Paranovus Entertainment Technology .(PAVS) - 2025 Q4 - Annual Report

Introductory Notes General Information This section clarifies that company names in the annual report are translated or transliterated from their original Chinese legal names, indicating the company's operational ties to China - Names of certain companies in the annual report are translated or transliterated from their original Chinese legal names[14] Forward-Looking Statements Nature and Cautionary Note This section outlines the nature of forward-looking statements within the report, emphasizing that they reflect current expectations and views of future events under the 'safe harbor' provisions, cautioning investors against undue reliance due to inherent uncertainties and evolving risks, and stating no obligation to update these statements except as required by law - Forward-looking statements reflect current expectations and views of future events, made under 'safe harbor' provisions[16] - Investors are cautioned not to place undue reliance on these statements due to evolving risks and uncertainties, and the company does not undertake to update them except as required by law[19] - Key terms identifying forward-looking statements include 'may,' 'will,' 'expect,' 'anticipate,' 'aim,' 'estimate,' 'intend,' 'plan,' 'believe,' 'is/are likely to,' 'potential,' and 'continue'[16] ITEM 1. Identity of Directors, Senior Management and Advisers Identity of Directors, Senior Management and Advisers This item is marked as 'Not applicable,' indicating that the company does not provide specific information regarding the identity of directors, senior management, and advisers in this section - This item is marked as 'Not applicable'[20] ITEM 2. Offer Statistics and Expected Timetable Offer Statistics and Expected Timetable This item is marked as 'Not applicable,' indicating that the company does not provide specific information regarding offer statistics and expected timetable in this section - This item is marked as 'Not applicable'[21] ITEM 3. Key Information A. [Reserved] This sub-item is reserved and contains no information B. Capitalization and Indebtedness This sub-item is marked as 'Not applicable,' indicating that the company does not provide specific information regarding capitalization and indebtedness in this section - This item is marked as 'Not applicable'[22] C. Reasons for the Offer and Use of Proceeds This sub-item is marked as 'Not applicable,' indicating that the company does not provide specific information regarding reasons for the offer and use of proceeds in this section - This item is marked as 'Not applicable'[23] D. Risk Factors This section highlights significant risks associated with investing in the company's ordinary shares, including those related to its evolving business model, dependence on TikTok, challenges in the AI industry, and operational risks in China, emphasizing the high degree of risk due to an evolving environment and regulatory uncertainties - An investment in the company's ordinary shares involves a high degree of risk, requiring careful consideration of all information in the annual report[24] - The company is a holding company with substantial operations in China, subject to a legal and regulatory environment that differs from the United States[24] - New risks emerge frequently, and management cannot predict all risk factors or their full impact on business results[19] Summary of Risk Factors This subsection provides a high-level overview of the significant risks, categorizing them into business-related, China-specific, and Class A Ordinary Shares-related risks, serving as an introduction to the detailed risk discussions that follow - Investing in the company involves significant risks, including competition, government policies, natural disasters, key personnel dependency, user experience, AI industry risks, and limited operating history for BW[26][27] - Risks related to doing business in China include uncertainties in PRC laws, data security oversight by CAC, CSRC approval for offerings, government intervention, difficulties for overseas regulators, and regulations on offshore special purpose companies[28][33] - Risks related to Class A Ordinary Shares include potential delisting from Nasdaq, less shareholder protection under Cayman Islands law, unenforceability of certain judgments, and the possibility of being classified as a Passive Foreign Investment Company (PFIC)[33][45] Risks Related to Our Business The company faces risks from its evolving business model, including the untested growth initiatives of its new acquisitions like BW and 2lab3, which have limited operating histories, alongside challenges from intense competition, dependence on key personnel and platforms like TikTok, and the inherent risks and evolving regulations of the AI industry - The company has an evolving business model with untested growth initiatives, including the recent acquisition of 51% equity in BW for TikTok e-commerce and solutions, and 2lab3 for AI entertainment[35][212] - 2lab3 is a recently formed entity with little track record, facing significant challenges in an emerging AI entertainment industry, and expects to incur substantial expenses without guaranteed profitability[36] - The AI industry presents risks such as flawed algorithms, incomplete/biased data, ethical issues, uncertain commercial viability of generative AI, and intellectual property challenges with AI-generated content[38][39][40] - BW's business is heavily dependent on TikTok's operations in the U.S., facing significant risks from potential regulatory restrictions or bans on the platform, which could materially affect its e-commerce activities[60][61][62] - BW operates in highly competitive and rapidly evolving social commerce and e-commerce enablement markets, competing with various players and platform operators, which could impact its market share and profitability[70][72][73] - The company's ability to continue as a going concern is in doubt due to a net loss of $8,305,429 and cash outflow from operating activities of $2,669,456 for FY2025, with an accumulated deficit of $70,262,448[44][576] Risks Related to Doing Business in China The company faces substantial risks operating in China, including uncertainties in the PRC legal system, evolving data security and cybersecurity regulations (e.g., CAC oversight, Data Security Law, PIPL), and potential requirements for CSRC approval for overseas listings, where these regulatory complexities, along with restrictions on capital flows and dividend payments, could significantly impact business operations