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Paranovus Entertainment Technology .(PAVS) - 2024 Q4 - Annual Report
PAVSParanovus Entertainment Technology .(PAVS)2024-07-31 21:47

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 11.3million)onAugust7,2023[61].−Theacquisitionof10011.3 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 21.42millionasofMarch31,2023,comparedtoalossofapproximately21.42 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,adecreaseof6,544,819, 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,representinganincreaseof9,927,324, representing an increase of 62,259,792 or 86.25% from the net loss of 72,187,116inthefiscalyearendedMarch31,2023[122].−Thecompanyincurredanetlossfromcontinuingoperationsof72,187,116 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,adecreaseof9,927,324, a decrease of 62,259,792 compared to 72,187,116forthefiscalyearendedMarch31,2023,primarilyduetotheterminationofdiscontinuedoperations[149].ShareIssuanceandCapitalRaising−Thecompanyplanstosellupto60millionClassAOrdinarySharesatapriceof72,187,116 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 27million[62].−Thecompanyissuedthree827 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 6millionfromthesaleof3,000,000ClassAordinarysharesatapriceof6 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 27millionbysellingupto60,000,000ClassAordinarysharesatapriceof27 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 1.9million[61].−TheCompanyplanstolaunchtheAI−poweredapplicationSimTwininQ32024,whichwillallowuserstointeractwithdigitalpersonas[74].−Themobilegame10,000LivesisexpectedtolaunchinQ42024,integratingAI−generatedcontentandcelebritypartnerships[74].MarketStrategyandExpansionPlans−ThecompanyaimstousenetproceedsfromsharesalesforstrategicacquisitionsinAI−poweredsolutionsandgeneralcorporatepurposes[62].−ThecompanyplanstoexpanditsmarketreachbyacquiringfirmsspecializinginAIlogistics,deliveryservices,e−commerce,andadvertisingplacements,althoughnoacquisitiontargetshavebeenidentifiedyet[66].−ThemarketingstrategyfortheAIentertainmentbusinesswillleveragesocialmediaanddigitalmarketingtoengagethetargetaudience[78].−TheAIentertainmentbusinessfocusesondevelopingAI−enhancedgamesandapplications,targetingbothcasualandhardcoregamers,withplansforexpansionintoNorthAmericaandAsia−Pacificregions,aswellasemergingmarketsinLatinAmerica,theMiddleEast,andAfrica[34].RegulatoryandComplianceIssues−ThecompanyfacespotentialrisksfromevolvingPRClawsandregulations,whichcouldmateriallyaffectitsoperationsandsecuritiesvalue[67].−ThePCAOB′sabilitytoinspectauditorsiscrucial;failuretocomplycouldleadtotradingprohibitionsundertheHFCAAct[68].−ThePRC′snewCybersecurityReviewMeasuresmayimpactcompanieswithoveronemillionusers,butthecompanycurrentlydoesnotmeetthisthreshold[71].−Thecompanyhasnotbeensubjecttoanycybersecurityreviewasitdoesnotoperatecriticalinformationinfrastructureorholdpersonalinformationofoveronemillionusers[71].EmployeeandCompensationInformation−CEOXiaoyueZhang′sannualbasesalaryis1.9 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 150,000inClassAordinaryshares,withaone−yeartermthatautomaticallyrenews[177].−CFOLingGuo′sannualbasesalaryis150,000 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 27,000inClassAordinaryshares,alsowithaone−yeartermthatautomaticallyrenews[178].−TotalcompensationforMinzhuXu(Chairperson)was27,000 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,andJohnLevy(FormerDirector)received12,500, 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,adecreasefrom944,242, a decrease from 2,049,362 in 2023 and 303,817in2022[157].−CurrentassetsasofMarch31,2024,wereapproximately303,817 in 2022[157]. - Current assets as of March 31, 2024, were approximately 2.85 million, down from 9.79millionin2023and9.79 million in 2023 and 56.57 million in 2022[157]. - The company incurred a net loss of US9,927,324forthefinancialyearendedMarch31,2024,withacashoutflowfromoperatingactivitiesofUS9,927,324 for the financial year ended March 31, 2024, with a cash outflow from operating activities of US11,875,246[252]. - Total assets decreased from 36,340,209in2023to36,340,209 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].