# EDGAR Filing Document

**Accession Number:** 0001751876
**File Stem:** 0001929980-25-000590
**Filing Date:** 2025-8
**Character Count:** 546603
**Document Hash:** 573aacc504d958bdd86d2123ebac4d97
**Contains OCR:** False
**Source Format:** 

## Filing Content

## Filing Summary
**0001929980-25-000590.hdr.sgml**: 20250804

**ACCESSION NUMBER**: 0001929980-25-000590

**CONFORMED SUBMISSION TYPE**: 20-F

**PUBLIC DOCUMENT COUNT**: 85

**CONFORMED PERIOD OF REPORT**: 20250331

**FILED AS OF DATE**: 20250804

**DATE AS OF CHANGE**: 20250804

**FILER**: 

**COMPANY DATA:**
- **COMPANY CONFORMED NAME:** Paranovus Entertainment Technology Ltd.
- **CENTRAL INDEX KEY:** 0001751876
- **STANDARD INDUSTRIAL CLASSIFICATION:** SERVICES-COMPUTER PROCESSING & DATA PREPARATION [7374]
- **ORGANIZATION NAME:** 06 Technology
- **EIN:** 000000000
- **STATE OF INCORPORATION:** E9
- **FISCAL YEAR END:** 0331

**FILING VALUES:**
- **FORM TYPE:** 20-F
- **SEC ACT:** 1934 Act
- **SEC FILE NUMBER:** 001-39098
- **FILM NUMBER:** 251180821

**BUSINESS ADDRESS:**
- **STREET 1:** NO. 11, DONGJIAO EAST ROAD, SHUANGXI
- **STREET 2:** SHUNCHANG
- **CITY:** NANPING
- **STATE:** F4
- **ZIP:** 353001
- **BUSINESS PHONE:** 516-951-9074

**MAIL ADDRESS:**
- **STREET 1:** 250 PARK AVENUE, 7TH FLOOR
- **CITY:** NEW YORK
- **STATE:** NY
- **ZIP:** 10177

**FORMER COMPANY:**
- **FORMER CONFORMED NAME:** Happiness Development Group Ltd
- **DATE OF NAME CHANGE:** 20211112

**FORMER COMPANY:**
- **FORMER CONFORMED NAME:** Happiness Biotech Group Ltd
- **DATE OF NAME CHANGE:** 20180831

?xml version='1.0' encoding='ASCII'? pavs_20f.htm

**UNITED STATES**

**SECURITIES AND EXCHANGE COMMISSION**

**WASHINGTON, D.C. 20549**

**FORM 20-F** 

**☐** **REGISTRATION STATEMENT PURSUANT TO SECTION 12(b) OR (g) OF THE SECURITIES EXCHANGE ACT OF 1934**

OR

**☒** **ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934**

**For the fiscal year ended <u>March 31, 2025</u>**

**OR**

**☐** **TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934**

**For the transition period from <u>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</u> to <u>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</u>**

**OR**

**☐** **SHELL COMPANY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934**

**Date of event requiring this shell company report**

Commission file number: **<u>333-230170</u>**

---

| |
|:---|
| **Paranovus Entertainment Technology Ltd.** |
| (Exact name of Registrant as specified in its charter) |

---

**<u>N/A</u>**

(Translation of the Registrant's name into English)

**<u>Cayman Islands</u>**

(Jurisdiction of incorporation or organization)

**250 Park Avenue, 7th Floor** 

**<u>New York, NY 10177</u>**

(Address of principal executive offices)

**Xiaoyue (Zoe) Zhang, Chief Executive Officer**

**Telephone: +1 516-951-9074**

**Email: zoe@pavs.ai**

**250 Park Avenue, 7th Floor** 

**<u>New York, NY 10177</u>**

(Name, Telephone, E-mail and/or Facsimile number and Address of Company Contact Person)

\* Securities registered or to be registered pursuant to Section 12(b) of the Act:

---

| | | |
|:---|:---|:---|
| Title of Each Class | Trading Symbol | Name of Each Exchange on Which Registered |
| **Class A ordinary shares, par value US$0.01 per share** | **PAVS** | **NASDAQ Capital Market** |

---

Securities registered or to be registered pursuant to Section 12(g) of the Act:

<u>**None**</u>

(Title of Class)

Securities for which there is a reporting obligation pursuant to Section 15(d) of the Act:

<u>**None**</u>

(Title of Class)

The number of outstanding shares of each of the issuer's classes of capital or common stock as of March 31, 2025 were 66,724,675 Class A ordinary shares, par value $0.01 per share and 612,255 Class B ordinary shares, par value $0.01 per share.

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.

Yes ☐ No ☒

If this report is an annual or transition report, indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934.

Yes ☐ No ☒

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.

Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).

Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, or a non-accelerated filer. See definition of "accelerated filer and large accelerated filer" in Rule 12b-2 of the Exchange Act.

---

| | | | |
|:---|:---|:---|:---|
| Large accelerated filer ☐ | Accelerated filer ☐ | Non-accelerated filer ☒ | Emerging growth company ☐ |

---

If an emerging growth company that prepares its financial statements in accordance with U.S. GAAP, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards† provided pursuant to Section 13(a) of the Exchange Act. ☐

† The term "new or revised financial accounting standard" refers to any update issued by the Financial Accounting Standards Board to its Accounting Standards Codification after April 5, 2012.

Indicate by check mark whether the registrant has filed a report on and attestation to its management's assessment of the effectiveness of its internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public accounting firm that prepared or issued its audit report. ☐

If securities are registered pursuant to Section 12(b) of the Act, indicate by check mark whether the financial statements of the registrant included in the filing reflect the correction of an error to previously issued financial statements. ☐

Indicate by check mark whether any of those error corrections are restatements that required a recovery analysis of incentive- based compensation received by any of the registrant's executive officers during the relevant recovery period pursuant to §240.10D-1(b). ☐

Indicate by check mark which basis of accounting the registrant has used to prepare the financial statements included in this filing:

---

| | | | | | |
|:---|:---|:---|:---|:---|:---|
| ☒ | U.S. GAAP | ☐ | International Financial Reporting Standards as issued by the International Accounting Standards Board | ☐ | Other  |

---

If "Other" has been checked in response to the previous question, indicate by check mark which financial statement item the registrant has elected to follow: Item 17 ☐ Item 18 ☐

If this is an annual report, indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒

**TABLE OF CONTENTS**

---

| | | |
|:---|:---|:---|
|  |  | **Page**<br>**Number** |
| **[INTRODUCTORY NOTES](#intro)** | **[INTRODUCTORY NOTES](#intro)** | ii |
| **[FORWARD-LOOKING STATEMENTS](#FORWARDING)** | **[FORWARD-LOOKING STATEMENTS](#FORWARDING)** | iii |
| **[ITEM 1.](#I1)** | **[IDENTITY OF DIRECTORS, SENIOR MANAGEMENT AND ADVISERS](#I1)** | 1 |
| **[ITEM 2.](#I2)** | **[OFFER STATISTICS AND EXPECTED TIMETABLE](#I2)** | 1 |
| **[ITEM 3.](#I3)** | **[KEY INFORMATION](#I3)** | 1 |
| **[ITEM 4.](#I4)** | **[INFORMATION ON THE COMPANY](#I4)** | 26 |
| **[ITEM 4A.](#I4A)** | **[UNRESOLVED STAFF COMMENTS](#I4A)** | 50 |
| **[ITEM 5.](#I5)** | **[OPERATING AND FINANCIAL REVIEW AND PROSPECTS](#I5)** | 51 |
| **[ITEM 6.](#I6)** | **[DIRECTORS, SENIOR MANAGEMENT AND EMPLOYEES](#I6)** | 61 |
| **[ITEM 7.](#I7)** | **[MAJOR SHAREHOLDERS AND RELATED PARTY TRANSACTIONS](#I7)** | 68 |
| **[ITEM 8.](#I8)** | **[FINANCIAL INFORMATION](#I8)** | 68 |
| **[ITEM 9.](#I9)** | **[THE OFFER AND LISTING](#I9)** | 69 |
| **[ITEM 10.](#I10)** | **[ADDITIONAL INFORMATION](#I10)** | 69 |
| **[ITEM 11.](#I11)** | **[QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK](#I11)** | 81 |
| **[ITEM 12.](#I12)** | **[DESCRIPTION OF SECURITIES OTHER THAN EQUITY SECURITIES](#I12)** | 82 |
| **[ITEM 13.](#I13)** | **[DEFAULTS, DIVIDEND ARREARAGES AND DELINQUENCIES](#I13)** | 82 |
| **[ITEM 14.](#I14)** | **[MATERIAL MODIFICATIONS TO THE RIGHTS OF SECURITY HOLDERS AND USE OF PROCEEDS](#I14)** | 82 |
| **[ITEM 15.](#I15)** | **[CONTROLS AND PROCEDURES](#I15)** | 82 |
| **[ITEM 16.](#I16)** | **[RESERVED](#I16)** | 83 |
| **[ITEM 16A.](#I16A)** | **[AUDIT COMMITTEE FINANCIAL EXPERT](#I16A)** | 83 |
| **[ITEM 16B.](#I16B)** | **[CODE OF ETHICS](#I16B)** | 84 |
| **[ITEM 16C.](#I16C)** | **[PRINCIPAL ACCOUNTANT FEES AND SERVICES](#I16C)** | 84 |
| **[ITEM 16D.](#I16D)** | **[EXEMPTIONS FROM THE LISTING STANDARDS FOR AUDIT COMMITTEES](#I16D)** | 84 |
| **[ITEM 16E.](#I16E)** | **[PURCHASES OF EQUITY SECURITIES BY THE ISSUER AND AFFILIATED PURCHASERS](#I16E)** | 84 |
| **[ITEM 16F.](#I16F)** | **[CHANGE IN REGISTRANT'S CERTIFYING ACCOUNTANTS](#I16F)** | 85 |
| **[ITEM 16G.](#I16G)** | **[CORPORATE GOVERNANCE](#I16G)** | 85 |
| **[ITEM 16H.](#I16H)** | **[MINE SAFETY DISCLOSURE](#I16H)** | 85 |
| **[ITEM 16I.](#I16I)** | **[DISCLOSURE REGARDING FOREIGN JURISDICTION THAT PREVENT INSPECTIONS](#I16I)** | 85 |
| **[ITEM 17.](#I17)** | **[FINANCIAL STATEMENTS](#I17)** | 87 |
| **[ITEM 18.](#I18)** | **[FINANCIAL STATEMENTS](#I18)** | 87 |
| **[ITEM 19.](#i19)** | **[EXHIBITS](#i19)** | 88 |

---

---

| |
|:---|
| i |
| *[**Table of Contents**](#toc)* |

---

**INTRODUCTORY NOTES**

Unless otherwise indicated or the context otherwise requires in this annual report:

● "2lab3" refer to 2lab3 Inc., a Delaware corporation which is wholly owned by the Company;

● "China" or the "PRC" refers to the People's Republic of China, including Hong Kong Special Administrative Region and the Macau Special Administrative Region, unless referencing specific laws and regulations adopted by the PRC and other legal or tax matters only applicable to mainland China, and excluding, for the purposes of this annual report only, Taiwan; "PRC subsidiaries" and "PRC entities" refer to entities established in accordance with PRC laws and regulations; 

● "Class A Ordinary Shares" refer to the Class A ordinary shares of the Company, par value $0.01 each; 

● "Class B Ordinary Shares" refer to the Class B ordinary shares of the Company, par value $0.01 each; 

● "Fujian Happiness" is to Fujian Happiness Biotech Co., Limited, a limited liability company organized under the laws of the PRC and a wholly-owned subsidiary of Happiness Fuzhou;

● "Happiness Hong Kong" refers to Happiness Holding Group Limited (formerly known as Happiness Biology Technology Group Limited), a Hong Kong limited liability company organized under the laws of Hong Kong and a wholly-owned subsidiary of Happiness Development;

● "Happiness Fuzhou" refers to Happiness (Fuzhou) E-commerce Co., Ltd,, formerly known as Happiness (Nanping) Biotech Co., Limited ("Happiness Nanping"), a limited liability company organized under the laws of the PRC and a wholly-owned subsidiary of Happiness Hong Kong;

● "Happy Buy" refers to Happy Buy (Fujian) Internet Technology Co., Limited, a limited liability company organized under the laws of the PRC and a wholly-owned subsidiary of Happiness Fuzhou;

● "PAVS", "Paranovus", or "the Company" refer to Paranovus Entertainment Technology Ltd. (formerly known as "Happiness Development Group Limited"), an exempted company registered in the Cayman Islands with limited liability;

● "Paranovus Hong Kong" refers to Paranovus Entertainment Technology Limited, a limited liability company established under the laws of Hong Kong and a wholly owned subsidiary of PAVS;

● "Paranovus PRC" refers to Hainan Paranovus Entertainment Technology Co., Ltd., a limited liability company organized under the laws of the PRC and a wholly-owned subsidiary of Paranovus Hong Kong;

● "BW" refers to Bomie Wookoo Inc, a corporation organized under the laws of New York, a 51% subsidiary controlled by PAVS;

● "RMB" and "Renminbi" refer to the legal currency of China;

● "Shunchang Happiness" is to Shunchang Happiness Nutraceutical Co., Ltd, a 100% subsidiary of "Fujian Happiness";

● "Taochejun," refers Taochejun (Fujian) Auto Sales Co., Limited., a 51% subsidiary controlled by Happiness Fuzhou;

● "US$," "U.S. dollars," "$" and "dollars" refer to the legal currency of the United States; and

● "we," "us," "our company" and "our" refer to Paranovus Entertainment Technology Ltd. and its consolidated subsidiaries. We conduct operations in China through our PRC subsidiaries.

Names of certain companies provided in this annual report are translated or transliterated from their original Chinese legal names.

---

| |
|:---|
| ii |
| *[**Table of Contents**](#toc)* |

---

**FORWARD-LOOKING STATEMENTS**

This annual report on Form 20-F contains forward-looking statements that reflect our current expectations and views of future events. These statements are made under the "safe harbor" provisions of the U.S. Private Securities Litigation Reform Act of 1995. You can identify these forward-looking statements by terminology such as "may," "will," "expect," "anticipate," "aim," "estimate," "intend," "plan," "believe," "is/are likely to," "potential," "continue" or other similar expressions. We have based these forward-looking statements largely on our current expectations and projections about future events and financial trends that we believe may affect our financial condition, results of operations, business strategy and financial needs. These forward-looking statements include, but are not limited to:

---

| |
|:---|
| the adverse effects of the COVID-19 outbreak on our business or the market price of our ordinary shares; |
| our goals and strategies; |
| our future business development, financial condition and results of operations; |
| our expectations regarding the market for our concrete products; |
| our expectations regarding demand for and market acceptance of our nutraceutical and dietary supplements products; |
| our plans to establish partnerships and develop new businesses; |
| our plans to invest in our business; |
| our relationships with our partners; |
| our future business development, results of operations and financial condition; |
| market conditions affecting our equity capital; |
| change in macroeconomic conditions; |
| competition in our industry; and |
| relevant government policies and regulations relating to our industry. |

---

We would like to caution you not to place undue reliance on these forward-looking statements and you should read these statements in conjunction with the risk factors disclosed in "Item 3. Key Information—D. Key Information—Risk Factors." Those risks are not exhaustive. We operate in an evolving environment. New risks emerge from time to time and it is impossible for our management to predict all risk factors, nor can we assess the impact of all factors on our business or the extent to which any factor, or combination of factors, may cause actual results to differ from those contained in any forward-looking statement. We do not undertake any obligation to update or revise the forward-looking statements except as required under applicable law. You should read this annual report and the documents that we reference in this annual report completely and with the understanding that our actual future results may be materially different from what we expect.

---

| |
|:---|
| iii |
| *[**Table of Contents**](#toc)* |

---

**PART I**

**ITEM 1. IDENTITY OF DIRECTORS, SENIOR MANAGEMENT AND ADVISERS**

Not applicable.

**ITEM 2. OFFER STATISTICS AND EXPECTED TIMETABLE**

Not applicable.

**ITEM 3. KEY INFORMATION**

**A. [Reserved]**

**B. Capitalization and indebtedness.**

Not applicable.

**C. Reasons for the offer and use of proceeds.**

Not applicable.

**D. Risk factors.**

*An investment in our ordinary shares involves a high degree of risk. You should carefully consider the risks and uncertainties described below together with all other information contained in this annual report, including the matters discussed under the headings "Forward-Looking Statements" and "Operating and Financial Review and Prospects" before you decide to invest in our* ordinary shares*. We are a holding company with substantial operations in China and are subject to a legal and regulatory environment that in many respects differs from the United States. If any of the following risks, or any other risks and uncertainties that are not presently foreseeable to us, actually occur, our business, financial condition, results of operations, liquidity and our future growth prospects could be materially and adversely affected.*

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| 1 |
| *[**Table of Contents**](#toc)* |

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**Summary of Risk Factors**

*Investing in our company involves significant risks. You should carefully consider all of the information in this annual report before making an investment in our company. These risks include but not limited to the following:*

Risk factors relating to our business include but not limited to the following:

● We face risks related to nature disasters (whether or not caused by climate change), unusually adverse weather conditions, pandemic outbreaks, in particular, the current coronavirus pandemic, terrorist acts and global political events. See a more detailed discussion of this risk factor on page 1 of this annual report.

● Our failure to compete effectively could adversely affect our market share, revenues and growth prospects. See a more detailed discussion of this risk factor on page 1 of this annual report.

● We are dependent on certain key personnel and loss of these key personnel could have a material adverse effect on our business, financial condition and results of operations. See a more detailed discussion of this risk factor on page 1 of this annual report.

● If we are unable to provide superior user experience, we may not be able to maintain or grow our user base or keep our users highly engaged. See a more detailed discussion of this risk factor on page 1 of this annual report.

● The AI industry faces its own risks and changing and extensive regulations. See a more detailed discussion of this risk factor on page 1 of this annual report.

● BW has a limited operating history and face significant challenges in an emerging industry. See more detailed discussion of this risk factor on page 1 of this annual report.

● BW's business depends substantially on the continuing efforts of its executive officers, and its business may be severely disrupted if it loses their services. See more detailed discussion of this risk factor on page 1 of this annual report.

● Global economic conditions could materially and adversely affect BW's business, financial condition, operating results and prospects. See more detailed discussion of this risk factor on page 1 of this annual report.

● A material portion of BW's revenue is generated outside of the United States. See more detailed discussion of this risk factor on page 1 of this annual report.

● BW may be unable to obtain financing for its working capital needs on favorable terms. See more detailed discussion of this risk factor on page 1 of this annual report.

● BW may be subject to product liability claims for products or brands that are marketed. Seasonal fluctuations in e-commerce activity could have a material impact on the revenue, cash flow and operating results. See more detailed discussion of this risk factor on page 1 of this annual report.

● BW rely on a number of internet platforms to conduct their internet media business. However, operators of the platforms may curtail or inhibit BW' ability to use the platforms, or there may be material disruption of the platforms. See more detailed discussion of this risk factor on page 1 of this annual report.

● BW's failure to maintain and grow its client base may negatively impact its revenue and business. See more detailed discussion of this risk factor on page 1 of this annual report.

Risk factors relating to doing business in China include but not limited to the following:

● Our business was subject to certain PRC laws and regulations. There are uncertainties regarding the interpretation and enforcement of PRC laws, rules and regulations. The uncertainty in the PRC legal system may make it difficult for us to predict the outcome of any disputes that we may be involved in. See a more detailed discussion of this risk factor on page 1 of this annual report.

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| 2 |
| *[**Table of Contents**](#toc)* |

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● In light of the greater oversight by the Cyberspace Administration of China, or CAC, over data security, we were subject to a variety of laws and other obligations regarding cybersecurity and data protection, and any failure to comply with applicable laws and obligations could have a material and adverse effect on our business, our listing on Nasdaq, financial condition and results of operations. See a more detailed discussion of this risk factor on page 1 of this annual report.

● The approval of the China Securities Regulatory Commission, or the CSRC, may be required in connection with an offering under PRC rules, regulations, or policies, and, if required, we cannot predict whether or how soon we will be able to obtain such approval. As a result, we face uncertainty about future actions by the PRC government that could significantly affect our business, our listing on Nasdaq, financial condition and results of operations. See a more detailed discussion of this risk factor on page 1 of this annual report.

● The PRC government has significant authority to intervene or influence the China operations of an offshore holding company at any time. The PRC government may exert more control over offerings conducted overseas and/or foreign investment in China-based issuers. If the PRC government exerts more oversight and control over offerings that are conducted overseas and/or foreign investment in China-based issuers and we were to be subject to such oversight and control, it may result in a material adverse change to our business operations, significantly limit or completely hinder our ability to offer or continue to offer securities to investors, and cause the ordinary shares to significantly decline in value or become worthless. See a more detailed discussion of this risk factor on page 1 of this annual report.

● It may be difficult for overseas shareholders and/or regulators to conduct investigation or collect evidence within China. See a more detailed discussion of this risk factor on page 1 of this annual report.

● PRC regulations relating to the establishment of offshore special purpose companies by PRC residents may subject our PRC resident beneficial owners or our PRC subsidiary to liability or penalties, limit our ability to inject capital into our PRC subsidiary, limit our PRC subsidiary's ability to increase their registered capital or distribute profits to us, or may otherwise adversely affect us. See more detailed discussion of this risk factor on page 1 of this annual report.

● PRC regulation of loans and direct investment by offshore holding companies to PRC entities may delay or prevent us from using the proceeds from the offerings of any securities to make loans or additional capital contributions to our PRC operating subsidiaries. See more detailed discussion of this risk factor on page 1 of this annual report.

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| 3 |
| *[**Table of Contents**](#toc)* |

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● Uncertainty in the interpretation of PRC tax regulations may have a negative impact on our business operations, our acquisition or restructuring strategy or the value of our investment in it. See more detailed discussion of this risk factor on page 1 of this annual report.

● Currency fluctuations and restrictions on currency exchange may adversely affect our business, including limiting our ability to convert RMB into foreign currencies and, if RMB were to decline in value, reducing our revenues and profits in U.S. dollar terms. See more detailed discussion of this risk factor on page 1 of this annual report.

● We are subject to the risks relating to the restrictions on paying dividends or making other payments to us by our subsidiaries in China. See more detailed discussion of this risk factor on page 1 of this annual report.

Risk factors relating to our Class A Ordinary Shares include but not limited to the following:

● Our Memorandum and Articles of Association afford less protection to our shareholders and may discourage claims and limit shareholders' ability to bring claims. See more detailed discussion of this risk factor on page 1 of this annual report.

● Certain judgments obtained against us by our shareholders may not be enforceable. See more detailed discussion of this risk factor on page 1 of this annual report.

● We are an emerging growth company within the meaning of the Securities Act and may take advantage of certain reduced reporting requirements. See more detailed discussion of this risk factor on page 1 of this annual report.

● We qualify as a foreign private issuer and, as a result, we are not subject to U.S. proxy rules and are subject to Exchange Act reporting obligations that permit less detailed and less frequent reporting than that of a U.S. domestic public company. See more detailed discussion of this risk factor on page 1 of this annual report.

● As a foreign private issuer, we are permitted to adopt certain home country practices in relation to corporate governance matters that differ significantly from Nasdaq corporate governance listing standards. See more detailed discussion of this risk factor on page 1 of this annual report.

● There can be no assurance that we will not be a passive foreign investment company, or PFIC, for U.S. federal income tax purposes for any taxable year, which could result in adverse U.S. federal income tax consequences to U.S. holders of our ordinary shares. See more detailed discussion of this risk factor on page 1 of this annual report.

● We may be exposed to potential risks relating to our internal controls over financial reporting. See more detailed discussion of this risk factor on page 1 of this annual report.

● The relative lack of public company experience of our management team may put us at a competitive disadvantage. See more detailed discussion of this risk factor on page 1 of this annual report.

● Our Class A Ordinary Shares are very thinly traded, and there can be no assurance that there will be an active market for our Class A Ordinary Shares in the future. See more detailed discussion of this risk factor on page 1 of this annual report.

● The TikTok-Driven E-Commerce business is heavily dependent on TikTok's operation in the U.S. See more detailed discussion of this risk factor on page 1 of this annual report.

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| 4 |
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**Risks related to Our Business**

***We have an evolving business model with still untested growth initiatives.***

We have an evolving business model and intend to implement new strategies to grow our business in the future. On March 25, 2025, we closed an acquisition transaction of 51% equity interests of BW for a total consideration of $22,440,000 in cash. BW operates through its two wholly owned subsidiaries, Bomie US LLC in New Jersey and WooKoo LLC in Texas, engaging in e-commerce business on TikTok as well as providing e-commerce solutions to customers. This acquisition aligns with the Company's strategy to expand into marketing-commerce field. By securing a majority interest in BW, the Company aims to capitalize on the growing interests demand for TikTok-driven e-commerce and related solutions. There can be no assurance that we will be successful in developing new product categories or in entering new specialty markets or in implementing any other growth strategies. Similarly, there can be no assurance that we already have or will be able to obtain or retain any employees, consultants or other resources with any specialized skills or relationships to successfully implement our strategies for our business in the future.

***2lab3 is a recently formed entity with little track record and limited historical financial information available.***

Because 2lab3 is in the early stages of executing the business strategy, we cannot provide assurance that, or when, our AI entertainment business will be profitable. We will need to make significant investments to develop and operate 2lab3 and expect to incur significant expenses in connection with operating components, including costs for developing technology, talent fees, marketing, and salaries. We expect to incur significant capital, operational and marketing expenses for a few years in connection with our strategy and growth plan. Any failure to achieve or sustain profitability may have a material adverse impact on the value of our Class A Ordinary Shares.

***The AI industry faces its own risks and changing and extensive regulations.***

We are incorporating AI technology into our product.

As with most emerging technologies, AI comes with its own set of risks and challenges that could affect its adoption and our business. AI algorithms may be flawed, and the data used could be incomplete or biased. Inappropriate or controversial data practices, by us or by others, could limit the acceptance of our AI-enhanced products and content. Certain AI applications could trigger ethical issues. Should our AI-powered product become controversial due to their effects on human rights, privacy, employment, or other social matters, we risk reputational harm or legal repercussions. In addition, uncertainties regarding the development and application of AI technology present a potential risk. There remains the possibility that AI technology may not progress as anticipated or deliver expected benefits, which could limit the acceptance and popularity of our AI-powered product.

The development and adoption of generative AI technologies are still in their early stages, and their commercial viability is uncertain. There is a risk that the demand for connectivity solutions for such technologies may not meet our expectations or that market acceptance may be slower than anticipated. Failure to achieve widespread acceptance and generate significant revenues from generative AI technologies could negatively impact our financial condition and results of operations.

Furthermore, there are uncertainties around the ownership and intellectual property protection of AI generated content ("AIGC") products. Using AIGC tools could also lead to potential copyright infringement and other legal challenges. If we are unable to secure the needed permissions or licenses for using AI tools—whether because we cannot identify the rights holder or for any other reason—we might infringe on others' rights which could lead to monetary claims, fines, penalties, or less content for our users.

The regulatory landscape surrounding generative AI technologies is evolving, and there is currently significant uncertainty as to whether governmental authorities, self-regulatory institutions or other regulatory authorities will take additional action to curtail the development or use of generative AI technologies. Moreover, laws, regulations or industry standards that develop in response to generative AI technologies may be burdensome or may prohibit the deployment of generative AI technologies for one or more uses, any of which could result in lower than anticipated demand for our product.

***Our efforts and investments in technology development may not always produce the expected results.***

We are continually developing and seeking to develop technologies that are closely related to AI that will be used in our services. As of the date of this annual report, our core research and development team consisted of a total of three employees. We cannot assure you that our future efforts to develop related technologies will be successful, in which case our products may lose their competitive edge.

In addition, we cannot assure you that the technologies we develop will be well accepted by customers, in which case our business, financial condition, results of operations and prospects may be materially and adversely affected.

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***We may be unable to continue as a going concern.***

Our audited financial statements have been prepared on a going concern basis under which an entity is considered to be able to realize its assets and satisfy its liabilities in the ordinary course of business. The assessment of our ability to continue as a going concern and to raise sufficient funds to pay for our ongoing operating expenditures and meet our liabilities for the ensuing year involves significant judgment based on historical experience and other factors, including expectation of future events that are believed to be reasonable under the circumstances. Our future operations are dependent upon the identification and successful completion of equity or debt financings and the achievement of profitable operations at an indeterminate time in the future. There can be no assurances that we will be successful in completing equity or debt financings or in achieving profitability.

***We face risks related to nature disasters (whether or not caused by climate change), unusually adverse weather conditions, pandemic outbreaks, in particular, the current coronavirus pandemic, terrorist acts and global political events, all of which could result in adverse effects to our business and financial performance.***

The occurrence of one or more natural disasters, such as hurricanes, fires, floods and earthquakes (whether or not caused by climate change), unusually adverse weather conditions, pandemic outbreaks, terrorist acts or disruptive global political events, could adversely affect our operations and financial performance.

On March 11, 2020, the World Health Organization declared the outbreak of COVID-19 a global pandemic. The COVID-19 pandemic had severely impacted China and the rest of the world, and resulted in quarantines, travel restrictions, the temporary closure of offices and facilities and cancelation of public activities, among others. In the year ended March 31, 2022, more than 80% of the company's suppliers and customers experienced lockdowns in different levels. At least 30% of the Company's revenue was affected due to the constant spread of COVID-19 which increased costs and expenses. The Company had to close seven experience stores in 2022 due to the travel restrictions and lockdowns. The Company's e-commerce sales were also negatively impacted as the logistics and delivery services were impaired.

Many of the restrictive measures previously adopted by the PRC governments at various levels to control the spread of the COVID-19 virus have been revoked or replaced with more flexible measures since December 2022. COVID-19 did not have material impact on our results of operation and financial conditions for the years ended March 31, 2025 and 2024.

However, with the uncertainties surrounding the COVID-19 outbreak, the threat to our business disruption and the related financial impact remains. Our business, results of operations, financial condition and prospects could be materially adversely affected to the extent that COVID-19 persists in China or harms the Chinese and global economy in general.

***We may not effectively manage our growth, which could materially harm our business.***

We expect that our business will continue to grow, which may place a significant strain on our management, personnel, systems and resources. We must continue to improve our operational and financial systems and managerial controls and procedures, and we will need to continue to expand, train and manage our technology and workforce. We must also maintain close coordination among our compliance, accounting, finance, marketing and sales organizations. We cannot assure you that we will manage our growth effectively. If we fail to do so, our business could be materially harmed.

Our continued growth will require an increased investment by us in technology, facilities, personnel and financial and management systems and controls. It also will require expansion of our procedures for monitoring and assuring our compliance with applicable regulations, and we will need to integrate, train and manage a growing employee base. The expansion of our existing businesses, any expansion into new businesses and the resulting growth of our employee base will increase our need for internal audit and monitoring processes that are more extensive and broader in scope than those we have historically required. Further, unless our growth results in an increase in our revenues that is proportionate to the increase in our costs associated with this growth, our operating margins and profitability will be adversely affected.

***We are dependent on certain key personnel and loss of these key personnel could have a material adverse effect on our business, financial condition and results of operations.***

Our success is, to a certain extent, attributable to the management, sales and marketing, and research and development expertise of key personnel. We are dependent upon the services of experienced personal and technicians, there can be no assurance that we will be able to recruit and retain qualified management team and skillful labor, due to labor market competition. The loss of these officers could have a material adverse effect upon our business, financial condition, and results of operations.

***We may not be able to hire and retain qualified personnel to support our growth and if we are unable to retain or hire these personnel in the future, our ability to improve our products and implement our business objectives could be adversely affected.***

We must attract, recruit and retain a sizeable workforce of technically competent employees. Competition for senior management and personnel is intense. We may not be able to retain the services of our senior executives or personnel, or attract and retain high-quality senior executives or personnel in the future. This failure could materially and adversely affect our future growth and financial condition.

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***If we fail to increase our brands' recognition, we may face difficulty in obtaining new customers.***

We believe that maintaining and enhancing our brand recognition in a cost-effective manner outside of that market is critical to achieving widespread acceptance of our current and future products and services and is an important element in our effort to increase our customer base. Successful promotion of our brand will depend largely on our ability to maintain a sizeable and active customer base, our marketing efforts and ability to provide reliable and useful products and services at competitive prices. Brand promotion activities may not yield increased revenue, and even if they do, any increased revenue may not offset the expenses we will incur in building our brand. If we fail to successfully promote and maintain our brands, or if we incur substantial expenses in an unsuccessful attempt to promote and maintain our brand, we may fail to attract enough new customers or retain our existing customers to the extent necessary to realize a sufficient return on our brand-building efforts, in which case our business, operating results and financial condition, would be materially adversely affected.

***If we are unable to provide superior user experience, we may not be able to maintain or grow our customer base or keep our customers highly engaged. As a result, our revenues, profitability and business prospects may be materially and adversely affected.***

The success of our business largely depends on our ability to provide superior user experience in order to maintain and grow our user base and keep our customers highly engaged on our online platform, which in turn depends on a variety of factors. These factors include our ability to continue to offer attractive and relevant content in engaging formats, source quality merchants to respond to user demands and preferences, maintain the quality of our products and services, provide reliable and user-friendly features for our users to browse for content and products, and provide high-quality customer service. If our users are not satisfied with our content, products or services, or our platform is severely interrupted or otherwise fail to meet our users' requests, our reputation and user loyalty could be adversely affected.

In addition, if users cannot obtain satisfactory customer services after they purchase products with us, our brand and user loyalty may be adversely affected. Any negative publicity or poor feedback regarding our customer service may harm our brand and reputation and in turn cause us to lose users and market share.

As a result, if we are unable to continue to maintain our user experience and provide high-quality customer service, we may not be able to retain or attract users or keep them highly engaged with the content and products we offer on our platform, which may have a material adverse effect on our business, financial condition and results of operations.

***We rely extensively on information technology systems, and cybersecurity incidents could adversely affect us.***

We rely on information technology systems and infrastructure to connect with clients, people and others, and to store and process business and financial data. Increased cybersecurity threats and attacks, including computer viruses, hacking and ransomware attacks, are constantly evolving and pose a risk to our systems and networks. Security breaches, improper use of our systems and unauthorized access to our data and information by employees and others may pose a risk that sensitive data may be exposed to unauthorized persons or to the public. We also have access to sensitive or personal data or information that is subject to privacy laws and regulations. Our systems and processes may be unable to prevent material security breaches, and such breaches could adversely affect our business, results of operations, financial position and reputation.

***BW's business is heavily dependent on TikTok's operation in the U.S.***

By securing a majority interest in BW, we expand into marketing-commerce field and capitalize on the growing interests demand for TikTok-driven e-commerce and related solutions. BW operates through its two wholly owned subsidiaries, engaging in e-commerce business on TikTok as well as providing e-commerce solutions to customers. This business currently relies heavily on TikTok as its primary sales and marketing platform, and any disruptions, regulatory restrictions, or changes to the platform's operations could have a material adverse effect on the business, financial condition, and results of operations.

Furthermore, these newer advertising and e-commerce channels often evolve rapidly and can be subject to disruptions beyond our control. For example, lawmakers in the United States, Europe, and Canada have intensified efforts to restrict or regulate access to TikTok due to national security concerns. On April 24, 2024, President Biden signed a bill requiring ByteDance to divest TikTok by January 19, 2025, or face a potential ban in the United States. Although ByteDance did not sell TikTok by the deadline, on January 20, 2025, President Trump issued an executive action delaying the enforcement of the TikTok ban for 75 days. Additionally, several U.S. states, governmental agencies, and institutions have raised similar concerns, leading to localized restrictions and prohibitions on TikTok's usage.

As laws and regulations governing digital platforms continue to evolve, any restrictions or outright bans on TikTok could significantly impact BW's ability to conduct business, as BW relies on the platform for product sales, advertising, and customer engagement. Furthermore, failure by BW, its employees, or third-party partners to comply with emerging regulations could expose it to regulatory investigations, legal liabilities, fines, or other penalties. Any sudden loss of access to TikTok or limitations on its functionality could require BW to rapidly shift to alternative sales channels, which may not be as effective or scalable, and could negatively affect BW's revenues, customer acquisition, and overall growth strategy.

Given BW's reliance on TikTok, any regulatory uncertainty, access restrictions, or platform policy changes could materially and adversely affect BW's ability to operate and grow BW's business.

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***BW has a limited operating history and face significant challenges in an emerging industry.***

BW has a limited operating history which makes it difficult to predict its results of operations. In addition, BW's results of operations may fluctuate from quarter to quarter as a result of the nature of its business and a number of factors, many of which are outside of BW's control and may be difficult to predict. Some additional factors that affect BW's results include, but are not limited to:

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| the level of demand for BW's services and solutions; |
| BW's ability to retain existing or add new creators and brands; |
| BW's ability to successfully integrate companies and assets it has acquired and in the future may acquire into its business; |
| the timing and success of new features, integrations, capabilities and enhancements by BW to its products or by its competitors to their products; |
| changes in the competitive landscape of BW's market; |
| BW's ability to accept and use of any new technology or marketing platform; |
| errors in BW's forecasting of the demand, which could lead to lower revenue, increased costs or both; |
| the amount and timing of operating expenses and capital expenditures, as well as entry into operating leases, that BW may incur to maintain and expand its business and operations and to remain competitive; |
| the timing of expenses and recognition of revenue; |
| security breaches, technical difficulties or interruptions resulting in service level agreement credits; |
| adverse litigation judgments, other dispute-related settlement payments or other litigation-related costs; |
| regulatory fines; |
| changes in, and continuing uncertainty in relation to, the legislative or regulatory environment; |
| legal and regulatory compliance costs in new and existing markets; |
| the number of new employees added and employee turnover; |
| the timing of the grant or vesting or settlement of equity awards to employees, directors or consultants; |
| the availability of content for licensing for use by creators; |
| pricing pressure as a result of competition or otherwise; |
| costs and timing of expenses related to the acquisition of businesses, talent, technologies or intellectual property, including potentially significant amortization costs and possible write-downs; and |
| general economic conditions in either domestic or international markets, including geopolitical uncertainty and instability. |

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Any one or more of the factors above may result in significant fluctuations in BW's quarterly results of operations. You should not rely on BW's past results as an indicator of its future performance. The variability and unpredictability of its quarterly results of operations or other operating metrics could result in its failure to meet its expectations or those of analysts that cover BW or investors with respect to revenue or other key metrics for a particular period. If BW fails to meet or exceed such expectations for these or any other reasons, the market price of shares could fall, and BW could face costly lawsuits, including securities class action suits.

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***BW depends on the performance and reputation of key opinion leaders (KOLs) and influencers, and its inability to attract, retain or effectively manage these individuals could materially and adversely affect its business, financial condition and results of operations.***

BW relies on the ability of KOLs and influencers to engage audiences and drive sales through short-form videos and livestreaming on platforms such as TikTok. BW collaborates with KOLs in both our self-operated TikTok shops and our e-commerce enablement services for third-party merchants. The effectiveness of these collaborations directly affects consumer traffic, brand visibility, and gross merchandise value (GMV), which in turn impacts the service fees and commission income BW earns.

BW's continued success depends on its ability to identify, attract and retain KOLs with strong content creation capabilities and established followings. However, there is intense competition for high-performing influencers, and we may not be able to retain them on commercially reasonable terms or at all. In addition, shifts in consumer preferences, platform algorithm changes, or reputational issues involving individual KOLs, such as public controversies, breaches of contract, or failure to comply with platform policies, which could result in the underperformance of influencer-driven campaigns, negatively affecting BW's financial performance.

If BW is unable to maintain strong relationships with a network of high-performing KOLs or fail to effectively manage influencer-led campaigns, its ability to deliver value to both its own e-commerce stores and its merchant clients may be materially and adversely affected.

***BW operates in highly competitive and rapidly evolving markets, and intense competition in the social commerce and e-commerce enablement sectors could adversely affect its business, financial condition, and results of operations.***

BW faces intense competition across multiple aspects of its business, including its own TikTok shops and its service offerings to third-party merchants. The social commerce industry is rapidly evolving and characterized by low barriers to entry, frequent innovation, and shifting consumer and platform dynamics. As a result, BW competes with a wide range of players, including other social commerce retailers, multi-channel networks (MCNs), livestreaming agencies, influencer marketing firms, and digital advertising solution providers.

In its own product sales channels, BW competes for consumer attention, traffic, and conversion with both established brands and individual content creators who manage their own online stores. Success in this environment depends heavily on the ability to produce engaging content, manage effective livestreams, and respond quickly to evolving trends. BW may face pressure to reduce pricing or increase promotional activity, which could erode its margins or require higher marketing expenditure.

In its e-commerce enablement services, BW competes for merchant clients with a growing number of third-party service providers offering livestreaming support, KOL engagement, advertising placement, and analytics tools. Many of these competitors may have longer operating histories, greater financial resources, deeper relationships with platforms, or stronger technological capabilities. Some merchants may also choose to develop in-house capabilities to manage content, KOLs, and digital marketing, reducing the demand for outsourced services.

In addition, platform operators such as TikTok may offer their own native marketing and commerce tools to brands, potentially disintermediating third-party service providers like BW. As competition intensifies, BW may be required to lower its pricing, offer more favorable commercial terms, or increase investment in talent, tools, and content production—each of which may adversely impact its financial performance.

If BW fails to compete effectively across its business lines, or is unable to differentiate its services and maintain strong relationships with merchants, KOLs, and platform partners, its market position, revenue growth, and profitability could be materially and adversely affected.

***BW's operations may be adversely affected by evolving regulations related to digital advertising, data privacy, and influencer marketing.***

BW engages in various activities that are subject to increasing regulatory scrutiny, including livestreaming sales, digital advertising placements, use of third-party influencers (KOLs), and data analytics services. Governments and regulatory authorities in BW's key markets, including the United States, have introduced or are considering new laws and regulations aimed at strengthening consumer protection, regulating influencer disclosures, ensuring transparency in online advertising, and protecting personal data.

For example, changes to rules requiring clearer disclosure of paid promotions, restrictions on ad targeting or algorithmic content distribution, or enhanced obligations around data collection and usage could affect how BW structures its services and interacts with consumers and merchant clients. Regulatory developments may also impose new compliance burdens on BW's clients, which could indirectly affect demand for BW's enablement services.

Because the regulatory landscape in these areas is evolving rapidly and may vary across jurisdictions, BW may be required to adapt its operations or technology on short notice, increase its compliance efforts, or face uncertainty when entering new markets. Failure to comply with applicable regulations, or delays in responding to regulatory changes, could result in reputational harm, fines, or restrictions on BW's business activities.

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 **BW's business depends substantially on the continuing efforts of its executive officers, and its business may be severely disrupted if it loses their services.**

BW's future success depends substantially on the continued services of its executive officers. BW does not currently maintain key man life insurance on any of its executive officers. If any of its executive officers are unable or unwilling to continue in their present positions, it may not be able to replace them readily, if at all. Therefore, BW's business may be severely disrupted, and it may incur additional expenses to recruit and retain new officers. In addition, if any of BW's executive officers joins a competitor or forms a competing company, its business, financial condition, operating results or prospects could be harmed.

