PART I [Item 3. Key Information](index=6&type=section&id=Item%203.%20Key%20Information) This section details significant investment risks, including business operations, VIE structure, China-specific regulatory challenges, and share price volatility [Risk Factors](index=6&type=section&id=3.D.%20Risk%20Factors) The company faces material risks from customer concentration, VIE structure vulnerabilities, PRC regulatory and political uncertainties, and potential delisting under the HFCA Act - The company operates as a British Virgin Islands holding company with no material operations, conducting all business through subsidiaries and a Variable Interest Entity (VIE) in China, posing unique risks for investors[24](index=24&type=chunk) - A significant portion of revenue is derived from a small number of customers, with **one customer accounting for 68.72% of total revenue in FY2025**[48](index=48&type=chunk) - The company's VIE agreements, crucial for operational control, have not been tested in a Chinese court, risking invalidation by PRC authorities[24](index=24&type=chunk)[67](index=67&type=chunk)[133](index=133&type=chunk) - The company's auditor, Enrome LLP, is currently subject to PCAOB inspections, but future inability to inspect for three consecutive years could lead to delisting under the HFCA Act[110](index=110&type=chunk)[114](index=114&type=chunk)[115](index=115&type=chunk) - The company has implemented two reverse stock splits: a **1-for-25 split effective October 5, 2023**, and a **1-for-8 split on February 25, 2025**, also eliminating the par value of ordinary shares[25](index=25&type=chunk) [Item 4. Information on The Company](index=34&type=section&id=Item%204.%20Information%20on%20The%20Company) This section describes the company's history, business operations, organizational structure, and properties, focusing on its Traditional Chinese Medicine Pieces (TCMP) R&D, manufacturing, and sales [History and Development of the Company](index=34&type=section&id=A.%20History%20and%20Development%20of%20the%20Company) The company, incorporated in the BVI in 2017, operates via a VIE structure controlling Taizhou Suxuantang, with its shares listed on Nasdaq since January 2019 - The company was incorporated in the British Virgin Islands on **July 4, 2017**, and operates through a VIE structure with Taizhou Suxuantang, established on **October 13, 2017**[160](index=160&type=chunk) - The company's ordinary shares commenced trading on the Nasdaq Capital Market under the symbol "SXTC" on **January 3, 2019**[162](index=162&type=chunk) [Business Overview](index=35&type=section&id=B.%20Business%20Overview) The company specializes in Traditional Chinese Medicine Pieces (TCMP), offering Advanced, Fine, and Regular varieties, with Regular TCMP dominating FY2025 revenue, and serves a diverse customer base in China Revenue Contribution by Product Type (FY2025 vs. FY2024) | Product Type | FY2025 Revenue % | FY2024 Revenue % | | :--- | :--- | :--- | | Advanced TCMP | 14.8% | 49.1% | | Regular TCMP | 82.9% | 49.0% | - The company has developed **11 Advanced TCMP products**, **5 Fine TCMPs**, and **200 Regular TCMPs**, with Advanced TCMP products being innovative for their ease of administration without traditional decoction[165](index=165&type=chunk)[166](index=166&type=chunk) - As of March 31, 2025, the company's customer base includes **57 pharmaceutical companies**, **14 chain pharmacies**, and **16 hospitals** across 5 provinces in China[170](index=170&type=chunk)[198](index=198&type=chunk) - The company has submitted **4 invention patent applications** and **8 utility model patent applications**, all under substantive examination by the State Intellectual Property Office of PRC[169](index=169&type=chunk)[200](index=200&type=chunk) [Organizational Structure](index=56&type=section&id=C.%20Organizational%20Structure) The company, a BVI holding entity, controls its PRC operating entity, Taizhou Suxuantang, through a Variable Interest Entity (VIE) structure, necessitated by foreign ownership restrictions - The company does not directly own its Chinese operating entity, Taizhou Suxuantang, but controls it through a series of VIE agreements entered into on **October 13, 2017**[268](index=268&type=chunk) - Key VIE agreements include: - **Exclusive Business Cooperation Agreement**: WFOE provides exclusive technical and management services to the VIE in exchange for service fees equal to the VIE's net income - **Share Pledge Agreement**: VIE shareholders pledge all their equity to WFOE to guarantee performance - **Exclusive Option Agreement**: WFOE has the right to purchase all equity in the VIE for a nominal price - **Power of Attorney**: VIE shareholders grant WFOE their voting rights[270](index=270&type=chunk)[273](index=273&type=chunk)[277](index=277&type=chunk)[280](index=280&type=chunk) [Property, plants and equipment](index=59&type=section&id=D.