and the value of its securities - The PRC legal system is still developing, leading to uncertainties in the interpretation and enforcement of laws, which may make it difficult to predict outcomes of disputes[94][95] - The company is subject to evolving cybersecurity and data protection laws (e.g., PRC Cybersecurity Law, Data Security Law, PIPL), with potential for significant penalties, service suspensions, or reputational harm for non-compliance[99][100][102][104] - Uncertainty exists regarding the need for CSRC approval for overseas offerings, and future PRC government actions could significantly limit or hinder the company's ability to offer securities or affect its business operations[106][107][108][109] - PRC regulations on offshore special purpose companies (SAFE Circular 37) may subject PRC resident beneficial owners to penalties, limit capital injection into PRC subsidiaries, or restrict profit distribution[116][117][118] - The company relies on dividends from PRC subsidiaries, which are subject to restrictions on distributable earnings, statutory reserves, and withholding taxes, potentially limiting its ability to fund operations or pay dividends[120][121][122] - Changes in international trade policies, particularly between the U.S. and China, including tariffs and sanctions, may adversely impact the company's business and operating results[140][141][143] Risks Related to Our Class A Ordinary Shares Risks related to the company's Class A Ordinary Shares include potential delisting from Nasdaq due to non-compliance with listing standards (e.g., minimum bid price), which could severely impact liquidity and value, and as a Cayman Islands company and foreign private issuer, it affords less protection to shareholders and is subject to different reporting and governance standards than U.S. domestic companies, with potential adverse U.S. federal income tax consequences if classified as a Passive Foreign Investment Company (PFIC) - The company received a deficiency letter from Nasdaq on July 11, 2025, for failing to meet the Minimum Bid Price Requirement ($1.00 for 30 consecutive business days), with a compliance period until January 7, 2026[146][147] - Delisting from Nasdaq could lead to reduced liquidity, 'penny stock' classification, limited news coverage, and decreased ability to raise additional financing[150][151][152][154] - As a Cayman Islands company, its Memorandum and Articles of Association offer less protection to shareholders compared to U.S. corporations, potentially limiting the ability to bring claims[155][156][157] - As a foreign private issuer, the company is exempt from certain U.S. proxy rules and Exchange Act reporting obligations, resulting in less detailed and frequent reporting than U.S. domestic public companies[160] - There is no assurance the company will not be a Passive Foreign Investment Company (PFIC) for U.S. federal income tax purposes, which could result in adverse tax consequences for U.S. holders of its shares[166] - The company's management team lacks U.S. public company experience, which could impair compliance with legal and regulatory requirements like the Sarbanes-Oxley Act[172][173] ITEM 4. Information on the Company A. History and Development of the Company Paranovus Entertainment Technology Ltd. (formerly Happiness Biotech Group Limited) was incorporated in the Cayman Islands in 2018, undergoing significant strategic shifts by divesting its historical nutraceutical, e-commerce, and automobile sales businesses in China, and pivoting towards AI and entertainment industries through acquisitions like 2lab3 and BW, while also engaging in various financing activities and corporate governance changes - Company incorporated in Cayman Islands on February 9, 2018, initially as 'Happiness Biotech Group Limited,' later changed to 'Paranovus Entertainment Technology Ltd.' in March 2023[180][188] - Historically operated in nutraceuticals, e-commerce, internet information/advertising, and automobile sales in China, but has divested or suspended these businesses by July 2024[182][184][185][191][200] - Acquired 100% of 2lab3 (AI-powered applications) in March 2023 and 51% of Bomie Wookoo Inc. (TikTok e-commerce) in March 2025, signaling a strategic shift to AI and marketing-commerce[189][205] - Engaged in software development for an interactive game '10,000 Lives' (formerly 'Hollywood Sunshine') with Blueline, expected to launch in Q4 2025[192][232] - Raised approximately $27,000,000 gross proceeds from a Class A Ordinary Shares offering in August 2024, with $22,400,000 used for the BW acquisition[201][479] B. Business Overview Paranovus Entertainment Technology Ltd. is a Cayman Islands holding company that has transitioned its operations from historical Chinese businesses (nutraceuticals, e-commerce, auto sales) to focus on AI and entertainment in the U.S., with current core businesses including AI-powered applications through 2lab3 and TikTok-driven e-commerce and solutions via BW, emphasizing its shift away from PRC-based operations and the associated regulatory risks - The company is a holding company with no material operations of its own, currently operating through its wholly-owned subsidiary 2Lab3 and 51% owned subsidiary BW in the U.S[211] - Historical operations in China (nutraceuticals, e-commerce, internet information/advertising, automobile sales) have been divested or suspended by July 2024, eliminating PRC business operations[211][200] - The company's strategy is to expand into the marketing-commerce field and AI entertainment, capitalizing on TikTok-driven e-commerce and AI-powered solutions[212][230] - The company faces significant legal and operational risks related to doing business in China, including evolving PRC laws and regulations on data security, anti-monopoly, and overseas offerings, though it has divested its PRC operations[213][214][215] Overview of Our Company Paranovus is a Cayman Islands holding company that has strategically shifted its focus from divested Chinese businesses to U.S.