 2022 No.
Transfer From Transfer To Approximate Value ($) Note 1 SXT HK WFOE 490,785 2 WFOE VIE 648,587 For the Year Ended March 31, 2023 No. Transfer From Transfer To Approximate Value ($) Note 1 SXT HK WFOE 3,469,975 2 The Company VIE 2,204,727 3 WFOE VIE 452,323 For the Year Ended March 31, 2022 No.
We currently have a product-developed portfolio of 17 Advanced TCMP products which have been commercialized, 5 Fine TCMP products, 87 Regular TCMP products, and 26 raw medicinal materials that address a wide variety of diseases and medical indications.
We currently have a product-developed portfolio of 11 Advanced TCMP products which have been commercialized, 5 Fine TCMP products, 200 Regular TCMP products, and 200 raw medicinal materials that address a wide variety of diseases and medical indications.
We have 5 major suppliers located in Anhui province in China, one of the largest TCM markets in China, and other major suppliers in provinces such as Anhui, Qinghai, Gansu and Yunnan. We have long-term relationship with these suppliers, who supply raw materials of genuine TCM for our production process.
We have 5 major suppliers located in Anhui province in China, one of the largest TCM markets in China, and other major suppliers in provinces such as Jiangsu, Jiangxi, Sichuan and Hebei. We have long-term relationship with these suppliers, who supply raw materials of genuine TCM for our production process.
For each principal product’s indications and year of commercialization, see “—Our Products.” 29 Taizhou Suxuantang, the VIE entity, was founded in 2005. Our net revenues decreased from $2,602,281 in fiscal year ended March 31, 2022 to $1,971,679 in fiscal year ended March 31, 2023, representing a decrease of 24%.
For each principal product’s indications and year of commercialization, see “-Our Products.” 29 Taizhou Suxuantang, the VIE entity, was founded in 2005. Our revenues decreased from $1,971,679 in fiscal year ended March 31, 2023 to $1,928,497 in fiscal year ended March 31, 2024, representing a decrease of 2%.
Employees As of March 31, 2023, we had a total of 78 full-time employees and no part-time employee.
Employees As of March 31, 2024, we had a total of 75 full-time employees and no part-time employee.
For the fiscal year ended March 31, 2021, Advanced TCMP brought in 37.1% of the total revenue, whereas Fine TCMP and Regular TCMP each brought in 12.1% and 30.4% of the total revenue respectively. Our Advanced TCMP includes 17 products, which can be further divided into 7 Directly-Oral-TCMP products, and 10 After-Soaking-Oral-TCMP products.
For the fiscal year ended March 31, 2022, Advanced TCMP brought in 44.7% of the total revenue, whereas Fine TCMP and Regular TCMP each brought in 15.4% and 30.5% of the total revenue respectively. Our Advanced TCMP includes 11 products, which can be further divided into 7 Directly-Oral-TCMP products, and 4 After-Soaking-Oral-TCMP products.
As of the date of this annual report, we have developed and introduced a diverse range of products, which include 17 Advanced TCMPs that have been produced and marketed, 5 Fine TCMPs, 87 Regular TCMPs, 4 TCMHS solid beverages, and 26 raw medicinal materials. Advanced TCMP has gradually become our principal product due to its quality and greater market potential.
As of the date of this annual report, we have developed and introduced a diverse range of products, which include 11 Advanced TCMPs that have been produced and marketed, 5 Fine TCMPs, 200 Regular TCMPs, and 200 raw medicinal materials. Advanced TCMP is our principal product due to its quality and greater market potential.
As of March 31, 2023, our end-customer base includes 57 pharmaceutical companies, 14 chain pharmacies and 16 hospitals in 10 provinces and municipalities in China including Jiangsu, Hubei, Shandong, Hebei, Jiangxi, Guangdong, Anhui, Henan, Liaoning, and Fujian.
As of March 31, 2024, our end-customer base includes 57 pharmaceutical companies, 14 chain pharmacies and 16 hospitals in 5 provinces and municipalities in China including Jiangsu, Anhui, Jiangxi, Guangdong and Hubei.
As of March 31, 2023, our end-customer base includes 57 pharmaceutical companies, 14 chain pharmacies and 16 hospitals in 10 provinces and municipalities in China including Jiangsu, Hubei, Shandong, Guangdong, Liaoning, Anhui, Henan, Jiangxi, Fujian, and Hebei.
As of March 31, 2024, our end-customer base includes 57 pharmaceutical companies, 14 chain pharmacies and 16 hospitals in 5 provinces and municipalities in China including Jiangsu, Anhui, Jiangxi, Guangdong and Hubei.
The following table sets forth the breakdown of our employees as of March 31, 2023 by function: Number of Employees % of Total Function Technology and Development 15 19 % Risk Management 2 3 % Operations, Sales and Marketing 8 10 % Product Development 29 37 % General and Administrative 24 31 % Total 78 100 % As required by PRC regulations, we participate in various government statutory employee benefit plans, including social insurance funds, namely a pension contribution plan, a medical insurance plan, an unemployment insurance plan, a work-related injury insurance plan and a maternity insurance plan, and a housing provident fund.
The following table sets forth the breakdown of our employees as of March 31, 2024 by function: Number of Employees % of Total Function Technology and Development 13 18 % Operations, Sales and Marketing 9 12 % Product Development 31 41 % General and Administrative 22 29 % Total 75 100 % As required by PRC regulations, we participate in various government statutory employee benefit plans, including social insurance funds, namely a pension contribution plan, a medical insurance plan, an unemployment insurance plan, a work-related injury insurance plan and a maternity insurance plan, and a housing provident fund.
Existing Issuers are not required to complete the filing procedures immediately, and they shall be required to file with the CSRC for any subsequent offerings. Based on the foregoing, we are currently not required to complete the filing procedures and submit the relevant information to the CSRC.
Existing Issuers are not required to complete the filing procedures immediately, and they shall be required to file with the CSRC for any subsequent offerings.
The revenue attributable to LuXueJing were $977,610 (RMB 6,631,521), $449,975 (RMB 2,887,939) and $481,431 (RMB 3,298,573) for the years ended March 31, 2021, 2022 and 2023, respectively. The revenue attributable to Xuejie powders is $7,033 (RMB 47,706), $1,660 (RMB 10,657) and $7,818 (RMB 53,566) for the years ended March 31, 2021, 2022 and 2023, respectively.
The revenue attributable to LuXueJing were $449,975 (RMB 2,887,939), $481,431 (RMB 3,298,573) and $900,701 (RMB 6,455,411) for the years ended March 31, 2022, 2023 and 2024, respectively. The revenue attributable to Xuejie powders is $1,660 (RMB 10,657), $7,818 (RMB 53,566) and Nil for the years ended March 31, 2022, 2023 and 2024, respectively.
Under the Patent Law of the People’s Republic of China (Revised), the validity period of patent rights for an invention shall be 20 years, which shall commence from the date of application. We have submitted the following 8 patent applications: Name Patent Type Patent Application No.
The beneficiary of all of our patent applications is “Taizhou Suxuantang.” Under the Patent Law of the People’s Republic of China (Revised), the validity period of patent rights for an invention shall be 20 years, which shall commence from the date of application. Currently, we have the following 28 utility model and invention patents: Name Patent Type Patent Application No.
Our Fine TCMP products are manufactured manually from only high-quality authentic ingredients derived from their region of origin. Regular TCMP We currently manufacture almost 87 Regular TCMP products listed on China Pharmacopoeia (version 2020) Parts I and IV for hospitals and drug stores for the treatment of various diseases or serving as dietary supplements.
Regular TCMP We currently manufacture almost 200 Regular TCMP products listed on China Pharmacopoeia (version 2020) Parts I and IV for hospitals and drug stores for the treatment of various diseases or serving as dietary supplements.
If a manufacturer fails to meet the GMP requirements and standards in the NMPA non-scheduled compliance-inspection, it may be suspended the Pharmaceutical Manufacturing Permit by the NMPA.
If a manufacturer fails to meet the GMP requirements and standards in the NMPA non-scheduled compliance-inspection, it may be suspended the Pharmaceutical Manufacturing Permit by the NMPA. A new GMP Certificate for our manufacturing facility had been issued and is effective from August 5, 2019 to August 4, 2024.
The following table summarizes the approved indications for our marketed TCMP and TCMHS products and the year in which each such product was first marketed to our distributors. 34 Product Ingredients Indication Year of Commercial Launch ChenXiang (powders) Powders of timbers of Aquilaria sinensis containing chromone, triterpenoid, volatile constituents.
The following table summarizes the approved indications for our marketed TCMP products and the year in which each such product was first marketed to our distributors. 34 Product Ingredients Indication Year of Commercial Launch SanQiFen (powders) Powders of roots and rhizomes of Panax notoginseng containing ginsenoside and sanchinoside, dencichine, flavonoids, amino acids.
We will submit an application for every technology, production design and research results to the Chinese national intellectual property department to get protection for our intellectual property. The beneficiary of all of our patent applications is “Taizhou Suxuantang” Each patent application we have submitted is an invention patent in which we are seeking patent protection of our prepared process.
We will submit an application for every technology, production design and research results to the Chinese national intellectual property department to get protection for our intellectual property.
The Opinions and any related implementing rules to be enacted may subject us to compliance requirements in the future. On February 17, 2023, the CSRC promulgated the Trial Measures and five supporting guidelines, which came into effect on March 31, 2023.
On February 17, 2023, the CSRC promulgated the Trial Measures and five supporting guidelines, which came into effect on March 31, 2023.
Our net revenues decreased from $4,777,573 in fiscal year ended March 31, 2021 to $2,602,281 in fiscal year ended March 31, 2022, representing a decrease of 46%. Our net loss increased from $2,748,183 in fiscal year ended March 31, 2021 to $5,736,095 in fiscal year ended March 31, 2022, representing an increase of 109% during this period.
Our net loss decreased from $5,934,772 in fiscal year ended March 31, 2023 to $3,098,532 in fiscal year ended March 31, 2024, representing a significant decrease of 48% of net loss during this period. Our revenues decreased from $2,602,281 in fiscal year ended March 31, 2022 to $1,971,679 in fiscal year ended March 31, 2023, representing a decrease of 24%.
Removed
For the fiscal year ended March 31, 2022, Advanced TCMP brought in 44.7% of the total revenue, whereas Fine TCMP and Regular TCMP each brought in 15.4% and 30.5% of the total revenue respectively.
Added
The Opinions and any related implementing rules to be enacted may subject us to compliance requirements in the future.
Removed
On February 24, 2023, the CSRC, together with the MOF, National Administration of State Secrets Protection and National Archives Administration of China, revised the Provisions issued by the CSRC and National Administration of State Secrets Protection and National Archives Administration of China in 2009.
Added
Pursuant to the PRC Cybersecurity Law, which was promulgated by the Standing Committee of the National People’s Congress on November 7, 2016 and took effect on June 1, 2017, personal information and important data collected and generated by a critical information infrastructure operator in the course of its operations in China must be stored in China, and if a critical information infrastructure operator purchases internet products and services that affects or may affect national security, it should be subject to cybersecurity review by the CAC.
Removed
The revised Provisions were issued under the title the “Provisions on Strengthening Confidentiality and Archives Administration of Overseas Securities Offering and Listing by Domestic Companies,” and came into effect on March 31, 2023 together with the Trial Measures.
Added
On July 30, 2021, the State Council issued Regulation on Protecting the Security of Critical Information Infrastructure, clarifying the definition of critical information infrastructure as “any of network facilities and information systems in important industries and fields—such as public communication and information services, energy, transportation, water conservancy, finance, public services, e-government, and science, technology and industry for national defense—that may seriously endanger national security, national economy and people’s livelihood, and public interests in the event that they are damaged or lose their functions or their data are leaked.” On December 28, 2021, the CAC and other relevant PRC governmental authorities jointly promulgated CAC Revised Measures to replace the original Cybersecurity Review Measures.
Removed
One of the major revisions to the revised Provisions is expanding their application to cover indirect overseas offering and listing, as is consistent with the Trial Measures.
Added
The CAC Revised Measures took effect on February 15, 2022. Pursuant to the CAC Revised Measures, if critical information infrastructure operators purchase network products and services, or network platform operators conduct data processing activities that affect or may affect national security, they will be subject to cybersecurity review.
Removed
The revised Provisions require that, among other things, (a) a domestic company that plans to, either directly or indirectly through its overseas listed entity, publicly disclose or provide to relevant individuals or entities, including securities companies, securities service providers, and overseas regulators, any documents and materials that contain state secrets or working secrets of government agencies, shall first obtain approval from competent authorities according to law, and file with the secrecy administrative department at the same level; and (b) a domestic company that plans to, either directly or indirectly through its overseas listed entity, publicly disclose or provide to relevant individuals and entities, including securities companies, securities service providers, and overseas regulators, any other documents and materials that, if leaked, will be detrimental to national security or public interest, shall strictly fulfil relevant procedures stipulated by applicable national regulations.
