Core Viewpoint - Paranovus Entertainment Technology Limited has received a deficiency letter from Nasdaq due to non-compliance with filing requirements, specifically for not timely submitting its Form 6-K for the period ended September 30, 2024 [1][2]. Group 1: Compliance and Regulatory Actions - The company has 60 calendar days from the date of the deficiency letter to submit a Compliance Plan to regain compliance with Nasdaq Listing Rules [2]. - If the Compliance Plan is accepted, Nasdaq may grant an extension of up to 180 calendar days from the filing's due date, allowing until September 29, 2025, for the company to regain compliance [2]. - The deficiency letter does not have an immediate impact on the listing of the company's Class A ordinary shares on the Nasdaq Capital Market [3]. Group 2: Company Overview and Strategic Developments - Paranovus focuses on developing AI-powered entertainment products, including AI-driven games and TikTok-related e-commerce solutions through its subsidiary [4]. - In March 2025, the company completed the acquisition of controlling equity interests in Bomie Wookoo Inc., which offers e-commerce solutions, as part of its strategic transformation [5]. - The company has exited its legacy businesses, including e-commerce, internet information, and advertising in September 2023, and ceased its automobile sales business in July 2024 [5].

Company Name and Structure Changes - The company changed its name to "Paranovus Entertainment Technology Ltd." on March 10, 2023, and began trading under the symbol "PAVS" on March 14, 2023[60]. - The company established a wholly owned subsidiary in Hong Kong on May 6, 2024, and a subsidiary in China on June 17, 2024, both of which currently do not have operating businesses[62]. - The company has not received any inquiries or sanctions from PRC regulatory authorities regarding its corporate structure as of the report date[69]. - The company is required to comply with the Trial Administrative Measures for overseas securities offerings, which took effect on March 31, 2023[69]. - The company has obtained all necessary business licenses from the State Administration for Market Regulation for its PRC subsidiaries[69]. Business Acquisitions and Divestitures - The company acquired 100% of Fuzhou Hekangyuan Trading Co., Ltd. on March 4, 2022, to strengthen its distribution network[61]. - The company sold its nutraceutical and dietary supplements business for RMB 78 million (approximately $11.3 million) on August 7, 2023[61]. - The acquisition of 100% of 2Lab3 in March 2023 marks the company's strategic transition to focus on AI-powered solutions and entertainment industries[66]. - The company divested its nutraceutical and dietary supplements business in August 2023 and suspended its e-commerce and internet information businesses in September 2023[66]. - The e-commerce and internet information and advertising businesses were transferred for cash consideration of RMB 5 million (approximately $0.7 million) on September 1, 2023[120]. Financial Performance and Losses - The e-commerce and internet information business incurred a loss of approximately $21.42 million as of March 31, 2023, compared to a loss of approximately $7.60 million as of March 31, 2022[61]. - For the fiscal year ended March 31, 2024, the company generated revenue of $6,544,819, a decrease of $16,787,404 or 71.95% compared to the previous fiscal year[122]. - The net loss for the fiscal year ended March 31, 2024, was $9,927,324, representing an increase of $62,259,792 or 86.25% from the net loss of $72,187,116 in the fiscal year ended March 31, 2023[122]. - The company incurred a net loss from continuing operations of $3,790,173 for the fiscal year ended March 31, 2024[122]. - Total net loss for the fiscal year ended March 31, 2024, was $9,927,324, a decrease of $62,259,792 compared to $72,187,116 for the fiscal year ended March 31, 2023, primarily due to the termination of discontinued operations[149]. Share Issuance and Capital Raising - The company plans to sell up to 60 million Class A Ordinary Shares at a price of $0.45 per share, aiming for gross proceeds of approximately $27 million[62]. - The company issued three 8% promissory notes, each with a principal amount of $750,000, to fund the development of "10,000 Lives" and general corporate activities[61]. - A private placement generated approximately $6 million from the sale of 3,000,000 Class A ordinary shares at a price of $2.00 per share[204]. - The company plans to raise approximately $27 million by selling up to 60,000,000 Class A ordinary shares at a price of $0.45 per share for strategic acquisitions[210]. Product Development and Launch Plans - The company entered into a software development agreement with Blueline for the interactive game application "10,000 Lives," with a total development fee of $1.9 million[61]. - The Company plans to launch the AI-powered application SimTwin in Q3 2024, which will allow users to interact with digital personas[74]. - The mobile game 10,000 Lives is expected to launch in Q4 2024, integrating AI-generated content and celebrity partnerships[74]. Market Strategy and Expansion Plans - The company aims to use net proceeds from share sales for strategic acquisitions in AI-powered solutions and general corporate purposes[62]. - The company plans to expand its market reach by acquiring firms specializing in AI logistics, delivery services, e-commerce, and advertising placements, although no acquisition targets have been identified yet[66]. - The marketing strategy for the AI entertainment business will leverage social media and digital marketing to engage the target audience[78]. - The AI entertainment business focuses on developing AI-enhanced games and applications, targeting both casual and hardcore gamers, with plans for expansion into North America and Asia-Pacific regions, as well as emerging markets in Latin America, the Middle East, and Africa[34]. Regulatory and Compliance Issues - The company faces potential risks from evolving PRC laws and regulations, which could materially affect its operations and securities value[67]. - The PCAOB's ability to inspect auditors is crucial; failure to comply could lead to trading prohibitions under the HFCA Act[68]. - The PRC's new Cybersecurity Review Measures may impact companies with over one million users, but the company currently does not meet this threshold[71]. - The company has not been subject to any cybersecurity review as it does not operate critical information infrastructure or hold personal information of over one million users[71]. Employee and Compensation Information - CEO Xiaoyue Zhang's annual base salary is $150,000 in cash and $150,000 in Class A ordinary shares, with a one-year term that automatically renews[177]. - CFO Ling Guo's annual base salary is $27,000 in cash and $27,000 in Class A ordinary shares, also with a one-year term that automatically renews[178]. - Total compensation for Minzhu Xu (Chairperson) was $25,000, while Alex Lightman (Director) received $12,500, and John Levy (Former Director) received $50,000 in the fiscal year ended March 31, 2024[180]. - As of March 31, 2024, the company had 11 full-time employees, with 8 located in the PRC and 3 in the United States[191]. Taxation and Financial Regulations - The enterprise income tax rate for PRC resident enterprises is 25%, while High and New Technology Enterprises (HNTEs) benefit from a reduced rate of 15%[105]. - A 10% withholding tax applies to dividends paid by foreign-invested enterprises in the PRC to non-resident foreign investors unless a tax treaty provides for a lower rate[93]. - The Cayman Islands imposes no taxes on profits, income, or gains, making it favorable for ordinary share holders[217]. - The PRC tax authorities have enhanced scrutiny over indirect transfers of equity interests in PRC resident enterprises, potentially subjecting them to PRC tax[219]. Financial Position and Cash Flow - As of March 31, 2024, cash and cash equivalents were $944,242, a decrease from $2,049,362 in 2023 and $303,817 in 2022[157]. - Current assets as of March 31, 2024, were approximately $2.85 million, down from $9.79 million in 2023 and $56.57 million in 2022[157]. - The company incurred a net loss of US$9,927,324 for the financial year ended March 31, 2024, with a cash outflow from operating activities of US$11,875,246[252]. - Total assets decreased from $36,340,209 in 2023 to $7,728,826 in 2024, representing a decline of approximately 78.7%[258]. Internal Controls and Governance - As of March 31, 2024, the company's disclosure controls and procedures were not effective at the reasonable assurance level due to identified material weaknesses[235]. - The company lacks personnel with technical knowledge in areas such as business combinations and goodwill impairment analysis, contributing to material weaknesses in internal control over financial reporting[236]. - Plans to address identified weaknesses include recruiting qualified professionals and investing in technology infrastructure to support financial reporting[237]. - The company has established a code of conduct and ethics applicable to all directors, officers, and employees[188].

