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China SXT Pharmaceuticals, Inc.

China SXT Pharmaceuticals, Inc.SXTC财报

Nasdaq · 医疗保健 · 药物制剂

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 — 2022 vs 2023

Top changes in China SXT Pharmaceuticals, Inc.'s 2023 20-F

386 paragraphs added · 243 removed · 205 edited across 5 sections

Item 3. Legal Proceedings

Legal Proceedings — active lawsuits and investigations

72 edited+52 added−22 removed295 unchanged
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.
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.
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.
Foreign-invested enterprises with investment as their main business (including foreign-oriented companies, foreign-invested venture capital enterprises and foreign-invested equity investment enterprises) are allowed to, under the premise of authenticity and compliance of their domestic investment projects, carry out based on their actual investment scales direct settlement of foreign exchange capital or transfer the RMB funds in the foreign exchange settlement account for pending payment to the invested enterprises’ accounts. 13 On May 10, 2013, SAFE released Circular 21, which came into effect on May 13, 2013.
Foreign-invested enterprises with investment as their main business (including foreign-oriented companies, foreign-invested venture capital enterprises and foreign-invested equity investment enterprises) are allowed to, under the premise of authenticity and compliance of their domestic investment projects, carry out based on their actual investment scales direct settlement of foreign exchange capital or transfer the RMB funds in the foreign exchange settlement account for pending payment to the invested enterprises’ accounts. 14 On May 10, 2013, SAFE released Circular 21, which came into effect on May 13, 2013.
The proposed Ensuring Quality Information and Transparency for Abroad-Based Listings on our Exchanges (“EQUITABLE”) 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.
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.
Risks Related to Our Corporate Structure We do not have direct ownership of our operating entities in China and rely on VIE Agreements with the VIEs 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.
Risks Related to Our Corporate Structure 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.
For example, if shareholders of a variable interest entity were to refuse to transfer their equity interests in such variable interest entity to us or our designated persons when we exercise the purchase option pursuant to these contractual arrangements, we may have to take a legal action to compel them to fulfill their contractual obligations. 10 If (i) the applicable PRC authorities invalidate these contractual arrangements for violation of PRC laws, rules and regulations, (ii) any variable interest entity or its shareholders terminate the contractual arrangements or (iii) any variable interest entity or its shareholders fail to perform their obligations under these contractual arrangements, our business operations in China would be materially and adversely affected, and the value of your stock would substantially decrease.
For example, if shareholders of a variable interest entity were to refuse to transfer their equity interests in such variable interest entity to us or our designated persons when we exercise the purchase option pursuant to these contractual arrangements, we may have to take a legal action to compel them to fulfill their contractual obligations. 11 If (i) the applicable PRC authorities invalidate these contractual arrangements for violation of PRC laws, rules and regulations, (ii) any variable interest entity or its shareholders terminate the contractual arrangements or (iii) any variable interest entity or its shareholders fail to perform their obligations under these contractual arrangements, our business operations in China would be materially and adversely affected, and the value of your stock would substantially decrease.
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. 18 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.
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.
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. 17 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. 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 we fail to successfully promote and maintain our brand, or if we incur substantial expenses in an unsuccessful attempt to promote and maintain our brand, we may fail to attract enough new customers or retain our existing customers to the extent necessary to realize a sufficient return on our brand-building efforts, in which case our business, operating results and financial condition, would be materially adversely affected. 7 Any disruption in the supply chain of raw materials and our products could adversely impact our ability to produce and deliver products.
If we fail to successfully promote and maintain our brand, or if we incur substantial expenses in an unsuccessful attempt to promote and maintain our brand, we may fail to attract enough new customers or retain our existing customers to the extent necessary to realize a sufficient return on our brand-building efforts, in which case our business, operating results and financial condition, would be materially adversely affected. 8 Any disruption in the supply chain of raw materials and our products could adversely impact our ability to produce and deliver products.
Such litigation, if instituted against us, could result in very substantial costs, divert our management’s attention and resources and harm our business, operating results and financial condition. 15 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.
Such litigation, if instituted against us, could result in very substantial costs, divert our management’s attention and resources and harm our business, operating results and financial condition. 16 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.
Our results of operations could be materially and adversely affected if Taizhou Suxuantang’s tax liabilities increase or if they are required to pay late payment fees and other penalties. 11 The approval of the China Securities Regulatory Commission and other compliance procedures may be required in connection with an offering under PRC rules, regulations or policies, and, if required, we cannot predict whether or how soon we will be able to obtain such approval.
Our results of operations could be materially and adversely affected if Taizhou Suxuantang’s tax liabilities increase or if they are required to pay late payment fees and other penalties. 12 The approval of the China Securities Regulatory Commission and other compliance procedures may be required in connection with an offering under PRC rules, regulations or policies, and, if required, we cannot predict whether or how soon we will be able to obtain such approval.
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 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 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 more detailed discussion of this risk factor on page 16 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 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 such allegations are not proven to be groundless, our Company and business operations will be severely hampered and your investment in our stock could be rendered worthless. 25 You may face difficulties in protecting your interests and exercising your rights as a stockholder since we conduct substantially all of our operations in China, and almost all of our officers and directors reside outside the U.S.
If such allegations are not proven to be groundless, our Company and business operations will be severely hampered and your investment in our stock could be rendered worthless. 27 You may face difficulties in protecting your interests and exercising your rights as a stockholder since we conduct substantially all of our operations in China, and almost all of our officers and directors reside outside the U.S.
Summary of Risk Factors Risks Related to Our Business Risks and uncertainties related to our business include, but are not limited to, the following: ● We face risks related to nature disasters (whether or not caused by climate change), unusually adverse weather conditions, pandemic outbreaks, in particular, the current coronavirus pandemic, terrorist acts and global political events, all of which could result in adverse effects to our business and financial performance.
Summary of Risk Factors Risks Related to Our Business Risks and uncertainties related to our business include, but are not limited to, the following: ● We face risks related to natural disasters (whether or not caused by climate change), unusually adverse weather conditions, pandemic outbreaks, in particular, the current coronavirus pandemic, terrorist acts and global political events, all of which could result in adverse effects to our business and financial performance.
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 12 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. 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.
Such reductions, along with any future price controls or government mandated price reductions may have a material adverse effect on our financial condition and results of operations, including significantly reducing our revenue and profitability. 9 If the TCMP products we produce are replaced by other medicines or are removed from the PRC’s insurance catalogue in the future, our revenue may suffer.
Such reductions, along with any future price controls or government mandated price reductions may have a material adverse effect on our financial condition and results of operations, including significantly reducing our revenue and profitability. 10 If the TCMP products we produce are replaced by other medicines or are removed from the PRC’s insurance catalogue in the future, our revenue may suffer.
We will remain an emerging growth company for up to five years, although we will lose that status sooner if we have more than $1.07 billion of revenues in a fiscal year, have more than $700 million in market value of our Ordinary Shares held by non-affiliates, or issue more than $1.0 billion of non-convertible debt over a three-year period.
We will remain an emerging growth company for up to five years, although we will lose that status sooner if we have more than $1.235 billion of revenues in a fiscal year, have more than $700 million in market value of our Ordinary Shares held by non-affiliates, or issue more than $1.0 billion of non-convertible debt over a three-year period.
Therefore, our shareholders may not know on a timely basis when our officers, directors and principal shareholders purchase or sell our Ordinary Shares. 16 As a foreign private issuer, we 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.
Therefore, our shareholders may not know on a timely basis when our officers, directors and principal shareholders purchase or sell our Ordinary Shares. 17 As a foreign private issuer, we 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 more detailed discussion of this risk factor on page 15 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 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 8 of this annual report. ● Price control regulations in the PRC may decrease our profitability. See more detailed discussion of this risk factor on page 9 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.
If the foreign exchange control system prevents us from obtaining sufficient foreign currency to satisfy our currency demands, we may not be able to pay dividends in foreign currencies to our security-holders. 24 Our business may be materially and adversely affected if any of our PRC subsidiaries declare bankruptcy or become subject to a dissolution or liquidation proceeding.
If the foreign exchange control system prevents us from obtaining sufficient foreign currency to satisfy our currency demands, we may not be able to pay dividends in foreign currencies to our security-holders. 26 Our business may be materially and adversely affected if any of our PRC subsidiaries declare bankruptcy or become subject to a dissolution or liquidation proceeding.
See more detailed discussion of this risk factor on page 21 of this annual report. 3 ● 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 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.
In addition, we do not have any business interruption insurance due to the limited coverage of any available business interruption insurance in China, and as a result, any business disruption or natural disaster could severely disrupt our business and operations and significantly decrease our revenue and profitability. 8 We face risks related to research and the ability to develop new TCMP products.
In addition, we do not have any business interruption insurance due to the limited coverage of any available business interruption insurance in China, and as a result, any business disruption or natural disaster could severely disrupt our business and operations and significantly decrease our revenue and profitability. 9 We face risks related to research and the ability to develop new TCMP products.
See more detailed discussion of this risk factor on page 25 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 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 more detailed discussion of this risk factor on page 11 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 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.
If we lose our foreign private issuer status on this date, we will be required to file with the SEC periodic reports and registration statements on U.S. domestic issuer forms beginning on January 1, 2023, which are more detailed and extensive than the forms available to a foreign private issuer.
If we lose our foreign private issuer status on this date, we will be required to file with the SEC periodic reports and registration statements on U.S. domestic issuer forms beginning on January 1, 2024, which are more detailed and extensive than the forms available to a foreign private issuer.
See more detailed discussion of this risk factor on page 22 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 22 of this annual report. ● We face exposure to foreign currency exchange rate fluctuations.
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 more detailed discussion of this risk factor on page 16 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 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 12 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 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.
We cannot assure you that we will be able to compete effectively with current or future competitors or that the competitive pressures we face will not harm our business. 6 Our dependence on a small number of customers could adversely affect our business or results of operations.
We cannot assure you that we will be able to compete effectively with current or future competitors or that the competitive pressures we face will not harm our business. 7 Our dependence on a small number of customers could adversely affect our business or results of operations.
These restrictions on the availability of our funding may impact our ability to pay dividends to our shareholders and to service our indebtedness. 14 If we exercise the option to acquire equity ownership of Taizhou Suxuantang, the ownership transfer may subject us to certain limitation and substantial costs.
These restrictions on the availability of our funding may impact our ability to pay dividends to our shareholders and to service our indebtedness. 15 If we exercise the option to acquire equity ownership of Taizhou Suxuantang, the ownership transfer may subject us to certain limitation and substantial costs.
Therefore, it is unclear how tax authorities will determine tax residency based on the facts of each case. 23 If the PRC tax authorities determine that we are a “resident enterprise” for PRC enterprise income tax purposes, a number of unfavorable PRC tax consequences could follow.
Therefore, it is unclear how tax authorities will determine tax residency based on the facts of each case. 25 If the PRC tax authorities determine that we are a “resident enterprise” for PRC enterprise income tax purposes, a number of unfavorable PRC tax consequences could follow.
The determination of foreign private issuer status is made annually on the last business day of an issuer’s most recently completed second fiscal quarter, and, accordingly, the next determination will be made with respect to us on September 30, 2022.
The determination of foreign private issuer status is made annually on the last business day of an issuer’s most recently completed second fiscal quarter, and, accordingly, the next determination will be made with respect to us on September 30, 2023.
See more detailed discussion of this risk factor on page 10 of this annual report. 2 ● 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 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. ● 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 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.
As all of the VIE Agreement with Taizhou Suxuantang are governed by the PRC laws and provide for the resolution of disputes through arbitration in the PRC, they would be interpreted in accordance with PRC law and any disputes would be resolved in accordance with PRC legal procedures.
As all of the VIE Agreements with Taizhou Suxuantang are governed by the PRC laws and provide for the resolution of disputes through arbitration in the PRC, they would be interpreted in accordance with PRC law and any disputes would be resolved in accordance with PRC legal procedures.
See more detailed discussion of this risk factor on page 9 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 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.