%20Property%2C%20plants%20and%20equipment) The company operates GMP-certified facilities in Taizhou, Jiangsu, including production, R&D, and storage, and is expanding its production base - The company has GMP-certified facilities in Taizhou, China, with a total of approximately **3,690 square meters** for production, R&D, and storage[283](index=283&type=chunk) - An expansion of the production base on a **33,300 square meter** land plot has been underway since **October 2017**[284](index=284&type=chunk) [Item 5. Operating and Financial Review and Prospects](index=59&type=section&id=Item%205.%20Operating%20and%20Financial%20Review%20and%20Prospects) This section analyzes the company's financial performance, highlighting a 10% revenue decrease and 7% net loss increase in FY2025, alongside improved liquidity from financing activities [Results of Operations](index=60&type=section&id=Results%20of%20Operations) In FY2025, revenue decreased 10% to $1.74 million and net loss widened 7% to $3.30 million, primarily due to declining Advanced TCMP sales and lower gross margin Financial Performance (FY2025 vs. FY2024) | Metric | FY 2025 | FY 2024 | Change ($) | Change (%) | | :--- | :--- | :--- | :--- | :--- | | Revenues | $1,740,907 | $1,928,497 | $(187,590) | (10)% | | Gross Profit | $367,427 | $553,971 | $(186,544) | (34)% | | Gross Margin | 21.1% | 28.7% | - | - | | Net Loss | $(3,303,652) | $(3,098,532) | $(205,120) | 7% | Financial Performance (FY2024 vs. FY2023) | Metric | FY 2024 | FY 2023 | Change ($) | Change (%) | | :--- | :--- | :--- | :--- | :--- | | Revenues | $1,928,497 | $1,971,679 | $(43,182) | (2)% | | Gross Profit | $553,971 | $426,271 | $127,700 | 30% | | Net Loss | $(3,098,532) | $(5,934,772) | $2,836,240 | (48)% | - The decrease in gross margin in FY2025 was mainly due to a significant drop in sales of high-margin Advanced TCMP products and a higher sales mix of low-margin Regular TCMP products[300](index=300&type=chunk) - General and administrative expenses in FY2025 included a **$1,006,052 impairment loss** for a long-term deposit, contributing to the increased net loss[302](index=302&type=chunk)[303](index=303&type=chunk) [Liquidity and Capital Resources](index=66&type=section&id=Liquidity%20and%20Capital%20Resources) As of March 31, 2025, cash and equivalents increased to $18.1 million, primarily from $8.4 million in financing activities, despite ongoing operating cash outflows and prior going concern doubts Cash Flow Summary (FY2025 vs. FY2024) | Cash Flow Activity | FY 2025 | FY 2024 | | :--- | :--- | :--- | | Net cash used in operating activities | $(2,345,333) | $(1,928,053) | | Net cash provided by investing activities | $63,516 | $26,423 | | Net cash provided by (used in) financing activities | $8,399,153 | $(2,624,428) | - Cash and cash equivalents increased to **$18.1 million** as of March 31, 2025, from **$12.1 million** as of March 31, 2024, primarily due to financing activities[345](index=345&type=chunk) - As of March 31, 2025, the company's VIE held **90% of total assets** and **91% of total liabilities**[332](index=332&type=chunk) - The independent auditor's report for the fiscal year 2024 raised substantial doubt about the company's ability to continue as a going concern due to recurring net losses and declining revenue[671](index=671&type=chunk) [Item 6. Directors, Senior Management and Employees](index=72&type=section&id=Item%206.%20Directors%2C%20Senior%20Management%20and%20Employees) This section details the company's directors, senior management, their compensation, board committee structure, and share ownership, including Co-CEOs Feng Zhou and Simon Lim Sze Beng - The company's leadership includes Co-CEO and Director Feng Zhou, Co-CEO Simon Lim Sze Beng (appointed Jan 20, 2025), and CFO Xiaodong Pan[362](index=362&type=chunk)[363](index=363&type=chunk)[364](index=364&type=chunk) Executive Compensation (FY2025) | Name | Position(s) | Salary ($) | | :--- | :--- | :--- | | Feng Zhou | Co-CEO and Director | 50,000 | | Simon Lim Sze Beng | Co-CEO | N/A (appointed Jan 2025) | | Xiaodong Pan | CFO | 50,000 | - The Board of Directors consists of **5 members**, including **3 independent directors**, and has established Audit, Compensation, and Nominating and Governance committees[376](index=376&type=chunk)[393](index=393&type=chunk) - As of July 23, 2025, the company had **116,027,758 ordinary shares outstanding**, with Co-CEO Feng Zhou beneficially owning **532 ordinary shares**[401](index=401&type=chunk)[403](index=403&type=chunk) [Item 7. Major Shareholders and Related Party Transactions](index=85&type=section&id=Item%207.