Company Overview - The company changed its name to "Paranovus Entertainment Technology Ltd." effective March 14, 2023, to better reflect its multiple business lines[188]. - The company operates primarily through its subsidiaries in China, with a focus on nutraceutical and dietary supplements made from Ganoderma spore powder[185]. - The company has established a B2B platform, Taochejun, for automobile sales, focusing on third and fourth tier cities in China[187]. - The company has signed an agreement to sell 100% equity interests of Fujian Happiness for cash consideration of RMB 78 million (approximately $11.3 million)[213]. - The company closed an acquisition of 100% membership interests of 2lab3 on March 28, 2023, to expand into the Web 3.0 industry[219]. Financial Performance - For the fiscal year ended March 31, 2023, the company generated revenue of $98,152,825, an increase of $8,664,167 or 9.68% compared to the previous fiscal year[359]. - The net loss for the fiscal year ended March 31, 2023, was $72,187,116, a decrease of $18,167,035 or 33.63% compared to the net loss of $54,020,081 for the fiscal year ended March 31, 2022[359]. - Total revenue for the year ended March 31, 2023, was $98,152,825, an increase of 9% from $89,488,658 in 2022[373]. - Healthcare products revenue was $31,770,835 in 2023, up from $30,323,831 in 2022, while online store revenue surged to $42,201,865 from $28,014,109[373]. - Internet information and advertising revenue decreased significantly to $1,197,348 in 2023 from $10,538,943 in 2022, indicating a decline of approximately 89%[373]. - The automobile segment generated $22,982,777 in revenue for 2023, compared to $20,611,775 in 2022, reflecting an increase of 11%[373]. Regulatory Compliance - The company is subject to evolving PRC laws and regulations, which could materially impact its operations and securities value[193]. - The company has obtained all necessary business licenses from the State Administration for Market Regulation for its PRC subsidiaries[199]. - The company faces risks related to compliance with the Data Security Law and the Personal Information Protection Law, which could affect its operations[193]. - The company has not received any regulatory objections to its listing on Nasdaq from PRC authorities as of the report date[202]. - The company is currently under review for renewal applications for products that require approval renewal, ensuring continued compliance with CFDA regulations[254]. Business Strategy - The company plans to divest its nutraceutical and dietary supplements business, which has been incurring losses, and transition into the entertainment and AI industries[212]. - The company is transitioning into the entertainment and AI industries, seeking prospective acquisition opportunities in these sectors[220]. - The company has established an online automobile sales platform, Taochejun, which utilizes a WeChat Mini Program to connect automobile dealers with comprehensive trade resources[223][231]. - The company has been focusing on e-commerce since 2020, providing services such as community group buying and cross-border e-commerce, and has a dedicated team for delivery optimization and live streaming[224]. Product and Market Information - As of March 31, 2023, the company had a diverse portfolio of approximately 15 nutraceutical and dietary supplement products, with sales from Lucidum spore powder products, Cordyceps mycelia products, and Ejiao solution products accounting for approximately 5.35%, 16.65%, and 18.7% of gross sales, respectively[220]. - The company has over 50 distributors and more than 10,000 sales terminals across 15 provinces in China as of March 31, 2023, with a customer conversion rate of approximately 50% for exclusive distributors[228][230]. - The company's e-commerce platform "Happy Buy" focuses on providing marketing and agency operation services to small and medium-sized businesses[217]. - The automobile sales platform "Happy Auto," later upgraded to "Taochejun," aims to connect car dealers and enhance the sales experience[218]. Intellectual Property and R&D - The company holds a total of 12 patents and has a dedicated research and development team of 13 employees, recognized as "Outstanding Research and Development Companies" by Nanping Intellectual Property Office[242][243]. - The company has obtained 38 trademarks and 18 patents, enhancing its intellectual property portfolio[313][314]. Employee and Labor Compliance - The company currently has 80 full-time employees and has employment contracts with all employees in accordance with PRC laws[249]. - The company has contributed to the basic and minimum social insurance plan, ensuring compliance with applicable PRC laws and regulations[249]. - The company has not experienced any work stoppages, indicating stable employee relations[249]. - The company is obligated to comply with labor laws, including minimum wage standards and social insurance contributions[319]. Taxation and Financial Obligations - The company is subject to a 10% withholding tax on dividends paid to foreign investors under the PRC Enterprise Income Tax Law[210]. - The company is required to set aside at least 10% of net profits each year for a statutory surplus reserve, which is not distributable as dividends[211]. - The PRC Enterprise Income Tax Law imposes a 25% tax rate on resident enterprises, with a preferential rate of 15% for High and New Technology Enterprises[320]. - The applicable VAT rate for the company is currently 13%, following a reduction from 17% and 16% in previous years[324]. Market Trends and Challenges - The sale of nutraceutical and dietary supplements is slightly seasonal, with higher sales typically occurring in winter due to traditional Chinese dietary culture[248]. - Local governments are providing subsidies for up to 30% of the investment cost for the construction of electric vehicle charging infrastructure[290]. - The State Council encourages the development of new energy vehicles as pillar industries, with municipal governments releasing plans to promote this sector[289].