**Global economic conditions could materially and adversely affect BW's business, financial condition, operating results and prospects.**

The global macroeconomic environment is facing challenges, and the uncertain state of the global economy continues to impact businesses around the world, including as a result of COVID-19. If global economic and financial market conditions do not improve or further deteriorate, BW's business, financial condition, operating results and prospects may be materially and adversely affected.

**A material portion of BW's revenue is generated outside of the United States.**

Global political uncertainty poses risks of volatility in global markets, which could negatively affect BW's operations and financial results. Changes in U.S. policy regarding foreign trade or manufacturing may create negative sentiment about the U.S. among non-U.S. dealers, end customers, employees or prospective employees, all of which could adversely affect BW's business, sales, hiring and employee retention. Implications related to BW's non-U.S. sales may negatively impact BW's financial operating results. These implications include foreign currency effects, tariffs, customs duties, inflation, difficulties in enforcing agreements and collecting receivables through foreign legal systems, compliance with international laws, treaties and regulations, unexpected changes in regulatory or tax environments, disruptions in supply or distribution, dependence on foreign personnel and various employee work agreements, foreign governmental action, as well as economic and social instability. In addition, there may unfavorable tax law changes.

**BW may be unable to obtain financing for its working capital needs on favorable terms.**

BW's success and growth are largely dependent upon having adequate working capital to fund its business objectives and planned growth on favorable terms. BW cannot assure you that it will be able to generate cash flow or that it will be able to borrow funds in amounts sufficient to enable it to meet its working capital requirements.

**Seasonal fluctuations in e-commerce activity could have a material impact on the revenue, cash flow and operating results.**

BW's revenue, cash flow, operating results and other key operating and performance metrics may vary from quarter to quarter due to the seasonal nature of clients' spending on advertising campaigns. For example, customers tend to devote more of their budgets to the fourth calendar quarter to coincide with consumer holiday spending. Moreover, the inventory in the fourth quarter may be more expensive due to increased demand for inventory. Political advertising could also cause the revenue to increase during election cycles and decrease during other periods.

**BW may be subject to product liability claims for products or brands that are marketed.**

As part of BW' internet media services, they provide integrated marketing services for products or brands. If any product or brand marketed by BW were to cause personal injury or injury to property, the injured party or parties could bring claims against BW. BW could also be subject to claims that consumers were harmed due to their reliance on BW' promotion of products or brands. If a claim were brought against BW, regardless of its merit, BW' business and the reputation of their services may be adversely affected. If a claim were to become successful, BW may have the right under the applicable laws, rules, and regulations to seek indemnification from the relevant manufacturers or third-party brands or merchants for any compensation that BW may be required to pay to consumers in connection with product liability, personal injury, or a similar claim, if such relevant party is found liable. However, there can be no assurance that BW will be able to recover all or any amounts from these parties. Any product liability claim, regardless of its merit or success, could result in the expenditure of funds and management time and adverse publicity and could have a negative impact on BW' reputation, business, financial condition, and results of operations.

**BW rely on a number of internet platforms to conduct their internet media business. However, operators of the platforms may curtail or inhibit BW' ability to use the platforms, or there may be material disruption of the platforms.**

BW rely on various internet platforms and social media networks to distribute marketing content. While these platforms are generally open to all users, they have no obligation to allow BW to use their platforms in the long term. The platform operators may decide at any time to curtail or inhibit BW' ability to use such platforms if BW breach the terms of use of such platforms or for any other reason. Additionally, these platforms may increase their fees or make changes to their respective business models, terms of use, policies, or systems, and those changes could impair or restrict BW' ability to post content. Further, platforms could cease operations unexpectedly due to a number of events, including interruptions in telecommunication services, computer viruses, and security breaches. Any of the above could reduce BW' ability to post marketing content, drive user traffic, and reach target audiences, and thus impair BW' ability to serve their customers, any of which could affect their ability to achieve profitability or have a material adverse effect on their business, financial condition and results of operations.

**BW's failure to maintain and grow its client base may negatively impact its revenue and business.**

To sustain or increase the revenue, BW must regularly add new clients and encourage existing clients to maintain or increase the amount of marketing services purchased, as well as to adopt new features and functionalities BW offers. If competitors introduce lower-cost or differentiated offerings that compete with, or are perceived to compete with BW's, BW's ability to attract new clients or retain existing ones could be impaired. BW cannot assure you that the clients will continue to use its services, or that BW will be able to replace, in a timely or effective manner, departing clients with new ones that generate comparable revenue. If a major client representing a significant portion of the business decides to materially reduce its use of BW's services or to cease using BW's services altogether, it is possible that BW's revenue could be significantly reduced.

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**Risks Related to Doing Business in China**

***Joint statement by the SEC and the PCAOB, rule changes by Nasdaq, and the HFCA Act all call for additional and more stringent criteria to be applied to emerging market companies upon assessing the qualification of their auditors, especially the non-U.S. auditors who are not inspected by the PCAOB.***

On May 20, 2020, the U.S. Senate passed the HFCA Act requiring a foreign company to certify it is not owned or controlled by a foreign government if the PCAOB is unable to audit specified reports because the company uses a foreign auditor not subject to PCAOB inspection. If the PCAOB is unable to inspect the company's auditors for three consecutive years, the issuer's securities are prohibited to trade on a national exchange. On December 2, 2020, the U.S. House of Representatives approved the HFCA Act. On December 18, 2020, the HFCA Act was signed into law.

On September 22, 2021, the PCAOB adopted a final rule implementing the HFCA Act, which provides a framework for the PCAOB to use when determining, as contemplated under the HFCA Act, whether the board of directors of a company is unable to inspect or investigate completely registered public accounting firms located in a foreign jurisdiction because of a position taken by one or more authorities in that jurisdiction.

On December 16, 2021, the PCAOB issued a report on its determinations that it is unable to inspect or investigate completely PCAOB-registered public accounting firms headquartered in mainland China and in Hong Kong because of positions taken by PRC and Hong Kong authorities in those jurisdictions.

On August 26, 2022, the CSRC, China's Ministry of Finance, and the PCAOB signed the SOP Agreements governing inspections and investigations of audit firms based in mainland China and Hong Kong, taking the first step toward opening access for the PCAOB to inspect and investigate registered public accounting firms headquartered in mainland China and Hong Kong. Pursuant to the fact sheet with respect to the SOP Agreements disclosed by the SEC, the PCAOB shall have independent discretion to select any issuer audits for inspection or investigation and has the unfettered ability to transfer information to the SEC. On December 15, 2022, the PCAOB determined that the PCAOB was able to secure complete access to inspect and investigate registered public accounting firms headquartered in mainland China and Hong Kong and voted to vacate its previous determinations to the contrary. However, should PRC authorities obstruct or otherwise fail to facilitate the PCAOB's access in the future, the PCAOB will consider the need to issue a new determination.

As an auditor of companies that are registered with the SEC and publicly traded in the United States and a firm registered with the PCAOB, our auditor is required under the laws of the United States to undergo regular inspections by the PCAOB to assess their compliance with the laws of the United States and professional standards.

Historically, we operated substantially in mainland China, a jurisdiction where the PCAOB is currently unable to conduct inspections without the approval of the Chinese government authorities, our auditor, Enrome LLP the independent registered public accounting firms that issues the audit report included elsewhere in this annual report, is subject to laws in the United States pursuant to which the PCAOB conducts regular inspections to assess our auditors' compliance with the applicable professional standards. Enrome LLP is headquartered in Singapore and can be inspected by the PCAOB on a regular basis. Enrome LLP had not been subject to the determinations announced by the PCAOB on December 16, 2021. However, in the event it is later determined that the PCAOB is unable to inspect or investigate completely our auditor because of a position taken by an authority in a foreign jurisdiction, then such lack of inspection could cause trading in our securities to be prohibited under the HFCA Act, and ultimately result in a determination by the Nasdaq to delist our securities. Delisting of our Class A Ordinary Shares would force holders of our Class A Ordinary Shares to sell their Class A Ordinary Shares. The market price of our Class A Ordinary Shares could be adversely affected as a result of anticipated negative impacts of these executive or legislative actions upon, as well as negative investor sentiment towards, companies with significant operations in China that are listed in the United States, regardless of whether these executive or legislative actions are implemented and regardless of our actual operating performance.

***Our business was subject to certain PRC laws and regulations. There are uncertainties regarding the interpretation and enforcement of PRC laws, rules and regulations. The uncertainty in the PRC legal system may make it difficult for us to predict the outcome of any disputes that we may be involved in.***

The PRC legal system is based on the PRC Constitution and is made up of written laws, regulations, circulars and directives. The PRC government is still in the process of developing its legal system, so as to meet the needs of investors and to encourage foreign investment. As the PRC economy is generally developing at a relative faster pace than its legal system, some degree of uncertainty exists in connection with whether and how existing laws and regulations will apply to certain events or circumstances.

Some of the laws and regulations, and the interpretation, implementation and enforcement thereof, are still subject to policy changes. There is no assurance that the introduction of new laws, changes to existing laws and the interpretation or application thereof or the delays in obtaining approvals from the relevant authorities will not have an adverse impact on our PRC subsidiaries' business, financial performance and prospects.

Further, precedents on the interpretation, implementation and enforcement of the PRC laws and regulations are limited, and unlike other common law countries such as the United States, decisions on precedent cases are not binding on lower courts. As such, the outcome of dispute resolutions may not be consistent or predictable as in the other more developed jurisdictions and it may be difficult to obtain swift or equitable enforcement of the laws in the PRC, or obtain enforcement of judgment by a court of another jurisdiction.

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In addition, the PRC government has recently announced its plans to enhance its regulatory oversight of Chinese companies listing overseas. The "Opinions on Intensifying Crack Down on Illegal Securities Activities" issued on July 6, 2021 called for:

● tightening oversight of data security, cross-border data flow and administration of classified information, as well as amendments to relevant regulation to specify responsibilities of overseas listed Chinese companies with respect to data security and information security;

● enhanced oversight of overseas listed companies as well as overseas equity fundraising and listing by Chinese companies; and

● extraterritorial application of China's securities laws.

As the Opinions on Intensifying Crack Down on Illegal Securities Activities were recently issued, there are great uncertainties with respect to the interpretation and implementation thereof. The Chinese government may promulgate relevant laws, rules and regulations that may impose additional and significant obligations and liabilities on overseas listed Chinese companies regarding data security, cross-border data flow, and compliance with China's securities laws. It is uncertain whether or how these new laws, rules and regulations and the interpretation and implementation thereof may affect us, but among other things, our ability and the ability of our subsidiaries to obtain external financing through the issuance of equity securities overseas could be negatively affected.

***In light of the greater oversight by the Cyberspace Administration of China, or CAC, over data security, we are subject to a variety of laws and other obligations regarding cybersecurity and data protection, and any failure to comply with applicable laws and obligations could have a material and adverse effect on our business, our listing on Nasdaq, financial condition and results of operations.***

Historically, we were subject to PRC laws relating to the collection, use, sharing, retention, security, and transfer of confidential and private information, such as personal information and other data. Our compliance obligations include those relating to the Data Protection Act (As revised) of the Cayman Islands and the relevant PRC laws in this regard. These PRC laws apply not only to third-party transactions, but also to transfers of information between us and our subsidiaries, and among us, our subsidiaries, and other parties with which we have commercial relations. These laws continue to develop, and the PRC government may adopt other rules and restrictions in the future. Non-compliance could result in penalties or other significant legal liabilities.

Pursuant to the PRC Cybersecurity Law, which was promulgated by the Standing Committee of the National People's Congress on November 7, 2016 and took effect on June 1, 2017, personal information and important data collected and generated by a critical information infrastructure operator in the course of its operations in China must be stored in China, and if a critical information infrastructure operator purchases internet products and services that affects or may affect national security, it should be subject to cybersecurity review by the CAC. Due to the lack of further interpretations, the exact scope of "critical information infrastructure operator" remains unclear. On December 28, 2021, the CAC and other relevant PRC governmental authorities jointly promulgated the Cybersecurity Review Measures (the "new Cybersecurity Review Measures") to replace the original Cybersecurity Review Measures. The new Cybersecurity Review Measures took effect on February 15, 2022. Pursuant to the new Cybersecurity Review Measures, if critical information infrastructure operators purchase network products and services, or network platform operators conduct data processing activities that affect or may affect national security, they will be subject to cybersecurity review. A network platform operator holding more than one million users/users' individual information also shall be subject to cybersecurity review before listing abroad. The cybersecurity review will evaluate, among others, the risk of critical information infrastructure, core data, important data, or a large amount of personal information being influenced, controlled or maliciously used by foreign governments and network information security risk in connection with the overseas listing. As of today, we have not received any inquiry, notice, warning, or sanctions regarding our corporate structure from the CSRC, CAC or any other PRC governmental agency. As of today, we have not received any inquiry, notice, warning, or sanctions regarding our corporate structure from the CSRC, CAC or any other PRC governmental agency. As advised by our PRC counsel, Jingtian & Gongcheng LLP, we are unlikely to be subject to cybersecurity review, because: (i) we have not received any notice from governmental agency to treat us as an operator of critical information infrastructure, and (ii) we have not received any notice from governmental agency to treat us as an online platform operator who possesses personal information of more than one million users. In addition, we currently do not have over one million users' personal information. If we ever became subject to the cybersecurity review of CAC in the future as the applicable rules, regulations, policies or the interpretation thereof change, during such review, we may be required to suspend our operation or experience other disruptions to our operations. Cybersecurity review could also result in negative publicity with respect to our company and diversion of our managerial and financial resources.

Furthermore, if we were found to be in violation of applicable laws and regulations in China during such review, we could be subject to administrative penalties, such as warnings, fines, or service suspension. Therefore, cybersecurity review could materially and adversely affect our business, financial condition, and results of operations.

In addition, the PRC Data Security Law, which was promulgated by the Standing Committee of the National People's Congress on June 10, 2021 and took effect on September 1, 2021, requires data collection to be conducted in a legitimate and proper manner, and stipulates that, for the purpose of data protection, data processing activities must be conducted based on data classification and hierarchical protection system for data security. As the Data Security Law was recently promulgated, we may be required to make further adjustments to our business practices to comply with this law. If our data processing activities were found to be not in compliance with this law, we could be ordered to make corrections, and under certain serious circumstances, such as severe data divulgence, we could be subject to penalties, including the revocation of our business licenses or other permits. Furthermore, the recently issued Opinions on Strictly Cracking Down Illegal Securities Activities in Accordance with the Law require (i) speeding up the revision of the provisions on strengthening the confidentiality and archives management relating to overseas issuance and listing of securities and (ii) improving the laws and regulations relating to data security, cross-border data flow, and management of confidential information. As there remain uncertainties regarding the further interpretation and implementation of those laws and regulations, we cannot assure you that we will be compliant such new regulations in all respects, and we may be ordered to rectify and terminate any actions that are deemed illegal by the regulatory authorities and become subject to fines and other sanctions. As a result, we may be required to suspend our relevant e-commerce businesses, including our internet information and advertising services, and automobile sale business, shut down our website and online platform, take down our operating application, or face other penalties, which may materially and adversely affect our business, financial condition, and results of operations.

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On August 20, 2021, the Standing Committee of the National People's Congress of China promulgated the Personal Information Protection Law of the PRC, or the PIPL, which took effect in November 2021. As the first systematic and comprehensive law specifically for the protection of personal information in the PRC, the PIPL provides, among others, that (i) an individual's consent shall be obtained to use sensitive personal information, such as biometric characteristics and individual location tracking, (ii) personal information operators using sensitive personal information shall notify individuals of the necessity of such use and impact on the individual's rights, and (iii) where personal information operators reject an individual's request to exercise his or her rights, the individual may file a lawsuit with a People's Court. As uncertainties remain regarding the interpretation and implementation of the PIPL, we cannot assure you that we will comply with the PIPL in all respects, we may become subject to fines and/or other penalties which may have material adverse effect on our business, operations and financial condition.

While we take measures to comply with all applicable data privacy and protection laws and regulations, we cannot guarantee the effectiveness of the measures undertaken by us and our business partners. However, compliance with any additional laws could be expensive, and may place restrictions on our business operations and the manner in which we interact with our users. In addition, any failure to comply with applicable cybersecurity, privacy, and data protection laws and regulations could result in proceedings against us by government authorities or others, including notification for rectification, confiscation of illegal earnings, fines, or other penalties and legal liabilities against us, which could materially and adversely affect our business, financial condition, and results of operations, and the value of our Class A Ordinary Shares. In addition, any negative publicity on our website or platform's safety or privacy protection mechanism and policy could harm our public image and reputation and materially and adversely affect our business, financial condition, and results of operations.

***The approval of the China Securities Regulatory Commission, or the CSRC, may be required in connection with an offering under PRC rules, regulations, or policies, and, if required, we cannot predict whether or how soon we will be able to obtain such approval. As a result, both you and us fact uncertainty about future actions by the PRC government that could significantly affect our business, our listing on Nasdaq, financial condition and results of operations.***

On August 8, 2006, six PRC regulatory agencies, including the MOFCOM, the State-Owned Assets Supervision and Administration Commission, or the SASAC, the SAT, the State Administration for Industry and Commerce, or the SAIC, the CSRC, and the State Administration of Foreign Exchange, or the SAFE, jointly adopted the Regulations on Mergers and Acquisitions of Domestic Enterprises by Foreign Investors, or the M&A Rules, which came into effect on September 8, 2006 and were amended on June 22, 2009. The M&A Rules include, among other things, provisions that purport to require that an offshore special purpose vehicle that is controlled by PRC domestic companies or individuals and that has been formed for the purpose of an overseas listing of securities through acquisitions of PRC domestic companies or assets to obtain the approval of the CSRC prior to the listing and trading of such special purpose vehicle's securities on an overseas stock exchange. On September 21, 2006, the CSRC published on its official website procedures regarding its approval of overseas listings by special purpose vehicles. However, substantial uncertainty remains regarding the scope and applicability of the M&A Rules to offshore special purpose vehicles.

While the application of the M&A Rules remains unclear, we believe, based on the advice of our PRC legal counsel, Jingtian & Gongcheng LLP, that the CSRC approval is not required for the listing and trading our Class A Ordinary Shares on the Nasdaq Capital Market because our WFOE was incorporated as a foreign-invested enterprise by means of foreign direct investments rather than by merger with or acquisition of any PRC domestic companies as defined under the M&A Rules. There can be no assurance that the relevant PRC government agencies, including the CSRC, would reach the same conclusion as our PRC legal counsel. If the CSRC or other PRC regulatory body subsequently determines that we need to obtain the CSRC's approval for our offering or if the CSRC or any other PRC government authorities promulgates any interpretation or implements rules that would require us to obtain CSRC or other governmental approvals for our offering, we may face adverse actions or sanctions by the CSRC or other PRC regulatory agencies. In any such event, these regulatory agencies may impose fines and penalties on our operations in China, limit our operating privileges in China, delay or restrict the repatriation of the proceeds from our offerings into the PRC, restrictions on or prohibition of the payments or remittance of dividends by our subsidiaries in China, or other actions that could have a material and adverse effect on our business, reputation, financial condition, results of operations, prospects, as well as the trading price of the Class A Ordinary Shares. The CSRC or other PRC regulatory agencies may also take actions requiring us, or making it advisable for us, to halt our offering before settlement and delivery of the Class A Ordinary Shares that we are offering. Consequently, if you engage in market trading or other activities in anticipation of and prior to settlement and delivery, you would be doing so at the risk that the settlement and delivery may not occur. In addition, if the CSRC or other regulatory agencies later promulgate new rules or explanations requiring us to obtain their approvals for our offering, we may be unable to obtain waivers of such approval requirements. Any uncertainties or negative publicity regarding such approval requirements could materially and adversely affect the trading price of our Class A Ordinary Shares.

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Recently, the PRC government adopted a series of regulatory actions and issued statements to regulate business operations in China with little advance notice, including cracking down on illegal activities in the securities market, adopting new measures to extend the scope of cybersecurity reviews, and expanding the efforts in anti-monopoly enforcement. As of the date of this annual report, as advised by our PRC counsel, Jingtian & Gongcheng LLP, we and our subsidiaries, (1) are not subject to permission requirements from the CAC or any other entity that is required to approve of our PRC subsidiaries' operations, and (2) have not received or were denied such permissions by any PRC authorities. Nevertheless, the General Office of the Central Committee of the Communist Party of China and the General Office of the State Council jointly issued the "Opinions on Severely Cracking Down on Illegal Securities Activities According to Law," or the Opinions, which were made available to the public on July 6, 2021. The Opinions emphasized the need to strengthen the administration over illegal securities activities, and the need to strengthen the supervision over overseas listings by Chinese companies. Given the current PRC regulatory environment, it is uncertain when and whether we or our PRC subsidiaries, will be required to obtain permission from the PRC government to list on U.S. exchanges in the future, and even when such permission is obtained, whether it will be denied or rescinded. We have been closely monitoring regulatory developments in China regarding any necessary approvals from the CSRC or other PRC governmental authorities required for overseas listings. As of the date of this annual report, we have not received any inquiry, notice, warning, sanctions or regulatory objection to this offering from the CSRC or other PRC governmental authorities. However, there remains significant uncertainty as to the enactment, interpretation and implementation of regulatory requirements related to overseas securities offerings and other capital markets activities.

On February 17, 2023, the CSRC promulgated the Trial Administrative Measures of Overseas Securities Offering and Listing by Domestic Companies (the "Trial Measures"), which will take effect on March 31, 2023. The Trial Measures clarified and emphasized several aspects, which include but are not limited to: (1) comprehensive determination of the "indirect overseas offering and listing by PRC domestic companies" in compliance with the principle of "substance over form" and particularly, an issuer will be required to go through the filing procedures under the Trial Measures if the following criteria are met at the same time: a) 50% or more of the issuer's operating revenue, total profit, total assets or net assets as documented in its audited consolidated financial statements for the most recent accounting year is accounted for by PRC domestic companies, and b) the main parts of the issuer's business activities are conducted in mainland China, or its main places of business are located in mainland China, or the senior managers in charge of its business operation and management are mostly Chinese citizens or domiciled in mainland China; (2) exemptions from immediate filing requirements for issuers that a) have already been listed or registered but not yet listed in foreign securities markets, including U.S. markets, prior to the effective date of the Trial Measures, and b) are not required to re-perform the regulatory procedures with the relevant overseas regulatory authority or the overseas stock exchange, c) whose such overseas securities offering or listing shall be completed before September 30, 2023, provided however that such issuers shall carry out filing procedures as required if they conduct refinancing or are involved in other circumstances that require filing with the CSRC; (3) a negative list of types of issuers banned from listing or offering overseas, such as (a) issuers whose listing or offering overseas have been recognized by the State Council of the PRC as possible threats to national security, (b) issuers whose affiliates have been recently convicted of bribery and corruption, (c) issuers under ongoing criminal investigations, and (d) issuers under major disputes regarding equity ownership; (4) issuers' compliance with web security, data security, and other national security laws and regulations; (5) issuers' filing and reporting obligations, such as obligation to file with the CSRC after it submits an application for initial public offering to overseas regulators, and obligation after offering or listing overseas to report to the CSRC material events including change of control or voluntary or forced delisting of the issuer; and (6) the CSRC's authority to fine both issuers and their shareholders between 1 and 10 million RMB for failure to comply with the Trial Measures, including failure to comply with filing obligations or committing fraud and misrepresentation. As of the date of this annual report, as advised by our PRC counsel, Jingtian & Gongcheng LLP, for any future follow-on offerings of our securities, we should submit filing materials to the CSRC within three working days after the completion of such offering. The required filing materials shall include, but not be limited to, (1) filing report and relevant commitment letter and (2) legal opinions by our local counsel.

***The PRC government has significant authority to intervene or influence the China operations of an offshore holding company at any time. The PRC government may exert more control over offerings conducted overseas and/or foreign investment in China-based issuers. If the PRC government exerts more oversight and control over offerings that are conducted overseas and/or foreign investment in China-based issuers and we were to be subject to such oversight and control, it may result in a material adverse change to our business operations, significantly limit or completely hinder our ability to offer or continue to offer securities to investors, and cause the ordinary shares to significantly decline in value or become worthless.***

Our business, prospects, financial condition, and results of operations may be influenced to a significant degree by political, economic, and social conditions in China generally. The PRC government has significant authority to intervene or influence the China operations of an offshore holding company at any time, which could result in a material adverse change to our operations and the value of the ordinary shares.

Furthermore, given recent statements by the Chinese government indicating an intent to exert more oversight and control over offerings that are conducted overseas, although we are currently not required to obtain permission from any of the PRC federal or local government and has not received any denial to list on the U.S. exchange, it is uncertain whether or when we might be required to obtain permission from the PRC government to list on U.S. exchanges in the future. Even if such permission is obtained, it is uncertain whether it will be later denied or rescinded, which could significantly limit or completely hinder our ability to offer or continue to offer our securities to investors and result in a material adverse change to our business operations, and damage our reputation, therefore, cause the value of our shares to significantly decline or be worthless.

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***It may be difficult for overseas shareholders and/or regulators to conduct investigation or collect evidence within China.***

Shareholder claims or regulatory investigation that are common in the United States generally are difficult to pursue as a matter of law or practicality in China. For example, in China, there are significant legal and other obstacles to providing information needed for regulatory investigations or litigation initiated outside China. Although the authorities in China may establish a regulatory cooperation mechanism with the securities regulatory authorities of another country or region to implement cross-border supervision and administration, such cooperation with the securities regulatory authorities in the Unities States may not be efficient in the absence of mutual and practical cooperation mechanism. Furthermore, according to Article 177 of the PRC Securities Law, or Article 177, which became effective in March 2020, no overseas securities regulator is allowed to directly conduct investigation or evidence collection activities within the territory of the PRC. While detailed interpretation of or implementation rules under Article 177 have yet to be promulgated, the inability for an overseas securities regulator to directly conduct investigation or evidence collection activities within China may further increase difficulties faced by you in protecting your interests.

Our principal business operation is conducted in the PRC. In the event that the U.S. regulators carry out investigation on us and there is a need to conduct investigation or collect evidence within the territory of the PRC, the U.S. regulators may not be able to carry out such investigation or evidence collection directly in the PRC under the PRC laws. The U.S. regulators may consider cross-border cooperation with securities regulatory authority of the PRC by way of judicial assistance, diplomatic channels or regulatory cooperation mechanism established with the securities regulatory authority of the PRC.

***PRC regulations relating to the establishment of offshore special purpose companies by PRC residents may subject our PRC resident beneficial owners or our PRC subsidiary to liability or penalties, limit our ability to inject capital into our PRC subsidiary, limit our PRC subsidiary's ability to increase their registered capital or distribute profits to us, or may otherwise adversely affect us.***

In July 2014, SAFE promulgated the Circular on Relevant Issues Concerning Foreign Exchange Control on Domestic Residents' Offshore Investment and Financing and Roundtrip Investment Through Special Purpose Vehicles, or SAFE Circular 37, to replace the Notice on Relevant Issues Concerning Foreign Exchange Administration for Domestic Residents' Financing and Roundtrip Investment Through Offshore Special Purpose Vehicles, or SAFE Circular 75, which ceased to be effective upon the promulgation of SAFE Circular 37. SAFE Circular 37 requires PRC residents (including PRC individuals and PRC corporate entities) to register with SAFE or its local branches in connection with their direct or indirect offshore investment activities. SAFE Circular 37 is applicable to our shareholders who are PRC residents and may be applicable to any offshore acquisitions that we make in the future.

Under SAFE Circular 37, PRC residents who make, or have prior to the implementation of SAFE Circular 37 made, direct or indirect investments in offshore SPVs will be required to register such investments with the SAFE or its local branches. In addition, any PRC resident who is a direct or indirect shareholder of a SPV is required to update its filed registration with the local branch of SAFE with respect to that SPV, to reflect any material change. Moreover, any subsidiary of such SPV in China is required to urge the PRC resident shareholders to update their registration with the local branch of SAFE. If any PRC shareholder of such SPV fails to make the required registration or to update the previously filed registration, the subsidiary of such SPV in China may be prohibited from distributing its profits or the proceeds from any capital reduction, share transfer or liquidation to the SPV, and the SPV may also be prohibited from making additional capital contributions into its subsidiary in China. On February 13, 2015, the SAFE promulgated a Notice on Further Simplifying and Improving Foreign Exchange Administration Policy on Direct Investment, or SAFE Notice 13, which became effective on June 1, 2015. Under SAFE Notice 13, applications for foreign exchange registration of inbound foreign direct investments and outbound overseas direct investments, including those required under SAFE Circular 37, will be filed with qualified banks instead of the SAFE. The qualified banks will directly examine the applications and accept registrations under the supervision of the SAFE.

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We cannot assure you that all of our shareholders that may be subject to SAFE regulations have completed all necessary registrations with the local SAFE branch or qualified banks as required by SAFE Circular 37, and we cannot assure you that these individuals may continue to make required filings or updates in a timely manner, or at all. We can provide no assurance that we are or will in the future continue to be informed of identities of all PRC residents holding direct or indirect interest in our company. Any failure or inability by such individuals to comply with the SAFE regulations may subject us to fines or legal sanctions, such as restrictions on our cross-border investment activities or our PRC subsidiary's ability to distribute dividends to, or obtain foreign exchange-denominated loans from, our company or prevent us from making distributions or paying dividends. As a result, our business operations and our ability to make distributions to you could be materially and adversely affected.

Furthermore, as these foreign exchange regulations are still relatively new and their interpretation and implementation has been constantly evolving, it is unclear how these regulations, and any future regulation concerning offshore or cross-border transactions, will be interpreted, amended and implemented by the relevant government authorities. For example, we may be subject to a more stringent review and approval process with respect to our foreign exchange activities, such as remittance of dividends and foreign-currency-denominated borrowings, which may adversely affect our financial condition and results of operations. In addition, if we decide to acquire a PRC domestic company, we cannot assure you that we or the owners of such company, as the case may be, will be able to obtain the necessary approvals or complete the necessary filings and registrations required by the foreign exchange regulations. This may restrict our ability to implement our acquisition strategy and could adversely affect our business and prospects.

***We may rely on dividends and other distributions on equity paid by our PRC subsidiaries to fund any cash and financing requirements we may have, and any limitation on the ability of our PRC subsidiaries to make payments to us could have a material and adverse effect on our ability to conduct our business.***

We rely principally on dividends and other distributions on equity from our PRC Subsidiary for our cash requirements, including for services of any debt we may incur.

Our PRC subsidiary's ability to distribute dividends is based upon its distributable earnings. Current PRC regulations permit our PRC subsidiary to pay dividends to its respective shareholders only out of their accumulated profits, if any, determined in accordance with PRC accounting standards and regulations. In addition, our PRC Subsidiary is required to set aside at least 10% of its after-tax profits each year, if any, to fund a statutory reserve until such reserve reaches 50% of its registered capital. These reserves are not distributable as cash dividends. If our PRC operating subsidiary incur debt on their own behalf in the future, the instruments governing the debt may restrict their ability to pay dividends or make other payments to us. Any limitation on the ability of our PRC subsidiary to distribute dividends or other payments to their respective shareholders could materially and adversely limit our ability to grow, make investments or acquisitions that could be beneficial to our businesses, pay dividends or otherwise fund and conduct our business.

In addition, the Enterprise Income Tax Law and its implementation rules provide that a withholding tax rate of up to 10% will be applicable to dividends payable by Chinese companies to non-PRC-resident enterprises unless otherwise exempted or reduced according to treaties or arrangements between the PRC central government and governments of other countries or regions where the non-PRC resident enterprises are incorporated.

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***We may be subject to a significant withholding tax should equity transfers by our non-resident enterprises be determined to have been done without a reasonable business purpose.***

In December 2009, the State Administration of Tax in China issued a circular on strengthening the management of proceeds from equity transfers by non-resident enterprises and requires foreign entities to report indirect sales of resident enterprises. If the existence of the overseas intermediary holding company is disregarded due to lack of reasonable business purpose or substance, gains on such sale are subject to PRC withholding tax. Due to limited guidance and implementation history of the circular, significant judgment is required in determining the existence of a reasonable business purpose by considering multiple factors, such as the form and substance of the arrangement, time of establishment of the foreign entity, relationship between each step of the arrangement, relationship between each component of the arrangement, implementation of the arrangement and the changes in the financial position of all parties involved in the transaction. Although we believe that our transactions during all the periods presented would be determined to have reasonable business purposes, should this not be the case, we would be subject to a significant withholding tax that could materially and adversely impact our financial position, results of operations and cash flows.

***Uncertainty in the interpretation of PRC tax regulations may have a negative impact on our business operations, our acquisition or restructuring strategy or the value of our investment in it.***

Pursuant to the Notice on Strengthening Administration of Enterprise Income Tax for Share Transfers by Non-PRC Resident Enterprises, or SAT Circular 698, issued by the State Administration of Taxation in December 2009, with retroactive effect from January 1, 2008, where a non-resident enterprise transfers the equity interests of a PRC resident enterprise indirectly by disposition of the equity interests of an overseas non-public holding company, or an Indirect Transfer, and such overseas holding company is located in a tax jurisdiction that: (i) has an effective tax rate of less than 12.5% or (ii) does not impose income tax on foreign income of its residents, the non-resident enterprise, being the transferor, must report to the competent tax authority of the PRC resident enterprise this Indirect Transfer. Using a "substance over form" principle, the PRC tax authority may disregard the existence of the overseas holding company if it lacks a reasonable commercial purpose and was established for the purpose of reducing, avoiding or deferring PRC tax. As a result, gains derived from such Indirect Transfer may be subject to PRC withholding tax at a rate of up to 10%. SAT Circular 698 also provides that, where a non-PRC resident enterprise transfers its equity interests in a PRC resident enterprise to its related parties at a price lower than fair market value, the relevant tax authority has the power to make a reasonable adjustment to the taxable income of the transaction.

On March 28, 2011, the State Administration of Taxation released SAT Public Notice (2011) No. 24, or SAT Public Notice 24, to clarify several issues related to Circular 698. SAT Public Notice 24 became effective on April 1, 2011. According to SAT Public Notice 24, the term "effective tax rate" refers to the effective tax rate on the gain derived from disposition of the equity interests of an overseas holding company; and the term "does not impose income tax" refers to the cases where the gain derived from disposition of the equity interests of an overseas holding company is not subject to income tax in the country/region where the overseas holding company is a resident.

There is uncertainty as to the application of SAT Circular 698. For example, while the term "Indirect Transfer" is not clearly defined, it is understood that the relevant PRC tax authorities have jurisdiction regarding requests for information over a wide range of foreign entities having no direct contact with China. Moreover, the relevant authority has not yet promulgated any formal provisions or made any formal declaration as to the process and format for reporting an Indirect Transfer to the competent tax authority of the relevant PRC resident enterprise. In addition, there are no formal declarations with regard to how to determine whether a foreign investor has adopted an abusive arrangement in order to reduce, avoid or defer PRC tax. SAT Circular 698 may be determined by the tax authorities to be applicable to previous investments by non-resident investors in its company, if any of such transactions were determined by the tax authorities to lack reasonable commercial purpose. As a result, we and our existing non-resident investors may be at risk of being taxed under SAT Circular 698 and may be required to expend valuable resources to comply with SAT Circular 698 or to establish that we should not be taxed under SAT Circular 698, which may have a material adverse effect on our financial condition and results of operations or such non-resident investors' investments in us. We have conducted and may conduct transactions involving our corporate structure. We cannot assure you that the PRC tax authorities will not, at their discretion, adjust any capital gains and impose tax return filing obligations on us or require us to provide assistance for the investigation of PRC tax authorities with respect thereto. Any PRC tax imposed on a transfer of our shares or any adjustment of such gains would cause us to incur additional costs and may have a negative impact on the value of your investment in us.

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***PRC regulation of loans and direct investment by offshore holding companies to PRC entities may delay or prevent us from using the proceeds from the offerings of any securities to make loans or additional capital contributions to our PRC operating subsidiaries.***

As an offshore holding company, our ability to make loans or additional capital contributions to our PRC operating subsidiaries is subject to PRC regulations and approvals. These regulations and approvals may delay or prevent us from using the proceeds we received in the past or will receive in the future from the offerings of securities to make loans or additional capital contributions to our PRC operating subsidiaries, and impair our ability to fund and expand our business which may adversely affect our business, financial condition and result of operations.

In 2008, the SAFE promulgated the Circular on the Relevant Operating Issues Concerning the Improvement of the Administration of the Payment and Settlement of Foreign Currency Capital of Foreign-Invested Enterprises, or SAFE Circular 142, which used to regulate the conversion by foreign-invested enterprises of foreign currency into Renminbi by restricting the usage of converted Renminbi. On April 8, 2015, the SAFE promulgated the Circular on Reforming the Management Approach Regarding the Foreign Exchange Capital Settlement of Foreign-Invested Enterprises, or SAFE Circular 19. SAFE Circular 19 took effect as of June 1, 2015 and superseded SAFE Circular 142 on the same date. SAFE Circular 19 launched a nationwide reform of the administration of the settlement of the foreign exchange capitals of foreign-invested enterprises and allows foreign-invested enterprises to settle their foreign exchange capital at their discretion, but continues to prohibit foreign-invested enterprises from using the Renminbi fund converted from their foreign exchange capitals for expenditures beyond their business scopes. On June 15, 2016, the SAFE promulgated the Circular on Reforming and Standardizing the Administrative Provisions on Capital Account Foreign Exchange, or SAFE Circular 16. SAFE Circular 19 and SAFE Circular 16 continue to prohibit foreign-invested enterprises from, among other things, using RMB fund converted from its foreign exchange capitals for expenditure beyond its business scope, investment and financing (except for guarantee products issued by banks), providing loans to non-affiliated enterprises or constructing or purchasing real estate not for self-use. SAFE Circular 19 and SAFE Circular 16 may significantly limit our ability to transfer to and use in China the net proceeds from our initial public offering, which may adversely affect our business, financial condition and results of operations.

***Currency fluctuations and restrictions on currency exchange may adversely affect our business, including limiting our ability to convert RMB into foreign currencies and, if RMB were to decline in value, reducing our revenues and profits in U.S. dollar terms.***

Our reporting currency is the U.S. dollar and our operations in China use RMB as functional currencies. The majority of our revenues derived and expenses incurred are in Chinese RMB with a relatively small amount in U.S. dollars. We are subject to the effects of exchange rate fluctuations with respect to any of these currencies. For example, the value of the RMB depends to a large extent on Chinese government policies and China's domestic and international economic and political developments, as well as supply and demand in the local market. Starting July 2005, the Chinese government changed its policy of pegging the value of the RMB to the U.S. dollar. Under the new policy, the RMB has fluctuated within a narrow and managed band against a basket of certain foreign currencies. It is possible that the Chinese government will adopt a more flexible currency policy, which could result in more significant fluctuations of the RMB against the U.S. dollar.

The income statements of our China operations are translated into U.S. dollars at the average exchange rates in each applicable period. To the extent the U.S. dollar strengthens against foreign currencies, the translation of these foreign currency-denominated transactions results in reduced revenues, operating expenses and net income for our non-U.S. operations. Similarly, to the extent the U.S. dollar weakens against foreign currencies, the translation of RMB denominated transactions results in increased revenues, operating expenses and net income for our non-U.S. operations. We are also exposed to foreign exchange rate fluctuations as we convert the financial statements of our non-U.S. subsidiaries into U.S. dollars in consolidation. If there is a change in foreign currency exchange rates, the conversion of the non-U.S. subsidiaries' financial statements will similarly be affected.

We have not entered into agreements or purchased instruments to hedge our exchange rate risks, although we may do so in the future. The availability and effectiveness of any hedging transaction may be limited and we may not be able to successfully hedge our exchange rate risks.

Although Chinese governmental policies were introduced in 1996 to allow the convertibility of RMB into foreign currency for current account items, conversion of RMB into foreign exchange for most of the capital items, such as foreign direct investment, loans or securities, requires the approval of the State Administration of Foreign Exchange, or SAFE. These approvals, however, do not guarantee the availability of foreign currency. We cannot be sure that we will be able to obtain all required conversion approvals for our operations or that Chinese regulatory authorities will not impose greater restrictions on the convertibility of RMB in the future. Because a significant amount of our future revenues are in the form of RMB, our inability to obtain the requisite approvals or any future restrictions on currency exchanges could limit our ability to utilize revenue generated in RMB to fund our business activities outside China, or to repay non-RMB-denominated obligations, including our debt obligations, which would have a material adverse effect on our financial condition and results of operations.

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***We are subject to risks relating to the restrictions on paying dividends or making other payments to us by our subsidiaries in China.***

We are a holding company and do not have any assets or conduct any business operations in China other than our investments in our subsidiaries in China. As a result, if our non-China operations require cash from China, we would depend on dividend payments from our subsidiaries in China. We cannot make any assurance that we can continue to receive payments from our subsidiaries in China. In addition, under Chinese law, our subsidiaries are only allowed to pay dividends to us out of their distributable earnings, if any, as determined in accordance with Chinese accounting standards and regulations. Moreover, our Chinese subsidiaries are required to set aside at least 10% of their respective after-tax profit each year, if any, to fund certain mandated reserve funds, unless these reserves have reached 50% of their registered capital. These reserve funds are not payable or distributable as cash dividends. For Chinese subsidiaries with after-tax profits for the periods presented, the difference between after-tax profits as calculated under PRC accounting standards and U.S. GAAP relates primarily to share-based compensation expenses and intangible assets amortization expenses, which are not pushed down to our subsidiaries under PRC accounting standards. In addition, under the EIT Law and its implementing Rules, dividends generated from our PRC subsidiaries after January 1, 2008 and payable to their immediate holding company incorporated in Hong Kong generally will be subject to a withholding tax rate of 10% (unless the PRC tax authorities determine that our Hong Kong subsidiary is a resident enterprise). If certain conditions and requirements under the Arrangement between the Mainland of China and the Hong Kong Special Administrative Region for the Avoidance of Double Taxation and the Prevention of Fiscal Evasion with respect to Taxes on Income entered into between Hong Kong and the PRC and other related PRC laws and regulations are met, the withholding rate could be reduced to 5%.

The Chinese government also imposes controls on the convertibility of RMB into foreign currencies and the remittance of currency out of China in certain cases. We have experienced and may continue to experience difficulties in completing the administrative procedures necessary to obtain and remit foreign currency. If we or any of our subsidiaries are unable to receive substantially all of the economic benefits from our operations through these contractual or dividend arrangements, we may be unable to effectively finance our operations or pay dividends on our ordinary shares.