-based AI and entertainment, now operating through 2lab3 (AI applications) and BW (TikTok e-commerce), aiming to leverage these acquisitions for growth while navigating the complex regulatory landscape, particularly concerning its former PRC operations - Paranovus is a Cayman Islands holding company with current operations through 2Lab3 (wholly owned) and BW (51% owned) in the U.S[211] - Historically, the company engaged in nutraceuticals, e-commerce, internet information/advertising, and automobile sales in the PRC, all of which have been divested or suspended[211] - The acquisition of 2lab3 in March 2023 expanded the company into AI and entertainment, and the acquisition of BW in March 2025 further expanded into TikTok-driven e-commerce and solutions[212] - As of the report date, the company has no business or operations in the PRC, having faced various legal and operational risks related to the Chinese regulatory environment[213] Cash Flows through Our Organization Cash transfers within the organization primarily involve the Company providing loans, capital contributions, and operating cash to its subsidiaries, and subsidiaries repaying these to the Company, while historically, the company declared a special cash dividend in 2020, but generally relies on dividends from PRC subsidiaries, which are subject to PRC accounting standards, statutory reserves, and withholding taxes Cash Transfers Between Company and Subsidiaries (FY2023-FY2025) | The Company transfers cash to its subsidiaries by way of | FY2025 | FY2024 | FY2023 | | :--- | :--- | :--- | :--- | | cash dividends | $ - | $ - | $ - | | providing loans | $ - | $ - | $ - | | making capital contributions | $ - | $ - | $ 660,000 | | providing operating cash | $ - | $ - | $ 500,136 | | Total | $ - | $ - | $ 1,160,136 | | The Company's subsidiaries transfer cash to the Company by way of | FY2025 | FY2024 | FY2023 | | repayment of loans | $ - | $ - | $ - | | repayment of operating cash | $ - | $ - | $ - | | Total | $ - | $ - | $ - | - A special cash dividend of $0.015 per share ($375,000 total) was paid on August 17, 2020. No other dividends have been made to shareholders[226] - PRC subsidiaries' ability to distribute dividends is restricted by PRC accounting standards, requiring 10% of after-tax profits to fund a statutory reserve until it reaches 50% of registered capital, and a 10% withholding tax on dividends to foreign enterprise investors[227] Products and Services The company's current products and services are focused on e-commerce and AI entertainment, with BW providing TikTok-related e-commerce solutions and product sales, while 2Lab3 is developing AI-powered applications, including the interactive game '10,000 Lives,' after discontinuing the 'SimTwin' application, and legacy businesses in automobile sales, e-commerce, internet information/advertising, and nutraceuticals have been divested or suspended - BW generates revenue through product sales on its own TikTok Shops, collaborative sales with KOLs, and B2B sales, also providing e-commerce enablement solutions like livestreaming operations and ad placement[228][229] - The AI entertainment business aims to provide AI-driven games and applications; 2Lab3 discontinued 'SimTwin' development due to performance issues[230][231] - The interactive game '10,000 Lives,' integrating AI-generated content and celebrity partnerships, is being developed by Blueline for a mobile-only release expected in Q4 2025[232] - Legacy businesses in automobile sales, e-commerce, internet information/advertising, and nutraceuticals have been divested or suspended due to losses and strategic shifts[233][234][235][239] Vendors The company defines major vendors as those accounting for over 10% of overall purchases in any given period, and it had no such major vendors for its advertising services during the last three fiscal years - Major vendors are defined as those whose sales to the company accounted for more than 10% of overall purchases in any given period[240] - The company had no major vendors for its advertising services during the last three fiscal years[240] Sales and Marketing The company's sales and marketing strategies are tailored to its distinct business segments, leveraging social commerce platforms like TikTok with influencer engagement and livestreaming for e-commerce, and employing a multifaceted digital approach including social media, SEM, content marketing, and email campaigns for AI entertainment, focusing on direct sales and promotions in North America and expanding into Asia-Pacific and emerging markets - BW's e-commerce sales and marketing strategy focuses on leveraging short-form video, livestreaming, and influencer (KOL) engagement on social commerce platforms like TikTok[241] - The AI entertainment business utilizes a multifaceted digital marketing approach, including social media, Search Engine Marketing (SEM), content marketing, and email marketing[242] - Sales efforts for AI entertainment will focus on direct sales via website and mobile app, supported by promotions and loyalty rewards, with success measured by sales growth, customer acquisition cost, and conversion rates[243] - Geographically, the company aims for a strong presence in North America for e-commerce and AI entertainment, with plans to expand AI entertainment into the Asia-Pacific region and emerging markets[246][248] Intellectual Property The company's intellectual property includes the copyright for the game '10,000 Lives' and its domain name 'https://pavs.ai' - The company owns the copyright for the game '10,000 Lives' (formerly 'Hollywood Sunshine') as per a development agreement[249] - The company's intellectual property also includes its domain name 'https://pavs.ai**'[250](index=250&type=chunk) Research and Development Historically, the company's R&D focused on nutraceuticals, involving a detailed process from feasibility studies to CFDA approval, and currently, its core R&D team consists of three employees, with future efforts focused on AI-related technologies for its services - Historically, R&D efforts focused on upgrading and inventing new nutraceutical and dietary supplement products, involving lab tests, pilot production, safety assessments, and CFDA registration[251][254] - As of the annual report date, the core R&D team consists of three employees, with future efforts directed towards developing AI-related technologies for services[42] Insurance The company provides workers' compensation and medical insurance to its full-time employees in the U.S., adhering to federal and state requirements, and believes it is compliant with regulations and has made adequate financial provisions for coverage - The company provides workers' compensation and medical insurance coverage for its full-time employees in the U.S., as required by applicable laws[251] - The company believes it complies with all applicable regulations and has made adequate provision for such coverage in its financial statements[251] Seasonality The company states that there is no seasonality impact on its e-commerce solutions or AI entertainment businesses - There is no seasonality impact to the business of E-Commerce solutions