Financial Performance - For the fiscal year ended March 31, 2022, the company generated revenue of $89,488,658, an increase of $18,003,955 compared to $71,484,703 in the previous fiscal year[329]. - The net loss for the fiscal year ended March 31, 2022, was $54,020,081, a decrease of $54,712,037 from a net income of $691,956 in the fiscal year ended March 31, 2021[329]. - The company generated $89,488,658 in revenues for the fiscal year ended March 31, 2022, representing an increase of $18,003,955 or 25.19% compared to $71,484,703 for the fiscal year ended March 31, 2021[358]. - Revenue from healthcare products dropped significantly to $30,323,831 in fiscal year 2022, primarily due to the adverse impact of the COVID-19 pandemic[358]. - Revenue from the online store increased to $28,014,109 in fiscal year 2022, up from $13,473,626 in fiscal year 2021, driven by the development of the online business model[359]. - Information service revenue reached $10,538,943 in fiscal year 2022, representing an increase of $1,293,924 or 14% compared to $9,245,019 in fiscal year 2021[360]. - Automobile sales revenue surged to $20,611,775 in fiscal year 2022, an increase of $17,235,419 or 510.47% from $3,376,356 in fiscal year 2021[361]. - The operating loss for the fiscal year ended March 31, 2022 was $57,885,796, a significant decline from operating income of $1,525,716 in the prior year, marking an increase in loss of $44,778,859[369]. - Net loss for the fiscal year ended March 31, 2022 was $54,020,081, a decrease of $53,328,125 compared to net income of $691,956 for the fiscal year ended March 31, 2021[374]. Revenue Recognition and Accounting - The company recognizes revenue from healthcare products, automobiles, and online store sales upon the transfer of control to customers[336][339][340]. - The company operates under U.S. GAAP, with critical accounting policies affecting the reported amounts of assets and liabilities[321]. - The company has established a provision for doubtful accounts based on individual account analysis and historical collection trends[332]. Cost and Expenses - Total cost of revenues was $85,777,192 for the fiscal year ended March 31, 2022, representing an increase of $32,468,090 or 60.91% compared to $53,309,102 for the fiscal year ended March 31, 2021[363]. - The gross margin ratio for the company was 4.2% for the fiscal year ended March 31, 2022, a decrease of 21.2% compared to 25.4% for the fiscal year ended March 31, 2021[363]. - The gross margin ratio for healthcare products was negative 0.7% for the fiscal year ended March 31, 2022, a decrease of 38.6% compared to 37.9% for the fiscal year ended March 31, 2021[363]. - Selling and marketing expenses surged to $40,476,616 for the fiscal year ended March 31, 2022, reflecting a 306.44% increase compared to $9,958,886 for the fiscal year ended March 31, 2021[365]. - General and administrative expenses rose to $9,126,812 for the fiscal year ended March 31, 2022, an increase of 81.4% from $5,030,899 in the prior year[366]. - Research and development expenses slightly increased to $1,684,089 for the fiscal year ended March 31, 2022, representing a 1.45% rise compared to $1,660,100 for the fiscal year ended March 31, 2021[367]. - Goodwill impairment amounted to $10,309,745 for the fiscal year ended March 31, 2022, compared to nil in the previous year, largely due to the impact of the COVID-19 pandemic[368]. Cash Flow and Investments - Net cash used in operating activities was $(28,134,783) for the fiscal year ended March 31, 2022, compared to $2,904,466 provided in the previous year[394]. - As of March 31, 2022, the company had cash and cash equivalents of $19.73 million, a decrease from $36.56 million in 2021 and $33.65 million in 2020[395]. - Net cash used in investing activities was $8.5 million for the year ended March 31, 2022, mainly due to a new business acquisition of approximately $6.1 million[399]. - Net cash provided by financing activities was approximately $18.8 million for the year ended March 31, 2022, primarily from capital contributions of net proceeds of $18.9 million from the issuance