{"url_path":"/sec/sxtc/10-k/2026/item-4","section_key":"item-4","section_title":"Item 4 INFORMATION ON","topic":"sec","document":{"doc_type":"20-F","doc_date":"2026-07-01","source_url":"https://www.sec.gov/Archives/edgar/data/1723980/0001213900-26-074310-index.html","accession_number":"0001213900-26-074310","cik":"0001723980","ticker":"SXTC","issuer_name":"China SXT Pharmaceuticals, Inc.","edgar_url":"https://www.sec.gov/Archives/edgar/data/1723980/0001213900-26-074310-index.html","primary_entity_key":"0001723980","primary_entity_name":"China SXT Pharmaceuticals, Inc."},"word_count":13386,"has_tables":true,"body_markdown":"ITEM 4. INFORMATION ON\nTHE COMPANY\n\n \n\nA. History and Development of the Company\n\n \n\nWe were incorporated in the\nBritish Virgin Islands on July 4, 2017. Our wholly owned subsidiary SXT HK was incorporated in Hong Kong on July 21, 2017. SXT HK in\nturn holds all the capital stocks of WFOE, a wholly foreign owned enterprise incorporated in China on October 13, 2017. WFOE, shareholders\nof Taizhou Suxuantang and Taizhou Suxuantang entered into a series of contractual arrangements, also known as VIE Agreements, on October\n13, 2017. Pursuant to the VIE Agreements, WFOE is regarded as the primary beneficiary of Taizhou Suxuantang and we are able to consolidate\nthe financial statements of Taizhou Suxuantang in accordance with U.S. GAAP. See “-C. Organizational Structure Chart-Contractual\nAgreements between WFOE and Taizhou Suxuantang.”\n\n \n\nPursuant to PRC laws, each\nentity formed under PRC law shall have certain business scope approved by the Administration of Industry and Commerce or its local counterpart.\nAs such, WFOE’s business scope is to primarily engage in technology development, provision of technology service, technology consulting;\ndevelopment of computer software and hardware, computer network technology, game software; provision of enterprise management and related\nconsulting service, human resource consulting service and intellectual property consulting service. Since the sole business of WFOE is\nto provide Taizhou Suxuantang with technical support, consulting services and other management services relating to its day-to-day business\noperations and management in exchange for a service fee approximately equal to the net income of Taizhou Suxuantang, such business scope\nis necessary and appropriate under PRC laws.\n\n  \n\nChina SXT Pharmaceutical\nis a holding company with no business operation other than holding the shares in SXT HK; SXT HK is a pass-through entity with no business\noperation. WFOE is exclusively engaged in the business of managing the operation of Taizhou Suxuantang. Taizhou Suxuantang has become\nprincipally engaged in offering Advanced TCMP products since March, 2015. Before 2015, Taizhou Suxuantang specialized in manufacturing\nand selling Regular and Fine TCMP products.\n\n \n\nOn January 3, 2019, our Ordinary\nShares commenced trading on the Nasdaq Capital Market under the symbol of “SXTC.”\n\n \n\nOur principal executive offices\nare located at 178 Taidong Rd North, Taizhou, Jiangsu, PRC, and our phone number is +86-523-8629-8290. We maintain a corporate website\nat www.sxtchina.com. The information contained in, or accessible from, our website or any other website does not constitute a part of\nthis annual report.\n\n \n\nB. Business Overview\n\n \n\nWe are an offshore holding\ncompany conducting all of our business through our subsidiaries and variable interest entity, Taizhou Suxuantang in China. Neither we\nnor our subsidiaries own any share in Taizhou Suxuantang. Instead, WFOE, Taizhou Suxuantang and its shareholders entered into a series\nof contractual arrangements, also known as VIE Agreements, pursuant to which, we are regarded as the primary beneficiary of Taizhou Suxuantang\nfor accounting purpose, and, therefore, we are able to consolidate the financial results of Taizhou Suxuantang in our consolidated financial\nstatements in accordance with U.S. GAAP.\n\n \n\nOur operations in China are\ngoverned by PRC laws and regulations. Our PRC subsidiaries and variable interest entities are generally subject to laws and regulations\napplicable to foreign investments in China and, in particular, laws and regulations applicable to wholly foreign-owned enterprises. Because\nof our corporate structure, we are subject to risks due to uncertainty of the interpretation and the application of the PRC laws and\nregulations, including but not limited to limitation on foreign ownership of internet technology companies, and regulatory review of\noversea listing of PRC companies through a special purpose vehicle, and the validity and enforcement of the VIE Agreements because they\nhave not been tested in a court of law. We are also subject to the risks of uncertainty about any future actions of the PRC government\nin this regard. The VIE Agreements may not be effective in providing control over our variable interest entities. We may also subject\nto sanctions imposed by PRC regulatory agencies including Chinese Securities Regulatory Commission if we fail to comply with their rules\nand regulations.\n\n \n\n31\n\n \n\n \n\nThrough our subsidiaries\nand variable interest entities in China, we are an innovative pharmaceutical company based in China that focuses on the research, development,\nmanufacture, marketing and sales of TCMP. TCMP is a type of Chinese Traditional Medicine (“TCM”) products that has been widely\naccepted by Chinese people for thousands of years. Throughout the decades of years, TCMP products’ origin, identification, prepared\nprocess, quality standard, indication, dosage and administration, precautions, and storage have been well documented, listed and specified\nin “China Pharmacopoeia” a state-governmental issued guidance on manufacturing TCMP. In recent years, TCMP industry enjoyed\nmore rapid growth than any other segments of the pharmaceutical industry primarily due to the favorable government policies for the TCMP\nindustry. Because of the favorable government policies, TCMP products do not have to go through rigorous clinical trials before commercialization.\nWe currently sell three types of TCMP products: Advanced TCMP, Fine TCMP and Regular TCMP. Although all of our TCMP products are generic\nTCMP drugs and we did not change the medical effects of these products in any significant way, these products are innovative in terms\nof their unconventional administration. The complexity of the manufacturing process is what differentiates these types of products. Advanced\nTCMP typically has the highest quality because it requires specialized equipment and prepared processes to manufacture and has to go\nthrough more manufacturing steps to produce than Fine TCMP and Regular TCMP. Fine TCMP is also manufactured with more refined ingredients\nthan Regular TCMP.\n\n \n\nAs of the date of this annual\nreport, we have developed and introduced a diverse range of products, which include 11 Advanced TCMPs that have been produced and marketed,\n5 Fine TCMPs, 200 Regular TCMPs, and 200 raw medicinal materials. For the fiscal year ended March 31, 2026, Advanced TCMP accounted for\n4.35% of the total revenue, whereas Regular TCMP contributed 95.02% of the total revenue, and Other products made up the remaining 0.63%\nof total revenue, respectively. For the fiscal year ended March 31, 2025, Advanced TCMP accounted for 14.8% of the total revenue, whereas\nRegular TCMP contributed 82.9% of the total revenue, respectively. For the fiscal year ended March 31, 2024, Advanced TCMP accounted\nfor 49.1% of the total revenue, whereas Regular TCMP contributed 49.0% of the total revenue, respectively. Our Advanced TCMP includes\n11 products, which can be further divided into 7 Directly-Oral-TCMP products, and 4 After-Soaking-Oral-TCMP products. Directly-Oral-TCMP,\nas the name suggests, has the advantage of being taken orally. After-Soak-Oral TCMP comes as a small, porous, sealed bag that can be\nimmersed in boiling water to make an infusion. Our major Directly-Oral-TCMP are SanQiFen, CuYanHuSuo, XiaTianWu and LuXueJing; our major\nAfter-Soaking-Oral-TCMP are ChenXiang, SuMu, ChaoSuanZaoRen, and JiangXiang. For each principal product’s indications and year\nof commercialization, see “-Our Products.”\n\n \n\nTaizhou Suxuantang, the VIE\nentity, was founded in 2005. Our revenues decreased from $1,740,907 in fiscal year ended March 31, 2025 to $1,138,052 in fiscal year\nended March 31, 2026, representing a decrease of 35%. Our net loss increased from $3,030,652 in fiscal year ended March 31, 2025 to $6,205,085\nin fiscal year ended March 31, 2026, representing a increase of 88% of net loss during this period. Our revenues decreased from $1,928,497\nin fiscal year ended March 31, 2024 to $1,740,907 in fiscal year ended March 31, 2025, representing a decrease of 10%. Our net loss increased\nfrom $3,098,532 in fiscal year ended March 31, 2024 to $3,303,652 in fiscal year ended March 31, 2025, representing a increase of 7%\nof net loss during this period.\n\n \n\nAs of the date of this annual\nreport, we own 12 Chinese registered trademarks related to our brand “Suxuantang.” In the near future, we plan to increase\nour efforts in cooperation with universities, research institutes, and R&D agents on joint R&D projects involving TCMP processing\nmethods and quality standard, as well as the training of our researchers.\n\n \n\nOur major customers are hospitals,\nespecially TCM hospitals, primarily in the Jiangsu province in China. Another substantial part of our sales is made to pharmaceutical\ndistributors, which then sell our products to hospitals and other healthcare distributors. As of March 31, 2026, our end-customer base\nincludes 46 pharmaceutical companies, 11 chain pharmacies and 12 hospitals in 5 provinces and municipalities in China including Jiangsu,\nAnhui, Jiangxi, Guangdong and Hubei.\n\n \n\nPermissions or Approval Required from the\nPRC Authorities for Our Operations and Listing\n\n \n\nIn order to operate our business\nactivities currently conducted in China, our WFOE and the VIE are required to obtain a business license from the State Administration\nfor Market Regulation (the “SAMR”). As of the date of this annual report, our WFOE and the VIE have obtained all the permissions\nwhich are required to obtain for their operations. Each of our WFOE and the VIE has obtained a valid business license from the SAMR,\nand no application for any such license has been denied.  \n\n \n\n32\n\n \n\n \n\nIn China, the production\nof TCMP must comply with the “Pharmaceutical Administration Law of PRC (2020 Revision)”, “GMP for drugs”, and\n“Good Supply Practice (“GSP”) for drugs”. Companies manufacturing and selling TCMP products must have the License:\n“Pharmaceutical Manufacturing Permit” and “TCM an approval throughout GMP compliance-inspection”. TCMP production\ncompanies that met both of the License Requirements within the scope of production and approval throughout GMP compliance-inspection\nwill not be required to obtain National Medical Products Administration (“NMPA”, in lieu of CFDA effective on December 1,\n2019) or local MPA approval before manufacturing their TCMP products and TCMP products are categorically exempted from being tested clinically\nbecause the effect of TCMP products are impossible to be tested clinically. As a result, TCMP products do not have the NMPA approval\nregistration number, which is typically found in western medicine products. For more details, please see “-Regulations.”\n\n \n\nTCMP also needs to follow\nnational drug reference standard codified in Pharmacopoeia of the PRC (“Guidance”). The Guidance supplies critical information\nto TCMP manufacturers regarding origin of ingredients, description, identification, processing, assay, property and flavor, meridian\ntropism, actions, indications, administration and dosage, precautions and warnings and storage. For more details, please see “Regulations.”