Senate passed the Accelerating Holding Foreign Companies Accountable Act (“HFCAA”), which, if enacted, would amend the HFCA Act and require the SEC to prohibit an issuer’s securities from trading on any U.S. stock exchanges if its auditor is not subject to PCAOB inspections for two consecutive years instead of three.
Senate passed the Accelerating Holding Foreign Companies Accountable Act (the “Accelerating HFCA Act”), which, if enacted, would amend the HFCA Act and require the SEC to prohibit an issuer’s securities from trading on any U.S. stock exchanges if its auditor is not subject to PCAOB inspections for two consecutive years instead of three.
As a result, our liquidity and our ability to fund and expand our business may be negatively affected. 22 Labor disputes could significantly affect our operations. Labor disputes with our employees or labor disputes regarding social welfare could significantly disrupt operations or expansion plans.
As a result, our liquidity and our ability to fund and expand our business may be negatively affected. 24 Labor disputes could significantly affect our operations. Labor disputes with our employees or labor disputes regarding social welfare could significantly disrupt operations or expansion plans.
These capital contributions must be approved by MOFCOM or its local counterpart, which usually takes no more than 30 working days to complete. We may not be able to obtain these government approvals on a timely basis, if at all, with respect to future capital contributions by us to our PRC subsidiaries.
These capital contributions must be approved by the MOF or its local counterpart, which usually takes no more than 30 working days to complete. We may not be able to obtain these government approvals on a timely basis, if at all, with respect to future capital contributions by us to our PRC subsidiaries.
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. 5 Although we were incorporated 16 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 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.
See more detailed discussion of this risk factor on page 6 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 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 7 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 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 21 of this annual report. ● We may have difficulty in enforcing any rights we may have under the VIE Agreements in PRC.
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.
On September 22, 2021, the PCAOB adopted a final rule implementing the HFCAA, which provides a framework for the PCAOB to use when determining, as contemplated under the HFCAA, 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 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.
You should carefully consider the risks and uncertainties described below together with all other information contained in this annual report, including the matters discussed under the headings “Forward-Looking Statements” and “Operating and Financial Review and Prospects” before you decide to invest in our ordinary shares .
You should carefully consider the risks and uncertainties described below together with all other information contained in this annual report, including the matters discussed under the headings “Forward-Looking Statements” and “Item 5. Operating and Financial Review and Prospects” before you decide to invest in our ordinary shares .
Since January 1, 2022 to the date of this annual report, there have been outbreaks of the Omicron variant of the COVID-19 in China and the local governments have placed lockdown and mass testing policies in several provinces, including Jiangsu, Liaoning, Heilongjiang, Henan, and Anhui, where some of our suppliers and clients operate, which had created disruption in the delivery of our raw materials and finished products and negatively impacted our revenue for the year ended March 31, 2022.
Since January 1, 2022 to December 2022, there have been outbreaks of the Omicron variant of the COVID-19 in China and the local governments have placed lockdown and mass testing policies in several provinces, including Jiangsu, Liaoning, Heilongjiang, Henan, and Anhui, where some of our suppliers and clients operate, which had created disruption in the delivery of our raw materials and finished products and negatively impacted our revenue for the year ended March 31, 2023.
See more detailed discussion of this risk factor on page 17 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 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 more detailed discussion of this risk factor on page 14 of this annual report.
See more detailed discussion of this risk factor on page 15 of this annual report.
Although our brand is well-respected in TCMP industry, we still believe that maintaining and enhancing our brand recognition in a cost-effective manner outside of that market is critical to achieving widespread acceptance of our current and future products and services and is an important element in our effort to increase our customer base.
Although our brand is well-respected in traditional Chinese medicine pieces (the “TCMP”) industry, we still believe that maintaining and enhancing our brand recognition in a cost-effective manner outside of that market is critical to achieving widespread acceptance of our current and future products and services and is an important element in our effort to increase our customer base.
Furthermore, any capital increase contributions we make to our PRC subsidiaries, which are foreign-invested enterprises, shall be approved by China’s Ministry of Commerce (“MOFCOM”), or its local counterparts. We may not be able to obtain these government registrations or approvals on a timely basis, if at all.
Furthermore, any capital increase contributions we make to our PRC subsidiaries, which are foreign-invested enterprises, shall be approved by the MOF, or its local counterparts. We may not be able to obtain these government registrations or approvals on a timely basis, if at all.
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 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.
We only started to produce Directly-Oral TCMP and After-Soaking-TCMP as our principal products three 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 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.
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.
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.
Substantially all of our assets and operations are currently located in China. Accordingly, our business, financial condition, results of operations, and prospects may be influenced to a significant degree by political, economic, and social conditions in China generally.
Changes in China’s economic, political, or social conditions could have a material adverse effect on our business and operations. Substantially all of our assets and operations are currently located in China. Accordingly, our business, financial condition, results of operations, and prospects may be influenced to a significant degree by political, economic, and social conditions in China generally.
If our shareholders sell substantial amounts of our Ordinary Shares in the public market, the market price of our Ordinary Shares could fall. Moreover, the perceived risk of this potential dilution could cause shareholders to attempt to sell their shares and investors to short our ordinary shares.
Moreover, the perceived risk of this potential dilution could cause shareholders to attempt to sell their shares and investors to short our ordinary shares, thus depress the market price of our shares.
See more detailed discussion of this risk factor on page 18 of this annual report. 4 Risks Related to Our Business We face risks related to nature disasters (whether or not caused by climate change), unusually adverse weather conditions, pandemic outbreaks, in particular, the current coronavirus pandemic, terrorist acts and global political events, all of which could result in adverse effects to our business and financial performance.
Risks Related to Our Business We face risks related to natural disasters (whether or not caused by climate change), unusually adverse weather conditions, pandemic outbreaks, in particular, the current coronavirus pandemic, terrorist acts and global political events, all of which could result in adverse effects to our business and financial performance.
These measures may cause decreased economic activities in China, which may adversely affect our business and operating results. 20 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.
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.
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. 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.
Our success is, to a certain extent, attributable to the management, sales and marketing, and research and development expertise of key personnel. We are dependent upon the services of Mr.
We are dependent on certain key personnel and loss of these key personnel could have a material adverse effect on our business, financial condition and results of operations. Our success is, to a certain extent, attributable to the management, sales and marketing, and research and development expertise of key personnel. We are dependent upon the services of Mr.
If Suxuantang does not replace them with other customers, the loss of business from any one of such customers could have a material adverse effect on our business or results of operations. We are dependent on certain key personnel and loss of these key personnel could have a material adverse effect on our business, financial condition and results of operations.
The loss or reduction of, or failure to renew or replace, any significant contracts with any of these customers could materially reduce Suxuantang’s revenue and cash flows. If Suxuantang does not replace them with other customers, the loss of business from any one of such customers could have a material adverse effect on our business or results of operations.
In addition, in the past the Chinese government has implemented certain measures, including interest rate adjustments, to control the pace of economic growth.
In addition, in the past the Chinese government has implemented certain measures, including interest rate adjustments, to control the pace of economic growth. These measures may cause decreased economic activities in China, which may adversely affect our business and operating results.
Suxuantang has long-standing relationships with many of its significant customers. However, because Suxuantang’s customers generally contract with a finite duration, Suxuantang may lose these customers if the contracts are not renewed or replaced. The loss or reduction of, or failure to renew or replace, any significant contracts with any of these customers could materially reduce Suxuantang’s revenue and cash flows.
We expect that Suxuantang’s largest customers will continue to account for a substantial portion of its total net revenue for the foreseeable future. Suxuantang has long-standing relationships with many of its significant customers. However, because Suxuantang’s customers generally contract with a finite duration, Suxuantang may lose these customers if the contracts are not renewed or replaced.
We have been following the recommendations of local health authorities to minimize exposure risk for our employees, including the temporary closures of our offices and production, and having employees work remotely. Due to the material impacts of COVID-19 on our logistics, our production was picking up slowly and returned to the normal level in May 2020.
Since early 2020, Jiangsu Province, where we conduct a substantial part of our business, was materially impacted by the COVID-19. We have been following the recommendations of local health authorities to minimize exposure risk for our employees, including the temporary closures of our offices and production, and having employees work remotely.
At 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. At March 31, 2021, we had cash and cash equivalents and restricted cash of $13,358,975, total current assets of $23,233,476 and total current liabilities of $18,579,903.
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.
We derive a substantial portion of our revenue from a relatively small number of customers. Suxuantang had one significant customer which accounted for 22.97% of our total revenue during the year ended March 31, 2022. We expect that Suxuantang’s largest customers will continue to account for a substantial portion of its total net revenue for the foreseeable future.
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 face uncertainty about future actions by the PRC government that could significantly affect the operating company’s financial performance and the enforceability of the VIE Agreements. 12 Furthermore, on December 24, 2021, the China Securities Regulatory Commission, or the CSRC, issued Provisions of the State Council on the Administration of Overseas Securities Offering and Listing by Domestic Companies (Draft for Comments) (the “Administration Provisions”), and the Provisions of the State Council on the Administration of Overseas Securities Offering and Listing by Domestic Companies (Draft for Comments) (the “Measures”), which are now open for public comments.
We face uncertainty about future actions by the PRC government that could significantly affect the operating company’s financial performance and the enforceability of the VIE Agreements. 13 Furthermore, on February 17, 2023, the CSRC promulgated the Trial Administrative Measures of Overseas Securities Offering and Listing by Domestic Companies (the “Trial Measures”), which took effect on March 31, 2023.
In addition, any administrative and court proceedings in China may be protracted, resulting in substantial costs and diversion of resources and management attention. 21 We may have difficulty in enforcing any rights we may have under the VIE Agreements in PRC.
We may have difficulty in enforcing any rights we may have under the VIE Agreements in PRC.
Senate passed the Accelerating Holding Foreign Companies Accountable Act, which, if enacted, would amend the HFCA Act and require the SEC to prohibit an issuer’s securities from trading on any U.S. stock exchanges if its auditor is not subject to PCAOB inspections for two consecutive years instead of three See more detailed discussion of this risk factor on page 18 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.
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 sales also may make it more difficult for us to sell equity or equity-related securities in the future at a time and price that we deem reasonable or appropriate.
A decline in the price of our Ordinary Shares might impede our ability to raise capital through the issuance of additional Ordinary Shares or other equity securities in the future at a time and price that we deem reasonable or appropriate.
As an auditor of companies that are traded publicly in the United States and a firm registered with the PCAOB, our auditor is required by the laws of the United States to undergo regular inspections by the PCAOB. Our auditor is located in Denver, Colorado, not mainland China or Hong Kong.
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.
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The PRC government may exert more control over offerings conducted overseas and/or foreign investment in China-based issuers.
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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.
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In December 2019, a novel strain of coronavirus was reported to have surfaced in Wuhan, China, which has and is continuing to spread throughout China and other parts of the world, including the United States.
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Global pandemics, epidemics in China or elsewhere in the world, or fear of spread of contagious diseases, such as Ebola virus disease (EVD), COVID-19, Middle East respiratory syndrome (MERS), severe acute respiratory syndrome (SARS), H1N1 flu, H7N9 flu, and avian flu, as well as hurricanes, earthquakes, tsunamis, or other natural disasters could disrupt our business operations, reduce or restrict our supply of products, incur significant costs to protect our employees and facilities, or result in regional or global economic distress, which may materially and adversely affect our business, financial condition, and results of operations.
Removed
On January 30, 2020, the World Health Organization declared the outbreak of the coronavirus disease (COVID-19) a “Public Health Emergency of International Concern,” and on March 11, 2020, the World Health Organization characterized the outbreak as a “pandemic.” Governments in affected countries are imposing travel bans, quarantines and other emergency public health measures, which have caused material disruption to businesses globally resulting in an economic slowdown.
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Actual or threatened war, terrorist activities, political unrest, civil strife, and other geopolitical uncertainty could have a similar adverse effect on our business, financial condition, and results of operations.
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These measures, though temporary in nature, may continue and increase depending on developments in the COVID-19’s outbreak. Jiangsu Province, where we conduct a substantial part of our business, was materially impacted by the COVID-19.
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Any one or more of these events may impede our production and delivery efforts and adversely affect our sales results, whether short-term or for a prolonged period of time, which could materially and adversely affect our business, financial condition, and results of operations. 5 COVID-19 has spread to many countries and was declared a pandemic by the WHO, resulting in actions from national and local governments that have significantly affected virtually all facets of the PRC and global economies.