Added
On November 14, 2021, CAC published the Administration Measures for Cyber Data Security (Draft for Public Comments), or the “Cyber Data Security Measure (Draft)”, which requires cyberspace operators with personal information of more than 1 million users who want to list abroad to file a cybersecurity review with the Office of Cybersecurity Review.
Removed
Any failure or perceived failure by our Company, our subsidiaries, or the VIE to comply with the above confidentiality and archives administration requirements under the revised Provisions and other PRC laws and regulations may result in the relevant entities being held legally liable by competent authorities, and referred to the judicial organ to be investigated for criminal liability if suspected of committing a crime.
Added
The cybersecurity review will evaluate, among others, the risk of critical information infrastructure, core data, important data, or a large amount of personal information being influenced, controlled or maliciously used by foreign governments and risk of network data security after going public overseas.
Removed
As there are still uncertainties regarding the interpretation and implementation of such regulatory guidance, we cannot assure you that we will be able to comply with new regulatory requirements relating to our future overseas capital-raising activities and we may become subject to more stringent requirements with respect to matters such as cross-border investigation, data privacy, and enforcement of legal claims.
Added
As confirmed by our PRC counsel, Beijing W&H (Taizhou) Law Firm , we are not subject to cybersecurity review with the CAC in accordance with the CAC Revised Measures, because (i) we are not in possession of or otherwise holding personal information of over one million users and it is also very unlikely that it will reach such threshold in the near future; and (ii) as of the date of this annual report, we have not received any notice or determination from applicable PRC governmental authorities identifying it as a critical information infrastructure operator.
Removed
TCMHS Solid Beverages We developed and commercially launched four solid beverage products in April 2019, as part of the Company’s TCM Homologous Supplements (“TCMHS”) products, a classification of health-supporting food used traditionally in China as TCM but which are also consumed as food. The solid beverages are a kind of granules produced through extraction of TCMHS materials.
Added
However, since these statements and regulatory actions are new, it is uncertain how soon legislative or administrative regulation making bodies will respond and what existing or new laws or regulations or detailed implementations and interpretations will be modified or promulgated, if any, and the potential impact such modified or new laws and regulations will have on our daily business operation, the ability to accept foreign investments and list on an U.S. exchange.
Removed
Hiccups, vomit; chest distension, abdominal pain; urethral syndrome; prostatitis; atrophic gastritis, gastric ulcer; irritable bowel syndrome; and chronic pulmonary heart disease. 2015 SanQiFen (powders) Powders of roots and rhizomes of Panax notoginseng containing ginsenoside and sanchinoside, dencichine, flavonoids, amino acids.
Added
Based on the foregoing, if in the future we are going to conduct any offering or financing in the U.S., we will complete filing procedures with the CSRC pursuant to the requirements of the Trial Measures.
Removed
Expiration Date ( if granted ) SanQiFen Directly-Oral TCMP Invention CN 201710234868.1 2037.4.11 ChenXiangFen After-Soaking-Oral TCMP Invention CN 201710234867.7 2037.4.11 XiaTianWu Directly-Oral TCMP Invention CN 201710345663.0 2037.5.16 CuYanHuSuo Directly-Oral TCMP Invention CN 201710355312.8 2037.5.18 HuangShuKuiHua Directly-Oral TCMP Invention CN 201710345688.0 2037.5.16 JiangXiangFen After-Soaking-Oral TCMP Invention CN 201710388685.5 2037.5.26 SuMu After-Soaking-Oral TCMP Invention CN 201710388696.3 2037.5.26 HongQi After-Soaking-Oral TCMP Invention CN 201710377191.7 2037.5.24 We submitted four additional invention patent applications as follows: Name Patent Type Patent Application No.
Added
In addition, we have not received any formal inquiry, notice, warning, sanction, or objection from the CSRC with respect our listing on the Nasdaq Capital Market. However, there remains significant uncertainty as to the enactment, interpretation and implementation of regulatory requirements related to overseas securities offerings and other capital markets activities.
Removed
Expiration Date (if granted) XueJie Directly-Oral TCMP Invention CN 201810058409.7 2039.1.2 ChuanBeiMu Directly-Oral TCMP Invention CN 201810058566.8 2039.1.22 ChaoSuanZaoRen After-Soaking TCMP Invention CN 201810058914.1 2039.1.22 HongQuMi After-Soaking-Oral TCMP Invention CN 201810058924.5 2039.1.22 Environmental Matters We comply with the Environmental Protection Law of China as well as applicable local regulations.
Added
Any failure or perceived failure of us to fully comply with such new regulatory requirements could significantly limit or completely hinder our ability to continue to offer securities to investors, cause significant disruption to our business operations, and severely damage our reputation, which could materially and adversely affect our financial condition and results of operations and could cause the value of our securities to significantly decline or be worthless.
Removed
A new GMP Certificate for our manufacturing facility had been issued and is effective from August 5, 2019 to August 4, 2024, before the new Pharmaceutical Administration Law of PRC was in effeteness as of December 1, 2019.
Added
Our Fine TCMP products are manufactured manually from only high-quality authentic ingredients derived from their region of origin. During the year ended March 31, 2024, we decided to discontinue cooperation with major clients in the sales of Fine TCMP, and not to develop or sell Fine TCMP products in future.
Added
Application Date A chopping knife type medicine cutting machine for traditional Chinese medicine Utility Model CN202222093724.8 2022.08.10 An automatic packaging machine for traditional Chinese medicine decoction pieces with flat sealing Utility Model CN202222669609.0 2022.10.11 A continuous sealing machine for plastic film of traditional Chinese medicine decoction pieces Utility Model CN202222670077.2 2022.10.11 A rapid liquid extraction device for traditional Chinese medicine Utility Model CN202222391943.4 2022.09.09 A high-speed reciprocating medicine cutting machine for traditional Chinese medicine Utility Model CN202222391745.8 2022.09.09 A powder packaging machine for traditional Chinese medicine Utility Model CN202222391578.7 2022.09.09 A multi-stage residue treatment device for traditional Chinese medicine Utility Model CN202221746367.4 2022.07.08 A liquid extraction device for Chinese herbal medicine Utility Model CN202222093718.2 2022.08.10 A moisturizing machine for moisturizing traditional Chinese medicine Utility Model CN202221411988.7 2022.06.08 A low-temperature drying and ozone sterilization cabinet for traditional Chinese medicine preservation Utility Model CN202221746470.9 2022.07.08 A high-efficiency mixing device for refined traditional Chinese medicine decoction pieces Utility Model CN202021884165.7 2020.09.02 A liquid extraction device for refined traditional Chinese medicine decoction pieces processing Utility Model CN202021814950.5 2020.08.27 A cleaning device for traditional Chinese medicine decoction pieces Utility Model CN202021893061.2 2020.09.03 A raw material crushing device for refined traditional Chinese medicine decoction pieces processing Utility Model CN202021791297.5 2020.08.25 A grinding equipment for modern traditional Chinese medicine decoction pieces processing Utility Model CN202021802618.7 2020.08.26 A raw material stirring device for refined traditional Chinese medicine decoction pieces processing Utility Model CN202021815137.X 2020.08.27 A pressing device for oral decoction pieces processing Utility Model CN202021793481.3 2020.08.25 A sealed storage device for refined traditional Chinese medicine decoction pieces Utility Model CN202022150842.9 2020.09.27 A post-processing device for refined decoction pieces with recyclable residue Utility Model CN202021815136.5 2020.08.27 A canning device for refined decoction pieces processing Utility Model CN202021792405.0 2020.08.25 A packaging device for refined decoction pieces processing Utility Model CN202021791301.8 2020.08.25 A clamping device for oral decoction pieces processing Utility Model CN202021801747.4 2020.08.26 A drying device for refined traditional Chinese medicine decoction pieces Utility Model CN202022150828.9 2020.09.27 Dendrobium powder crushing method Invention CN201910946550.5 2019.10.06 A grinding device for precious traditional Chinese medicine Invention CN201910364895.X 2019.04.30 A tablet grinding method Invention CN201810375362.7 2018.04.24 A tubular film evaporator for pharmaceutical use Invention CN201810603332.7 2018.06.12 A sowing device for traditional Chinese medicine planting Invention CN201910075080.X 2019.01.25 We submitted five additional invention patent applications as follows: Name Patent Type Patent Application No.
Added
Application Date A traditional chinese medicine roasting processing equipment Utility Model 202226702142 2022-10-11 A soaking and cleaning machine for traditional chinese medicine Utility Model 202220936550 2022-08-10 A rotary traditional chinese medicine beverage machine Utility Model 202217465078 2022-07-08 A hot air circulating oven for use with traditional chinese medicine Utility Model 2022214119868 2022-06-08 A flip-board dryer for use with traditional chinese medicine Utility Model 2022214122964 2022-06-08 39 Environmental Matters We comply with the Environmental Protection Law of China as well as applicable local regulations.
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We were inspected for our compliance with GMP requirements in April 2024 and, as of the date of this annual report, we have submitted all required documents for the renewal of our GMP Certificate as of the date of this annual report..

Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

48 edited+18 added−26 removed51 unchanged
Cash Flow in Investing Activities We had net cash used in investing activities of $12,303 for the year ended March 31, 2023, which primarily consisted of the purchase of property, plant and equipment of $70,684, and cash received from Huangshan Panjie Investment Management Co., Ltd. of $58,381.
We had net cash used in investing activities of $12,303 for the year ended March 31, 2023, which primarily consisted of the purchase of property, plant and equipment of $70,684, and cash received from Huangshan Panjie Investment Management Co., Ltd. of $58,381.
For the year ended March 31, 2022, the change in inventory was $0.18 million net cash outflow, which led to a $0.59 million increase in net cash inflow from operating activities. c) Change in advance to suppliers was $138 net cash inflow for the year ended March 31, 2023.
For the year ended March 31, 2022, the change in inventory was $0.18 million net cash outflow, which led to a $0.59 million increase in net cash inflow from operating activities. 60 c) Change in advance to suppliers was $138 net cash inflow for the year ended March 31, 2023.
Results of Operations for the Year Ended March 31, 2023 Compared to the Year Ended March 31, 2022 For the Years Ended March 31, Change 2023 2022 Amount % Revenues $ 1,971,679 $ 2,602,281 $ (630,602 ) (24 ) Cost of revenues (1,545,408 ) (1,350,638 ) (194,770 ) 14 Gross profit 426,271 1,251,643 (825,372 ) (66 ) Selling expenses (387,452 ) (924,538 ) 537,086 (58 ) General and administrative expenses (5,646,328 ) (5,516,778 ) (129,550 ) 2 Total operating expenses (6,033,780 ) (6,441,316 ) 407,536 (6 ) Loss from operations (5,607,509 ) (5,189,673 ) (417,836 ) 8 Interest expense, net (476,776 ) (36,695 ) (440,081 ) 1,199 Other income (expenses), net 149,513 (181,581 ) 331,094 (182 ) Total other expenses, net (327,263 ) (218,276 ) (108,987 ) 50 Loss before income taxes expense (5,934,772 ) (5,407,949 ) (526,823 ) 10 Provision (Benefit) for income taxes - 328,146 328,146 (100 ) Net Loss $ (5,934,772 ) $ (5,736,095 ) $ (198,677 ) 3 51 Revenues We generated revenues primarily from manufacture and sales of three types of TCMP products: Advanced TCMP, Fine TCMP, Regular TCMP, TCMHS products and raw medicinal materials.
Results of Operations for the Year Ended March 31, 2023 Compared to the Year Ended March 31, 2022 For the Years Ended March 31, Change 2023 2022 Amount % Revenues $ 1,971,679 $ 2,602,281 $ (630,602 ) (24 ) Cost of revenues (1,545,408 ) (1,350,638 ) (194,770 ) 14 Gross profit 426,271 1,251,643 (825,372 ) (66 ) Selling expenses (387,452 ) (924,538 ) 537,086 (58 ) General and administrative expenses (5,646,328 ) (5,516,778 ) (129,550 ) 2 Total operating expenses (6,033,780 ) (6,441,316 ) 407,536 (6 ) Loss from operations (5,607,509 ) (5,189,673 ) (417,836 ) 8 Interest expense, net (476,776 ) (36,695 ) (440,081 ) 1,199 Other income (expenses), net 149,513 (181,581 ) 331,094 (182 ) Total other expenses, net (327,263 ) (218,276 ) (108,987 ) 50 Loss before income taxes expense (5,934,772 ) (5,407,949 ) (526,823 ) 10 Income tax expenses - 328,146 328,146 (100 ) Net Loss $ (5,934,772 ) $ (5,736,095 ) $ (198,677 ) 3 54 Revenues We generated revenues primarily from manufacture and sales of three types of TCMP products: Advanced TCMP, Fine TCMP, Regular TCMP, TCMHS products and raw medicinal materials.
For the years ended March 31, 2023 and 2022, payroll expenses of $1,151,466 and $2,979,374 were recorded in general and administrative expenses. 53 Other income (expense), net Interest expenses, net for the year ended March 31, 2023 mainly consisted of accretion of finance costs and interest expenses related to the Convertible Notes we issued on March 16, 2022, December 19, 2022 and March 7, 2023, and interest expenses from our borrowings from banks and various individuals.