%20Major%20Shareholders%20and%20Related%20Party%20Transactions) This section outlines the company's related party transactions, including minimal revenue from related parties, financial guarantees, and non-cash settlements, with key figures like CEO Feng Zhou involved Revenue from Related Parties | Fiscal Year Ended March 31, | Revenue ($) | | :--- | :--- | | 2025 | 4,301 | | 2024 | 27,760 | | 2023 | 33,621 | - The company has provided financial guarantees for loans to related parties, including Taizhou Jiutian Pharmaceutical Co. Ltd., for amounts up to **$387,796** and **$303,168**[429](index=429&type=chunk)[866](index=866&type=chunk) - The company leases office and warehouse space from a related party for free and recorded operating lease expenses of **$69,343 for FY2025** based on the lease's fair value[428](index=428&type=chunk)[864](index=864&type=chunk) - Significant non-cash settlements occurred between the company and related parties, including an offset of a **$7.27 million long-term deposit** against amounts due to related parties in FY2025[426](index=426&type=chunk)[862](index=862&type=chunk) [Item 10. Additional Information](index=88&type=section&id=Item%2010.%20Additional%20Information) This section covers corporate governance, material contracts, exchange controls, and taxation, highlighting significant financing activities, reverse stock splits, and potential PRC resident enterprise or PFIC classifications - The company has engaged in multiple financing transactions through securities purchase agreements, primarily with Streeterville Capital, LLC, issuing convertible promissory notes throughout **2022, 2023, and 2024**[509](index=509&type=chunk)[517](index=517&type=chunk)[526](index=526&type=chunk) - In **January 2025**, the company conducted a PIPE offering, selling **14.2 million ordinary shares** and issuing warrants, and in **March 2025**, exchanged **28.4 million of these warrants for 11.225 million new ordinary shares**[553](index=553&type=chunk) - The company is subject to PRC exchange controls, where Renminbi is freely convertible for current account items (like dividends) but not for capital account items without prior approval[565](index=565&type=chunk) - There is a risk that the company could be classified as a PRC "resident enterprise," which would subject its global income to a **25% PRC enterprise income tax** and potentially subject non-PRC shareholders to a **10% withholding tax on dividends**[145](index=145&type=chunk)[576](index=576&type=chunk)[579](index=579&type=chunk) - The company may be classified as a Passive Foreign Investment Company (PFIC) for U.S. tax purposes, which could result in adverse tax consequences for U.S. shareholders[593](index=593&type=chunk) [Item 11. Quantitative and Qualitative Disclosures about Market Risk](index=122&type=section&id=Item%2011.%20Quantitative%20and%20Qualitative%20Disclosures%20about%20Market%20Risk) The company faces market risks including credit, interest rate, commodity price, and foreign exchange fluctuations, particularly given RMB's non-convertibility, and does not use hedging instruments - The company's primary market risks include credit risk, interest rate risk, commodity price risk, foreign exchange risk, and inflation risk[612](index=612&type=chunk)[614](index=614&type=chunk) - Substantially all cash is held in PRC bank accounts, which are not insured, and the company's revenue and costs are denominated in RMB, exposing it to foreign currency exchange rate fluctuations[613](index=613&type=chunk)[617](index=617&type=chunk) - The company has not entered into any hedging transactions to mitigate its exposure to foreign currency or interest rate risks[615](index=615&type=chunk)[618](index=618&type=chunk) PART II [Item 15. Controls and Procedures](index=123&type=section&id=Item%2015.%20Controls%20and%20Procedures) Management concluded that disclosure controls were ineffective as of March 31, 2025, due to material weaknesses in internal control over financial reporting, with a remediation plan underway - Management concluded that as of March 31, 2025, the company's disclosure controls and procedures were not effective[625](index=625&type=chunk) - Material weaknesses in internal control over financial reporting were identified, including: - Inadequate accounting personnel with U.S. GAAP and bilingual capabilities - Inadequate segregation of duties in accounting processes due to limited staff size[626](index=626&type=chunk) - A remediation plan is in place to hire additional personnel, engage consultants, and enhance training to address these weaknesses[629](index=629&type=chunk)[631](index=631&type=chunk) [Item 16. Corporate Governance and Other Matters](index=124&type=section&id=Item%2016.