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Item 4. Mine Safety Disclosures

Mine Safety Disclosures — required of mining issuers

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We are also subject to the risks of uncertainty about any future actions of the PRC government in this regard. Our VIE Agreements may not be effective in providing control over our variable interest entities.
We are also subject to the risks of uncertainty about any future actions of the PRC government in this regard. The VIE Agreements may not be effective in providing control over our variable interest entities.
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.
We are required under PRC law to make contributions to employee benefit plans at specified percentages of the salaries, bonuses and certain allowances of our employees, up to a maximum amount specified by the local government from time to time. As of the date of this report, we have made adequate employee benefit payments.
We are required under PRC law to make contributions to employee benefit plans at specified percentages of the salaries, bonuses and certain allowances of our employees, up to a maximum amount specified by the local government from time to time. As of the date of this annual report, we have made adequate employee benefit payments.
We have 5 major suppliers located in Henan province and 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 Anhui, Qinghai, Gansu and Yunnan. We have long-term relationship with these suppliers, who supply raw materials of genuine TCM for our production process.
Since the sole business of WFOE is to provide Taizhou Suxuantang with technical support, consulting services and other management services relating to its day-to-day business operations and management in exchange for a service fee approximately equal to the net income of Taizhou Suxuantang, such business scope is necessary and appropriate under PRC laws. 26 China SXT Pharmaceutical is a holding company with no business operation other than holding the shares in SXT HK; SXT HK is a pass-through entity with no business operation.
Since the sole business of WFOE is to provide Taizhou Suxuantang with technical support, consulting services and other management services relating to its day-to-day business operations and management in exchange for a service fee approximately equal to the net income of Taizhou Suxuantang, such business scope is necessary and appropriate under PRC laws. 28 China SXT Pharmaceutical is a holding company with no business operation other than holding the shares in SXT HK; SXT HK is a pass-through entity with no business operation.
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. 34 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. 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.
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 192 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.
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.
With relatively less intermediaries involved in distribution and sales compared to many other pharmaceutical companies in China, we are able to keep our selling cost lower than the industry average. Research and Development We devote substantial resources to the research and development of new products, which do not require additional approval from regulatory agencies unless the products are PTCMs.
With relatively less intermediaries involved in distribution and sales compared to many other pharmaceutical companies in China, we are able to keep our selling cost lower than the industry average. Research and Development We devote substantial resources to the research and development of new products, which do not require additional approval from regulatory agencies unless the products are TCMPs.
As a result, we believe the curative effects of our products have been firmly demonstrated. 36 Ready to Use TCMPs Unlike most TCMPs in the market that have to be prepared as decoction before use, our innovative Directly-Oral TCMPs and After-soaking-oral TCMPs can be easily dissolved or infused in hot water without requiring lengthy preparation.
As a result, we believe the curative effects of our products have been firmly demonstrated. 41 Ready to Use TCMPs Unlike most TCMPs in the market that have to be prepared as decoction before use, our innovative Directly-Oral-TCMPs and After-Soaking-Oral-TCMPs can be easily dissolved or infused in hot water without requiring lengthy preparation.
Although it is not explicitly stipulated in the Power of Attorney, the term of the Power of Attorney shall be the same as the term of that of the Exclusive Option Agreement. 44 This Power of Attorney is coupled with an interest and shall be irrevocable and continuously valid for each shareholder from the date it is executed until the date he/she no longer is a shareholder of Taizhou Suxuantang.
Although it is not explicitly stipulated in the Power of Attorney, the term of the Power of Attorney shall be the same as the term of that of the Exclusive Option Agreement. 49 This Power of Attorney is coupled with an interest and shall be irrevocable and continuously valid for each shareholder from the date it is executed until the date he/she no longer is a shareholder of Taizhou Suxuantang.
Our quality control starts with procurement and continues in our manufacturing, packaging, storage capabilities, and cost competitiveness to ensure that all of our products meet the requirements and are still profitable. 35 Certificates and Permits A pharmaceutical manufacturer, including a TCMP manufacturer, must obtain a Pharmaceutical Manufacturing Permit from the NMPA’s relevant provincial branch.
Our quality control starts with procurement and continues in our manufacturing, packaging, storage capabilities, and cost competitiveness to ensure that all of our products meet the requirements and are still profitable. 40 Certificates and Permits A pharmaceutical manufacturer, including a TCMP manufacturer, must obtain a Pharmaceutical Manufacturing Permit from the NMPA’s relevant provincial branch.
On the label of TCMP shall be indicated the name of the drug, grade/weight, origin of production, manufacturer, product batch number and production date; if the said TCMP is controlled by an approval number, the number shall also be indicated. Currently, all of our marketed products meet the packaging requirements. 41 Microbial limitation standards on Chinese medicine extraction and TCMP.
On the label of TCMP shall be indicated the name of the drug, grade/weight, origin of production, manufacturer, product batch number and production date; if the said TCMP is controlled by an approval number, the number shall also be indicated. Currently, all of our marketed products meet the packaging requirements. 46 Microbial limitation standards on Chinese medicine extraction and TCMP.
Our success in existing product development and branding reflects the significant experience that members of our management team have in their respective fields of expertise and their in-depth knowledge of the regulatory framework in China. 37 Our Growth Strength The key elements of our strategy to grow our business include: Promoting Our Existing Brands to Increase Our National Recognition.
Our success in existing product development and branding reflects the significant experience that members of our management team have in their respective fields of expertise and their in-depth knowledge of the regulatory framework in China. 42 Our Growth Strength The key elements of our strategy to grow our business include: Promoting Our Existing Brands to Increase Our National Recognition.
Besides general GMP for drugs, the production of TCMP also needs to follow the GMP specifically tailored for TCMP, which can be found as annex attached to NMPA regulations. 39 Regulations Relating to Pharmaceutical Industry. The pharmaceutical industry in China is highly regulated. The primary regulatory authority is the NMPA, including its provincial and local branches.
Besides general GMP for drugs, the production of TCMP also needs to follow the GMP specifically tailored for TCMP, which can be found as annex attached to NMPA regulations. 44 Regulations Relating to Pharmaceutical Industry. The pharmaceutical industry in China is highly regulated. The primary regulatory authority is the NMPA, including its provincial and local branches.
All of these patents are preparation process patents, which do not involve new products. 32 Our general R&D strategy was established to use advanced technology to revolutionize TCMP production and continue developing newly advanced and non-decocting TCMP/TCM products capable of meeting the highest quality standard.
All of these patents are preparation process patents, which do not involve new products. 37 Our general R&D strategy was established to use advanced technology to revolutionize TCMP production and continue developing newly advanced and non-decocting TCMP/TCM products capable of meeting the highest quality standard.
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. 29 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 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 Taizhou Suxuantang Shareholders further agree not to dispose of the pledged equity interests or take any actions that would prejudice WFOE’s interest. 43 The Share Pledge Agreement shall be effective upon execution. Taizhou Suxuantang does not have the right to terminate the Share Pledge Agreement. Only WFOE has right to terminate the Share Pledge Agreement.
The Taizhou Suxuantang Shareholders further agree not to dispose of the pledged equity interests or take any actions that would prejudice WFOE’s interest. 48 The Share Pledge Agreement shall be effective upon execution. Taizhou Suxuantang does not have the right to terminate the Share Pledge Agreement. Only WFOE has right to terminate the Share Pledge Agreement.
Sore throat, laryngopharyngitis, cough, allergic asthma, diabetes, and intoxication. 2018 31 Product Ingredients Indication Year of Commercial Launch JueMingZi (powders) Mature seeds of Cassia obtusifolia L. containing anthraquinones, naphthyl ketones, fatty acids, volatile constituents, daidzein, polysaccharides, amino acids.
Sore throat, laryngopharyngitis, cough, allergic asthma, diabetes, and intoxication. 2018 36 Product Ingredients Indication Year of Commercial Launch JueMingZi (powders) Mature seeds of Cassia obtusifolia L. containing anthraquinones, naphthyl ketones, fatty acids, volatile constituents, daidzein, polysaccharides, amino acids.
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 over 10 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 produce 5 Fine TCMP products for drug stores and hospitals.
Leukopenia; thrombocytopenia; or hypoimmunity; chronic anemia; aplastic anemia; erectile dysfunction; and postoperative rehabilitation. 2016 30 Product Ingredients Indication Year of Commercial Launch XueJie (powders) Powders of fruit resins of Daemonorops draco containing flavanoide, terpenoid, and phlobaphene constituents, and resins.
Leukopenia; thrombocytopenia; or hypoimmunity; chronic anemia; aplastic anemia; erectile dysfunction; and postoperative rehabilitation. 2016 35 Product Ingredients Indication Year of Commercial Launch XueJie (powders) Powders of fruit resins of Daemonorops draco containing flavanoide, terpenoid, and phlobaphene constituents, and resins.
We believe that we maintain a good working relationship with our employees, and we have not experienced any major labor disputes. 38 Insurance We provide social security insurance including pension insurance, unemployment insurance, work-related injury insurance and medical insurance for our employees.
We believe that we maintain a good working relationship with our employees, and we have not experienced any major labor disputes. 43 Insurance We provide social security insurance including pension insurance, unemployment insurance, work-related injury insurance and medical insurance for our employees.
GMP standards regulate whole processes and procedures in generating pharmaceutical products to ensure the quality in China. Those include strict Quality Control (“QC”) and Quality Assurance (“QA”). China National People’s Congress promulgated a new Pharmaceutical Administration Law of PRC, and was effective as of December 1, 2019. National Medical Products Administration (“NMPA”) is the new agency that replaced CFDA.
GMP standards regulate whole processes and procedures in generating pharmaceutical products to ensure the quality in China. Those include strict Quality Control (“QC”) and Quality Assurance (“QA”). China National People’s Congress promulgated a new Pharmaceutical Administration Law of PRC, and was effective as of December 1, 2019. NMPA is the new agency that replaced CFDA.
Organizational Structure Chart The following diagram illustrates our corporate structure, including our subsidiaries and consolidated affiliated entities, as of the date of this report: 42 Contractual Arrangements between WFOE and Suxuantang Due to PRC legal restrictions on foreign ownership in the pharmaceutical sector, neither we nor our subsidiaries own any equity interest in Taizhou Suxuantang.
Organizational Structure Chart The following diagram illustrates our corporate structure, including our subsidiaries and consolidated affiliated entities, as of the date of this annual report: 47 Contractual Arrangements between WFOE and Taizhou Suxuantang Due to PRC legal restrictions on foreign ownership in the pharmaceutical sector, neither we nor our subsidiaries own any equity interest in Taizhou Suxuantang.