For the years ended March 31, 2023 and 2022, payroll expenses of $1,151,466 and $2,979,374 were recorded in general and administrative expenses. 56 Other Income (Expense), Net Interest expenses, net for the year ended March 31, 2023 mainly consisted of accretion of finance costs and interest expenses related to the Convertible Notes we issued on March 16, 2022, December 19, 2022 and March 7, 2023, and interest expenses from our borrowings from banks and various individuals.
Income tax expense (benefit) Income tax expense (benefit) represented current and deferred income tax expenses or benefits derived from income before taxes generated by Suxuantang, the variable interest entity of the Company. As compared with the year ended March 31, 2022, the income tax expense for the year ended March 31, 2023 decreased by $328,146, or 100%.
Income Tax Expenses Income tax expenses represented current and deferred income tax expenses derived from income before taxes generated by Suxuantang, the variable interest entity of the Company. As compared with the year ended March 31, 2022, the income tax expense for the year ended March 31, 2023 decreased by $328,146, or 100%.
Regular TCMP We currently manufacture 235 Regular TCMP products listed on China Pharmacopoeia (version 2020) Parts I and IV for hospitals and drug stores in treatment of various diseases or serving as dietary supplements. Revenue from Regular TCMP accounted for 35% and 30% of the revenue recognized during the years ended March 31, 2023 and 2022, respectively.
Regular TCMP We manufactured 235 Regular TCMP products listed on China Pharmacopoeia (version 2020) Parts I and IV for hospitals and drug stores in treatment of various diseases or serving as dietary supplements. Revenue from Regular TCMP accounted for 35% and 30% of the revenue recognized during the years ended March 31, 2023 and 2022, respectively.
Critical accounting estimates are those estimates made in accordance with generally accepted accounting principles that i) involve a significant level of estimation uncertainty and ii) have had or are reasonably likely to have a material impact on the financial condition or results of operations. The management determined there were no critical accounting estimates. 5.C.
Critical accounting estimates are those estimates made in accordance with generally accepted accounting principles that i) involve a significant level of estimation uncertainty and ii) have had or are reasonably likely to have a material impact on the financial condition or results of operations. The management determined there were no critical accounting estimates. 62
Additionally, as part of our marketing strategy to maintain our market share, we reduced the price of our Advanced TCMP products. Fine TCMP We currently produce over 10 Fine TCMP products for drug stores and hospitals. Our Fine TCMP products are manufactured manually from only high-quality authentic ingredients derived from their region of origin.
Additionally, as part of our marketing strategy to maintain our market share, we reduced the price of our Advanced TCMP products. Fine TCMP We produced over 10 Fine TCMP products for drug stores and hospitals. Our Fine TCMP products are manufactured manually from only high-quality authentic ingredients derived from their region of origin.
For the year ended March 31, 2022, the change in advance from customers was $0.19 million net cash outflow, which led to a $0.28 million increase in net cash inflow from operating activities. g) Change in accrued expenses and other current liabilities was $0.05 million net cash outflow for the year ended March 31, 2023.
For the year ended March 31, 2022, the change in contract liabilities was $0.19 million net cash outflow, which led to a $0.28 million increase in net cash inflow from operating activities. g) Change in accrued expenses and other current liabilities was $0.05 million net cash outflow for the year ended March 31, 2023.
The estimates include but are not limited to: determinations of the useful lives of long-lived assets, estimates of allowances for doubtful accounts, sales return rate, abnormal capacity for inventory production, valuation assumptions in performing asset impairment tests of long-lived assets, the discount rate used for right-of-use assets and lease liabilities calculation, and determinations of fair value of warrants.
The estimates include but are not limited to: determinations of the useful lives of long-lived assets, estimates of expected credit loss for doubtful accounts, sales return rate, abnormal capacity for inventory production, valuation assumptions in performing asset impairment tests of long-lived assets, the discount rate used for right-of-use assets and lease liabilities calculation, and determinations of fair value of warrants.
For the year ended March 31, 2022, the change in refund liabilities was $0.36 million net cash outflow, which led to a $0.36 million decrease in net cash outflow from operating activities. f) Change in advance from customers was $0.09 million net cash inflow for the year ended March 31, 2023.
For the year ended March 31, 2022, the change in refund liabilities was $0.36 million net cash outflow, which led to a $0.36 million decrease in net cash outflow from operating activities. f) Change in contract liabilities was $0.09 million net cash inflow for the year ended March 31, 2023.
Additionally, the portion of revenue from Regular TCMP products of our total revenue also decreased because of the new sales of raw medicinal materials during the year ended March 31, 2023. 52 TCMHS Solid Beverages Four solid beverage products as part of the Company’s TCMHS products were developed and commercially launched in April 2019 and generated revenue of $0 and $245,959 for the years ended March 31, 2023 and 2022, respectively.
Additionally, the portion of revenue from Regular TCMP products of our total revenue also decreased because of our effort to start the new sales of raw medicinal materials during the year ended March 31, 2023. 55 TCMHS Solid Beverages Four solid beverage products as part of the Company’s TCMHS products were developed and commercially launched in April 2019 and generated revenue of $0 and $245,959 for the years ended March 31, 2023 and 2022, respectively.
Cash Flow in Financing Activities For the year ended March 31, 2023, the net cash provided by financing activities was $2,941,602, which was primarily attributable to net proceeds from the issuance of convertible notes of $3,289,930 (gross proceeds of $3,721,667 and debt issuance cost of $431,737), net proceeds from shares purchase agreements of $2,194,827, and proceeds from borrowing from banks and individuals of $309,417, net by repayment to amounts due from related parties of $2,826,466, and repayment of principal and interest of bank loans of $26,106.
For the year ended March 31, 2023, the net cash provided by financing activities was $2,941,602, which was primarily attributable to net proceeds from the issuance of convertible notes of $3,289,930 (gross proceeds of $3,721,667 and debt issuance cost of $431,737), net proceeds from shares purchase agreements of $2,194,827, and proceeds from borrowing from banks and individuals of $309,417, net by repayment to related parties of $2,197,555, advances to related parties of $628,911, and repayment of principal and interest of bank loans of $26,106.
We used funds in operating activities of $80,757 and $1,316,561 for the years ended March 31, 2023 and 2021, and generated funds in operating activities of $268,293 for the year ended March 31, 2022, respectively. In addition, we have suffered a continuous decline in revenue for the years ended March 31, 2023, 2022, and 2021.
We used funds in operating activities of $1,928,053 and $80,757 for the years ended March 31, 2024 and 2023, and generated funds in operating activities of $268,293 for the year ended March 31, 2022, respectively. In addition, we have suffered a continuous decline in revenue for the years ended March 31, 2024, 2023, and 2022.
Regular TCMP We currently manufacture 235 Regular TCMP products listed on China Pharmacopoeia (version 2020) Parts I and IV for hospitals and drug stores in treatment of various diseases or serving as dietary supplements. Revenue from Regular TCMP accounted for 30% and 30% of revenue recognized during the years ended March 31, 2022 and 2021, respectively.
Regular TCMP We currently manufacture 200 Regular TCMP products listed on China Pharmacopoeia (version 2020) Parts I and IV for hospitals and drug stores in treatment of various diseases or serving as dietary supplements. Revenue from Regular TCMP accounted for 49% and 35% of the revenue recognized during the years ended March 31, 2024 and 2023, respectively.
This has resulted in a cash and cash equivalents balance of $17,368,478 as of March 31, 2023, as compared to $15,524,322 as of March 31, 2022. We primarily hold our excess unrestricted cash in short-term interest-bearing bank accounts at financial institutions.
This has resulted in a cash and cash equivalents and restricted cash balance of $12,077,187 as of March 31, 2024, as compared to $17,368,478 as of March 31, 2023. We primarily hold our excess unrestricted cash in short-term interest-bearing bank accounts at financial institutions.
General and administrative expenses General and administrative expenses primarily consisted of staff payroll and welfare expenses, research and development expenses, entertainment expenses, travelling expenses, depreciation and amortization expenses for administrative purposes, and office supply expenses.
General and Administrative Expenses General and administrative expenses primarily consisted of staff payroll and welfare expenses, research and development expenses, professional fees, entertainment expenses, travelling expenses, depreciation and amortization expenses for administrative purposes, office supply expenses, credit loss provision and impairment expenses.
As of March 31, 2023, our VIE accounted for an aggregate of 97% and 75% of our total assets and total liabilities, respectively. As of March 31, 2022, our VIE accounted for an aggregate of 85% and 85% of our total assets and total liabilities, respectively.
As of March 31, 2024, our VIE accounted for an aggregate of 98% and 75% of our total assets and total liabilities, respectively.
As reflected in the accompanying consolidated financial statements, we reported net losses of $5,934,772, $5,736,095, and $2,748,183 for the years ended March 31, 2023, 2022 and 2021, respectively. We had accumulated deficits of $21,613,133 and $15,688,278 as of March 31, 2023 and 2022, respectively.
As reflected in the accompanying consolidated financial statements, we reported net losses of $3,098,532, $5,934,772, and $5,736,095 for the years ended March 31, 2024, 2023 and 2022, respectively. We had accumulated deficits of $24,711,665 and $21,613,133 as of March 31, 2024 and 2023, respectively.
Both Directly Oral TCMP and After-soaking-oral TCMP are new types of Advanced TCMP. Revenue from Advanced TCMP accounted for 45% and 37% of revenue recognized during the year ended March 31, 2022 and 2021, respectively.
Both Directly Oral TCMP and After-soaking-oral TCMP are new types of Advanced TCMP. Revenue from Advanced TCMP accounted for 49% and 33% of the revenue recognized during the years ended March 31, 2024 and 2023, respectively.
WFOE, shareholders of Taizhou Suxuantang and Taizhou Suxuantang entered into a series of contractual arrangements, also known as VIE Agreements, on October 13, 2017. Pursuant to the VIE Agreements, WFOE is regarded as the primary beneficiary of Taizhou Suxuantang and we are able to consolidate the financial statements of Taizhou Suxuantang in accordance with U.S. GAAP.
Pursuant to the VIE Agreements, WFOE is regarded as the primary beneficiary of Taizhou Suxuantang and we are able to consolidate the financial statements of Taizhou Suxuantang in accordance with U.S. GAAP.
As of March 31, 2023 and 2022, $16,735,938 and $14,217,855 of cash and cash equivalents were denominated in RMB, respectively.
As of March 31, 2022, our VIE accounted for an aggregate of 85% and 85% of our total assets and total liabilities, respectively. As of March 31, 2023 and 2022, $16,735,938 and $14,217,855 of cash and cash equivalents were denominated in RMB, respectively.
For the year ended March 31, 2021, change in refund liabilities was $0.34 million net cash inflow, which led to $0.70 million decrease in net cash inflow from operating activities.
For the year ended March 31, 2023, the change in refund liabilities was $1,380 net cash outflow, which led to a $0.11 million increase in net cash inflow from operating activities.
For the year ended March 31, 2022, the net cash provided by financing activities was $1,595,140, which was primarily attributable to net proceeds from the 2022 convertible note of $2,356,557 (gross proceeds of $2,804,848 and debt issuance cost of $448,291), and net proceeds from the 2022 public offering of $3,115,106, net by repayment to amounts due from related parties of $3,813,468, payment related to equity incentive plan of $30,000, and repayment of principal and interest of bank loans of $33,055.
For the year ended March 31, 2022, the net cash provided by financing activities was $1,595,140, which was primarily attributable to net proceeds from the 2022 convertible note of $2,356,557 (gross proceeds of $2,804,848 and debt issuance cost of $448,291), and net proceeds from the 2022 public offering of $3,115,106, net by advances to related parties of $3,581,746, repayment to amounts due from related parties of $231,722, payment related to equity incentive plan of $30,000, and repayment of principal and interest of bank loans of $33,055. 61 Going Concern The accompanying consolidated financial statements for the years ended March 31, 2024 and 2023 have been prepared on a going concern basis, which contemplates the realization of assets and the settlement of liabilities and commitments in the normal course of business.
For the year ended March 31, 2021, change in accounts receivable was $0.52 million net cash outflow, which led to $1.35 million increase in net cash inflow from operating activities. 60 c) Change in advance to suppliers was $0.48 million net cash inflow for the year ended March 31, 2022.
For the year ended March 31, 2023, the change in accounts receivable was $0.91 million net cash inflow, which led to a $1.23 million increase in net cash outflow from operating activities. c) Change in inventory was $0.22 million net cash outflow for the year ended March 31, 2024.
We are an offshore holding company conducting all of our business through our subsidiaries and the consolidated variable interest entity, Taizhou Suxuantang in China. Neither we nor our subsidiaries own any share in Taizhou Suxuantang.
See “Forward-Looking Statements”. 50 Key Factors Affecting Our Results of Operation We are an offshore holding company incorporated in British Virgin Islands and we conduct all of our business through our subsidiaries and the consolidated variable interest entity, Taizhou Suxuantang, in China. Neither we nor our subsidiaries own any share in Taizhou Suxuantang.