\n\n \n\nThe VIE has obtained certificates,\npermits, and licenses required for the operation of a pharmaceutical enterprise and the manufacturing of pharmaceutical products in the\nPRC. We cannot assure you that the VIE can maintain all required licenses, permits and pass the GMP compliance-inspection to carry on\nits business at all times, and in the past from time to time it may have not been in compliance with all such required licenses, permits\nand pass the GMP compliance-inspection. For more details, please see “Item 3. Key Information-D. Risk Factors- Risks Related to\nOur Business-Our business requires a number of permits and licenses.”\n\n  \n\nWe are currently not required\nto obtain permission from any of the PRC authorities for the trading of Class A Ordinary Shares in foreign stock exchanges. In addition,\nwe, our subsidiaries, and the VIE are not required to obtain permission or approval relating to our Class A Ordinary Shares from the\nPRC authorities, including the CSRC or CAC, for our subsidiaries or the VIE’s operations.\n\n \n\nThe General Office of the\nCentral Committee of the Communist Party of China and the General Office of the State Council jointly issued the Opinions, which were\nmade available to the public on July 6, 2021. The Opinions emphasized the need to strengthen the administration over illegal securities\nactivities and the need to strengthen the supervision over overseas listings by Chinese companies. Effective measures, such as promoting\nthe construction of relevant regulatory systems, will be taken to deal with the risks and incidents of China-concept overseas listed\ncompanies, cybersecurity, data privacy protection requirements, and similar matters. The Opinions and any related implementing rules\nto be enacted may subject us to compliance requirements in the future.\n\n \n\nPursuant to the PRC Cybersecurity\nLaw, which was promulgated by the Standing Committee of the National People’s Congress on November 7, 2016 and took effect on June\n1, 2017, personal information and important data collected and generated by a critical information infrastructure operator in the course\nof its operations in China must be stored in China, and if a critical information infrastructure operator purchases internet products\nand services that affects or may affect national security, it should be subject to cybersecurity review by the CAC. On July 30, 2021,\nthe State Council issued Regulation on Protecting the Security of Critical Information Infrastructure, clarifying the definition of critical\ninformation infrastructure as “any of network facilities and information systems in important industries and fields—such\nas public communication and information services, energy, transportation, water conservancy, finance, public services, e-government,\nand science, technology and industry for national defense—that may seriously endanger national security, national economy and people’s\nlivelihood, and public interests in the event that they are damaged or lose their functions or their data are leaked.” On December\n28, 2021, the CAC and other relevant PRC governmental authorities jointly promulgated CAC Revised Measures to replace the original Cybersecurity\nReview Measures. The CAC Revised Measures took effect on February 15, 2022. Pursuant to the CAC Revised Measures, if critical information\ninfrastructure operators purchase network products and services, or network platform operators conduct data processing activities that\naffect or may affect national security, they will be subject to cybersecurity review. On November 14, 2021, CAC published the Administration\nMeasures for Cyber Data Security (Draft for Public Comments), or the “Cyber Data Security Measure (Draft)”, which requires\ncyberspace operators with personal information of more than 1 million users who want to list abroad to file a cybersecurity review with\nthe Office of Cybersecurity Review. The cybersecurity review will evaluate, among others, the risk of critical information infrastructure,\ncore data, important data, or a large amount of personal information being influenced, controlled or maliciously used by foreign governments\nand risk of network data security after going public overseas. We believe that we are not subject to cybersecurity review with the CAC\nin accordance with the CAC Revised Measures, because (i) we are not in possession of or otherwise holding personal information of over\none million users and it is also very unlikely that it will reach such threshold in the near future; and (ii) as of the date of this\nannual report, we have not received any notice or determination from applicable PRC governmental authorities identifying it as a critical\ninformation infrastructure operator.   However, since these statements and regulatory actions are new, it is uncertain how\nsoon legislative or administrative regulation making bodies will respond and what existing or new laws or regulations or detailed implementations\nand interpretations will be modified or promulgated, if any, and the potential impact such modified or new laws and regulations will\nhave on our daily business operation, the ability to accept foreign investments and list on an U.S. exchange.\n\n \n\n33\n\n \n\n \n\nOn February 17, 2023, the\nCSRC promulgated the Trial Measures and five supporting guidelines, which came into effect on March 31, 2023. Pursuant to the Trial Measures,\ndomestic companies that seek to offer or list securities overseas, both directly and indirectly, shall complete filing procedures with\nthe CSRC pursuant to the requirements of the Trial Measures within three working days following its submission of initial public offerings\nor listing application. If a domestic company fails to complete required filing procedures or conceals any material fact or falsifies\nany major content in its filing documents, such domestic company may be subject to administrative penalties, such as an order to rectify,\nwarnings, fines, and its controlling shareholders, actual controllers, the person directly in charge and other directly liable persons\nmay also be subject to administrative penalties, such as warnings and fines.  According to the Notice on the Administrative Arrangements\nfor the Filing of the Overseas Securities Offering and Listing by Domestic Companies from the CSRC, or “the CSRC Notice,”\nthe domestic companies that have already been listed overseas before the effective date of the Trial Measures (namely, March 31, 2023)\nshall be deemed as Existing Issuers. Existing Issuers are not required to complete the filing procedures immediately, and they shall\nbe required to file with the CSRC for any subsequent offerings. Based on the foregoing, if in the future we are going to conduct any\noffering or financing in the U.S., we will complete filing procedures with the CSRC pursuant to the requirements of the Trial Measures.\nIn addition, we have not received any formal inquiry, notice, warning, sanction, or objection from the CSRC with respect our listing\non the Nasdaq Capital Market. However, there remains significant uncertainty as to the enactment, interpretation and implementation\nof regulatory requirements related to overseas securities offerings and other capital markets activities. Any failure or perceived failure\nof us to fully comply with such new regulatory requirements could significantly limit or completely hinder our ability to continue to\noffer securities to investors, cause significant disruption to our business operations, and severely damage our reputation, which could\nmaterially and adversely affect our financial condition and results of operations and could cause the value of our securities to significantly\ndecline or be worthless. See “Item 3. Key Information-D. Risk Factors-Risks Related to Doing Business in China-The Opinions,\nthe Trial Measures, and the revised Provisions recently issued by the PRC authorities may subject us to additional compliance requirements\nin the future.” Other than the foregoing, as of the date of this annual report, we are not aware of any PRC laws or regulations\nin effect requiring that we obtain permission from any PRC authorities to issue securities to foreign investors, and we have not received\nany inquiry, notice, warning, sanction, or any regulatory objection to the listing and trading of our Class A Ordinary Shares from the\nCSRC, the CAC, or any other PRC authorities that have jurisdiction over our operations.\n\n \n\nTransfers Between Our Company, Our Subsidiaries,\nand the VIE\n\n \n\nAs of the date of this annual\nreport, our Company, SXT HK, WFOE, and the VIE have not distributed any earnings or settled any amounts owed under the VIE Agreements.\nOur Company, SXT HK, WFOE, and the VIE do not have any plan to distribute earnings or settle amounts owed under the VIE Agreements in\nthe foreseeable future.\n\n \n\nOur management is directly\nsupervising cash management. Our finance department is responsible for establishing the cash management policies and procedures among\nour departments and the operating entities. Each department or operating entity initiates a cash request by putting forward a cash demand\nplan, which explains the specific amount and timing of cash requested, and submitting it to designated management members of our Company,\nbased on the amount and the use of cash requested. The designated management member examines and approves the allocation of cash based\non the sources of cash and the priorities of the needs, and submit it to the cashier specialists of our finance department for a second\nreview. Other than the above, we currently do not have other cash management policies or procedures that dictate how funds are transferred\nnor a written policy that addresses how we will handle any limitations on cash transfers due to PRC law.\n\n \n\n34\n\n \n\n \n\nDuring the fiscal years ended\nMarch 31, 2026, 2025, and 2024, cash transfers and transfers of other assets between our Company, SXT HK, WFOE, and the VIE were as follows:\n\n \n\nFor the Year Ended March 31, 2026\n\nNo. \nTransfer From \nTransfer To \nApproximate\nValue ($)  \nNote\n\n1 \nThe Company \nSXT HK \n 1,062  \n \n\n2 \nThe Company \nVIE \n 3,000,000  \n \n\n3 \nVIE \nWFOE \n 467,670  \n \n\n4 \nWFOE \nVIE \n 56,914  \n \n\n \n\nFor the Year Ended March 31, 2025\n\nNo. \nTransfer From \nTransfer To \nApproximate\nValue ($)  \nNote\n\n1 \nThe Company \nSXT HK \n 580,000  \n \n\n2 \nSXT HK \nWFOE \n 579,992  \n \n\n3 \nSXT HK \nVIE \n 33,682  \n \n\n4 \nWFOE \nVIE \n 458,016  \n \n\n \n\nFor the Year Ended March 31, 2024\n\nNo. \nTransfer From \nTransfer To \nApproximate\nValue ($)  \nNote\n\n1 \nSXT HK \nWFOE \n 490,785  \n \n\n2 \nWFOE \nVIE \n 648,587  \n \n\n \n\nDividends or Distributions Made to our Company\nand U.S. Investors and Tax Consequences\n\n \n\nAs of the date of this annual\nreport, none of our subsidiaries or the VIE have made any dividends or distributions to our Company and our Company has not made any\ndividends or distributions to our shareholders. We intend to keep any future earnings to finance the expansion of our business, and we\ndo not anticipate that any cash dividends will be paid in the foreseeable future. Subject to the passive foreign investment company (“PFIC”)\nrules, the gross amount of distributions we make to investors with respect to our Class A Ordinary Shares (including the amount of any\ntaxes withheld therefrom) will be taxable as a dividend, to the extent that the distribution is paid out of our current or accumulated\nearnings and profits, as determined under U.S. federal income tax principles.\n\n \n\nSubject to the BVI Act and\nour M&A, our directors may, by resolution, declare dividends at a time and amount as they think fit if they are satisfied, based\non reasonable grounds, that, immediately after distribution of the dividend, the value of our assets will exceed our liabilities and\nwe will be able to pay our debts as they fall due.