The TCMP production and quality standard must comply with corresponding TCM and sections on the Pharmacopeia of the PRC. 40 Continuing NMPA Regulation Pharmaceutical manufacturers in China are subject to continuing regulation by the NMPA.
The TCMP production and quality standard must comply with corresponding TCM and sections on the Pharmacopeia of the PRC. 45 Continuing NMPA Regulation Pharmaceutical manufacturers in China are subject to continuing regulation by the NMPA.
In addition, and unlike chemical entity medicines and Traditional Chinese Patent Medicine (“TCPM” 中成药 ) products which can only be sold to GSP-certified pharmaceutical distributors according to latest Guidelines on Perfecting Medicine Procurement of Public Hospitals in China, our TCMP products can also be sold directly to hospitals.
In addition, and unlike chemical entity medicines and Traditional Chinese Patent Medicine (“TCPM”, also known as “中成药” in Chinese) products which can only be sold to GSP-certified pharmaceutical distributors according to latest Guidelines on Perfecting Medicine Procurement of Public Hospitals in China, our TCMP products can also be sold directly to hospitals.
Complete Permits to Produce Advanced TCMP Products We have the Pharmaceutical Manufacturing Permit and pharmaceutical good manufacturing practices (“GMP”) Certificates, both the Permit and the Certificate with the scope of Directly-Oral TCMP authorized by Jiangsu provincial MPA, to produce After-Soaking-Oral-TCMPs, Directly-Oral-TCMPs, Fine TCMPs and Regular TCMPs and there is no need to apply for additional permits from Jiangsu Food and Drug Commission in order to manufacture or sell our products.
Complete Permits to Produce Advanced TCMP Products We have the Pharmaceutical Manufacturing Permit and pharmaceutical GMP Certificates, both the Permit and the Certificate with the scope of Directly-Oral-TCMP authorized by Jiangsu provincial MPA, to produce After-Soaking-Oral-TCMPs, Directly-Oral-TCMPs, Fine TCMPs and Regular TCMPs and there is no need to apply for additional permits from Jiangsu Food and Drug Commission in order to manufacture or sell our products.
TCMP is a type of TCM products that has been widely accepted by Chinese people for thousands of years. Throughout the decades of years, TCMP products’ origin, identification, prepared process, quality standard, indication, dosage and administration, precautions, and storage have been well documented, listed and specified in “China Pharmacopoeia” a state-governmental issued guidance on manufacturing TCMP.
TCMP is a type of Chinese Traditional Medicine (“TCM”) products that has been widely accepted by Chinese people for thousands of years. Throughout the decades of years, TCMP products’ origin, identification, prepared process, quality standard, indication, dosage and administration, precautions, and storage have been well documented, listed and specified in “China Pharmacopoeia” a state-governmental issued guidance on manufacturing TCMP.
Following the principle of Directly-Oral-TCMP, we have established a new scientific and technological strategy and methods for the research and development of the direct-oral pharmaceutical TCMP products. Our products comply with the regulations of the National Medical Products Administration (NMPA) and provincial MPA, as well as keep the principles of TCM.
Following the principle of Directly-Oral-TCMP, we have established a new scientific and technological strategy and methods for the research and development of the direct-oral pharmaceutical TCMP products. Our products comply with the regulations of the NMPA and provincial MPA, as well as keep the principles of TCM.
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 18 dedicated researchers as of March 31, 2022.
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.
A pharmaceutical manufacturer must meet the Good Manufacturing Practice (“GMP”) requirements and standards for each of its production facilities in China for each form of pharmaceutical product it produces. GMP requirements and standards include staff qualifications, production premises and facilities, equipment, raw materials, environmental hygiene, production management, quality control and customer complaint administration.
A pharmaceutical manufacturer must meet the GMP requirements and standards for each of its production facilities in China for each form of pharmaceutical product it produces. GMP requirements and standards include staff qualifications, production premises and facilities, equipment, raw materials, environmental hygiene, production management, quality control and customer complaint administration.
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. See “—C.
The complexity of the manufacturing process is what differentiates these types of products. Advanced TCMP typically has the highest quality because it requires specialized equipment and prepared processes to manufacture, and has to go through more manufacturing steps to produce than Fine TCMP and Regular TCMP.
The complexity of the manufacturing process is what differentiates these types of products. Advanced TCMP typically has the highest quality because it requires specialized equipment and prepared processes to manufacture, and has to go through more manufacturing steps to produce than Fine TCMP and Regular TCMP. Fine TCMP is also manufactured with more refined ingredients than Regular TCMP.
See” Business — Contractual Agreements with WFOE and Taizhou Suxuantang.” Pursuant to PRC laws, each entity formed under PRC law shall have certain business scope approved by the Administration of Industry and Commerce or its local counterpart.
Organizational Structure Chart—Contractual Agreements between WFOE and Taizhou Suxuantang.” Pursuant to PRC laws, each entity formed under PRC law shall have certain business scope approved by the Administration of Industry and Commerce or its local counterpart.
As of March 31, 2022, our end-customer base includes 68 pharmaceutical companies, 14 chain pharmacies and 20 hospitals in 10 provinces and municipalities in China including Jiangsu, Hubei, Shandong, Guangdong, Liaoning, Anhui, Henan, Jiangxi, Fujian, and Hebei.
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.
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 revenues decreased from $5,162,268 in fiscal year ended March 31, 2020 to $4,777,573 in fiscal year ended March 31, 2021, representing a decrease of 7%.
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 Products We currently sell four types of TCMP products: Advanced TCMP, Fine TCMP, Regular TCMP, and TCMHS Solid Beverages. 28 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 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.
We have submitted 12 invention patent applications with the State Intellectual Property Office of the PRC, all of which are under the substantive examination stage.
We have submitted 8 patent application and 4 invention patent applications with the State Intellectual Property Office of the PRC, all of which are under the substantive examination stage.
The regulatory system, known as the “Traditional Chinese Medicine Pieces System.” provides sole guidance on TCMP production in the following aspects: The production of TCMP must comply with the “Pharmaceutical Administration Law of PRC (2019 Revision)”, “Good Manufacturing Practice (“GMP”) for drugs”, and “Good Supply Practice (“GSP”) for drugs”.
The regulatory system, known as the “Traditional Chinese Medicine Pieces System.” provides sole guidance on TCMP production in the following aspects: The production of TCMP must comply with the “Pharmaceutical Administration Law of PRC (2019 Revision)”, “GMP for drugs”, and “GSP for drugs”.
The following table sets forth the breakdown of our employees as of March 31, 2022 by function: Number of Employees % of Total Function Technology and Development 18 21 % Risk Management 3 3 % Operations, Sales and Marketing 15 17 % Product Development 36 42 % General and Administrative 15 17 % Total 87 100 % 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, 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.
Employees As of March 31, 2022, we had a total of 88 full-time employees and no part-time employee.
Employees As of March 31, 2023, we had a total of 78 full-time employees and no part-time employee.
It is defined on China Pharmacopoeia (version 2020) Parts I and IV. Like the Directly-Oral TCMP, we also have built a new scientific and technological strategy and methods for the R&D of the after-soaking orally pharmaceutical TCMP products.
It is defined on China Pharmacopoeia (version 2020) Parts I and IV. Like the Directly-Oral-TCMP, we also have built a new scientific and technological strategy and methods for the R&D of the after-soaking orally pharmaceutical TCMP products. The products comply with the regulations of the NMPA and local MPA, as well as retain the principles of TCM.
For each principal product’s indications and year of commercialization, see “Business – Our Products.” Taizhou Suxuantang, our VIE entity, was founded in 2005. 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%.
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%.
We have two types of Advanced TCMP depending on the way it is consumed, Directly-Oral TCMP and After-Soaking-Oral TCMP products Directly-Oral TCMP Directly-Oral TCMP is a novel Advanced TCMP recently cataloged on Pharmaceutical GMP (version 2010) and China Pharmacopoeia (version 2020) Parts I and IV. The products, unlike Regular TCMP, can be taken orally without decocting.
Directly-Oral-TCMP Directly-Oral-TCMP is a novel Advanced TCMP recently cataloged on Pharmaceutical GMP (version 2010) and China Pharmacopoeia (version 2020) Parts I and IV. The products, unlike Regular TCMP, can be taken orally without decocting.
Ltd. (“WFOE”), a wholly foreign owned enterprise incorporated in China on October 13, 2017. WFOE, shareholders of Taizhou Suxuantang and Taizhou Suxuantang entered into a series of contractual arrangements, also known as VIE Agreements..
SXT HK in turn holds all the capital stocks of WFOE, a wholly foreign owned enterprise incorporated in China on October 13, 2017. WFOE, shareholders of Taizhou Suxuantang and Taizhou Suxuantang entered into a series of contractual arrangements, also known as VIE Agreements, on October 13, 2017.
China National People’s Congress promulgated a new revision “Pharmaceutical Administration Law of PRC (2019 Revision), and was effective as of December 1, 2019. National Medical Products Administration (“NMPA”) is the new agency that replaced CFDA. The pharmaceutical GMP inspection without notification has replaced the “Pharmaceutical GMP Certificate”.
China National People’s Congress promulgated a new revision “Pharmaceutical Administration Law of PRC (2019 Revision), and was effective as of December 1, 2019. NMPA is the new agency that replaced CFDA. The pharmaceutical GMP inspection without notification has replaced the “Pharmaceutical GMP Certificate”. As a result, pharmaceutical manufacturers are required to obtain a valid “Pharmaceutical Manufacturing Permit”. Pharmaceutical products packages.
Although Advanced TCMP has the same medicinal effects as Fine and Regular TCMP and cannot be considered a new type of medicine, Advanced TCMP is much easier to be taken since it does not require decoction.
Although Advanced TCMP has the same medicinal effects as Fine and Regular TCMP and cannot be considered a new type of medicine, Advanced TCMP is much easier to be taken since it does not require decoction. We have two types of Advanced TCMP depending on the way it is consumed, Directly-Oral-TCMP and After-Soaking-Oral-TCMP products.
We currently have a product-developed portfolio of 19 Advanced TCMP products among which 17 Advanced TCMP products have been commercialized, 10 Fine TCMP products, and almost 192 Regular TCMP products that address a wide variety of diseases and medical indications.
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.
The four solid beverage products were commercially launched in April 2019. 33 Intellectual Property We emphasize the protection of intellectual property and have signed agreements with patent agents to assist us to file patent applications. We also have signed confidentiality agreements with every employee we have to protect our production design.
As of the date of this annual report, we have successfully developed four solid beverage products. 38 Intellectual Property We emphasize the protection of intellectual property and have signed agreements with patent agents to assist us to file patent applications. We also have signed confidentiality agreements with every employee we have to protect our production design.
The revenue attributable to LuXueJing were $983,999 (RMB 6,852,276), $977,610 (RMB 6,631,521) and $449,975 (RMB 2,887,939)for the years ended March 31, 2020, 2021 and 2022, respectively. The revenue attributable to Xuejie powders is $4,047 (RMB 28,179), $7,033 (RMB 47,706) and $1,660 (RMB 10,657) for the years ended March 31, 2020, 2021 and 2022, respectively.
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.