***The PRC Labor Contract Law and its implementing rules may adversely affect our business and results of operations.***

The PRC Labor Contract Law became effective and was implemented on January 1, 2008. The PRC Labor Contract Law has reinforced the protection for employees who, under the PRC Labor Contract Law, have the right, among others, to have written labor contracts, to enter into labor contracts with no fixed terms under certain circumstances, to receive overtime wages and to terminate or alter terms in labor contracts. Furthermore, the PRC Labor Contract Law establishes additional restrictions and increases the costs involved with dismissing employees. As the PRC Labor Contract Law is relatively new, there remains significant uncertainty as to its interpretation and application by the PRC Government. In the event that we decide to significantly reduce our workforce, the PRC Labor Contract Law could adversely affect our ability to do so in a timely and cost-effective manner, and our results of operations could be adversely affected. In addition, for employees whose contracts include non-competition terms, the Labor Contract Law requires us to pay monthly compensation after such employment is terminated, which will increase our operating expenses.

***Changes in international trade policies, or the escalation of tensions in international relations, particularly with regard to China, may adversely impact our business and operating results.***

Recently, there have been heightened tensions in international relations, particularly between the United States and China. The U.S. government has made statements and taken certain actions that may lead to potential changes to U.S. and international trade policies towards China. Any unfavorable government policies on international trade, such as capital controls or tariffs, or the U.S. dollar payment and settlement system may materially and adversely affect our operations, results of operations and financial condition.

In addition to trade related tensions between China and the United States, the U.S. government escalated tensions between the U.S. and China in recent years by revoking Hong Kong's special trading status and further sanctioning Chinese companies such as Huawei. Also, the Congress of the United States enacted the Uyghur Forced Labor Prevention Act (UFLPA) in December 2021. Effective from June 21, 2022, the UFLPA creates a rebuttable presumption that goods mined, produced, or manufactured (wholly or in part) in China's Xinjiang Uyghur Autonomous Region are made with forced labor, where goods designated as such will be subject to an import ban into the United States. The President of the United States may also impose sanctions on companies that knowingly engage in, are responsible for, or facilitate forced labor in Xinjiang. We will keep monitoring our supplier relationships and make efforts to comply with any new law that may affect us. However, there is no assurance that we will be able to identify all activities conducted by our suppliers or other business partners as we do not have a control over them. To the extent we identify any potential non-compliance by any of our suppliers, we may have to find and establish relationships with alternative qualified suppliers under commercially acceptable terms. We cannot assure you that we will be able to do so in a timely manner.

Recently, the war in Ukraine and sanctions on Russia increased the uncertainties in the relations between China and the United States, and tensions between two countries could be heightened as a result. These tensions have affected both diplomatic and economic ties between the two countries. Heightened tensions could reduce levels of trade, investments, technological exchanges, and other economic activities between the two major economies. The existing tensions and any further deterioration in the relationship between the United States and China may have a negative impact on the general, economic, political, and social conditions in both countries and, given our focus on the Chinese market, adversely impact our business, financial condition, and results of operations.

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**Risks Related to Our Class A Ordinary Shares**

***There can be no assurance that we will be able to comply with the continued listing standards of Nasdaq. If we are not able to comply with the applicable continued listing requirements or standards of the Nasdaq Capital Markets, Nasdaq could delist our Class A Ordinary Shares.***

The Company's Class A Ordinary Shares are currently listed on the Nasdaq Capital Market. In order to maintain that listing, we must satisfy minimum financial and other continued listing requirements and standards, including those regarding minimum stockholders' equity, minimum market value, minimum share price, and certain corporate governance requirements.

On July 11, 2025, the Company received a deficiency letter from the Listing Qualifications Department (the "Staff") of the Nasdaq, notifying the Company that it is not in compliance with Nasdaq Listing Rule 5550(a)(2) (the "Minimum Bid Price Requirement") for continued listing on the Nasdaq Capital Market, as the bid price of the Company's ordinary shares on the Nasdaq Capital Market was below $1.00 for 30 consecutive business days.

In accordance with Nasdaq Listing Rule 5810(c)(3)(A) (the "Compliance Period Rule"), the Company has a period of 180 calendar days, or until January 7, 2026 (the "Compliance Date"), to regain compliance with the Minimum Bid Price Requirement. If, at any time before the Compliance Date, the closing bid price of the Company's Class A Ordinary Shares is at least $1.00 for a minimum of ten consecutive business days, the Staff will provide a written confirmation to the Company that it has regained compliance with the Minimum Bid Price Requirement.

In addition, pursuant to Nasdaq Listing Rule 5810(c)(3)(A)(iii), if the Class A Ordinary Shares trade below $0.10 per share for ten consecutive trading days, we could be subject to a Nasdaq delisting notification which could result in the delisting of our Class A Ordinary Shares from Nasdaq unless we appeal or unless Nasdaq provides a compliance period in which to cure such bid price deficiency.

If the Company does not regain compliance with the Minimum Bid Price Requirement by the Compliance Date, the Company may be eligible for additional time. To qualify, the Company will be required to meet the continued listing requirement for market value of publicly held shares and all other initial listing standards for The Nasdaq Capital Market, with the exception of the Minimum Bid Price Requirement, and will need to provide written notice of its intention to cure the deficiency during the second compliance period, by effecting a reverse stock split, if necessary. If the Company meets these requirements, Nasdaq will inform the Company that it has been granted an additional 180 calendar days. However, if it appears to Nasdaq that the Company will not be able to cure the deficiency, or if the Company is otherwise not eligible, Nasdaq will provide notice that its securities will be subject to delisting. At that time, the Company may appeal the Staff's delisting determination to a Nasdaq Listing Qualifications Panel (the "Panel") pursuant to the procedures set forth in the applicable Nasdaq Listing Rules. However, there can be no assurance that, if the Company receives a delisting notice and appeals the delisting determination by the Staff to the Panel, such appeal would be successful.

Additionally, there can be no assurance that the Company will be able to regain compliance with the Minimum Bid Price Requirement, or will otherwise be compliant with other Nasdaq Listing Rules.

If Nasdaq delists the Class A Ordinary Shares from trading on its exchange for failure to meet the listing standards, we and our stockholders could face significant material adverse consequences including:

● a limited availability of market quotations for our securities;

● reduced liquidity for our securities;

● a determination that the Class A Ordinary Shares is a "penny stock" which will require brokers trading in the Class A Ordinary Shares to adhere to more stringent rules and possibly result in a reduced level of trading activity in the secondary trading market for our securities;

● a limited amount of news and analyst coverage; and

● a decreased ability to issue additional securities or obtain additional financing in the future.

The National Securities Markets Improvement Act of 1996, which is a federal statute, prevents or preempts the states from regulating the sale of certain securities, which are referred to as "covered securities." To the extent the Class A Ordinary Shares are listed on Nasdaq, they are covered securities. Although the states are preempted from regulating the sale of our securities, the federal statute does allow the states to investigate companies if there is a suspicion of fraud, and, if there is a finding of fraudulent activity, then the states can regulate or bar the sale of covered securities in a particular case. Further, if we were no longer listed on Nasdaq, our securities would not be covered securities and we would be subject to regulation in each state in which we offer our securities.

Upon delisting from Nasdaq, our Class A Ordinary Shares may be traded, if at all in the over-the-counter inter-dealer quotation system, more commonly known as the OTC. OTC transactions involve risks in addition to those associated with transactions in securities traded on securities exchanges such as Nasdaq. Many OTC stocks trade less frequently and in smaller volumes than exchange-listed Stocks. Accordingly, our stock would be less liquid than it would be otherwise. Also, the values of OTC stocks are often more volatile than exchange-listed stocks. Additionally, institutional investors are often prohibited from investing in OTC stocks, and it might be more challenging to raise capital when needed.

In addition, if our Class A Ordinary Shares are delisted, your ability to transfer or sell your Class A Ordinary Shares may be limited and the value of those securities will be materially adversely affected.

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***Our Memorandum and Articles of Association afford less protection to our shareholders and may discourage claims and limit shareholders' ability to bring claims.***

Our shareholders could have more difficulty protecting their interests than would shareholders of a corporation incorporated in a jurisdiction of the United States. As a Cayman Islands company, we are governed by our memorandum and articles of association and Cayman Islands Companies Law (as amended). The provisions of the Cayman Islands Companies Act, which applies to us, differs in some material respects from laws generally applicable to U.S. corporations and shareholders, including the provisions relating to shareholder lawsuits.

Our amended and restated memorandum and articles of association contain a provision by virtue of which we and our shareholders waive any claim or right of action that they have, both individually and on our behalf, against any director or officer in relation to any action or failure to take action by such director or officer, except in respect of any fraud or dishonesty of such director or officer. Class actions and derivative actions generally are available to shareholders under Delaware law for, among other things, breach of fiduciary duty, corporate waste and actions not taken in accordance with applicable law. In such actions, the court has discretion to permit the winning party to recover attorneys' fees incurred in connection with such action. Although this provision does not preclude our shareholders to bring federal securities claims against us, it may be difficult or impossible for our shareholders to bring an action against us or against any director or officer in the United States in the event that our shareholders believe that their rights have been infringed under the United States federal securities laws or otherwise. Even if the Shareholder are successful in bringing an action of this kind, the laws of the Cayman Islands and of China may render you unable to enforce a judgment against our assets or the assets of our directors and officers.

As a result of these differences, investors could have more difficulty protecting their interests than would shareholders of a corporation incorporated in the United States.

***Certain judgments obtained against us by our shareholders may not be enforceable.***

We are a Cayman Islands company. It may be difficult or impossible for you to bring an action against us in the United States in the event that you believe that your rights have been infringed under the U.S. federal securities laws or otherwise. Even if you are successful in bringing an action of this kind, the laws of the Cayman Islands and of China may render you unable to enforce a judgment against our assets or the assets of our directors and officers.

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In addition, judgment of United States courts will not be directly enforced in Hong Kong. There are currently no treaties or other arrangements providing for reciprocal enforcement of foreign judgments between Hong Kong and the United States. There is uncertainty as to whether the courts of Hong Kong would (i) recognize or enforce judgments of United States courts obtained against us or our directors or officers predicated upon the civil liability provisions of the securities laws of the United States or any state in the United States or (ii) entertain original actions brought in Hong Kong against us or our directors or officers predicated upon the securities laws of the United States or any state in the United States. A judgment of a court in the United States predicated upon U.S. federal or state securities laws may be enforced in Hong Kong at common law by bringing an action in a Hong Kong court on that judgment for the amount due thereunder, and then seeking summary judgment on the strength of the foreign judgment, provided that the foreign judgment, among other things, is (i) for a debt or a definite sum of money (not being taxes or similar charges to a foreign government taxing authority or a fine or other penalty) and (ii) final and conclusive on the merits of the claim, but not otherwise. Such a judgment may not, in any event, be so enforced in Hong Kong if (a) it was obtained by fraud; (b) the proceedings in which the judgment was obtained were opposed to natural justice; (c) its enforcement or recognition would be contrary to the public policy of Hong Kong; (d) the court of the United States was not jurisdictionally competent; or (e) the judgment was in conflict with a prior Hong Kong judgment. Hong Kong has no arrangement for the reciprocal enforcement of judgments with the United States. As a result, there is uncertainty as to the enforceability in Hong Kong, in original actions or in actions for enforcement, of judgments of United States courts of civil liabilities predicated solely upon the federal securities laws of the United States or the securities laws of any State or territory within the United States.

***We qualify as a foreign private issuer and, as a result, we are not subject to U.S. proxy rules and are subject to Exchange Act reporting obligations that permit less detailed and less frequent reporting than that of a U.S. domestic public company.***

We report under the Exchange Act as a non-U.S. company with foreign private issuer status. Because we qualify as a foreign private issuer under the Exchange Act, we are exempt from certain provisions of the Exchange Act that are applicable to U.S. domestic public companies, including (i) the sections of the Exchange Act regulating the solicitation of proxies, consents or authorizations in respect of a security registered under the Exchange Act; (ii) the sections of the Exchange Act requiring insiders to file public reports of their stock ownership and trading activities and liability for insiders who profit from trades made in a short period of time; and (iii) the rules under the Exchange Act requiring the filing with the SEC of quarterly reports on Form 10-Q containing unaudited financial and other specified information, or current reports on Form 8-K upon the occurrence of specified significant events. In addition, our officers, directors and principal shareholders are exempt from the reporting and "short-swing" profit recovery provisions of Section 16 of the Exchange Act and the rules thereunder. Therefore, our shareholders may not know on a timely basis when our officers, directors and principal shareholders purchase or sell our ordinary shares. In addition, foreign private issuers are not required to file their annual report on Form 20-F within four months after the end of each fiscal year, while U.S. domestic issuers that are accelerated filers are required to file their annual report on Form 10-K within 75 days after the end of each fiscal year. Foreign private issuers also are exempt from Regulation Fair Disclosure, aimed at preventing issuers from making selective disclosures of material information. As a result of the above, you may not have the same protections afforded to shareholders of companies that are not foreign private issuers.

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If we lose our status as a foreign private issuer, we would be required to comply with the Exchange Act reporting and other requirements applicable to U.S. domestic issuers, which are more detailed and extensive than the requirements for foreign private issuers. We may also be required to make changes in our corporate governance practices in accordance with various SEC and Nasdaq rules. The regulatory and compliance costs to us under U.S. securities laws if we are required to comply with the reporting requirements applicable to a U.S. domestic issuer may be significantly higher than the cost we would incur as a foreign private issuer. As a result, we expect that a loss of foreign private issuer status would increase our legal and financial compliance costs and would make some activities highly time consuming and costly. We also expect that if we were required to comply with the rules and regulations applicable to U.S. domestic issuers, it would make it more difficult and expensive for us to obtain and maintain directors' and officers' liability insurance, and we may be required to accept reduced coverage or incur substantially higher costs to obtain coverage. These rules and regulations could also make it more difficult for us to attract and retain qualified members of our board of directors.

***As a foreign private issuer, we are permitted to adopt certain home country practices in relation to corporate governance matters that differ significantly from Nasdaq corporate governance listing standards. These practices may afford less protection to shareholders than they would enjoy if we complied fully with corporate governance listing standards.***

As a foreign private issuer, we are permitted to take advantage of certain provisions in the Nasdaq rules that allow us to follow our home country law for certain governance matters. Certain corporate governance practices in our home country, the Cayman Islands, may differ significantly from corporate governance listing standards. We choose to follow home country practice with respect to our corporate governance, therefore, our shareholders may be afforded less protection than they would otherwise enjoy under the Nasdaq corporate governance listing standards applicable to U.S. domestic issuers. See Item 16G "Corporate Governance".

***We may lose our foreign private issuer status in the future, which could result in significant additional costs and expenses.***

As discussed above, we are a foreign private issuer, and therefore, we are not required to comply with all the periodic disclosure and current reporting requirements of the Exchange Act. The determination of foreign private issuer status is made annually on the last business day of an issuer's most recently completed second fiscal quarter, and, accordingly, the next determination will be made with respect to us on September 30, 2024.

In the future, we would lose our foreign private issuer status if, among others, (1) more than 50% of our outstanding voting securities, which we intend to determine based on the voting power of our common shares and high voting shares on a combined basis are directly or indirectly held of record by U.S. residents and (2) a majority of our directors or executive officers are U.S. citizens or residents, more than 50% of our assets are located in the United States or our business is administered principally in the United States. If we lose our foreign private issuer status, we will be required to file with the SEC periodic reports and registration statements on U.S. domestic issuer forms including consolidated financial statements prepared under US GAAP, and which are more detailed and extensive than the forms available to a foreign private issuer. We will also have to mandatorily comply with U.S. federal proxy requirements, and our officers, directors and principal shareholders will become subject to the short-swing profit disclosure and recovery provisions of Section 16 of the Exchange Act. In addition, we will lose our ability to rely upon exemptions from certain corporate governance requirements under the listing rules of Nasdaq.

As a U.S. listed public company that is not a foreign private issuer, we would incur significant additional legal, accounting and other expenses that we would not incur as a foreign private issuer. These expenses would relate to, among other things, the obligation to present our financial information in accordance with U.S. GAAP in the future. Additionally, a loss of our foreign private issuer status would divert our management's attention from other business concerns, which could have a material adverse effect on our business, financial condition, results of operations and prospects.

***There can be no assurance that we will not be a passive foreign investment company, or PFIC, for U.S. federal income tax purposes for any taxable year, which could result in adverse U.S. federal income tax consequences to U.S. holders of our Class A Ordinary Shares.***

A non-U.S. corporation will be a PFIC for any taxable year if either (1) at least 75% of its gross income for such year consists of certain types of "passive" income; or (2) at least 50% of the value of its assets (based on an average of the quarterly values of the assets) during such year is attributable to assets that produce passive income or are held for the production of passive income (the "asset test"). Based on our current and expected income and assets (taking into account the expected cash proceeds and our market capitalization), we do not presently expect to be a PFIC for the current taxable year or the foreseeable future. However, no assurance can be given in this regard because the determination of whether we are or will become a PFIC is a fact-intensive inquiry made on an annual basis that depends, in part, upon the composition of our income and assets. In addition, there can be no assurance that the Internal Revenue Service, or IRS, will agree with our conclusion or that the IRS would not successfully challenge our position. Fluctuations in the market price of our Class A Ordinary Shares may cause us to become a PFIC for the current or subsequent taxable years because the value of our assets for the purpose of the asset test may be determined by reference to the market price of our Class A Ordinary Shares. The composition of our income and assets may also be affected by how, and how quickly, we use our liquid assets and the cash raised in our initial public offering. If we were to be or become a PFIC for any taxable year during which a U.S. Holder holds our Class A Ordinary Shares, certain adverse U.S. federal income tax consequences could apply to such U.S. Holder. See "Taxation— Passive Foreign Investment Company Consequences."

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***The economic substance legislation of the Cayman Islands may adversely impact the Company or its operations.***

The Cayman Islands, together with several other non-European Union jurisdictions, have introduced legislation aimed at addressing concerns raised by the Council of the European Union as to offshore structures engaged in certain activities which attract profits without real economic activity. With effect from January 1, 2019, the International Tax Co-operation (Economic Substance) Law, 2018 (the "ES Law") and issued related Regulations and Guidance Notes came into force in the Cayman Islands introducing certain economic substance requirements for "relevant entities" which are engaged in certain "relevant activities," which in the case of exempted companies incorporated before January 1, 2019, will apply in respect of financial years commencing July 1, 2019, onwards. A "relevant entity" includes an exempted company incorporated in the Cayman Islands; however, it does not include an entity that is tax resident outside the Cayman Islands. Accordingly, for so long as the Company is a tax resident outside the Cayman Islands, it is not required to satisfy the economic substance test. Although it is presently anticipated that the ES Law will have little material impact on the Company or its operations, as the legislation is new and remains subject to further clarification and interpretation it is not currently possible to ascertain the precise impact of these legislative changes on the Company.

***We may be exposed to liabilities under the Foreign Corrupt Practices Act, and any determination that we violated the Foreign Corrupt Practices Act or Chinese anti-corruption law could have a material adverse effect on our business.***

We are subject to the Foreign Corrupt Practice Act, or FCPA, and other laws that prohibit improper payments or offers of payments to foreign governments and their officials and political parties by U.S. persons and issuers as defined by the statute for the purpose of obtaining or retaining business. Chinese anti-corruption law also strictly prohibits bribery of government officials. We have operations, agreements with third parties and make sales in China, where corruption may occur. Our activities in China create the risk of unauthorized payments or offers of payments by one of the employees, consultants, sales agents or distributors of our Company, even though these parties are not always subject to our control. It is our policy to implement safeguards to prevent these practices by our employees. However, our existing safeguards and any future improvements may prove to be less than effective, and the employees, consultants, sales agents or distributors of our Company may engage in conduct for which we might be held responsible.

Violations of the FCPA or other anti-corruption laws may result in severe criminal or civil sanctions, and we may be subject to other liabilities, which could negatively affect our business, operating results and financial condition. In addition, the United States government may seek to hold our Company liable for successor liability FCPA violations committed by companies in which we invest or that we acquire.

***We rely on internal models to manage risk, to provide accounting estimates and to make other business decisions. Our results could be adversely affected if those models do not provide reliable estimates or predictions of future activity.***

We rely heavily on internal models in making a variety of decisions crucial to the successful operation of our business, including the allowance for doubtful accounts and other accounting estimates. It is therefore important that our models are accurate, and any failure in this regard could have a material adverse effect on our results. Models are inherently imperfect predictors of actual results because they are based on historical data available to us and our assumptions about factors such as credit demand, payment rates, default rates, delinquency rates and other factors that may overstate or understate future experience. Our models could produce unreliable results for a number of reasons, including the limitations of historical data to predict results due to unprecedented events or circumstances, invalid or incorrect assumptions underlying the models, the need for adjustments in response to rapid changes in economic and health conditions. In particular, models are less dependable when the economic environment is outside of historical experience, as has been the case recently.

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***The relative lack of public company experience of our management team may put us at a competitive disadvantage.***

Our management team lacks U.S. public company experience, which could impair our ability to comply with legal and regulatory requirements such as those imposed by the Sarbanes-Oxley Act. Our senior management does not have experience managing a U.S. publicly traded company and lacks knowledge about the Sarbanes-Oxley Act. Such responsibilities include complying with federal securities laws and making required disclosures on a timely basis. Our senior management are unable to implement programs and policies in an effective and timely manner or that adequately respond to the increased legal, regulatory and reporting requirements associated with being a U.S. publicly traded company. Our failure to comply with all applicable requirements could lead to the imposition of fines and penalties, distract our management from attending to the management and growth of our business, result in a loss of investor confidence in our financial reports and have an adverse effect on our business and stock price.

***We may be exposed to potential risks relating to our internal controls over financial reporting.***

As directed by Section 404 of the Sarbanes-Oxley Act of 2002 or SOX 404, the SEC adopted rules requiring public companies to include a report of management on the company's internal controls over financial reporting in their annual reports. Under current law, the auditor attestation will not be required as long as our filing status remains as a smaller reporting company, but we may cease to be a smaller reporting company in future years, in which case we will be subject to the auditor attestation requirement. We were subject to the management report requirement for the fiscal year ended March 31, 2025, and a report of our management for the 2025 fiscal year is included under Item 15 of this annual report concluding that, as of March 31, 2025, our internal controls over financial reporting were not effective. If we cannot remediate the material weakness identified in a timely manner, investors and others may lose confidence in the reliability of our financial statements, which could adversely affect the price of our ordinary shares.

***Our** **Class A O** **rdinary** **S** **hares are very thinly traded, and there can be no assurance that there will be an active market for our** **Class A O** **rdinary** **S** **hares in the future.***

Our Class A Ordinary Shares are very thinly traded, and the price if traded may not reflect our value. There can be no assurance that there will be an active market for our Class A Ordinary Shares in the future. The market liquidity will be dependent on the perception of our operating business and any steps that our management might take to bring us to the awareness of investors. There can be no assurance given that there will be any awareness generated. Consequently, investors may not be able to liquidate their investment or liquidate it at a price that reflects the value of the business. If a more active market should develop, the price may be highly volatile. Because there may be a low price for our Class A Ordinary Shares, many brokerage firms may not be willing to effect transactions in the securities. Even if an investor finds a broker willing to effect a transaction in our Class A Ordinary Shares, the combination of brokerage commissions, transfer fees, taxes, if any, and any other selling costs may exceed the selling price. Further, many lending institutions will not permit the use of such ordinary shares as collateral for any loans.

***You may not receive dividends or other distributions on our ordinary shares and you may not receive any value for them, if it is illegal or impractical to make them available to you.***

Under Cayman Islands law, we may only pay dividends out of our profits or share premium account subject to our ability to pay our debts as they fall due in the ordinary course of our business. Our ability to pay dividends will therefore depend on our ability to generate sufficient profits. On July 31, 2020, the Board of the Company declared a special cash dividend of $0.015 per share. The dividend, equal to $375,000 in the aggregate, was fully paid on August 17, 2020. However, we cannot give any assurance that we will declare dividends of any amounts, at any rate or at all in the future. Future dividends, if any, will be paid at the discretion of our board of directors, subject to requirements under Cayman Islands law and our memorandum and articles of association, as amended and restated from time to time, and will depend upon our future operations and earnings, capital expenditure requirements, general financial conditions, legal and contractual restrictions and other factors that our board of directors may deem relevant.

***We may be subject to penny stock regulations and restrictions and you may have difficulty selling our ordinary shares.***

The SEC has adopted regulations which generally define so-called "penny stocks" to be an equity security that has a market price less than $5.00 per share or an exercise price of less than $5.00 per share, subject to certain exemptions. If our ordinary shares become a "penny stock", we may become subject to Rule 15g-9 under the Exchange Act, or the "Penny Stock Rule". This rule imposes additional sales practice requirements on broker-dealers that sell such securities to persons other than established customers and "accredited investors" (generally, individuals with a net worth in excess of $1,000,000 or annual incomes exceeding $200,000, or $300,000 together with their spouses). For transactions covered by Rule 15g-9, a broker-dealer must make a special suitability determination for the purchaser and have received the purchaser's written consent to the transaction prior to sale. As a result, this rule may affect the ability of broker-dealers to sell our securities and may affect the ability of purchasers to sell any of our securities in the secondary market.

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For any transaction involving a penny stock, unless exempt, the rules require delivery, prior to any transaction in a penny stock, of a disclosure schedule prepared by the SEC relating to the penny stock market. Disclosure is also required to be made about sales commissions payable to both the broker-dealer and the registered representative and current quotations for the securities. Finally, monthly statements are required to be sent disclosing recent price information for the penny stock held in the account and information on the limited market in penny stock.

There can be no assurance that our ordinary shares will qualify for exemption from the Penny Stock Rule. In any event, even if our ordinary shares were exempt from the Penny Stock Rule, we would remain subject to Section 15(b)(6) of the Exchange Act, which gives the SEC the authority to restrict any person from participating in a distribution of penny stock, if the SEC finds that such a restriction would be in the public interest.

**ITEM 4. INFORMATION ON THE COMPANY**

**A.** **History and development of the company.**

We were formed under the name of "Happiness Biotech Group Limited" on February 9, 2018, under the laws of the Cayman Islands. In October 2022, we changed the name from "Happiness Biotech Group Limited" to "Happiness Development Group Limited". In March 2023, our registered name was changed to "Paranovus Entertainment Technology Ltd."

Our registered office is at Harnes Fiduciary (Cayman) Limited, with its offices located at 4<sup>th</sup> Floor, Harbour Place, 103 South Church Street, P.O. Box 10240, Grand Cayman, KY1-1002M Cayman Islands. Our principal executive offices are located at 250 Park Avenue, 7th Floor, New York, NY 10177. Our telephone number at that address is + 1-516-951-9074. Our company website is https://pavs.ai.

Paranovus is the sole shareholder of Paranovus Entertainment Technology Limited, incorporated in Hong Kong on May 6, 2024 ("Paranovus Hong Kong"), which is the sole shareholder of Hainan Paranovus Entertainment Technology Co., Ltd ("Paranovus PRC"). Paranovus PRC was incorporated on June 17, 2024 under the laws of the People's Republic of China, as a wholly-owned subsidiary of Paranovus Hong Kong and a wholly foreign-owned entity under the PRC laws. None of Paranovus, Paranovus Hong Kong and Paranovus PRC engages in any active business other than acting as holding companies currently. We conduct our business mainly through 2lab3 LLC, a limited liability company incorporated in Delaware on August 12, 2022.

Historically, Paranovus was the sole shareholder of Happiness Hong Kong, incorporated in Hong Kong on March 5, 2018, which was the sole shareholder of Happiness Fuzhou. Happiness Fuzhou was incorporated on June 1, 2018 under the laws of the People's Republic of China, as a wholly-owned subsidiary of Happiness Hong Kong and a wholly foreign-owned entity under the PRC laws. Neither Paranovus, Happiness Hong Kong nor Happiness Fuzhou was currently engaged in any active business other than acting as holding companies. We conducted our business through Fujian Happiness, a wholly-owned subsidiary of Happiness Fuzhou and incorporated on November 19, 2004 under the PRC laws. Fujian Happiness holds all of the equity or ownership of Shunchang Happiness Nutraceutical Co., Ltd ("Shunchang Happiness"). Through Fujian Happiness and Shunchang Happiness, the Company was a biotech company that specializes in research, development, production and selling of nutraceutical and dietary supplements made of Ganoderma spore powder and others mainly in China.

On October 25, 2019, our ordinary shares commenced trading on Nasdaq under the symbol "HAPP".

On July 17, 2020, Happy Buy (Fujian) Internet Technology Co., Limited, or "Happy Buy", was incorporated under the laws of People's Republic of China and was a wholly owned subsidiary of Happiness Fuzhou. Happy Buy was incorporated in order to develop our e-commerce business. Our e-commerce business focused on providing e-commerce solutions and services for small and medium-sized enterprises. Our mission for the e-commerce business was to enable small and medium-sized enterprises to fully leverage the power of e-commerce to grow rapidly.

On April 27, 2021, Taochejun (Fujian) Auto Sales Co., Limited, "Taochejun", was incorporated under the laws of People's Republic of China and 51% of it is owned by Happiness Fuzhou. We launched this B2B (Business-to-Business) platform for sales of automobiles. Our automobile sales business was formerly under the brand name of "Happy Auto", and was rebranded to "Taochejun" in June 2021. Taochejun mainly focused on building a network among car dealers in China to offer better overall sales experience and services to purchasers, and to streamline the automotive industry transaction. China is one of the world's largest automobile markets, both in terms of demand and supply. Through Taochejun, we utilized our dealer network to distribute the inventories and used cars from large 4S stores, online car hailing platforms and car makers to third and fourth tier cities, which served as a great solution to the over-supply issues in first tier cities.

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On October 14, 2021, Paranovus and its wholly-owned subsidiary, Fujian Happiness, acquired 70% of the equity interest in Fujian Shennong Jiagu Development Co., Ltd. ("Shennong") to further strengthen the Company's industrial integration. The acquisition of Fujian Shennong closed on November 22, 2021.

On March 4, 2022, Paranovus and its wholly-owned subsidiary, Fujian Happiness, acquired 100% of the equity interest in Fuzhou Hekangyuan Trading Co., Ltd. ("Hekangyuan") to further strengthen the distribution network of the Company.

On March 10, 2023, the Company's shareholders have approved, via a special resolution, to change our name to "Paranovus Entertainment Technology Ltd." and the trading symbol to "PAVS", effective on March 14, 2023, to better reflect the Company's multiple business lines.

On March 14, 2023, the Company entered into a securities purchase agreement with (i) 2lab3, a Delaware limited liability company; and (ii) the sole member of 2lab3. Pursuant to the acquisition SPA, the Company purchased all the membership interests of 2lab3 from the Seller, and, in exchange, the Company issued an aggregate of 1,375,000 Class A ordinary share to 21ab3 and/or its designees. The parties to the acquisition SPA agreed that valuation of 2lab3 was approximately $6 million. The Class A ordinary shares were issued at a per share price of $4.4, which is equal to the volume-weighted average price of the past five-day of the Class A ordinary shares upon signing. On March 28, 2023, the Company closed this acquisition.

On April 10, 2023, Happiness Shunchang, Fujian Happiness and Fujian Hengda Beverage Co., Ltd. ("Fujian Hengda") entered into a certain share purchase agreement. Pursuant to this disposition SPA, Fujian Hengda agreed to purchase the Fujian Happiness from Happiness Shunchang in exchange for cash consideration of RMB 78 million (approximately $11.3 million). This transaction was closed on August 7, 2023. Upon closing, Fujian Hengda became the sole shareholder of Fujian Happiness and, as a result, assumed all assets and liabilities of Fujian Happiness and subsidiaries owned or controlled by Fujian Happiness.

On September 3, 2023, the Board of Directors of the Company approved suspension of the Company's e-commerce and internet information and advertising business conducted through the Company's indirect subsidiary Happy Buy (Fujian) Internet Technology Co., Limited. As of March 31, 2023, the e-commerce and internet information and advertising business incurred loss of approximately $21.42 million comparing to loss of approximate $7.60 million as of March 31, 2022. Due to the lingering adverse impacts of COVID-19 and sluggish macro-economic condition in China, the management does not expect short-term turn-over of these businesses and therefore the Board decided to suspend these loss-incurring businesses. After disposition of its nutraceutical and dietary supplements business in August 2023 and suspension of the e-commerce and internet information and advertising business expected in September 2023, the Company's only remaining operating business based in China was the automobile sales business.

On November 12, 2023, the Company entered into a software development agreement with Blueline. Pursuant to the development agreement, Blueline shall be responsible for developing and delivering certain interactive game application ("10,000 Lives", formerly known as "Hollywood Sunshine"), including the underlying software, documentation, and technical data, under the terms and conditions of the Development Agreement, and agreed to assign to the Company all the right, title, and interest in 10,000 Lives, excluding any Background Technology (as defined in the development agreement). Blueline will deliver the initial full-featured version for the PC platform (the "PC Release") six months after the Start Date as defined in the Development Agreement, followed by the delivery of iOS version (the "iOS Release") three months after the PC Release. In exchange, the Company agreed to pay a total of $1,500,000 development fee to Blueline for the PC Release, and $400,000 development fee for the iOS Release, in accordance with the schedule set forth in the Development Agreement. The decision to develop the iOS Release is at the discretion of the Company. Furthermore, once 10,000 Lives starts generating revenues, the Company agreed to pay Blueline 9% of the net revenue after deducting all the licensing fees owned to all talent partners.

On November 9, 2023, January 18, 2024, March 12, 2024, respectively, the Company signed three promissory note purchase agreements with a non-U.S. investor (the "Lender"), pursuant to which, the Company issued three 8% promissory notes, each with principal amount of $750,000 to such investor on November 14, 2023, January 18, 2024 and March 12, 2024. The Note will mature in 12-month after its issuance and can be pre-paid in part or in whole by the Company prior to its maturity date. The proceeds from the Note were used to fund the development of 10,000 Lives and the general corporate activities of the Company.

On November 16, 2023, the Company filed a Form F-3 registration statement, which went effective on December 5, 2023, offering to sell up to $100,000,000 in the aggregate of Class A ordinary shares, par value $0.01 per share, preferred shares, warrants, units and rights to purchase Class A Ordinary Shares or preferred shares, debt securities, rights or any combination of the foregoing, either individually or as units comprised of one or more of the other securities.

On January 19, 2024, the Company held three extraordinary general meetings of shareholders of Class B Ordinary Shares, shareholders of Class A Ordinary Shares, and shareholders of Class B Ordinary Shares and Class A Ordinary Shares, respectively. The purpose of the meetings are to approve the variation of class rights attached to the Class B Ordinary Shares, as set out in the Company's fourth amended and restated memorandum and articles of association (effective on March 10, 2023) (the "Fourth M&A"), to terminate certain "sunset provisions" attached to the Class B Ordinary Shares, by the removal of (a) the conversion rights set out in Articles 8(6)(b) and 8(6)(c) of the Fourth M&A (such proposal, the "Variation of Rights of Class B Ordinary Shares Proposal"). Shareholders of Class B Ordinary Shares and shareholders of Class A Ordinary Shares approved such proposal separately, as a special resolutions of shareholders of Class B Ordinary Shares, and an ordinary resolution of shareholders of Class A Ordinary Shares. Then, all the shareholders approved, as a special resolution, to adopt the fifth amended and restated memorandum and articles of association to effect the Variation of Rights of Class B Ordinary Shares Proposal. The fifth amended and restated memorandum and articles of association became effective on January 19, 2024.

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On May 6, 2024, the Company established a wholly owned subsidiary in Hong Kong, Paranovus Entertainment Technology Limited ("Paranovus Hong Kong").

On May 20, 2024, the Company signed a promissory note purchase agreement with Ms. Minzhu Xu, who is the chairperson of the Board. Ms. Xu is also the sole shareholder of Happy Group Inc., which owns 602,255 Class B ordinary shares of the Company, par value $0.01 each, representing 63.5% of the total voting power of the Company. Pursuant to the purchase agreement, the Company issued an 8% promissory note with principal amount of $750,000 to Ms. Xu on May 20, 2024, the closing date of this transaction. The note will mature in 12 months after its issuance and can be pre-paid in part or in whole by the Company prior to its maturity date. The proceeds from the note offering were used for the general working capital purposes of the Company.

On June 17, 2024, the Company established a subsidiary in China, Hainan Paranovus Entertainment Technology Limited ("Paranovus PRC"), which is wholly owned by Paranovus Hong Kong. As of the date of this annual report, both Paranovus Hong Kong and Paranovus PRC do not have operating business yet.

On July 5, 2024, the Company has sold 100% equity interests of Happiness Hong Kong to Mr. Yuan Liu, who is not affiliate of the Company or any of its directors or officers, together with Happiness Hong Kong's direct and indirect subsidiaries of Happiness (Shunchang) E-commerce Co., Ltd., the operating entity of the Company's e-commerce and internet information and advertising business, and Taochejun (Fujian) Auto Sales Co., Ltd., the operating entity of the Company's automobile sales business, in China.

On July 17, 2024, in connection with the Company's strategic transition to streamline its operations and to concentrate in our core competencies in providing AI-powered solutions, the Company entered into a certain securities purchase agreement with certain non-U.S. investors, pursuant to which the Company agreed to sell up to 60,000,000 Class A Ordinary Shares at a per share purchase price of $0.45. Upon satisfying all closing conditions, the offering was consummated on August 7, 2024. The Company issued a total of 60,000,000 restricted Class A Ordinary Shares to the investors. The gross proceeds to the Company are approximately $27,000,000, before deducting any fees or expenses. The Company plans to use the net proceeds for possible strategic acquisition with companies that have an expertise in AI-powered solutions, including AI logistics and delivery services, AI e-commerce services, and AI advertising placements, and company engaged in the businesses of gas-fired power generation, and for general corporate purpose.

On September 13, 2024, the Company filed a Form F-3 registration statement, which became effective on September 27, 2024, to register the resale of up to an aggregate of 60,000,000 Class A ordinary shares, par value $0.01 per share, by the investors from the offering that closed on August 7, 2024.

On September 30, 2024 and January 13, 2025, respectively, the Company signed two promissory note purchase agreements with Ms. Minzhu Xu. Pursuant to these purchase agreements, the Company issued to Ms. Xu an 8% promissory note with principal amount of $500,000 on September 30, 2024, and another 8% promissory note with principal amount of $450,000 on January 13, 2025, which were the respective closing dates of the two transactions. Each note matures in 12 months after its issuance and can be pre-paid in part or in whole by the Company prior to its maturity date. The proceeds from the two note offerings were used for the general working capital purposes of the Company.

On January 14, 2025, the Company filed a Form S-8 to register an aggregate of 10,008,701 Class A ordinary shares, par value US$0.01 per share, which are reserved for issuance under the Company's 2024 Equity Incentive Plan. This registration statement was filed in order to register the Company's ordinary shares that may be offered or sold to participants under this equity incentive plan, either directly or upon exercise of options or other share-based awards granted under this plan.

On February 28, 2025, the Company, BW, a corporation organized under the laws of New York, and stockholders of BW, entered into a share purchase agreement. Pursuant to the agreement, the Company agreed to acquire 102 shares of common stock of BW, representing 51% equity interest from BW's stockholders for a total consideration of $22,440,000 in cash. The transaction was closed on March 25, 2025, upon the satisfaction or waiver of customary closing conditions, including the approval of the Company's shareholders. On March 24, 2025, the Company's shareholders approved the consummation of the transaction pursuant to the share purchase agreement in a general extraordinary meeting. The Company was granted the right to appoint a majority of the members of BW's board of directors. BW operates through its two wholly owned subsidiaries, Bomie US LLC in New Jersey and WooKoo LLC in Texas, engaging in e-commerce business on TikTok as well as providing e-commerce solutions to customers. This acquisition aligns with the Company's strategy to expand into marketing-commerce field. By securing a majority interest in BW, the Company aims to capitalize on the growing interests demand for TikTok-driven e-commerce and related solutions.

On April 3, 2025 and May 30, 2025, respectively, the Company signed two promissory note purchase agreements with Mr. Guangrong Ao, who is a non-affiliated shareholder of the Company with less than 1% of the total voting power of the Company. Pursuant to these purchase agreements, the Company issued to Mr. Ao two 8% promissory note with principal amount of $200,000 each on April 3, 2025 and on May 30, 2025, which were the respective closing dates of the two transactions. Each note matures in 12 months after its issuance and can be pre-paid in part or in whole by the Company prior to its maturity date. The proceeds from the two note offerings were used for the general working capital purposes of the Company.

The following chart illustrates our corporate structure as of the date of this annual report, showing the Company's principal subsidiaries, together with the jurisdiction of incorporation of each company and the percentage of voting securities beneficially owned, controlled or directed, directly or indirectly, by the Company.

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![pavs_20fimg3.jpg](pavs_20fimg3.jpg)

\* unless otherwise indicated, the percentage of the voting power is 100% in the chart above.

The Company is subject to the informational requirements of the Securities Exchange Act of 1934, as amended, and will file reports, registration statements and other information with the SEC. The Company's reports, registration statements and other information can be inspected on the SEC's website at www.sec.gov. You may also visit us at https://pavs.ai. However, information contained on our website does not constitute a part of this annual report.

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**B.** **Business overview.**

***Overview of our Company***

We are a holding company incorporated in Cayman Islands with no material operations of our own. Currently, our operation is conducted through our wholly owned subsidiary, 2Lab3 and 51% owned subsidiary, BW, in the U.S. Historically, through our operating subsidiaries in the PRC, we engaged in the (i) nutraceutical and dietary supplements business (divested in August 2023), (ii) e-commerce business (suspended in September 2023), (iii) internet information and advertising business (suspended in September 2023) and (iv) automobile sale business (divested in July 2024).

In March 2023, we consummated an acquisition of 100% of 2lab3, through which, we expanded our business into the AI and entertainment industries. On March 25, 2025, we closed an acquisition transaction of 51% equity interests of BW for a total consideration of $22,440,000 in cash. BW operates through its two wholly owned subsidiaries, Bomie US LLC in New Jersey and WooKoo LLC in Texas, engaging in e-commerce business on TikTok as well as providing e-commerce solutions to customers. This acquisition aligns with the Company's strategy to expand into marketing-commerce field. By securing a majority interest in BW, the Company aims to capitalize on the growing interests demand for TikTok-driven e-commerce and related solutions.

As of the date of this annual report, we do not have any business or operations in the PRC. In connection with our historical operation in China, we faced various legal and operational risks and uncertainties related to doing business in China that could result in a material change in our operations and/or the value of our securities. We were subject to complex and evolving PRC laws and regulations. The PRC government has recently issued statements and conducted regulatory actions relating to areas such as approvals, filings or other administrative requirements on offshore offerings, anti-monopoly regulatory actions, and oversight on cybersecurity and data privacy. The PRC government's significant authority in regulating our operations and its oversight and control over offerings conducted overseas by, and foreign investment in, China-based issuers could significantly limit our and our PRC subsidiaries' ability to conduct business and/or significantly limit or completely hinder our ability to offer or continue to offer securities to investors, accept foreign investments or list on a United States or other foreign exchange, or cause the value of our securities to significantly decline or be worthless. For more details, see "Item 3. Key Information—D. Risk Factors—Risks Related to Doing Business in China."