\n\n \n\nIf we determine to pay dividends\non our Class A Ordinary Shares in the future, as a holding company, we will depend on receipt of funds from our WFOE and from the VIE\nto our WFOE in accordance with the VIE Agreements. Pursuant to the EIT Law and its implementation rules, any dividends paid by WFOE to\nSXT HK will be subject to a withholding tax rate of 10%. However, if SXT HK is determined by the relevant PRC tax authority to have satisfied\nthe relevant conditions and requirements under the Arrangement between the Mainland China and the Hong Kong Special Administrative Region\nfor the Avoidance of Double Taxation and Tax Evasion on Income, or the “Double Tax Avoidance Arrangement,” and other applicable\nlaws, the 10% withholding tax on the dividends SXT HK receives from WFOE may be reduced to 5%.\n\n \n\n35\n\n \n\n \n\nCurrent PRC regulations permit\nWFOE, our indirect subsidiary, to pay dividends to SXT HK only out of its accumulated profits, if any, determined in accordance with\nChinese accounting standards and regulations. In addition, our WFOE is required to set aside at least 10% of its after-tax profits each\nyear, if any, to fund a statutory reserve until such reserve reaches 50% of its registered capital. Each of such entity in the PRC is\nalso required to further set aside a portion of its after-tax profits to fund the employee welfare fund, although the amount to be set\naside, if any, is determined at the discretion of its board of directors. Although the statutory reserves can be used, among other ways,\nto increase the registered capital and eliminate future losses in excess of retained earnings of the respective companies, the reserve\nfunds are not distributable as cash dividends except in the event of liquidation. Furthermore, if our subsidiaries and the VIE in China\nincur debt on their own in the future, the instruments governing the debt may restrict their ability to pay dividends or make other payments.\nIf we or our subsidiaries are unable to receive all of the revenue from our operations, we may be unable to pay dividends on our Class\nA Ordinary Shares.\n\n \n\nUnder existing PRC foreign\nexchange regulations, payments of current account items, including profit distributions, interest payments, and trade and service-related\nforeign exchange transactions, can be made in foreign currencies, without prior approval of SAFE, by complying with certain procedural\nrequirements. Specifically, without prior approval of SAFE, cash generated from the operations in PRC may be used to pay dividends to\nour Company. As of the date of this annual report, our WFOE has conducted the foreign exchange registration related to our Company under\nthe existing PRC foreign exchange regulations, which enables our PRC subsidiary to legally distribute their earnings to our Company.\n\n \n\nOur Company’s ability\nto settle amounts owed under the VIE Agreements relies upon payments made from Taizhou Suxuantang to WFOE in accordance with the VIE\nAgreements. For services rendered to Taizhou Suxuantang by WFOE under the Exclusive Business Cooperation Agreement, WFOE is entitled\nto collect a service fee approximately equal to the net income of Taizhou Suxuantang. Pursuant to the Exclusive Option Agreement, WFOE\nmay at any time and under any circumstances, or have its designee, purchase, at its discretion, to the extent permitted under PRC law,\nall or part of the shareholders’ equity interest in Taizhou Suxuantang.\n\n \n\nOur Products\n\n \n\nWe currently sell two types\nof TCMP products: Advanced TCMP and Regular TCMP, for the year ended March 31, 2026 and 2025.\n\n \n\nAdvanced TCMP\n\n \n\nAdvanced TCMP typically has\nthe highest quality because it requires specialized equipment to manufacture and has to go through more manufacturing steps to produce\nthan Fine TCMP and Regular TCMP. Although Advanced TCMP has the same medicinal effects as Fine and Regular TCMP and cannot be considered\na new type of medicine, Advanced TCMP is much easier to be taken since it does not require decoction. We have two types of Advanced TCMP\ndepending on the way it is consumed, Directly-Oral-TCMP and After-Soaking-Oral-TCMP products.\n\n \n\n*Directly-Oral-TCMP*\n\n \n\nDirectly-Oral-TCMP is a novel\nAdvanced TCMP recently cataloged on Pharmaceutical GMP (version 2010) and China Pharmacopoeia (version 2020) Parts I and IV. The products,\nunlike Regular TCMP, can be taken orally without decocting. Following the principle of Directly-Oral-TCMP, we have established a new\nscientific and technological strategy and methods for the research and development of the direct-oral pharmaceutical TCMP products. Our\nproducts comply with the regulations of the NMPA and provincial MPA, as well as keep the principles of TCM. Our R&D results indicated\nthat the Directly-Oral-TCMP products, in contrast to Regular TCMPs, have significant advantages in terms of preserving the quality of\nthe TCM original ingredients, and being safer and easier to use.\n\n \n\n*After-Soaking-Oral TCMP*\n\n \n\nAfter-Soaking-Oral TCMP is\nanother new type of Advanced TCMP, which can be taken after soaking with hot water without decocting. It is defined on China Pharmacopoeia\n(version 2020) Parts I and IV. Like the Directly-Oral-TCMP, we also have built a new scientific and technological strategy and methods\nfor the R&D of the after-soaking orally pharmaceutical TCMP products. The products comply with the regulations of the NMPA and local\nMPA, as well as retain the principles of TCM. Like Directly-Oral-TCMP, our After-Soaking-Oral-TCMP provide the special features of being\nnon-decocting, such as keeping NMPA-recognized TCM theoretic fundamental principles, preserving the quality of TCM original ingredients,\nincreasing aqueous extracts to improve bioavailability for bioactive constitutes, and being easy to use and store.\n\n \n\n36\n\n \n\n \n\nFine TCMP\n\n \n\nWe have 5 Fine TCMP products\nfor drug stores and hospitals. Our Fine TCMP products are manufactured manually from only high-quality authentic ingredients derived\nfrom their region of origin. During the year ended March 31, 2024, we decided to discontinue cooperation with major clients in the sales\nof Fine TCMP, and not to develop or sell Fine TCMP products in future.\n\n \n\nRegular TCMP\n\n \n\nWe currently manufacture\nalmost 200 Regular TCMP products listed on China Pharmacopoeia (version 2020) Parts I and IV for hospitals and drug stores for the treatment\nof various diseases or serving as dietary supplements. \n\n \n\nWe currently have a product-developed\nportfolio of 11 Advanced TCMP products which have been commercialized, 200 Regular TCMP products, and 200 raw medicinal materials that\naddress a wide variety of diseases and medical indications. All of our products have complied with quality, dosage, safety and efficacy\nstandards of Chinese Pharmacopoeia and have been granted permits issued by the Jiangsu MPA based on product manufacturing scope described\nin the Pharmaceutical Product Permit and GMP certification, and most of our products are sold on a prescription basis. The following\ntable summarizes the approved indications for our marketed TCMP products and the year in which each such product was first marketed to\nour distributors.\n\n \n\nProduct\n \nIngredients\n \nIndication\n \nYear\nof\n\nCommercial\n\nLaunch\n\nSanQiFen\n(powders)\n \nPowders of roots and rhizomes\nof *Panax notoginseng*containing ginsenoside and sanchinoside, dencichine, flavonoids, amino acids.\n \nCoronary heart disease;\nhigh cholesterol; angina; hyperlipidemia; hemorrhage (bleeding); hepatobiliary diseases; intractable headache; and cancer.\n \n2015\n\n \n \n \n \n \n \n \n\nHongQi\n(pieces)\n \nDry roots of *Hedysarum\npolybotrys*containing flavonoids, saponins, polysaccharides.\n \nSweating; dizziness, palpitations;\nshortness of breath; chronic diarrhea archoptosis; dyspeptic fullness; indigestion; hemiplegia, arthralgia, numbness; chronic wound;\ndiabetic nephropathy; low immunity; cancer; and liver disease.\n \n2015\n\n \n \n \n \n \n \n \n\nSuMu\n(powders)\n \nPowders heartwoods of *Caesalpinia\nsappan*containing homeisoflavonoid, and triterpenoid compounds.\n \nDigestive tract tumor;\nliver cancer; ovarian neoplasms; cervical cancer; chronic myeloid leukemia; fracture; traumatic injury; thoracic abdominal pain;\ncarbuncle furuncle sore; immunosuppressive agent; and diabetes.\n \n2015\n\n \n \n \n \n \n \n \n\nJiangXiang\n(powders)\n \nPowder of heartwoods of\ntrunks and roots of *Dalbergia odorifera*containing flavonoid, terpenoid, volatile constituents.\n \nCoronary heart disease;\nangina pectoris, arrhythmia; hypertension; hyperlipidemia; dizziness; vomiting blood, nose bleed, bleeding and injury; pain caused\nby ecchymoma; pediatric glomerulonephritis; and pediatric pneumonia.\n \n2015\n\n \n \n \n \n \n \n \n\nCuYanHuSuo\n(powders)\n \nPowders of dry tubers of\n*Corydalis yanhusuo*W.T.Wang containing isoquinoline alkaloids.\n \nVarious pains (non-addictive\nanalgesics); Paroxysmal atrial fibrillation; Rapid supraventricular arrhythmia; Superficial gastritis; Acute or chronic torsion and\ncontusion\n \n2015\n\n \n \n \n \n \n \n \n\nXiaTianWu\n(powders)\n \nPowders of tubers of *Corydalis\ndecumbens*containing isoquinoline alkaloid constituents.\n \nHemiplegia; facial paralysis;\ncerebral infarction; waist intervertebral disc prominent sickness; cervical spondylopathy; shoulder periarthritis; sciatica; arthritic\nsymptoms; cerebral apoplexy; and pseudomyopia.\n \n2016\n\n \n \n \n \n \n \n \n\nLuXueJing\n(crystal-like scales)\n \nDry blood of *Cervus\nnippon or Cervus elaphus*containing proteins.\n \nLeukopenia; thrombocytopenia;\nor hypoimmunity; chronic anemia; aplastic anemia; erectile dysfunction; and postoperative rehabilitation.\n \n2016\n\n \n\n37\n\n \n\n \n\nProduct\n \nIngredients\n \nIndication\n \nYear\nof\n\nCommercial\n\nLaunch\n\nXueJie\n(powders)\n \nPowders\nof fruit resins of *Daemonorops draco*containing flavanoide, terpenoid, and phlobaphene constituents, and resins.\n \nMyocardial\ninfarction; coronary heart disease, angina pectoris; anorectal, gastrointestinal diseases; internal and external bleeding; chronic\ninflammatory colitis; chronic dermal ulcer; cervical erosion, diabetic foot ulcer; scrotal edema; and post-herpetic neuralgia.\n \n2016\n\n \n \n \n \n \n \n \n\nChaoSuanZaoRen\n(powders)\n \nPowders of slight flied\nseeds of *Ziziphus jujuba*containing flavonoid, saponin, alkaloid compounds.\n \nInsomnia, upsetting; spontaneous\nsweating; night sweat; hyperhidrosis; cardiovascular atherosclerosis; hypertension; high blood lipids; epileptic; and hypoimmunity.\n \n2016\n\n \n \n \n \n \n \n \n\nHongQuMi\n(grains)\n \nDry rice fermented by fungi\n*Monascus purpureus*containing monacolins, monascus pigments, polysaccharides.\n \nHigh blood lipids, high\nblood pressure; postpartum lochiorrhea; abdominal pain; dyspeptic fullness; indigestion; poor appetite; osteoporosis, climacteric\nsyndrome; hypoimmunity; and diabetic nephropathy syndrome\n \n2016\n\n \n \n \n \n \n \n \n\nChuanBeiMu\n(powders)\n \nPowders of bulbus of *Fritilaria\ncirrhosa*or *F. unibracteata*or *F*. *przezvalskii*or *F. delavayi* or *F. taipaiensis*, or *F.\nunibracteata*containing alkaloid, sterol, nucleosides constituents.\n \nChildren with chronic irritating\ncough; difficultly in expectoration; sore throat; acute or chronic bronchitis; dry cough; epilepsy; mastitis; and hypertension.\n \n2017\n\n \n \n \n \n \n \n \n\nHuangShuKuiHua\n(powders)\n \nPowders of corollas of\n*Abelmoschus manihot*containing flavonoid and flavone glycoside, polysaccharide constituents, volatile oil, proteins.\n \nChronic nephritis; hydremic\nnephritis; adiabatic nephropathy; oral ulcers; parotitis; edemas; cerebrovascular disease; cancer; and scalds or burns.\n \n2017\n\n \n \n \n \n \n \n \n\nWuWeiZi\n(Crude powders)\n \nRipe fruits of *Schisandra\nchinensis* (Turcz.) Baill. containing lignans, volatile constituents, organic acids, sterol, vitamin C, vitamin E.