For the fiscal year ended March 31, 2020, Advanced TCMP brought in 30.6% of the total revenue, whereas Fine TCMP and Regular TCMP each brought in 20.0% and 44.2% of the total revenue respectively. Our Advanced TCMP includes nineteen products, which can be further divided into seven Directly-Oral TCMP products, and ten After-Soaking-Oral TCMP products.
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.
ITEM 4. INFORMATION ON THE COMPANY A. History and Development of the Company We were incorporated in the British Virgin Islands on July 4, 2017. Our wholly owned subsidiary China SXT Group Limited (“SXT HK”) was incorporated in Hong Kong on July 21, 2017. China SXT Group Limited in turn holds all the capital stocks of Taizhou Suxantang Biotechnology Co.
ITEM 4. INFORMATION ON THE COMPANY A. History and Development of the Company We were incorporated in the British Virgin Islands on July 4, 2017. Our wholly owned subsidiary SXT HK was incorporated in Hong Kong on July 21, 2017.
Our advance TCMPs come in the form of powders or sachets, which make oral administration easier for our customers. This improvement is significant because otherwise TCMP have to be prepared through decoction before use, which has proven to be both inconvenient and overly complex for customers.
This improvement is significant because otherwise TCMP have to be prepared through decoction before use, which has proven to be both inconvenient and overly complex for customers.
In China, TCMP companies are treated differently from other pharmaceutical companies manufacturing western drugs and Traditional Chinese Patent Medicine (“TCPM”). Both western drugs and TCPM are required to go through clinical trials and obtain clinical trial approval, whereas TCMP products have no such requirement.
In China, TCMP companies are treated differently from other pharmaceutical companies manufacturing western drugs and TCPM. Both western drugs and TCPM are required to go through clinical trials and obtain clinical trial approval, whereas TCMP products have no such requirement. Once a TCM company obtains the Pharmaceutical Manufacturing Permit and GMP Certificate, it can begin manufacturing its products immediately.
Another substantial part of our sales is made to pharmaceutical distributors, which then sell our products to hospitals and other healthcare distributors. As of March 31, 2022, our end-customer base includes 68 pharmaceutical companies, 14 chain pharmacies and 20 hospitals in 10 provinces and municipalities in China including Jiangsu, Hubei, Shandong, Hebei, Jiangxi, Guangdong, Anhui, Henan, Liaoning, and Fujian.
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.
We extended our production facility for lyophilization processing, also known as freeze drying, and received a new Pharmaceutical Manufacturing Permit with a new production scope of lyphilization processing from Jiangsu Province MPA on June 1, 2021.
We extended our production facility for lyophilization processing, also known as freeze drying, and received a new Pharmaceutical Manufacturing Permit with a new production scope of lyphilization processing from Jiangsu Province MPA on June 1, 2021. This lypohilization processing allows us to utilize the lyophilization technology for production of our products, especially Directly-Oral-TCMPs and After-Soaking-Oral-TCMPs, which contain temperature-sensitive components.
Business Overview We are an offshore holding company conducting all of our business through our subsidiaries and variable interest entity, Taizhou Suxuantang in China. Neither we nor our subsidiaries own any share in Taizhou Suxuantang.
The information contained in, or accessible from, our website or any other website does not constitute a part of this annual report. B. Business Overview We are an offshore holding company conducting all of our business through our subsidiaries and variable interest entity, Taizhou Suxuantang in China. Neither we nor our subsidiaries own any share in Taizhou Suxuantang.
We have developed 19 Advanced TCMPs, 17 of which have been produced and marketed, 10 Fine TCMPs, 235 Regular TCMPs and 4 TCMHS solid beverages. 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 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 a result, pharmaceutical manufacturers are required to obtain a valid “Pharmaceutical Manufacturing Permit”. Pharmaceutical products packages. Pharmaceutical products packages must, in accordance with the regulations, be labeled and have an instruction booklet attached.
Pharmaceutical products packages must, in accordance with the regulations, be labeled and have an instruction booklet attached.
There are four invention patent applications that have been submitted to the State Intellectual Property Office of PRC and are under the substantive examination stages as of the date of this annual report. Our major customers are hospitals, especially TCM hospitals, primarily in the Jiangsu province in China.
We have been focusing on the research and development of new Advanced TCMP products. As of the date of this annual report, there are four invention patent applications that have been submitted to the State Intellectual Property Office of PRC and are under the substantive examination stages.
Since 2014, we have developed 8 Directly-Oral TCMP and 11 After-Soaking-Oral TCMP products and 17 of them are commercially marketed all of those to pharmaceutical distributors/hospitals.
As of the date of this annual report, we have developed 7 Directly-Oral-TCMP and 10 After-Soaking-Oral-TCMP products which are commercially marketed all of those to pharmaceutical distributors/hospitals.
In the near future, we plan to increase our efforts in cooperation with universities, research institutes, and R&D agents on joint R&D projects involving TCMP processing methods and quality standard, as well as the training of our researchers. We have been focusing on the research and development of new Advanced TCMP products. We established a research center in December 2013.
As of the date of this annual report, we own 12 Chinese registered trademarks related to our brand “Suxuantang.” In the near future, we plan to increase our efforts in cooperation with universities, research institutes, and R&D agents on joint R&D projects involving TCMP processing methods and quality standard, as well as the training of our researchers.
E-beam processing has the ability to break the chains of DNA in living organisms, such as bacteria, resulting in microbial death and rendering the space they inhabit sterile.
High-Energy Electron Beam Sterilization Method E-beam processing or electron irradiation is a process that involves using beta radiation, usually of high energy, to treat an object for a variety of purposes. E-beam processing has the ability to break the chains of DNA in living organisms, such as bacteria, resulting in microbial death and rendering the space they inhabit sterile.
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.
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.
Our principal executive offices are located at 178 Taidong Rd North, Taizhou, Jiangsu, PRC, and our phone number is +86-523-8629-8290. We maintain a corporate website at www.sxtchina.com. The information contained in, or accessible from, our website or any other website does not constitute a part of this annual report. B.
On January 3, 2019, our Ordinary Shares commenced trading on the Nasdaq Capital Market under the symbol of “SXTC.” Our principal executive offices are located at 178 Taidong Rd North, Taizhou, Jiangsu, PRC, and our phone number is +86-523-8629-8290. We maintain a corporate website at www.sxtchina.com.
Our Directly-Oral TCMP, Luxuejing, which is made from fresh bloods of Cuerus nippon can enjoy such advantages provided by lyophilization process and have better quality. We have successfully developed 42 substitute tea and four solid beverage products.
Also, this process can make materials or products dryer, which can extend our products’ shelf life. More importantly, it can keep the original ingredients materials or products under frozen-drying condition. Our Directly-Oral-TCMP, Luxuejing, which is made from fresh bloods of Cuerus nippon can enjoy such advantages provided by lyophilization process and have better quality.
Once a TCM company obtains the Pharmaceutical Manufacturing Permit and GMP Certificate, it can begin manufacturing its products immediately. Currently, very few TCM companies in China have both the permit and the certificate with the scope required to produce TCMP, and Directly-Oral and After-Soaking-Oral products.
Currently, very few TCM companies in China have both the permit and the certificate with the scope required to produce TCMP, and Directly-Oral and After-Soaking-Oral products. Strong Research and Development Capability We believe that our research and development capabilities allow us to create innovative TCMP that fulfill our customers’ needs.
Our net loss decreased from $10,287,872 in fiscal year ended March 31, 2020 to $2,748,183 in fiscal year ended March 31, 2021, representing a decrease of 73% of net loss during this period.
Our net loss increased from $5,736,095 in fiscal year ended March 31, 2022 to $5,934,772 in fiscal year ended March 31, 2023, representing a slight increase of 3% of net loss during this period.
This lypohilization processing allows us to utilize the lyophilization technology for production of our products, especially Directly-Oral TCMPs and After-Soaking-Oral TCMPs, which contain temperature-sensitive components. The lyophilization process is freezing materials or products and then removing the frozen water by sublimation (so ice turns directly into vapor leaving out the liquid phase).
The lyophilization process is freezing materials or products and then removing the frozen water by sublimation (so ice turns directly into vapor leaving out the liquid phase). After going through the lyophilization process, materials or products become e loose and fragile, as a result, remarkably improving their aqueous solubility.
Strong Research and Development Capability We believe that our research and development capabilities allow us to create innovative TCMP that fulfill our customers’ needs. Although all of our TCMP products are generic TCMP drugs and, these products are innovative in terms of their conventional administration.
Although all of our TCMP products are generic TCMP drugs and, these products are innovative in terms of their conventional administration. Our advance TCMPs come in the form of powders or sachets, which make oral administration easier for our customers.
Removed
Fine TCMP is also manufactured with more refined ingredients than Regular TCMP. 27 In December 2018, we reconstructed and assembled a facility and received a “Food Manufacturing Certificate” issued by the local Food and Drug Administration, which granted the Company permission to produce TCMHS (TCM Homologous Supplements), a classification of health-supporting food used traditionally in China as TCM but which are also consumed as food.
Added
Our major customers are hospitals, especially TCM hospitals, primarily in the Jiangsu province in China. Another substantial part of our sales is made to pharmaceutical distributors, which then sell our products to hospitals and other healthcare distributors.
Removed
The scope of production includes “Substitute Teas,” made of TCMHS plants, and “Solid Beverages,” a kind of granule produced through extraction of TCMHS materials. We have successfully developed 4 solid beverage products which were commercially launched in April 2019.
Added
Permissions or Approval Required from the PRC Authorities for Our Operations and Listing In order to operate our business activities currently conducted in China, our WFOE and the VIE are required to obtain a business license from the State Administration for Market Regulation (the “SAMR”).
Removed
We own twelve Chinese registered trademarks related to our brand “Suxuantang.” Our TCMP products received the prestigious award of Jiangsu Taizhou Famous Product, and Well-known Brand Trademark in December 2016, and 2017, respectively. The awards were granted by the Government of Taizhou City, Jiangsu, China.
Added
As of the date of this annual report, our WFOE and the VIE have obtained all the permissions which are required to obtain for their operations. Each of our WFOE and the VIE has obtained a valid business license from the SAMR, and no application for any such license has been denied.
Removed
We submitted eight invention patent applications regarding Advanced TCMP to the State Intellectual Property Office of the PRC in the Spring of 2017. We also submitted five additional invention patent applications to the afterward, one of which was rejected.
Added
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”.
Removed
The products comply with the regulations of the NMPA and local MPA, as well as retain the principles of Chinese Traditional Medicine (“TCM”).
Added
As a result, TCMP products do not have the NMPA approval registration number, which is typically found in western medicine products. For more details, please see “—Regulations.” TCMP also needs to follow national drug reference standard codified in Pharmacopoeia of the PRC (“Guidance”).
Removed
After going through the lyophilization process, materials or products become e loose and fragile, as a result, remarkably improving their aqueous solubility. Also, this process can make materials or products dryer, which can extend our products’ shelf life. More importantly, it can keep the original ingredients materials or products under frozen-drying condition.