For example, the recently promulgated Data Security Law and the Personal Information Protection Law in 2021 posed additional challenges to our cybersecurity and data privacy compliance. On December 28, 2021, the CAC and other relevant PRC governmental authorities jointly promulgated the Cybersecurity Review Measures (the "new Cybersecurity Review Measures") to replace the original Cybersecurity Review Measures. The new Cybersecurity Review Measures took effect on February 15, 2022. Pursuant to the new Cybersecurity Review Measures, if critical information infrastructure operators purchase network products and services, or network platform operators conduct data processing activities that affect or may affect national security, they will be subject to cybersecurity review. A network platform operator holding more than one million users/users' individual information also shall be subject to cybersecurity review before listing abroad. The cybersecurity review will evaluate, among others, the risk of critical information infrastructure, core data, important data, or a large amount of personal information being influenced, controlled or maliciously used by foreign governments and network information security risk in connection with the overseas listing. On September 24, 2024, the State Council promulgated the Network Data Security Administration (the "Security Administration Regulations"), which came into effect on January 1, 2025. According to the Security Administration Regulations, network data processing activities refer to the collection, storage, use, processing, transmission, provision, disclosure, deletion, and other activities of network data. A network data processor refers to an individual or organization that independently determines the purpose and method of processing in network data processing activities. If a network data processor conducts network data processing activities that affect or may affect national security, a national security review is required. Security Administration Regulations further stipulates that if it is indeed necessary to provide important data collected or generated within the country to overseas entities, a data export security assessment organized by the national cyberspace administration must be conducted. As of today, we have not received any inquiry, notice, warning, or sanctions regarding our corporate structure from the CSRC, CAC or any other PRC governmental agency. As advised by our PRC counsel, Jingtian & Gongcheng LLP, we are unlikely to be subject to cybersecurity review, because: (i) we have not received any notice from governmental agency to treat us as an operator of critical information infrastructure, and (ii) we have not received any notice from governmental agency to treat us as an online platform operator who possesses personal information of more than one million users. In addition, we currently do not have over one million users' personal information. If we ever became subject to the cybersecurity review of CAC in the future as the applicable rules, regulations, policies or the interpretation thereof change, during such review, we may be required to suspend our operation or experience other disruptions to our operations. Cybersecurity review could also result in negative publicity with respect to our company and diversion of our managerial and financial resources. For additional details, see "Item 3. Key Information—Risk Factors—Risks Related to Doing Business in China."

On February 17, 2023, the CSRC promulgated the Trial Administrative Measures of Overseas Securities Offering and Listing by Domestic Companies (the "Trial Measures"), which took effect on March 31, 2023.

Furthermore, the PRC regulators have promulgated new anti-monopoly and competition laws and regulations and strengthened the enforcement under these laws and regulations. There remain uncertainties as to how the laws, regulations and guidelines recently promulgated will be implemented and whether these laws, regulations and guidelines will have a material impact on our business, financial condition, results of operations and prospects. We cannot assure you that our business operations comply with such regulations and authorities' requirements in all respects. If any non-compliance is raised by relevant authorities and determined against us, we may be subject to fines and other penalties.

Risks and uncertainties arising from the legal system in China, including the above-mentioned risks and uncertainties regarding the enforcement of laws and quickly evolving rules and regulations in China, could result in a material adverse change in our operations and the value of our ordinary shares. For more details, see "Item 3. Key Information—D. Risk Factors—Risks Related to Doing Business in China."

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Our Class A Ordinary Shares may be prohibited from trading on a national exchange or "over-the-counter" markets under the Holding Foreign Companies Accountable Act (the "HFCA Act") if the Public Company Accounting Oversight Board (the "PCAOB") is unable to inspect our auditors for three consecutive years beginning in 2021. Furthermore, on June 22, 2021, the U.S. Senate passed the Accelerating Holding Foreign Companies Accountable Act (the "AHFCAA"), which, if signed into law, would amend the HFCA Act and require the SEC to prohibit an issuer's securities from trading on any U.S. stock exchanges if its auditor is not subject to the PCAOB inspections for two consecutive years instead of three consecutive years. Pursuant to the HFCA Act, the PCAOB issued a Determination Report on December 16, 2021 which found that the PCAOB is unable to inspect or investigate completely registered public accounting firms headquartered in: (1) mainland China of the People's Republic of China because of a position taken by one or more authorities in mainland China; and (2) Hong Kong, a Special Administrative Region and dependency of the PRC, because of a position taken by one or more authorities in Hong Kong. In addition, the PCAOB's report identified the specific registered public accounting firms which are subject to these determinations. On December 29, 2022, a legislation entitled "Consolidated Appropriations Act, 2023" (the "Consolidated Appropriations Act"), was signed into law by President Biden. The Consolidated Appropriations Act contained, among other things, an identical provision to AHFCAA, which reduces the number of consecutive non-inspection years required for triggering the prohibitions under the HFCA Act from three years to two. Our auditor, Enrome LLP, the independent registered public accounting firm that issue the audit report included in this prospectus, as auditors registered with the PCAOB. Enrome LLP is subject to laws in the United States pursuant to which the PCAOB conducts regular inspections to assess their compliance with applicable professional standards. Enrome LLP is headquarter in Singapore and can be inspected by the PCAOB on a regular basis. Our auditor is not subject to the determinations announced by the PCAOB on December 16, 2021 relating to the PCAOB's inability to inspect or investigate completely registered public accounting firms headquartered in mainland China of the PRC or Hong Kong because of a position taken by one or more authorities in the PRC or Hong Kong, however, recent developments with respect to audits of China-based companies create uncertainty about the ability of our PRC subsidiaries to fully cooperate with Enrome LLP's audit without the approval of the Chinese authorities. In the event it is later determined that the PCAOB is unable to inspect or investigate completely our auditor, then such lack of inspection could cause trading in our securities to be prohibited under the HFCA Act, and ultimately result in a determination by a securities exchange to delist our securities. On August 26, 2022, the PCAOB signed a Statement of Protocol (the "SOP") Agreement with the CSRC and China's Ministry of Finance. The SOP Agreement, together with two protocol agreements (collectively, "SOP Agreements"), governs inspections and investigations of audit firms based in mainland China and Hong Kong, taking the first step toward opening access for the PCAOB to inspect and investigate registered public accounting firms headquartered in mainland China and Hong Kong. Pursuant to the fact sheet with respect to the Protocol disclosed by the U.S. Securities and Exchange Commission (the "SEC"), the PCAOB shall have independent discretion to select any issuer audits for inspection or investigation and has the unfettered ability to transfer information to the SEC. On December 15, 2022, the PCAOB Board determined that the PCAOB was able to secure complete access to inspect and investigate registered public accounting firms headquartered in mainland China and Hong Kong and voted to vacate its previous determinations to the contrary. However, should PRC authorities obstruct or otherwise fail to facilitate the PCAOB's access in the future, the PCAOB Board will consider the need to issue a new determination.

These risks, if materialized, could result in a material adverse change in our operations and the value of our ordinary shares, significantly limit or completely hinder our ability to continue to offer securities to investors, or cause the value of such securities to significantly decline or be worthless. For more details, see "Item 3. Key Information—D. Risk Factors—Risks Related to Doing Business in China."

***Permissions or Approval Required from the PRC Authorities for Our Operations and Listing***

Each of our PRC subsidiaries is required to obtain a business license from the State Administration for Market Regulation (the "SAMR"). As of the date of this annual report, our PRC subsidiaries had obtained all the permissions which are required to obtain for their operations. Each of our PRC subsidiaries had obtained a valid business license from the SAMR, and no application for any such license had been denied.

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Furthermore, as advised by our PRC legal counsel, Jingtian & Gongcheng LLP, we and our PRC subsidiaries shall fulfill the filing procedure with the CSRC according to the requirements of the Trial Administrative Measures and are not required to obtain other permission or approval for the current listing or trading of Class A ordinary shares in foreign stock exchanges from the PRC authorities including the CSRC or the CAC, or any other PRC governmental authorities. As of the date of this annual report, we or our subsidiaries have not received any inquiry, notice, warning, sanctions or regulatory objection to our listing on Nasdaq from the CSRC or other PRC governmental authorities. However, there remains significant uncertainty as to the enactment, interpretation and implementation of regulatory requirements related to overseas securities offerings and other capital markets activities.

We are aware, however, that recently the PRC government initiated a series of regulatory actions and statements to regulate business operations in China with little advance notice, including cracking down on illegal activities in the securities market, enhancing supervision over China-based companies listed overseas using a variable interest entity structure, adopting new measures to extend the scope of cybersecurity reviews, and expanding the efforts in anti-monopoly enforcement.

On February 17, 2023, the CSRC promulgated the Trial Measures, which took effect on March 31, 2023. The Trial Measures clarified and emphasized several aspects, which include but are not limited to: (1) comprehensive determination of the "indirect overseas offering and listing by PRC domestic companies" in compliance with the principle of "substance over form" and particularly, an issuer will be required to go through the filing procedures under the Trial Measures if the following criteria are met at the same time: a) 50% or more of the issuer's operating revenue, total profit, total assets or net assets as documented in its audited consolidated financial statements for the most recent accounting year is accounted for by PRC domestic companies, and b) the main parts of the issuer's business activities are conducted in mainland China, or its main places of business are located in mainland China, or the senior managers in charge of its business operation and management are mostly Chinese citizens or domiciled in mainland China; (2) exemptions from immediate filing requirements for issuers that a) have already been listed or registered but not yet listed in foreign securities markets, including U.S. markets, prior to the effective date of the Trial Measures, and b) are not required to re-perform the regulatory procedures with the relevant overseas regulatory authority or the overseas stock exchange, c) whose such overseas securities offering or listing shall be completed before September 30, 2023, provided however that such issuers shall carry out filing procedures as required if they conduct refinancing or are involved in other circumstances that require filing with the CSRC; (3) a negative list of types of issuers banned from listing or offering overseas, such as (a) issuers whose listing or offering overseas have been recognized by the State Council of the PRC as possible threats to national security, (b) issuers whose affiliates have been recently convicted of bribery and corruption, (c) issuers under ongoing criminal investigations, and (d) issuers under major disputes regarding equity ownership; (4) issuers' compliance with web security, data security, and other national security laws and regulations; (5) issuers' filing and reporting obligations, such as obligation to file with the CSRC after it submits an application for initial public offering to overseas regulators, and obligation after offering or listing overseas to report to the CSRC material events including change of control or voluntary or forced delisting of the issuer; and (6) the CSRC's authority to fine both issuers and their shareholders between 1 and 10 million RMB for failure to comply with the Trial Measures, including failure to comply with filing obligations or committing fraud and misrepresentation.

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Pursuant to the PRC Cybersecurity Law, which was promulgated by the SCNPC on November 7, 2016 and took effect on June 1, 2017, personal information and important data collected and generated by a critical information infrastructure operator in the course of its operations in China must be stored in China, and if a critical information infrastructure operator purchases internet products and services that affects or may affect national security, it should be subject to cybersecurity review by the CAC. Due to the lack of further interpretations, the exact scope of "critical information infrastructure operator" remains unclear. On December 28, 2021, the CAC and other relevant PRC governmental authorities jointly promulgated the Cybersecurity Review Measures (the "new Cybersecurity Review Measures") to replace the original Cybersecurity Review Measures. The new Cybersecurity Review Measures took effect on February 15, 2022. Pursuant to the new Cybersecurity Review Measures, if critical information infrastructure operators purchase network products and services, or network platform operators conduct data processing activities that affect or may affect national security, they will be subject to cybersecurity review. A network platform operator holding more than one million users/users' individual information also shall be subject to cybersecurity review before listing abroad. The cybersecurity review will evaluate, among others, the risk of critical information infrastructure, core data, important data, or a large amount of personal information being influenced, controlled or maliciously used by foreign governments and risk of network data security after going public overseas. On September 24, 2024, the State Council promulgated the Regulations on the Network Data Security Administration (the "Security Administration Regulations"), which came into effect on January 1, 2025. According to the Security Administration Regulations, network data processing activities refer to the collection, storage, use, processing, transmission, provision, disclosure, deletion, and other activities of network data. A network data processor refers to an individual or organization that independently determines the purpose and method of processing in network data processing activities. If a network data processor conducts network data processing activities that affect or may affect national security, a national security review is required. Security Administration Regulations further stipulates that if it is indeed necessary to provide important data collected or generated within the country to overseas entities, a data export security assessment organized by the national cyberspace administration must be conducted. As of the date of this annual report, we have not received any inquiry, notice, warning, or sanctions regarding our operations and listing from the CSRC, CAC or any other PRC governmental agency. As advised by our PRC counsel, Jingtian & Gongcheng LLP, we do not expect to be subject to cybersecurity review because: (i) we are not an operator of critical information infrastructure, and (ii) we are not an online platform operator who possesses personal information of more than one million users.

Since these statements and regulatory actions are new, it is highly uncertain how soon legislative or administrative regulation making bodies will respond and what existing or new laws or regulations or detailed implementations and interpretations will be modified or promulgated, if any, and the potential impact such modified or new laws and regulations will have on our daily business operation, the ability to accept foreign investments and list on a U.S. exchange. If we and our subsidiaries (i) inadvertently conclude that such permissions or approvals are not required, or (ii) applicable laws, regulations, or interpretations change, and we are required to obtain permission or approval from the PRC authorities, including the CSRC and the CAC, for the Offering of our Class A Ordinary Shares and any follow-on offering in the U.S. in the future, and if any of such permission or approval were not received maintained, or subsequently rescinded, it would likely result in a material change in our operations, including our ability to continue our existing holding company structure, carry on our current business, accept foreign investments, and offer or continue to offer securities to our investors. We may also be subject to penalties and sanctions imposed by the PRC regulatory agencies, including the CSRC, if we fail to comply with such rules and regulations. These adverse actions could cause the value of our Class A ordinary shares to significantly decline or become worthless. See "Item 3. Key Information—D. Risk Factors—Risks Related to Doing Business in China."

***Cash Flows through Our Organization***

The cash transfers within our organization are generally made in the following manners: (i) the Company transfers cash to its subsidiaries by way of providing loans, making capital contributions and providing operating cash, and (ii) the Company's subsidiaries transfer cash to the Company by way of repayment of loans and repayment of operating cash due to the Company. Other than cash transfers, no transfer of other assets has occurred between the Company and its subsidiaries. The following table presents cash transfers between the Company and its subsidiaries for the fiscal year ended March 31, 2025, 2024, and 2023:

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| | | | |
|:---|:---|:---|:---|
| **The Company transfers cash to its subsidiaries by way of** | **FY2025** | **FY2024** | **FY2023** |
| cash dividends | $- | $- | $- |
| providing loans | $- | $- | $- |
| making capital contributions | $- | $- | $660000 |
| providing operating cash | $- | $- | $500136 |
| **Total** | $**-** | $**-** | $**1160136** |

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| | | |
|:---|:---|:---|
| **The Company's subsidiaries transfer cash to the Company by way of** | **FY2025** | **FY2023** |
| repayment of loans | $– $– $|  |
| repayment of operating cash | $– $– $|  |
| **Total** | $– $– $|  |

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On July 31, 2020, the Board of the Company declared a special cash dividend of $0.015 per share. The dividend, equal to $375,000 in the aggregate, was fully paid on August 17, 2020. Except for the aforementioned, the Company has not made any dividend distribution to its shareholders, and the Company's subsidiaries did not make any dividend or distribution to the Company. Pursuant to the PRC Enterprise Income Tax Law and Implementation Regulations for the Corporate Income Tax Law (the "CIT Law"), a withholding tax rate of 10% would apply to any dividends paid by a PRC "resident enterprise" to a foreign enterprise investor, unless such non-resident enterprise's jurisdiction of incorporation has a tax treaty with China that provides for a reduced rate of withholding tax and such non-resident enterprise is the beneficial owner of the dividends. The Cayman Islands, where the holding company is incorporated, does not have such a tax treaty with China. The CIT Law provides that PRC resident enterprises are generally subject to the uniform 25% enterprise income tax rate on their worldwide income. Therefore, if we are treated as a PRC resident enterprise, we will be subject to PRC income tax on our worldwide income at the 25% uniform tax rate, which could have an impact on our effective tax rate and an adverse effect on our net income and results of operations, although we would be exempted from enterprise income tax on dividends distributed from our PRC subsidiaries to us, since such income received by PRC resident enterprise is tax exempted under the CIT Law.

In addition, except for the special dividend declared in 2020, we have not made any dividend or distribution to any U.S. investor. As an offshore holding company, we may rely upon dividends paid to us by our subsidiaries in the PRC to pay dividends and to finance any debt we may incur. If our subsidiaries or any newly formed subsidiaries incur debt on their own behalf in the future, the instruments governing their debt may restrict their ability to pay dividends to us. In addition, our subsidiaries are permitted to pay dividends to us only out of their accumulated profits, if any, as determined in accordance with PRC accounting standards and regulations. Under PRC laws and regulations, each of our PRC subsidiaries are required to set aside a portion of their net profits each year to fund a statutory surplus reserve which are no less than 10% of their net profits each year until such reserve reaches 50% of its registered capital. This reserve is not distributable as dividends. As a result, our PRC subsidiaries are restricted in their ability to transfer a portion of their net assets to us in the form of dividends, loans or advances. As an offshore holding company, we are permitted under PRC laws and regulations to provide funding from the proceeds of our offshore fund-raising activities to our subsidiaries in China only through loans or capital contributions, subject to the satisfaction of the applicable government registration and approval requirements. Before providing loans to our PRC subsidiaries, we will be required to make filings about details of the loans with the State Administration of Foreign Exchange of the PRC (the "SAFE") in accordance with relevant PRC laws and regulations. Our PRC subsidiaries that receive the loans are only allowed to use the loans for the purposes set forth in these laws and regulations. Under regulations of the SAFE, Renminbi is not convertible into foreign currencies for capital account items, such as loans, repatriation of investments and investments outside of China, unless the prior approval of the SAFE is obtained and prior registration with the SAFE is made. See "Item 4. Information on the Company—B. Business Overview—PRC Laws and Regulations Relating to Our Business" for more details.

***Products and Services***

*E-Commerce and E-commerce Enablement Solutions*

BW, through its wholly owned subsidiaries, Bomie US LLC ("Bomie US") and WooKoo LLC ("Wookoo"), as an e-commerce company and also provides TikTok-related e-commerce solutions for customers.

BW generates revenue through multiple channels, including product sales on its own TikTok Shops, collaborative sales with key opinion leaders (KOLs) often supported by advertising, and direct B2B sales. In addition, BW earns service-based fees by providing e-commerce enablement solutions such as livestreaming operations, influencer engagement, and ad placement for third-party merchants.

*AI Entertainment Application*

Currently, we engage in the AI-powered entertainment industry, aiming to provide users with AI-driven games and applications to deliver immersive and engaging entertainment experiences.

2Lab3, a Los Angeles-based company and a wholly owned subsidiary of our Company, transitioned its focused from Web 3.0 to AI-powered applications. 2lab3 was working on the launch an AI-powered application called SimTwin. By utilizing AI technology, SimTwin will analyze users' social interactions and emotional expressions to create digital personas. This will allow users to interact with digital versions of people, including deceased loved ones, and capture significant life moments. The development of SimTwin is outsourced to a third party specialist company. The SimTwin application was initially scheduled for release on the Apple App Store and Google Play Store in the third quarter of 2024. However, internal testing conducted in early 2025 indicated that the application's performance did not meet expectations. As a result, the Company made the decision to discontinue the development of this application.

In addition, pursuant to the development agreement dated November 12, 2023, Blueline has been developing and delivering certain interactive game application, 10,000 Lives (formerly known as Hollywood Sunshine), and we are entitled to all the right, title, and interest in 10,000 Lives, excluding any background technology (as defined in the development agreement). The game 10,000 Lives is a mobile game where players pursue various careers and life goals using a board game mechanic. Players earn dice to move on the board, collect money, participate in mini-games, and upgrade relics to achieve goals such as becoming a basketball player, singer, or doctor. The game integrates AI-generated content to create context for current life goals and stories around player interactions, and features celebrity partnerships for a socially connected experience. Originally planned for PC, Blueline has shifted the focus of 10,000 Lives to a mobile-only release. The game is expected to launch in the fourth quarter of 2025.

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**Our Legacy Businesses**

*Automobile Sales*

In November 2020, the Company began its automobile sales business. The Company entered into agreements with automobile companies to purchase cars and obtain authorization to distribute the cars in different cities in China including Xiamen, Zhangzhou and Hangzhou. The Company utilized its online platform of "Taochejun" on WeChat, as a WeChat Mini Program, to link comprehensive automobile trade and resource providers, and provided vehicle source solutions for automobile dealers. However, the automobile sales business did not generate any revenue since April 2024 and has been divested in July 2024.

*E-Commerce*

In 2020, the Company commenced its the e-commerce business on several different platforms. The Company focused on providing e-commerce overall services, internet promotion, agency operations, supply chain resources and logistics services for all types of enterprises. The Company's main business forms were community group buying and cross-border e-commerce. The Company had a delivery and optimization department, a procurement department, and a live streaming team, and has established a comprehensive business support center and management team. In September 2023, the Company decided to suspend the operation of its e-commerce business as it had incurred losses and the management did not expect short-tern turnover of this business.

*Internet Information and Advertising Service*

In 2021, the Company began to provide internet information and advertising service to small online stores or small manufacturers in China. In September 2023, the Company decided to suspend the operation of its e-commerce business as it had incurred losses and the management did not expect short-tern turnover of this business.

*Nutraceutical and dietary supplements*

As of March 31, 2023, we had a diverse portfolio of approximately 15 kinds of nutraceutical and dietary supplements products marketed and sold through over 50 distributors in 15 different provinces in China. We categorized our products into six groups: Lucidum spore powder products, Cordyceps mycelia products, Ejiao solution products, vitamins and dietary supplements products, American ginseng products, and others. For the years ended March 31, 2023 and 2022, our sales from Lucidum spore powder products, Cordyceps mycelia products and Ejiao solution products, approximately amounted approximately 5.35% and 16.65% of our gross sales, respectively.

As in Administrative Measures for Nutraceutical Products promulgated by National Health Commission of PRC, nutraceutical and dietary supplements products are a category of food targeted to specific population with general health benefits for daily wellness. Nutraceutical and dietary supplements products are not intended to treat any specific diseases and must not cause any acute, subacute or chronic harm to the human body. With the requirements of nutraceutical and dietary supplements being met and approved by the CFDA, the predecessor of the NMPA, under regulations for nutraceutical and dietary supplements, herbal and animal extracts used as both nourishment food and traditional Chinese medicine can be included into raw materials of nutraceutical and dietary supplements products.

We mainly used herbal and animal extracts as raw materials of our Lucidum spore powder products, Cordyceps mycelia products, Ejiao solution products and others. These herbal and animal extracts have been used as both daily nourishment food and traditional Chinese medicine in China for a long time. Approved by CFDA under regulations for nutraceutical and dietary supplements, 26 kinds of our products were nutraceutical and dietary supplements products labeled with "Blue Caps." All our products were produced in compliance with the regulations of food industry.

In August 2023, we consummated the transaction of selling 100% equity interests in Fujian Happiness, the operating entity of our nutraceutical and dietary supplements business, to Fujian Hengda Beverage Co., Ltd. ("Fujian Hengda"), a PRC company which is not affiliate of the Company or any of its directors or officers for cash consideration of RMB 78 million.

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**Vendors**

We considered our vendors whose sales to us accounted for more than 10% of our overall purchases in any given period to be our major vendors of such period. We had no such vendors of our advertising services during the last three fiscal years.

**Sales and Marketing**

*E-commerce*

BW's sales and marketing strategy focuses on leveraging short-form video, livestreaming, and influencer (KOL) engagement to drive product discovery, consumer engagement, and conversion across social commerce platforms.

*AI Entertainment*

As for our AI entertainment business, our marketing plan will leverage a multifaceted digital approach to reach and engage our target audience. We will utilize social media platforms like Facebook, Instagram, Twitter, and TikTok to share engaging content, conduct live demos, and collaborate with influencers. Search Engine Marketing (SEM) through Google Ads and Bing Ads will drive traffic to our website, while content marketing will feature blog posts, videos, and guest articles on AI in entertainment. Email marketing will be employed to deliver newsletters, special offers, and product launch updates tailored to user preferences.

Sales efforts will focus on direct sales via our website and mobile app, supported by attractive launch promotions and discounts. Promotions will include seasonal campaigns, referral programs, and loyalty rewards. We will measure success through key performance indicators such as sales growth, customer acquisition cost, and conversion rates, using tools like Google Analytics, CRM software, and social media analytics to continuously refine our strategies.

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**Competition**

*E-Commerce Solutions*

The rise of social commerce has transformed digital marketing and e-commerce, with platforms like TikTok becoming dominant sales channels for brands targeting younger audiences. The U.S. TikTok Shop market has experienced rapid expansion, driven by influencer-driven purchasing behavior, short-form video engagement, and AI-driven content recommendations. BW aims positioned itself to capitalize on this trend by continuously. Key trends include the rise of live-stream selling, influencer marketing and social shopping; platforms increasingly integrate payment, fulfillment and promotional tools to simplify merchant onboarding.

Geographically, we are aiming to establish a strong presence in North America.

*AI Entertainment*

As for our AI entertainment business, it operates in the rapidly growing AI-powered entertainment industry, focusing on developing and distributing AI-enhanced games, applications, and immersive virtual/augmented reality experiences. The activities in this market cater to both casual and hardcore gamers with a variety of genres, and they create AI-driven applications for both entertainment and educational purposes, leveraging machine learning to offer personalized and innovative content.

Geographically, we are aiming to have a strong presence in North America and the Asia-Pacific region. Additionally, we are planning to expand into emerging markets in Latin America, the Middle East, and Africa.

**Intellectual Property**

*Software Copyright*

We will own the copyright of the game 10,000 Lives, formerly known as Hollywood Sunshine, in accordance with the development agreement dated November 12, 2023.

*Domain Names*

Our intellectual property includes our domain names of https://pavs.ai.

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**Research and Development**

*Historical R&D Efforts*

Historically, we relied on our in-house research and development team to upgrade and invent new products for our nutraceutical and dietary supplement business. A detailed development process of our new products is as following:

● Start-up of a project: feasibility study on the formula, production process and technical requirements of the new product;

● Lab test of the formula and production process on small scale;

● Pilot production test of the formula and production process on medium scale;

● Make further modification on the formula and production process of the new product based on the results of lab test and pilot test to meet current technical requirements and quality standards of nutraceutical and diet supplements;

● Assessment on safety and general health benefits of the new product: the assessment covers hygienic testing, toxicological testing and functional testing on safety, stability and health benefits of the products. The assessment reports are required and reviewed by CFDA to make sure the product can not cause any acute, subacute or chronic harm to the human body. We mainly rely on third party assessment agencies authorized by CFDA to perform the assessment of the safety, stability and general health benefits of the new products.

● Submit the materials to CFDA for registration or record-filing process of the new product (for a detailed discussion on the materials needed, see section "Regulation");

● Approved by CFDA and get the official approval and "Blue Cap" label of the new product: CFDA shall review the materials for registration or record-filing and perform on-site verification of the production process to confirm whether the products meet the requirements of nutraceutical and dietary supplements products. With the requirements of nutraceutical and dietary supplements being met, CFDA will issue the official approvals of the products to the manufacturers.

**Insurance**

As required by applicable laws and regulations in the United States, we provide our full-time employees with workers' compensation insurance and medical insurance coverage. We maintain these employee benefit programs in accordance with relevant federal and state requirements. In addition, we have obtained and maintain insurance policies to cover workplace injuries, disability, and healthcare needs of our eligible employees. We believe we are in compliance with all applicable regulations and have made adequate provision for such coverage in our financial statements. However, any failure to maintain sufficient insurance coverage or to comply with applicable legal requirements could result in penalties, additional costs, or other liabilities imposed by the relevant authorities.

**Seasonality**

There is no seasonality impact to the business of E-Commerce solutions or the AI entertainment business.

**Employees**

We currently have 25 full-time employees, based in the U.S. We have employment contracts with all of our employees in accordance with relevant U.S. laws. Our employees are not represented by a labor organization or covered by a collective bargaining agreement. We have not experienced any work stoppages.

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**Competitive Advantage**

For our e-commerce and e-commerce enablement solutions business, we believe our competitive advantages are as follows:

Platform-Focused Operational Experience: BW focuses its operations on TikTok shops, allowing it to develop experience in content creation, campaign execution, and store management tailored to the platform's features and user dynamics. This focus supports the performance of both its self-operated stores and the services it provides to third-party merchants.

Robust Influencer and Content Network: WooKoo maintains a wide network of influencers and creators. It partners with third-party professionals to pair brands with the right content partners to run live-stream sales and short-form video campaigns, boosting exposure and engagement.

End-to-End Solutions: BW provides a range of support services to merchants looking to establish and operate TikTok Shops. Leveraging its platform expertise, BW helps brands and merchants navigate and grow within the rapidly evolving landscape of social and livestream commerce.

***Regulations***

BW is subject to a variety of domestic and foreign laws and regulations in the United States and abroad involving matters that are important to, or may otherwise impact our live-stream sales and e-commerce solution service business. These include laws related to advertising and marketing practices, consumer protection, intellectual property protection and infringement prevention, privacy and data security, intermediary liability, and taxation. Many of these legal frameworks can be enforced not only by government authorities but also by private parties. These laws and regulations continue to evolve and may change significantly over time. Consequently, the application, interpretation, and enforcement of these regulatory frameworks—whether existing, newly proposed, or amended—remain uncertain and may vary by jurisdiction and over time, particularly as they pertain to the rapidly evolving digital commerce and live-streaming landscape.

Federal Trade Commission Act (15 U.S.C. § 45), particularly Section 5, prohibits "unfair or deceptive acts or practices in or affecting commerce." This includes false advertising, misleading pricing claims, and failure to honor stated return or refund policies. The FTC enforces this provision against companies that engage in conduct likely to mislead consumers acting reasonably under the circumstances. In addition, Federal Trade Commission's (FTC) Endorsement Guides (16 CFR Part 255) are designed to ensure that endorsements and testimonials used in marketing communications are truthful, not misleading, and include clear disclosure of any material connection between the endorser and the sponsoring brand. These obligations apply to all formats of promotional content, including short-form videos and live-streams on social media platforms such as TikTok and Instagram. Disclosures must be made in a manner that is both clear and conspicuous to consumers, regardless of the informal or real-time nature of the content.

Because BW's marketing activities may reach younger audiences, BW may be subject to the Children's Online Privacy Protection Act (COPPA). COPPA imposes specific obligations on operators of websites, applications, and online services that are either directed toward children under the age of 13 or that knowingly collect personal information from such children. These obligations include obtaining verifiable parental consent prior to collecting, using, or disclosing personal information, providing a publicly accessible privacy policy, offering parents the ability to review and delete their child's data, and maintaining reasonable safeguards for protecting children's information. These requirements are particularly relevant to its use of platforms such as TikTok and YouTube, where underage users may be part of the viewing audience.

Furthermore, BW needs to comply with the Restore Online Shoppers' Confidence Act (ROSCA), a federal law that aims to prevent deceptive online sales practices, especially in the context of free trials, negative option billing, and subscription-based models. Under ROSCA, all material terms of a transaction—including total cost, trial period duration, and cancellation procedures—must be clearly disclosed prior to the completion of a purchase. Express informed consent must be obtained from the consumer before any credit card is charged, and a simple, transparent mechanism for canceling recurring charges must be provided. These provisions are intended to promote transparency and protect consumers from unauthorized or unintended purchases.

In terms of consumer protection, BW must also comply with various state-level laws, most notably the Unfair or Deceptive Acts and Practices (UDAP) statutes. While these laws generally align with federal standards, they may impose additional obligations or establish separate enforcement mechanisms. UDAP laws prohibit deceptive, fraudulent, or unfair marketing and sales practices and are enforced by state Attorneys General as well as, in some jurisdictions, private litigants.

INFORM Consumers Act, which became effective in June 2023, is intended to enhance transparency and accountability in online marketplaces by imposing specific obligations on platforms and third-party sellers engaged in high-volume sales. Although the primary regulatory burden falls on the platform operators, the law requires high-volume third-party sellers, who conduct 200 or more transactions totaling at least $5,000 in a 12-month period, to provide verified information such as their full name, physical address, bank account, and tax identification number. This data must be periodically updated and may be disclosed to consumers under certain conditions. As a seller operating on platforms covered by this law, BW is responsible for cooperating with identity and financial verification requirements, as well as for ensuring the accuracy of information disclosed to consumers. Failure to comply may result in suspension from the platform or civil penalties.

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Moreover, BW's live-streaming and marketing operations require careful adherence to intellectual property laws, including the Copyright Act of 1976, the Digital Millennium Copyright Act (DMCA), and the Lanham Act. These laws regulate BW's use of third-party music, video content, logos, trademarks, and other protected intellectual property during live-streamed events. Unauthorized use of such materials may result in takedown notices, financial liability, platform penalties, or reputational damage. In particular, BW may face liability under trademark law if it is alleged to have used another party's brand name, logo, or trade dress in a misleading or unauthorized manner.

BW's operations are also governed by laws and regulations specific to the product categories we offer for sale, including leather goods and sportswear. For example, the FTC's Textile and Wool Acts require accurate labeling of fiber content, country of origin, and care instructions for apparel and textile items. Leather products are also subject to labeling standards that prohibit misrepresentation of material content, such as using the terms "genuine leather" or "full-grain" without meeting established definitions and industry norms. In addition, BW may be subject to safety regulations enforced by the Consumer Product Safety Commission (CPSC), especially when its products involve materials, components, or design elements that could present risks related to flammability, chemical exposure, or choking hazards.

As an online retailer that sources products from wholesalers, manufacturers, or other sellers, we must also consider potential exposure to intermediary liability—legal responsibility that can arise when a seller facilitates the sale of goods that are defective, mislabeled, counterfeit, or otherwise non-compliant with applicable law. Although primary liability may rest with the original manufacturer or importer, U.S. law permits enforcement actions and private claims to be brought against downstream sellers in certain situations.

Additionally, BW is subject to a complex framework of state and local sales and use tax laws that govern our sale of goods via live-stream and e-commerce platforms. Following the U.S. Supreme Court's decision in South Dakota v. Wayfair, Inc., states may impose sales tax obligations on remote sellers, including those without a physical presence in the state, once certain economic nexus thresholds are met. In many states, "marketplace facilitator" statutes have shifted the obligation to collect and remit taxes to platforms such as TikTok Shop, Shopify, and Amazon. However, even when these platforms assist in tax collection, BW remains ultimately responsible for ensuring compliance with applicable tax reporting, registration, and remittance requirements. Non-compliance with such obligations may subject it to audits, penalties, interest, and reputational harm.

***PRC Laws and Regulations Relating to Our Business***

<u>Regulation on Foreign Exchange Control</u>

Foreign exchange in China is primarily regulated by:

● The Foreign Currency Administration Regulations (1996), as amended on January 14, 1997 and August 5, 2008; and

● The Administration Rules of the Settlement, Sale and Payment of Foreign Exchange (1996), or the Administration Rules.

Under the Foreign Currency Administration Regulations, the Renminbi is convertible for current account items, including the distribution of dividends, interest payments and trade and service-related foreign exchange transactions. Conversion of Renminbi into foreign currency for capital account items, such as, loans, investment in securities and repatriation of investments, however, remains subject to the registration of the SAFE or its local counterparts as required by law. Under the Administration Rules, foreign-invested enterprises may buy, sell and remit foreign currencies at banks authorized to conduct foreign exchange transactions for settlement of current account transactions after providing valid commercial documents and, in the case of capital account item transactions, only after registration with the SAFE and, as the case may be, other relevant PRC government authorities as required by law. Capital investments directed outside of China by foreign-invested enterprises are also subject to restrictions, which include registration filing with MOFCOM. If the investment is made to the sensitive countries, districts, or industries, it needs to be approved by MOFCOM.

The value of the Renminbi against the U.S. dollar and other currencies may fluctuate and is affected by, among other things, changes in China's political and economic conditions. The conversion of Renminbi into foreign currencies, including U.S. dollars, has been based on rates set by the People's Bank of China. On July 21, 2005, the PRC government changed its policy of pegging the value of the Renminbi to the U.S. dollar. Under the new policy, the Renminbi will be permitted to fluctuate within a band against a basket of certain foreign currencies. We receive a significant portion of our revenue in Renminbi, which is not a freely convertible currency. Under our current structure, our income will be primarily derived from dividend payments from our subsidiaries in China. Even though we may remit the income from China to anywhere we want, the fluctuation of exchange rate may be a disadvantage to us if Renminbi depreciated.

In November 2012, SAFE promulgated the Circular of Further Improving and Adjusting Foreign Exchange Administration Policies on Foreign Direct Investment, as amended on May 4, 2015, which substantially amends and simplifies the current foreign exchange procedure. Pursuant to this circular, the opening of various special purpose foreign exchange accounts, such as pre-establishment expenses accounts, foreign exchange capital accounts and guarantee accounts, the reinvestment of Renminbi proceeds derived by foreign investors in China, and remittance of foreign exchange profits and dividends by a foreign-invested enterprise to its foreign shareholders no longer require the approval or verification of SAFE, and multiple capital accounts for the same entity may be opened in different provinces, which was not possible previously. In addition, SAFE promulgated the Provisions on Foreign Exchange Administration over Direct Investment Made by Foreign Investors in China in May 2013, which specifies that the administration by SAFE or its local branches over direct investment by foreign investors in China must be conducted by way of registration and banks must process foreign exchange business relating to the direct investment in China based on the registration information provided by SAFE and its branches. On February 28, 2015, SAFE promulgated the Notice on Further Simplifying and Improving the Administration of the Foreign Exchange Concerning Direct Investment, or SAFE Notice 13. After SAFE Notice 13 became effective on June 1, 2015, instead of applying for approvals regarding foreign exchange registrations of foreign direct investment and overseas direct investment from SAFE, entities and individuals may apply for such foreign exchange registrations from qualified banks. The qualified banks, under the supervision of SAFE, may directly review the applications and conduct the registration.

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On March 30, 2015, SAFE promulgated the Circular of the SAFE on Reforming the Management Approach regarding the Settlement of Foreign Capital of Foreign-invested Enterprise, or Circular 19, which expands a pilot reform of the administration of the settlement of the foreign exchange capitals of foreign-invested enterprises nationwide. Circular 19 came into force and replaced both the Circular of the State Administration of Foreign Exchange on Issues Relating to the Improvement of Business Operations with Respect to the Administration of Foreign Exchange Capital Payment and Settlement of Foreign-invested Enterprises, or Circular 142 and the Circular of the State Administration of Foreign Exchange on Issues concerning the Pilot Reform of the Administrative Approach Regarding the Settlement of the Foreign Exchange Capitals of Foreign-invested Enterprises in Certain Areas, or Circular 36 on June 1, 2015. Circular 19 allows foreign-invested enterprises established in China whose main business is investment to use their foreign exchange capitals to make equity investment and removes certain other restrictions under Circular 142. However, Circular 19 continues to prohibit foreign-invested enterprises from, among other things, using Renminbi fund converted from its foreign exchange capitals for expenditure beyond its business scope and providing entrusted loans or repaying loans between non-financial enterprises.

SAFE promulgated the Notice of the State Administration of Foreign Exchange on Reforming and Standardizing the Foreign Exchange Settlement Management Policy of Capital Account, or Circular 16, effective in June 2016, which reiterates some of the rules set forth in Circular 19, but compared to Circular 19, Circular 16 provides that discretionary foreign exchange settlement applies to foreign exchange capital, foreign debt offering proceeds and remitted foreign listing proceeds, and the corresponding Renminbi capital converted from foreign exchange are not restricted from extending loans to related parties or repaying the intercompany loans (including advances by third parties).

SAFE further promulgated Notice of the State Administration of Foreign Exchange on Further Facilitating Cross-border Trade and Investment, or Circular 28, effective from January 2020, which allows all foreign-invested enterprises to make domestic equity investments using their foreign exchange capitals or Renminbi fund converted from its foreign exchange capitals with limited preconditions. However, there exist substantial uncertainties with respect to the interpretation and implementation in practice with respect to the Circular 28, Circular 16 and other laws and regulations related to foreign currency exchange.

<u>Regulation on Foreign Exchange Registration of Offshore Investment by PRC Residents</u>

SAFE Circular on Relevant Issues Relating to Domestic Resident's Investment and Financing and Roundtrip Investment through Special Purpose Vehicles, or SAFE Circular 37, issued by SAFE and effective on July 4, 2014, regulates foreign exchange matters in relation to the use of special purpose vehicles, or SPVs, by PRC residents or entities to seek offshore investment and financing and conduct round trip investment in China. Under SAFE Circular 37, an SPV refers to an offshore entity established or controlled, directly or indirectly, by PRC residents or entities for the purpose of seeking offshore financing or making offshore investment, using legitimate domestic or offshore assets or interests, while "round trip investment" refers to the direct investment in China by PRC residents or entities through SPVs, namely, establishing foreign-invested enterprises to obtain the ownership, control rights and management rights. SAFE Circular 37 requires that, before making contribution into an SPV, PRC residents or entities are required to complete foreign exchange registration with SAFE or its local branch. In the event of change of basic information such as the individual shareholder, name, operation term, etc., or if there is a capital increase, decrease, equity transfer or swap, merge, spin-off or other amendment of the material items, the PRC residents or entities shall complete foreign exchange alteration registration formality for offshore investment. The SAFE Circular 37 further provides that option or share-based incentive tool holders of a non-listed SPV can exercise the options or share incentive tools to become a shareholder of such non-listed SPV, subject to registration with SAFE or its local branch. In addition, according to the procedural guidelines as attached to SAFE Circular 37, PRC residents or entities are only required to register the SPV directly established or controlled (first level).

On February 13, 2015, SAFE further promulgated the Circular on Further Simplifying and Improving the Administration of the Foreign Exchange Concerning Direct Investment, or SAFE Circular 13, which took effect on June 1, 2015. SAFE Circular 13 has amended SAFE Circular 37 by requiring PRC residents or entities to register with qualified banks rather than SAFE or its local branch in connection with their establishment or control of an offshore entity established for the purpose of overseas investment or financing.

<u>Regulation on Dividend Distributions</u>

Our PRC subsidiary, Happiness Fuzhou is a wholly foreign-owned enterprise under the PRC law. The principal regulations governing the distribution of dividends paid by wholly foreign-owned enterprises include:

● Corporate Law (1993) as amended in 2005 and 2013;

● The Wholly Foreign-Owned Enterprise Law (1986), as amended in 2000;

● The Wholly Foreign-Owned Enterprise Law Implementation Regulations (1990), as amended in 2001; and

● The Enterprise Income Tax Law (2007) and its Implementation Regulations (2007).