of new ordinary shares[401]. - Capital expenditures amounted to $2.41 million for the year ended March 31, 2022, compared to $3.83 million in 2021 and $1.16 million in 2020[402]. Business Operations and Strategy - The company has over 100 distributors and 10 experience stores across 20 provinces in China for its nutraceutical and dietary supplements[325]. - The online store "Happy Buy" was launched in September 2020, focusing on e-commerce services for small and medium-sized enterprises, with steady growth attributed to the live streaming e-commerce trend[325]. - The automobile sales platform "Happy Auto," upgraded to "Taochejun," focuses on small cities in China and new energy vehicle sales[328]. - The company categorizes its products into four groups: Healthcare products, e-commerce products, automobile sales, and Internet information advertising services[325]. - The company has made significant investments in quality control and self-manufacturing to ensure high-quality products[323]. - The company plans to continue investing in the online store and automobile business to drive future growth[359][361]. - The company closed 7 experience stores during the year ended March 31, 2022, due to poor performance to avoid further losses[358]. Internal Control and Risk Management - The company plans to address internal control weaknesses by recruiting qualified professionals and investing in technology infrastructure[579]. - The company has not entered into any hedging transactions to reduce exposure to foreign exchange risk, despite being exposed to fluctuations in the exchange rate between the U.S. dollar and RMB[574]. - The company experienced a significant decrease in current assets, from approximately $95.1 million in 2021 to $56.6 million in 2022[395].

Financial Performance - For the fiscal year ended March 31, 2021, the company generated revenue of $71,484,703, representing an increase of 9.9% compared to $65,061,953 for the fiscal year ended March 31, 2020[280]. - The net income for the fiscal year ended March 31, 2021, was $691,956, a significant decrease of 94.5% from $12,688,035 in the previous fiscal year[280]. - Revenues for the fiscal year ended March 31, 2021 were $71,484,703, an increase of $6,422,750 or 9.9% compared to $65,061,953 for the fiscal year ended March 31, 2020[297]. - Sales from healthcare products dropped significantly from $65,061,953 in fiscal year 2020 to $45,389,702 in fiscal year 2021 due to COVID-19 impacts[298]. - Operating income decreased by $13,873,001 or approximately 90.1% to $1,525,716 for the fiscal year ended March 31, 2021[306]. - Net income for the fiscal year ended March 31, 2021 was $691,956, a decrease of $11,996,079 or 94.5% compared to $12,688,035 for the fiscal year ended March 31, 2020[312]. Sales and Distribution - The company has over 100 distributors and 17 experience stores across 18 provinces in China, enhancing its market presence[278]. - Online sales have been a growing distribution channel since the launch of the "Happy Buy" platform in September 2020, capitalizing on the rapid expansion of live streaming e-commerce in China[278]. - The automobile sales platform "Taochejun" was launched in November 2020, focusing on small cities and new energy vehicles, leveraging a network of car dealers[279]. - Online store sales generated $13,473,626 in revenue for the fiscal year ended March 31, 2021, marking a successful entry into e-commerce[299]. Cost and Expenses - Total cost of revenues increased by $18,666,453 or 53.9% to $53,309,102 for the fiscal year ended March 31, 2021, resulting in a gross margin ratio of 25.4%[301]. - Selling and marketing expenses increased by $779,726 or 8.5% to $9,958,886 for the fiscal year ended March 31, 2021[303]. - General and administrative expenses rose by $1,548,440 or 44.5% to $5,030,899 for the fiscal year ended March 31, 2021[304]. - Research and development expenses decreased by $698,868 or 29.6% to $1,660,100 for the fiscal year ended March 31, 2021[305]. - The gross margin ratio of online sales was 5.3% for the fiscal year ended March 31, 2021, reflecting the industry's