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Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

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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 46 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.
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.
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. 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.
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.
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. 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, 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.
Cash Flow in Financing 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), net proceeds from the 2022 public offering of $3,115,106, 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 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.
Relevant factors, risks and uncertainties include, but are not limited to, those discussed in the section entitled “Business,” “Risk Factors” and elsewhere in this Form 20-F. Readers are cautioned not to place undue reliance on forward-looking statements, which reflect management’s beliefs and opinions as of the date of this Form 20-F.
Relevant factors, risks and uncertainties include, but are not limited to, those discussed in the section entitled “Business,” “Risk Factors” and elsewhere in this Form 20-F. Readers are cautioned not to place undue reliance on forward-looking statements, which reflect management’s beliefs and opinions as of the date of this annual report on Form 20-F.
Trend information Other than as disclosed elsewhere in this annual report, we are not aware of any trends, uncertainties, demands, commitments or events that are reasonably likely to have a material effect on our net revenues, income from continuing operations, profitability, liquidity or capital resources, or that would cause reported financial information not necessarily to be indicative of future operating results or financial condition. 5.E.
Trend information Other than as disclosed elsewhere in this annual report, we are not aware of any trends, uncertainties, demands, commitments or events that are reasonably likely to have a material effect on our net revenues, income from continuing operations, profitability, liquidity or capital resources, or that would cause reported financial information not necessarily to be indicative of future operating results or financial condition. 62
See “Cautionary Note Regarding Forward-Looking Statements.” 45 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.
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.
Cash Flow in Investing Activities We had net cash used in investing activities of $46,909, for the year ended March 31, 2022, which primarily consisted of purchase of property and equipment of $60,932, capital expenditure in construction in process of $1,558, and cash received from Huangshan Panjie Investment Management Co., Ltd. of $15,581 (please refer to Note 7 in the consolidated financial statements).
We had net cash used in investing activities of $46,909 for the year ended March 31, 2022, which primarily consisted of purchase of property, plant and equipment of $60,932, capital expenditure in construction in process of $1,558, and cash received from Huangshan Panjie Investment Management Co., Ltd. of $15,581.
Please refer to Item 4 Subparagraph B, “Information on the Company—Business Overview—Research and Development” and “—Intellectual Property.” 50 5.D.
Research and development, patents, and licenses, etc. Please refer to Item 4 Subparagraph B, “Information on the Company—Business Overview—Research and Development” and “—Intellectual Property.” 5.D.
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 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.
Total assets and liabilities presented on the Company’s consolidated balance sheets and revenue, expense, net income presented on consolidated statement of operations and comprehensive income as well as the cash flow from operating, investing and financing activities presented on the consolidated statement of cash flows are substantially the financial position, operation and cash flow of the Company’s VIE subsidiary.
Total assets and liabilities presented on the Company’s consolidated balance sheets, along with the revenue, expenses, and net income shown on the consolidated statement of operations and comprehensive income, as well as the cash flows from operating, investing and financing activities presented on the consolidated statement of cash flows, all substantially present the financial position, operation and cash flow of the VIE.
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, 2021, the income tax expense for the year ended March 31, 2022 increased by $520,829, or 270%.
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%.
For the years ended March 31, 2022 2021 Net Cash Provided by (Used in) Operating Activities 268,293 (1,316,561 ) Net Cash Used in Investing Activities (46,909 ) (5,805,519 ) Net Cash Provided by Financing Activities 1,595,140 12,409,487 Effect of Exchange Rate Changes on Cash 394,120 784,536 Cash, cash equivalents and restricted cash at Beginning of Year 13,358,975 7,287,032 Cash, cash equivalents and restricted cash at End of Year 15,569,619 13,358,975 48 Cash Flow in Operating Activities 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 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.
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.
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.
As a result of our total activities, we had cash and cash equivalents of $15,524,322 as of March 31, 2022 as compared to $13,333,028 as of March 31, 2021. 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 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.
Critical Accounting Estimates The preparation of consolidated financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, disclosure of contingent assets and liabilities at the date of the financial statements, and the reported amounts of revenue and expenses during the reporting period.
GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, disclosure of contingent assets and liabilities at the date of the financial statements, and the reported amounts of revenue and expenses during the reporting period. Actual results could differ from those estimates.
As of March 31, 2022 and 2021, $14,217,166 and $13,352,503 of cash and cash equivalents were denominated in RMB, 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.
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 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.
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.
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%. 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.
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%.
As of March 31, 2022, our variable interest entities accounted for an aggregate of 91% and 99% of our total assets and total liabilities, respectively. As of March 31, 2021, our variable interest entities accounted for an aggregate of 94% and 92% of our total assets and total liabilities, respectively.
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.
The following are some of the areas requiring significant judgments and estimates as of March 31, 2022 and 2021: 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 and determinations of fair value of convertible note (liability component, etc.) and warrants.
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.
Actual results could differ from those estimates. On an ongoing basis, management reviews these estimates and assumptions using the currently available information. Changes in facts and circumstances may cause the Company to revise its estimates.
On an ongoing basis, management reviews these estimates and assumptions using the currently available information.
For the year ended March 31, 2021, the net cash provided by financing activities was $12,409,487, which was primarily attributable to repayment of principal and interest of Convertible Notes of $82,939, cash received from related parties of $12,534,433, and repayment of principal and interest of bank loans of $42,007. 49 Consolidation The Company provides substantially all of its services in China via the VIE subsidiary of the Company, due to PRC legal restrictions of foreign ownership in certain sectors.
For the year ended March 31, 2021, the net cash provided by financing activities was $12,409,487, which was primarily attributable to repayment of principal and interest of Convertible Notes of $82,939, cash received from related parties of $12,534,433, and repayment of principal and interest of bank loans of $42,007. 61 Going Concern The accompanying consolidated financial statements for the years ended March 31, 2023 and 2022 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.
Gross margin was 48.1% for the year ended March 31, 2022, compared to 59.4% for the year ended March 31, 2021. 47 Selling expenses Selling expenses primarily consisted of sales staff payroll and welfare expenses, travelling expenses, advertisement expenses, distribution expenses.
Selling expenses Selling expenses primarily consisted of sales staff payroll and welfare expenses, travelling expenses, advertisement expenses, distribution expenses. The selling expenses decreased from $924,538 for the year ended March 31, 2022 to $387,452 for the year ended March 31, 2023, representing a decrease of $537,086, or 58%.
Related Parties and Material Related Party Transactions Please refer to “Item 7.B. Related Party Transactions” and Note 18 of our Consolidated Financial Statements included in this Form 20-F for details of related parties and material related party transactions. 5.C. Research and development, patents, and licenses, etc.
Related Party Transactions” and Note 17 of our Consolidated Financial Statements included in this Form 20-F for details of related parties and material related party transactions. Critical Accounting Estimates The preparation of consolidated financial statements in conformity with U.S.
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 To date, we have financed our operations primarily through shareholder capital contributions, shareholder loans, and cash flow from operations.
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.
As of March 31, 2022, we had amounts due to related parties balance of $8,695,702, which the Company expects to repay with its cash and cash equivalents.
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.
Removed
With the current cash and cash equivalents and anticipated cash flows from operating activities, we believe that our cash position is sufficient to meet our liquidity needs for at least the next 12 months.
Added
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.
Removed
Substantially all of the Company’s revenues, costs and net income in China are directly or indirectly generated through the VIE subsidiary of the Company.
Added
TCMHS is a classification of health-supporting food used traditionally in China as TCM but which are also consumed as food. As compared with the year ended March 31, 2022, our total revenues decreased by $630,602, or 24%, for the year ended March 31, 2023.