Under these regulations, wholly foreign-owned enterprises in China may pay dividends only out of their accumulated profits, if any, as determined in accordance with PRC accounting standards and regulations. In addition, an enterprise in China is required to set aside at least 10% of its after-tax profit based on PRC accounting standards each year to its general reserves until its cumulative total reserve funds reaches 50% of its registered capital. Our Company's reserve fund has not yet reached this level. The board of directors of a wholly foreign-owned enterprise has the discretion to allocate a portion of its after-tax profits to its employee welfare and bonus funds. These reserve funds, however, may not be distributed as cash dividends.

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On March 16, 2007, the National People's Congress enacted the Enterprise Income Tax Law, and on December 6, 2007, the State Council issued the Implementation Regulations on the Enterprise Income Tax Law, both of which became effective on January 1, 2008. Under this law and its implementation regulations, dividends payable by a foreign-invested enterprise in the PRC to its foreign investor who is a non-resident enterprise will be subject to a 10% withholding tax, unless any such foreign investor's jurisdiction of incorporation has a tax treaty with the PRC that provides for a lower withholding tax rate.

<u>M&A Rules and Regulation on Overseas Listings</u>

On August 8, 2006, six PRC regulatory agencies, MOFCOM, the State Assets Supervision and Administration Commission, the State Administration for Taxation, the State Administration for Industry and Commerce, CSRC and SAFE, jointly adopted the Regulation on Mergers and Acquisitions of Domestic Enterprises by Foreign Investors, or the M&A Rules, which became effective on September 8, 2006, and were later amended on June 22, 2009. The M&A Rules purport, among other things, to require that offshore SPVs that are controlled by PRC companies or individuals and that have been formed for overseas listing purposes through acquisitions of PRC domestic interests held by such PRC companies or individuals, obtain the approval of the CSRC prior to publicly listing their securities on an overseas stock exchange.

On July 6, 2021, the relevant PRC government authorities issued Opinions on Strictly Cracking Down Illegal Securities Activities in Accordance with the Law, or the Opinions on Security Activities, which calls for the need to strengthen the administration over illegal securities activities and the supervision on overseas listings by China-based companies and proposed to take effective measures, such as promoting the construction of relevant regulatory systems to deal with the risks and incidents faced by China-based overseas-listed companies. On December 24, 2021, the State Council issued a draft Regulations of the State Council on the Administration of Overseas Issuance and Listing of Securities by Domestic Companies (Draft for Comments), or the Draft Provisions, and the CSRC issued a draft Measures for the Record-Filing of Overseas Securities Offering and Listing by Domestic Companies (Draft for Comments), or the Draft Administration Measures, for public comments. On February 17, 2023, the CSRC promulgated the Trial Administrative Measures of Overseas Securities Offering and Listing by Domestic Companies (the "Trial Measures"), which will take effect on March 31, 2023. The Trial Measures clarified and emphasized several aspects, which include but are not limited to: (1) comprehensive determination of the "indirect overseas offering and listing by PRC domestic companies" in compliance with the principle of "substance over form" and particularly, an issuer will be required to go through the filing procedures under the Trial Measures if the following criteria are met at the same time: a) 50% or more of the issuer's operating revenue, total profit, total assets or net assets as documented in its audited consolidated financial statements for the most recent accounting year is accounted for by PRC domestic companies, and b) the main parts of the issuer's business activities are conducted in mainland China, or its main places of business are located in mainland China, or the senior managers in charge of its business operation and management are mostly Chinese citizens or domiciled in mainland China; (2) exemptions from immediate filing requirements for issuers that a) have already been listed or registered but not yet listed in foreign securities markets, including U.S. markets, prior to the effective date of the Trial Measures, and b) are not required to re-perform the regulatory procedures with the relevant overseas regulatory authority or the overseas stock exchange, c) whose such overseas securities offering or listing shall be completed before September 30, 2023, provided however that such issuers shall carry out filing procedures as required if they conduct refinancing or are involved in other circumstances that require filing with the CSRC; (3) a negative list of types of issuers banned from listing or offering overseas, such as (a) issuers whose listing or offering overseas have been recognized by the State Council of the PRC as possible threats to national security, (b) issuers whose affiliates have been recently convicted of bribery and corruption, (c) issuers under ongoing criminal investigations, and (d) issuers under major disputes regarding equity ownership; (4) issuers' compliance with web security, data security, and other national security laws and regulations; (5) issuers' filing and reporting obligations, such as obligation to file with the CSRC after it submits an application for initial public offering to overseas regulators, and obligation after offering or listing overseas to report to the CSRC material events including change of control or voluntary or forced delisting of the issuer; and (6) the CSRC's authority to fine both issuers and their shareholders between 1 and 10 million RMB for failure to comply with the Trial Measures, including failure to comply with filing obligations or committing fraud and misrepresentation.

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On September 6, 2024, the NDRC and the Ministry of Commerce, jointly issued the 2024 Negative List, which became effective on November 1, 2024. Pursuant to the 2024 Negative List, if a domestic company engaging in the prohibited business stipulated in the 2024 Negative List seeks an overseas offering and listing, it shall obtain the approval from the competent governmental authorities. Besides, the foreign investors of the company shall not be involved in the company's operation and management, and their shareholding percentages shall be subject, mutatis mutandis, to the relevant regulations on the domestic securities investments by foreign investors. As the 2024 Negative List is relatively new, there remain substantial uncertainties as to the interpretation and implementation of these new requirements, and it is unclear as to whether and to what extent listed companies like us will be subject to these new requirements.

On February 24, 2023, the CSRC, together with Ministry of Finance of the PRC, National Administration of State Secrets Protection and National Archives Administration of China, revised the Provisions on Strengthening Confidentiality and Archives Administration for Overseas Securities Offering and Listing, which were issued by the CSRC, National Administration of State Secrets Protection and National Archives Administration of China in 2009, or the Provisions. The revised Provisions were issued under the title the "Provisions on Strengthening Confidentiality and Archives Administration of Overseas Securities Offering and Listing by Domestic Companies" and came into effect on March 31, 2023 together with the Trial Measures. One of the major revisions to the revised Provisions is expanding their application to cover indirect overseas offering and listing, as is consistent with the Trial Measures. The revised Provisions require that, including, but not limited to, (a) a domestic company that plans to, either directly or indirectly through its overseas listed entity, publicly disclose or provide to relevant individuals or entities, including securities companies, securities service providers and overseas regulators, any documents and materials that contain state secrets or working secrets of government agencies, shall first obtain approval from competent authorities according to law, and file with the secrecy administrative department at the same level; and (b) a domestic company that plans to, either directly or indirectly through its overseas listed entity, publicly disclose or provide to relevant individuals and entities including securities companies, securities service providers and overseas regulators, any other documents and materials that, if leaked, will be detrimental to national security or public interest, shall strictly fulfill relevant procedures stipulated by applicable national regulations.

<u>Restriction on Foreign Ownership</u>

Pursuant to the Foreign Investment Industries Guidance Catalog (2017 Revision), or the 2017 Catalogue, which was amended by the NDRC and the MOFCOM, and became effective on July 28, 2017 replacing the Foreign Investment Industries Guidance Catalog (2015 Revision). The 2017 Catalogue classifies the various industries into three categories: encouraged, restricted and prohibited. Our company's primary products, nutraceutical products, are encouraged industries for foreign investors.

The Special Administrative Measures for Access of Foreign Investment (Foreign Investment Access Negative List) set forth in the 2017 Catalogue was replaced by the Special Administrative Measures for Access of Foreign Investment (Negative List) (2018 Version), or the 2018 Negative List, promulgated on June 28, 2018 with effect on July 28, 2018, which imposes the same restriction and prohibition on foreign investors. On June 30, 2019, the MOFCOM and the NDRC jointly released the Catalog of Industries Encouraging Foreign Investment (2019 Version), or the 2019 Encouraged Catalog, which became effective on July 30, 2019 and replaced the previous list of the industries in which foreign investment is encouraged to invest under the 2017 Catalogue, and the Special Administrative Measures for Access of Foreign Investment (Negative List) (2019 Version), or the 2019 Negative List, which became effective on July 30, 2019 and replaced the 2018 Negative List. On June 23, 2020, the MOFCOM and the NDRC jointly released the Special Administrative Measures for Access of Foreign Investment (Negative List) (2020 Version), or the 2020 Negative List, which superseded the 2019 Negative List on July 23, 2020. On December 27, 2021, the NDRC and the MOFCOM jointly released the Special Administrative Measures for Access of Foreign Investment (Negative List) (2021 Version), or the 2021 Negative List which came into effect on January 1, 2022 and replaced the 2020 Negative List. Then, on September 6, 2024, the NDRC and the MOFCOM promulgated the Special Management Measures (Negative List) for the Access of Foreign Investment (2024 Version), or the Negative List, which became effective on November 1, 2024, replacing previous negative list.

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<u>Regulations on Offshore Parent Holding Companies' Direct Investment in and Loans to Their PRC Subsidiaries</u>

An offshore company may invest equity in a PRC company, which will become the PRC subsidiary of the offshore holding company after investment. Such equity investment is subject to a series of laws and regulations generally applicable to any foreign-invested enterprise in China, which include the Wholly Foreign Owned Enterprise Law, the Sino-foreign Equity Joint Venture Enterprise Law, the Sino-foreign Contractual Joint Venture Enterprise Law, all as amended from time to time, and their respective implementing rules; the Tentative Provisions on the Foreign Exchange Registration Administration of Foreign-Invested Enterprise; and the Notice on Certain Matters Relating to the Change of Registered Capital of Foreign-Invested Enterprises.

Under the aforesaid laws and regulations, the increase of the registered capital of a foreign-invested enterprise is subject to the prior approval by or registration with the original approval authority of its establishment. In addition, the increase of registered capital and total investment amount shall both be registered with SAIC.

Shareholder loans made by offshore parent holding companies to their PRC subsidiaries are regarded as foreign debts in China for regulatory purposes, which debts are subject to a number of PRC laws and regulations, including the PRC Foreign Exchange Administration Regulations, the Interim Measures on Administration on Foreign Debts, the Tentative Provisions on the Statistics Monitoring of Foreign Debts and its implementation rules, and the Administration Rules on the Settlement, Sale and Payment of Foreign Exchange.

Under these regulations, the shareholder loans made by offshore parent holding companies to their PRC subsidiaries shall be registered with SAFE. Furthermore, the total amount of foreign debts that can be incurred by such PRC subsidiaries, including any shareholder loans, shall not exceed the difference between the total investment amount and the registered capital amount of the PRC subsidiaries, both of which are subject to governmental approval.

<u>Regulations on Trademarks</u>

Trademarks are protected by the PRC Trademark Law adopted in 1982, as subsequently amended, as well as the Implementation Regulations of the PRC Trademark Law adopted by the State Council in 2002 and 2013. The Trademark Office under the SAIC handles trademark registrations. Trademarks can be registered for a term of ten years and can be extended for another ten years if requested upon expiration of the first or any renewed ten-year term. The PRC Trademark Law has adopted a "first-to-file" principle with respect to trademark registration. Where a trademark for which a registration application has been made is identical or similar to another trademark which has already been registered or been subject to a preliminary examination and approval for use on the same type of or similar commodities or services, the application for such trademark registration may be rejected. Any person applying for the registration of a trademark may not prejudice the existing right first obtained by others, nor may any person register in advance a trademark that has already been used by another party and has already gained a "sufficient degree of reputation" through such other party's use. Trademark license agreements must be filed with the Trademark Office or its regional offices. Meanwhile, we have successfully obtained 38 trademarks.

<u>Regulations on Patents</u>

The PRC Patent Law provides for patentable inventions, utility models and designs, which must meet three conditions: novelty, inventiveness and practical applicability. The State Intellectual Property Office is responsible for examining and approving patent applications. A patent is valid for a term of twenty years in the case of an invention patent and a term of ten years in the case of utility models and designs. We have obtained 18 patents, all of which we have ownership of, including a number of those that were originally under the ownership of certain individuals affiliated with our Company through ownership transfer.

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<u>PRC Enterprise Income Tax Law and Individual Income Tax Law</u>

Under the Enterprise Income Tax Law or EIT Law, enterprises are classified as resident enterprises and non-resident enterprises. PRC resident enterprises typically pay an enterprise income tax at the rate of 25%. An enterprise established outside of the PRC with its "de facto management bodies" located within the PRC is considered a "resident enterprise," meaning that it can be treated in a manner similar to a PRC domestic enterprise for enterprise income tax purposes. The implementation rules of the EIT Law define "de facto management body" as a managing body that in practice exercises "substantial and overall management and control over the production and operations, personnel, accounting, and properties" of the enterprise.

The SAT Circular 82 issued by the SAT in April 2009 provides certain specific criteria for determining whether the "de facto management body" of a PRC-controlled offshore incorporated enterprise is located in China. Pursuant to the SAT Circular 82, a PRC-controlled offshore incorporated enterprise has its "de facto management body" in China only if all of the following conditions are met: (a) the senior management and core management departments in charge of its daily operations function have their presence mainly in the PRC; (b) its financial and human resources decisions are subject to determination or approval by persons or bodies in the PRC; (c) its major assets, accounting books, company seals, and minutes and files of its board and shareholders' meetings are located or kept in the PRC; and (d) more than half of the enterprise's directors or senior management with voting rights habitually reside in the PRC. The SAT Bulletin 45, in effect from September 2011, provides more guidance on the implementation of the SAT Circular 82 and provides for procedures and administration details on determining resident status and administration on post-determination matters. Although the SAT Circular 82 and the SAT Bulletin 45 only apply to offshore enterprises controlled by PRC enterprises or PRC enterprise groups, not those controlled by PRC individuals or foreign individuals, the determining criteria set forth there may reflect the SAT's general position on how the "de facto management body" test should be applied in determining the tax resident status of offshore enterprises, regardless of whether they are controlled by PRC enterprises or PRC enterprise groups or by PRC or foreign individuals.

Due to the lack of applicable legal precedents, it remains unclear how the PRC tax authorities will determine the PRC tax resident treatment of a foreign company controlled by individuals. We may be classified as a PRC "resident enterprise" for PRC enterprise income tax purposes. Such classification would likely result in unfavorable tax consequences to us and our non-PRC shareholders and have a material adverse effect on our results of operations and the value of your investment.

<u>Employment Laws</u>

In accordance with the PRC National Labor Law, which became effective in January 1995, and the PRC Labor Contract Law, which became effective in January 2008, as amended subsequently in 2012, employers must execute written labor contracts with full-time employees in order to establish an employment relationship. All employers must compensate their employees equal to at least the local minimum wage standards. All employers are required to establish a system for labor safety and sanitation, strictly abide by state rules and standards and provide employees with appropriate workplace safety training. In addition, employers in China are obliged to pay contributions to the social insurance plan and the housing fund plan for employees. We have contributed to the basic and minimum social insurance plan. While we believe we have made adequate provision of such outstanding amounts of contributions to such plans in our financial statements, any failure to make sufficient payments to such plans would be in violation of applicable PRC laws and regulations and, if we are found to be in violation of such laws and regulations, we could be required to make up the contributions for such plans as well as to pay late fees and fines.

<u>Taxation</u>

*Income Tax*

The New Income Tax Law was promulgated by NPC on March 16, 2007 and came into effect on January 1, 2008. The Chinese domestic enterprises and FIEs are treated equally on the income tax rate, and the enterprise income tax rate shall be 25%. Enterprise Income Tax law grants preferential tax treatment to High and New Technology Enterprises ("HNTEs"). Under this preferential tax treatment, HNTEs are entitled to an income tax rate of 15%, subject to a requirement that they re-apply for HNTE status every three years. In accordance with the New Income Tax Law and its implementing regulations, the non-resident enterprise which has not set up institutions or establishments in China, or has set up institutions or establishments but the income has no relationship with such institutions or establishments, it shall pay enterprise income tax on such income sourced from China, and the income tax rate shall be 20%, subject to reduction as provided by any applicable double taxation treaty, unless the relevant income is specially exempted from tax under the applicable tax laws, regulations, notices and decisions which relate to FIEs and their investors.

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The enterprises that were approved and established prior to the promulgation hereof and that, in accordance with the effective tax laws and administrative regulations, enjoy a special lower tax rate shall, in accordance with the provisions of the State Council, progressively transit to the tax rate specified herein within 5 years following the implementation hereof. Those enterprises that enjoy a fixed-term tax exemption or tax reduction shall, in accordance with the provisions of the State Council, continue to enjoy such exemption or reduction after the implementation hereof until the expiration of the term of such exemption or reduction. However, if an enterprise did not enjoy such preferential treatment because it has not yet achieved profitability, the term of such preferential treatment shall be calculated from January 1, 2008 until the expiration of the term of such exemption or reduction.

According to the Notice on Strengthening Administration of Enterprise Income Tax for Share Transfers by Non-PRC Resident Enterprise (Circular Guoshuihan [2009] No. 698) implemented on January 1, 2008, except for the purchase and sale of equity through a public securities market, where a foreign corporate investor indirectly transfers the equity of a PRC resident enterprise by disposing the equity of an overseas holding company (the "Indirect Transfer") located in a tax jurisdiction that (i) has an effective tax rate of less than 12.5%, or (ii) does not tax its residents on their foreign income, the foreign corporate investor shall report the Indirect Transfer to the competent PRC tax authority within 30 days from the date when the equity transfer agreement was made. In this case, the PRC tax authority will examine the true nature of the Indirect Transfer. Should it deem the foreign investor to have made the Indirect Transfer without reasonable commercial purpose and in order to avoid the PRC tax, the PRC tax authority may disregard the existence of the overseas holding company that is used for tax planning purpose and re-characterize the Indirect Transfer. As a result, gains derived from such Indirect Transfer by the foreign investor may be subject to the EIT Law.

*Value-Added Tax*

Pursuant to the Provisional Regulations on Value-added Tax of PRC, last amended on November 5, 2008 and took effect from January 1, 2009, and its implementation rules which were revised on December 15, 2008 and took effect from January 1, 2009, all entities or individuals in PRC engaging in the sale of goods, the provision of processing services, repairs and replacement services, and the import of goods are required to pay value-added tax ("VAT"). The amount of VAT payable in the sale or import of goods except as otherwise provided by paragraph (2) and paragraph (3) of Article 2 of the Provisional Regulations on Value-added Tax of PRC. Before May 1, 2018, the applicable VAT rate was 17%, while after May 1, 2018 and before April 1, 2019, the Company is subject to a VAT rate of 16%. After April 1, 2019, the Company is subject to a VAT rate of 13% based on the new Chinese tax law.

In November 2011, the Ministry of Finance ("MOF") and the State Administration of Tax ("SAT") promulgated the Pilot Plan for Imposition of Value-Added Tax to Replace Business Tax (the "Pilot Plan"). Since January 1, 2012, the PRC government has been implementing a pilot program in certain provinces and municipalities, to levy a 6% VAT on revenue generated from certain kinds of services in lieu of the 5% business tax. According to the Notice Regarding the Nationwide Implementation of B2V Transformation Pilot Program in respect of Transportation and Certain Modern Service Industries jointly issued by the MOF and SAT effective from August 1, 2013 (the "B2V Circular 37"), such policy has been implemented nationwide. In addition, the MOF and SAT released the Notice on Including Railway Transportation and Postal Services Sectors into the Pilot Scheme on Switching from Business Tax to VAT on December 12, 2013, which further expanded the scope of taxable services for value-added tax and replaced the B2V Circular 37 as of January 1, 2014.

*Business Tax*

Pursuant to the Interim Regulation of the People's Republic of China on Business Tax ("Business Tax Regulation") last amended on November 10, 2008 and took effect from 1 January, 2009, business that provide services (including entertainment business), assign intangible assets or sell immovable property became liable to business tax at a rate ranging from 3% to 20% of the charges of the services provided, intangible assets assigned or immovable property sold, as the case may be.

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*Tax on Dividends from PRC Enterprise with Foreign Investment*

According to the New Income Tax Law and the Implementation Rules, income such as dividends and profits distribution from the PRC derived from a foreign enterprise which has no establishment in the PRC is subject to a 10% withholding tax, subject to reduction as provided by any applicable double taxation treaty.

*Stamp Duty*

Under the PRC Interim Regulations on Stamp Duty promulgated by the State Council on August 6, 1988 and amended in January 6, 2011, for building property transfer instruments, including those in respect of property ownership transfer, the duty rate shall be 0.03% of the amount stated therein; for permits and certificates relating to rights, including real estate title certificates and land use right certificates, stamp duty shall be levied on an item basis at an annual rate of RMB5 per item.

*Urban Maintenance Tax*

Under the PRC Interim Regulations on Urban Maintenance Tax promulgated by the State Council on February 8, 1985 and amended on January 8, 2011, any taxpayer, whether an individual or otherwise, of product tax, value-added tax or business tax shall be required to pay urban maintenance tax. The tax rate shall be 7% for a taxpayer whose domicile is in an urban area, 5% for a taxpayer whose domicile is in a county and a town, and 1% for a taxpayer whose domicile is not in any urban area or county or town.

<u>Wholly Foreign-Owned Enterprise</u>

WFOE is governed by the Law of the People's Republic of China Concerning Enterprises with Sole Foreign Investments, which was promulgated on April 12, 1986 and was subsequently amended on October 31, 2000, and its Implementation Regulations promulgated on December 12, 1990 and was subsequently amended on April 12, 2001 (together the "Foreign Enterprises Law").

*Procedures for Establishment of a WFOE*

The establishment of a WFOE will have to be approved by Ministry of Commerce (or its delegated authorities) (the "MOC"). If two or more foreign investors jointly apply for the establishment of a WFOE, a copy of the contract between the parties must also be submitted to MOC (or its delegated authorities) for its record. A WFOE must also obtain a business license from the State Administration of Industry and Commerce (or its delegated authorities) before it can commence business.

*Nature*

A WFOE is a limited liability company under the Foreign Enterprise Law. It is a legal entity which may independently assume civil obligations, enjoy civil rights and has the right to own, use and dispose of property. It is required to have a registered capital contributed by the foreign investor(s). The liability of the foreign investor(s) is limited to the amount of registered capital contributed. The foreign investor may make its contributions by installments and the registered capital must be contributed within the period as approved by the MOC (or its delegated authorities) in accordance with relevant regulations.

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*Profit Distribution*

The Foreign Enterprise Law provides that after payment of taxes, a WFOE must make contributions to a reserve fund and at least 10% of the after-tax profits must be allocated to the reserve fund. If the accumulative amount of allocated reserve funds reaches 50% of an enterprise's registered capital, the WFOE will not be required to make any additional contribution. The WFOE is prohibited from distributing dividends unless the losses (if any) of previous years have been made up.

In accordance with the Notice of the Ministry of Finance on the Issue of Handling Financial Issues by Relevant Enterprises after the Implementation of the Company Law promulgated by the Ministry of Finance on March 15, 2006 and effective April 1, 2006, from January 1, 2006 on, enterprises established in accordance with the Company Law shall distribute profits pursuant to Article 167 of the Company Law and shall no longer make contributions to the reserve fund. After an enterprise ceases to make contributions to the reserve fund, it may continue to make contributions to the employee bonus and welfare fund as decided by the board of directors if the purpose, use conditions, and procedures thereof shall be made clear, and such funds shall be manage as debts.

<u>Company Law</u>

The establishment and operation of corporate entities in China is governed by the PRC Company Law, which was promulgated by the Standing Committee of the NPC on December 29, 1993 and became effective on July 1, 1994 ("1993 PRC Company Law"). It was subsequently amended on December 25, 1999, August 28, 2004, October 27, 2005, December 28, 2013, October 26, 2018 and July 1, 2024.

The PRC Company Law generally governs 2 types of companies — limited liability companies and joint stock limited companies. Both types of companies have the status of legal persons, and the liability of a company to its debtors is limited to the value of assets owned by the company. Liabilities of shareholders of a limited liability company are limited to the amount of registered capital they have contributed.

The amendments to the PRC Company Law adopted in October 2005 seek to reform various aspects of the 1993 PRC Company Law and simplify the establishment and operation of companies incorporated in China by lowering capitalization requirements, increasing shareholder and creditor protection, improving corporate governance, and relaxing rules regarding the establishment of subsidiaries. Further, the restriction relating to the total investment of a company in other entities exceeding 50% of its net assets has been removed, the incorporation of one shareholder limited liability companies in addition to wholly State-owned enterprises is permitted, and the Chinese Company Law shall apply to foreign invested limited liability companies. Where laws on foreign investment have other stipulations, such stipulations shall apply.

The amendments to the PRC Company Law adopted in December 2013 took effect on March 1, 2014. These amendments cover three aspects: (a) replacing the paid-up capital registration system by subscribed capital registration system; (b) relaxing the requirements for registered capital registration; and (c) streamlining the registration items and requirements for registration documents.

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<u>PRC Laws and Regulations Relating to Foreign Investment</u>

With respect to the establishment and operation of wholly foreign-owned projects, or WFOE, the MOFCOM and NDRC, promulgated the Special Administrative Measures for the Access of Foreign Investment (Negative List) (2024 Version) (the "2024 Negative List") on September 6, 2024, which became effective on November 1, 2024. The 2024 Negative List will replace the Special Administrative Measures for the Access of Foreign Investment (2021 Version) (the "2021 Negative List") and serve as the main basis for management and guidance for the MOFCOM to manage and supervise foreign investments. Those industries not set out on the 2024 Negative List shall be classified as industries permitted for foreign investment. None of our Group's business activities are listed on the 2024 Negative List, nor on the 2021 Negative List. Therefore, the Company is able to conduct its business through its wholly owned PRC Subsidiaries without being subject to restrictions imposed by the foreign investment laws and regulations of the PRC.

The Foreign Investment Law of the People's Republic of China (the "Foreign Investment Law") was adopted by the second meeting of the 13th National People's Congress on March 15, 2019, which became effective on January 1, 2020. On December 26, 2019, the State Council promulgated Regulation for Implementing the Foreign Investment Law of the People's Republic of China (the "Regulation"), which became effective on January 1, 2020.

The Foreign Investment Law and the Regulation apply the administrative system of pre-establishment national treatment plus negative list to foreign investment and clarify the state shall develop a catalogue of industries for encouraging foreign investment to specify the industries, fields, and regions where foreign investors are encouraged and directed to invest, which refers to the Catalogue of Industries for Guiding Foreign Investment Industries (amended in 2020) (the "Catalogue"). Specifically, the special administrative measures to be implemented are the restricted and prohibited industry categories as well as encouraged industry categories having shareholding and executive management requirements prescribed in the Catalogue (the Special Administrative Measures for the Access of Foreign Investment specified in the Catalogue was replaced by the 2020 Negative List, and the Catalogue of Industries for Encouraged Foreign Investment specified in the Catalogue was replaced by the Catalogue of Industries for Encouraged Foreign Investment (2020 Version).

<u>Labor Law</u>

Pursuant to the Labor Law of the PRC promulgated by Standing Committee of the NPC on July 5, 1994 and was subsequently amended on August 27, 2009, the Labor Contract Law of the PRC promulgated by Standing Committee of the NPC on June 29, 2007 and was subsequently amended on December 28, 2012 and the Labor Contract Law Implementation Rules of the PRC promulgated by the State Council on September 18, 2008, companies must enter into employment contracts with their employees, based on the principles of equality, consent and agreement through consultation. Companies must establish and effectively implement system of ensuring occupational safety and health, educating employees on occupational safety and health, preventing work-related accidents and reducing occupational hazards. Companies must also pay for their employees' social insurance premium.

<u>Social Insurance Law</u>

Employers in China are required to contribute, on behalf of their employees, to a number of social security funds, including funds for basic pension insurance, unemployment insurance, basic medical insurance, work-related injury insurance, maternity insurance, and housing provident funds. These payments are made to local administrative authorities and an employer who fails to contribute may be fined and be ordered to make-up for the missed contributions. The various laws and regulations that govern the employers' obligation to contribute to the social security funds include PRC Social Insurance Law promulgated by the Standing Committee of the NPC on October 28, 2010 and became effective July 1, 2011; the Interim Regulations on the Collection and Payment of Social Security Funds, which were promulgated by the State Council and became effective on January 22, 1999; the Interim Measures concerning the Maternity Insurance, which were promulgated by the Ministry of Labor on December 14, 1994 and became effective on January 1, 1995; the Regulations on Occupational Injury Insurance, which were promulgated by the State Council on April 27, 2003 and became effective on January 1, 2004 and was amended on December 20, 2010; the Regulations on Management of the Housing Provident Fund, which were promulgated and became effective on April 3, 1999 and was amended on March 24, 2002.

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Where the enterprises fail to pay the full amount of the social insurance premiums, the relevant department aforesaid has the authority to check and decide on the amount of social insurance premiums that the enterprises should pay as the supplementary payment. If the enterprises do not pay for the social insurance premiums after the relevant department has charged the full amount of the supplementary payment, the relevant department is authorized to either inquire about the deposit account of such enterprises, or apply to the related department at or above the county level for making the decision of the allocation of social insurance premiums. The relevant department can also inform the bank or other financial institution to execute the allocation by written notice. If the amount of the deposit account is smaller than the amount of social insurance premiums required to pay by the enterprises, the enterprises may provide a security and delay the date to pay the social insurance premiums. If the amount of the deposit account is smaller than the amount of the social insurance premiums needed to pay by the enterprises, and the enterprises fails to provide a security, the relevant department shall apply to the court for the levying, sealing and auctioning of the property of such enterprises.

If the enterprises do not pay the full amount of social insurance premiums as scheduled, the social insurance premium collection institution shall order them to make the payment or make up the difference within a stipulated period and impose a daily fine equivalent to 0.05% of the overdue payment from the date on which the payment is overdue. If payment is not made within the stipulated period, the relevant administration department shall impose a fine from one to three times the amount of overdue payment.

**Corporate Information**

Our principal executive offices are located at 250 Park Avenue, 7th Floor, New York, NY 10177. Our telephone number at that address is +1 516-951-9074. Our company website is https://pavs.ai.

**C. Organizational structure**

See "Item 4. A. History and Development of the Company."

**D. Property, Plants and Equipment**

Information regarding our property, plants and equipment is described under the caption "Item 4. B. Business Overview."

**ITEM 4A. UNRESOLVED STAFF COMMENTS**

Not required.

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**ITEM 5. OPERATING AND FINANCIAL REVIEW AND PROSPECTS**

*The following discussion and analysis of our financial condition and results of operations should be read in conjunction with our consolidated financial statements and related notes that appear in this annual report. In addition to historical consolidated financial information, the following discussion contains forward-looking statements that reflect our plans, estimates, and beliefs. These forward-looking statements can be identified by the use of words such as "believes," "estimates," "could," "possibly," "probably," anticipates," "projects," "expects," "may," "will," or "should" or other variations or similar words. No assurances can be given that the future results anticipated by the forward-looking statements will be achieved. Forward-looking statements reflect management's current expectations and are inherently uncertain. Our actual results could differ materially from those discussed in the forward-looking statements. Factors that could cause or contribute to these differences include those discussed below and elsewhere in this annual report, particularly in "Item 3. Key Information—D. Risk Factors." All amounts included herein with respect to the fiscal years ended March 31, 2025, 2024, and 2023 are derived from our audited consolidated financial statements included elsewhere in this annual report. The audited consolidated financial statements for the fiscal years ended March 31, 2025, 2024, and 2023 have been prepared in accordance with U.S. Generally Accepted Accounting Principles, or US GAAP.*

**Overview**

We are a holding company incorporated in Cayman Islands with no material operations of our own. Currently, our operation is conducted through our wholly owned subsidiaries: 2Lab3 and Bomie Wookoo Inc in the U.S. Historically, through our operating subsidiaries in the PRC, we engaged in the (i) nutraceutical and dietary supplements business (divested in August 2023), (ii) e-commerce business (suspended in September 2023), (iii) internet information and advertising business (suspended in September 2023) and (iv) automobile sale business (divested in July 2024).

In March 2025, we consummated an acquisition of 51% of Bomie Wookoo Inc in March 2025. Through this acquisition, we now engage in the e-commerce business on TikTok as well as providing e-commerce solutions to customers. BW generates revenue through multiple channels, including product sales on its own TikTok Shops, collaborative sales with key opinion leaders (KOLs) often supported by advertising, and direct B2B sales. In addition, BW earns service-based fees by providing e-commerce enablement solutions such as livestreaming operations, influencer engagement, and ad placement for third-party merchants.

On March 28, 2023, we closed an acquisition of 100% membership interests of 2lab3. 2lab3 is a Los Angeles-based company engaged in the business of developing AI-powered applications.

In summary, we generated a revenue and had net loss of $71,542 and $8,305,429, respectively, for the year ended March 31, 2025, representing an increase of $71,542 or 100.00% and decrease of $1,621,895 or 16.34% respectively, compared with the fiscal year ended March 31, 2024, during which we generated revenue and had net loss of $0 and $9,927,324, respectively. We incurred our net loss from continuing operations of $7,002,647 and net loss from discontinued operations of $1,302,782 for the year ended March 31, 2025. We incurred a net loss of $9,927,324 for the year ended March 31, 2024, representing a decrease of $62,259,792 or 86.25%, compared with the fiscal year ended March 31, 2023, during which we incurred net loss of $72,187,116.

**Critical Accounting Policies**

We believe it is helpful to investors to understand the critical accounting policies underlying our financial statements and the following discussion of our company's financial condition and results of operations.

**Use of Estimates**&nbsp;&nbsp;&nbsp;&nbsp;

In preparing the consolidated financial statements in conformity with US GAAP, management makes estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. These estimates are based on information as of the date of the consolidated financial statements. Significant estimates required to be made by management include, but are not limited to, the valuation of accounts receivable and related allowance for doubtful accounts, useful lives of property, plant and equipment, net and intangible assets, the recoverability of long-lived assets, inventory reserve, allowance for credit losses, goodwill impairment, income taxes related to realization of deferred tax assets and uncertain tax position, provisions necessary for contingent liabilities and purchase price allocation in connection with the business combination. The current economic environment has increased the degrees of uncertainty inherent in those estimates and assumptions, actual results could differ from those estimates.

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***Accounts Receivable***

Accounts receivable, net are recognized and carried at original invoiced amount less an estimated allowance for uncollectible accounts. The Company determines the adequacy of reserves for doubtful accounts based on individual account analysis and historical collection trends. The Company establishes a provision for doubtful receivables when there is objective evidence that the Company may not be able to collect amounts due. The allowance is based on management's best estimates of specific losses on individual exposures, as well as a provision on historical trends of collections. Based on management of customers' credit and ongoing relationship, management makes conclusions whether any balances outstanding at the end of the period will be deemed uncollectible on an individual basis and on aging analysis basis. The provision is recorded against accounts receivables balances, with a corresponding charge recorded in the consolidated statements of income and comprehensive income. Delinquent account balances are written-off against the allowance for doubtful accounts after management has determined that the likelihood of collection is not probable.

***Business combination***

Business combinations are recorded using the acquisition method of accounting. The assets acquired, the liabilities assumed, and any non-controlling interests of the acquiree at the acquisition date, if any, are measured at their fair values as of the acquisition date. Goodwill is recognized and measured as the excess of the total consideration transferred plus the fair value of any non-controlling interest of the acquiree and fair value of previously held equity interest in the acquiree, if any, at the acquisition date over the fair values of the identifiable net assets acquired. Common forms of the consideration made in acquisitions include cash and common equity instruments. Consideration transferred in a business acquisition is measured at the fair value as of the date of acquisition. Acquisition-related expenses and restructuring costs are expensed as incurred.

Accounting Standards Codification ("ASC") 805 establishes a measurement period to provide the Company with a reasonable amount of time to obtain the information necessary to identify and measure various items in a business combination and cannot extend beyond one year from the acquisition date.

***Goodwill***

Goodwill represents the excess of the purchase price over the fair value of the identifiable assets and liabilities acquired in a business combination.

Goodwill is not depreciated or amortized but is tested for impairment on an annual basis as of March 31, and in between annual tests when an event occurs or circumstances change that could indicate that the asset might be impaired. In accordance with the FASB ASC 350 guidance on "Testing of Goodwill for Impairment", a company first has the option to assess qualitative factors to determine whether it is more likely than not that the fair value of a reporting unit is less than its carrying amount. If the company decides, as a result of its qualitative assessment, that it is more likely than not that the fair value of a reporting unit is less than its carrying amount, the quantitative impairment test is mandatory. Otherwise, no further testing is required. The quantitative impairment test consists of a comparison of the fair value of each reporting unit with its carrying amount, including goodwill. If the carrying amount of each reporting unit exceeds its fair value, an impairment loss equal to the difference between the fair value of the reporting unit and the carrying amount will be recorded. Application of a goodwill impairment test requires significant management judgment, including the identification of reporting units, assigning assets and liabilities to reporting units, assigning goodwill to reporting units, and determining the fair value of each reporting unit. The judgment in estimating the fair value of reporting units includes estimating future cash flows, determining appropriate discount rates and making other assumptions. Changes in these estimates and assumptions could materially affect the determination of fair value for each reporting unit.

As of March 31, 2025, goodwill resulting from business acquisitions has two reporting units, including BW and 2Lab3. The Company evaluates whether there are indicators of goodwill impairment on quarterly basis and performs the annual goodwill impairment assessment as of March 31. As of March 31, 2025, the Company qualitatively assessed relevant events and circumstances, including macroeconomics conditions, industry and market considerations, its overall financial performance, and concluded by weighing all these factors in their entirety that it was more likely than not the fair value of the Company's reporting unit was lower than its respective carrying value.

**Impairment of Long-lived Assets other than goodwill**

The Company reviews long-lived assets, including definite-lived intangible assets, for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. If the estimated cash flows from the use of the asset and its eventual disposition are below the asset's carrying value, then the asset is deemed to be impaired and written down to its fair value. The Company recorded impairment of intangible asset amounted to $1,108,333 as of March 31, 2025 and there were no impairments of these assets as of March 31, 2024.

***Discontinued operations***

In accordance with ASC 205-20, Reporting Discontinued Operations and Disclosures of Disposals of Components of an Entity, a disposal of a component of an entity or a group of components of an entity is required to be reported as a discontinued operation if the disposal represents a strategic shift that has (or will have) a major effect on an entity's operations and financial results when the components of an entity meets the criteria in paragraph 205-20-45-1E to be classified as held for sale. When all of the criteria to be classified as held for sale are met, including management, having the authority to approve the action, commits to a plan to sell the entity, the major current assets, other assets, current liabilities, and non-current liabilities shall be reported as components of total assets and liabilities separate from those balances of the continuing operations. At the same time, the results of all discontinued operations, less applicable income taxes (benefit), shall be reported as components of net income (loss) separate from the net income (loss) of continuing operations in accordance with ASC 205-20-45.

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***Revenue Recognition***

For the last three fiscal years, the Company generated its revenue mainly from sales of healthcare products, automobiles, online store sales and internet information and advertising services.

The core principle of the guidance is that an entity should recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. Revenue is the transaction price the Company expects to be entitled to in exchange for the promised services in a contract in the ordinary course of the Company's activities and is recorded net of value-added tax ("VAT"). To achieve that core principle, the Company applies the following steps:

Step 1: Identify the contract (s) with a customer

Step 2: Identify the performance obligations in the contract

Step 3: Determine the transaction price

Step 4: Allocate the transaction price to the performance obligations in the contract

Step 5: Recognize revenue when (or as) the entity satisfies a performance obligation

No practical expedients were used when adoption ASC 606. Revenue recognition policies for each type of revenue stream are as follow:

*Healthcare products*

The Company sold nutraceutical and dietary supplements to third-party distributors and experience stores. Experience stores were owned by third parties, which are located in tourist sites where the sales consultants gave in-depth presentation of the origin, tradition and history of the Company's products. Tourists were guided to enjoy a presentation of traditional Chinese herb culture offered by the distributors in the experience store and be presented with the Company's healthcare products. The Company was a principal for the healthcare product sales as i) the Company produced or obtained control of the specified goods before transferring to the customers; ii) the Company had the right to determine the sales price; iii) the Company bear the risk of inventories and collection of consideration. For all sales, the Company requires a signed contract and sales order, which specifies pricing, quantity and product specifications. Under ASC 606, the Company recognized revenue upon the satisfaction of its performance obligation, which is to transfer the control of the promised products to customers in an amount that reflects the consideration to which the Company expected to be entitled to in exchange for those products, excluding amounts collected on behalf of third parties (e.g., value-added taxes). The transfer of control of the products is satisfied at a point in time, which is the delivery of the products to distributors' or the experience stores' premises and evidenced by signed acknowledgment. The selling price, which is specified in the signed sales orders, is fixed. The Company had unconditional right to receive full payment of the sales price, upon the delivery of the products to distributors or experience stores and the signing of their acknowledgment. Distributors and experience stores were required to pay under the customary payment terms, which is generally less than six months. According to the sales agreement, the healthcare product sold cannot be returned after the acknowledgement.

*Automobile*

The Company sold automobiles in fiscal year 2022. For all sales, the Company required a signed contract and sales order, which specifies pricing, quantity and product specifications. The Company was a principal for the automobiles sales as i) the Company produce or obtain control of the specified goods before transferring to the customers; ii) the Company has the right to determine the sales price; iii) the Company bear the risk of inventories and collection of consideration. Under ASC 606, the Company recognized revenue upon the satisfaction of its performance obligation, which is to transfer the control of the promised products to customers in an amount that reflects the consideration to which the Company expects to be entitled to in exchange for those products, excluding amounts collected on behalf of third parties (e.g., value-added taxes). The transfer of control of the products is satisfied at a point in time, which is the delivery of the products to customers' premises and evidenced by signed customer acknowledgment. According to the contract, the automobile sold cannot be returned after the customer acknowledgement. The selling price, which was specified in the signed sales orders, is fixed. The Company had unconditional right to receive full payment of the sales price, upon the delivery of the products to customers and the signing of the customer acknowledgment, which is within 3 months after sales.

*Online store*

The Company sold various goods through its online store business in fiscal year 2022. For all sales, the Company required a sales order generated by the online store platform, which specifies pricing, quantity and product specifications. The Company was a principal for the online store sales as i) the Company produced or obtained control of the specified goods before transferring to the customers; ii) the Company had the right to determine the sales price; iii) the Company bear the risk of inventories and collection of consideration. Under ASC 606, the Company recognized revenue upon the satisfaction of its performance obligation, which is to transfer the control of the promised products to customers in an amount that reflects the consideration to which the Company expected to be entitled to in exchange for those products, excluding amounts collected on behalf of third parties (e.g., value-added taxes). The transfer of control of the products is satisfied at a point in time, which is the delivery of the products to customers' premises and evidenced by signed customer acknowledgment. The selling price, which is specified in the signed sales orders, is fixed. The Company had unconditional right to receive full payment of the sales price, upon the delivery of the products to customers and the signing of the customer acknowledgment unless the customers require sales return within 7 days after the acknowledgement. Customers were required to pay to the third-party platform before the goods were send out and the Company would receive the amount from the third-party platform after the customer sign off the acceptance form on the platform.