or the AI entertainment business[252] Employees The company has 25 full-time employees based in the U.S., all under employment contracts in accordance with U.S. laws, with employees not unionized and relations historically good - The company has 25 full-time employees based in the U.S., with employment contracts in accordance with relevant U.S. laws[253] - Employees are not represented by a labor organization or covered by a collective bargaining agreement, and no work stoppages have been experienced[253] Competitive Advantage For its e-commerce and e-commerce enablement solutions, the company's competitive advantages include platform-focused operational experience on TikTok, a robust network of influencers and content creators, and end-to-end support services for merchants - BW's competitive advantages include platform-focused operational experience on TikTok shops, enabling tailored content creation and store management[255] - The company maintains a robust influencer and content network through WooKoo, partnering with professionals to boost exposure and engagement for brands[256] - BW provides end-to-end e-commerce enablement solutions, leveraging its platform expertise to help merchants establish and grow TikTok Shops[257] Regulations The company's operations are subject to a complex and evolving regulatory landscape in both the U.S. and China, with U.S. regulations covering advertising, consumer protection (FTC, COPPA, ROSCA, UDAP, INFORM Consumers Act), intellectual property, product-specific standards, and sales taxes, while PRC regulations, though less directly applicable post-divestment of China operations, historically covered foreign exchange, M&A, data security, labor, social insurance, and various taxes, with ongoing uncertainties in interpretation and enforcement - BW is subject to U.S. laws and regulations concerning advertising, consumer protection (e.g., FTC Act, Endorsement Guides, COPPA, ROSCA, UDAP, INFORM Consumers Act), intellectual property (Copyright Act, DMCA, Lanham Act), and product-specific regulations[258][259][260][261][262][263][265][266] - The company is subject to state and local sales and use tax laws, requiring compliance with reporting, registration, and remittance, even when marketplace facilitators assist in collection[268] - PRC foreign exchange regulations (e.g., Foreign Currency Administration Regulations, Circular 37, Circular 13, Circular 19, Circular 16, Circular 28) govern RMB convertibility, offshore investments by PRC residents, and capital settlement for foreign-invested enterprises[269][271][272][273][274][275][276] - PRC M&A Rules and regulations on overseas listings (e.g., Trial Administrative Measures) impose requirements for CSRC approval and filing procedures for domestic companies seeking overseas listings, with significant uncertainties in interpretation[281][282] - PRC tax regulations (EIT Law, VAT, Business Tax, Stamp Duty, Urban Maintenance Tax) and labor laws (Labor Contract Law, Social Insurance Law) impose various obligations and potential liabilities on companies operating in China[296][299][300][304][306][307][308][309][323][324] C. Organizational Structure This section refers to 'Item 4.A. History and Development of the Company' for details on the company's organizational structure, indicating that the information is consolidated there - Information on the organizational structure is provided under 'Item 4.A. History and Development of the Company'[328] D. Property, Plants and Equipment This section refers to 'Item 4.B. Business Overview' for information regarding the company's property, plants, and equipment, indicating that the details are integrated into the business overview - Information regarding property, plants and equipment is described under 'Item 4.B. Business Overview'[328] ITEM 4A. Unresolved Staff Comments Unresolved Staff Comments This item is marked as 'Not required,' indicating that there are no unresolved staff comments to report - This item is marked as 'Not required'[329] ITEM 5. Operating and Financial Review and Prospects Overview The company, a Cayman Islands holding entity, has shifted its operations to the U.S. through 2Lab3 (AI applications) and BW (TikTok e-commerce), having divested its historical Chinese businesses, and for FY2025, it generated $71,542 in revenue and a net loss of $8,305,429, an improvement from FY2024's $9,927,324 net loss, but still reflecting significant losses from continuing and discontinued operations - The company is a Cayman Islands holding company, now operating through 2Lab3 and Bomie Wookoo Inc. in the U.S., after divesting historical PRC businesses[332][333][334] Key Financial Performance (FY2025 vs. FY2024) | Metric | FY2025 | FY2024 | Change (YoY) | | :--- | :--- | :--- | :--- | | Revenue | $71,542 | $0 | +$71,542 (100%) | | Net Loss | $(8,305,429) | $(9,927,324) | +$1,621,895 (16.34% decrease in loss) | - Net loss from continuing operations was $7,002,647 and from discontinued operations was $1,302,782 for FY2025[335] Critical Accounting Policies This section outlines the critical accounting policies, including the use of estimates, valuation of accounts receivable, business combination accounting (acquisition method, goodwill recognition), and impairment testing for long-lived assets, where these policies involve significant management judgment, and actual results may differ from estimates, especially in the current economic environment - Management makes significant estimates and assumptions in financial statements, including valuation of accounts receivable, useful lives of assets, goodwill impairment, and income taxes[337] - Business combinations are recorded using the acquisition method, measuring acquired assets and liabilities at fair value, with goodwill recognized as the excess of consideration over identifiable net assets[339] - Goodwill is tested for impairment annually (as of March 31) or when circumstances change, involving qualitative and quantitative assessments of reporting unit fair values[342][343] - Long-lived assets (excluding goodwill) are reviewed for impairment when events indicate carrying value may not be recoverable; $1,108,333 in intangible asset impairment was recorded in FY2025[345][368] - Discontinued operations are reported separately if the disposal represents a strategic shift with a major effect on operations and financial results[346] Revenue Recognition The company recognizes revenue based on the transfer of promised goods or services to customers, reflecting the expected consideration, and historically, revenue was generated from healthcare