This represents an increase of $1,924,448 of net loss compared with net loss for the year ended March 31, 2021. b) Change in accounts receivable was $0.83 million net cash inflow for the year ended March 31, 2022.
This represents an increase in cash outflow of $50,277 for the year ended March 31, 2024, compared with the year ended March 31, 2023. b) Change in accounts receivable was $0.32 million net cash outflow for the year ended March 31, 2024.
For the year ended March 31, 2022 net cash provided by operating activities was $268,293, as compared to net cash used in operating activities of $1,316,561 for the year ended March 31, 2021, representing an increase in cash inflow of $1,584,854.
For the year ended March 31, 2023, net cash used in operating activities was $80,757, as compared to net cash provided by operating activities of $268,293 for the year ended March 31, 2022, representing a decrease in cash inflow of $349,050.
For the years ended March 31, 2023 2022 2021 Net cash (used in) provided by operating activities $ (80,757 ) $ 268,293 (1,316,561 ) Net cash used in investing activities (12,303 ) (46,909 ) (5,805,519 ) Net cash provided by financing activities 2,941,602 1,595,140 12,409,487 Effect of exchange rate changes on cash and cash equivalents (1,049,683 ) 394,120 784,536 Net increase in cash, cash equivalents and restricted cash 1,798,859 2,210,644 6,071,943 Cash, cash equivalents and restricted cash at beginning of year 15,569,619 13,358,975 7,287,032 Cash, cash equivalents and restricted cash at end of year $ 17,368,478 $ 15,569,619 13,358,975 59 Cash Flow in Operating Activities For the year ended March 31, 2023, net cash used in operating activities was $80,757, as compared to net cash provided by operating activities of $268,293 for the year ended March 31, 2022, representing a decrease in cash inflow of $349,050.
As of March 31, 2024, we had a balance of $1,047,550 due to related parties, which we expect to repay using our cash and cash equivalents. 59 For the years ended March 31, 2024 2023 2022 Net cash (used in) provided by operating activities $ (1,928,053 ) $ (80,757 ) 268,293 Net cash provided by (used in) investing activities 26,423 (12,303 ) (46,909 ) Net cash (used in) provided by financing activities (2,624,428 ) 2,941,602 1,595,140 Effect of exchange rate changes on cash and cash equivalents (765,233 ) (1,049,683 ) 394,120 Net (decrease) increase in cash, cash equivalents and restricted cash (5,291,291 ) 1,798,859 2,210,644 Cash, cash equivalents and restricted cash at beginning of year 17,368,478 15,569,619 13,358,975 Cash, cash equivalents and restricted cash at end of year $ 12,077,187 $ 17,368,478 15,569,619 Cash Flow in Operating Activities For the year ended March 31, 2024, net cash used in operating activities was $1,928,053, as compared to net cash used in operating activities of $80,757 for the year ended March 31, 2023, representing an increase in cash outflow of $1,847,296.
The increase in cash inflow in operating activities primarily resulted from the change of following accounts: a) A net loss for the year ended March 31, 2022 of $5,736,095, compared with a net loss of $2,748,183 for the year ended March 31, 2021.
The increase in cash outflow in operating activities primarily resulted from the change of the following accounts: a) A net loss for the year ended March 31, 2024 of $3,098,532, compared with a net loss of $5,934,772 for the year ended March 31, 2023.
Revenue from Fine TCMP accounted for 15% and 12% of revenue recognized during the year ended March 31, 2022 and 2021. As compared with the year ended March 31, 2021, our revenue from Fine TCMP decreased by $180,018, or 31% for the year ended March 31, 2022.
Revenue from Fine TCMP accounted for 0% and 6% of the revenue recognized during the years ended March 31, 2024 and 2023. As compared with the year ended March 31, 2023, our revenue from Fine TCMP decreased by $114,628, or nearly 100% for the year ended March 31, 2024.
For the year ended March 31, 2021, change in advance to suppliers was $0.34 million net cash outflow, which led to $0.82 million increase in net cash inflow from operating activities.
For the year ended March 31, 2023, the change in inventory was $0.41 million net cash inflow, which led to a $0.63 million increase in net cash outflow from operating activities. d) Change in refund liabilities was $0.11 million net cash inflow for the year ended March 31, 2024.
Excluding the adjustments of non-cash items, the net loss (income) for the year ended March 31, 2022 and 2021 were $1,634,769 and $(289,679), respectively.
Excluding the adjustments of non-cash items, net loss for the year ended March 31, 2024 and 2023 were $1,546,494 and $1,496,267, respectively.
As compared with the year ended March 31, 2021, our revenue from Advanced TCMP decreased by $609,527, or 34% for the year ended March 31, 2022. Fine TCMP We currently produce over 10 Fine TCMP products for drug stores and hospitals. Our Fine TCMP products are manufactured manually from only high-quality authentic ingredients derived from their region of origin.
Additionally, the sales price of major Advanced TCMP products (DBC products) increased significantly during the year ended March 31, 2024. Fine TCMP We currently have four Fine TCMP products for drug stores and hospitals. Our Fine TCMP products are manufactured manually from only high-quality authentic ingredients derived from their region of origin.
As compared with the year ended March 31, 2021, our revenue from TCMHS products decreased by $728,862, or 75% for the year ended March 31, 2022. 55 Gross Profit Cost of revenues primarily include cost of materials, direct labors, overhead, and other related incidental expenses that are directly attributable to the Company’s principal operations.
Cost of Revenues Cost of revenues primarily includes cost of materials, direct labors, overhead, and other related incidental expenses that are directly attributable to the Company’s principal operations. Total cost of revenue decreased by $170,882, or 11%, to $1,374,526 for the year ended March 31, 2024 from $1,545,408 for the year ended March 31, 2023.
The following is a selected condensed consolidating schedule depicting the financial position as of March 31, 2023 and 2022, cash flows and results of operations for the years ended March 31, 2023 and 2022 for our Company, our subsidiaries, the VIE and corresponding eliminating adjustments. 57 Selected Condensed Consolidation Schedule of Balance Sheet As of March 31, 2023 Parent and Hong Kong WFOE VIE Elimination and Reclassification Consolidated Cash $ 632,540 $ 177,420 $ 16,558,518 $ - 17,368,478 Intercompany receivables 2,244,727 2,943,477 - (5,188,204 ) - Total Current Assets 3,031,436 3,170,114 18,507,901 (5,188,204 ) 19,521,247 Investment in Subsidiaries 7,939,957 - - (7,939,957 ) - Total Non-current Assets 7,939,957 - 10,032,809 (7,939,957 ) 10,032,809 Intercompany payables - - 5,188,204 (5,188,204 ) - Total Liabilities 3,667,315 102,656 16,280,994 (5,188,204 ) 14,862,761 Total Shareholders’ Equity 7,304,078 3,067,458 12,259,716 (7,939,957 ) 14,691,295 Selected Condensed Consolidation Schedule of Comprehensive Loss For the year ended March 31, 2023 Parent and Hong Kong WFOE VIE Elimination and Reclassification Consolidated Revenues $ - $ - $ 1,971,679 $ - 1,971,679 Cost of revenues - - (1,545,408 ) - (1,545,408 ) Gross profit - - 426,271 - 426,271 Total operating expenses (2,889,348 ) (525 ) (3,143,907 ) - (6,033,780 ) Loss from operations (2,889,348 ) (525 ) (2,717,636 ) - (5,607,509 ) Net loss (3,357,186 ) (628 ) (2,576,958 ) - (5,934,772 ) Total Comprehensive Loss (3,357,186 ) (628 ) (3,730,671 ) - (7,088,485 ) Selected Condensed Consolidation Schedule of Cash Flows For the year ended March 31, 2023 Parent and Hong Kong WFOE VIE Elimination and Reclassification Consolidated Net cash (used in) provided by operating activities $ (483,882 ) $ (15,525 ) $ 418,650 $ - (80,757 ) Net cash used in investing activities - - (12,303 ) - (12,303 ) Net cash (used in) provided by financing activities (189,945 ) 192,629 2,938,918 - 2,941,602 Selected Condensed Consolidation Schedule of Balance Sheet As of March 31, 2022 Parent and Hong Kong WFOE VIE Elimination and Reclassification Consolidated Cash $ 1,306,367 $ 790 $ 14,217,165 $ - 15,524,322 Intercompany receivables 40,000 2,491,154 - (2,531,154 ) - Total Current Assets 3,112,037 4,394,294 17,476,678 (2,531,154 ) 22,451,855 Investment in Subsidiaries 4,469,982 - - (4,469,982 ) - Total Non-current Assets 4,649,982 - 10,914,418 (4,469,982 ) 11,094,418 Intercompany payables - - 2,531,154 (2,531,154 ) - Total Liabilities 2,455,826 74,782 17,122,111 (2,531,154 ) 17,121,565 Total Shareholders’ Equity 5,306,193 4,319,512 11,268,985 (4,469,982 ) 16,424,708 58 Selected Condensed Consolidation Schedule of Comprehensive Loss For the year ended March 31, 2022 Parent and Hong Kong WFOE VIE Elimination and Reclassification Consolidated Revenues $ - $ - $ 2,602,281 $ - 2,602,281 Cost of revenues - - (1,350,638 ) - (1,350,638 ) Gross profit - - 1,251,643 - 1,251,643 Total operating expenses (2,637,502 ) - (3,803,814 ) - (6,441,316 ) Loss from operations (2,637,502 ) - (2,552,171 ) - (5,189,673 ) Net loss (2,674,446 ) (193 ) (3,061,456 ) - (5,736,095 ) Total Comprehensive Loss (2,674,446 ) (193 ) (2,633,100 ) - (5,307,739 ) Selected Condensed Consolidation Schedule of Cash Flows For the year ended March 31, 2022 Parent and Hong Kong WFOE VIE Elimination and Reclassification Consolidated Net cash (used in) provided by operating activities $ (106,787 ) $ 73,630 $ 301,450 $ - 268,293 Net cash used in investing activities - - (46,909 ) - (46,909 ) Net cash provided (used in) by financing activities 1,406,681 (13,726 ) 202,185 - 1,595,140 As of the date of this annual report, we have financed our operations primarily through shareholder capital contributions, shareholder loans, and cash flow from operations.
Selected Consolidation Schedule of Balance Sheet As of March 31, 2024 Parent and Hong Kong WFOE VIE Elimination and Reclassification Consolidated Cash $ 487,787 $ 3,058 $ 11,586,342 $ - 12,077,187 Intercompany receivables 2,359,863 3,592,064 - (5,951,927 ) - Total Current Assets 2,859,319 3,627,210 13,698,757 (5,951,927 ) 14,233,359 Investment in Subsidiaries 8,430,742 - - (8,430,742 ) - Total Non-current Assets 8,430,742 - 8,893,698 (8,430,742 ) 8,893,698 Intercompany payables - - 5,951,927 (5,951,927 ) - Total Liabilities 2,117,612 178,589 12,852,337 (5,951,927 ) 9,196,611 Total Shareholders’ Equity 9,172,449 3,448,621 9,740,118 (8,430,742 ) 13,930,446 Selected Consolidation Schedule of Operations and Comprehensive Loss For the year ended March 31, 2024 Parent and Hong Kong WFOE VIE Elimination and Reclassification Consolidated Revenues $ - $ 13,150 $ 1,915,347 $ - 1,928,497 Cost of revenues - (9,167 ) (1,365,359 ) - (1,374,526 ) Gross profit - 3,983 549,988 - 553,971 Total operating expenses (621,878 ) (29,977 ) (2,417,333 ) - (3,069,188 ) Loss from operations (621,878 ) (25,994 ) (1,867,345 ) - (2,515,217 ) Net loss (1,147,536 ) (108,498 ) (1,842,498 ) - (3,098,532 ) Total Comprehensive Loss (1,147,536 ) (108,498 ) (2,670,722 ) - (3,926,756 ) Selected Consolidation Schedule of Cash Flows For the year ended March 31, 2024 Parent and Hong Kong WFOE VIE Elimination and Reclassification Consolidated Net cash (used in) provided by operating activities $ (738,154 ) $ 53,990 $ (1,243,891 ) $ - (1,928,053 ) Net cash provided by investing activities - - 26,423 - 26,423 Net cash provided by (used in) financing activities 577,422 (220,917 ) (2,980,933 ) - (2,624,428 ) 58 Selected Consolidation Schedule of Balance Sheet As of March 31, 2023 Parent and Hong Kong WFOE VIE Elimination and Reclassification Consolidated Cash $ 632,540 $ 177,420 $ 16,558,518 $ - 17,368,478 Intercompany receivables 2,244,727 2,943,477 - (5,188,204 ) - Total Current Assets 3,031,436 3,170,114 18,507,901 (5,188,204 ) 19,521,247 Investment in Subsidiaries 7,939,957 - - (7,939,957 ) - Total Non-current Assets 7,939,957 - 10,032,809 (7,939,957 ) 10,032,809 Intercompany payables - - 5,188,204 (5,188,204 ) - Total Liabilities 3,667,315 102,656 16,280,994 (5,188,204 ) 14,862,761 Total Shareholders’ Equity 7,304,078 3,067,458 12,259,716 (7,939,957 ) 14,691,295 Selected Consolidation Schedule of Operations and Comprehensive Loss For the year ended March 31, 2023 Parent and Hong Kong WFOE VIE Elimination and Reclassification Consolidated Revenues $ - $ - $ 1,971,679 $ - 1,971,679 Cost of revenues - - (1,545,408 ) - (1,545,408 ) Gross profit - - 426,271 - 426,271 Total operating expenses (2,889,348 ) (525 ) (3,143,907 ) - (6,033,780 ) Loss from operations (2,889,348 ) (525 ) (2,717,636 ) - (5,607,509 ) Net loss (3,357,186 ) (628 ) (2,576,958 ) - (5,934,772 ) Total Comprehensive Loss (3,357,186 ) (628 ) (3,730,671 ) - (7,088,485 ) Selected Consolidation Schedule of Cash Flows For the year ended March 31, 2023 Parent and Hong Kong WFOE VIE Elimination and Reclassification Consolidated Net cash (used in) provided by operating activities $ (483,882 ) $ (15,525 ) $ 418,650 $ - (80,757 ) Net cash used in investing activities - - (12,303 ) - (12,303 ) Net cash (used in) provided by financing activities (189,945 ) 192,629 2,938,918 - 2,941,602 As of the date of this annual report, we have financed our operations primarily through shareholder capital contributions, and mainly cash used on operating activities.