typical low margin[302]. Cash Flow and Investments - Net cash provided by operating activities decreased to approximately $2.9 million for the year ended March 31, 2021, down from approximately $10.8 million for the year ended March 31, 2020[330]. - Net cash used in investing activities was $13,222,847 for the year ended March 31, 2021, compared to $1,159,355 for the previous year[334]. - Capital expenditures amounted to $3,834,578 for the year ended March 31, 2021, compared to $1,159,355 for the year ended March 31, 2020[337]. - As of March 31, 2021, cash and cash equivalents were $36,558,752, an increase from $33,654,765 as of March 31, 2020[329]. Internal Control and Compliance - As of March 31, 2021, the company's internal control over financial reporting was deemed ineffective due to insufficient knowledge of U.S. GAAP and SEC reporting requirements[485]. - Material weaknesses identified include inadequate procedures for identifying related party transactions[485]. - The company plans to recruit qualified professionals to address accounting issues in complex transactions[486]. - Investment in technology infrastructure is planned to enhance the financial reporting function[486]. - Improved communication between management, the board of directors, and the chief financial officer is a priority[486]. - No changes in internal control over financial reporting occurred during the reporting period that materially affected internal controls[487].

Financial Performance - For the fiscal year ended March 31, 2020, the company generated revenue of $65,061,953, representing an increase of 1.8% compared to $63,936,185 for the fiscal year ended March 31, 2019[253]. - The net income for the fiscal year ended March 31, 2020, was $12,688,035, which is a decrease of 32.2% from $18,721,979 in the previous fiscal year[253]. - Total revenues for the fiscal year ended March 31, 2020, were $65,061,953, an increase of $1,125,768 or 1.8% compared to $63,936,185 for the fiscal year ended March 31, 2019[273]. - Revenue from Lucidum spore powder products increased by $8,346,748 or 42.0%, accounting for 43.4% of total revenue for the fiscal year ended March 31, 2020[274]. - Revenue from Cordyceps mycelia products decreased by $2,028,581 or 3.4%, accounting for 13.6% of total revenue for the fiscal year ended March 31, 2020[275]. - Revenue from experience stores accounted for 41.2% of total revenue for the fiscal year ended March 31, 2020, an increase of 2.9% compared to the previous year[277]. - The gross margin ratio decreased to 46.8% for the fiscal year ended March 31, 2020, down from 50.4% for the fiscal year ended March 31, 2019[280]. - The gross margin ratio for Lucidum spore powder products was 51.9% for the fiscal year ended March 31, 2020, a decrease of 8.7% compared to 60.6% for the fiscal year ended March 31, 2019[281]. - Operating income decreased by $6,444,155 or approximately 29.5% to $15,398,717 for the fiscal year ended March 31, 2020, compared to $21,842,873 for the fiscal year ended March 31, 2019[285]. - Net income fell by $6,033,944 or 32.2% to $12,688,035 for the fiscal year ended March 31, 2020, compared to $18,721,979 for the fiscal year ended March 31, 2019[288]. - Other income increased by $71,145 or 114.3%, totaling $133,405 for the fiscal year ended March 31, 2020[272]. Expenses and Costs - Total cost of revenues was $34,642,649 for the fiscal year ended March 31, 2020, representing an increase of $2,953,532 or 9.3% compared to $31,689,117 for the fiscal year ended March 31, 2019[280]. - Selling and marketing expenses increased by $2,887,932 or 45.9% to $9,179,160 for the fiscal year ended March 31, 2020, primarily due to higher advertising costs and support for experience store operators[282]. - General and administrative expenses increased by $1,531,200 or 78.5% to $3,482,459 for the fiscal year ended March 31, 2020, compared to $1,951,259 for the fiscal year ended March 31, 2019[283]. - Research and development expenses rose by $197,260 or 9.1% to $2,358,968 for the fiscal year ended March 31, 2020, compared to $2,161,708 for the fiscal year ended March 