products, automobiles, online store sales, and internet information/advertising services, with recognition occurring at the point of control transfer (typically delivery or service completion), and for FY2025, all revenue ($71,542**) was from internet information and advertising services - Revenue is recognized when control of promised goods or services is transferred to customers, in an amount reflecting the expected consideration, net of VAT[348] - The company applies a five-step model for revenue recognition: identify contract, identify performance obligations, determine transaction price, allocate price, and recognize revenue upon satisfaction of performance obligation[353] - Historically, revenue streams included healthcare products, automobiles, online store sales, and internet information and advertising services, with control transfer typically at delivery or service completion[347][349][350][351][352] Revenue by Product Line (FY2023-FY2025) | Product Line | FY2025 | FY2024 | FY2023 | | :--- | :--- | :--- | :--- | | Internet information and advertising service | $71,542 | $ - | $ - | | Total Revenue | $71,542 | $ - | $ - | - All revenues from contracts with customers represent products transferred at a point in time and are generated in PRC, recognized on a gross basis[355] A. Operating Results The company's operating results for FY2025 show a net loss of $8.31 million, an improvement from FY2024's $9.93 million loss, primarily driven by a decrease in net loss from discontinued operations, with revenue increasing to $71,542 from zero in FY2024, but operating loss widening due to significant goodwill and intangible asset impairments related to 2lab3 Consolidated Statements of Operations Overview (FY2023-FY2025) | Metric | FY2025 | FY2024 | FY2023 | | :--- | :--- | :--- | :--- | | Revenues | $71,542 | $0 | $0 | | Cost of revenues | $(62,526) | $0 | $0 | | Gross profit | $9,016 | $0 | $0 | | Total operating expenses | $(6,792,577) | $(4,269,943) | $(4,002,589) | | Operating loss | $(6,783,561) | $(4,269,943) | $(4,002,589) | | Net loss from continuing operations | $(7,002,647) | $(4,289,195) | $(4,279,876) | | Net loss from discontinued operations | $(1,302,782) | $(5,638,129) | $(67,907,240) | | Net loss | $(8,305,429) | $(9,927,324) | $(72,187,116) | Year Ended March 31, 2025 Compared to Year Ended March 31, 2024 In FY2025, revenues increased to $71,542 from zero in FY2024, primarily from internet information and advertising services, while operating loss widened by 58.87% to $6.78 million, mainly due to significant goodwill impairment ($3.38 million) and intangible asset impairment ($1.11 million) related to 2lab3's underperformance, and net loss decreased by 16.34% to $8.31 million, largely due to a substantial reduction in losses from discontinued operations - Revenues increased by $71,542 (100%) to $71,542 in FY2025, primarily from internet information and advertising services[361] - Cost of revenues was $62,526 in FY2025, resulting in a gross margin of 12.60%[364] - Goodwill impairment increased by 86.75% to $3,376,186 in FY2025, and intangible asset impairment of $1,108,333 was recognized, both primarily due to 2lab3's projected performance failure[367][368] - Operating loss increased by 58.87% to $6,783,561 in FY2025, mainly due to the impairments[369] - Interest expense increased by 568.56% to $261,854, mainly due to an unsecured loan payable to a related party[371] - Net loss from discontinued operations decreased significantly by $4,335,347, from $5,638,129 in FY2024 to $1,302,782 in FY2025, due to the smaller proportion of divested automobile sales business[374] - Overall net loss decreased by 16.34% to $8,305,429 in FY2025[376] Year Ended March 31, 2024 Compared to Year Ended March 31, 2023 In FY2024, selling and marketing expenses decreased significantly by 99.99% to $94, and general and administrative expenses decreased by 20.36% to $2.46 million, however, a new goodwill impairment of $1.81 million was recognized for 2lab3, leading to a slight increase in operating loss, and the overall net loss dramatically decreased by 86.25% to $9.93 million, primarily due to a $7.55 million gain on disposal of discontinued operations and optimization of these businesses - Selling and marketing expenses decreased by 99.99% to $94 in FY2024, mainly due to reduced advertising costs and network flow fees[377] - General and administrative expenses decreased by 20.36% to $2,462,001 in FY2024, attributed to decreased headcount and service fees from business strategy optimization[378] - Goodwill impairment of $1,807,848 was recognized in FY2024 for 2lab3 due to failure to reach projected performance[379] - Operating loss increased by $267,354 in FY2024, primarily due to the goodwill impairment[380] - Net loss from discontinued operations decreased by $62,269,111 to $5,638,129 in FY2024, largely due to a $7,547,428 gain on disposal of discontinued operations (healthcare products, e-commerce, internet information and advertising businesses)[384] - Overall net loss decreased by 86.25% to $9,927,324 in FY2024, primarily due to the termination and disposal of discontinued operations[386] B. Liquidity and Capital Resources The company's cash and cash equivalents decreased to $261,355 by March 31, 2025, from $341,779 in FY2024, with operating activities using $2.67 million in cash in FY2025, a significant improvement from previous years due to business strategy adjustments, investing activities using $27.05 million, primarily for the BW acquisition, while financing activities provided $29.01 million, mainly from a Class A Ordinary Shares offering and related party loans Cash Flow Summary (FY2023-FY2025) | Cash Flow Activity | FY2025 | FY2024 | FY2023 | | :--- | :--- | :--- | :--- | | Net cash used in operating activities | $(2,669,456) | $(13,105,978) | $(20,705,496) | | Net cash (used in) provided by investing activities | $(27,046,341) | $11,698,379 | $89,322 | | Net cash provided by financing activities | $29,006,249 | $0 | $3,145,524 | | Effect of exchange rate changes on cash and cash equivalents | $26,661 | $(1,003,646) | $1,092,526 | | Net decrease in cash and cash equivalents | $(682,887) | $(2,411,245) | $(16,378,124) | - Cash and cash equivalents were $261,355 as of March 31, 2025, down from $341,779 in FY2024. Current assets were $7.19 million and current liabilities were $6.40 million in FY2025[388] - Net cash used in operating activities decreased significantly in FY2025 to $2.67 million, primarily due to business strategy adjustments in loss-making subsidiaries[389][390] - Net cash used in investing activities was $27.05 million in FY2025, mainly for the purchase of 51% equity in Bomie Wookoo Inc.