The increase in net loss was mainly due to the decrease in our gross profit and the increase in our general and administrative expenses. Liquidity and Capital Resources Consolidation The Company provides all of its products in China via the VIE of the Company, due to PRC legal restrictions of foreign ownership on certain sectors.
Liquidity and Capital Resources Consolidation The Company provides all of its products in China via the VIE of the Company, due to PRC legal restrictions of foreign ownership on certain sectors. WFOE, shareholders of Taizhou Suxuantang and Taizhou Suxuantang entered into a series of contractual arrangements, also known as VIE Agreements, on October 13, 2017.
The current income tax expenses of Nil and Nil for the years ended March 31, 2022 and 2021 were mainly due to the loss before corporate income taxes of the Company and its subsidiaries and the VIE entity.
Income Tax Expenses Income tax expenses represented current and deferred income tax expenses derived from income before taxes generated by Suxuantang, the variable interest entity of the Company. Current income tax expenses for the years ended March 31, 2024 and 2023 were Nil and Nil, respectively.
Interest income (expenses) for the year ended March 31, 2021 mainly consisted of accretion of finance cost, interest expense of the issuance and forbearance of Convertible Notes issued on April 16, 2019 and the expense related to the issuance of warrants to a third party.
Interest expenses, net for the year ended March 31, 2023 mainly consisted of accretion of finance costs and interest expenses related to the Convertible Notes we issued on March 16, 2022, December 19, 2022 and March 7, 2023, and interest expenses from our borrowings from banks and various individuals.
Other income (expenses) for the year ended March 31, 2022 mainly consists of other non-operating income of $164,013 and other non-operating expense of $345,593.
Other expenses for the year ended March 31, 2024 mainly consisted of other non-operating income of $53,853 and other non-operating expenses of $109,740. Other income for the year ended March 31, 2023 mainly consisted of other non-operating income of $156,914 and other non-operating expenses of $7,401.
The increase in general and administrative expenses was mainly due to the payroll expenses of $2,334,397 recorded for the year ended March 31, 2022 related to the 2021 equity incentive plan, and the increase of bad debt provision for accounts receivable Other income(expense), net Interest income (expenses) for the year ended March 31, 2022 mainly consisted of accretion of finance cost and interest expense related to the Convertible Note we issued on March 16, 2022.
The significant decrease in our general and administrative expenses is mainly due to the following reasons: (i) the staff payroll and welfare expenses decreased significantly during the year ended March 31, 2024 compared to the year ended March 31, 2023; (ii) the credit loss provision decreased by 90% during the year ended March 31, 2024 compared to the year ended March 31, 2023. 53 Other Income (Expenses), Net Interest expenses, net for the year ended March 31, 2024 mainly consisted of accretion of finance cost and interest expense related to the Convertible Note we issued on December 19, 2022, March 7, 2023, December 13, 2023 and March 27, 2024, and interest expenses from our borrowings from banks and various individuals.
Selling expenses Selling expenses primarily consisted of sales staff payroll and welfare expenses, travelling expenses, advertisement expenses, distribution expenses. The selling expenses decreased from $1,587,333 for the year ended March 31, 2021 to $924,538 for the year ended March 31, 2022, representing a decrease of $662,795, or 42%.
Selling Expenses Selling expenses primarily consisted of sales staff payroll and welfare expenses, travelling expenses, market development and advertising fees, distribution and promotion expenses. The selling expenses increased from $387,452 for the year ended March 31, 2023 to $433,566 for the year ended March 31, 2024, representing an increase of $46,114, or 11%.
Revenue from Regular TCMP products decreased by $656,885, or 45%, to $793,430 for the year ended March 31, 2022 from $1,450,315 for the year ended March 31, 2021.
Revenue from Regular TCMP products increased by $247,282, or 35%, to $945,000 for the year ended March 31, 2024 from $697,518 for the year ended March 31, 2023.
Net income (loss) As a result of the foregoing, net loss for the year ended March 31, 2022 was $5,736,095, representing an increase of $2,987,912, or 109%, from net loss of $2,748,183 for the year ended March 31, 2021.
Deferred income tax expenses for the years ended March 31, 2024 and 2023 were Nil and Nil, respectively. Net Loss As a result of the foregoing, net loss for the year ended March 31, 2024 was $3,098,532, representing a decrease of $2,836,240, or 48%, from net loss of $5,934,772 for the year ended March 31, 2023.
For the year ended March 31, 2022, the Company recorded amortization of issuance cost and debt discount of $29,926 and Convertible Note (please refer to FS, Note 13) interest expense of $7,020.
For the year ended March 31, 2024, we recorded amortization of issuance cost and debt discount of $292,771 and interest expenses of $231,583 for the Convertible Notes. For the year ended March 31, 2024, we recorded interest expenses of $29,022 for the other borrowings from banks and individuals.
We had net cash used in investing activities of $5,805,519, for the year ended March 31, 2021, which primarily consisted of purchase of property and equipment of $78,302, capital expenditure in construction in process of $14,742, long-term deposit paid to one entity of $8,845,122 which the Company is seeking to acquire certain percentage of ownership (please refer to Note 11 in the consolidated financial statements), and cash received from Huangshan Panjie Investment Management Co., Ltd. of $3,132,647 (please refer to Note 7 in the consolidated financial statements).
Cash Flow in Investing Activities We had net cash provided by investing activities of $26,423 for the year ended March 31, 2024, which primarily consisted of cash received from Huangshan Panjie Investment Management Co., Ltd. of $33,486, offset by cash paid for purchase of property, plant and equipment of $7,063.
The decrease in selling expenses was mainly due to the decrease in marketing and advertising expenses and shipping and handling expenses caused by the decrease in our revenues.
The decrease in net loss was mainly due to the increase in gross profit and decrease in operating expenses.
The general and administrative expenses increased from $3,449,293 for the year ended March 31, 2021 to $5,516,778 for the year ended March 31, 2022, representing an increase of $2,067,485, or 60%.
For the year ended March 31, 2024, general and administrative expenses decreased $3,010,706, or 53%, compared to the year ended March 31, 2023.
Removed
See “Forward-Looking Statements.” 50 Key Factors Affecting Our Results of Operation Working capital required to implement our business plan will most likely be provided by funds obtained through offerings of our equity, debt, debt-linked securities, and/or equity-linked securities, and revenues generated by us.
Added
Results of Operations for the Year Ended March 31, 2024 Compared to the Year Ended March 31, 2023 For the Years Ended March 31, Change 2024 2023 Amount % Revenues $ 1,928,497 $ 1,971,679 $ (43,182 ) (2 ) Cost of revenues (1,374,526 ) (1,545,408 ) 170,882 (11 ) Gross profit 553,971 426,271 127,700 30 Selling expenses (433,566 ) (387,452 ) (46,114 ) 12 General and administrative expenses (2,635,622 ) (5,646,328 ) 3,010,706 (53 ) Total operating expenses (3,069,188 ) (6,033,780 ) 2,964,592 (49 ) Loss from operations (2,515,217 ) (5,607,509 ) 3,092,292 (55 ) Interest expense, net (544,279 ) (476,776 ) (67,503 ) 14 Other (expenses) income, net (39,036 ) 149,513 (188,549 ) (126 ) Total other expenses, net (583,315 ) (327,263 ) (256,052 ) 78 Loss before income taxes expense (3,098,532 ) (5,934,772 ) 2,836,240 (48 ) Income tax expenses - - - - Net Loss $ (3,098,532 ) $ (5,934,772 ) $ 2,836,240 (48 ) 51 Revenues We generated revenues primarily from manufacture and sales of the following products: three types of TCMP products, consisting of Advanced TCMP, Fine TCMP and Regular TCMP, and raw medicinal materials and others.
Removed
No assurance can be given that we will have revenues sufficient to support and sustain our operations or that we would be able to obtain equity/debt financing in the current economic environment.
Added
As compared with the year ended March 31, 2023, our total revenues decreased slightly by $43,182, or 2%, for the year ended March 31, 2024.
Removed
If we do not have sufficient working capital and are unable to generate sufficient revenues or raise additional funds, we may delay the completion of or significantly reduce the scope of our current business plan; delay some of our development and clinical or marketing efforts; postpone the hiring of new personnel; or, under certain dire financial circumstances, substantially curtail or cease our operations.
Added
The following table sets forth the breakdown of revenues by revenue source for each period presented: For the Years Ended March 31, Change 2024 2023 Amount % Advanced TCMP $ 946,015 656,942 $ 289,073 44 Fine TCMP 166 114,794 (114,628 ) (100 ) Regular TCMP 945,000 697,518 247,482 35 Raw medicinal materials 24,166 502,425 (478, 259 ) (95 ) Others 13,150 - 13,150 100 Total revenues $ 1,928,497 $ 1,971,679 $ (43,182 ) (2 ) Advanced TCMP Advanced TCMP is comprised of seven Directly-Oral-TCMP products and four After-Soaking-Oral-TCMP products.
Removed
Results of Operations for the Year Ended March 31, 2022 Compared to the Year Ended March 31, 2021 For the Years Ended March 31, Change 2022 2021 Amount % Revenues $ 2,602,281 $ 4,777,573 $ (2,175,292 ) (46 ) Cost of revenues (1,350,638 ) (1,938,023 ) 587,385 (30 ) Gross profit 1,251,643 2,839,550 (1,587,907 ) (56 ) Selling expenses (924,538 ) (1,587,333 ) 662,795 (42 ) General and administrative expenses (5,516,778 ) (3,449,293 ) (2,067,485 ) 60 Total operating expenses (6,441,316 ) (5,036,626 ) (1,404,690 ) 28 Loss from operations (5,189,673 ) (2,197,076 ) (2,992,597 ) 136 Interest expense, net (36,695 ) (1,615,440 ) 1,578,745 (98 ) Other income (expenses), net (181,581 ) 871,650 (1,053,231 ) (121 ) Total other expenses, net (218,276 ) (743,790 ) 525,514 (71 ) Loss before income taxes expense (5,407,949 ) (2,940,866 ) (2,467,083 ) 84 Provision (Benefit) for income taxes 328,146 (192,683 ) 520,829 (270 ) Net Loss $ (5,736,095 ) $ (2,748,183 ) $ (2,987,912 ) 109 54 Revenues We generated revenues primarily from manufacture and sales of three types of traditional Chinese medicine pieces (the “TCMP”) products: Advanced TCMP, Fine TCMP, Regular TCMP, and TCM Homologous Supplements (“TCMHS”) products.
Added
As compared with the year ended March 31, 2023, our revenue from Advanced TCMP increased by $289,073, or 44%, for the year ended March 31, 2024.
Removed
TCMHS is a classification of health-supporting food used traditionally in China as TCM but which are also consumed as food, which was developed and commercialized during the year ended March 31, 2020. As compared with the year ended March 31, 2021, our total revenues decreased by $2,175,292, or 46% for the year ended March 31, 2022.
Added
The increase was primarily due to that after the lift of lockdown measure imposed due to the COVID-19 pandemic, the supply of raw materials for the production of Advance TCMP products was secured and the Company’s production efficiency was gradually improved, market demand gradually recovered and therefore sales volume of Advanced TCMP increased during the year ended March 31, 2024.
Removed
The decrease was primarily due to the effect of the continuous lockdown for Covid-19 and the ongoing renewal process of our GMP certificate.
Added
The decrease was primarily attributable to the fact that we decided to discontinue cooperation with major clients in the sales of Fine TCMP, and not to develop or sell Fine TCMP products in future.