\n \nAcute or chronic hepatitis;\ndizziness and vitreous opacification; neurasthenic and insomnia; asthma and bronchitis; angioneurotic headache; gallstones.\n \n2018\n\n \n \n \n \n \n \n \n\nDingXiang\n(powders)\n \nBuds of *Ewgewia caryophyllata*Thunb. containing volatile oil, such aseugenol, beta-caryophyllene, humuleno, chavicol, eugenone; flavonoids, and triterpenoid\nconstituents.\n \nAbdominal pain; hiccup;\nnausea and vomiting; erectile dysfunctiona (ED); chronic gastritis and gastric ulcer; tooth pains.\n \n2018\n\n \n \n \n \n \n \n \n\nRenShen\n(powders)\n \nRoots and rhizomes of *Panax\nginseng* C. A. Mey. containing panaxosides, such as panaxoside Rg1, Re, Rb1, flavonoids, panax polysaccharides, organogermanium.\n \nCardiogenic shock, fatigue,\ndiabetes, impotence, senility, and asthenic overstrain.\n \n2018\n\n \n \n \n \n \n \n \n\nQingGuo\n(crude powders)\n \nDry\nfruits of *Canarium album*Raeusch. containing flavonoids, triterpenes, lignans, polyphenols, organic acids, volatile oil, etc.\n \nSore\nthroat, laryngopharyngitis, cough, allergic asthma, diabetes, and intoxication.\n \n2018\n\n \n\n38\n\n \n\n \n\nProduct\n \nIngredients\n \nIndication\n \nYear\nof\n\nCommercial\n\nLaunch\n\nJueMingZi\n(powders)\n \nMature seeds of *Cassia\nobtusifolia* L. containing anthraquinones, naphthyl ketones, fatty acids, volatile constituents, daidzein, polysaccharides, amino\nacids.\n \nHigh blood pressure; hyperlipidemia;\ncerebrovascular diseases; constipation; mastitis; ophthalmologic diseases.\n \n2018\n\n \n \n \n \n \n \n \n\nShaRen\n(powders)\n \nRipe fruits of *Amomom\nvillosum* Lour. or *A. villosum var. xanthioides* T. L. Wu et Senjen or *A. longiligulare* T. L. Wu containing volatile\nconstituents and flavonoids.\n \nGastric and duodenal ulcer;\nenteritidis; pediatrics abdominal pain and chronic diarrhea; irritable bowel syndrome; threatened abortion; chronic renal failure;\nglomerulonephritis; Kidney stones; asthma; chronic myeloid leukemia; malignant lymphoma.\n \n2018\n\n \n\nWe believe we are well-positioned\nin a steadily growing industry in one of the fastest-growing economies in the world. We currently manufacture a number of advanced TCMP\nthat were among the first to market in the PRC. Instead of requiring consumers that take TCMP to go through the rather complex decoction\nprocess before use, our advanced Chinese medicine products can be simply administered orally as tablets, capsules or liquids. We believe\nthis innovative feature of our products has given us a competitive edge in the market. In addition, and unlike chemical entity medicines\nand Traditional Chinese Patent Medicine (“TCPM”, also known as “中成药” in Chinese) products\nwhich can only be sold to GSP-certified pharmaceutical distributors according to latest Guidelines on Perfecting Medicine Procurement\nof Public Hospitals in China, our TCMP products can also be sold directly to hospitals. We expect to continue to gain additional competitive\nadvantages through the growing pipeline of new TCMP products. Our diverse portfolio of products and our new product pipelines include\nproducts for high-incidence and high-mortality conditions in the PRC, such as cardiovascular, central nervous system (“CNS”),\ninfectious, and digestive diseases.\n\n \n\nOur Suppliers, Customers and Distributors\n\n \n\nWe believe we have a well-functioning\nproduction and sales network. Our current Chinese medicine product portfolio is comprised of both prescription drugs and supplements.\nWe have 5 major suppliers located in Anhui province in China, one of the largest TCM markets in China, and other major suppliers in provinces\nsuch as Jiangsu, Jiangxi, Sichuan and Hebei. We have long-term relationship with these suppliers, who supply raw materials of genuine\nTCM for our production process.\n\n \n\nOur major customers are hospitals,\nespecially TCM hospitals primarily in the Jiangsu provinces in China and pharmaceutical wholesalers. The wholesalers distribute our products\nto hospitals and other healthcare distributors such as Jiuzhoutong Pharmaceutical Co. Ltd. As of March 31, 2026, our end-customer base\nincludes 46 pharmaceutical companies, 11 chain pharmacies and 12 hospitals in 5 provinces and municipalities in China including Jiangsu,\nAnhui, Jiangxi, Guangdong and Hubei.\n\n \n\nWe currently have 4 sales\noffices covering 12 of China’s major provinces/municipalities, including Jiangsu, Hubei, Shandong, Liaoning, Anhui, Henan, Jiangxi,\nGuangdong, Chongqing, Sichuan, Hebei and Fujian, and over 68 sales representatives who assist in managing our relationships with our\nexisting distributors and developing future distributors.  With relatively less intermediaries involved in distribution and sales\ncompared to many other pharmaceutical companies in China, we are able to keep our selling cost lower than the industry average.\n\n \n\nResearch and Development\n\n \n\nWe devote substantial resources\nto the research and development of new products, which do not require additional approval from regulatory agencies unless the products\nare TCMPs.\n\n \n\nOur general R&D strategy\nwas established to use advanced technology to revolutionize TCMP production and continue developing newly advanced and non-decocting\nTCMP/TCM products capable of meeting the highest quality standard.\n\n \n\n39\n\n \n\n \n\nThe strategy includes a calculated\nsystem of studying aqueous extracting ratio and fingerprint or characteristic charts of components, quantization of bioactive compounds,\nquality control, stability, development of production process of TCMP products, and establishing a higher benchmark for advanced TCMP\nproducts in China.\n\n \n\nIn 2017, our R&D team\nfound that electron beam (“e-beam”) processing could break down certain medicinal plant cells to create additional paths\nfor components in the cells to be extracted into aqueous solution more easily. This processing significantly improved the bioavailability\nof some TCMP forms (such as pieces). Our research data on our Directly-Oral-TCMP and After-Soaking-Oral-TCMP indicated the total aqueous\ncomponent and bioactive compound extracting ratios at 37±1oC (human body temperature) were increased by 15% through\ne-beam processing than through regular extraction processing; the finding has been included in our patent application for each product.\n\n \n\nOur R&D team has received\nnumerous national awards for its significant contribution in the TCMP field. Recently in the China Scientist Forum, we received three\nawards on the research and development of Directly-Oral TCMP and After-Soaking-Oral TCMP products: Innovation Award, Outstanding Contribution\nAward, Best R&D Article Award, and State High-tech Enterprise which further demonstrated that we maintain a national leading position\nin the research and development of Advanced TCMP.\n\n \n\nWe built a DNA Exam Laboratory\nwhich was approved by Jiangsu province Medical Product Administration (JSMPA) in October of 2019. The Laboratory has been granted to\nperform research and development (R&D) and quality control of TCM raw materials and TCMP products applying DNA testing technology.\n\n \n\nWe believe our R&D team\nholds a leading position in the R&D field of Advanced TCMP products based on our market analysis of our 11 Advanced TCMP. We will\ncontinue to sharpen our advantages and expect to develop new Advanced TCMP products in the foreseeable future.\n\n \n\nUnder the administration\nand regulation of the NMPA, a new TCMP product is subject to GMP requirements to comply with corresponding standards of Chinese Pharmacopeia\n(Version 2020) Parts I and Part IV before it can be sold commercially without clinic trai’ls and any additional approval from the\nNMPA. As of the date of this annual report, we have developed 7 Directly-Oral-TCMP and 10 After-Soaking-Oral-TCMP products which are\ncommercially marketed all of those to pharmaceutical distributors/hospitals. \n\n \n\nIn December 2018, we reconstructed\nand assembled an 850-square-meter facility and received a “Food Manufacturing Certificate” issued by the local Food and Drug\nAdministration, which granted the Company permission to produce TCMHS (TCM Homologous Supplements). The scope of production includes\n“substitute teas,” made of TCMHS plants, and “solid beverage” a kind of granule produced through extraction of\nTCMHS materials.\n\n \n\nWe extended our production\nfacility for lyophilization processing, also known as freeze drying, and received a new Pharmaceutical Manufacturing Permit with a new\nproduction scope of lyphilization processing from Jiangsu Province MPA on June 1, 2021. This lypohilization processing allows us to utilize\nthe lyophilization technology for production of our products, especially Directly-Oral-TCMPs and After-Soaking-Oral-TCMPs, which contain\ntemperature-sensitive components.\n\n \n\nThe lyophilization process\nis freezing materials or products and then removing the frozen water by sublimation (so ice turns directly into vapor leaving out the\nliquid phase). After going through the lyophilization process, materials or products become e loose and fragile, as a result, remarkably\nimproving their aqueous solubility. Also, this process can make materials or products dryer, which can extend our products’ shelf\nlife. More importantly, it can keep the original ingredients materials or products under frozen-drying condition. Our Directly-Oral-TCMP,\nLuxuejing, which is made from fresh bloods of *Cuerus nippon* can enjoy such advantages provided by lyophilization process and have\nbetter quality.\n\n \n\nAs of the date of this annual\nreport, we have successfully developed four solid beverage products.\n\n \n\n40\n\n \n\n \n\nIntellectual Property\n\n \n\nWe emphasize the protection\nof intellectual property and have signed agreements with patent agents to assist us to file patent applications. We also have signed\nconfidentiality agreements with every employee we have to protect our production design. We will submit an application for every technology,\nproduction design and research results to the Chinese national intellectual property department to get protection for our intellectual\nproperty. The beneficiary of all of our patent applications is “Taizhou Suxuantang.”\n\n \n\nUnder the Patent Law of the\nPeople’s Republic of China (Revised), the validity period of patent rights for an invention shall be 20 years, which shall commence\nfrom the date of application. Currently, we have the following 28 utility model and invention patents:\n\n \n\nName\n \nPatent\nType\n \nPatent\n\nApplication No.