%20Corporate%20Governance%20and%20Other%20Matters) This section details corporate governance, including the audit committee financial expert, code of ethics, principal accountant fees, foreign private issuer exemptions, and cybersecurity risk management Principal Accountant Fees | Fee Type | FY 2025 | FY 2024 | | :--- | :--- | :--- | | Audit fees | $130,000 | $151,000 | | Audit related fees | $15,000 | $30,000 | | Total | $145,000 | $181,000 | - The company follows its home country (British Virgin Islands) corporate governance practices, which exempt it from certain NASDAQ shareholder approval requirements for security issuances and the requirement to hold an annual meeting every year[641](index=641&type=chunk) - The company has implemented a cybersecurity risk management program overseen by the board of directors, with no material cybersecurity incidents identified as of the report date[646](index=646&type=chunk)[647](index=647&type=chunk)[648](index=648&type=chunk) PART III [Item 18. Financial Statements](index=128&type=section&id=Item%2018.%20Financial%20Statements) This section presents the company's consolidated financial statements for FY2025 and FY2024, prepared under U.S. GAAP, including balance sheets, income statements, cash flows, and detailed notes Consolidated Balance Sheet Highlights | Metric | As of Mar 31, 2025 | As of Mar 31, 2024 | | :--- | :--- | :--- | | Total Assets | $21,663,508 | $23,127,057 | | Total Liabilities | $6,223,746 | $9,196,611 | | Total Shareholders' Equity | $15,439,762 | $13,930,446 | Consolidated Statement of Loss Highlights | Metric | FY ended Mar 31, 2025 | FY ended Mar 31, 2024 | | :--- | :--- | :--- | | Revenues | $1,740,907 | $1,928,497 | | Gross Profit | $367,427 | $553,971 | | Net Loss | $(3,303,652) | $(3,098,532) | | Loss Per Share (Basic & Diluted) | $(2.321) | $(28.577) | - The company's operations are conducted through a VIE structure due to PRC legal restrictions on foreign ownership in the pharmaceutical sector, with agreements designed to give the company's WFOE control and economic benefits equivalent to direct ownership[690](index=690&type=chunk) - For the year ended March 31, 2025, the company recorded a **$1,000,451 impairment allowance** on a long-term deposit related to a potential acquisition that is no longer probable[775](index=775&type=chunk)

Group 1 - The stock price of Su Xuan Tang (SXTC) increased by 2.79% on July 30, reaching $1.583 per share, with a total market capitalization of $18.4 million [1] - As of September 30, 2024, Su Xuan Tang reported total revenue of $829,500, a year-on-year decrease of 11.72%, while the net profit attributable to the parent company was -$802,600, reflecting a year-on-year increase of 91.72% [1] - Su Xuan Tang Pharmaceutical Co., Ltd. is an innovative Chinese medicine company focused on the research, production, and sales of traditional Chinese medicine pieces, particularly modern Chinese medicine pieces [1]

Group 1 - The core viewpoint of the article highlights the financial performance and market position of Su Xuan Tang (SXTC), a Chinese pharmaceutical company specializing in traditional Chinese medicine [1] - As of July 29, SXTC's stock opened at $1.605 per share, reflecting a 2.88% increase, with a total market capitalization of $18.6 million [1] - Financial data indicates that for the period ending September 30, 2024, SXTC reported total revenue of $829,500, representing a year-on-year decrease of 11.72% [1] - The company experienced a net loss attributable to shareholders of $802,600, which is a significant improvement with a year-on-year increase of 91.72% [1] Group 2 - Su Xuan Tang is identified as an innovative pharmaceutical company focused on the research, production, and sales of traditional Chinese medicine pieces, particularly modern oral and infusion forms [1] - Traditional Chinese medicine pieces have been widely used in China for thousands of years, indicating a long-standing cultural and medicinal significance [1]

Core Viewpoint - China SXT Pharmaceuticals, Inc. has regained compliance with Nasdaq's Minimum Bid Price Requirement after a share consolidation, closing the matter with Nasdaq [1][4]. Group 1: Compliance Notification - The company received a Compliance Notice from Nasdaq on March 13, 2025, confirming it has met the Minimum Bid Price Requirement [1][4]. - Previously, on October 3, 2024, the company was notified of its failure to maintain a minimum bid price of US$1.00 per share for 30 consecutive business days [2]. Group 2: Share Consolidation - To address the Minimum Bid Price deficiency, the company executed a share consolidation on February 25, 2025, consolidating every eight ordinary shares into one [3]. - Following the consolidation, the company achieved a closing bid price of at least US$1.00 per share for 10 consecutive business days from February 25, 2025, to March 12, 2025 [4]. Group 3: Company Overview - China SXT Pharmaceuticals, Inc. was founded in 2005 and is headquartered in Taizhou City, Jiangsu Province, China, focusing on Traditional Chinese Medicine Pieces [5].