*Internet information and advertising service*

The Company provideed internet information and advertising services online. For all sales, the Company required a signed contract and sales order, which specifies the price and service range. The Company is a principal for the services as i) the Company had the right to determine the sales price; ii) the Company bear the collection risks; iii) the Company was responsible to the service provided. Under ASC 606, the Company recognized revenue upon the satisfaction of its performance obligation, which is to provide specified information and advertising service to customers in an amount that reflects the consideration to which the Company expected to be entitled to in exchange for those services, excluding amounts collected on behalf of third parties (e.g., value-added taxes). The information and advertising service provided was satisfied at a point in time, which is the time when the information and advertising service is performed. No sales return is permitted after the service performed according to the contract signed. The selling price per click, which was specified in the signed sales orders, is fixed. The Company had unconditional right to receive full payment of the sales price, upon the completion of the service. Customers were required to pay to the Company in advance according to the contract.

All of the Company's revenues from contracts with customers represent products transferred at a point in time as control is transferred to the customer and are generated in PRC. All of the Company's revenues are recognized on a gross basis and presented as revenue on the consolidated statements of operations and comprehensive income/(loss).

The following table presents an overview of our sales from our product lines for the years ended March 31, 2025, 2024 and 2023:

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|  | **For the years ended March 31,** | **For the years ended March 31,** | **For the years ended March 31,** |
|  | **2025** | **2024** | **2023** |
| Internet information and advertising service | $71542 | $- | $- |
| **Revenue** | $**71542** | $**-** | $**-** |

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***Foreign Currency Translation***&nbsp;&nbsp;&nbsp;&nbsp;

The Company and its subsidiaries' principal country of operations is the PRC. The Company maintained its financial record using the United States dollar ("US dollar") as the functional currency, while the subsidiaries of the Company in Hong Kong and mainland China maintained their financial records using RMB as the functional currencies. The consolidated statements of operation and other comprehensive income (loss) and cash flows denominated in foreign currency are translated at the average rate of exchange during the reporting period. Assets and liabilities denominated in foreign currencies at the balance sheet date are translated at the applicable rates of exchange in effect at that date. The equity denominated in the functional currency is translated at the historical rate of exchange at the time of capital contribution. Because cash flows are translated based on the average rate of exchange, amounts related to assets and liabilities reported on the consolidated statements of cash flows will not necessarily agree with changes in the corresponding balances on the consolidated balance sheets. Translation adjustments arising from the use of different exchange rates from period to period are included as a separate component of accumulated other comprehensive income (loss) included in consolidated statements of changes in shareholders' equity. Gains and losses from foreign currency transactions are included in the consolidated statement of comprehensive income (loss).

The value of RMB against US$ and other currencies may fluctuate and is affected by, among other things, changes in the PRC's political and economic conditions. Any significant revaluation of RMB may materially affect the Company's financial condition in terms of US$ reporting. The following table outlines the currency exchange rates that were used in creating the consolidated financial statements in this report:

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|  | **March 31,** <br>**2025** | **March 31,** <br>**2024** | **March 31,**<br>**2023** |
| Period-end spot rate | US$1=RMB 7.1782 | US$1=RMB 7.0950 | US$1=RMB 6.8717 |
| Average rate | US$1=RMB 7.1349 | US$1=RMB 7.1157 | US$1=RMB 6.8855 |

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**A. Operating Results**

***Comparison of Fiscal Years Ended March 31, 202** **5** **, 202** **4** **, and 202** **3***

The following table presents an overview of our results of operations for the years ended March 31, 2025, 2024 and 2023:

(All amounts, other than percentages, in U.S. dollars)

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|  | **For the years ended March 31,** | **For the years ended March 31,** | **For the years ended March 31,** |
|  | **2025** | &nbsp;&nbsp;&nbsp;&nbsp;**2024** | **2023** |
| Revenues | $71542 | $- | $- |
| Cost of revenues | (62526) | - | - |
| **Gross profit** | **9016** | **-** | **-** |
| Operating expenses: |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;Selling and marketing | (1445) | (94) | (911111) |
| &nbsp;&nbsp;&nbsp;&nbsp;General and administrative | (2306613) | (2462001) | (3091478) |
| &nbsp;&nbsp;&nbsp;&nbsp;Goodwill impairment | (3376186) | (1807848) |  |
| &nbsp;&nbsp;&nbsp;&nbsp;Intangible asset impairment | (1108333) | - | - |
| **Total operating expenses** | **(6792577)** | **(4269943)** | **(4002589)** |
| **Operating loss** | **(6783561)** | **(4269943)** | **(4002589)** |
| Other income (expenses): |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;Interest income | 156 |  | 1 |
| &nbsp;&nbsp;&nbsp;&nbsp;Interest expense | (261854) | (39167) |  |
| &nbsp;&nbsp;&nbsp;&nbsp;Other income, net | 42612 | 19915 | (277288) |
| **Total other expenses, net** | **(219086)** | **(19252)** | **(277287)** |
| **Loss from continuing operations before income taxes** | **(7002647)** | **(4289195)** | **(4279876)** |
| Income tax expenses | - | - | - |
| Net loss from continuing operations | $(7002647) | $(4289195) | $(4279876) |
| Net loss from discontinued operations before tax | (935559) | (13185557) | (67907240) |
| (Loss) Gain on disposal of discontinued operations | (367223) | 7547428 | - |
| Net loss from discontinued operations | (1302782) | (5638129) | (67907240) |
| **Net loss** | **(8305429)** | **(9927324)** | **(72187116)** |

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<u>*Year Ended March 31, 2025 Compared to Year Ended March 31, 2024*</u>

***Revenues***

We generated $71,542 in revenues for the fiscal year ended March 31, 2025, representing an increase of $71,542 or 100.00%, as compared with $0 for the fiscal year ended March 31, 2024. The increase was primarily due to the increase of the revenues generated from the internet information and advertising service business.

Since we have disposed the nutraceutical and dietary supplement, e-commerce business in September 2023 and disposed the automobiles sales business and July 2024, the revenue generated from the nutraceutical and dietary supplement, e-commerce and automobile sales was reclassified into the net income (loss) from discontinued operations account.

Beginning in April 2025, we have gradually shifted toward the development of e-commerce marketing services and e-commerce solutions to customers that would like to establish a presence on TikTok.

***Cost of Revenues***

Total cost of revenues was $62,526 for the fiscal year ended March 31, 2025, representing a increase of $62,526 or 10.00%, compared with $0 for the fiscal year ended March 31, 2024. The gross margin ratio of us was 12.60% for the fiscal year ended March 31, 2025.

***Selling and Marketing Expenses***

We incurred $1,445 in selling and marketing expenses for the fiscal year ended March 31, 2025, representing an increase of $1,351 or 1,437.23%, compared with $94 for the fiscal year ended March 31, 2024. Selling and marketing expenses remained stable in fiscal 2025 compared to fiscal 2024.

***General and Administrative Expenses***

We incurred $2,306,613 in general and administrative expenses for the fiscal year ended March 31, 2025, representing a decrease of $155,388 or 6.31%, compared with $2,462,001 for the fiscal year ended March 31, 2024. The decrease was primarily attributable to the decreased headcount and service fee result from the business strategy structure optimization.

***Goodwill impairment***

We recognized $3,376,186 in goodwill impairment for the fiscal year ended March 31, 2025, representing an increase of $1,568,338 or 86.75%, compared with $1,807,848 for the fiscal year ended March 31, 2024. The increase was primarily due to failure to reach the projected performance of the AI-powered application developed by 2lab3. We have assessed and recorded the goodwill impairment of acquired 2lab3 amounted to $3,376,186 as of March 31, 2025.

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***Intangible asset impairment***

We recognized $1,108,333 in intangible asset impairment for the fiscal year ended March 31, 2025, representing a increase of $1,108,333 or 100.00%, compared with $0 for the fiscal year ended March 31, 2024. The increase was primarily due to failure to reach the projected performance. We have assessed and recorded the intangible asset impairment of acquired 2lab3 amounted to $1,108,333 as of March 31, 2025.

***Operating loss***

As a result of the factors described above, our operating loss was $6,783,561 for the fiscal year ended March 31, 2025, compared with operating loss of $4,269,943 for the fiscal year ended March 31, 2024, increased by $2,513,618 or 58.87%. The increase was primarily due to the impairment of goodwill and intangible asset recorded for 2lab3.

***Interest income***

Our interest income of $156 for the fiscal year ended March 31, 2025 increased by $156 or 100.00%, compared with interest income of $0 for the fiscal year ended March 31, 2024. The interest income was stable during the two years of ended March 31, 2025.

***Interest expense***

Our interest expense of $261,854 for the fiscal year ended March 31, 2025 increased by $222,687 or 568.56%, compared with interest expense of $39,167 for the fiscal year ended March 31, 2024. The increase was mainly due to the increase of an unsecured loan payable to the related party, bearing a fixed interest rate of 8%.

***Other Income***

Our other income of $42,612 for the fiscal year ended March 31, 2025 increased by $22,697 or 113.97% compared with other income of $19,915 for the fiscal year ended March 31, 2024. The increase was primarily attribute to the foreign exchange gain of $45,556, offset by non-operating expenses of $2,944 for the fiscal year ended March 31, 2025.

***Net loss from continuing operations***

Our net loss from continuing operations for the fiscal year ended March 31, 2025 was $7,002,647, representing an increase of $2,713,452 or 63.26%, compared with net loss from continuing operations of $4,289,195 for the fiscal year ended March 31, 2024. The increasing was primarily attribute to the goodwill impairment recorded for 2lab3.

***Net loss from discontinued operations***

Our net loss from discontinued operations for the fiscal year ended March 31, 2025 was $1,302,782, representing an decrease of $4,335,347, compared with net loss from discontinued operations of $5,638,129 for the fiscal year ended March 31, 2024. This reduction was primarily attributable to the fact that the divested automobile sales business in 2025 accounted for a smaller proportion of our total operations than the discontinued operation nutraceutical and dietary supplements (healthcare products), e-commerce, internet information and advertising business in 2024.

On July 5, 2024, we sold all of the equity interests of Happiness Hong Kong with its automobile sales business for approximately HK$10,000 as consideration. Beginning on July 7, 2024, we no longer retained any financial interest over automobile sales business and accordingly deconsolidated this business' financial statements from our consolidated financial statements and accordingly deconsolidated automobile sales business' financial statements from our consolidated financial statements.

***Net loss***

As a result of the factors described above, our net loss for the fiscal year ended March 31, 2025 was $8,305,429, representing an decrease of $1,621,895 or 16.34%, compared with net loss of $9,927,324 for the fiscal year ended March 31, 2024.

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<u>*Year Ended March 31, 2024 Compared to Year Ended March 31, 2023*</u>

***Selling and Marketing Expenses***

We incurred $94 in selling and marketing expenses for the fiscal year ended March 31, 2024, representing a decrease of $911,017 or 99.99%, compared with $911,111 for the fiscal year ended March 31, 2023. The decrease was primarily due to the decreased advertising costs, and network flow fee.

***General and Administrative Expenses***

We incurred $2,462,001 in general and administrative expenses for the fiscal year ended March 31, 2024, representing a decrease of $629,477 or 20.36%, compared with $3,091,478 for the fiscal year ended March 31, 2023. The decrease was primarily attributable to the decreased headcount and service fee result from the business strategy structure optimization.

***Goodwill impairment***

We recognized $1,807,848 in goodwill impairment for the fiscal year ended March 31, 2024, representing a increase of $1,807,848 or 100.00%, compared with $0 for the fiscal year ended March 31, 2023. The increase was primarily due to failure to reach the projected performance. We have assessed and recorded the goodwill impairment of 2lab3 amounted to $1,807,848 as of March 31, 2024.

***Operat** **ing loss***

As a result of the factors described above, our operating loss was $4,269,943 for the fiscal year ended March 31, 2024, compared with operating loss of $4,002,589 for the fiscal year ended March 31, 2023, increased by $267,354. The increasing was primarily attribute to the goodwill impairment recorded for 2lab3.

***Interest expense***

Our interest expense of $39,167 for the fiscal year ended March 31, 2024 increased by $39,167 or 100.00%, compared with interest expense of $0 for the fiscal year ended March 31, 2023. The increase was mainly due to the increase of an unsecured loan payable to the third party, bearing a fixed interest rate of 8%.

***Other Income** **, net***

Our other income of $19,915 for the fiscal year ended March 31, 2024 increased by $297,203 or 107.18% compared with other expense of $277,288 for the fiscal year ended March 31, 2023. The increase was primarily due to the higher amount of the disposal of equipment and exchange gain for the fiscal year ended March 31, 2023.

***Net loss from continuing operations***

Our net loss from continuing operations for the fiscal year ended March 31, 2024 was $4,289,195, representing an increase of $9,319, compared with net loss from continuing operations of $4,279,876 for the fiscal year ended March 31, 2023. Net loss from continuing operations remained relatively unchanged between the two fiscal years.

***Net loss from discontinued operations***

Our net loss from discontinued operations for the fiscal year ended March 31, 2024 was $5,638,129, representing an decrease of $62,269,111, compared with net loss from discontinued operations of $67,907,240 for the fiscal year ended March 31, 2023. The decreasing was primarily due to the reason that we generated $7,547,428 in gain on disposal of discontinued operations for the fiscal year ended March 31, 2024 by sale of the business of the nutraceutical and dietary supplements (healthcare products), e-commerce, internet information and advertising with cash consideration of $11,664,348 received for the fiscal year ended March 31, 2024. It also having positive influence of the business strategy structure optimization of the businesses of the nutraceutical and dietary supplements (healthcare products), e-commerce, internet information and advertising for the fiscal year ended March 31, 2024 and 2023.

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***Net loss***

As a result of the factors described above, our net loss for the fiscal year ended March 31, 2024 was $9,927,324, representing a decrease of $62,259,792, compared with net loss of $72,187,116 for the fiscal year ended March 31, 2023 as a result of the termination of the discontinued operations.

**B. Liquidity and Capital Resources**

The following table presents an overview of cash flows for the periods indicated:

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| | | | |
|:---|:---|:---|:---|
|  | **For the years ended March 31,** | **For the years ended March 31,** | **For the years ended March 31,** |
|  | **2025** | **2024** | **2023** |
| Net cash used in operating activities | $(2669456) | $(13105978) | $(20705496) |
| Net cash (used in) provided by investing activities | (27046341) | 11698379 | 89322 |
| Net cash provided by financing activities | 29006249 |  | 3145524 |
| Effect of exchange rate changes on cash and cash equivalents | 26661 | (1003646) | 1092526 |
| Net decrease in cash and cash equivalents | $(682887) | $(2411245) | $(16378124) |

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As of March 31, 2025, 2024 and 2023, we had cash and cash equivalents of $261,355, $341,779 and $1,522,292, respectively. We had short-term investments of $4,758,797 as of March 31, 2025 and we did not had any other short-term investments as of March 31, 2024. As of March 31, 2025 and 2024, our current assets were approximately $7.19 million and $2.85 million, respectively, and our current liabilities were approximately $6.40 million and $2.56 million, respectively.

 ***Operating Activities***

Net cash used in operating activities for the year ended March 31, 2025 was approximately $2.67 million, which was primarily attributable to a net loss approximately $7.20 million, adjusted for non-cash items for approximately $4.12 million, adjustments for changes in working capital approximately $0.10 million and net cash provided by operating activities from discontinued operations for approximately $0.30 million. Net cash used in operating activities for the year ended March 31, 2024 was approximately $13.11 million, which was primarily attributable to a net loss approximately $9.93 million, adjusted for non-cash items for approximately $5.28 million, adjustments for changes in working capital approximately $1.06 million and net cash provided by operating activities from discontinued operations for approximately $3.16 million. Net cash provided by operating activities for the year ended March 31, 2023 was approximately $20.71 million, which was primarily attributable to a net loss approximately $72.19 million adjusted for non-cash items for approximately $3.01 million, adjustments for changes in working capital approximately $0.01 million and net cash provided by operating activities from discontinued operations for approximately $54.48 million.

The decrease in the year ended March 31, 2025 was mainly due to the business strategy adjustment in loss-making subsidiaries.

***Investing Activities***

Net cash used in investing activities was $27.05 million for the year ended March 31, 2025, and net cash provided by investing activities were $11.70 million and $0.09 million for the year ended March 31, 2024 and 2023, respectively. For the year ended March 31, 2025, the cash used was primarily attributable to the purchase of 51% equity interest in Bomie Wookoo Inc. For the year ended March 31, 2024, the result was mainly generated from the cash consideration from the disposal of the discontinued operation of approximately $11.70 million. For the year ended March 31, 2023, the result was primarily attributable to the disposal of equipment generated from the discontinued subsidiaries.

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***Financing Activities***

Net cash provided by financing activities was approximately $29.01 million, $0 and $3.15 million for the year ended March 31, 2025, 2024 and 2023, respectively. Net cash provided by financing activities from continuing operations for the year ended March 31, 2025 was primarily generated from the proceeds amounted to $27.00 million of the offering of 60,000,000 Class A Ordinary Shares and increase of the amount due to the related party amounted to $1.85 million. Net cash provided by financing activities for the year ended March 31, 2023 was mainly attributable to capital contributions of net proceeds $3.00 million from issuance of new ordinary shares.

**Capital Expenditures**

Our capital expenditures consist primarily of expenditures for the construction of facilities, purchase of fixed assets and intangible assets as a result of our business growth. No capital expenditures was incurred for the years ended March 31, 2025, 2024 and 2023.

**Related Party Transactions**

In addition to the executive officer compensation arrangements discussed in "Executive Compensation," below we describe transactions since April 1, 2024, to which we have been a participant, in which the amount involved in the transactions is material to us or the related party.

On September 30, 2024, we signed a promissory note purchase agreement with Ms. Minzhu Xu, who is the chairperson of the Company's board of directors. Pursuant to the Purchase Agreement, we issued an 8% promissory note with principal amount of $500,000 to Ms. Xu on September 30, 2024, the closing date of this transaction. The Note will mature in 12 months after its issuance and can be pre-paid in part or in whole by us prior to its maturity date.

On May 20, 2024, we signed a promissory note purchase agreement with Ms. Minzhu Xu. Pursuant to the Purchase Agreement, we issued an 8% promissory note with principal amount of $750,000 to Ms. Xu on May 20, 2024, the closing date of this transaction. The Note will mature in 12 months after its issuance and can be pre-paid in part or in whole by us prior to its maturity date.

On January 13, 2025, we signed a promissory note purchase agreement with Ms. Minzhu Xu. Pursuant to the Purchase Agreement, we issued an 8% promissory note with principal amount of $450,000 to Ms. Xu on January 13, 2025. The Note will mature in 12 months after its issuance and can be pre-paid in part or in whole by us prior to its maturity date.

The above-mentioned proceeds from the Note Offering will be used for the general working capital purposes of us.

There was no other material related party transaction as of March 31, 2025 and 2024.

***Future Related Party Transactions***

We will apply all rules about related party transactions as a listing company, and the Corporate Governance Committee of our Board of Directors (consist solely of independent directors) must approve all related party transactions. All related party transactions will be made or entered into on terms that are no less favorable to use than can be obtained from unaffiliated third parties. Related party transactions that we have previously entered into were not approved by independent directors, as we had no independent directors at that time.

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**Holding Company Structure**

We are a holding company with no material operations of our own. We used to conduct our operations through our subsidiaries in China. As a result, our ability to pay dividends depended upon dividends paid by our PRC subsidiaries in previous years.

Currently, our operation is conducted through our wholly owned subsidiaries, 2Lab3 and 51% owned subsidiary, Bomie Wookoo Inc in the United States.

**C. Research and development, patents, and licenses, etc.**

Please refer to Item 4 Subparagraph B "Information on the Company—Business Overview—Research and Development", "Information on the Company—Business Overview— Trademarks, Copyrights, Patents and Domain Names" and "Information on the Company—Business Overview—Licenses, Permits and Government Regulations."

**D. Trend Information**

Other than as disclosed elsewhere in this annual report, we are not aware of any trends, uncertainties, demands, commitments or events that are reasonably likely to have a material effect on our net revenues, income from continuing operations, profitability, liquidity or capital resources, or that would cause reported financial information not necessarily to be indicative of future operating results or financial condition.

**E. Critical Accounting Estimates**

Management makes estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. These estimates are based on information as of the date of the consolidated financial statements. Significant estimates required to be made by management include, but are not limited to, the valuation of accounts receivable and related allowance for doubtful accounts, useful lives of property and equipment and intangible assets, the recoverability of long-lived assets, inventory reserve, goodwill impairment, income taxes related to realization of deferred tax assets and uncertain tax position, provisions necessary for contingent liabilities and contingent consideration. The current economic environment has increased the degrees of uncertainty inherent in those estimates and assumptions, actual results could differ from those estimates.

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**ITEM 6. DIRECTORS, SENIOR MANAGEMENT AND EMPLOYEES**

**A. Directors and Senior Management**

As of the date of this annual report, our directors and executive officers are as follows:

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| | | | |
|:---|:---|:---|:---|
| **Name** | **Age** | **Age** | **Position** |
| Xiaoyue Zhang |  | 37 | Chief Executive Officer, Director |
| Ling Guo  |  | 46 | Chief Financial Officer |
| Minzhu Xu |  | 44 | Chairperson of the Board |
| David Sean Lu |  | 33 | Director |
| Alex Lightman |  | 65 | Director |
| Yijian Xu |  | 61 | Director |

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Below is a summary of the business experience of each of our executive officers and directors:

***Xiaoyue Zhang***

Ms. Xiaoyue Zhang has extensive experience in management. She is the founder of Zeo Creation LLC and has been in charge of its management since January 2019. From July 2019 to December 2023, she was the assistant to the chairman of PX Global Advisors, LLC, where she was responsible for the project management. From August 2020 to January 2022, Ms. Zhang served as a director at Hudson Capital Inc. (now known as Freight Technologies, Inc.). From March 2022 to December 2023, she was the vice president of NY Swap Holding Ltd., where she focused on office management. Ms. Zhang obtained her bachelor's degree in business Japanese from Zhengzhou University in 2011, and her master's degree in marketing from Pace University in 2016.

***Ling Guo***

Ms. Ling Guo was the chief operating officer and a director of Weilock Group Inc. from February 2021 to April 2024. From June 2017 to February 2021, Ms. Guo was the CEO of Shanghai Welive Business Management Consulting Ltd. ("Welive"). From February 2021 to April 2024, she was the CFO and director of Welive. She is experienced in business consulting and management. Ms. Guo obtained her bachelor's degree in telecommunication engineering from University of Science and Technology, Beijing, in May 2002 and her MBA degree from Baruch College of The City University of New York in May 2009, where she pursued a double major in financial investment and public accounting.

***Minzhu Xu***

Ms. Minzhu Xu has extensive experience in advertising, marketing and public relations. She has been a retail investor since November 2022, researching and analyzing market trends and economic indicators to secure investment opportunities to realize financial growth. From April 2018 to October 2022, Ms. Xu was the private equity partner of Hanfor Capital Management Ltd., where she was responsible for identifying and assessing potential investment opportunities. From November 2011 to March 2018, she was the PR director at Fleishman Hillard PR Agency, where she designed annual public relations and communication plan, developed business overview, and controlled the overall progress of projects. From October 2007 to October 2012, she was the PR director at Ogilby and Mather, where she led proposals for new clients' brand promotions, integrated and managed resources to analyze project objective. Ms. Xu obtained her bachelor's degree in history from Nanjing Normal University in 2003. Ms. Xu obtained her master's degree in communication from Peking University in September 2007.

***David Sean Lu***

Mr. David Sean Lu joined our board on October 30, 2022. Mr. David Sean Lu has served as an advisor of Opulous USA LLC since January 2021. Mr. Lu has been the chief strategy officer of OMNYS Pte. Ltd. since April 2020. From July 2016 to July 2021, Mr. Lu was the Partner of Hamilton Pro Management Inc. From April 2018 to October 2020, Mr. Lu was a managing partner at New York- based LYJ Vernon Blvd LLC. From March 2018 to June 2018, Mr. Lu was a partner at Australian blockchain company Block Capital Pte. Ltd. From August 2017 to December 2017, Mr. Lu served as a listing agent for New York City-based apartment rental company Roomeze LLC. Mr. Lu obtained a Bachelor of Business Administration in Finance and Economics from the Pace University Lubin School of Business in December, 2016.

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***Alex Lightman***

Mr. Alex Lightman has served as our independent director since December 15, 2022. Mr. Lightman is an award winning writer, entrepreneur, board member, inventor, and advisor to governments, corporations, and NGOs. Mr. Lightman was the recipient of the first Economist magazine Reader's Award for "the innovation that will most radically change the world in the 2010s" on behalf of 4G wireless broadband. From August 2021 to March 2022, Mr. Lightman served as a director of the board of Tingo, Inc. (OTC Markets: TMNA). Mr. Lightman is the founder of Keemoji Inc. and served as chief executive officer of Keemoji Inc. from 2017 to 2022. Mr. Lightman earned his bachelor's degree in enterprise engineering from the Massachusetts Institute of Technology in 1982 and attended Harvard University with a major in business management from 1982 to 1983.

***George Yijian Xu***

Mr. George Yijian Xu is a certified public accountant licensed in the State of New York. He has been practicing certified public accounting for over 30 years. He has led his accounting firm, George Xu, C.P.A., P.C., to provide financial accounting, audit and tax services to companies in a variety of industries since June 2000. From September 1996 to June 2000, he worked as an accountant and manager at Gobstein, Weigarten & Goldfarb CPA LLP. From September 1992 to August 1996, he worked as an accountant and advisor at Arthur Andersen LLP. He obtained his master's degree in accountancy from The State University of New York at Albany in September 1992. He obtained his bachelor's degree in industrial management from Shanghai University of Engineering Science in 1986 in China.

***Board Diversity***

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| | | | | |
|:---|:---|:---|:---|:---|
| **Board Diversity Matrix** | **Board Diversity Matrix** | **Board Diversity Matrix** | **Board Diversity Matrix** | **Board Diversity Matrix** |
| Country of Principal Executive Offices: | China | China | China | China |
| Foreign Private Issuer | Yes | Yes | Yes | Yes |
| Disclosure Prohibited under Home Country Law | No | No | No | No |
| Total Number of Directors | 5 | 5 | 5 | 5 |
|  | **Female** | **Male** | **Non-** <br>**Binary** | **Did Not**<br>**Disclose**<br>**Gender** |
| **Part I: Gender Identity** |  |  |  |  |
| Directors | 2 | 3 | 0 | 0 |
| **Part II: Demographic Background** |  |  |  |  |
| Underrepresented Individual in Home Country Jurisdiction | 0 | 0 | 0 | 0 |
| LGBTQ+ | 0 | 0 | 0 | 0 |
| Did Not Disclose Demographic Background | 0 | 0 | 0 | 0 |

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***Employment Agreements with Senior Management***

On April 29, 2024, we entered into an employment agreement with our CEO, Xiaoyue Zhang, effective on the same day. Pursuant to such agreement, Ms. Zhang shall receive an annual base salary of $150,000 in cash, paid in periodic installments in accordance with the Company's regular payroll practices, and $150,000 worth of Class A ordinary shares of the Company, par value $0.01 per share pro-rated over twelve (12)-month period , payable on December 31 each year. Such compensation is subject to annual review and adjustment by the Board.. Ms. Zhang is also eligible for bonus, benefits and reasonable expenses reimbursement.

Under this employment agreement, Ms. Zhang is employed as our CEO for a term of one year, which automatically renews for additional one-year terms unless terminated earlier pursuant to the terms of the employment agreement. We may terminate the employment for cause, at any time, without notice or remuneration, for certain acts of the executive officer, such as conviction or plea of guilty to a felony or grossly negligent or dishonest acts to our detriment, or misconduct or a failure to perform agreed duties. In such case, the executive officer will not be entitled to receive payment of any severance benefits or other amounts by reason of the termination, and the executive officer's right to all other benefits will terminate, except as required by any applicable law. We may also terminate an executive officer's employment without cause upon one-month advance written notice. In such case of termination by us, we are required to provide compensation to the executive officer, including (1) a lump sum cash payment equal to 1 months of the Ms. Zhang's base salary as of the date of such termination; (2) a lump sum cash payment equal to a pro-rated amount of her target annual bonus for the year immediately preceding the termination, if any; (3) payment of premiums for continued health benefits under the Company's health plans for 12 months fo1lowing the termination, if any; and (4) immediate vesting of 100% of the then-unvested portion of any outstanding equity awards held by Ms. Zhang.

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***Employment Agreement with Ling Guo***

On April 29, 2024, we entered into an employment agreement with our CFO, Ms. Ling Guo, effective on the same day. Pursuant to such agreement, she shall receive an annual base salary of $27,000 in cash, paid in periodic installments in accordance with the Company's regular payroll practices, and $27,000 worth of Class A ordinary shares of the Company, par value $0.01 per share pro-rated over twelve (12)-month period, payable on December 31 each year. Such compensation is subject to annual review and adjustment by the Board. Ms. Guo is also eligible for bonus, benefits and reasonable expenses reimbursement.

Under this employment agreement, Ms. Guo is employed as our CFO for a term of one year, which automatically renews for additional one year terms unless terminated earlier pursuant to the terms of this Agreement. We may terminate the employment for cause, at any time, without notice or remuneration, for certain acts of the executive officer, such as conviction or plea of guilty to a felony or grossly negligent or dishonest acts to our detriment, or misconduct or a failure to perform agreed duties. In such case, the executive officer will not be entitled to receive payment of any severance benefits or other amounts by reason of the termination, and the executive officer's right to all other benefits will terminate, except as required by any applicable law. We may also terminate an executive officer's employment without cause upon one-month advance written notice. In such case of termination by us, we are required to provide compensation to the executive officer, including (1) a lump sum cash payment equal to 1 months of the Ms. Guo's base salary as of the date of such termination; (2) a lump sum cash payment equal to a pro-rated amount of her target annual bonus for the year immediately preceding the termination, if any; (3) payment of premiums for continued health benefits under the Company's health plans for 12 months fo1lowing the termination, if any; and (4) immediate vesting of 100% of the then-unvested portion of any outstanding equity awards held by Ms. Guo.

On May 1, 2025, compensation committee of the board of the Company proposed, approved and ratified an adjustment to Ms. Guo's compensation for her services as the CFO of the Company. As a result, effective on May 1, 2025, Ms. Guo's annual base salary was increased from $27,000 in cash and $27,000 in Class A ordinary shares of the Company, par value $0.01 per share to $150,000 in cash, to be paid in periodic installments in accordance with the Company's regular payroll practices, and $50,000 in Class A ordinary shares, pro-rated over twelve (12)-month period. Such compensation of shares will be payable on December 31 each year.

**B. Compensation**

***Directors and Executive Compensation***

The following table represents compensation earned by our executive officers in the fiscal year ended March 31, 2025:

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| | | | | | | |
|:---|:---|:---|:---|:---|:---|:---|
| **Name and Principal Position** | **Salary**<br>**($)** | **Bonus**<br>**($)** | **Stock**<br>**Awards**<br>**($)** | **Option**<br>**Award**<br>**($)** | **Other**<br>**Compensation**<br>**($)** | **Total**<br>**($)** |
| Xiaoyue Zhang (CEO and Director) | 150000 |  |  |  |  | 150000 |
| Ling Guo (CFO) | 27000 |  |  |  |  | 27000 |
| Minzhu Xu (Chairperson) |  |  |  |  |  |  |
| David Sean Lu (Director) | 25000 |  |  |  |  | 25000 |
| Alex Lightman (Director) | 12500 |  |  |  |  | 12500 |
| Yijian Xu (Director) | 50000 |  |  |  |  | 50000 |
| John Levy (Former Director)<sup>(1)</sup> |  |  |  |  |  |  |
| Xuezhu Wang (Former CEO and Chairman)<sup>(2)</sup> |  |  |  |  |  |  |
| Sophie Ye Tao (Former CFO and Director) <sup>(3)</sup> |  |  |  |  |  |  |

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(1) John Levy resigned as a director of the Company on May 15, 2024.

(2) Xuezhu Wang resigned as the Chief Executive Officer of the Company, the chairman and a director of the board on April 29, 2024.

(3) Sephie Ye Tao resigned as the Chief Financial Officer and a director on April 29, 2024.

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***Grants of Plan Based Awards***

From April 1, 2021 through the date of this annual report, we have issued a total of 1,478,103 Class A Ordinary Shares to employees, directors and consultants.

***Pension Benefits***

None of the named executives currently participates in or has account balances in qualified or nonqualified defined benefit plans sponsored by us.

***Nonqualified Deferred Compensation***

None of the named executives currently participates in or has account balances in nonqualified defined contribution plans or other deferred compensation plans maintained by us.

Other than as disclosed above, we have not entered into any agreements or arrangements with our executive officers or directors, and have not made any agreements to provide benefits upon termination of employment.

**C. Board Practices**

**Committees of the Board of Directors**

We have established an audit committee, a compensation committee and a nominating and governance committee. As of the date of this annual report, each of the committees of the Board has the composition and responsibilities described below.

*Audit Committee*

David Sean Lu, Alex Lightman and George Yijian Xu are members of our Audit Committee, where George Yijian Xu, serves as the chairman. All members of our Audit Committee satisfy the independence standards promulgated by the SEC and by NASDAQ as such standards apply specifically to members of audit committees.

We have adopted and approved a charter for the Audit Committee prior to consummation of our initial public offering. In accordance with our Audit Committee Charter, our Audit Committee performs several functions, including:

● evaluates the independence and performance of, and assesses the qualifications of, our independent auditor, and engages such independent auditor;

● approves the plan and fees for the annual audit, quarterly reviews, tax and other audit-related services, and approves in advance any non-audit service to be provided by the independent auditor;

● monitors the independence of the independent auditor and the rotation of partners of the independent auditor on our engagement team as required by law;

● reviews the financial statements to be included in our Annual Report on Form 20-F and Quarterly Reports on Form 6-K and reviews with management and the independent auditors the results of the annual audit and reviews of our quarterly financial statements;

● oversees all aspects our systems of internal accounting control and corporate governance functions on behalf of the board;

● reviews and approves in advance any proposed related-party transactions and report to the full Board on any approved transactions; and

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● provides oversight assistance in connection with legal, ethical and risk management compliance programs established by management and the Board, including Sarbanes-Oxley Act implementation, and makes recommendations to the Board regarding corporate governance issues and policy decisions.

It is determined that George Yijian Xu, possesses accounting or related financial management experience that qualifies him as an "audit committee financial expert" as defined by the rules and regulations of the SEC.

*Compensation Committee*

We have established the Compensation Committee in October 2019. David Sean Lu, Alex Lightman, and George Yijian Xu are members of our Compensation Committee and David Sean Lu is the chairman. All members of our Compensation Committee are qualified as independent under the current definition promulgated by NASDAQ. We have adopted a charter for the Compensation Committee prior to consummation of this offering. In accordance with the Compensation Committee's Charter, the Compensation Committee is responsible for overseeing and making recommendations to the Board regarding the salaries and other compensation of our executive officers and general employees and providing assistance and recommendations with respect to our compensation policies and practices.

*Nominating and Governance Committee*

David Sean Lu, Geroge Yijian Xu and Alex Lightman are the members of our Nominating and Governance Committee where Alex Lightman serves as the chairman. All members of our Nominating and Governance Committee are qualified as independent under the current definition promulgated by NASDAQ. The Board of Directors adopted and approved a charter for the Nominating and Governance Committee prior to consummation of this offering. In accordance with the Nominating and Governance Committee's Charter, the Nominating and Corporate Governance Committee is responsible to identify and propose new potential director nominees to the Board of Directors for consideration and review our corporate governance policies.

*Code of Conduct and Ethics*

On October 24, 2019, we adopted a code of conduct and ethics applicable to our directors, officers and employees in accordance with applicable federal securities laws and NASDAQ rules.

**Corporate Governance**

Our board of directors has adopted a code of business conduct and ethics, which is applicable to all of our directors, officers and employees. We will make our code of business conduct and ethics publicly available on our website prior to the initial closing of this offering.

**Insider Trading Policy**

On October 24, 2019, our Board of Directors adopted an insider trading policy that applies to our directors, officers and employees.

**Director Independence**

In conformity with Nasdaq's Corporate Governance Rules, the Company, as a foreign private issuer, has opted not to comply with Nasdaq's independence requirements. Accordingly, our Board of Directors has determined that three of our directors, David Sean Lu, Alex Lightman and George Yijian Xu qualify as independent directors pursuant to the rules of the Nasdaq Marketplace.

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**D. Employees**

As of March 31, 2025, we had a total of 28 full-time employees, based in the U.S and China. As of the date of this annual report, we have a total of 28 full-time employees, based in the U.S and China.

None of our employees are represented by a union. We believe that our relationship with our employees has historically been good, and this is expected to continue.

The functional distribution of our full-time employees as of March 31, 2025 is as follows:

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| | |
|:---|:---|
| **Function** | **Number** |
| Management | 7 |
| Sales and marketing | 13 |
| Finance and administration | 2 |
| Warehouse | 6 |
| Total | 28 |

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**E. Share Ownership**

The following table sets forth information regarding the beneficial ownership of our ordinary shares as of the date of this annual report:

● each person known by us to be the beneficial owner of more than 5% of our outstanding ordinary shares;

● each of our executive officers and directors; and

● all our executive officers and directors as a group.

The beneficial ownership of ordinary shares is determined in accordance with the rules of the SEC and generally includes any ordinary shares over which a person exercises sole or shared voting or investment power. For purposes of the table below, we deem shares subject to options, warrants or other exercisable or convertible securities that are exercisable or convertible currently or within 60 days of the date of this annual report, to be outstanding and to be beneficially owned by the person holding the options, warrants or other currently exercisable or convertible securities for the purposes of computing the percentage ownership of that person but we do not treat them as outstanding for the purpose of computing the percentage ownership of any other person. Unless otherwise indicated below, to our knowledge, all persons named in the table have sole voting and investment power with respect to their shares, except to the extent authority is shared by spouses under community property laws.

Percentage of beneficial ownership of each listed person is based on 66,724,675 Class A Ordinary Shares and 612,255 Class B Ordinary Shares outstanding as of the date of this annual report.

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| | | | | | |
|:---|:---|:---|:---|:---|:---|
|  | **Shares Beneficially Owned <sup>(1)(2)</sup>** | **Shares Beneficially Owned <sup>(1)(2)</sup>** | **Shares Beneficially Owned <sup>(1)(2)</sup>** | **Shares Beneficially Owned <sup>(1)(2)</sup>** | |
|  | **Class A ordinary shares** | **Class A ordinary shares** | **Class B ordinary shares** | **Class B ordinary shares** | |
|  | **Number** | **%** | **Number** | **%** |<br>**% of Total**<br>**Voting Power** |
| **Directors and Executive Officers<sup>(3)</sup>:** |  |  |  |  |  |
| Xiaoyue Zhang, Chief Executive Officer and Director |  |  |  |  |  |
| Ling Guo, Chief Financial Officer |  |  |  |  |  |
| Minzhu Xu, Chairwoman<sup>(4)</sup> |  |  | 602255 | 98.37% | 15.25% |
| David Sean Lu, Director |  |  |  |  |  |
| Alex Lightman, Director |  |  |  |  |  |
| George Yijian Xu, Director |  |  |  |  |  |
| **All Directors and Executive Officers** |  |  | **602255** | **98.37%** | **15.25%** |
| **5% Shareholders:** |  |  |  |  |  |
| Happy Group Inc. <sup>(4)</sup> |  |  | 602255 | 98.37% | 15.25% |
| Joyful Bright Management Limited<sup>(5)</sup> | 6100000 | 9.14% |  |  | 7.72% |
| Vanity Glow Management Limited<sup>(6)</sup> | 5600000 | 8.39% |  |  | 7.09% |
| Fortune Universe Company Limited<sup>(7)</sup> | 5300000 | 7.94% |  |  | 6.71% |
| Minotaur HK Limited<sup>(8)</sup> | 4700000 | 7.04% |  |  | 5.95% |
| Beta Vortex Limited<sup>(9)</sup> | 4600000 | 6.89% |  |  | 5.83% |
| Yosmite Unanimous Investment Limited<sup>(10)</sup> | 4500000 | 6.74% |  |  | 5.70% |
| Tender Grass International Limited<sup>(11)</sup> | 4400000 | 6.59% |  |  | 5.57% |
| Blackbull Mvm Limited<sup>(8)</sup> | 4300000 | 6.44% |  |  | 5.45% |

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\* less than 1%

(1) Beneficial ownership is determined in accordance with the rules of the SEC and includes voting or investment power with respect to the ordinary shares. All shares represent only ordinary shares held by shareholders as no options are issued or outstanding.

(2) Each Class A ordinary share has one (1) vote per share. Each Class B ordinary share has twenty (20) votes per share.

(3) The business address for each of our directors and officers is c/o Paranovus Entertainment Technology Ltd., 250 Park Avenue,7th Floor, New York, NY 10177.

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(4) Ms. Minzhu Xu holds 602,255 Class B Ordinary Shares via Happy Group Inc., which is wholly owned by Ms. Xu. 

(5) Xin Li indirectly holds 6,100,000 Class A Ordinary Shares via Joyful Bright Management Limited which is incorporated in Hong Kong, China and is wholly owned by Xin Li. Joyful Bright Management Limited's business address is Room 1805, Building A12, Tiancheng Galaxy Park, Seoul, Yanjiao, Sanhe City, Langfang, Hebei Province, China.

(6) Fan Li indirectly holds 5,600,000 Class A Ordinary Shares via Vanity Glow Management Limited which is incorporated in Hong Kong, China and is wholly owned by Fan Li. Vanity Glow Management Limited's business address is Room 505, No. 107, Anshan Road, Heping District, Tianjin, China.

(7) Xiaojiao He indirectly holds 5,300,000 Class A Ordinary Shares via Fortune Universe Company Limited which is incorporated in Hong Kong, China and is wholly owned by Xiaojiao He. Fortune Universe Company Limited's business address is Room 904, Building 1, Heda Yulong Mansion, No.23, Xingcheng Road, Zengfu Street, Beihu District, Chenzhou City, Hunan Province, China.

(8) Wenting Chang indirectly holds 9,000,000 Class A Ordinary Shares of the Company. Among these, 4,700,000 Class A Ordinary Shares are held via Minotaur HK Limited which is incorporated in Hong Kong, China and is wholly owned by Wenting Chang; 4,300,000 Class A Ordinary Shares are held via Blackbull MVM Limited which is incorporated in Hong Kong, China and is wholly owned by Wenting Chang. The business address of Wenting Chang and Minotaur HK Limited is Room 201,2/F., Pak Hovan Commercial Building, No.18 Hillwood Road, Tsim Sha Tsui, Hong Kong. Blackbull MVM Limited's business address is Room 912a,9/F., Witty Commercial Building, 1a-1l Tung Choi Street, Mongkok, Kowloon, Hong Kong.