\n \nApplication\n\nDate\n\nA\nchopping knife type medicine cutting machine for traditional Chinese medicine\n \nUtility\nModel\n \nCN202222093724.8\n \n2022.08.10\n\nAn\nautomatic packaging machine for traditional Chinese medicine decoction pieces with flat sealing\n \nUtility\nModel\n \nCN202222669609.0\n \n2022.10.11\n\nA\ncontinuous sealing machine for plastic film of traditional Chinese medicine decoction pieces\n \nUtility\nModel\n \nCN202222670077.2\n \n2022.10.11\n\nA\nrapid liquid extraction device for traditional Chinese medicine\n \nUtility\nModel\n \nCN202222391943.4\n \n2022.09.09\n\nA\nhigh-speed reciprocating medicine cutting machine for traditional Chinese medicine\n \nUtility\nModel\n \nCN202222391745.8\n \n2022.09.09\n\nA\npowder packaging machine for traditional Chinese medicine\n \nUtility\nModel\n \nCN202222391578.7\n \n2022.09.09\n\nA\nmulti-stage residue treatment device for traditional Chinese medicine\n \nUtility\nModel\n \nCN202221746367.4\n \n2022.07.08\n\nA\nliquid extraction device for Chinese herbal medicine\n \nUtility\nModel\n \nCN202222093718.2\n \n2022.08.10\n\nA\nmoisturizing machine for moisturizing traditional Chinese medicine\n \nUtility\nModel\n \nCN202221411988.7\n \n2022.06.08\n\nA\nlow-temperature drying and ozone sterilization cabinet for traditional Chinese medicine preservation\n \nUtility\nModel\n \nCN202221746470.9\n \n2022.07.08\n\nA\nhigh-efficiency mixing device for refined traditional Chinese medicine decoction pieces\n \nUtility\nModel\n \nCN202021884165.7\n \n2020.09.02\n\nA\nliquid extraction device for refined traditional Chinese medicine decoction pieces processing\n \nUtility\nModel\n \nCN202021814950.5\n \n2020.08.27\n\nA\ncleaning device for traditional Chinese medicine decoction pieces\n \nUtility\nModel\n \nCN202021893061.2\n \n2020.09.03\n\nA\nraw material crushing device for refined traditional Chinese medicine decoction pieces processing\n \nUtility\nModel\n \nCN202021791297.5\n \n2020.08.25\n\nA\ngrinding equipment for modern traditional Chinese medicine decoction pieces processing\n \nUtility\nModel\n \nCN202021802618.7\n \n2020.08.26\n\nA\nraw material stirring device for refined traditional Chinese medicine decoction pieces processing\n \nUtility\nModel\n \nCN202021815137.X\n \n2020.08.27\n\nA\npressing device for oral decoction pieces processing\n \nUtility\nModel\n \nCN202021793481.3\n \n2020.08.25\n\nA\nsealed storage device for refined traditional Chinese medicine decoction pieces\n \nUtility\nModel\n \nCN202022150842.9\n \n2020.09.27\n\nA\npost-processing device for refined decoction pieces with recyclable residue\n \nUtility\nModel\n \nCN202021815136.5\n \n2020.08.27\n\nA\ncanning device for refined decoction pieces processing\n \nUtility\nModel\n \nCN202021792405.0\n \n2020.08.25\n\nA\npackaging device for refined decoction pieces processing\n \nUtility\nModel\n \nCN202021791301.8\n \n2020.08.25\n\nA\nclamping device for oral decoction pieces processing\n \nUtility\nModel\n \nCN202021801747.4\n \n2020.08.26\n\nA\ndrying device for refined traditional Chinese medicine decoction pieces\n \nUtility\nModel\n \nCN202022150828.9\n \n2020.09.27\n\nDendrobium\npowder crushing method\n \nInvention\n \nCN201910946550.5\n \n2019.10.06\n\nA\ngrinding device for precious traditional Chinese medicine\n \nInvention\n \nCN201910364895.X\n \n2019.04.30\n\nA\ntablet grinding method\n \nInvention\n \nCN201810375362.7\n \n2018.04.24\n\nA\ntubular film evaporator for pharmaceutical use\n \nInvention\n \nCN201810603332.7\n \n2018.06.12\n\nA\nsowing device for traditional Chinese medicine planting\n \nInvention\n \nCN201910075080.X\n \n2019.01.25\n\n \n\n41\n\n \n\n \n\nEnvironmental Matters\n\n \n\nWe comply with the Environmental\nProtection Law of China as well as applicable local regulations. In addition to statutory and regulatory compliance, we actively ensure\nthe environmental sustainability of our operations. Penalties may be levied upon us if we fail to adhere to and maintain certain standards.\nSuch failure has not occurred in the past, and we generally do not anticipate that it will occur in the future, but no assurance can\nbe given in this regard.\n\n \n\nManufacturing\n\n \n\nRegularly, raw materials\nused in the production of TCMP, primarily medicinal plants, first go through a purifying process, during which raw materials are selected,\ncut, rinsed and dried. Processed raw materials then go through a series of extraction processes that involve mixing with solvents, soaking,\nstewing, drying and grinding. Materials extracted from the plants are then processed into various dosage forms such as capsules, tablets,\nsyrups, tinctures and granules. In the past, many steps in the manufacturing of TCMP were performed manually, with limited assistance\nfrom modern production equipment, which resulted in a lack of quality and dosage consistency; such manual processing also resulted in\nlengthy production cycles. We refined the traditional labor intensive manufacturing process to employ modern technology and production\nequipment to help us improve the quality of our products and to increase manufacturing yield. We use two unique manufacturing methods:\n\n \n\n*1. High-Energy Electron Beam Sterilization\nMethod*\n\n \n\nE-beam processing or electron\nirradiation is a process that involves using beta radiation, usually of high energy, to treat an object for a variety of purposes. E-beam\nprocessing has the ability to break the chains of DNA in living organisms, such as bacteria, resulting in microbial death and rendering\nthe space they inhabit sterile. E-beam processing has been used for the sterilization of medical products and aseptic packaging materials\nfor foods as well as disinfestation, the elimination of live insects from grain, tobacco, and other unprocessed bulk crops.\n\n \n\nSterilization with electrons\nhas significant advantages over current methods of sterilization. The process is quick, reliable, and compatible with most materials,\nand does not require any quarantine following the processing. For some materials and products that are sensitive to oxidative effects,\nradiation tolerance levels for electron beam irradiation may be slightly higher than for gamma exposure. This is due to the higher dose\nrates and shorter exposure times of e-beam irradiation that have been shown to reduce the degradative effects of oxygen.\n\n \n\nOur research results on the\nsterilization of TCMP products revealed that certain high energy e-beam processing is a quick, efficient, reliable, non-degradable, and\ncompatible sterilization method for most advanced TCMP products. Combining with the guideline on TCM irradiation sterilization released\nby NMPA on November 11, 2015, we use the e-beam processing for the sterilization of Directly-Oral TCMP and After-Soaking-Oral TCMP products.\nThe e-beam processing is carried out at a certified and contracted company in Taizhou city of Jiangsu province in the PRC under our closed\nsupervision. The technical method applied for the sterilization has been in our patent application for each product.\n\n \n\n*2. Dust-Sucking Thermostatic Pulverizing\nTechnique*\n\n \n\nWe also apply the dust sucking\nthermostatic pulverizing technique for the pulverization of various materials such as roots, barks, fruits, seeds, and leafs to produce\nthe Fine and Advanced TCMP products. This technique allows raw materials to go through multiple filters and cleaning mechanisms to remove\nimpurities.\n\n \n\nQuality Control and Assurance\n\n \n\nIn China, each pharmaceutical\nmanufacturer was required to comply with the GMP standards and to obtain Pharmaceutical Product Manufacturing Permits and GMP Certification\ngranted by the NMPA of the PRC before it engages in any pharmaceutical manufacturing and distribution. GMP standards regulate whole processes\nand procedures in generating pharmaceutical products to ensure the quality in China. Those include strict Quality Control (“QC”)\nand Quality Assurance (“QA”).\n\n \n\nChina National People’s\nCongress promulgated a new Pharmaceutical Administration Law of PRC, and was effective as of December 1, 2019. NMPA is the new agency\nthat replaced CFDA. The pharmaceutical GMP compliance-inspection replaced the “Pharmaceutical Certificate”. As a result,\npharmaceutical manufacturers are required to obtain a “Pharmaceutical Manufacturing Permit” and pass pharmaceutical GMP compliance-inspection\n\n \n\nBesides the strict pharmaceutical\nGMP requirements, TCMP manufacturers also need to obtain pharmaceutical product manufacturing permit specifically tailored to manufacturing\nof TCMP products.\n\n \n\nWe are GMP requirements-certified\nand have obtained a Pharmaceutical Manufacturing permit with the product manufacturing scopes covering all including specific types of\nTCMP. We have well-qualified and trained professional employees for manufacturing and quality control procedures. Our quality control\nstarts with procurement and continues in our manufacturing, packaging, storage capabilities, and cost competitiveness to ensure that\nall of our products meet the requirements and are still profitable.\n\n \n\n42\n\n \n\n \n\nCertificates and Permits\n\n \n\nA pharmaceutical manufacturer,\nincluding a TCMP manufacturer, must obtain a Pharmaceutical Manufacturing Permit from the NMPA’s relevant provincial branch. This\npermit is valid for five years and is renewable for an additional five-year period upon its expiration. Our current Pharmaceutical Manufacturing\nPermit, issued by the NMPA, will expire on December 17, 2025. Generally, we will file a renewal request 3 months before the expiration\ndate.\n\n \n\n*Good Manufacturing Practice.*\nA pharmaceutical manufacturer must meet the GMP requirements and standards for each of its production facilities in China for each form\nof pharmaceutical product it produces. GMP requirements and standards include staff qualifications, production premises and facilities,\nequipment, raw materials, environmental hygiene, production management, quality control and customer complaint administration. If a manufacturer\nfails to meet the GMP requirements and standards in the NMPA non-scheduled compliance-inspection, it may be suspended the Pharmaceutical\nManufacturing Permit by the NMPA.\n\n \n\nOur manufacturing facility\npreviously held a GMP Certificate, which was valid from August 5, 2019, to August 4, 2024. Following a change in government policy, regulatory\nauthorities no longer issue new GMP Certificates and instead provide an inspection satisfactory notice upon verification of compliance.\nIn April 2024, we underwent a GMP compliance inspection by the relevant government authority. As of the date of this annual report, we\nhave received the inspection satisfactory notice and have not been notified of any revocation or suspension of this notice. Beside regular\nTCMP, fine TCMP, and Directly-oral TCMP, the high-Energy Electron Beam Sterilization Method utilized currently for our advanced TCMP\nproducts, and classification of After-Soaking-Oral TCMP had been also certified in the scope of production processing.\n\n \n\nCompetition\n\n \n\nWe compete with other top-tier\npharmaceutical companies specialized in manufacturing TCM in China. Many of them entered into TCMP markets earlier than us, thus they\nare more established than we are and have significantly greater financial, technical, marketing and other resources than we presently\npossess. Some of our product competitors have greater name recognition and a larger customer base. Those competitors may be able to respond\nmore quickly to new opportunities or market changes or customer requirements, and may be able to undertake more extensive promotional\nactivities, offer more attractive terms to distributors, and adopt more aggressive pricing policies. Some of our competitors have also\ndeveloped similar TCMP products that compete with ours.\n\n \n\nNumerous competitors nationwide,\nincluding Kangmei, CTCM and Xiangxue, participate in the sale of Chinese medicinal herbs and TCMPs; among them are some high-profile\nand large-scale companies along with some companies that have huge production and storage capacity to influence the market price. Despite\nthat, we believe we are well-positioned to compete in this fast-developing market with our well recognized Suxuangtang brand, diversified\nproduct portfolio, proven research and development and in-licensing capabilities, established sales and marketing network, management\nexperience and favorable cost structure.\n\n \n\nOur Competitive Advantages\n\n \n\nWe believe our principal\ncompetitive strengths are as follows:\n\n \n\n*Recognized Brand Name*\n\n \n\n“Suxuangtang”\n(苏轩堂), which has over 270 years of history, is a well-known TCM brand in China, especially in Eastern China. Because\nof its brand recognition, Suxuantang has received numerous awards from the local government such as the Jiangsu Taizhou Famous Product\nAward and Well-known Brand Trademark granted by the government of Taizhou city. To some, Suxuangtang is more than just a TCM brand; it\nis a symbol of tradition and culture, which Chinese customers value deeply. Suxuangtang is also widely recognized by the industry as\none of the three most famous TCM brands; the other two are “Hui Chun Tang” (回春堂) and “Tong Ren\nTang” (同仁堂). Suxuangtang is a household brand in Jiangsu province, having originated there and being well\nrecognized in provinces nearby, such as Hubei, Shandong, Anhui, where our products have been widely used and their curative effects proven.