Core Viewpoint - China SXT Pharmaceuticals, Inc. has regained compliance with Nasdaq's Minimum Bid Price Requirement after a share consolidation and has closed the matter with Nasdaq [1][4]. Group 1: Compliance Notification - The company received a Compliance Notice from Nasdaq on March 13, 2025, confirming it has met the Minimum Bid Price Requirement [1]. - Previously, on October 3, 2024, the company was notified of its failure to maintain a minimum bid price of US$1.00 per share for 30 consecutive business days [2]. - The company was given until April 1, 2025, to regain compliance under Nasdaq Listing Rules [2]. Group 2: Share Consolidation - To address the Minimum Bid Price deficiency, the company executed a share consolidation on February 25, 2025, consolidating every eight ordinary shares into one [3]. - Following the consolidation, the company achieved a closing bid price of at least US$1.00 per share for 10 consecutive business days from February 25, 2025, to March 12, 2025 [4]. Group 3: Company Overview - China SXT Pharmaceuticals, Inc. was founded in 2005 and is headquartered in Taizhou City, Jiangsu Province, China [5]. - The company specializes in the research, development, manufacturing, marketing, and sales of Traditional Chinese Medicine Pieces (TCMPs) and TCM Homologous Supplements (TCMHS) [5].

Core Viewpoint - China SXT Pharmaceutics, Inc. will implement a share consolidation at a ratio of 1-for-8 effective February 25, 2025, to comply with Nasdaq's minimum bid price requirement of $1.00 per share [1][2]. Company Actions - The Board of Directors approved the share consolidation to regain compliance with Nasdaq's minimum bid price requirement, which necessitates a closing bid price of $1.00 or more for at least ten consecutive trading days by April 1, 2025 [2]. - Following the share consolidation, every eight shares will be consolidated into one ordinary share, with no fractional shares issued; any fractional shares will be rounded up to one ordinary share [3]. Shareholder Impact - Shareholders holding shares through banks, brokers, or other nominees will have their shares automatically adjusted to reflect the consolidation [4]. - Beneficial holders are advised to contact their bank, broker, or nominee for further information regarding the share consolidation [4]. Company Overview - China SXT Pharmaceuticals, Inc. is an innovative pharmaceutical company established in 2005, focusing on the research, development, manufacturing, marketing, and sales of Traditional Chinese Medicine Pieces [5].