(9) Xin Zhong indirectly holds 4,600,000 Class A Ordinary Shares via Beta Vortex Limited which is incorporated in Hong Kong, China and is wholly owned by Xin Zhong. Beta Vortex Limited's business address is Flat/Rm A 12/F Zj 300, 300 Lockhart Road, Wan Chai, Hong Kong.

(10) Fang He indirectly holds 4,500,000 Class A Ordinary Shares via Yosmite Unanimous Investment Limited which is incorporated in Hong Kong, China and is wholly owned by Fang He. The business address of Yosmite Unanimous Investment Limited is No.5, Floor 23, Building A2, Nanwai Chinese Garden, Dachuan District, Dazhou City, Sichuan Province, China.

(11) Runfeng Zuo indirectly holds 4,400,000 Class A Ordinary Shares via Tender Grass International Limited which is incorporated in Hong Kong, China and is wholly owned by Runfeng Zuo. Tender Grass International Limited's business address is Unit 135, 1/F., 143 Wai Yip Street, Kwun Tong, Hong Kong.

**F. Disclosure of a Registrant's Action to Recover Erroneously Awarded Compensation**

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Not applicable.

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**ITEM 7. MAJOR SHAREHOLDERS AND RELATED PARTY TRANSACTIONS**

**A. Major Shareholders**

Please refer to Item 6 "Directors, Senior Management and Employees—E. Share Ownership."

**B. Related Party Transactions**

In addition to the executive officer and director compensation arrangements discussed in "Directors and Executive Compensation," below we describe transactions since April 1, 2024, to which we have been a participant, in which the amount involved in the transactions is material to us or the related party.

On May 20, 2024, the Company signed a promissory note purchase agreement with Ms. Minzhu Xu, who is the chairperson of the Board. Ms. Xu is also the sole shareholder of Happy Group Inc., which owns 602,255 Class B ordinary shares of the Company, par value $0.01 each, representing15.2N/a5% of the total voting power of the Company. Pursuant to the purchase agreement, the Company issued an 8% promissory note with principal amount of $750,000 to Ms. Xu on May 20, 2024, the closing date of this transaction. The note will mature in 12 months after its issuance and can be pre-paid in part or in whole by the Company prior to its maturity date. The proceeds from the note offering were used for the general working capital purposes of the Company.

On September 30, 2024 and January 13, 2025, respectively, the Company signed two promissory note purchase agreements with Ms. Minzhu Xu. Pursuant to these purchase agreements, the Company issued to Ms. Xu an 8% promissory note with principal amount of $500,000 on September 30, 2024, and another 8% promissory note with principal amount of $450,000 on January 13, 2025, which were the respective closing dates of the two transactions. Each note matures in 12 months after its issuance and can be pre-paid in part or in whole by the Company prior to its maturity date. The proceeds from the two note offerings were used for the general working capital purposes of the Company.

As of the date of this annual report, there were no outstanding balances owed to related parties.

**C. Interests of Experts and Counsel**

Not applicable.

**ITEM 8. FINANCIAL INFORMATION**

**A. Consolidated Statements and Other Financial Information**

***Financial Statements***

We have appended consolidated financial statements filed at the end of this report on 20-F, beginning on page F-1.

***Legal Proceedings***

We are currently not a party to any material legal or administrative proceedings. We may from time to time be subject to various legal or administrative claims and proceedings arising in the ordinary course of business. Litigation or any other legal or administrative proceeding, regardless of the outcome, is likely to result in substantial cost and diversion of our resources, including our management's time and attention.

***Dividend Policy***

On July 31, 2020, the Board of the Company declared a special cash dividend of $0.015 per ordinary shares. The dividend, equal to $375,000 in the aggregate, was fully paid on August 17, 2020. We have no plan to declare or pay any dividends in the near future on our Ordinary Shares. We currently intend to retain most, if not all, of our available funds and any future earnings to operate and expand our business.

Our board of directors has discretion as to whether to distribute dividends, subject to certain requirements of Cayman Islands law. In addition, subject to the provisions in our articles of association, our shareholders may by ordinary resolution declare a dividend, but no dividend may exceed the amount recommended by our board of directors. Even if our board of directors decides to pay dividends, the form, frequency, and amount will depend upon our future operations and earnings, capital requirements and surplus, general financial condition, contractual restrictions, and other factors that the board of directors may deem relevant.

We are a holding company incorporated in the Cayman Islands. We have not received and do not have any present plan to receive dividends paid by our subsidiaries, but we have discretion as to whether such dividends are paid, subject to applicable statutory and contractual restrictions.

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**B. Significant Changes**

Not applicable.

**ITEM 9. THE OFFER AND LISTING**

**A. Offer and Listing Details**

Our Class A ordinary shares, par value $0.01 per share, are currently trading under the ticker symbol "PAVS" on the NASDAQ Capital Market.

**B. Plan of Distribution**

Not applicable.

**C. Markets**

Our Class A ordinary shares are currently trading under the ticker symbol "PAVS" on the NASDAQ Capital Market

**D. Selling Shareholders**

Not applicable.

**E. Dilution**

Not applicable.

**F. Expenses of the Issue**

Not Applicable.

**ITEM 10. ADDITIONAL INFORMATION**

**A. Share Capital**

Not applicable.

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**B. Memorandum and Articles of Association**

We incorporate by reference into this annual report our Amended and Restated Memorandum and Articles of Association, Exhibit 1.6 attached hereto, the description of our Class A Ordinary Shares (filed as Exhibit 2.2 hereof), and the description of differences in corporate laws contained in our registration statement on Form F-1 (File No. 333-254909), as amended, initially filed with the SEC on March 8, 2019.

**C. Material Contracts**

*The following descriptions of the material provisions of the referenced agreements do not purport to be complete and are subject to, and qualified in their entirety by reference to the agreements which have been filed as exhibits to this report.*

**Share Purchase Agreement with Fujian Hengda Beverage Co., Ltd**

On April 10, 2023, the Company's indirect wholly owned subsidiary (the "Seller"), Fujian Happiness and Fujian Hengda Beverage Co., Ltd, a PRC company which is not affiliate of the Company or any of its directors or officers (the "SPA Purchaser") entered into certain share purchase agreement (the "Disposition SPA"). Pursuant to the Disposition SPA, the SPA Purchaser agreed to purchase the Fujian Happiness in exchange for cash consideration of RMB 78 million (approximately $11.3 million, the "SPA Purchase Price"). Upon the closing of the transaction on August 7, 2023 , the SPA Purchaser became the sole shareholder of Fujian Happiness and, as a result, assumed all assets and liabilities of Fujian Happiness and subsidiaries owned or controlled by Fujian Happiness. The Disposition SPA is filed as Exhibit 10.1 to the Current Report on Form 6-K on April 18, 2023, and such document is incorporated herein by reference.

**Software Development Agreement with Blueline Studios Inc.**

On November 12, 2023, the Company entered into a software development agreement ("Development Agreement") with Blueline Studios Inc. ("Blueline"), a company incorporated in Vancouver, Canada. Pursuant to the Development Agreement, Blueline shall be responsible for developing and delivering certain interactive game application ("Hollywood Sunshine"), including the underlying software, documentation, and technical data, under the terms and conditions of the Development Agreement, and agreed to assign to the Company all the right, title, and interest in Hollywood Sunshine, excluding any Background Technology (as defined in the Development Agreement). Blueline will deliver the initial full-featured version for the PC platform (the "PC Release") six months after the Start Date as defined in the Development Agreement, followed by the delivery of iOS version (the "iOS Release") three months after the PC Release. In exchange, the Company agreed to pay a total of $1,500,000 development fee to Blueline for the PC Release, and $400,000 development fee for the iOS Release, in accordance with the schedule set forth in the Development Agreement. The decision to develop the iOS Release is at the discretion of the Company. Furthermore, once Hollywood Sunshine starts generating revenues, the Company agreed to pay Blueline 9% of the net revenue after deducting all the licensing fees owned to all talent partners.

On November 9, 2023, the Company signed a promissory note purchase agreement (the "Purchase Agreement") with a non-U.S. investor (the "Investor"), pursuant to which, the Company issued an 8% promissory note with principal amount of $750,000 (the "Note") to such Investor on November 14, 2023, the closing date of this transaction. The Note will mature in 12-month after its issuance and can be pre-paid in part or in whole by the Company prior to its maturity date. The proceeds from the Note will be used to fund the Hollywood Sunshine and the general corporate activities of the Company.

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**Note Purchase Agreements with a Non-U.S. Investor**

On March 12, 2024, the Company signed a promissory note purchase agreement (the "Purchase Agreement") with a non-U.S. investor (the "Investor"), pursuant to which, the Company issued an 8% promissory note with principal amount of $750,000 (the "Note") to such Investor on March 12, 2024, the closing date of this transaction. The Note will mature in 12-month after its issuance and can be pre-paid in part or in whole by the Company prior to its maturity date. The proceeds from the Note will be used to fund development of a software as contemplated in the Development Agreement by and between the Company and Blueline and the general corporate activities of the Company.

As previously disclosed, on November 14, 2023 and January 18, 2024, respectively, the Company has also issued to the same Investor an 8% promissory note, in the same form as the Note (collectively, the "Previous Notes"), each with a principal amount of $750,000. The proceeds from the Previous Notes were used to fund the software development in accordance with the Development Agreement and the general corporate activities of the Company.

The copies of the Purchase Agreement and the Note are attached as Exhibits 10.1 and 10.2 to the Current Report on Form 6-K filed on March 14, 2024, and such documents are incorporated herein by reference.

**Note Purchase Agreement with Minzhu Xu**

On May 20, 2024, the Company signed a promissory note purchase agreement (the "Purchase Agreement") with Ms. Minzhu Xu, who is the chairperson of the Company's Board. Ms. Xu is also the sole shareholder of Happy Group Inc., which owns 602,255 Class B ordinary shares of the Company, par value $0.01 each, representing 15.25% of the total voting power of the Company. Pursuant to the Purchase Agreement, the Company issued an 8% promissory note with principal amount of $750,000 (the "Note") to Ms. Xu on May 20, 2024, the closing date of this transaction (the "Note Offering"). The Note will mature in 12 months after its issuance and can be pre-paid in part or in whole by the Company prior to its maturity date. The proceeds from the Note Offering will be used to for the general working capital purposes of the Company.

This Note Offering was unanimously approved by the audit committee of the Board of the Company consisting only of independent directors.

The copies of the Purchase Agreement and the Note are attached as Exhibits 10.1 and 10.2 to the Current Report on Form 6-K filed on May 20, 2024, and such documents are incorporated herein by reference.

On September 30, 2024 and January 13, 2025, respectively, the Company signed two promissory note purchase agreements with Ms. Minzhu Xu. Pursuant to these purchase agreements, the Company issued to Ms. Xu an 8% promissory note with principal amount of $500,000 on September 30, 2024, and another 8% promissory note with principal amount of $450,000 on January 13, 2025, which were the respective closing dates of the two transactions. Each note matures in 12 months after its issuance and can be pre-paid in part or in whole by the Company prior to its maturity date. The proceeds from the two note offerings were used for the general working capital purposes of the Company.

These note offerings were each unanimously approved by the audit committee of the Board of the Company consisting only of independent directors.

The copies of the purchase agreements and the notes are respectively attached as Exhibits 10.1 and 10.2 to the Current Report on Form 6-K filed on October 3, 2024 and January 17, 2025, and such documents are incorporated herein by reference.

**Securities Purchase Agreement with Non-U.S. Persons**

On July 17, 2024, in connection with the Company's strategic transition to streamline its operations and to concentrate in our core competencies in providing AI-powered solutions, the Company entered into a certain securities purchase agreement with certain non-U.S. investors, pursuant to which the Company agreed to sell up to 60,000,000 Class A Ordinary Shares at a per share purchase price of $0.45.

Upon satisfying all closing conditions, this offering was consummated on August 7, 2024. The Company issued a total of 60,000,000 restricted Class A Ordinary Shares to the investors. The form of the SPA was filed as Exhibit 10.1 to the Current Report on Form 6-K filed on July 23, 2024 and such document are incorporated herein by reference. The gross proceeds to the Company are approximately $27,000,000, before deducting any fees or expenses. The Company used $22,400,000 from the proceeds to fund the acquisition of 51% of outstanding shares of Bomie Wookoo Inc.

**Note Purchase Agreement with Guangrong Ao**

On April 3, 2025 and May 30, 2025, respectively, the Company signed two promissory note purchase agreements with Mr. Guangrong Ao, who is a non-affiliated shareholder of the Company with less than 1% of the total voting power of the Company. Pursuant to these purchase agreements, the Company issued to Mr. Ao two 8% promissory note with principal amount of $200,000 each on April 3, 2025 and on May 30, 2025, which were the respective closing dates of the two transactions. Each note matures in 12 months after its issuance and can be pre-paid in part or in whole by the Company prior to its maturity date. The proceeds from the two note offerings were used for the general working capital purposes of the Company.

The copies of the purchase agreements and the notes are respectively attached as Exhibits 10.1 and 10.2 to the Current Report on Form 6-K filed on April 3, 2025 and May 30, 2025, and such documents are incorporated herein by reference.

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**Acquisition of BW**

On February 28, 2025, the Company, BW, a corporation organized under the laws of New York, and stockholders of BW, entered into a share purchase agreement. Pursuant to the agreement, the Company agreed to acquire 102 shares of common stock of BW, representing 51% equity interest from BW's stockholders for a total consideration of $22,440,000 in cash. The transaction was closed on March 25, 2025, upon the satisfaction or waiver of customary closing conditions, including the approval of the Company's shareholders. On March 24, 2025, the Company's shareholders approved the consummation of the transaction pursuant to the share purchase agreement in a general extraordinary meeting. The Company was granted the right to appoint a majority of the members of BW's board of directors.

BW operates through its two wholly owned subsidiaries, Bomie US LLC in New Jersey and WooKoo LLC in Texas, engaging in e-commerce business on TikTok as well as providing e-commerce solutions to customers. This acquisition aligns with the Company's strategy to expand into marketing-commerce field. By securing a majority interest in BW, the Company aims to capitalize on the growing interests demand for TikTok-driven e-commerce and related solutions.

The share purchase agreement is filed as Exhibit 10.1 to the Current Report on Form 6-K filed on March 3, 2025 and such document is incorporated herein by reference.

**D. Exchange Controls**

***Cayman Islands***

There are currently no exchange control regulations in the Cayman Islands applicable to us or our shareholders.

***The PRC***

***General administration of foreign exchange***

The principal regulation governing foreign currency exchange in the PRC is the Administrative Regulations of the PRC on Foreign Exchange (the "Foreign Exchange Regulations"), which were promulgated on January 29, 1996, became effective on April 1, 1996 and were last amended on August 5, 2008. Under these rules, Renminbi is generally freely convertible for payments of current account items, such as trade- and service-related foreign exchange transactions and dividend payments, but not freely convertible for capital account items, such as capital transfer, direct investment, investment in securities, derivative products or loans unless prior approval by competent authorities for the administration of foreign exchange is obtained. Under the Foreign Exchange Regulations, foreign-invested enterprises in the PRC may purchase foreign exchange without the approval of SAFE to pay dividends by providing certain evidentiary documents, including board resolutions, tax certificates, or for trade- and services-related foreign exchange transactions, by providing commercial documents evidencing such transactions.

***Circular No. 75, Circular No. 37 and Circular No. 13***

Circular 37 was released by SAFE on July 4, 2014 and abolished Circular 75 which had been in effect since November 1, 2005. Pursuant to Circular 37, a PRC resident should apply to SAFE for foreign exchange registration of overseas investments before it makes any capital contribution to a special purpose vehicle, or SPV, using his or her legitimate domestic or offshore assets or interests. SPVs are offshore enterprises directly established or indirectly controlled by domestic residents for the purpose of investment and financing by utilizing domestic or offshore assets or interests they legally hold. Following any significant change in a registered offshore SPV, such as capital increase, reduction, equity transfer or swap, consolidation or division involving domestic resident individuals, the domestic individuals shall amend the registration with SAFE. Where an SPV intends to repatriate funds raised after completion of offshore financing to the PRC, it shall comply with relevant PRC regulations on foreign investment and foreign debt management. A foreign-invested enterprise established through return investment shall complete relevant foreign exchange registration formalities in accordance with the prevailing foreign exchange administration regulations on foreign direct investment and truthfully disclose information on the actual controller of its shareholders.

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If any shareholder who is a PRC resident (as determined by the Circular No. 37) holds any interest in an offshore SPV and fails to fulfil the required foreign exchange registration with the local SAFE branches, the PRC subsidiaries of that offshore SPV may be prohibited from distributing their profits and dividends to their offshore parent company or from carrying out other subsequent cross-border foreign exchange activities. The offshore SPV may also be restricted in its ability to contribute additional capital to its PRC subsidiaries. Where a domestic resident fails to complete relevant foreign exchange registration as required, fails to truthfully disclose information on the actual controller of the enterprise involved in the return investment or otherwise makes false statements, the foreign exchange control authority may order them to take remedial actions, issue a warning, and impose a fine of less than RMB300,000 on an institution or less than RMB50,000 on an individual.

Circular 13 was issued by SAFE on February 13, 2015 and became effective on June 1, 2015. Pursuant to Circular 13, a domestic resident who makes a capital contribution to an SPV using his or her legitimate domestic or offshore assets or interests is no longer required to apply to SAFE for foreign exchange registration of his or her overseas investments. Instead, he or she shall register with a bank in the place where the assets or interests of the domestic enterprise in which he or she has interests are located if the domestic resident individually seeks to make a capital contribution to the SPV using his or her legitimate domestic assets or interests; or he or she shall register with a local bank at his or her permanent residence if the domestic resident individually seeks to make a capital contribution to the SPV using his or her legitimate offshore assets or interests.

***Circular 19 and Circular 16***

Circular 19 was promulgated by SAFE on March 30, 2015 and became effective on June 1, 2015. According to Circular 19, foreign exchange capital of foreign-invested enterprises shall be granted the benefits of Discretional Foreign Exchange Settlement ("Discretional Foreign Exchange Settlement"). With Discretional Foreign Exchange Settlement, foreign exchange capital in the capital account of a foreign-invested enterprise for which the rights and interests of monetary contribution has been confirmed by the local foreign exchange bureau, or for which book-entry registration of monetary contribution has been completed by the bank, can be settled at the bank based on the actual operational needs of the foreign-invested enterprise. The allowed Discretional Foreign Exchange Settlement percentage of the foreign exchange capital of a foreign-invested enterprise has been temporarily set to be 100%. The Renminbi converted from the foreign exchange capital will be kept in a designated account and if a foreign-invested enterprise needs to make any further payment from such account, it will still need to provide supporting documents and to complete the review process with its bank.

Furthermore, Circular 19 stipulates that foreign-invested enterprises shall make bona fide use of their capital for their own needs within their business scopes. The capital of a foreign-invested enterprise and the Renminbi if obtained from foreign exchange settlement shall not be used for the following purposes:

● directly or indirectly used for expenses beyond its business scope or prohibited by relevant laws or regulations;

● directly or indirectly used for investment in securities unless otherwise provided by relevant laws or regulations;

● directly or indirectly used for entrusted loan in Renminbi (unless within its permitted scope of business), repayment of inter-company loans (including advances by a third party) or repayment of bank loans in Renminbi that have been sub-lent to a third party; and

● directly or indirectly used for expenses related to the purchase of real estate that is not for self-use (except for foreign-invested real estate enterprises).

Circular 16 was issued by SAFE on June 9, 2016. Pursuant to Circular 16, enterprises registered in the PRC may also convert their foreign debts from foreign currency to Renminbi on a self-discretionary basis. Circular 16 provides an integrated standard for conversion of foreign exchange capital items (including but not limited to foreign currency capital and foreign debts) on a self-discretionary basis applicable to all enterprises registered in the PRC. Circular 16 reiterates the principle that an enterprise's Renminbi converted from foreign currency-denominated capital may not be directly or indirectly used for purposes beyond its business scope or purposes prohibited by PRC laws or regulations, and such converted Renminbi shall not be provided as loans to non-affiliated entities.

Circulars 16 and 19 address foreign direct investments into the PRC, and stipulate the procedures applicable to foreign exchange settlement. If and when circumstances require funds to be transferred to our WFOE in the PRC from our offshore entities, then any such transfer would be subject to Circulars 16 and 19.

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**E. Taxation**

The following summary of the material Cayman Islands, PRC and U.S. tax consequences of an investment in our ordinary shares is based upon laws and relevant interpretations thereof in effect as of the date hereof, all of which are subject to change, possibly with retroactive effect. This summary is not intended to be, nor should it be construed as, legal or tax advice and is not exhaustive of all possible tax considerations. This summary also does not deal with all possible tax consequences relating to an investment in our ordinary shares, such as the tax consequences under state, local, non-U.S., non-PRC, and non-Cayman Islands tax laws. Investors should consult their own tax advisors with respect to the tax consequences of the acquisition, ownership and disposition of our ordinary shares.

***Cayman Islands Taxation***

The Cayman Islands currently levies no taxes on individuals or corporations based upon profits, income, gains or appreciation and there is no taxation in the nature of inheritance tax or estate duty. There are no other taxes levied by the Government of the Cayman Islands that are likely to be material to holders of ordinary shares or ordinary shares. The Cayman Islands is not party to any double tax treaties. There are no exchange control regulations or currency restrictions in the Cayman Islands.

***People's Republic of China Taxation***

Under the EIT Law, an enterprise established outside the PRC with a "de facto management body" within the PRC is considered a PRC resident enterprise for PRC enterprise income tax purposes and is generally subject to a uniform 25% enterprise income tax rate on its worldwide income as well as tax reporting obligations. Under the Implementation Rules, a "de facto management body" is defined as a body that has material and overall management and control over the manufacturing and business operations, personnel and human resources, finances and properties of an enterprise. In addition, SAT Circular 82 issued in April 2009 specifies that certain offshore-incorporated enterprises controlled by PRC enterprises or PRC enterprise groups will be classified as PRC resident enterprises if all of the following conditions are met: (a) senior management personnel and core management departments in charge of the daily operations of the enterprises have their presence mainly in the PRC; (b) their financial and human resources decisions are subject to determination or approval by persons or bodies in the PRC; (c) major assets, accounting books and company seals of the enterprises, and minutes and files of their board's and shareholders' meetings are located or kept in the PRC; and (d) half or more of the enterprises' directors or senior management personnel with voting rights habitually reside in the PRC. Further to SAT Circular 82, the SAT issued SAT Bulletin 45, which took effect in September 2011, to provide more guidance on the implementation of SAT Circular 82. SAT Bulletin 45 provides for procedures and administration details of determination on PRC resident enterprise status and administration on post-determination matters. If the PRC tax authorities determine that Paranovus Entertainment Technology Ltd. is a PRC resident enterprise for PRC enterprise income tax purposes, a number of unfavorable PRC tax consequences could follow. For example, Fujian Happiness may be subject to enterprise income tax at a rate of 25% with respect to its worldwide taxable income. Also, a 10% withholding tax would be imposed on dividends we pay to our non-PRC enterprise shareholders and with respect to gains derived by our non-PRC enterprise shareholders from transferring our shares or ordinary shares and potentially a 20% of withholding tax would be imposed on dividends we pay to our non-PRC individual shareholders and with respect to gains derived by our non-PRC individual shareholders from transferring our shares or ordinary shares.

It is unclear whether, if we are considered a PRC resident enterprise, holders of our shares or ordinary shares would be able to claim the benefit of income tax treaties or agreements entered into between China and other countries or areas. See "Risk Factors — Risk Factors Relating to Doing Business in China — Under the PRC Enterprise Income Tax Law, we may be classified as a PRC resident enterprise for PRC enterprise income tax purposes. Such classification would likely result in unfavorable tax consequences to us and our non-PRC Shareholders and have a material adverse effect on our results of operations and the value of your investment".

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Pursuant to the Arrangement between the Mainland China and the Hong Kong Special Administrative Region for the Avoidance of Double Taxation and Tax Evasion on Income, or the Tax Arrangement, where a Hong Kong resident enterprise which is considered a non-PRC tax resident enterprise directly holds at least 25% of a PRC enterprise, the withholding tax rate in respect of the payment of dividends by such PRC enterprise to such Hong Kong resident enterprise is reduced to 5% from a standard rate of 10%, subject to approval of the PRC local tax authority. Pursuant to the Notice of the State Administration of Taxation on the Issues concerning the Application of the Dividend Clauses of Tax Agreements, or Circular 81, a resident enterprise of the counter-party to such Tax Arrangement should meet the following conditions, among others, in order to enjoy the reduced withholding tax under the Tax Arrangement: (i) it must directly own the required percentage of equity interests and voting rights in such PRC resident enterprise; and (ii) it should directly own such percentage in the PRC resident enterprise anytime in the 12 months prior to receiving the dividends. Furthermore, the Administrative Measures for Non-Resident Enterprises to Enjoy Treatments under Tax Treaties (For Trial Implementation), or the Administrative Measures, which became effective in October 2009, requires that the non-resident enterprises must obtain the approval from the relevant tax authority in order to enjoy the reduced withholding tax rate under the tax treaties. There are also other conditions for enjoying such reduced withholding tax rate according to other relevant tax rules and regulations. According to Circular 81, if the relevant tax authorities consider the transactions or arrangements we have are for the primary purpose of enjoying a favorable tax treatment, the relevant tax authorities may adjust the favorable withholding tax in the future.

***United States Federal Income Taxation*** 

The following is a discussion of United States federal income tax considerations relating to the acquisition, ownership, and disposition of our ordinary shares by a U.S. Holder, as defined below, that acquires our ordinary shares and holds our ordinary shares as "capital assets" (generally, property held for investment) under the United States Internal Revenue Code of 1986, as amended (the "Code"). This discussion is based upon existing United States federal income tax law, which is subject to differing interpretations or change, possibly with retroactive effect. No ruling has been sought from the Internal Revenue Service (the "IRS") with respect to any United States federal income tax consequences described below, and there can be no assurance that the IRS or a court will not take a contrary position. This discussion does not address all aspects of United States federal income taxation that may be important to particular investors in light of their individual circumstances, including investors subject to special tax rules (such as, for example, certain financial institutions, insurance companies, regulated investment companies, real estate investment trusts, broker-dealers, traders in securities that elect mark-to-market treatment, partnerships and their partners, tax-exempt organizations (including private foundations)), investors who are not U.S. Holders, investors that own (directly, indirectly, or constructively) 10% or more of our voting stock, investors that hold their ordinary shares as part of a straddle, hedge, conversion, constructive sale or other integrated transaction), or investors that have a functional currency other than the U.S. dollar, all of whom may be subject to tax rules that differ significantly from those summarized below. In addition, this discussion does not address any tax laws other than the United States federal income tax laws, including any state, local, alternative minimum tax or non-United States tax considerations, or the Medicare tax. Each potential investor is urged to consult its tax advisor regarding the United States federal, state, local and non-United States income and other tax considerations of an investment in our ordinary shares.

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<u>General</u>

For purposes of this discussion, a "U.S. Holder" is a beneficial owner of our ordinary shares that is, for United States federal income tax purposes, (i) an individual who is a citizen or resident of the United States, (ii) a corporation (or other entity treated as a corporation for United States federal income tax purposes) created in, or organized under the laws of, the United States or any state thereof or the District of Columbia, (iii) an estate the income of which is includible in gross income for United States federal income tax purposes regardless of its source, or (iv) a trust (A) the administration of which is subject to the primary supervision of a United States court and which has one or more United States persons who have the authority to control all substantial decisions of the trust or (B) that has otherwise elected to be treated as a United States person under the Code.

If a partnership (or other entity treated as a partnership for United States federal income tax purposes) is a beneficial owner of our ordinary shares, the tax treatment of a partner in the partnership will depend upon the status of the partner and the activities of the partnership. Partnerships and partners of a partnership holding our ordinary shares are urged to consult their tax advisors regarding an investment in our ordinary shares.

The discussion set forth below is addressed only to U.S. Holders that purchase ordinary shares. Prospective purchasers are urged to consult their own tax advisors about the application of the U.S. federal income tax rules to their particular circumstances as well as the state, local, foreign and other tax consequences to them of the purchase, ownership and disposition of our ordinary shares.

<u>Taxation of Dividends and Other Distributions on our Class A Ordinary Shares</u>

Subject to the passive foreign investment company rules discussed below, the gross amount of distributions made by us to you with respect to the ordinary shares (including the amount of any taxes withheld therefrom) will generally be includable in your gross income as dividend income on the date of receipt by you, but only to the extent that the distribution is paid out of our current or accumulated earnings and profits (as determined under U.S. federal income tax principles). With respect to corporate U.S. Holders, the dividends will not be eligible for the dividends-received deduction allowed to corporations in respect of dividends received from other U.S. corporations.

With respect to non-corporate U.S. Holders, including individual U.S. Holders, dividends will be taxed at the lower capital gains rate applicable to qualified dividend income, provided that (1) the ordinary shares are readily tradable on an established securities market in the United States, or we are eligible for the benefits of an approved qualifying income tax treaty with the United States that includes an exchange of information program, (2) we are not a passive foreign investment company (as discussed below) for either our taxable year in which the dividend is paid or the preceding taxable year, and (3) certain holding period requirements are met. Because there is no income tax treaty between the United States and the Cayman Islands, clause (1) above can be satisfied only if the ordinary shares are readily tradable on an established securities market in the United States. Under U.S. Internal Revenue Service authority, ordinary shares are considered for purpose of clause (1) above to be readily tradable on an established securities market in the United States if they are listed on Nasdaq. You are urged to consult your tax advisors regarding the availability of the lower rate for dividends paid with respect to our ordinary shares, including the effects of any change in law after the date of this report.

To the extent that the amount of the distribution exceeds our current and accumulated earnings and profits (as determined under U.S. federal income tax principles), it will be treated first as a tax-free return of your tax basis in your ordinary shares, and to the extent the amount of the distribution exceeds your tax basis, the excess will be taxed as capital gain. We do not intend to calculate our earnings and profits under U.S. federal income tax principles. Therefore, a U.S. Holder should expect that a distribution will be treated as a dividend even if that distribution would otherwise be treated as a non-taxable return of capital or as capital gain under the rules described above.

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<u>Taxation of Dispositions of Class A Ordinary Shares</u>

Subject to the passive foreign investment company rules discussed below, you will recognize taxable gain or loss on any sale, exchange or other taxable disposition of a share equal to the difference between the amount realized (in U.S. dollars) for the share and your tax basis (in U.S. dollars) in the ordinary shares. The gain or loss will be capital gain or loss. If you are a non-corporate U.S. Holder, including an individual U.S. Holder, who has held the ordinary shares for more than one year, you may be eligible for reduced tax rates on any such capital gains. The deductibility of capital losses is subject to limitations.

<u>Passive Foreign Investment Company Rules</u>

A foreign (i.e., non-U.S.) corporation will be a PFIC if at least 75% of its gross income in a taxable year of the foreign corporation, including its pro rata share of the gross income of any corporation in which it is considered to own at least 25% of the shares by value, is passive income. Alternatively, a foreign corporation will be a PFIC if at least 50% of its assets in a taxable year of the foreign corporation, ordinarily determined based on fair market value and averaged quarterly over the year, including its pro rata share of the assets of any corporation in which it is considered to own at least 25% of the shares by value, are held for the production of, or produce, passive income. Passive income generally includes dividends, interest, rents and royalties (other than certain rents or royalties derived from the active conduct of a trade or business) and gains from the disposition of passive assets.

Based on the composition of our assets and the nature of the Company's income and subsidiaries' income for our taxable year ended March 31, 2025, we do not expect to be treated as a PFIC for such year and we do not expect to be one for our taxable year ending March 31, 2025 or become one in the foreseeable future. Nevertheless, the application of the PFIC rules is subject to ambiguity in several respects and, in addition, we must make a separate determination each year as to whether we are a PFIC (after the close of each taxable year). Accordingly, we cannot assure you that we will not be a PFIC for the current or any other taxable year. Moreover, although we do not believe we would be treated as a PFIC, we have not engaged any U.S. tax advisers to determine our PFIC status. In addition, if a U.S. Holder owned our ordinary shares at any time prior to our acquisition of Elite, such U.S. Holder may be considered to own stock of a PFIC by virtue of the fact that we may have been a PFIC during the period prior to our acquisition of Elite, unless such U.S. Holder made either a valid and timely QEF election or a valid and timely mark-to-market election, in each case as described below.

If we are determined to be a PFIC for any taxable year (or portion thereof) that is included in the holding period of a U.S. Holder of our shares or redeemable warrants and, in the case of our shares, the U.S. Holder did not make either a timely qualified electing fund ("QEF") election for our first taxable year as a PFIC in which the U.S. Holder held (or was deemed to hold) such shares, a QEF election along with a purging election, or a mark-to-market election, each as described below, such holder generally will be subject to special rules for regular U.S. federal income tax purposes with respect to:

● any gain recognized by the U.S. Holder on the sale or other disposition of its shares or redeemable warrants; and

● any "excess distribution" made to the U.S. Holder (generally, any distributions to such U.S. Holder during a taxable year of the U.S. Holder that are greater than 125% of the average annual distributions received by such U.S. Holder in respect of the shares or warrants during the three preceding taxable years of such U.S. Holder or, if shorter, such U.S. Holder's holding period for the shares or warrants).

Under these rules,

● the U.S. Holder's gain or excess distribution will be allocated ratably over the U.S. Holder's holding period for the shares or redeemable warrants;

● the amount allocated to the U.S. Holder's taxable year in which the U.S. Holder recognized the gain or received the excess distribution, or to the period in the U.S. Holder's holding period before the first day of our first taxable year in which we are a PFIC, will be taxed as ordinary income;

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● the amount allocated to other taxable years (or portions thereof) of the U.S. Holder and included in its holding period will be taxed at the highest tax rate in effect for that year and applicable to the U.S. Holder; and

● the interest charge generally applicable to underpayments of tax will be imposed in respect of the tax attributable to each such other taxable year of the U.S. Holder.

In general, if we are determined to be a PFIC, a U.S. Holder may avoid the PFIC tax consequences described above in respect to our shares by making a timely QEF election (or a QEF election along with a purging election, as described below). Pursuant to the QEF election, a U.S. Holder will be required to include in income its pro rata share of our net capital gains (as long-term capital gain) and other earnings and profits (as ordinary income), on a current basis, in each case whether or not distributed, in the taxable year of the U.S. Holder in which or with which our taxable year ends. A U.S. Holder may make a separate election to defer the payment of taxes on undistributed income inclusions under the QEF rules, but if deferred, any such taxes will be subject to an interest charge.

A U.S. Holder may not make a QEF election with respect to its redeemable warrants. As a result, if a U.S. Holder sells or otherwise disposes of a redeemable warrant (other than upon exercise of the redeemable warrant), any gain recognized generally will be subject to the special tax and interest charge rules treating the gain as an excess distribution, as described above, if we were a PFIC at any time during the period the U.S. Holder held the redeemable warrants. If a U.S. Holder that exercises such redeemable warrants properly makes a QEF election with respect to the newly acquired ordinary shares (or has previously made a QEF election with respect to our shares), the QEF election will apply to the newly acquired ordinary shares, but the adverse tax consequences relating to PFIC shares, adjusted to take into account the current income inclusions resulting from the QEF election, will continue to apply with respect to such newly acquired ordinary shares (which generally will be deemed to have a holding period for purposes of the PFIC rules that includes the period the U.S. Holder held the redeemable warrants), unless the U.S. Holder makes a purging election with respect to such shares. The purging election creates a deemed sale of such shares at their fair market value. The gain recognized by the purging election will be subject to the special tax and interest charge rules treating the gain as an excess distribution, as described above. As a result of the purging election, the U.S. Holder will increase the adjusted tax basis in its ordinary shares acquired upon the exercise of the redeemable warrants by the gain recognized and will also have a new holding period in such ordinary shares for purposes of the PFIC rules.

The QEF election is made on a shareholder-by-shareholder basis and, once made, can be revoked only with the consent of the IRS. A U.S. Holder generally makes a QEF election by attaching a completed IRS Form 8621 (Information Return by a Shareholder of a Passive Foreign Investment Company or Qualified Electing Fund), including the information provided in a PFIC annual information statement, to a timely filed U.S. federal income tax return for the taxable year to which the election relates. Retroactive QEF elections generally may be made only by filing a protective statement with such return and if certain other conditions are met or with the consent of the IRS.

In order to comply with the requirements of a QEF election, a U.S. Holder must receive certain information from us. Upon request from a U.S. Holder, we will endeavor to provide to the U.S. Holder no later than 90 days after the request such information as the IRS may require, including a PFIC annual information statement, in order to enable the U.S. Holder to make and maintain a QEF election. However, there is no assurance that we will have timely knowledge of our status as a PFIC in the future or of the required information to be provided.

If a U.S. Holder has made a QEF election with respect to our shares and the special tax and interest charge rules do not apply to such shares (because of a timely QEF election for our first taxable year as a PFIC in which the U.S. Holder holds (or is deemed to hold) such shares or a QEF election, along with a purge of the PFIC taint pursuant to a purging election, as described above), any gain recognized on the sale or other taxable disposition of our shares generally will be taxable as capital gain and no interest charge will be imposed. As discussed above, for regular U.S. federal income tax purposes, U.S. Holders of a QEF are currently taxed on their pro rata shares of the QEF's earnings and profits, whether or not distributed. In such case, a subsequent distribution of such earnings and profits that were previously included in income generally should not be taxable as a dividend to such U.S. Holders. The adjusted tax basis of a U.S. Holder's shares in a QEF will be increased by amounts that are included in income, and decreased by amounts distributed but not taxed as dividends, under the above rules. Similar basis adjustments apply to property if by reason of holding such property the U.S. Holder is treated under the applicable attribution rules as owning shares in a QEF.

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Although a determination as to our PFIC status will be made annually, the initial determination that we are a PFIC generally will apply for subsequent years to a U.S. Holder who held shares or redeemable warrants while we were a PFIC, whether or not we meet the test for PFIC status in those subsequent years, unless such U.S. Holder made a purging election as described below. A U.S. Holder who makes the QEF election discussed above for our first taxable year as a PFIC in which the U.S. Holder holds (or is deemed to hold) our shares, however, will not be subject to the PFIC tax and interest charge rules discussed above in respect to such shares. In addition, such U.S. Holder will not be subject to the QEF inclusion regime with respect to such shares for any of our taxable years that end within or with a taxable year of the U.S. Holder and in which we are not a PFIC. On the other hand, if the QEF election is not effective for each of our taxable years in which we are a PFIC and during which the U.S. Holder holds (or is deemed to hold) our shares, the PFIC rules discussed above will continue to apply to such shares unless the holder files on a timely filed U.S. income tax return (including extensions) a QEF election and a purging election to recognize under the rules of Section 1291 of the Code any gain that the U.S. Holder would otherwise recognize if the U.S. Holder had sold our shares for their fair market value on the "qualification date." The qualification date is the first day of our tax year in which we qualify as a QEF with respect to such U.S. Holder. The purging election can only be made if such U.S. Holder held our ordinary shares on the qualification date. The gain recognized by the purging election will be subject to the special tax and interest charge rules treating the gain as an excess distribution, as described above. As a result of the purging election, the U.S. Holder will increase the adjusted tax basis in its ordinary shares by the amount of the gain recognized and will also have a new holding period in the shares for purposes of the PFIC rules.

If a U.S. Holder did not make a timely "mark-to-market" election (as described above), and if we were a PFIC at any time during the period such U.S. Holder held our ordinary shares, then such ordinary shares will continue to be treated as stock of a PFIC with respect to such U.S. Holder even if we cease to be a PFIC in a future year, unless such U.S. Holder makes a "purging election" for the year we cease to be a PFIC. A "purging election" creates a deemed sale of such ordinary shares at their fair market value on the last day of the last year in which we are treated as a PFIC. The gain recognized by the purging election will be subject to the special tax and interest charge rules treating the gain as an excess distribution, as described above. As a result of the purging election, such U.S. Holder will have a new tax basis (equal to the fair market value of the ordinary shares on the last day of the last year in which we are treated as a PFIC) and tax holding period (which new holding period will begin the day after such last day) in such ordinary shares.

As an alternative to the QEF election, if a U.S. Holder, at the close of its taxable year, owns shares in a PFIC that are treated as marketable stock, the U.S. Holder may make a mark-to-market election with respect to such shares for such taxable year. If the U.S. Holder makes a valid mark-to-market election for the first taxable year of the U.S. Holder in which the U.S. Holder holds (or is deemed to hold) our shares and for which we are determined to be a PFIC, such holder generally will not be subject to the PFIC rules described above in respect to its shares. Instead, in general, the U.S. Holder will include as ordinary income each year the excess, if any, of the fair market value of its shares at the end of its taxable year over the adjusted tax basis in its shares. The U.S. Holder also will be allowed to take an ordinary loss in respect of the excess, if any, of the adjusted tax basis of its shares over the fair market value of its shares at the end of its taxable year (but only to the extent of the net amount of previously included income as a result of the mark-to-market election). The U.S. Holder's adjusted tax basis in its shares will be adjusted to reflect any such income or loss amounts, and any further gain recognized on a sale or other taxable disposition of the shares will be treated as ordinary income. Currently, a mark-to-market election may not be made with respect to our redeemable warrants.

The mark-to-market election is available only for stock that is regularly traded on a national securities exchange that is registered with the Securities and Exchange Commission, including the NASDAQ Capital Market, or on a foreign exchange or market that the IRS determines has rules sufficient to ensure that the market price represents a legitimate and sound fair market value. Although our ordinary shares are listed and traded on the NASDAQ Capital Market, we cannot guarantee that our shares will continue to be listed and traded on the NASDAQ Capital Market. U.S. Holders should consult their own tax advisors regarding the availability and tax consequences of a mark-to-market election in respect to our shares under their particular circumstances.

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If we are a PFIC and, at any time, have a foreign subsidiary that is classified as a PFIC, a U.S. Holder generally would be deemed to own a portion of the shares of such lower-tier PFIC, and generally could incur liability for the deferred tax and interest charge described above if we receive a distribution from, or dispose of all or part of our interest in, or the U.S. Holder otherwise were deemed to have disposed of an interest in, the lower-tier PFIC. Upon request, we will endeavor to cause any lower-tier PFIC to provide to a U.S. Holder no later than 90 days after the request the information that may be required to make or maintain a QEF election with respect to the lower-tier PFIC. However, there is no assurance that we will have timely knowledge of the status of any such lower-tier PFIC, and we do not plan to make annual determinations or otherwise notify U.S. Holders of the PFIC status of any such lower-tier PFIC. There also is no assurance that we will be able to cause the lower-tier PFIC to provide the required information. U.S. Holders are urged to consult their own tax advisors regarding the tax issues raised by lower-tier PFICs.