\nOur Fine and Regular TCMP products have been in pharmaceutical markets such as hospitals and drug stores for decades, and received steady\nand consistent positive feedbacks from our customers. As a result, we believe the curative effects of our products have been firmly demonstrated.\n\n \n\n43\n\n \n\n \n\n*Ready to Use TCMPs*\n\n \n\nUnlike most TCMPs in the\nmarket that have to be prepared as decoction before use, our innovative Directly-Oral-TCMPs and After-Soaking-Oral-TCMPs can be easily\ndissolved or infused in hot water without requiring lengthy preparation. This feature sets us apart from our peers and makes our products\nmore appealing to our customers.\n\n \n\n*Complete Permits to Produce Advanced TCMP\nProducts*\n\n \n\nWe have the Pharmaceutical\nManufacturing Permit and pharmaceutical GMP Certificates, both the Permit and the Certificate with the scope of Directly-Oral-TCMP authorized\nby Jiangsu provincial MPA, to produce After-Soaking-Oral-TCMPs, Directly-Oral-TCMPs, Fine TCMPs and Regular TCMPs and there is no need\nto apply for additional permits from Jiangsu Food and Drug Commission in order to manufacture or sell our products. In China, TCMP companies\nare treated differently from other pharmaceutical companies manufacturing western drugs and TCPM. Both western drugs and TCPM are required\nto go through clinical trials and obtain clinical trial approval, whereas TCMP products have no such requirement. Once a TCM company\nobtains the Pharmaceutical Manufacturing Permit and GMP Certificate, it can begin manufacturing its products immediately. Currently,\nvery few TCM companies in China have both the permit and the certificate with the scope required to produce TCMP, and Directly-Oral and\nAfter-Soaking-Oral products.\n\n \n\n*Strong Research and Development Capability*\n\n \n\nWe believe that our research\nand development capabilities allow us to create innovative TCMP that fulfill our customers’ needs. Although all of our TCMP products\nare generic TCMP drugs and, these products are innovative in terms of their conventional administration. Our advance TCMPs come in the\nform of powders or sachets, which make oral administration easier for our customers. This improvement is significant because otherwise\nTCMP have to be prepared through decoction before use, which has proven to be both inconvenient and overly complex for customers. Our\nresearch and development team has demonstrated its success in use of the sophisticated research strategies and modern technologies to\ndevelop TCMP products with innovative features that lend us an edge over our major competitors. We have established a strong research\nand development team of 9 dedicated researchers as of March 31, 2026.  Our R&D Team has successfully developed multiple modernized\nTCMPs, many of which have already been directly commercialized with our Pharmaceutical Manufacturing Permit, the Pharmaceutical GMP requirements\nand standards, and China Pharmacopoeia without the need for additional approvals or registrations by the regulatory authorities.\n\n \n\n*Experienced and Accomplished Leadership\nTeam with a Proven Track Record*\n\n \n\nWe have an experienced management\nteam. Almost all of our members, except our Co-CEO Mr. Feng Zhou, whose expertise is procurement, possess more than 10 years of pharmaceutical\nand related industry experience. We believe that our leadership team is well positioned to lead us through clinical development, regulatory\napproval and commercialization of our product candidates. Collectively, our management team has extensive experience in the research\nand development, manufacture, commercialization, and in-licensing and acquisition of companies in China’s TCM industry. Experienced\nin managing fast-growing enterprises, our entrepreneurial management team takes the initiative to adapt our business strategies to market,\nindustry and therapeutic trends. Our management team has successfully established a deep product pipeline, and built an integrated research\nand development, production, and sales and marketing infrastructure. Our success in existing product development and branding reflects\nthe significant experience that members of our management team have in their respective fields of expertise and their in-depth knowledge\nof the regulatory framework in China.\n\n \n\n44\n\n \n\n \n\nOur Growth Strength\n\n \n\n*The key elements of our\nstrategy to grow our business include:*\n\n \n\nPromoting Our Existing\nBrands to Increase Our National Recognition. Although “Suxuantang” is a brand (“苏轩堂”)\nwith a solid reputation in Eastern China, particularly Jiangsu Province, our national reach is relatively limited. In order to become\na national brand, we intend to support and grow the existing recognition and reputation of our over 270-year old brand “Suxuantang”\nand maintain our branded pricing strategy through continued sales and marketing efforts, as well as our newly upgraded GMP-compliant\nproduction lines. To achieve this goal, we plan to promote the efficacy and safety profiles of all of our Advanced TCMP products to physicians\nat hospitals and clinics through our sales force, independent distributors and educational physician conferences and seminars. Under\nthe current pharmaceutical regulations in China, TCMP manufacturers are not required to obtain approval from any regulatory authority\nin order to claim the efficacy and safety of TCMP products, since the efficacy and safety of such products are specifically indicated\nin “China Pharmacopeia”. China Pharmacopoeia provides state pharmaceutical standards and quality control requirements in\nChina. There are currently 618 TCMP raw materials and their related products exclusively listed in China Pharmacopoeia Part I (version\n2020). China Pharmacopeia offers guidance related to each TCMP raw material such as its origin, characteristics, properties, identification,\nquantitation (assay), indication (action), preparation processing, administration and dosage, storage, and side effects. Each TCMP manufacturer\nis required by law to follow the guidance set forth in the China Pharmacopoeia. China Pharmacopoeia Part I also stipulates the national\nstandard for TCMP products regarding their efficacy and safety. We intend to promote and advertise the efficacy and safety profiles of\nall of our Advanced TCMP products by educating the physicians who might not be familiar with the China Pharmacopoeia.\n\n \n\nDeveloping and Introducing\nAdditional Products to Expand or Strengthen Our Existing Product Portfolio. We plan to focus on our development capabilities towards\nexpanding our existing portfolio, including our TCMHS products. In addition, we are constantly in the process of developing new types\nof Advanced TCMP products. We are introducing new products at a steady pace to further strengthen our branded market leadership position\nin Directly-Oral and After-Soaking-Oral-TCMPs.\n\n \n\nExpanding Our Distribution\nNetwork to Increase Market Penetration. We intend to expand our reach in the PRC to drive additional growth in our existing and future\nproducts. We currently contract with over 102 distributors in the PRC and plan to expand on these relationships to target new markets.\nWe plan to continue to broaden our marketing efforts outside of major cities in the PRC and to increase our market penetration in cities\nand rural areas where we already have a growing presence. Over the long term, we intend to expand our presence beyond the PRC to international\nmarkets by partnering with international pharmaceutical companies in cross-selling our products.\n\n \n\nEmployees \n\n \n\nAs of March 31, 2026, we\nhad a total of 56 full-time employees and no part-time employee. The following table sets forth the breakdown of our employees as of\nMarch 31, 2026 by function:\n\n \n\n  \nNumber of\nEmployees  \n% of\nTotal \n\nFunction \n   \n  \n\nTechnology and Development \n 9  \n 16%\n\nOperations, Sales and Marketing \n 8  \n 14%\n\nProduct Development \n 22  \n 39%\n\nGeneral and Administrative \n 17  \n 31%\n\nTotal \n 56  \n 100%\n\n \n\nAs required by PRC regulations,\nwe participate in various government statutory employee benefit plans, including social insurance funds, namely a pension contribution\nplan, a medical insurance plan, an unemployment insurance plan, a work-related injury insurance plan and a maternity insurance plan,\nand a housing provident fund. We are required under PRC law to make contributions to employee benefit plans at specified percentages\nof the salaries, bonuses and certain allowances of our employees, up to a maximum amount specified by the local government from time\nto time. As of the date of this annual report, we have made adequate employee benefit payments. However, if we were found by the relevant\nauthorities that we failed to make adequate payment, we may be required to make up the contributions for these plans as well as to pay\nlate fees and fines. \n\n \n\nWe enter into standard labor\nand confidentiality agreements with our employees. We believe that we maintain a good working relationship with our employees, and we\nhave not experienced any major labor disputes.\n\n \n\n45\n\n \n\n \n\nInsurance\n\n \n\nWe provide social security\ninsurance including pension insurance, unemployment insurance, work-related injury insurance and medical insurance for our employees.\nWe do not maintain business interruption insurance or general third-party liability insurance, nor do we maintain product liability insurance\nor key-man insurance. We consider our insurance coverage to be sufficient for our business operations in China.\n\n \n\nLegal Proceedings\n\n \n\nWe are currently not a party\nto any material legal or administrative proceedings. We may from time to time be subject to various legal or administrative claims and\nproceedings arising in the ordinary course of business. Litigation or any other legal or administrative proceeding, regardless of the\noutcome, is likely to result in substantial cost and diversion of our resources, including our management’s time and attention. \n\n \n\nRegulations\n\n \n\nThis section sets forth a\nsummary of the most significant rules and regulations that affect our business activities in China.\n\n \n\n*Overview*\n\n \n\nWe operate our business in\nChina under a legal regime consisting of the National People’s Congress, which is the country’s highest legislative body,\nthe State Council, which is the highest authority of the executive branch of the PRC central government, and several ministries and agencies\nunder its authority, including the Ministry of Industry and Information Technology, State Administration for Industry and Commerce (“SAIC”)\nand their respective local offices.\n\n \n\nIn China, unlike western\nmedicine which is required to go through clinical trials and complex approval process before commercial launch, Chinese Traditional Medicine,\nincluding TCMP, is subject to a completely different regulatory system in terms of approval, quality control and development process\nbecause it is currently impossible to test the effects of TCMP clinically. TCMP utilizes various herbs as its ingredients, which are\nnatural products and their chemical composition varies and complicates. Given that the drug effect on each person can vary significantly,\nthere is a lack of common scientific standards and appropriate clinical methods for evaluating TCMP to ensure its safety, efficacy. In\naddition, TCMP has a very long history and it originated from the sum total of the practices based on different TCM practitioners’\ntheories, beliefs and experiences, which are often inexplicable.