Removed
The Company has signed various agreements with the VIE subsidiary and legal shareholders of the VIE to allow the transfer of economic benefits from the VIE subsidiary to the Company and to direct the activities of the VIE subsidiary.
Added
The decrease was primarily due to the effect of the continuous lockdown for COVID-19 during the calendar year of 2023.
Removed
The following table sets forth the assets, liabilities, results of operations and changes in cash, cash equivalents the VIE subsidiary taken as a whole, which were included in the Company’s consolidated balance sheets and statements of comprehensive income and statements of cash flows with intercompany transactions eliminated: March 31, March 31, 2022 2021 Current assets $ 19,564,864 $ 21,493,546 Non-current assets 10,914,420 11,134,125 Total assets $ 30,479,284 $ 32,627,671 Total liabilities 16,865,767 17,091,683 Total shareholders’ equity $ 13,613,517 $ 15,535,988 For the years ended March 31, 2022 2021 Operating revenue $ 2,602,281 $ 4,777,573 Net income (loss) (3,061,455 ) (1,404,618 ) For the years ended March 31, 2022 2021 Net cash provided by (used in) operating activities $ 301,450 $ (1,639,183 ) Net cash used in investing activities (46,909 ) (5,805,519 ) Net cash provided by financing activities 202,185 12,765,660 Off-Balance Sheet Arrangements The Company does not have any off-balance sheet arrangements that have or are reasonably likely to have a current or future effect on its financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources that are material to investors.
Added
The following table sets forth the breakdown of revenues by revenue source for each period presented: For the Years Ended March 31, Change 2023 2022 Amount % Advanced TCMP $ 656,942 1,163,122 $ (506,180 ) (44 ) Fine TCMP 114,794 399,770 (284,976 ) (71 ) Regular TCMP 697,518 793,430 (95,912 ) (12 ) Raw medicinal materials 502,425 - 502,425 100 TCMHS - 245,959 (245,959 ) (100 ) Total revenues $ 1,971,679 $ 2,602,281 $ (630,602 ) (24 ) Advanced TCMP Advanced TCMP is comprised of seven Directly-Oral-TCMP and ten After-Soaking-Oral-TCMP.
Removed
The Company bases its estimates on historical experience and on various other assumptions that are believed to be reasonable, the results of which form the basis for making judgments about the carrying values of assets and liabilities.
Added
Both Directly Oral TCMP and After-soaking-oral TCMP are new types of Advanced TCMP. Revenue from Advanced TCMP accounted for 33% and 45% of the revenue recognized during the years ended March 31, 2023 and 2022, respectively.
Added
As compared with the year ended March 31, 2022, our revenue from Advanced TCMP decreased by $506,180, or 44%, for the year ended March 31, 2023. The decrease was primarily due to the continuous lockdown in China in the calendar year of 2022, which adversely affected the production and distribution of our products.
Added
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.
Added
Revenue from Fine TCMP accounted for 6% and 15% of the revenue recognized during the years ended March 31, 2023 and 2022. As compared with the year ended March 31, 2022, our revenue from Fine TCMP decreased by $284,976, or 71% for the year ended March 31, 2023.
Added
The decrease was primarily attributable to the continuous lockdown in China, which impacted the operation of pharmaceutical stores, the main sale channel for fine TCMP products. Additionally, our decided to discontinue cooperation with some clients in the sales of fine TCMP, as the purchase price of raw materials surged during the year ended March 31, 2023.
Added
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.
Added
Revenue from Regular TCMP products decreased by $95,912, or 12%, to $697,518 for the year ended March 31, 2023 from $793,430 for the year ended March 31, 2022. The decrease in revenue from Regular TCMP products is due to the continuous lockdown in China, which affected the production and distribution of our products.
Added
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.
Added
As compared with the year ended March 31, 2022, our revenue from TCMHS products decreased by $245,959, or 100% for the year ended March 31, 2023. The decrease was primarily due to the unfavorable condition of the market.
Added
For the year ended March 31, 2023, we decided to suspend our production and sales of TCMHS products and develop new product lines in the near future. Raw medicinal materials For the year ended March 31, 2023, we generated revenue from sales of raw medicinal materials of $502,425, which represented 25% of our total revenue.
Added
As the market demand for our products has declined for several years, we sold some of the raw medicinal materials to increase our sales and revitalize our current assets. Gross Profit 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.
Added
Total cost of revenue increased by $194,770, or 14%, to $1,545,408 for the year ended March 31, 2023 from $1,350,638 for the year ended March 31, 2022.
Added
The reason that cost of revenues did not decrease comparatively with the revenue was mainly because of the increase in the purchasing price of raw materials, and fixed costs such as the depreciation of our property, plant and equipment and direct labor cost.
Added
For the years ended March 31, 2023 and 2022, the Company had abnormal capacity due to unexpected product demand reductions, and a partial of the fixed overhead was recorded in general and administrative expenses instead of in cost of revenues.
Added
Gross profit decreased by $825,372, or 66%, to $ 426,271 for the year ended March 31, 2023 from $1,251,643 for the year ended March 31, 2022. Gross margin was 21.6% for the year ended March 31, 2023, compared to 48.1% for the year ended March 31, 2022.
Added
The significant decrease in our gross margin is mainly due to the decrease in our sales of products affected by the continuous lockdown in China for the year ended March 31, 2023, the decrease in sales price of our LuXuejing product, the low gross margin of raw medicinal materials, and the increase in purchasing prices of our raw materials.
Added
The decrease in selling expenses was mainly due to lower marketing and advertising expenses and shipping and handling expenses, resulting from the decline in our revenues.
Added
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, office supply expenses, bad debt expenses and impairment expenses.
Added
The general and administrative expenses increased from $5,516,778 for the year ended March 31, 2022 to $5,646,328 for the year ended March 31, 2023, representing a slight increase of $129,550, or 2%.
Added
General and administrative expenses for the year ended March 31, 2023 mainly consisted of bad debt provision for accounts receivable of $820,352, bad debt provision for prepayment, receivable and other current assets of $474,342, bad debt provision for loan receivable and accrued interest of $1,581,000, and impairment expense for construction in progress of $349,390.
Added
General and administrative expenses for the year ended March 31, 2022 mainly consisted of payroll expenses of $2,334,397 recorded related to the equity incentive plan and bad debt provision for accounts receivable of $477,299.
Added
For the years ended March 31, 2023 and 2022, the Company had abnormal capacity due to unexpected product demand reductions, and fixed overhead of $157,028 and $67,096 were recorded in general and administrative expenses instead of in cost of revenues, respectively.
Added
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.
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.
Added
Interest expenses, net 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. For the year ended March 31, 2022, the Company recorded amortization of issuance cost and debt discount of $29,926 and interest expense of $7,020 for the Convertible Notes.
Added
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. Other expenses for the year ended March 31, 2022 mainly consisted of other non-operating income of $164,013 and other non-operating expenses of $345,593.
Added
The current income tax expenses of Nil and Nil for the years ended March 31, 2023 and 2022 were mainly due to the loss before corporate income taxes of the Company and its subsidiaries and the VIE entity. Deferred income tax expenses for the years ended March 31, 2023 and 2022 were Nil and $328,146, respectively.
Added
Net loss As a result of the foregoing, net loss for the year ended March 31, 2023 was $5,934,772, representing a slight increase of $198,677, or 3%, from net loss of $5,736,095 for the year ended March 31, 2022. The increase in net loss was mainly due to the decrease in our revenues and gross profit.
Added
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.
Added
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
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.
Added
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.
Added
We had accumulated deficits of $21,613,133 and $15,688,278 as of March 31, 2023 and 2022, respectively. 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.
Added
In addition, we have suffered a continuous decline in revenue for the years ended March 31, 2023, 2022, and 2021. These factors raise substantial doubt about our ability to continue as a going concern.
Added
We are in the process in building our customer base to generate increasing revenues as well as cutting expenses, and we are seeking to raise capital through additional debt from equity financings to fund our operations for the next 12 months.
Added
The decrease in cash inflow in operating activities primarily resulted from the change of the following accounts: a) A net loss for the year ended March 31, 2023 of $5,934,772, compared with a net loss of $5,736,095 for the year ended March 31, 2022.
Added
Excluding the adjustments of non-cash items, the net losses for the year ended March 31, 2023 and 2022 were $1,496,267 and $1,634,769, respectively.
Added
This represents an increase in cash inflow of $138,502 for the year ended March 31, 2023, compared with the year ended March 31, 2022. b) Change in inventory was $0.41 million net cash inflow for the year ended March 31, 2023.
Added
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.
Added
For the year ended March 31, 2022, the change in advance to suppliers was $0.48 million net cash inflow, which led to a $0.48 million decrease in net cash inflow from operating activities. d) Change in prepayments, receivables and other current assets was $0.05 million net cash inflow for the year ended March 31, 2023.
Added
For the year ended March 31, 2022, the change in prepayments, receivables and other current assets was $1.02 million net cash inflow, which led to a $0.97 million decrease in net cash inflow from operating activities. e) Change in refund liabilities was $1,380 net cash outflow for the year ended March 31, 2023.
Added
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.
Added
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.
Added
For the year ended March 31, 2022, the change in accrued expenses and other current liabilities was $0.38 million net cash inflow, which led to a $0.43 million decrease in net cash inflow from operating activities.