[391] - Net cash provided by financing activities was $29.01 million in FY2025, primarily from a $27.00 million offering of Class A Ordinary Shares and an increase in amounts due to related parties ($1.85 million)[392] Related Party Transactions Since April 1, 2024, the company has entered into several promissory note purchase agreements with Ms. Minzhu Xu, the Chairperson of the Board, totaling $1,700,000, where these 8% promissory notes, maturing in 12 months, were used for general working capital and were unanimously approved by the audit committee - The company signed three 8% promissory note purchase agreements with Ms. Minzhu Xu (Chairperson of the Board) totaling $1,700,000 ($750,000 on May 20, 2024; $500,000 on September 30, 2024; $450,000 on January 13, 2025)[395][396][397] - Proceeds from these notes were used for general working capital purposes[398] - These related party transactions were unanimously approved by the audit committee of the Board of Directors, consisting solely of independent directors[400][475][477] Holding Company Structure The company operates as a holding company, with no material operations of its own, previously conducting operations through PRC subsidiaries, relying on their dividends, but now primarily operating through its U.S. subsidiaries, 2Lab3 and 51% owned Bomie Wookoo Inc. - The company is a holding company with no material operations of its own[401] - Operations are currently conducted through wholly-owned 2Lab3 and 51% owned Bomie Wookoo Inc. in the United States[402] - Historically, the company relied on dividends from its PRC subsidiaries to fund its operations[401] D. Trend Information The company is not aware of any trends, uncertainties, demands, commitments, or events that are reasonably likely to have a material effect on its net revenues, income from continuing operations, profitability, liquidity, or capital resources, beyond what is already disclosed in the annual report - No new material trends, uncertainties, demands, commitments, or events are identified that are likely to materially affect net revenues, income, profitability, liquidity, or capital resources, beyond what is already disclosed[403] E. Critical Accounting Estimates Management's critical accounting estimates involve significant judgment and assumptions that impact reported financial figures, including valuations for accounts receivable, useful lives of assets, recoverability of long-lived assets, inventory reserves, goodwill impairment, income taxes, contingent liabilities, and purchase price allocation, with the current economic environment increasing the inherent uncertainty in these estimates - Management's critical accounting estimates include valuation of accounts receivable, useful lives of property/equipment and intangible assets, recoverability of long-lived assets, inventory reserve, goodwill impairment, income taxes, contingent liabilities, and purchase price allocation[404] - These estimates are based on information as of the financial statements date, and the current economic environment increases the uncertainty, meaning actual results could differ[404] ITEM 6. Directors, Senior Management and Employees A. Directors and Senior Management The company's leadership team includes Xiaoyue Zhang (CEO, Director), Ling Guo (CFO), Minzhu Xu (Chairperson), and independent directors David Sean Lu, Alex Lightman, and George Yijian Xu, whose diverse backgrounds span management, finance, marketing, and public accounting, with significant experience in their respective fields Directors and Executive Officers as of August 4, 2025 | Name | Age | Position | | :--- | :--- | :--- | | Xiaoyue Zhang | 37 | Chief Executive Officer, Director | | Ling Guo | 46 | Chief Financial Officer | | Minzhu Xu | 44 | Chairperson of the Board | | David Sean Lu | 33 | Director | | Alex Lightman | 65 | Director | | Yijian Xu | 61 | Director | - Xiaoyue Zhang (CEO) has extensive management experience, including founding Zeo Creation LLC and project management at PX Global Advisors[406] - Ling Guo (CFO) has experience in business consulting and management, previously serving as CEO of Shanghai Welive Business Management Consulting Ltd[407] - Minzhu Xu (Chairperson) has extensive experience in advertising, marketing, and public relations, and is a retail investor[408] - David Sean Lu, Alex Lightman, and George Yijian Xu serve as directors, with backgrounds in strategy, entrepreneurship, and certified public accounting, respectively[409][410][412] Board Diversity The company's Board of Directors consists of 5 members, with 2 identified as female and 3 as male, and the company is a foreign private issuer with principal executive offices in China and does not prohibit disclosure under home country law Board Diversity Matrix | Metric | Value | | :--- | :--- | | Country of Principal Executive Offices | China | | Foreign Private Issuer | Yes | | Disclosure Prohibited under Home Country Law | No | | Total Number of Directors | 5 | | Female Directors | 2 | | Male Directors | 3 | | Non-Binary Directors | 0 | | Did Not Disclose Gender | 0 | | Underrepresented Individual in Home Country Jurisdiction | 0 | | LGBTQ+ | 0 | | Did Not Disclose Demographic Background | 0 | Employment Agreements with Senior Management The company has employment agreements with its CEO, Xiaoyue Zhang, and CFO, Ling Guo, effective April 29, 2024, where Ms. Zhang receives an annual base salary of $150,000 cash and $150,000 in Class A ordinary shares, and Ms. Guo's compensation was adjusted on May 1, 2025, to an annual base salary of $150,000 cash and $50,000 in Class A ordinary shares, with both agreements for one-year terms, automatically renewable, with specific termination clauses and severance benefits - CEO Xiaoyue Zhang's employment agreement (effective April 29, 2024) includes an annual base salary of $150,000 cash and $150,000 worth of Class A ordinary shares[414] - CFO Ling Guo's compensation was adjusted on May 1, 2025, to an annual base salary of $150,000 cash and $50,000 worth of Class A ordinary shares[419] - Both agreements are for one-year terms, automatically renewable, and include provisions for termination with or without cause, specifying severance benefits[415][418] B. Compensation This section details the compensation earned by executive officers and directors for the fiscal year ended March 31, 2025, notes the issuance of 1,478,103 Class A Ordinary Shares to employees, directors, and consultants since April 1, 2021, and confirms that no