Financial Performance - For the fiscal year ended March 31, 2024, total revenue decreased by 2% to $1,928,497 compared to $1,971,679 in the previous fiscal year[180]. - The net loss for the fiscal year ended March 31, 2024, decreased by 48% to $3,098,532 from $5,934,772 in the previous fiscal year[180]. - Total revenues for the year ended March 31, 2024, were $1,928,497, a decrease of $43,182 or 2% compared to $1,971,679 for the year ended March 31, 2023[303]. - Gross profit increased by $127,700 or 30% to $553,971 for the year ended March 31, 2024, with a gross margin of 28.7% compared to 21.6% for the previous year[313]. - Total operating expenses decreased by $2,964,592 or 49% to $3,069,188 for the year ended March 31, 2024, primarily due to a significant reduction in general and administrative expenses[303]. - General and administrative expenses decreased by $3,010,706 or 53% to $2,635,622, mainly due to reduced payroll expenses and a 90% decrease in credit loss provisions[316]. - Loss from operations improved by $3,092,292 or 55% to $2,515,217 for the year ended March 31, 2024[303]. - The company generated $13,150 in revenue from a new health beverage product, contributing 1% to total revenue for the year ended March 31, 2024[311]. - The company’s total comprehensive loss for the year ended March 31, 2024, was $3,926,756, compared to $7,088,485 for the year ended March 31, 2023[344]. - The company experienced a continuous decline in revenue for the years ended March 31, 2024, 2023, and 2022, raising substantial doubt about its ability to continue as a going concern[364]. Product Development and R&D - Advanced TCMP products accounted for 49.1% of total revenue for the fiscal year ended March 31, 2024, up from 33.3% in the fiscal year ended March 31, 2023[179]. - The company has developed and marketed 11 Advanced TCMP products, 5 Fine TCMP products, and 200 Regular TCMP products[179]. - The company has decided to discontinue cooperation with major clients in the sales of Fine TCMP and will not develop or sell Fine TCMP products in the future[206]. - The company has a product portfolio of 11 Advanced TCMP products, 5 Fine TCMP products, 200 Regular TCMP products, and 200 raw medicinal materials[207]. - The R&D team has submitted 8 patent applications and 4 invention patent applications, all under substantive examination, focusing on preparation process patents[216]. - The company’s R&D strategy aims to revolutionize TCMP production using advanced technology, including e-beam processing which improved bioavailability by 15%[218][219]. - The company has established a strong R&D team of 13 researchers, focusing on innovative TCMP products that simplify administration for customers[249]. - The company has successfully commercialized multiple modernized TCMPs without the need for additional regulatory approvals[249]. Market and Customer Base - The customer base includes 57 pharmaceutical companies, 14 chain pharmacies, and 16 hospitals across five provinces in China[182]. - As of March 31, 2024, the company’s end-customer base includes 57 pharmaceutical companies, 14 chain pharmacies, and 16 hospitals across 5 provinces[214]. - The company currently contracts with over 102 distributors in the PRC and plans to expand its distribution network to increase market penetration[254]. - The company operates 4 sales offices covering 12 major provinces in China, with over 68 sales representatives managing distributor relationships[215]. Financial Structure and Compliance - The company operates under a VIE structure, consolidating the financial results of Taizhou Suxuantang in accordance with U.S. GAAP[176]. - The company has not distributed any earnings or settled amounts owed under the VIE Agreements as of the date of the annual report[191]. - The company is subject to a 10% withholding tax on dividends paid by WFOE to SXT HK, which may be reduced to 5% under certain conditions[199]. - The company has conducted foreign exchange registration under existing PRC regulations, allowing its PRC subsidiary to legally distribute earnings[201]. - The company has established contractual arrangements with Taizhou Suxuantang to consolidate financial results under U.S. GAAP due to PRC legal restrictions on foreign ownership[282]. Production and Manufacturing - The company reconstructed an 850-square-meter facility in December 2018 for TCMHS production and received a Food Manufacturing Certificate[222]. - The company has extended its production facility for lyophilization processing, enhancing its capability to produce temperature-sensitive TCMP products[222]. - The company operates GMP-certified facilities totaling approximately 1,200 square meters for Regular TCMP production and 450 square meters for Fine TCMP production[294]. - The company holds a Pharmaceutical Manufacturing Permit from the NMPA, valid until December 17, 2025[239]. - The company is GMP certified, ensuring compliance with strict quality control and assurance standards in pharmaceutical manufacturing[236]. Intellectual Property - The company holds 28 utility model and invention patents, with a validity period of 20 years from the application date[225]. - The company has submitted five additional invention patent applications recently, enhancing its intellectual property portfolio[227]. - There are currently four invention patent applications under substantive examination at the State Intellectual Property Office of PRC[181]. Strategic Goals and Future Plans - The company plans to enhance collaboration with universities and research institutes for joint R&D projects related to TCMP processing methods and quality standards[181]. - The company intends to retain future earnings to finance business expansion and does not anticipate paying cash dividends in the foreseeable future[196]. - The company aims to promote its existing brand to increase national recognition and maintain a branded pricing strategy through marketing efforts[252]. - The company is focused on developing and introducing additional Advanced TCMP products to strengthen its existing product portfolio[253]. Challenges and Risks - The company competes with established pharmaceutical companies in the TCMP market, which have greater resources and market presence[242]. - The management team has extensive experience in the pharmaceutical industry, with most members having over 10 years of relevant experience[250]. - The company experienced a significant increase in cash outflow from operating activities, with net cash used amounting to $1,928,053 for the year ended March 31, 2024, compared to $80,757 for the year ended March 31, 2023[352].