Removed
The following table sets forth the breakdown of revenues by revenue source for each period presented: For the Years Ended March 31, Change 2022 2021 Amount % Advanced TCMP $ 1,163,122 1,772,649 $ (609,527 ) (34 ) Fine TCMP 399,770 579,788 (180,018 ) (31 ) Regular TCMP 793,430 1,450,315 (656,885 ) (45 ) TCMHS 245,959 974,821 (728,862 ) (75 ) Total revenues $ 2,602,281 $ 4,777,573 $ (2,175,292 ) (46 ) Advanced TCMP Advanced TCMP is comprised of seven Directly Oral TCMP products (the “Directly-Oral-TCMP”) and ten After-soaking-oral TCMP products (the “After-Soaking-Oral-TCMP”).
Added
The increase in revenue from Regular TCMP products is due to the increased market demand for our Regular TCMP during the year ended March 31, 2024. 52 Raw medicinal materials For the year ended March 31, 2024 and 2023, we generated revenue from sales of raw medicinal materials of $24,166 and $502,425, which represented 1% and 25% of our total revenue, respectively.
Removed
TCMHS Solid Beverages Four solid beverage products as part of the Company’s TCMHS products were developed and commercially launched in April 2019 and generated revenue of $245,959 and $974,821 for the years ended March 31, 2022 and 2021, respectively.
Added
As the low gross margin rate and declined market demand for our raw medicinal materials, we gradually decreased the sales of raw medicinal materials during the year ended March 31, 2024. Others For the year ended March 31, 2024, we also generated revenue of $13,150, or 1% of our total revenue, from the launch of a new health beverage product.
Removed
Total cost of revenue decreased by $587,385, or 30%, to $1,350,638 for the year ended March 31, 2022 from $1,938,023 for the year ended March 31, 2021.
Added
The decrease of cost of revenues was mainly due to the significant decrease in sale of raw medicinal materials which have low margin. Gross Profit Gross profit increased by $127,700, or 30%, to $ 553,971 for the year ended March 31, 2024 from $ 426,271 for the year ended March 31, 2023.
Removed
The reason that cost of revenues did not decrease comparatively with the revenue was mainly due to the fact that fixed costs such as depreciation of our property, plant and equipment and direct labor cost did not decrease comparatively.
Added
Gross margin was 28.7% for the year ended March 31, 2024, compared to 21.6% for the year ended March 31, 2023.
Removed
For the year ended March 31, 2022, the Company had abnormal capacity due to unexpected product demand reductions, and partial of the fixed overhead was recorded in general and administrative expenses instead of in cost of revenues.
Added
The significant increase in our gross margin is mainly due to the following reasons: (i) the sales in our Advanced TCMP products increased significantly during the year ended March 31, 2024 compared to the year ended March 31, 2023, and Advanced TCMP products have relatively high margin; (ii) the sales of raw medicinal materials, which have very low margin, accounted for a small portion of our total revenue during the year ended March 31, 2024 while a significant portion of total revenue during the year ended March 31, 2023.
Removed
Gross profit decreased by $1,587,907, or 56%, to $1,251,643 for the year ended March 31, 2022 from $2,839,550 for the year ended March 31, 2021. Gross margin was 48.1% for the year ended March 31, 2022, compared to 59.4% for the year ended March 31, 2021.
Added
The increase in selling expenses was mainly due to the increase market development and advertising fee from $227,850 for the year ended March 31, 2023 to $327,208 for the year ended March 31, 2024.
Removed
For the year ended March 31, 2021, the Company recorded amortization of issuance cost and debt discount of $184,587 and interest expense of $935,680 of the Convertible Notes (please refer to FS, Note 13) and the expense related to the issuance of warrants to a third party of $509,000.
Added
General and administrative expenses of $2,635,622 for the year ended March 31, 2024 mainly consisted of payroll expenses of $828,341, professional fees of $617,365, credit loss for accounts receivable of $283,234, and impairment expense for property, plant and equipment of $401,995.
Removed
Other income (expenses) for the year ended March 31, 2021 mainly consists of the collection of other receivables which was written off in prior period of $468,687 and government subsidy of $410,158. 56 Income tax expense (benefit) Income tax expense (benefit) represented current and deferred income tax expenses or benefits derived from income before taxes generated by Suxuantang, the variable interest entity of the Company.
Added
General and administrative expenses of $5,646,328 for the year ended March 31, 2023 mainly consisted of payroll expenses of $$1,151,466, credit loss for accounts receivable of $820,352, credit loss for prepayment, receivable and other current assets of $474,342, credit loss for loan receivable and accrued interest of $1,581,000, and impairment expense for construction in progress of $349,390.
Removed
As compared with the year ended March 31, 2021, the income tax expense for the year ended March 31, 2022 increased by $520,829, or 270%. Income tax expense for the year ended March 31, 2022 consists of $328,146 deferred tax expense. Income tax benefit for the year ended March 31, 2021 consists of $192,683 deferred tax benefit.
Added
For the year ended March 31, 2023, we recorded amortization of issuance cost and debt discount of $335,654 and interest expenses of $130,282 for the Convertible Notes. For the year ended March 31, 2023, we recorded interest expenses of $10,840 for the other borrowings from banks and individuals.
Removed
As of March 31, 2023, we had a balance of $5,203,762 due to related parties, which we expect to repay using our cash and cash equivalents. We reported net losses of $5,934,772, $5,736,095, and $2,748,183 for the years ended March 31, 2023, 2022 and 2021, respectively.
Added
As of March 31, 2024 and 2023, $11,589,400 and $16,735,938 of cash and cash equivalents were denominated in RMB, respectively. 57 As of March 31, 2023, our VIE accounted for an aggregate of 97% and 75% of our total assets and total liabilities, respectively.

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Item 6. [Reserved]

Selected Financial Data — reserved (removed by SEC in 2021)

33 edited+15 added−4 removed59 unchanged
We may terminate the employment for cause, at any time, without notice or remuneration, for certain acts of the executive officer, such as conviction or plea of guilty to a felony or grossly negligent or dishonest acts to our detriment, or misconduct or a failure to perform agreed duties.
We may terminate the employment for cause, at any time, without notice or remuneration, for certain acts of the executive officer, such as conviction or plea of guilty to a felony or grossly negligent or dishonest acts to our detriment, or misconduct or a failure to perform agreed duties.
In such case, the executive officer will not be entitled to receive payment of any severance benefits or other amounts by reason of the termination, and the executive officer’s right to all other benefits will terminate, except as required by any applicable law. We may also terminate an executive officer’s employment without cause upon one-month advance written notice.
In such case, the executive officer will not be entitled to receive payment of any severance benefits or other amounts by reason of the termination, and the executive officer’s right to all other benefits will terminate, except as required by any applicable law. We may also terminate an executive officer’s employment without cause upon one-month advance written notice.
The executive officer may terminate the employment at any time with a one-month advance written notice if there is any significant change in the executive officer’s duties and responsibilities or a material reduction in the executive officer’s annual salary.
The executive officer may terminate the employment at any time with a one-month advance written notice if there is any significant change in the executive officer’s duties and responsibilities or a material reduction in the executive officer’s annual salary.
At each annual general meeting, each director so elected shall hold office for a one-year term and until the election of their respective successors in office or removed. Board Diversity The table below provides certain information regarding the diversity of our board of directors as of the date of this annual report.
At each annual general meeting, each director so elected shall hold office for a one-year term and until the election of their respective successors in office or removed. 64 Board Diversity The table below provides certain information regarding the diversity of our board of directors as of the date of this annual report.
It is determined that Mr. Songfan He possesses accounting or related financial management experience that qualifies him as an “audit committee financial expert” as defined by the rules and regulations of the SEC. 68 Compensation Committee Mr. Tong Liu, Mr. Songfan He, and Mr. Xiaodong Ji are members of our Compensation Committee and Mr. Tong Liu is the chairman.
It is determined that Mr. Songfan He possesses accounting or related financial management experience that qualifies him as an “audit committee financial expert” as defined by the rules and regulations of the SEC. Compensation Committee Mr. Tong Liu, Mr. Songfan He, and Mr. Xiaodong Ji are members of our Compensation Committee and Mr. Tong Liu is the chairman.
Feng Zhou and Mr. Hao Xia. According to the 2022 Voting Agreements, Mr. Zhijun Xiao irrevocably grants a power of attorney to, and entrust Mr. Zhou and Mr. Xia, respectively, for the maximum period of time permitted by law, with all of Mr.
Hao Xia. According to the 2022 Voting Agreements, Mr. Zhijun Xiao irrevocably grants a power of attorney to, and entrust Mr. Zhou and Mr. Xia, respectively, for the maximum period of time permitted by law, with all of Mr.
(2) Junsong Li resigned from his position of director of the Company on May 9, 2022 (3) Wenwei Fan resigned from his position of director of the Company on May 9, 2022 (4) Tong Liu assumed his position of director of the Company on May 10, 2022 (5) Songfan He assumed his position of director of the Company on May 10, 2022 66 Agreements with Named Executive Officers On December 30, 2017, we entered into an employment agreement with our CEO, Mr.
(2) Junsong Li resigned from his position of director of the Company on May 9, 2022 (3) Wenwei Fan resigned from his position of director of the Company on May 9, 2022 (4) Tong Liu assumed his position of director of the Company on May 10, 2022 (5) Songfan He assumed his position of director of the Company on May 10, 2022 67 Agreements with Named Executive Officers On December 30, 2017, we entered into an employment agreement with our CEO, Mr.
Our board of directors may exercise all the powers of the company to borrow money and to mortgage or charge our undertakings and property or any part thereof, to issue debentures, debenture stock and other securities whenever money is borrowed or as security for any debt, liability or obligation of the company or of any third party. 65 6.B.
Our board of directors may exercise all the powers of the company to borrow money and to mortgage or charge our undertakings and property or any part thereof, to issue debentures, debenture stock and other securities whenever money is borrowed or as security for any debt, liability or obligation of the company or of any third party. 66 6.B.
Compensation Summary Compensation Table The following table sets forth certain information with respect to compensation for the year ended March 31, 2023 earned by or paid to our directors and senior management.
Compensation Summary Compensation Table The following table sets forth certain information with respect to compensation for the year ended March 31, 2024 earned by or paid to our directors and senior management.
Code of Conduct and Ethics We intend to adopt a code of conduct and ethics applicable to our directors, officers and employees in accordance with applicable federal securities laws and NASDAQ rules. 6.D. Employees See the section entitled “Employees” in Item 4 above. 69 6.E.
Code of Conduct and Ethics We adopted a code of conduct and ethics applicable to our directors, officers and employees in accordance with applicable federal securities laws and NASDAQ rules. 69 6.D. Employees See the section entitled “Employees” in Item 4 above. 6.E.
The market effective date of 2022 Reverse Split was May 19, 2022, which was the first day when the Company’s ordinary shares begin trading on a split-adjusted basis. The 2022 Reverse Split did not change the number of the Company’s authorized preferred and ordinary shares, which remain as unlimited.
The market effective date of 2023 Reverse Split was October 5, 2023, which was the first day when the Company’s ordinary shares begin trading on a split-adjusted basis. The 2023 Reverse Split did not change the number of the Company’s authorized preferred and ordinary shares, which remain as unlimited.
As a result of 2022 Reverse Split, the shareholders received one new ordinary share of the Company, par value $0.08 each, for every twenty (20) shares they hold. No fractional ordinary shares were issued to any shareholders in connection with the reverse stock split.
As a result of 2023 Reverse Split, the shareholders received one new ordinary share of the Company, no par value each, for every twenty-five (25) shares they hold. No fractional ordinary shares were issued to any shareholders in connection with the reverse stock split.
Name Age Position(s) Feng Zhou 32 Chief Executive Officer and Director Xiaodong Pan 46 Chief Financial Officer Jun Zheng 47 Director Tong Liu 45 Independent Director Xiaodong Ji 54 Independent Director Songfan He 51 Independent Director The following is a brief biography of each of our executive officers and directors: Executive Officers: Mr.
Name Age Position(s) Feng Zhou 33 Chief Executive Officer and Director Xiaodong Pan 47 Chief Financial Officer Jun Zheng 48 Director Tong Liu 46 Independent Director Xiaodong Ji 55 Independent Director Songfan He 52 Independent Director The following is a brief biography of each of our executive officers and directors: Executive Officers: Mr.
A copy of the incentive plan was filed as Exhibit 4.6 to this annual report. 71
A copy of the incentive plan was filed as Exhibit 4.7 to this annual report. 72
Each shareholder was entitled to receive one ordinary share in lieu of the fractional share that would have resulted from the reverse stock split. The share numbers in this annual report are all presented on a post-split basis unless otherwise noted. Holders of Ordinary Shares are entitled to one vote per share.
No fractional ordinary shares were issued to any shareholders in connection with the reverse stock split. Each shareholder was entitled to receive one ordinary share in lieu of the fractional share that would have resulted from the reverse stock split. The share numbers in this annual report are all presented on a post-split basis unless otherwise noted.
All of our executive officers are appointed by and serve at the discretion of our board of directors. Qualification There are no membership qualifications for directors. Further, there are no share ownership qualifications for directors unless so fixed by us in a general meeting. There are no other arrangements or understandings pursuant to which our directors are selected or nominated.