named executives participate in pension or nonqualified deferred compensation plans Executive Officer and Director Compensation (FY2025) | Name and Principal Position | Salary ($) | Bonus ($) | Stock Awards ($) | Option Award ($) | Other Compensation ($) | Total ($) | | :--- | :--- | :--- | :--- | :--- | :--- | :--- | | Xiaoyue Zhang (CEO and Director) | 150,000 | - | - | - | - | 150,000 | | Ling Guo (CFO) | 27,000 | - | - | - | - | 27,000 | | Minzhu Xu (Chairperson) | - | - | - | - | - | - | | David Sean Lu (Director) | 25,000 | - | - | - | - | 25,000 | | Alex Lightman (Director) | 12,500 | - | - | - | - | 12,500 | | Yijian Xu (Director) | 50,000 | - | - | - | - | 50,000 | - A total of 1,478,103 Class A Ordinary Shares have been issued to employees, directors, and consultants from April 1, 2021, through the report date[424] - None of the named executives participate in qualified or nonqualified defined benefit plans or nonqualified deferred compensation plans[425][426] C. Board Practices The company has established an Audit Committee, a Compensation Committee, and a Nominating and Governance Committee, all composed of independent directors, with George Yijian Xu as the audit committee financial expert, and as a foreign private issuer, the company follows home country corporate governance practices, differing from some Nasdaq standards, such as not requiring shareholder approval for certain security issuances - The Board of Directors has established an Audit Committee, a Compensation Committee, and a Nominating and Governance Committee[427] - All members of these committees (David Sean Lu, Alex Lightman, George Yijian Xu) are independent directors, with George Yijian Xu serving as the audit committee financial expert[428][430][431][432] - As a foreign private issuer, the company follows home country corporate governance practices, which may differ from Nasdaq standards, such as not requiring shareholder approval for certain security issuances[437][561] - The company adopted a code of conduct and ethics and an insider trading policy on October 24, 2019[434][436] D. Employees As of March 31, 2025, the company had 28 full-time employees based in the U.S. and China, with a functional distribution across management, sales and marketing, finance and administration, and warehouse roles, and employee relations are historically good, with no employees unionized - As of March 31, 2025, the company had 28 full-time employees based in the U.S. and China[438] Functional Distribution of Full-Time Employees (March 31, 2025) | Function | Number | | :--- | :--- | | Management | 7 | | Sales and marketing | 13 | | Finance and administration | 2 | | Warehouse | 6 | | Total | 28 | - None of the employees are represented by a union, and the relationship with employees has historically been good[439] E. Share Ownership This section details the beneficial ownership of the company's ordinary shares as of the report date, including directors, executive officers, and 5% shareholders, with Minzhu Xu, through Happy Group Inc., holding 15.25% of total voting power via Class B ordinary shares, and several non-U.S. investors holding significant percentages of Class A ordinary shares Beneficial Ownership of Ordinary Shares (as of Report Date) | Holder | Class A Ordinary Shares (Number) | Class A Ordinary Shares (%) | Class B Ordinary Shares (Number) | Class B Ordinary Shares (%) | % of Total Voting Power | | :--- | :--- | :--- | :--- | :--- | :--- | | Xiaoyue Zhang | — | — | — | — | — | | Ling Guo | — | — | — | — | — | | Minzhu Xu (via Happy Group Inc.) | — | — | 602,255 | 98.37% | 15.25% | | David Sean Lu | — | — | — | — | — | | Alex Lightman | — | — | — | — | — | | George Yijian Xu | — | — | — | — | — | | All Directors and Executive Officers | — | — | 602,255 | 98.37% | 15.25% | | Joyful Bright Management Limited | 6,100,000 | 9.14% | | | 7.72% | | Vanity Glow Management Limited | 5,600,000 | 8.39% | | | 7.09% | | Fortune Universe Company Limited | 5,300,000 | 7.94% | | | 6.71% | | Minotaur HK Limited | 4,700,000 | 7.04% | | | 5.95% | | Beta Vortex Limited | 4,600,000 | 6.89% | | | 5.83% | | Yosmite Unanimous Investment Limited | 4,500,000 | 6.74% | | | 5.70% | | Tender Grass International Limited | 4,400,000 | 6.59% | | | 5.57% | | Blackbull Mvm Limited | 4,300,000 | 6.44% | | | 5.45% | - Beneficial ownership is determined by SEC rules, including voting or investment power. Class A ordinary shares have one vote, and Class B ordinary shares have twenty votes[441][445] - Percentage of beneficial ownership is based on 66,724,675 Class A Ordinary Shares and 612,255 Class B Ordinary Shares outstanding as of the report date[442] F. Disclosure of a Registrant's Action to Recover Erroneously Awarded Compensation This item is marked as 'Not applicable,' indicating that the company has no actions to disclose regarding the recovery of erroneously awarded compensation - This item is marked as 'Not applicable'[447] ITEM 7. Major Shareholders and Related Party Transactions A. Major Shareholders This section refers to 'Item 6.E. Share Ownership' for information regarding major shareholders, indicating that the details are provided there - Information regarding major shareholders is provided under 'Item 6.E. Share Ownership'[448] B. Related Party Transactions Since April 1, 2024, the company has entered into three promissory note purchase agreements with Ms. Minzhu Xu, the Chairperson of the Board, totaling $1,700,000, where these 8% promissory notes were issued for general working capital purposes and were unanimously approved by the audit committee, and as of the report date, there were no outstanding balances owed to related parties - The company signed three 8% promissory note purchase agreements with Ms. Minzhu Xu (Chairperson of the Board) totaling $1,700,000 ($750,000 on May 20, 2024; $500,000 on September 30, 2024; $450,000 on January 13, 2025)[449][450] - The proceeds from these note offerings were used for the general working capital purposes of the company[450] - These transactions were unanimously approved by the audit committee of the Board of the Company, consisting only of independent directors[475][477] - As of the date of this annual report, there were no outstanding balances owed to related parties[451] C. Interests of Experts and Counsel This item is marked as 'Not applicable,' indicating that there are no interests of experts and counsel to disclose in this section - This item is marked as 'Not applicable'[452] ITEM 8. Financial Information A. Consolidated Statements and Other Financial Information This section confirms the inclusion