31, 2019[284]. Cash Flow and Financial Position - Net cash provided by operating activities increased by approximately $4,232,964 or 64.7% to $10,777,843 for the fiscal year ended March 31, 2020, compared to $6,544,879 for the fiscal year ended March 31, 2019[290]. - Net cash used in investing activities increased to $1,159,355 for the fiscal year ended March 31, 2020, compared to $277,158 for the fiscal year ended March 31, 2019[295]. - Net cash used in financing activities was approximately $10,404,718 for the fiscal year ended March 31, 2020, compared to $271,105 for the fiscal year ended March 31, 2019[297]. - As of March 31, 2020, cash and cash equivalents were $33,654,765, up from $14,800,772 as of March 31, 2019[298]. - As of March 31, 2020, the company's PRC subsidiaries had aggregate retained earnings of approximately RMB 454.5 million (US$67.6 million) under PRC GAAP[312]. - The company does not have any long-term debt outstanding and monitors banks' prime rates for cash management[459]. Business Operations and Strategy - The company marketed and sold approximately 32 kinds of nutraceutical and dietary supplements, with Lucidum spore powder, Cordyceps mycelia, and Ejiao solution products accounting for approximately 66.6% and 63.1% of gross sales for the years ended March 31, 2020, and 2019, respectively[251]. - The company has established a new experience store model since 2017 to boost market share, alongside traditional distribution channels[250]. - The company has a significant focus on quality control and self-manufacturing, producing most products in-house without outsourcing[249]. - The company has approximately 100 distributors across 20 provinces and operates 26 experience stores in China[251]. - The company plans to expand its business in the water supply market and strengthen its market position, requiring additional capital through equity financing[302]. Governance and Management - The company has established an audit committee, a compensation committee, and a nominating and governance committee to oversee various functions[331][334][335]. - The Audit Committee consists of Wanhe Zhang, Rui Qiang, and John Levy, with John Levy serving as the chairman[331]. - The Compensation Committee was established in October 2019, with Rui Qiang as the chairman[334]. - The Nominating and Governance Committee includes Wanhe Zhang, John Levy, and Rui Qiang, with Wanhe Zhang as the chairman[335]. - The company has not entered into any agreements to provide benefits upon termination of employment for its executives[330]. - The employment agreements for both the CEO and CFO are for a term of five years, automatically renewing for additional one-year terms[325][327]. - John Levy is recognized as an "audit committee financial expert" as defined by SEC regulations[333]. - The company has not granted any plan-based awards to its executives[324]. - Xuezhu Wang, the CEO, received an annual compensation of $25,587 for the fiscal year ended March 31, 2020[323]. - Jiong Bian, the CFO, received an annual compensation of $37,339 for the same fiscal year[323]. - As of March 31, 2020, the company has a total of 151 full-time employees, with 70 in operations and logistics, 39 in sales and marketing, and 23 in research and development[339]. - The company has opted not to comply with Nasdaq's independence requirements for its board of directors[338]. Risks and Challenges - The company reported a comprehensive loss of $4.15 million due to a 3.5% average depreciation of the RMB against the U.S. dollar[460]. - The company has not entered into any hedging transactions to mitigate foreign exchange risk, which may affect revenues and results of operations[460]. - The board of directors has identified material weaknesses in internal control over financial reporting, including insufficient knowledge of U.S. GAAP and SEC reporting requirements[464]. - The company plans to address identified weaknesses by recruiting qualified professionals and investing in technology infrastructure[465]. - The company has not experienced significant seasonal fluctuations in employee numbers[339].