All of our executive officers are appointed by and serve at the discretion of our board of directors. Qualification There are no membership qualifications for directors. Further, there are no share ownership qualifications for directors unless so fixed by us in a general meeting.
Share Ownership The following table sets forth information with respect to the beneficial ownership of our equity shares as of July 27, 2023 by each director and our senior management executives. There were 14,138,349 Ordinary Shares issued and outstanding as of July 27, 2023.
Share Ownership The following table sets forth information with respect to the beneficial ownership of our equity shares as of June 20, 2024 by each director and our senior management executives. There were 3,092,994 Ordinary Shares issued and outstanding as of June 20, 2024.
Under the 2021 Plan, there are 2,325,000 Ordinary Shares (116,250 shares retrospectively restated for effect of reverse stock split on May 19, 2022) available for issuance. As of the date of this annual report, we have issued all the Ordinary Shares available under such plan.
Under the 2022 Plan, there are 6,094,180 Ordinary Shares (12,188 shares retrospectively restated for effect of reverse stock split on May 19, 2022 and October 5, 2023) available for issuance. As of the date of this annual report, we have issued all the Ordinary Shares available under such plan.
On September 22, 2022, the Company entered into certain securities purchase agreement (the “2022 SPA”) with Zhijun Xiao, a non-affiliate non-U.S. person, pursuant to which Mr. Zhijun Xiao agreed to purchase 1,625,798 Ordinary Shares of the Company, par value $0.08 per share at a per share purchase price of $1.35.
Holders of ordinary shares are entitled to one vote per share. On September 22, 2022, the Company entered into certain securities purchase agreement (the “2022 SPA”) with Zhijun Xiao, a non-affiliate non-U.S. person, pursuant to which Mr.
As of the date of this annual report, we have issued all the Ordinary Shares available under such plan.
Under the 2024 Plan, there are 185,316 Ordinary Shares available for issuance. As of the date of this annual report, we have issued 185,316 Ordinary Shares available under such plan.
A copy of the incentive plan was filed as Exhibit 4.7 to this annual report. 2021 Equity Incentive Plan On March 31, 2021, upon the shareholders’ approval, we have adopted an equity incentive plan for our employees, directors and consultants (the “2021 Plan”).
A copy of the incentive plan was filed as Exhibit 4.6 to this annual report. 2022 Equity Incentive Plan On March 15, 2022, the board of directors adopted an equity incentive plan for our employees, directors and consultants (the “2022 Plan”).
Zhijun Xiao. 70 On May 10, 2022, the Company’s board of directors approved an amended and restated memorandum and articles of association to effectuate a one-for-twenty (1-for-20) reverse split for its ordinary shares. The amended and restated memorandum and articles of association became effective on May 19, 2022.
Feng Zhou is deemed to have the voting power and investment discretion over the shares held by Mr. Zhijun Xiao. 70 On May 10, 2022, the Company’s board of directors approved an amended and restated memorandum and articles of association to effectuate a one-for-twenty (1-for-20) reverse split for its ordinary shares (the “2022 Reverse Split”).
Board Diversity Matrix Country of Principal Executive Offices: China Foreign Private Issuer Yes Disclosure Prohibited under Home Country Law No Total Number of Directors 5 Female Male Non- Binary Did Not Disclose Gender Part I: Gender Identity Directors 0 5 Part II: Demographic Background Underrepresented Individual in Home Country Jurisdiction 0 LGBTQ+ 0 Did Not Disclose Demographic Background 0 64 Family Relationships None of the directors or executive officers has a family relationship as defined in Item 401 of Regulation S-K.
Board Diversity Matrix Country of Principal Executive Offices: China Foreign Private Issuer Yes Disclosure Prohibited under Home Country Law No Total Number of Directors 5 Female Male Non- Binary Did Not Disclose Gender Part I: Gender Identity Directors 0 5 Part II: Demographic Background Underrepresented Individual in Home Country Jurisdiction 0 LGBTQ+ 0 Did Not Disclose Demographic Background 0 The table below provides certain information regarding the diversity of our board of directors as of March 31, 2023.
The shares issuable upon conversion of the 2023 Note may be offered for sale from time to time by Streeterville. The Company will not receive proceeds from the sale of the underlying Ordinary Shares. We are not aware of any arrangement that may, at a subsequent date, result in a change of control of our Company.
The shares issuable upon conversion of the 2023 Note may be offered for sale from time to time by Streeterville. The Company will not receive proceeds from the sale of the underlying ordinary shares.
Zhijun Xiao’s voting rights as a shareholder of the Company, including without limitation, in connection with the election of directors and approval of all corporate transactions which requires the approval of the Company’s shareholders. Therefore, Mr. Feng Zhou is deemed to have the voting power and investment discretion over the shares held by Mr.
Xia, respectively, for the maximum period of time permitted by law, with all of Mr. Zhijun Xiao’s voting rights as a shareholder of the Company, including without limitation, in connection with the election of directors and approval of all corporate transactions which requires the approval of the Company’s shareholders. Therefore, Mr.
The gross proceeds of this transaction are $2,194,827.3, which has been paid in full as of the date of this annual report. On the same date, Mr. Zhijun Xiao entered into a voting agreements (the “2022 Voting Agreements”) with Mr. Feng Zhou and Mr. Hao Xia. According to the 2022 Voting Agreements, Mr.
Zhijun Xiao agreed to purchase 1,625,798 ordinary shares of the Company, par value $0.08 per share at a per share purchase price of $1.35. The gross proceeds of this transaction are $2,194,827.3, which has been paid in full. On the same date, Mr. Zhijun Xiao entered into voting agreements (the “2022 Voting Agreements”) with Mr. Feng Zhou and Mr.
Songfan He, serves as the chairman. All members of our Audit Committee satisfy the independence standards promulgated by the SEC and by NASDAQ as such standards apply specifically to members of audit committees. We adopted and approved a charter for the Audit Committee prior to consummation of our initial public offering .
Tong Liu and Mr. Xiaodong Ji are members of our Audit Committee, where Mr. Songfan He, serves as the chairman. All members of our Audit Committee satisfy the independence standards promulgated by the SEC and by NASDAQ as such standards apply specifically to members of audit committees.
Committees of the Board of Directors We established an audit committee, a compensation committee and a nominating and governance committee. Each of the committees of the Board have the composition and responsibilities described below. 67 Audit Committee Mr. Songfan He, Mr. Tong Liu and Mr. Xiaodong Ji are members of our Audit Committee, where Mr.
There are no other arrangements or understandings pursuant to which our directors are selected or nominated. 68 Committees of the Board of Directors We established an audit committee, a compensation committee and a nominating and governance committee. Each of the committees of the Board have the composition and responsibilities described below. Audit Committee Mr. Songfan He, Mr.
Feng Zhou is entitled to an aggregate of 1,732,048 shares with shared voting power, includes (i) 106,250 Ordinary Shares solely held by Mr.
As of the date of this annual report, Mr. Feng Zhou is entitled to an aggregate of 138,203 with shared voting power, includes (i) 4,205 Ordinary Shares solely held by Mr.
Feng Zhou is deemed to have the voting power and investment discretion over the shares held by Rising Sun Capital Ltd. (3) Zhijun Xiao’s principal business address is No.41 Team Huangjiu, Liangxu Town, Jiangyan District, Taizhou City, Jiangsu Province, China. On September 22, 2022 Mr. Zhijun Xiao entered into a voting agreements (the “2022 Voting Agreements”) with Mr.
(iii) 65,032 Ordinary Shares that are subject to the voting agreement entered into between Feng Zhou, Haoxia and Zhijun Xiao, whose principal business address is No.41 Team Huangjiu, Liangxu Town, Jiangyan District, Taizhou City, Jiangsu Province, China, dated September 22, 2022, pursuant to which Mr. Zhijun Xiao irrevocably grants a power of attorney to, and entrust Mr. Zhou and Mr.
Ordinary Shares Beneficially Owned As of July 27, 2023 Number Percent Directors and Executive Officers: Feng Zhou (1) 106,250 0.75 % Xiaodong Pan - - Jun Zheng - - Tong Liu - - Xiaodong Ji - - Songfan He - - All directors and executive officers as a group (6 persons) 106,250 0.75 % 5% shareholder: Rising Sun Capital Ltd.
Ordinary Shares Beneficially Owned As of June 20, 2024 Number Percent Directors and Executive Officers: Feng Zhou (1) 138,203 4.47 % Xiaodong Pan - - Jun Zheng - - Tong Liu - - Xiaodong Ji - - Songfan He - - All directors and executive officers as a group (6 persons) 138,203 4.47 % 5% shareholder: - - - Total share outstanding 138,203 4.47 % (1) Feng Zhou is the 100% owner of Feng Zhou Management Limited and therefore shall be deemed as the beneficial owner of shares held by such entity.
(2) Rising Sun Capital Ltd., a limited liability company organized under the laws of Australia, is wholly-owned by Wei Shi. Rising Sun Capital Ltd.’s principal business address is Suite 118, 252 Russel Street, Melbourne, Vic, 3000. On February 22, 2023, Rising Sun Capital Ltd. entered into voting agreements (the “2023 Voting Agreements”) with Mr.
Rising Sun Capital Ltd.’s principal business address is Suite 118, 252 Russel Street, Melbourne, Vic, 3000, dated February 22, 2023, pursuant to which, Rising Sun Capital Ltd. irrevocably grants a power of attorney to, and entrusts Mr.
Feng Zhou through his wholly owned entity Feng Zhou Management Limited; (ii) 1,625,798 Ordinary Shares that are subject to the 2022 Voting Agreement ( see below ); and (iii) 1,724,138 Ordinary Shares that are subject to the 2023 Voting Agreement ( see below ).
Feng Zhou through his wholly owned entity Feng Zhou Management Limited; (ii) 68,966 Ordinary Shares that are subject to the voting agreement entered into between Feng Zhou and Rising Sun Capital Ltd., a limited liability company organized under the laws of Australia, which is wholly-owned by Wei Shi.
Removed
(2) 1,724,138 12.19 % Zhijun Xiao (3) 1,625,798 11.50 % Total share outstanding 14,138,349 100 % (1) Feng Zhou is the 100% owner of Feng Zhou Management Limited and therefore shall be deemed as the beneficial owner of shares held by such entity. As of the date of this annual report, Mr.
Added
Board Diversity Matrix Country of Principal Executive Offices: China Foreign Private Issuer Yes Disclosure Prohibited under Home Country Law No Total Number of Directors 5 Female Male Non- Binary Did Not Disclose Gender Part I: Gender Identity Directors 0 5 Part II: Demographic Background Underrepresented Individual in Home Country Jurisdiction 0 LGBTQ+ 0 Did Not Disclose Demographic Background 0 Under Rule 5606(f)(2) and Rule 5606(f)(6) of the Nasdaq Listing Rules, we are required to have, or disclose why we do not have, at least one “diverse” (as such term is defined in Rule 5606(f)(2)(B) of the Nasdaq Listing Rules) director by December 31, 2023.
Removed
Zhijun Xiao irrevocably grants a power of attorney to, and entrust Mr. Zhou and Mr. Xia, respectively, for the maximum period of time permitted by law, with all of Mr.
Added
As of July 31, 2024, we did not have at least one diverse director because we have not yet identified a suitable candidate.
Removed
Feng Zhou, who beneficially owns 1,732,048 Ordinary Shares (including 1,625,798 Ordinary Shares he controls via the 2022 Voting Agreement with Mr. Zhijun Xiao dated September 22, 2022) as of the date of February 22, 2023. According to the 2023 Voting Agreement, Rising Sun Capital Ltd. irrevocably grants a power of attorney to, and entrusts Mr.
Added
We will continue our search for a suitable candidate in order to increase the diversity of our board. 65 Family Relationships None of the directors or executive officers has a family relationship as defined in Item 401 of Regulation S-K.
Removed
Equity Incentive Plans 2022 Equity Incentive Plan On March 15, 2022, the board of directors adopted an equity incentive plan for our employees, directors and consultants (the “2022 Plan”). Under the 2021 Plan, there are 6,094,180 Ordinary Shares (304,709 shares retrospectively restated for effect of reverse stock split on May 19, 2022) available for issuance.
Added
We adopted and approved a charter for the Audit Committee prior to consummation of our initial public offering .
Added
Feng Zhou is deemed to have the voting power and investment discretion over the shares held by Rising Sun Capital Ltd.
Added
The amended and restated memorandum and articles of association became effective on May 19, 2022. The market effective date of 2022 Reverse Split was May 19, 2022, which was the first day when the Company’s ordinary shares begin trading on a split-adjusted basis.
Added
The 2022 Reverse Split did not change the number of the Company’s authorized preferred and ordinary shares, which remain as unlimited. As a result of 2022 Reverse Split, the shareholders received one new ordinary share of the Company, par value $0.08 each, for every twenty (20) shares they hold.
