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].
Paranovus Entertainment Technology .(PAVS) - 2020 Q4 - Annual Report