\n\n \n\nThe regulatory system, known\nas the “Traditional Chinese Medicine Pieces System.” provides sole guidance on TCMP production in the following aspects:\n\n \n\nThe production of TCMP must\ncomply with the “Pharmaceutical Administration Law of PRC (2019 Revision)”, “GMP for drugs”, and “GSP for\ndrugs”. Companies manufacturing and selling TCMP products must have the License: “Pharmaceutical Manufacturing Permit”\nand “TCM an approval throughout GMP compliance-inspection”. TCMP production companies that met both of the License Requirements\nwithin the scope of production and approval throughout GMP compliance-inspection will not be required to obtain NMPA (in lieu of CFDA\neffective on December 1, 2019) or local MPA approval before manufacturing their TCMP products and TCMP products are categorically exempted\nfrom being tested clinically because the effect of TCMP products are impossible to be tested clinically. As a result, TCMP products do\nnot have the NMPA approval registration number, which is typically found in western medicine products.\n\n \n\nTCMP also needs to follow\nnational drug reference standard codified in Pharmacopoeia of the PRC (“Guidance”). The Guidance supplies critical information\nto TCMP manufacturers regarding origin of ingredients, description, identification, processing, assay, property and flavor, meridian\ntropism, actions, indications, administration and dosage, precautions and warnings and storage.\n\n \n\nBesides general GMP for drugs,\nthe production of TCMP also needs to follow the GMP specifically tailored for TCMP, which can be found as annex attached to NMPA regulations.\n\n \n\n46\n\n \n\n \n\n*Regulations Relating to Pharmaceutical Industry*\n\n \n\nThe pharmaceutical industry\nin China is highly regulated. The primary regulatory authority is the NMPA, including its provincial and local branches. As a developer\nand producer of medicinal products, we are subject to regulation and oversight by the NMPA and its provincial and local branches. The\nLaw of the PRC on the Administration of Pharmaceuticals provides the basic legal framework for the administration of the production and\nsale of pharmaceuticals in China and covers the manufacturing, distribution, packaging, pricing and advertising of pharmaceutical products.\nThese regulations set forth detailed rules with respect to the administration of pharmaceuticals in China. We are also subject to other\nPRC laws and regulations that are applicable to business operators, manufacturers and distributors in general.\n\n \n\n*Registration and Approval of Medicine*\n\n \n\nPursuant to the PRC Provisions\nfor Drug Registration, a medicine must be registered and approved by the NMPA before it can be manufactured and sold. The registration\nand approval process require the manufacturer to submit to the NMPA a registration application containing detailed information concerning\nthe efficacy and quality of the medicine and the manufacturing process and the production facilities the manufacturer expects to use.\nThis process generally takes two to five years and could be longer, depending on the nature of the medicine under review, the quality\nof the data provided and the workload of the NMPA. If a manufacturer chooses to manufacture a pre-clinical medicine, it is also required\nto conduct pre-clinical trials, apply to the NMPA for permission to conduct clinical trials and go through the clinical trials. If a\nmanufacturer chooses to manufacture a post-clinical medicine, it only needs to go through the clinical trials. In both cases, a manufacturer\nneeds to file clinical data with the NMPA for approval for manufacturing after clinical trials are completed.\n\n \n\nNew Medicine. If the NMPA\napproves a medicine production, it will issue a new approval after pharmaceutical GMP inspections conducted by NMPA or local MPA. During\nthe monitoring period of pharmaceutical GMP compliance, the NMPA will monitor the safety of the new medicine, and will neither accept\nthe compliance for an identical medicine by another pharmaceutical company, nor approve the production or import of an identical medicine\nby other pharmaceutical companies. As a result of these new regulations, keeping the compliance with pharmaceutical GMP requirements\nhas the exclusive right to manufacture the new medicine during the monitoring period.\n\n \n\nNational Production Standard\nand Provisional Standard. In connection with the NMPA’s approval of a new medicine, the NMPA will normally direct the manufacturer\nto produce the medicine according to a provisional national production standard, or a provisional standard. A provisional standard is\nvalid for two years, during which time the NMPA closely monitors the production process and quality consistency of the medicine to develop\na national final production standard for the medicine, or a final standard. Three months before the expiration of the two-year period,\nthe manufacturer is required to apply to the NMPA to convert the provisional standard to a final standard. Upon approval, the NMPA will\npublish the final standard for the production of this medicine. There is no statutory timeline for the NMPA to complete its review and\ngrant approval for the conversion. In practice, the approval for conversion to a final standard is time-consuming and could take a number\nof years. However, during the NMPA’s review period, the manufacturer may continue to produce the medicine according to the provisional\nstandard.\n\n \n\nTransitional Period. Prior\nto the latter of (1) the expiration of a new medicine’s monitoring period or (2) the date when the NMPA grants a final standard\nfor a new medicine after the expiration of the provisional standard, the NMPA will not accept applications for an identical medicine\nnor will it approve the production of an identical medicine by other pharmaceutical companies. Accordingly, the manufacturer will continue\nto have an exclusive production right for the new medicine during this transitional period.\n\n \n\nAll TCMP (not TCPM) products\nas medicine are administrated separately by NMPA. Without clinical trial application, the TCMP medicines are registered and approved\nby the NMPA based on manufacturer’s Pharmaceutical Manufacturing Permit before they can be manufactured and sold. A TCMP manufacturer\nmanufactures only the TCMP products of scope approved by NMPA described on both Pharmaceutical Manufacturing Permit and GMP requirements\nand standards. For example, Directly-Oral-TCMP products are not subjected to manufacture without the directly oral TCMP term appeared\non the Permit. The TCMP production and quality standard must comply with corresponding TCM and sections on the Pharmacopeia of the PRC.\n\n \n\n47\n\n \n\n \n\n*Continuing NMPA Regulation*\n\n \n\nPharmaceutical manufacturers\nin China are subject to continuing regulation by the NMPA. If the labeling or its manufacturing process of an approved medicine is significantly\nmodified, a new pre-market approval or pre-market approval supplement will be required by the NMPA. A pharmaceutical manufacturer is\nsubject to periodic inspection and safety monitoring by the NMPA to determine compliance with regulatory requirements.\n\n \n\nThe NMPA has a variety of\nenforcement actions available to enforce its regulations and rules, including fines and injunctions, recall or seizure of products, the\nimposition of operating restrictions, partial suspension or complete shutdown of production and criminal prosecution.\n\n \n\n*Pharmaceutical Product Manufacturing*\n\n \n\nA pharmaceutical manufacturer\nmust obtain a Pharmaceutical Manufacturing Permit from the NMPA’s relevant provincial branch. This permit is valid for five years\nand is renewable for an additional five-year period upon its expiration. Our current Pharmaceutical Manufacturing Permit, issued by the\nNMPA, will expire on December 16, 2030.\n\n \n\nA pharmaceutical manufacturer\nmust meet the Pharmaceutical Good Manufacturing Practice (current 2010 version) standards, or GMP standards, for each of its production\nfacilities in China in respect of each form of pharmaceutical product it produces. GMP standards include staff qualifications, production\npremises and facilities, equipment, raw materials, environmental hygiene, production management, quality control and customer complaint\nadministration.\n\n \n\nChina National People’s\nCongress promulgated a new revision “Pharmaceutical Administration Law of PRC (2019 Revision), and was effective as of December\n1, 2019. NMPA is the new agency that replaced CFDA. The pharmaceutical GMP inspection without notification has replaced the “Pharmaceutical\nGMP Certificate”. As a result, pharmaceutical manufacturers are required to obtain a valid “Pharmaceutical Manufacturing\nPermit”.\n\n \n\n*Pharmaceutical Products Packages*\n\n \n\nPharmaceutical products packages\nmust, in accordance with the regulations, be labeled and have an instruction booklet attached. The name of the drug, its ingredients,\nspecifications, the manufacturing enterprise, approval number, product batch number, date of production, expiry date, suitability for\nsymptoms or main function, methods of use, dosage, contraindications, side-effects and points to note must be clearly indicated on the\nlabel or in the instruction booklet. The labels of narcotic drugs, psychotropic drugs, poisonous drugs, radioactive drugs, drugs for\nexternal use only and non-prescription drugs must bear the prescribed mark.\n\n \n\n*Regulations relating to Price Control*\n\n \n\nThe laws of the PRC provide\nfor the government to fix and adjust prices. The prices of certain TCMP products we distribute, including those listed in the Chinese\ngovernment’s catalogue of medications that are reimbursable under the PRC’s social insurance program, or the Insurance Catalogue,\nare subject to control by the relevant state or provincial price administration authorities. The PRC establishes price levels for products\nbased on market conditions, average industry cost, supply and demand and social responsibility. In practice, price control with respect\nto these medicines sets a ceiling on their retail price. The actual price of such medicines set by manufacturers, wholesalers and retailers\ncannot historically exceed the price ceiling imposed by applicable government price control regulations.\n\n \n\nWe have one product not listed\non national Medicare Insurance Catalogue, which are Directly-Oral products LuXueJing (which is listed on Medicare Insurance Catalogue\nof Jiangsu and Guangzhou provinces). The revenue attributable to LuXueJing were $900,701 (RMB 6,455,411), $259,184 (RMB 1,870,351) and\n$48,478 (RMB 348,787) for the years ended March 31, 2024, 2025 and 2026, respectively.  \n\n \n\nPackaging materials and containers\nselected for production of all TCMP shall accommodate to drug property. No TCMP whose package fails to conform to regulations may be\nmarketed. A label shall be printed on or attached to the package of TCMP. On the label of TCMP shall be indicated the name of the drug,\ngrade/weight, origin of production, manufacturer, product batch number and production date; if the said TCMP is controlled by an approval\nnumber, the number shall also be indicated.\n\n \n\nCurrently, all of our marketed\nproducts meet the packaging requirements. \n\n \n\n48\n\n \n\n \n\n*Microbial Limitation Standards on Chinese\nMedicine Extraction and TCMP*\n\n \n\nChinese medicine extraction\n- The total number of aerobic organisms shall not exceed 10³ cfu/g or cfu/ml. The total number of molds and yeasts in Chinese medicine\nextraction shall not exceed 10² cfu/g or cfu/ml. There are no standard regulations regarding control microbes.\n\n \n\nPowdered, liquid, Directly-Oral-TCMP\nand After-Soaking-Oral-TCMP - Their regulations and standards are complied with the description on the GMP certificate and China Pharmacopeia\nParts I and IV, including relation to the limitation of the total number of permitted aerobic organisms, molds and yeasts. However, for\nevery 10 grams of powdered Directly-Oral-TCMP and After-Soaking-Oral-TCMP, shall be no *Salmonella* bacteria detectable. Any other\nbile salt resistant organisms shall not exceed 104 cfu (1g). We are in full compliance with these microbial limitation standards.