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Item 6. [Reserved]

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

27 edited+19 added−1 removed50 unchanged
Feng Zhou has been our CEO and director since July 4, 2017. He was the CEO of Taizhou Suxuantang, our VIE Entity from May 2017 to February, 2018. From January 2015 to May 2017, he was the vice manager of Taizhou Suxuantang.
Feng Zhou has been our CEO and director since July 4, 2017. He was the CEO of Taizhou Suxuantang, the VIE Entity from May 2017 to February, 2018. From January 2015 to May 2017, he was the vice manager of Taizhou Suxuantang.
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.
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 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 64 Family Relationships None of the directors or executive officers has a family relationship as defined in Item 401 of Regulation S-K.
Involvement in Certain Legal Proceedings To the best of our knowledge, none of our directors or executive officers has, during the past ten years, been involved in any legal proceedings described in subparagraph (f) of Item 401 of Regulation S-K. 52 Board of Directors Our board of directors consists of 5 directors as of the date of this annual report.
Involvement in Certain Legal Proceedings To the best of our knowledge, none of our directors or executive officers has, during the past ten years, been involved in any legal proceedings described in subparagraph (f) of Item 401 of Regulation S-K. Board of Directors Our board of directors consists of 5 directors as of the date of this annual report.
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. 53 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. 65 6.B.
Pan earned his Bachelor’s Degree in Accounting from Nanjing College of Economics in 2000, and obtained his Master’s Degree in Business Administration in 2021 from Nanjing Institute of Technology. 51 Non-Management Directors Mr. Jun Zheng has been appointed as our director upon closing of our IPO on December 31, 2018. Mr.
Pan earned his Bachelor’s Degree in Accounting from Nanjing College of Economics in 2000, and obtained his Master’s Degree in Business Administration in 2021 from Nanjing Institute of Technology. 63 Non-Management Directors Mr. Jun Zheng has been appointed as our director upon closing of our IPO on December 31, 2018. Mr.
(“ Sutaitang ”) in October 2019 and currently serves as the CEO of Sutaitang. He is also the deputy general manager of Jiangsu Health Pharmaceutical investment Co., Ltd. Mr. Ji has rich experience of two decades in corporation management, brand chain operation and marketing. Prior to joining us, Mr.
(“Sutaitang”) in October 2019 and currently serves as the CEO of Sutaitang. He is also the deputy general manager of Jiangsu Health Pharmaceutical investment Co., Ltd. Mr. Ji has rich experience of two decades in corporation management, brand chain operation and marketing. Prior to joining us, Mr.
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. 56 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. 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.
Under the 2021 Plan, there are 2,325,000 Ordinary Shares (116,250 shares retrospectively restated for effect of reverse stock split on May 17, 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 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.
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. 57 6.E.
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.
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. 55 Audit Committee Mr. Songfan He, Mr. Tong Liu and Mr. Xiaodong Ji are members of our Audit Committee, where Mr.
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.
Compensation Summary Compensation Table The following table sets forth certain information with respect to compensation for the year ended March 31, 2022 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, 2023 earned by or paid to our directors and senior management.
Ji has served as CEOs of Dongfang Purple Wine, Zhengde Pharmaceutical, China Belt and Road Shopping Mall Co., Ltd. (the subsidiary of Zhong Zong Tou Group, “ Shopping Mall ”), respectively. Mr. Ji was responsible for the enterprise management and channel construction of Dongfang Purple Wine and Zhengde Pharmaceutical.
Ji has served as CEOs of Dongfang Purple Wine, Zhengde Pharmaceutical, China Belt and Road Shopping Mall Co., Ltd. (the subsidiary of Zhong Zong Tou Group, “Shopping Mall”), respectively. Mr. Ji was responsible for the enterprise management and channel construction of Dongfang Purple Wine and Zhengde Pharmaceutical.
A copy of the incentive plan was filed as Exhibit 4.6 to this annual report. 59
A copy of the incentive plan was filed as Exhibit 4.6 to this annual report. 71
Equity Incentive Plans 2022 Equity Incentive Plan On March 15, 2022, upon the shareholders’ approval, we have 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 17, 2022) available for issuance.
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.
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.
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.
Name Age Position(s) Feng Zhou 30 Chief Executive Officer and Director Xiaodong Pan 44 Chief Financial Officer Jun Zheng 45 Director Tong Liu 43 Independent Director Xiaodong Ji 52 Independent Director Songfan He 49 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 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.
Share Ownership The following table sets forth information with respect to the beneficial ownership of our equity shares as of July 15, 2022 by each director and our senior management executives. There were 2,687,246 Ordinary Shares issued and outstanding as of July 15, 2022.
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.
Lee resigned from his position of CFO of the Company on January 31, 2022 (3) Jingzhen Deng resigned from his positions of CSO and COO of the Company on December 15, 2021 (4) Junsong Li resigned from his position of director of the Company on May 9, 2022 (5) Wenwei Fan resigned from his position of director of the Company on May 9, 2022 (6) Tong Liu assumed his position of director of the Company on May 10, 2022 (7) Songfan He assumed his position of director of the Company on May 10, 2022 54 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 66 Agreements with Named Executive Officers On December 30, 2017, we entered into an employment agreement with our CEO, Mr.
The amended and restated memorandum and articles of association became effective on May 17, 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.
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 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.
As a result of 2022 Reverse Split, the shareholders received one new ordinary share of the Company, par value $0.08 each, for every twenty (20) shares they hold. No fractional ordinary shares were issued to any shareholders in connection with the reverse stock split.
Lee, Former CFO (2) 41,667 - - - - - - 41,667 Jingzhen Deng, Former COO and CSO (3) 37,500 - - - - - - 37,500 Junsong Li, Former Independent Director (4) - - - - - - - - Wenwei Fan, Former Independent Director (5) - - - - - - - - Jun Zheng, Director - - - - - - - - Tong Liu, Independent Director (6) - - - - - - - - Xiaodong Ji, Independent Director - - - - - - - - Songfan He, Independent Director (7) - - - - - - - - (1) Xiaodong Pan assumed his position of CFO of the Company on January 31, 2022.
Name and Principal Position Salary ($) Bonus ($) Stock Awards ($) Option Awards ($) Non-Equity Incentive Plan Compensation Deferred Compensation Earnings Other Total ($) Feng Zhou, CEO and Director 50,000 - - - - - - 50,000 Xiaodong Pan, CFO (1) 50,000 - - - - - - 50,000 Junsong Li, Former Independent Director (2) - - - - - - - - Wenwei Fan, Former Independent Director (3) - - - - - - - - Jun Zheng, Director - - - - - - - - Tong Liu, Independent Director (4) - - - - - - - - Xiaodong Ji, Independent Director - - - - - - - - Songfan He, Independent Director (5) - - - - - - - - (1) Xiaodong Pan assumed his position of CFO of the Company on January 31, 2022.
(2) Xia Hao’s principal business address is Room 708, 3 th Building, Jinxiu Mansion, 3 Chengbei Road, Shuncang County, Fujian Province, China. 58 On May 5, 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.
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.
Holders of Ordinary Shares are entitled to one vote per share. 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. We are not aware of any arrangement that may, at a subsequent date, result in a change of control of our Company.
Ordinary Shares Beneficially Owned As of July 15, 2022 Number Percent Directors and Executive Officers: Feng Zhou 106,250 3.95 % Xiaodong Pan - - Jun Zheng - - Tong Liu - - Xiaodong Ji - - Songfan He - - All directors and executive officers as a group (6 persons) 106,250 3.95 % 5% shareholder: Xia Hao 200,704 7.47 % Total share outstanding 2,687,246 100 % (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.
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.
Removed
Name and Principal Position Salary ($) Bonus ($) Stock Awards ($) Option Awards ($) Non-Equity Incentive Plan Compensation Deferred Compensation Earnings Other Total ($) Feng Zhou, CEO and Director 50,000 - - - - - - 50,000 Xiaodong Pan, CFO (1) 8,333 - - - - - - 8,333 Wang (Wallace) L.
Added
(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
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.
Added
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 ).
Added
(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.
Added
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
Zhou for the maximum period of time permitted by law, with all of the Investor ’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.
Added
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.
Added
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.
Added
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.
Added
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.
Added
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.
Added
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
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.
Added
On February 22, 2023, the Company entered into a securities purchase agreement (the “2023 SPA”) with Rising Sun Capital Ltd., a limited liability company organized under the laws of Australia, pursuant to which Rising Sun Capital Ltd. agreed to purchase 1,724,138 Ordinary Shares of the Company, par value $0.08 per share at a per share purchase price of $0.58.
Added
The gross proceeds of this transaction are approximately $1 million, which has not received by the Company as of the date of this annual report. On the same date, Rising Sun Capital Ltd. entered into voting agreements (the “2023 Voting Agreements”) with Mr.
Added
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
Zhou for the maximum period of time permitted by law, with all of the Investor ’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.
Added
On March 24, 2023, the Company offered and sold up to $1,374,712 of its Ordinary Shares, par value $0.08 each, issuable upon conversion of an unsecured convertible promissory note (the “2023 Note”). Ordinary Shares are issuable upon conversion of the 2023 Note which are currently held by Streeterville.
Added
The Company issued the 2023 Note pursuant a securities purchase agreement dated March 7, 2023, where the Company issued Streeterville an unsecured promissory note in the original principal amount of $2,126,666.67, convertible into Ordinary Shares of the Company for $2,000,000.00 in gross proceeds.

Item 7. Management's Discussion & Analysis

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

10 edited+4 added−3 removed4 unchanged
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 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 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.
Ltd. For the year ended March 31, 2022, 2021 and 2020, the Company generated revenues of $19,246, $84,848 and $60,639, respectively, from sales transactions with Taizhou Su Xuan Tang Chinese Hospital Co. Ltd.
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.
For the years ended March 31, 2022, 2021 and 2020, the Company generated revenue of $16,658, $68,473 and $18,042, respectively, from sales transactions with Taizhou Su Xuan Tang Chinese Medicine Clinic.
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.
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, 2022.
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.
Related party balances The amounts due to related parties as of March 31, 2022 and 2021 were as follows: As of March 31, 2022 2021 Jiangsu Health Pharmaceutical Investment Co., Ltd. $ 5,529,274 $ 10,351,338 Jianping Zhou 2,030,035 1,797,123 Jiangsu Sutaitang Online Commercial Co., Ltd. 769,611 - Feng Zhou 276,683 - Xiaodong Pan 90,099 - Total $ 8,695,702 $ 12,148,461 Material Transactions with Related Parties For the years ended March 31, 2022, 2021 and 2020, the Company generated revenues of $138,275, $731,669 and $251,749, respectively, from sales transactions with Taizhou Jiutian Pharmaceutical Co.
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.
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.
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%.
On May 31, 2021, Taizhou Suxuantang signed a financial guarantee agreement with Bank of Nanjing to provide guarantee for Jiutian Pharmaceutical in borrowing of $536,337 (equivalent of RMB 3,400,000) for a one-year period. Taizhou Suxuantang is obliged to pay on behalf the related party the principal, interest, penalty and other expenses if Taizhou Jiutian Pharmaceutical Co. Ltd. defaults in payment.
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.
On October 28, 2013, Taizhou Suxuantang signed a financial guarantee agreement with Fenlan Xu to provide guarantee for Jianping Zhou in borrowing of $946,477 (equivalent of RMB 6,000,000), which was due on April 27, 2014.
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.
As of the date of this report, Jianping Zhou has made payment for a total of $559,999 (equivalent of RMB 3,550,000) to Fenlan Xu and intends to repay the remaining amount in accordance with the terms of the settlement agreement. Employment Agreements See Item 6.B “Agreements with Named Executive Officers.” 7.C. Interests of Experts and Counsel Not applicable. 61
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
For the year ended March 31, 2020, the Company repaid $3,180,171 to Feng Zhou, Jiangsu Health Pharmaceutical Investment Co., Ltd. and Jianbin Zhou. 60 Guarantee On April 12, 2021, Taizhou Suxuantang signed a financial guarantee agreement with Jiangsu Changjiang Commercial Bank to provide guarantee for Jiutian Pharmaceutical in borrowing of $441,689 (equivalent of RMB 2,800,000) for three-year period.
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.
Removed
Taizhou Suxuantang and Jiutian pharmaceutical, which was also a guarantor for Jianping Zhou in connection with this loan, and Jianping Zhou are obliged to pay on behalf Jianping Zhou the principal, interest, penalty and other expenses if Jianping Zhou defaults in payment.
Added
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.
Removed
Fenlan Xu brought a lawsuit against Jianping Zhou because he failed repay the loan timely and Fenlan Xu claimed that Taizhou Suxuantang and Jiutian pharmaceutical should be jointly responsible for the loan.
Added
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.
Removed
On March 24, 2021, Jianping Zhou and Fenlan Xu reached a settlement that Jianping Zhou agreed to repay the outstanding loan for a total of $914,928 (equivalent of RMB 5,800,000) with interests in installments. Taizhou Suxuantang did not charge any financial guarantee fees from Jianping Zhou.
Added
Since Jianping Zhou deceased after yearend, Taizhou Suxuantang should bear all the risk for the repayment. However, subsequent to yearend, Taizhou Jiutian Pharmaceutical Co. Ltd. signed an agreement with Taizhou Suxuantang to take all the responsibility and obligation for repay the amount borrowed from Fenlan Xu on behalf of Jianping Zhou.
Added
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.

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