Financial Performance - Revenues for the year ended March 31, 2019, were $63,936,185, representing an increase of 3.97% from $61,495,527 in 2018[21]. - Gross profit increased to $32,247,068, up from $29,352,200, reflecting a gross margin improvement[21]. - Operating income rose to $21,842,873, compared to $20,240,785 in the previous year, indicating a growth of 7.93%[21]. - Net income for the year was $18,721,979, an increase of 7.05% from $17,489,940 in 2018[21]. - Basic and diluted earnings per share increased to $0.81 from $0.76, marking a 6.58% rise[21]. - The company's comprehensive income for the year ended March 31, 2019, was $15,736,393, down from $20,664,197 in 2018, a decrease of approximately 23.5%[136]. Assets and Liabilities - As of March 31, 2019, total assets of Happiness Biotech Group Limited were $65,679,048, an increase from $53,396,326 in 2018, representing a growth of approximately 22.6%[18]. - Total current assets rose to $54,840,259 in 2019, up from $43,758,268 in 2018, marking an increase of approximately 25.4%[18]. - The company reported total liabilities of $4,763,401 in 2019, down from $8,844,700 in 2018, representing a decrease of about 46.3%[18]. - Total short-term bank borrowings decreased to $1,039,578 as of March 31, 2019, from $1,494,887 in 2018, a reduction of 30.5%[102]. - The company recognized a current income tax provision of $3,183,154 for the year ended March 31, 2019, an increase of 10.9% from $2,871,693 in 2018[121]. Shareholder Equity - Shareholders' equity increased significantly to $60,915,647 in 2019 from $44,551,626 in 2018, indicating a growth of around 36.6%[18]. - The company's retained earnings rose to $53,935,169 as of March 31, 2019, compared to $35,269,267 in 2018, indicating a significant increase of approximately 53.1%[135]. - Total equity as of March 31, 2019, was $60,915,647, compared to $44,551,626 in 2018, reflecting a growth of 36.5%[23]. Cash Flow - Cash and cash equivalents increased to $14,800,772 in 2019 from $8,884,829 in 2018, reflecting a growth of about 66.5%[18]. - Net cash provided by operating activities was $6,544,879, a decrease from $12,933,949 in 2018[26]. - Cash and cash equivalents at the end of the year were $14,800,772, up from $8,884,829, representing a 66.5% increase[26]. Expenses - Research and development expenses increased to $2,161,708 from $1,857,818, indicating a focus on innovation and product development[21]. - Advertising costs increased from $2,048,026 in 2018 to $3,217,096 in 2019[58]. - Shipping and handling costs were $1,841,312 and $2,296,687 for the years ended March 31, 2019 and 2018, respectively[57]. Inventory and Receivables - Accounts receivable remained relatively stable at $32,011,536 in 2019, slightly down from $32,564,827 in 2018[18]. - As of March 31, 2019, accounts receivable amounted to $32,011,536, a decrease from $32,564,827 in 2018, with no allowance for doubtful accounts recorded[88]. - Total inventories as of March 31, 2019, were $1,970,735, down from $2,269,182 in 2018, with raw materials at $1,696,353[90]. Regulatory and Compliance - Happiness Biotech Group Limited is classified as an emerging growth company and prepares its financial statements in accordance with U.S. GAAP[7]. - The company has not been required to file reports pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months[5]. - The company adopted ASC Topic 606 for revenue recognition effective April 1, 2019, which requires revenue to be recognized upon transfer of control of goods[52]. Other Financial Information - The company did not declare any dividends for the years ended March 31, 2019, and 2018[115]. - The company has no write-downs recognized for inventories for the years ended March 31, 2019 and 2018[41]. - The company has no material purchase commitments or significant leases as of March 31, 2019[124].