\n\n \n\n*National Drug Reference Standard*\n\n \n\nOur TCMP products must also\nsatisfy national drug reference standard. In China, companies manufacturing TCMP products must follow a specific guidance known as the\n“Pharmacopoeia of the People’s Republic of China” (“Guidance”) and relevant standards promulgated by the\ndrug control and administrative department of the State Council. This Guidance (Latest Version 2020) became effective on December 31,\n2020 and it has been codified into state law with the purpose of providing clear guidance on TCMP manufacturing process. The Guidance\nshall apply to all aspects of TCMP manufacturing process including the research and development, production (import), management, use\nand supervision of TCMP. It provides standard language that can be used by TCMP companies to draft description, identification, processing,\nassay, property and flavor, meridian tropism, actions, indications, storage, administration and dosage, precautions and warnings of TCMP\nproducts.\n\n \n\nC. Organizational Structure Chart\n\n \n\nThe following diagram illustrates\nour corporate structure, including our subsidiaries and consolidated affiliated entities, as of the date of this annual report:\n\n \n\n \n\n49\n\n \n\n \n\nContractual Arrangements between WFOE and\nTaizhou Suxuantang\n\n \n\nDue to PRC legal restrictions\non foreign ownership in the pharmaceutical sector, neither we nor our subsidiaries own any equity interest in Taizhou Suxuantang. Neither\nwe nor our subsidiaries own any share in Taizhou Suxuantang. Instead, WFOE, Taizhou Suxuantang and its shareholders entered into a series\nof contractual arrangements, also known as VIE Agreements, pursuant to which, we are regarded as the primary beneficiary of Taizhou Suxuantang\nfor accounting purpose, and, therefore, we are able to consolidate the financial results of Taizhou Suxuantang in our consolidated financial\nstatements in accordance with U.S. GAAP.\n\n \n\nAccording to the Exclusive\nBusiness Cooperation Agreement between WFOE and Taizhou Suxuantang, which is one of the VIE Agreements that was also entered into on\nOctober 13, 2017, Taizhou Suxuantang is obligated to pay service fees to WFOE approximately equal to the net income of Taizhou Suxuantang.\n\n \n\nEach of the VIE Agreements\nis described in detail below:\n\n \n\n*Exclusive Business Cooperation\nAgreement*\n\n \n\nPursuant to the Exclusive\nBusiness Cooperation Agreement between Taizhou Suxuantang and WFOE, WFOE provides Taizhou Suxuantang with technical support, consulting\nservices and other management services relating to its day-to-day business operations and management, on an exclusive basis, utilizing\nits advantages in technology, human resources, and information. Additionally, Taizhou Suxuantang granted an irrevocable and exclusive\noption to WFOE to purchase from Taizhou Suxuantang, any or all of Taizhou Suxuantang’s assets at the lowest purchase price permitted\nunder the PRC laws. Should WFOE exercise such option, the parties shall enter into a separate asset transfer or similar agreement. For\nservices rendered to Taizhou Suxuantang by WFOE under this agreement, WFOE is entitled to collect a service fee each month determined\nby the parties through negotiation after considering: complexity and difficulty of the services provided by WFOE; title of and time consumed\nby employees of WFOE providing the services; contents and value of the services provided by WFOE; market price of the same type of services;\nand operation conditions of Taizhou Suxuantang.\n\n \n\nThe Exclusive Business Cooperation\nAgreement shall remain in effect unless it is terminated by WFOE for Taizhou Suxuantang’s material breach of this Agreement. Taizhou\nSuxuantang does not have the right to terminate the Agreement unilaterally.\n\n \n\nWFOE has absolute authority\nrelating to the management of Taizhou Suxuantang, including but not limited to decisions with regard to expenses, salary raises and bonuses,\nhiring, firing and other operational functions. The Exclusive Business Cooperation Agreement does not prohibit related party transactions.\nHowever, since establishment of the Company’s audit committee at the consummation of our initial public offering, the audit committee\nhas been required to review and approve in advance any related party transactions, including transactions involving WFOE or Taizhou Suxuantang.\n\n \n\n*Share Pledge Agreement*\n\n \n\nUnder the Share Pledge Agreement\namong WFOE and Feng Zhou, Ziqun Zhou, and Di Zhou, who together hold 100% shares of Taizhou Suxuantang (“Taizhou Suxuantang Shareholders”),\nthe Taizhou Suxuantang Shareholders pledged all of their equity interests in Taizhou Suxuantang to WFOE to guarantee the performance\nof Taizhou Suxuantang’s obligations under the Exclusive Business Cooperation Agreement. Under the terms of the agreement, in the\nevent that Taizhou Suxuantang or its shareholders breach their respective contractual obligations under the Exclusive Business Cooperation\nAgreement, WFOE, as pledgee, will be entitled to certain rights, including, but not limited to, the right to collect dividends generated\nby the pledged equity interests. Taizhou Suxuantang Shareholders also agreed that upon occurrence of any event of default, as set forth\nin the Share Pledge Agreement, WFOE is entitled to dispose of the pledged equity interest in accordance with applicable PRC laws. The\nTaizhou Suxuantang Shareholders further agree not to dispose of the pledged equity interests or take any actions that would prejudice\nWFOE’s interest.\n\n \n\n50\n\n \n\n \n\nThe Share Pledge Agreement\nshall be effective upon execution. Taizhou Suxuantang does not have the right to terminate the Share Pledge Agreement. Only WFOE has\nright to terminate the Share Pledge Agreement. According to the Share Pledge Agreement, upon fulfillment of all the obligations under\nthe Agreement and full payment under the VIE Agreements by Taizhou Suxuantang and its shareholders, WFOE may release Taizhou Suxuantang\nfrom its obligations under the Share Pledge Agreement. WFOE may terminate the Share Pledge Agreement when the Company disposes Taizhou\nSuxuantang by terminating all the VIE Agreements or when WFOE decides to purchase the equity interest in Taizhou Suxuantang from its\nshareholders pursuant to the Exclusive Option Agreement and terminates all the VIE Agreements in the event the PRC laws allow foreign\nownership in the pharmaceutical sector. In case the Company, upon obtaining its shareholders approval, if required, disposes Taizhou\nSuxuantang by terminating the VIE Agreements, such termination will have significant effect on the Company. In the event WFOE purchases\nthe equity interests in Taizhou Suxuantang when foreign ownership in pharmaceutical sector is permitted, termination of the VIE Agreements\nshall not have significant effect to the Company as the Company will control Taizhou Suxuantang through equity ownership.\n\n \n\nPursuant to the Power of\nAttorney, WFOE is authorized to act on behalf the Taizhou Suxuantang shareholders as their exclusive agent and attorney with respect\nto all rights as shareholders, including having Taizhou Suxuantang to make required payment under the Share Pledge Agreement.\n\n \n\nThe purposes of the Share\nPledge Agreement are to (1) guarantee the performance of Taizhou Suxuantang’s obligations under the Exclusive Business Cooperation\nAgreement, (2) make sure the shareholders of Taizhou Suxuantang shall not transfer or assign the pledged equity interest, or create or\nallow any encumbrance that would prejudice WFOE’s interests without WFOE’s prior written consent and (3) provide WFOE control\nover Taizhou Suxuantang. Under the Exclusive Option Agreement (described below), WFOE may exercise its option to acquire the equity interests\nin Taizhou Suxuantang any time to the extent permitted by the PRC Law. In the event Taizhou Suxuantang breaches its contractual obligations\nunder the Exclusive Business Cooperation Agreement, WFOE will be entitled to foreclose on the Taizhou Suxuantang Shareholders’\nequity interests in Taizhou Suxuantang and may (1) exercise its option to purchase or designate third parties to purchase part or all\nof their equity interests in Taizhou Suxuantang and in this situation, WFOE may terminate the VIE agreements after acquisition of all\nequity interests in Taizhou Suxuantang or form a new VIE structure with the third parties designated by WFOE; or (2) dispose the pledged\nequity interests and be paid in priority out of the proceeds from the disposal in which case the VIE structure will be terminated.\n\n \n\n*Exclusive Option Agreement*\n\n \n\nUnder the Exclusive Option\nAgreement, the Taizhou Suxuantang Shareholders irrevocably granted WFOE (or its designee) an exclusive option to purchase, to the extent\npermitted under PRC law, once or at multiple times, at any time, part or all of their equity interests in Taizhou Suxuantang at the exercise\nprice of RMB10.00.\n\n \n\nUnder the Exclusive Option\nAgreement, WFOE may at any time under any circumstances, purchase, or have its designated person to purchase, at its discretion, to the\nextent permitted under PRC law, all or part of the shareholders’ equity interests in Taizhou Suxuantang.\n\n \n\nThis Agreement shall remain\neffective until all equity interests held by Taizhou Suxuantang Shareholders in Taizhou Suxuantang have been transferred or assigned\nto WFOE and/or any other person designated by WFOE in accordance with this Agreement.\n\n \n\n*Power of Attorney*\n\n \n\nUnder the Power of Attorney,\nthe Taizhou Suxuantang Shareholders authorize WFOE to act on their behalf as their exclusive agent and attorney with respect to all rights\nas shareholders, including but not limited to: (a) attending shareholders’ meetings; (b) exercising all the shareholder’s\nrights, including voting, that shareholders are entitled to under the laws of China and the Articles of Association, including but not\nlimited to the sale or transfer or pledge or disposition of shares in part or in whole; and (c) designating and appointing on behalf\nof shareholders the legal representative, the executive director, supervisor, the chief executive officer and other senior management\nmembers of Taizhou Suxuantang.\n\n \n\nAlthough it is not explicitly\nstipulated in the Power of Attorney, the term of the Power of Attorney shall be the same as the term of that of the Exclusive Option\nAgreement.\n\n \n\n51\n\n \n\n \n\nThis Power of Attorney is\ncoupled with an interest and shall be irrevocable and continuously valid for each shareholder from the date it is executed until the\ndate he/she no longer is a shareholder of Taizhou Suxuantang.\n\n \n\nThe Exclusive Option Agreement,\ntogether with the Share Pledge Agreement and the Power of Attorney enable WFOE to exercise effective control over Taizhou Suxuantang.\n\n \n\nD. Property, plants and equipment\n\n \n\nFacilities  \n\n \n\nWe currently have the following\nGMP-certified facilities located in Taizhou city of Jiangsu province in China: approximately 1,200 square meters for Regular TCMP production,\n450 square meters for Fine TCMP production, 240 square meters for Directly-Oral TCMP and After-Soaking-Oral TCMP production, 250 square\nmeters for TCMP raw materials sterilization facility, 450 square meters for quality control, and research& development centers, and\na total of 1,100 square meters for storage.\n\n \n\nWe have started expanding\na production base to increase production capacity to meet rapidly growing demand for TCMPs since October 2017, which covers a total of\n33,300 square meter land.\n\n \n\nDescription of Property\n\n \n\nWe have leased properties\nset forth in the table below.  \n\n \n\n  \nAddress \nSize(m²) \nLeased/Owned/Granted \nFunction\n\n1. \nNo. 178 Taidongbei Rd., Taizhou, Jiangsu, China \n2,028 \nLeased \n \n\n2. \nNo. 178 Taidongbei Rd., Taizhou, Jiangsu, China \n900 \nLeased"}