of consolidated financial statements in the report, starting on page F-1, and outlines the company's dividend policy, where the company paid a special cash dividend in 2020 but currently has no plans for future dividends, intending to retain earnings for business operations and expansion - Consolidated financial statements are appended at the end of this report on 20-F, beginning on page F-1[453] - A special cash dividend of $0.015 per ordinary share ($375,000 total) was declared on July 31, 2020, and fully paid on August 17, 2020[456] - The company has no plan to declare or pay any dividends in the near future, intending to retain available funds and future earnings for business operations and expansion[456] - Dividend distribution is at the discretion of the board of directors, subject to Cayman Islands law and articles of association, and depends on future operations, earnings, and capital requirements[457] B. Significant Changes This item is marked as 'Not applicable,' indicating that there are no significant changes to report in this section - This item is marked as 'Not applicable'[459] ITEM 9. The Offer and Listing A. Offer and Listing Details The company's Class A ordinary shares are currently trading on the NASDAQ Capital Market under the ticker symbol 'PAVS' - Class A ordinary shares are trading under the ticker symbol 'PAVS' on the NASDAQ Capital Market[460] B. Plan of Distribution This item is marked as 'Not applicable,' indicating that there is no plan of distribution to disclose in this section - This item is marked as 'Not applicable'[461] C. Markets The company's Class A ordinary shares are currently listed and trading on the NASDAQ Capital Market - Class A ordinary shares are currently trading under the ticker symbol 'PAVS' on the NASDAQ Capital Market[462] D. Selling Shareholders This item is marked as 'Not applicable,' indicating that there are no selling shareholders to disclose in this section - This item is marked as 'Not applicable'[462] E. Dilution This item is marked as 'Not applicable,' indicating that there is no dilution information to disclose in this section - This item is marked as 'Not applicable'[463] F. Expenses of the Issue This item is marked as 'Not applicable,' indicating that there are no expenses of the issue to disclose in this section - This item is marked as 'Not applicable'[464] ITEM 10. Additional Information A. Share Capital This item is marked as 'Not applicable,' indicating that there is no specific share capital information to disclose in this section - This item is marked as 'Not applicable'[465] B. Memorandum and Articles of Association This section incorporates by reference the company's Amended and Restated Memorandum and Articles of Association, along with descriptions of its Class A Ordinary Shares and differences in corporate laws, as filed in previous SEC documents - The Amended and Restated Memorandum and Articles of Association, description of Class A Ordinary Shares, and differences in corporate laws are incorporated by reference from previous SEC filings[466] C. Material Contracts This section details several material contracts, including the disposition of Fujian Happiness for $11.3 million, a software development agreement with Blueline Studios for the '10,000 Lives' game, multiple promissory note purchase agreements with Ms. Minzhu Xu and a non-U.S. investor for working capital and software development, a $27 million Class A Ordinary Shares offering, and the $22.44 million acquisition of 51% equity in BW - Disposition SPA: Sold Fujian Happiness for RMB 78 million (approx. $11.3 million) to Fujian Hengda Beverage Co., Ltd. on August 7, 2023[468] - Software Development Agreement: Entered with Blueline Studios Inc. on November 12, 2023, for the '10,000 Lives' interactive game, with development fees of $1,500,000 for PC Release and $400,000 for iOS Release, plus 9% of net revenue[469] - Promissory Note Purchase Agreements (Non-U.S. Investor): Issued three 8% promissory notes, each for $750,000, on November 14, 2023, January 18, 2024, and March 12, 2024, to fund software development and general corporate activities[470][471][472] - Promissory Note Purchase Agreements (Ms. Minzhu Xu): Issued three 8% promissory notes totaling $1,700,000 ($750,000 on May 20, 2024; $500,000 on September 30, 2024; $450,000 on January 13, 2025) for general working capital, approved by the audit committee[474][476] - Securities Purchase Agreement (Non-U.S. Persons): Sold 60,000,000 Class A Ordinary Shares for $0.45 per share, generating $27,000,000 gross proceeds on August 7, 2024. $22,400,000 was used for the BW acquisition[478][479] - Acquisition of BW: Acquired 51% equity interest in Bomie Wookoo Inc. for $22,440,000 in cash on March 25, 2025, approved by shareholders, to expand into marketing-commerce and TikTok e-commerce solutions[482][483] D. Exchange Controls This section details exchange control regulations in the Cayman Islands and the PRC, where the Cayman Islands have no applicable exchange controls, and in the PRC, foreign exchange is regulated by the Administrative Regulations of the PRC on Foreign Exchange, allowing free convertibility for current account items but requiring approval or registration for capital account items, with various SAFE circulars (No. 37, 13, 19, 16, 28) governing offshore investments by PRC residents, capital settlement for foreign-invested enterprises, and foreign debt conversion, with potential penalties for non-compliance and ongoing uncertainties in interpretation - The Cayman Islands currently levies no exchange control regulations applicable to the company or its shareholders[485] - In the PRC, Renminbi is convertible for current account items but requires approval or registration for capital account items under the Foreign Exchange Regulations[486] - SAFE Circular 37 requires PRC residents to register offshore investments in special purpose vehicles (SPVs) and update registrations for material changes, with potential penalties for non-compliance[487][488] - Circulars 19 and 16 allow foreign-invested enterprises discretionary foreign exchange settlement but prohibit using converted Renminbi for expenditures beyond business scope, securities investment (unless permitted), or providing loans to non-affiliated entities[490][491][492] - The value of RMB against the U.S. dollar fluctuates based on China's political and economic conditions, and significant revaluation could affect the company's financial condition in U.S. dollar terms[270] E. Taxation This section summarizes the material tax consequences in the Cayman Islands, PRC, a