Financial Performance - For the fiscal year ended March 31, 2023, net revenues decreased by 24% to $1,971,679 from $2,602,281 in the previous fiscal year[175]. - The net loss for the fiscal year ended March 31, 2023, increased by 3% to $5,934,772 compared to a net loss of $5,736,095 in the prior year[175]. - Total revenues for the year ended March 31, 2023, were $1,971,679, a decrease of $630,602 or 24% compared to $2,602,281 for the year ended March 31, 2022[298]. - Gross profit for the year ended March 31, 2023, was $426,271, down from $1,251,643 in the previous year, representing a decline of 66%[298]. - Loss from operations increased to $5,607,509 for the year ended March 31, 2023, compared to $5,189,673 for the year ended March 31, 2022, an increase of 8%[298]. - Interest expense net rose significantly to $476,776 in 2023 from $36,695 in 2022, marking a 1,199% increase[298]. - The accumulated deficit as of March 31, 2023, was $21,613,133, up from $15,688,278 as of March 31, 2022[344]. - The company has raised substantial doubt about its ability to continue as a going concern due to ongoing losses and declining revenues[359]. Revenue Breakdown - Advanced TCMP products accounted for 33.3% of total revenue for the fiscal year ended March 31, 2023, down from 44.7% in the previous year[174]. - Revenue from Advanced TCMP decreased by $506,180, or 44%, accounting for 33% of total revenue for the year ended March 31, 2023[302]. - Revenue from Fine TCMP decreased by $284,976, or 71%, representing 6% of total revenue for the year ended March 31, 2023[303]. - Revenue from Regular TCMP decreased by $95,912, or 12%, accounting for 35% of total revenue for the year ended March 31, 2023[304]. - Revenue from raw medicinal materials was $502,425, representing 25% of total revenue for the year ended March 31, 2023[306]. Operational Developments - The company has developed and introduced a total of 17 Advanced TCMP products, 5 Fine TCMP products, and 87 Regular TCMP products as of the date of the annual report[174]. - The company plans to enhance cooperation with universities and research institutes for joint R&D projects related to TCMP processing methods and quality standards[176]. - The company has established a production facility for lyophilization processing, enhancing the quality and shelf life of its products[219]. - The company has a well-functioning production and sales network with 5 major suppliers in key TCM provinces[210]. - The company has been expanding its production base since October 2017, covering a total land area of 33,300 square meters to meet growing demand for TCMPs[288]. Research and Development - The R&D team has submitted 8 patent applications and 4 invention patent applications, all under substantive examination, focusing on preparation process patents[213]. - The company has achieved a 15% increase in bioactive compound extraction efficiency through e-beam processing compared to regular extraction methods[216]. - The research and development team consists of 15 dedicated researchers, focusing on innovative TCMP products that simplify administration for customers[244]. - The company intends to introduce new Advanced TCMP products steadily to strengthen its market leadership position in Directly-Oral and After-Soaking-Oral TCMPs[248]. Regulatory Compliance - The company’s operations are subject to PRC laws and regulations, which may pose risks related to foreign ownership and regulatory compliance[172]. - The company has obtained all necessary business licenses from the State Administration for Market Regulation for its operations[178]. - The VIE entity has obtained the required licenses and permits for pharmaceutical manufacturing, but compliance with GMP standards is critical for ongoing operations[179]. - The company complies with China's Environmental Protection Law and has not faced any penalties for non-compliance in the past[225]. - The production of Traditional Chinese Medicine Products (TCMP) must comply with the "Pharmaceutical Administration Law of PRC (2019 Revision)" and GMP standards[257]. Employee and Management Information - As of March 31, 2023, the company had a total of 78 full-time employees, with a focus on maintaining a qualified workforce for manufacturing and quality control[250]. - The company has signed confidentiality agreements with all employees to protect its production design and intellectual property[222]. - Information regarding directors, executive officers, and key employees is provided, indicating a structured management team[367]. Future Outlook - The company intends to retain future earnings to finance business expansion and does not anticipate paying cash dividends in the foreseeable future[191]. - The company is seeking to raise capital through additional debt and equity financings to fund operations for the next 12 months[344]. - The company plans to expand its distribution network, currently contracting with over 102 distributors in the PRC, to increase market penetration[249].