Added
On September 11, 2023, the Company’s board of directors approved an amended and restated memorandum and articles of association to (i) alter the par value of its ordinary shares from $0.08 per share to no par value each; and (ii) effectuate a one-for-twenty-five (1-for-25) reverse split for its ordinary shares (the “2023 Reverse Split”).
Added
Each shareholder was entitled to receive one ordinary share in lieu of the fractional share that would have resulted from the reverse stock split. 71 On December 13, 2023, the Company entered into a securities purchase agreement (the “ December 2023 Purchase Agreement ”) with Streeterville Capital, LLC (the “Investor”) , pursuant to which the Company issued the Investor an unsecured promissory note on December 13, 2023 in the original principal amount of $531,666.67 (the “ December 2023 Note ” ) convertible into Ordinary Shares, for $500,000.00 in gross proceeds.
Added
Ordinary Shares are issuable upon conversion of the December 2023 Note which are currently held by Streeterville. The shares issuable upon conversion of the December 2023 Note may be offered for sale from time to time by Streeterville. The Company will not receive proceeds from the sale of the underlying Ordinary Shares.
Added
On March 27, 2024, the Company entered into a securities purchase agreement (the “ March 2024 Purchase Agreement ”) with the Investor, pursuant to which the Company issued the Investor an unsecured promissory note on March 27, 2024 in the original principal amount of $531,666.67 (the “ March 2024 Note ”), convertible into Ordinary Shares of the Company, for $500,000.00 in gross proceeds.
Added
Ordinary Shares are issuable upon conversion of the March 2024 Note which are currently held by Streeterville. The shares issuable upon conversion of the March 2024 Note may be offered for sale from time to time by Streeterville. The Company will not receive proceeds from the sale of the underlying Ordinary Shares.
Added
On May 9, 2024, China SXT Pharmaceuticals, Inc., a British Virgin Islands company (the “Company”) entered into a securities purchase agreement (the “May 2024 Purchase Agreement”) with Streeterville Capital, LLC, a Utah limited liability company (the “Investor”), pursuant to which the Company issued the Investor an unsecured promissory note on May 9, 2024 in the original principal amount of $797,500.00 (the “May 2024 Note”), convertible into ordinary shares, $0.08 par value per share, of the Company (the “Ordinary Shares”), for $750,000.00 in gross proceeds.
Added
Ordinary Shares are issuable upon conversion of the May 2024 Note which are currently held by Streeterville. The shares issuable upon conversion of the May 2024 Note may be offered for sale from time to time by Streeterville. The Company will not receive proceeds from the sale of the underlying Ordinary Shares.
Added
We are not aware of any arrangement that may, at a subsequent date, result in a change of control of our Company. Equity Incentive Plans 2024 Equity Incentive Plan On January 24, 2024, the board of directors adopted an equity incentive plan for our employees, directors and consultants (the “2024 Plan”).

Item 7. Management's Discussion & Analysis

Management's Discussion & Analysis (MD&A) — revenue / margin commentary

11 edited+3 added−5 removed2 unchanged
On January 1, 2018, the Company entered into a lease agreement with Jiangsu Health Pharmaceutical Investment Co., Ltd. to obtain the right of use for office and warehouse of 3,627 square meters for 10 years for free. The Company recorded right-of-use assets and lease expenses based on the fair value of the lease.
On January 1, 2018, the Company entered into a lease agreement with Jiangsu Health Pharmaceutical Investment Co., Ltd. to obtain the right of use for office and warehouse of 3,627 square meters for 10 years for free. The Company recorded right-of-use assets and lease expenses based on the fair value for the lease.
This additional agreement releases Taizhou Suxuantang from future obligation in regard to the guarantee agreement. The Company did not charge financial guarantee fees over Jianping Zhou. Taizhou Juiutian Pharmaceutical Co. Ltd. is fully obliged to pay the principal, interests from January 1, 2021 to the actual date of repayment, including penalty and other expenses.
This additional agreement releases Taizhou Suxuantang from future obligation in regard to the guarantee agreement. The Company did not charge financial guarantee fees over Jianping Zhou. Taizhou Jiutian Pharmaceutical Co. Ltd. is fully obliged to pay the principal, interests from January 1, 2021 to the actual date of repayment, including penalty and other expenses.
As such, the Company expects no liabilities from the financial guarantee. Employment Agreements See Item 6.B “Agreements with Named Executive Officers.” 7.C. Interests of Experts and Counsel Not applicable. 73
As such, the Company expects no liabilities from the financial guarantee. Employment Agreements See Item 6.B “Agreements with Named Executive Officers.” 7.C. Interests of Experts and Counsel Not applicable. 74
(“Jiutian Pharmaceutical”) An entity controlled by Jianping Zhou Jiangsu Health Pharmaceutical Investment Co., Ltd. An entity controlled by Jianping Zhou Taizhou Su Xuan Tang Chinese Medicine Clinic An entity controlled by Jianping Zhou Taizhou Su Xuan Tang Chinese hospital Co., Ltd. An entity controlled by Jianping Zhou Jiangsu Sutaitang Online Commercial Co., Ltd.
Ltd. An entity controlled by Jianping Zhou Jiangsu Health Pharmaceutical Investment Co., Ltd. An entity controlled by Jianping Zhou Taizhou Su Xuan Tang Chinese Medicine Clinic An entity controlled by Jianping Zhou Taizhou Su Xuan Tang Chinese hospital Co., Ltd. An entity controlled by Jianping Zhou Jiangsu Sutaitang Online Commercial Co., Ltd.
On October 28, 2013, Taizhou Suxuantang signed a financial guarantee agreement with Fenlan Xu for Jianping Zhou in borrowing of $844,545 (equivalent of RMB 5,800,000) for an unlimited period. Taizhou Suxuantang is obliged to pay the amount if Jianping Zhou in default of the payment of principal and interests.
On October 28, 2013, Taizhou Suxuantang signed a financial guarantee agreement with Fenlan Xu for JJianping Zhou in borrowing of $803,291 (equivalent of RMB 5,800,000) for an unlimited period. Taizhou Suxuantang is obliged to pay the amount if Jianping Zhou in default of the payment of principal and interests.
For the years ended March 31, 2023, 2022 and 2021, the Company record operating lease expenses were $73,034, $77,968 and $74,299, respectively. Guarantee On April 12, 2021, Taizhou Suxuantang entered into a financial guarantee agreement with Jiangsu Changjiang Commercial Bank for Taizhou Jiutian Pharmaceutical Co.
For the years ended March 31, 2024, 2023 and 2022, the Company record operating lease expenses were $69,819, $73,034, and $77,968, respectively. Guarantee On April 12, 2021, Taizhou Suxuantang signed a financial guarantee agreement with Jiangsu Changjiang Commercial Bank for Taizhou Jiutian Pharmaceutical Co. Ltd. in borrowing of $387,796 (equivalent of RMB 2,800,000) for three-year period.
For the year ended March 31, 2021, the Company borrowed $12,148,461 from Jianping Zhou and Jiangsu Health Pharmaceutical Investment Co., Ltd., which was non-interest bearing and repaid on demand. 72 For the year ended March 31, 2023, the Company borrowed $94,647 from Jun Zheng, which is valid from January 18, 2023 to January 17, 2024 and bears an interest of 6%.
For the year ended March 31, 2023, the Company borrowed $94,647 from Jun Zheng, which is valid from January 18, 2023 to January 17, 2024 and bear interest of 6%.
Related party balances The amounts due to related parties as of March 31, 2023 and 2022 were as follows: As of March 31, 2023 March 31, 2022 Jiangsu Health Pharmaceutical Investment Co., Ltd. $ 2,910,088 $ 5,529,274 Feng Zhou 1,823,679 276,683 Jianping Zhou - 2,030,035 Jiangsu Sutaitang Online Commercial Co., Ltd. 320,202 769,611 Xiaodong Pan 73,110 90,099 Zhijun Xiao 62,658 - Jun Zheng 14,025 - Total $ 5,203,762 $ 8,695,702 Material Transactions with Related Parties For the years ended March 31, 2023, 2022 and 2021, the Company generated revenues of $4,610, $138,275 and $731,669, respectively, from sales transactions with Taizhou Jiutian Pharmaceutical Co.
An entity controlled by Xiaodong Ji Related party balances The amounts due to related parties as of March 31, 2024 and 2023 were as follows: As of March 31, 2024 2023 Jiangsu Health Pharmaceutical Investment Co., Ltd. $ 1,047,550 $ 2,910,088 Feng Zhou - 1,823,679 Jiangsu Sutaitang Online Commercial Co., Ltd. - 320,202 Jun Zheng - 14,025 Xiaodong Pan - 73,110 Zhijun Xiao - 62,658 Total due to related parties $ 1,047,550 $ 5,203,762 Material Transactions with Related Parties 1) Revenues generated from related parties The company sells several TCMP products to related companies based on terms and conditions mutually agreed between the relevant parties.
Ltd., providing a guarantee for their borrowing of $407,712 (equivalent to RMB 2,800,000) for a three-year period. Under this agreement, Taizhou Suxuantang is obliged to pay on behalf of Taizhou Jiutian Pharmaceutical Co. Ltd. in the event of default, including the principal, interest, penalty and other expenses. The Company did not charge financial guarantee fees over Taizhou Jiutian Pharmaceutical Co.
Taizhou Suxuantang is obliged to pay on behalf of the related party the principal, interest, penalty and other expenses if Taizhou Jiutian Pharmaceutical Co. Ltd. defaults in payment. The Company did not charge financial guarantee fees over Taizhou Jiutian Pharmaceutical Co. Ltd.
Related Party Transactions Nature of relationships with related parties Name of related parties Relationship with the Company Feng Zhou A director of the Company, and the CEO of the Company Jianping Zhou Father of Feng Zhou and two of Taizhou Suxuantang shareholders, the controlling shareholder of Taizhou Suxuantang from its inception to May 8, 2017 (decreased subsequent year-end from death) Xiaodong Pan Chief Financial Officer Taizhou Jiutian Pharmaceutical Co., Ltd.
Related Party Transactions Nature of relationships with related parties Name of related parties Relationship with the Company Feng Zhou Major shareholder of the Company, Chief Executive Officer Zhijun Xiao 5% shareholder for the year ended March 31, 2023 Jun Zheng Director of the Company Xiaodong Ji Independent Director of the Company Xiaodong Pan Chief Financial Officer Taizhou Jiutian Pharmaceutical Co.
For the years ended March 31, 2023, 2022 and 2021, the Company generated revenue of $11,533, $16,658 and $68,473, respectively, from sales transactions with Taizhou Su Xuan Tang Chinese Medicine Clinic.
These related party transactions were conducted in the ordinary course of business of the Company. For the years ended March 31, 2024 2023 2022 Taizhou Su Xuan Tang Chinese Hospital Co. Ltd. 25,528 17,478 19,246 Taizhou Su Xuan Tang Chinese Medicine Clinic 2,232 11,533 16,658 Taizhou Jiutian Pharmaceutical Co.
Removed
An entity controlled by Xiaodong Ji, Independent Director of the Company.
Added
Ltd. - 4,610 138,275 Total revenue generated from related parties $ 27,760 $ 33,621 $ 174,179 73 2) Other related party transactions For the years ended March 31, 2024, 2023 and 2022, the Company made advances to related parties of $2,205,254, $628,911 and $3,581,746, respectively.
Removed
Ltd. For the year ended March 31, 2023, 2022 and 2021, the Company generated revenues of $17,478, $19,246 and $84,848, respectively, from sales transactions with Taizhou Su Xuan Tang Chinese Hospital Co. Ltd.
Added
For the years ended March 31, 2024, 2023 and 2022, the Company made repayments to related parties of $1,727,418, $2,197,555 and $231,722, respectively. For the years ended March 31, 2024, 2023 and 2022, non-cash settlement between balances of accounts receivable from related parties and due to related parties were $1,235,290, $1,263,993 and $Nil, respectively.
Removed
For the year ended March 31, 2023, the Company borrowed $76,683 from Zhijun Xiao and Jun Zheng, and repaid $2,899,694 to Jiangsu Health Pharmaceutical Investment Co., Ltd., Jianping Zhou, Jiangsu Sutaitang Online Commercial Co., Ltd., Feng Zhou and Xiaodong Pan.
Added
For the years ended March 31, 2024, 2023 and 2022, non-cash settlement between balances of due from related parties and due to related parties were $6,080,971, $4,051,569 and $3,653,418, respectively. For the year ended March 31, 2024, the Company borrowed $90,024 from Jun Zheng, which has no fixed term and bear interest of 6%.
Removed
For the year ended March 31, 2022, the Company borrowed $1,122,458 from Jiangsu Sutaitang Online Commercial Co., Ltd, Feng Zhou and Xiaodong Pan, and repaid $4,935,926 to Jiangsu Health Pharmaceutical Investment Co., Ltd. and Jianpiang Zhou.
Removed
Ltd. defaults in payment. Taizhou Suxuantang did not charge financial guarantee fees over Jiutian Pharmaceutical. Taizhou Suxuantang has not made any payment under the above guarantee agreements for the year ended March 31, 2023.

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