A U.S. Holder that owns (or is deemed to own) shares in a PFIC during any taxable year of the U.S. Holder may have to file an IRS Form 8621 (whether or not a QEF election or mark-to-market election is or has been made) with such U.S. Holder's U.S. federal income tax return and provide such other information as may be required by the U.S. Treasury Department.

The rules dealing with PFICs and with the QEF and mark-to-market elections are very complex and are affected by various factors in addition to those described above. Accordingly, U.S. Holders of our shares and redeemable warrants should consult their own tax advisors concerning the application of the PFIC rules to our shares and redeemable warrants under their particular circumstances.

<u>Non-U.S. Holders</u>

Dividends (including constructive dividends) paid or deemed paid to a Non-U.S. Holder in respect to our securities generally will not be subject to U.S. federal income tax, unless the dividends are effectively connected with the Non-U.S. Holder's conduct of a trade or business within the United States (and, if required by an applicable income tax treaty, are attributable to a permanent establishment or fixed base that such holder maintains or maintained in the United States).

In addition, a Non-U.S. Holder generally will not be subject to U.S. federal income tax on any gain attributable to a sale or other taxable disposition of our securities unless such gain is effectively connected with its conduct of a trade or business in the United States (and, if required by an applicable income tax treaty, is attributable to a permanent establishment or fixed base that such holder maintains or maintained in the United States) or the Non-U.S. Holder is an individual who is present in the United States for 183 days or more in the taxable year of sale or other disposition and certain other conditions are met (in which case, such gain from U.S. sources generally is subject to U.S. federal income tax at a 30% rate or a lower applicable tax treaty rate).

Dividends and gains that are effectively connected with the Non-U.S. Holder's conduct of a trade or business in the United States (and, if required by an applicable income tax treaty, are attributable to a permanent establishment or fixed base that such holder maintains or maintained in the United States) generally will be subject to regular U.S. federal income tax at the same regular U.S. federal income tax rates applicable to a comparable U.S. Holder and, in the case of a Non-U.S. Holder that is a corporation for U.S. federal income tax purposes, may also be subject to an additional branch profits tax at a 30% rate or a lower applicable tax treaty rate.

The U.S. federal income tax treatment of a Non-U.S. Holder's exercise of redeemable warrants, or the lapse of redeemable warrants held by a Non-U.S. Holder, generally will correspond to the U.S. federal income tax treatment of the exercise or lapse of redeemable warrants by a U.S. Holder, as described under "*U.S. Holders — Exercise or Lapse of Redeemable Warrants*" above.

<u>Backup Withholding and Information Reporting</u>

Dividend payments with respect to our ordinary shares and proceeds from the sale, exchange or redemption of our ordinary shares may be subject to information reporting to the U.S. Internal Revenue Service and possible U.S. backup withholding at a current rate of 24%. Backup withholding will not apply, however, to a U.S. Holder who furnishes a correct taxpayer identification number and makes any other required certification on U.S. Internal Revenue Service Form W-9 or who is otherwise exempt from backup withholding. U.S. Holders who are required to establish their exempt status generally must provide such certification on U.S. Internal Revenue Service Form W-9. U.S. Holders are urged to consult their tax advisors regarding the application of the U.S. information reporting and backup withholding rules.

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Backup withholding is not an additional tax. Amounts withheld as backup withholding may be credited against your U.S. federal income tax liability, and you may obtain a refund of any excess amounts withheld under the backup withholding rules by filing the appropriate claim for refund with the U.S. Internal Revenue Service and furnishing any required information. We do not intend to withhold taxes for individual shareholders. However, transactions effected through certain brokers or other intermediaries may be subject to withholding taxes (including backup withholding), and such brokers or intermediaries may be required by law to withhold such taxes.

Under the Hiring Incentives to Restore Employment Act of 2010, certain U.S. Holders are required to report information relating to our ordinary shares, subject to certain exceptions (including an exception for ordinary shares held in accounts maintained by certain financial institutions), by attaching a complete Internal Revenue Service Form 8938, Statement of Specified Foreign Financial Assets, with their tax return for each year in which they hold ordinary shares.

**F. Dividends and Paying Agents**

Not applicable.

**G. Statement by Experts**

Not applicable.

**H. Documents on Display**

The Company is subject to the informational requirements of the Securities Exchange Act of 1934, as amended, and will file reports, registration statements and other information with the SEC. The Company's reports, registration statements and other information can be inspected on the SEC's website at www.sec.gov and such information can also be inspected and copies ordered at the public reference facilities maintained by the SEC at the following location: 100 F Street NE, Washington, D.C. 20549. You may also visit us at https://pavs.ai. However, information contained on our website does not constitute a part of this annual report.

**I. Subsidiary Information**

Not applicable.

**ITEM 11. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK**

***Interest Rate Risk***

We deposit surplus funds with Chinese banks earning daily interest. We do not invest in any instruments for trading purposes. Most of our outstanding debt instruments carry loan prime rates plus basis points of interest. Our operations generally are not directly sensitive to fluctuations in interest rates and we currently do not have any long-term debt outstanding. Management monitors the banks' prime rates in conjunction with our cash requirements to determine the appropriate level of debt balances relative to other sources of funds. We have not entered into any hedging transactions in an effort to reduce our exposure to interest rate risk.

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***Foreign Exchange Risk***

While our reporting currency is the U.S. dollar, substantially all of our consolidated revenues and consolidated costs and expenses are denominated in RMB. Substantially all of our assets are denominated in RMB. As a result, we are exposed to foreign exchange risk as our revenues and results of operations may be affected by fluctuations in the exchange rate between the U.S. dollar and the RMB. If the RMB depreciates against the U.S. dollar, the value of our RMB revenues, earnings and assets as expressed in our U.S. dollar financial statements will decline. Assets and liabilities are translated at exchange rates at the balance sheet dates and revenue and expenses are translated at the average exchange rates and equity is translated at historical exchange rates. Any resulting translation adjustments are not included in determining net income but are included in determining other comprehensive income, a component of equity. An average appreciation of the RMB against the U.S. dollar of 3.34% increased our comprehensive loss to $3.22 million based on our outstanding revenues, costs and expenses, assets and liabilities denominated in RMB as of March 31, 2025. As of March 31, 2025. We have not entered into any hedging transactions in an effort to reduce our exposure to foreign exchange risk.

The value of RMB against the U.S. dollar and other currencies is affected by, among other things, changes in China's political and economic conditions. Since July 2005, RMB has not been pegged to the U.S. dollar. Although the People's Bank of China regularly intervenes in the foreign exchange market to prevent significant short-term fluctuations in the exchange rate, RMB may appreciate or depreciate significantly in value against the U.S. dollar in the medium to long term. Moreover, it is possible that in the future, PRC authorities may lift restrictions on fluctuations in RMB exchange rate and lessen intervention in the foreign exchange market.

***Inflation***

Inflationary factors such as increases in the cost of our product and overhead costs may adversely affect our operating results. Although we do not believe that inflation has had a material impact on our financial position or results of operations to date, a high rate of inflation in the future may have an adverse effect on our ability to maintain current levels of gross margin and selling, general and administrative expenses as a percentage of net revenues if the selling prices of our products do not increase with these increased costs.

**ITEM 12. DESCRIPTION OF SECURITIES OTHER THAN EQUITY SECURITIES**

Not applicable.

**ITEM 13. DEFAULTS, DIVIDEND ARREARAGES AND DELINQUENCIES**

None.

**ITEM 14. MATERIAL MODIFICATIONS TO THE RIGHTS OF SECURITY HOLDERS AND USE OF PROCEEDS**

None.

**ITEM 15. CONTROLS AND PROCEDURES**

**Evaluation of Disclosure Controls and Procedures**

Our management, with the participation of our CEO and CFO, has performed an evaluation of the effectiveness of our disclosure controls and procedures (as defined in Rule 13a-15(e) under the Exchange Act) as of the end of the period covered by this report, as required by Rule 13a-15(b) under the Exchange Act. Based on the foregoing evaluation, our principal executive officer and principal financial officer concluded that, as of March 31, 2025, our disclosure controls and procedures were not effective at the reasonable assurance level due to the material weaknesses described below.

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**Management's Report on Internal Control over Financial Reporting**

Our management is responsible for establishing and maintaining adequate internal control over financial reporting, as defined in Rules 13a-15 (f) under the Exchange Act. Our management, with the participation of our CEO and CFO, evaluated the effectiveness of our internal control over financial reporting based on criteria established in the framework in Internal Control—Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission. Based on this evaluation under the 2013 Framework, our principal executive officer and principal financial officer have concluded that our internal control over financial reporting was not effective as of March 31, 2025 due to the following material weaknesses:

● We had insufficient financial reporting and accounting with appropriate knowledge of U.S. GAAP and SEC reporting requirements to properly address complex U.S. GAAP accounting issues and to prepare and review our consolidated financial statements and related disclosures to fulfil U.S. GAAP and SEC financial reporting requirements;

● We lack personnel with technical knowledge of business combinations, fair value measurement, intangibles valuation and goodwill impairment analysis;

A material weakness is a deficiency, or a combination of deficiencies, within the meaning of PCAOB Auditing Standard AS 2201, in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of the Company's annual or interim financial statements will not be prevented or detected on a timely basis.

We plan to address the weaknesses identified above by implementing the following measures:

(1) recruiting qualified professionals with appropriate levels of knowledge and experience to assist in resolving accounting issues in non-routine or complex transactions;

(2) investing in technology infrastructure to support our financial reporting function;

(3) improving the communication between management, board of directors and chief financial officer; and

**Changes in Internal Control Over Financial Reporting**

There were no changes in our internal control over financial reporting that occurred during the period covered by this annual report on Form 20-F that have materially affected, or are reasonably likely to materially affect, our internal controls over financial reporting.

**ITEM 16. RESERVED**

**ITEM 16A. AUDIT COMMITTEE FINANCIAL EXPERT**

Our board of directors has determined that Mr. George Yijian Xu is an independent director as defined by the rules of the NASDAQ Stock Market as well as qualifies as an audit committee financial expert as defined by the rules of the NASDAQ Stock Market, Inc. and Rule 10A-3 under the Exchange Act.

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**ITEM 16B. CODE OF ETHICS**

Our board of directors has adopted a code of ethics that applies to our directors, officers, employees and agents, including certain provisions that specifically apply to our chief executive officer, chief financial officer, vice presidents and any other persons who perform similar functions for us. We have posted a copy of our code of business conduct and ethics on our website at https://pavs.ai.

**ITEM 16C PRINCIPAL ACCOUNTANT FEES AND SERVICES**

The following table sets forth the aggregate fees by categories specified below in connection with certain professional services rendered by our independent registered public accounting firm, we did not pay any other fees to our independent registered public accounting firm during the periods indicated below.

---

| | | | |
|:---|:---|:---|:---|
|  | **Year Ended**<br>**March 31,**<br>**2025** | **Year Ended**<br>**March 31,**<br>**2024** | **Year Ended**<br>**March 31,**<br>**2023** |
| Audit fees<sup>(1)</sup> | $110000 | $200000 | $200000 |
| Audit related fees<sup>(2)</sup> |  |  |  |
| Tax fees<sup>(3)</sup> |  |  |  |
| All other fees<sup>(4)</sup> | - | - | - |
| TOTAL | $110000 | $200000 | $200000 |

---

(1) "Audit fees" means the aggregate fees billed for each of the fiscal years for professional services rendered by our principal accountant for the audit of our annual financial statements or services that are normally provided by the accountant in connection with statutory and regulatory filings or engagements for those fiscal years.

(2) "Audit related fees" means the aggregate fees billed for each of the fiscal years for assurance and related services by our principal accountant that are reasonably related to the performance of the audit or review of our financial statements and are not reported under paragraph (1).

(3) "Tax Fees" represents the aggregate fees billed in each of the fiscal years listed for the professional tax services rendered by our principal auditors.

(4) "All Other Fees" represents the aggregate fees billed in each of the fiscal years listed for services rendered by our principal auditors other than services reported under "Audit fees," "Audit-related fees" and "Tax fees."

The policy of our audit committee and our board of directors is to pre-approve all audit and non-audit services provided by our principal auditors, including audit services, audit-related services, and other services as described above, other than those for de minimis services which are approved by the audit committee or our board of directors prior to the completion of the services.

**ITEM 16D. EXEMPTIONS FROM THE LISTING STANDARDS FOR AUDIT COMMITTEES**

Not applicable.

**ITEM 16E. PURCHASES OF EQUITY SECURITIES BY THE ISSUER AND AFFILIATED PURCHASERS**

None.

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**ITEM 16F. CHANGE IN REGISTRANT'S CERTIFYING ACCOUNTANTS**

None.

**ITEM 16G. CORPORATE GOVERNANCE**

Our Class A Ordinary Shares are listed on the NASDAQ Capital Market, or NASDAQ. As such, we are subject to corporate governance requirements imposed by NASDAQ. Under NASDAQ rules, listed non-US companies such as ourselves may, in general, follow their home country corporate governance practices in lieu of some of the NASDAQ corporate governance requirements. A NASDAQ-listed non-US company is required to provide a general summary of the significant differences to its US investors either on the company website or in its annual report distributed to its US investors.

Other than as described in this section, our corporate governance practices do not differ from those followed by domestic companies listed on the NASDAQ Capital Market. NASDAQ Listing Rule 5635 generally provides that shareholder approval is required of U.S. domestic companies listed on the NASDAQ Capital Market prior to issuance (or potential issuance) of securities (i) equaling 20% or more of the company's common stock or voting power for less than the greater of market or book value (ii) resulting in a change of control of the company; and (iii) which is being issued pursuant to a stock option or purchase plan to be established or materially amended or other equity compensation arrangement made or materially amended. Notwithstanding this general requirement, NASDAQ Listing Rule 5615(a)(3)(A) permits foreign private issuers to follow their home country practice rather than these shareholder approval requirements. The Cayman Islands do not require shareholder approval prior to any of the foregoing types of issuances. The Company, therefore, is not required to obtain such shareholder approval prior to entering into a transaction with the potential to issue securities as described above. The Board of Directors of the Company has elected to follow the Company's home country rules as to such issuances and will not be required to seek shareholder approval prior to entering into such a transaction. Rule 5620(a) requires each company listing common stock or voting preferred stock, or their equivalents, shall hold an annual meeting of shareholders no later than one year after the end of the issuer's fiscal year-end. The Company follows the home country practice and expect to hold annual shareholders meetings only if there are matters that require shareholders' approval.

**ITEM 16H. MINE SAFETY DISCLOSURE**

Not applicable.

**ITEM 16I. DISCLOSURE REGARDING FOREIGN JURISDICTION THAT PREVENT INSPECTION**

Not applicable

**ITEM 16J. INSIDER TRADING POLICIES**

Our board of directors has adopted an insider trading policy, which governs the purchase, sale, and other dispositions of our securities by directors, senior management, and employees that are reasonably designed to promote compliance with applicable insider trading laws, rules, and regulations, and any listing standards applicable to us. A copy of the insider trading policy is attached as Exhibit 11.2 to this annual report.

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**ITEM 16K. CYBERSECURITY**

**Risk Management and Strategy**

We believe that cybersecurity is important to our operations and we recognize the importance of timely and appropriately assessing, preventing, identifying and managing risks associated with cybersecurity threats. Such risks include, among other things, potential operational risks, financial risks, intellectual property theft, fraud, extortion, harm to employees and clients, violation of privacy and other litigation and legal risks, and reputational risks.

We do not have a dedicated board committee solely focused on cybersecurity, and our senior management team, including Ms. Xiaoyue Zhang, CEO, and Ms. Ling Guo, CFO, has oversight responsibility for risks and incidents relating to cybersecurity threats, including compliance with disclosure requirements, cooperation with law enforcement, and related effects on financial and other risks, and it reports any material findings and recommendations, as appropriate, to our board of directors for consideration.

In the year ended March 31, 2025, we have not encountered any cybersecurity incidents which have affected or are reasonably likely to affect us, and we have not implemented any specific policies with respect to monitoring and managing cybersecurity threats. However, we intend to adopt cybersecurity processes, technologies and controls to aid in our efforts to assess, prevent, identify and manage such risks. We cannot assure that we will not encounter any material cybersecurity incidents in the future or that our business operations, financial position or results of operations will not be materially and adversely affected as a result. Since we do not currently implement a comprehensive cybersecurity risk management program, our efforts may not be adequate, and we may fail to accurately assess the severity of an incident, may not be sufficient to prevent or limit harm, or may fail to sufficiently remediate an incident in a timely fashion, any of which could harm our business, reputation, results of operations and financial condition.

Although risks from cybersecurity threats have not to date materially affected, and we do not believe they are reasonably likely to materially affect, us, our business strategy, results of operations or financial condition, we may, from time to time, experience threats to and security incidents related to our data and systems. See "Item 3. Key Information—D. Risk Factors—Risks Relating to Our Business—We rely extensively on information technology systems, and cybersecurity incidents could adversely affect us.."

**Governance**

Our Board of Directors oversees the Company's cybersecurity risks management and receives and reviews management reports on material cybersecurity risks and issues on an as-needed basis. In particular, our Board reviews and approves the cybersecurity-related disclosure in the periodic reports (including our annual reports on Form 20-F) of the Company.

Our R&D team has the primary responsibility for day-to-day assessment and management of cybersecurity risks. When cybersecurity incidents occur, our R&D team will collect the relevant information, prepare solutions to address the issues, and report the incidents to our management, which supervises our R&D team.

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**PART III**

**ITEM 17. FINANCIAL STATEMENTS**

We have elected to provide financial statements pursuant to Item 18.

**ITEM 18. FINANCIAL STATEMENTS**

See the Index to Consolidated Financial Statements accompanying this report beginning page F-1.

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**PARANOVUS ENTERTAINMENT TECHNOLOGY LTD.**

**INDEX TO CONSOLIDATED FINANCIAL STATEMENTS**

---

| | |
|:---|:---|
| **Table of Contents** | **Pages** |
| [Report of Independent Registered Public Accounting Firm #6907](#report) | F-2 |
| [Consolidated Balance Sheets as of March 31, 2025 and 2024](#bs) | F-3 |
| [Consolidated Statements of Operations and Other Comprehensive Income (Loss) for the Years Ended March 31, 2025, 2024 and 2023](#so) | F-4 |
| [Consolidated Statements of Changes in Shareholders' Equity for the Years Ended March 31, 2025, 2024 and 2023](#sse) | F-5 |
| [Consolidated Statements of Cash Flows for the Years Ended March 31, 2025, 2024 and 2023](#cs) | F-6 |
| [Notes to Consolidated Financial Statements](#note) | F-7 |

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| F-1 |
| *[**Table of Contents**](#Toc2)* |

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**REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM**

To the Board of Directors and Shareholders of

Paranovus Entertainment Technology Ltd.

**Opinion on the Consolidated Financial Statements**

We have audited the accompanying consolidated balance sheet of Paranovus Entertainment Technology Ltd. and its subsidiaries (the "Company") as of March 31, 2025 and 2024, and the related consolidated statements of operations and other comprehensive income (loss), changes in shareholders' equity, and cash flows for each of the years ended March 31, 2025, 2024 and 2023 and the related notes (collectively referred to as the "consolidated financial statements"). In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company as of March 31, 2025 and 2024, and the results of its operations and its cash flows for each of the years ended March 31, 2025, 2024 and 2023, in conformity with accounting principles generally accepted in the United States of America ("U.S. GAAP").

**Substantial doubt about the Company's ability to continue as a going concern**

The accompanying consolidated financial statements have been prepared assuming that the Company will continue as a going concern. The Company incurred a net loss of US$8,305,429 during the financial year ended March 31, 2025 and recorded a cash outflow from operating activities of US$2,669,456 for the year ended March 31, 2025, as of that date, the Company's accumulated deficit amounted to US$70,262,448. These conditions raise substantial doubt about the Company's ability to continue as a going concern. Management's plans in regard to these matters are also discussed in Note 1 to the consolidated financial statements. The consolidated financial statements do not include any adjustments that might result from the outcome of this uncertainty. Our opinion is not modified in respect of this matter.

**Basis for Opinion**

These consolidated financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on the Company's consolidated financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audits in accordance with the standards of the PCAOB and in accordance with auditing standards generally accepted in the United States of America. Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits, we are required to obtain an understanding of internal control over financial reporting, but not for the purpose of expressing an opinion on the effectiveness of the Company's internal control over financial reporting. Accordingly, we express no such opinion.

Our audits included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements. We believe that our audits provide a reasonable basis for our opinion.

/s/ Enrome LLP

We have served as the Company's auditor since 2023

Singapore

August 4, 2025

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| F-2 |
| *[**Table of Contents**](#Toc2)* |

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**PARANOVUS ENTERTAINMENT TECHNOLOGY LTD.**

**CONSOLIDATED BALANCE SHEETS**

**AS OF MARCH 31, 2025 AND 2024**

(**IN U.S. DOLLARS)**

---

| | | |
|:---|:---|:---|
|  | **As of**<br>**March 31,**<br>**2025** | **As of**<br>**March 31,**<br>**2024** |
| **ASSETS** |  |  |
| Current assets |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;Cash and cash equivalents | $261355 | $341779 |
| &nbsp;&nbsp;&nbsp;&nbsp;Short-term investments | 4758797 |  |
| &nbsp;&nbsp;&nbsp;&nbsp;Inventories | 653342 |  |
| &nbsp;&nbsp;&nbsp;&nbsp;Prepaid expenses and other current assets | 1512208 | 1501651 |
| &nbsp;&nbsp;&nbsp;&nbsp;Current assets from discontinued operations - disposal | - | 1008281 |
| **Total current assets** | **7185702** | **2851711** |
| &nbsp;&nbsp;&nbsp;&nbsp;Property, plant and equipment, net | 24856 |  |
| &nbsp;&nbsp;&nbsp;&nbsp;Intangible assets, net | 10751426 | 1488333 |
| &nbsp;&nbsp;&nbsp;&nbsp;Goodwill | 17500601 | 3376186 |
| &nbsp;&nbsp;&nbsp;&nbsp;Right-of-use assets | 101588 |  |
| &nbsp;&nbsp;&nbsp;&nbsp;Non-current assets from discontinued operations - disposal | - | 12596 |
| **Total non-current assets** | **28378471** | **4877115** |
| **TOTAL ASSETS** | $**35564173** | $**7728826** |
| **LIABILITIES AND SHAREHOLDERS' EQUITY** |  |  |
| Current liabilities |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;Accounts payable | $1733707 | $- |
| &nbsp;&nbsp;&nbsp;&nbsp;Other payables and accrued liabilities | 2621563 | 2446075 |
| &nbsp;&nbsp;&nbsp;&nbsp;Due to related parties | 1946627 |  |
| &nbsp;&nbsp;&nbsp;&nbsp;Lease liabilities | 101588 |  |
| &nbsp;&nbsp;&nbsp;&nbsp;Current liabilities from discontinued operations - disposal | - | 114306 |
| **Total current liabilities** | **6403485** | **2560381** |
| &nbsp;&nbsp;&nbsp;&nbsp;Other non-current liabilities | 158091 | - |
| **Total non-current liability** | **158091** | **-** |
| **TOTAL LIABILITIES** | **6561576** | **2560381** |
| **COMMITMENTS AND CONTINGENCIES (NOTE 13)** |  |  |
| **SHAREHOLDERS' EQUITY** |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Class A Ordinary shares, $0.01 par value,350,000,000 shares authorized, 66,724,675 shares issued and outstanding; $0.01 par value,350,000,000 shares authorized, 6,724,675 shares issued and outstanding | 667177 | 67177 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Class B Ordinary shares, $0.01 par value, 100,000,000 shares authorized, 612,255 shares issued and outstanding; $0.01 par value, 100,000,000 shares authorized, 612,255 shares issued and outstanding | 6123 | 6123 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Preferred shares, $0.01 par value,500,000 shares authorized, 0 shares issued and outstanding |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;Additional paid-in capital | 91318726 | 64918726 |
| &nbsp;&nbsp;&nbsp;&nbsp;Accumulated deficit | (70262448) | (61957019) |
| &nbsp;&nbsp;&nbsp;&nbsp;Accumulated other comprehensive income | 2527322 | 2545619 |
| **Total Paranovus Entertainment Technology Ltd.'s shareholders' equity** | **24256900** | **5580626** |
| Non-controlling interests | 4745697 | (412181) |
| **Total shareholders' equity** | **29002597** | **5168445** |
| **TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY** | $**35564173** | $**7728826** |

---

The accompanying notes are an integral part of these consolidated financial statements.

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| F-3 |
| *[**Table of Contents**](#Toc2)* |

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**PARANOVUS ENTERTAINMENT TECHNOLOGY LTD**

**CONSOLIDATED STATEMENTS OF OPERATIONS AND OTHER COMPREHENSIVE INCOME (LOSS)**

**(IN U.S. DOLLARS)**

---

| | | | |
|:---|:---|:---|:---|
|  | **For the years ended March 31,** | **For the years ended March 31,** | **For the years ended March 31,** |
|  | **2025** | &nbsp;&nbsp;&nbsp;&nbsp;**2024** | **2023** |
| Revenues | $71542 | $- | $- |
| Cost of revenues | (62526) | - | - |
| **Gross profit** | **9016** | **-** | **-** |
| Operating expenses: |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;Selling and marketing | (1445) | (94) | (911111) |
| &nbsp;&nbsp;&nbsp;&nbsp;General and administrative | (2306613) | (2462001) | (3091478) |
| &nbsp;&nbsp;&nbsp;&nbsp;Goodwill impairment | (3376186) | (1807848) |  |
| &nbsp;&nbsp;&nbsp;&nbsp;Intangible asset impairment | (1108333) |  |  |
| **Total operating expenses** | **(6792577)** | **(4269943)** | **(4002589)** |
| **Operating loss** | **(6783561)** | **(4269943)** | **(4002589)** |
| Other income (expenses): |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;Interest income | 156 |  | 1 |
| &nbsp;&nbsp;&nbsp;&nbsp;Interest expense | (261854) | (39167) |  |
| &nbsp;&nbsp;&nbsp;&nbsp;Other income, net | 42612 | 19915 | (277288) |
| **Total other expenses, net** | **(219086)** | **(19252)** | **(277287)** |
| **Loss from continuing operations before income taxes** | **(7002647)** | **(4289195)** | **(4279876)** |
| Income tax expenses | - | - | - |
| Net loss from continuing operations | $(7002647) | $(4289195) | $(4279876) |
| Net loss from discontinued operations before tax | (935559) | (13185557) | (67907240) |
| (Loss) Gain on disposal of discontinued operations | (367223) | 7547428 | - |
| Net loss from discontinued operations | (1302782) | (5638129) | (67907240) |
| **Net loss** | **(8305429)** | **(9927324)** | **(72187116)** |
| Less: Net (loss) income attributable to noncontrolling interest | (412181) | 198867 | (448242) |
| **Net loss attributable to Paranovus Entertainment Technology Limited** | **(7893248)** | **(10126191)** | **(71738874)** |
| Other comprehensive income (loss): |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;Foreign currency translation adjustments | (18297) | 3222698 | (4435667) |
| **Comprehensive loss** | $**(8323726)** | $**(6704626)** | $**(76622783)** |
| Less: comprehensive (loss) income attributable to non-controlling interests: | (412181) | 274960 | 272988 |
| **Comprehensive loss attributable to the Company** | $**(7911545)** | $**(6979586)** | $**(76895771)** |
| Basic and diluted loss per ordinary share |  |  |  |
| Continuing operations basic and diluted | $(0.08) | $(0.91) | $(0.67) |
| Basic and diluted loss per ordinary share |  |  |  |
| Discontinued operations basic and diluted | $(0.02) | $(1.19) | $(11.96) |
| Weighted average number of ordinary shares outstanding |  |  |  |
| Basic and diluted | 84512945 | 4732726 | 5678081 |

---

The accompanying notes are an integral part of these consolidated financial statements.

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| F-4 |
| *[**Table of Contents**](#Toc2)* |

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**PARANOVUS ENTERTAINMENT TECHNOLOGY LTD**

**CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY**

**(IN U.S. DOLLARS)**

---

| | | | | | | | | | | | |
|:---|:---|:---|:---|:---|:---|:---|:---|:---|:---|:---|:---|
|  | **Class A**<br>**Ordinary** <br>**shares** | **Class A**<br>**Ordinary** <br>**shares** <br>**amount** | **Class B**<br>**Ordinary**<br>**shares** | **Class B**<br>**Ordinary**<br>**shares**<br>**amount** | **Additional** <br>**paid-in**<br>**capital** | **Statutory** <br>**surplus reserve** | **Retained**<br>**Earnings (accumulated** <br>**Deficit)** | **Accumulated**<br>**other comprehensive income (loss)** | **Total Paranovus**<br>**Entertainment**<br>**Technology Ltd**<br>**shareholders'**<br>**equity** | **Non-controlling interests** | **Total**<br>**equity** |
| **Balance as of March 31, 2022** | **67004583** | $**33502** | **12095100** | $**6048** | $**53871226** | $**7622765** | $**12285281** | $**4306536** | $**78125358** | $**(710754)** | $**77414604** |
| Ordinary shares issued for cash | 3000000 | 30000 |  |  | 5970000 |  |  |  | 6000000 |  | 6000000 |
| Share consolidation | (63504908) |  | (11632845) |  |  |  |  |  |  |  |  |
| Business acquisition (Note 11) | 1375000 | 13750 |  |  | 7067500 |  |  |  | 7081250 |  | 7081250 |
| Convention of Class A Ordinary shares into Class B Ordinary shares | (150000) | (75) | 150000 | 75 |  |  |  |  |  |  |  |
| Net (loss) |  |  |  |  |  |  | (71738874) |  | (71738874) | (448242) | (72187116) |
| Foreign currency translation adjustments | - | - | - | - | - | - |  | (4708655) | (4708655) | 272988 | (4435667) |
| **Balance as of March 31, 2023** | **7724675** | $**77177** | **612255** | $**6123** | $**66908726** | $**7622765** | $**(59453593)** | $**(402119)** | $**14759079** | $**(886008)** | $**13873071** |
| Share cancellation | (1000000) | (10000) |  |  | (1990000) |  |  |  | (2000000) |  | **(2000000)** |
| Net loss |  |  |  |  |  |  | (4289195) |  | (4289195) | 198867 | (4090328) |
| Discontinued operations - disposal |  |  |  |  |  | (7622765) | 1785769 |  | (5836996) |  | (5836996) |
| Foreign currency translation adjustments | - | - | - | - | - | - | - | 2947738 | 2947738 | 274960 | **3222698** |
| **Balance as of March 31, 2024** | **6724675** | $**67177** | **612255** | $**6123** | $**64918726** | $**-** | $**(61957019)** | $**2545619** | $**5580626** | $**(412181)** | $**5168445** |
| Ordinary shares issue for cash | 60000000 | 600000 |  |  | 26400000 |  |  |  | 27000000 |  | 27000000 |
| Net loss |  |  |  |  |  |  | (7002647) |  | (7002647) |  | (7002647) |
| Discontinued operations |  |  |  |  |  |  | (1302782) |  | (1302782) | 412181 | (890601) |
| Business combination |  |  |  |  |  |  |  |  |  | 4745697 | 4745697 |
| Foreign currency translation adjustments | - | - | - | - | - | - | - | (18297) | (18297) | - | (18297) |
| **Balance as of March 31, 2025** | **66724675** | $**667177** | **612255** | $**6123** | $**91318726** | $**-** | $**(70262448)** | $**2527322** | $**24256900** | $**4745697** | $**29002597** |

---

The accompanying notes are an integral part of these consolidated financial statements.

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| F-5 |
| *[**Table of Contents**](#Toc2)* |

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**PARANOVUS ENTERTAINMENT TECHNOLOGY LTD**

**CONSOLIDATED STATEMENTS OF CASH FLOWS**

**(IN U.S. DOLLARS)**

---

| | | | |
|:---|:---|:---|:---|
|  | **For the years ended March 31,** | **For the years ended March 31,** | **For the years ended March 31,** |
|  | **2025** | **2024** | **2023** |
| Cash Flows from Operating Activities: |  |  |  |
| Net loss | $(8305429) | $(9927324) | $(72187116) |
| Adjustments to reconcile net loss to net cash used in operating activities: |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;Depreciation and amortization | 380000 | 380000 | 31667 |
| &nbsp;&nbsp;&nbsp;&nbsp;Goodwill impairment | 3376186 | 1807849 |  |
| &nbsp;&nbsp;&nbsp;&nbsp;Intangible asset impairment | 1488333 |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;Gain on disposal of discontinued operations | 367223 | (7472035) | (3039676) |
| Changes in operating assets and liabilities: |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;Prepaid expenses and other current assets | 1281 | (1501651) | 3000 |
| &nbsp;&nbsp;&nbsp;&nbsp;Other payables and accrued liabilities | 98842 | 442735 | 3340 |
| Net cash used in operating activities from continuing operations | (2973564) | (16270426) | (75188785) |
| Net cash provided by operating activities from discontinued operations | 304108 | 3164448 | 54483289 |
| **Net cash used in operating activities** | **(2669456)** | **(13105978)** | **(20705496)** |
| Cash Flows from Investing Activities: |  |  |  |
| &nbsp;&nbsp;&nbsp;Short-term investment | (4758797) |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;Business of acquisition of BW | (22287544) |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;Proceeds from disposal of discontinued operations | - | 11698379 | - |
| Net cash (used in) provided by investing activities from continuing operations | (27046341) | 11698379 |  |
| Net cash provided by investing activities from discontinued operations | - | - | 89322 |
| **Net cash (used in) provided by investing activities** | **(27046341)** | **11698379** | **89322** |
| Cash Flows from Financing Activities: |  |  |  |
| &nbsp;&nbsp;&nbsp;Ordinary shares issued for cash | 27000000 |  | 3000000 |
| &nbsp;&nbsp;&nbsp;Amount due to the related party | 1848158 |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;Proceeds from borrowing | 158091 | - | - |
| Net cash provided by financing activities from continuing operations | 29006249 |  | 3000000 |
| Net cash provided by financing activities from discontinued operations | - | - | 145524 |
| **Net cash provided by financing activities** | **29006249** | **-** | **3145524** |
| Effect of exchange rate changes on cash and cash equivalents | 26661 | (1003646) | 1092526 |
| Net decrease in cash and cash equivalents | (682887) | (2411245) | (16378124) |
| Cash and cash equivalents of continuing operations - beginning of year | 341779 | 1522292 | 161962 |
| Cash and cash equivalents of discontinued operations - beginning of year | 602463 | 1833195 | 19571649 |
| Cash and cash equivalents - beginning of year | 944242 | 3355487 | 19733611 |
| Cash and cash equivalents - end of year | 261355 | 944242 | 3355487 |
| **Less cash and cash equivalents of discontinued operations - end of year** | - | 602463 | 1833195 |
| **Cash and cash equivalents of continuing operations - end of year** | $**261355** | $**341779** | $**1522292** |
| Supplemental disclosures of cash flows information: |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;Cash paid for income taxes | $- | $- | $- |
| &nbsp;&nbsp;&nbsp;&nbsp;Cash paid for interest expense | $- | $- | $- |
| Supplemental schedule of non-cash investing and financing activities |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;Ordinary shares issued for cash | $- | $- | $3000000 |

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| F-6 |
| *[**Table of Contents**](#Toc2)* |

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**PARANOVUS ENTERTAINMENT TECHNOLOGY LIMITED**

**NOTES TO CONSOLIDATED FINANCIAL STATEMENTS**

**NOTE 1 – ORGANIZATION AND NATURE OF OPERATIONS**

Paranovus Entertainment Technology Limited ("Paranovus Cayman") is a holding company. It was incorporated on February 13, 2018 under the laws of the Cayman Islands and previously named Happiness Biotech Group Limited. On November 5, 2021, the Company changed its name to Happiness Development Group Limited under the special resolution dated October 21, 2021. On March 13, 2023 the Company changed its name to Paranovus Entertainment Technology Limited under the special resolution dated March 13, 2023. The Company has no substantive operations other than holding 100% equity or ownership of Paranovus Entertainment (Hong Kong) Technology Ltd. ("Paranovus Hong Kong"), Paranovus Entertainment (New York) Technology Limited ("Paranovus NewYork") and 51% of equity interest of Bomie Wookoo Inc. ("BW"). Paranovous Hong Kong is a holding company of all of the equity or ownership of Hainan Paranovous Technology Co., Ltd. ("Paranouvous Hainan"), which was established on May 6, 2024. Paranovus NewYork is a holding company of 100% equity or ownership of 2Lab3 LLC, which was established on December 8, 2022. BW is a holding company of 100% equity or ownership of Wookoo LLC and Bomie US LLC, which was acquired on March 25, 2025.

**Reorganization**

A Reorganization of the legal structure was completed in August 2018. The Reorganization involved the incorporation of Paranovus Entertainment Technology Limited, a Cayman Islands holding company; Happiness Biology Technology Group Limited, a holding company established in Hong Kong, PRC; Happiness (Fuzhou) E-commerce Co., Ltd, a holding company established in Fujian, PRC; and the transfer of 100% ownership of Fujian Happiness from the former shareholders to Happiness Fuzhou. Paranovus Cayman, Happiness Hong Kong and Happiness Fuzhou are all holding companies and had not commenced operation until August 21, 2018.

Prior to the reorganization, Mr. Wang Xuezhu, Chief Executive Officer owns 47.7% ownership of Fujian Happiness. On August 21, 2018, Mr. Wang Xuezhu and other shareholders of Fujian Happiness transferred their 100% ownership interests in Fujian Happiness to Happiness Fuzhou, which is 100% owned by Happiness Hong Kong. After the reorganization, Paranovus Cayman owns 100% equity interests of Fujian Happiness. Mr. Wang Xuezhu, who owns 52.37% ownership of Paranovus Cayman, became the ultimate controlling shareholder ("the Controlling Shareholder") of the Company.

Since the Company is effectively controlled by the same Controlling Shareholder before and after the reorganization, it is considered under common control. Therefore, the above-mentioned transactions were accounted for as a recapitalization. The reorganization has been accounted for at historical cost and prepared on the basis as if the aforementioned transactions had become effective as of the beginning of the first period presented in the accompanying financial statements of the Company.

On March 4, 2019, the Company subdivided its 50,000 ordinary shares into 90,000,000 ordinary shares and 10,000,000 preferred shares. The authorized ordinary shares became 100,000,000 shares and the par value was changed from $1 to $0.0005. On the same day, the Company cancelled 77,223,100 ordinary shares and sold additional 223,100 ordinary shares.

On October 7, 2022, the Company's board of directors approved an amended and restated memorandum and articles of association to effectuate a one-for-twenty (1-for-20) reverse split for all classes and its ordinary shares (the "2022 Reverse Split"), and to increase the Company's authorized shares, immediately following the 2022 Reverse Split. The market effective date of 2022 Reverse Split was October 11, 2022 As a result, the authorized share capital of the Company was changed to US$5,000,000.00 divided into 350,000,000 Class A Ordinary Shares with a par value of US$0.01 each, 100,000,000 Class B Ordinary Shares with a par value of US$0.01 each, and 50,000,000 Preferred Shares with par value of US$0.01 each.

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| F-7 |
| *[**Table of Contents**](#Toc2)* |

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During the reporting periods, the Company has the following subsidiaries. Details of the Company and its operating subsidiaries are set out below:

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| | | | | | |
|:---|:---|:---|:---|:---|:---|
| **Name of subsidiary** | **Place of**<br>**incorporation** | **Date of**<br>**incorporation** | **Date of**<br>**Acquisition** | **% of** <br>**Ownership** | **Principal activities** |
| Paranovus Entertainment (NewYork) Technology Limited ("Paranovus New York") | New York | 8 December, 2022 | N/a | 100% by Paranovus Cayman | Investment |
| 2lab3 LLC("2Lab3") | Delaware | 12 August, 2022 | March 28, 2023 | 100% by Paranovus New York | AI-powered applications |
| Paranovus Entertainment (Hong Kong) Technology Ltd. ("Paranovus Hong Kong") | Hong Kong | May 6, 2024 | N/a | 100% by Paranovus Cayman | Investment |
| Hainan Paranovous Technology Co., Ltd. ("Paranouvous Hainan" | PRC | June 17, 2024 | N/a | 100% by Paranovus Hong Kong | Investment |
| Bomie Wookoo Inc.("BW") | New York | September 6, 2022 | March 25, 2025 | 51% by Paranovus Cayman | Investment |
| WooKoo LLC ("Wookoo") | Texas | May 25, 2023 | March 25, 2025 | 100% by BW | E-commerce sales |
| Bomie US LLC ("Bomie US") | New Jersey | November 19, 2024 | March 25, 2025 | 100% by BW | Trading and providing e-commerce solutions |
| Hainan Paranovous Technology Co., Ltd(("Paranovus Hainan") | PRC | June 17, 2024 | N/a | 100% by Paranovous HK | Entertainment |
| Happiness (Shunchang) E-commerce Co., Ltd ("Happiness Shunchang")<sup>\*</sup> | PRC | July 11, 2023 | N/a | 100% by Happiness Hong Kong | Investment |
| Fuzhou Happiness Enterprise Management Consulting Co., Ltd<sup>\*</sup> | PRC | December 15, 2020 | N/a | 100% by Happiness Shunchang | Management and consulting service |
| Taochejun (Fujian) automobiles Co., Ltd<sup>\*</sup> | PRC | April 27, 2021 | N/a | 61% by Happiness Shunchang | Automobile sales |

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\* On July 5, 2024, the Company transferred the 100% of the equity interests of Happiness Hong Kong and its subsidiaries to a third party by the strategic decision.

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| F-8 |
| *[**Table of Contents**](#Toc2)* |

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**Going Concern**

The accompanying consolidated financial statements have been prepared assuming that the Company will continue as a going concern. The Company incurred a net loss of US$8,305,429 during the financial year ended March 31, 2025 and recorded a cash outflow from operating activities of US$2,669,456 for the year ended March 31, 2025, as of that date, the Company's accumulated deficit was amounted to US$70,262,448 as of March 31, 2025. These factors raise substantial doubt about the Company's ability to continue as a going concern.

Notwithstanding the above, the Company continues to have a reasonable expectation that adequate resources to continue in operation through disposing the entity with losses and the newly acquired BW with positive cash contributions for at least the next 12 months and that the going concern basis of preparation for these finance statement remains appropriate based on the following factors:

To sustain its ability to support the Company's operating activities, the Company considered supplementing its sources of funding through the following:

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|:---|
| On April 3, 2025 and May 30, 2025, respectively, the Company signed two promissory note purchase agreements with Mr Guangrong Ao, who is a non-affiliated shareholder of the Company with less than 1% of the total voting power of the Company. Pursuant to the purchase agreement, the Company issued two 8% promissory notes with principal amount of $200,000 and $200,000 to Mr Ao on April 3, 2025 and May 30, 2025, respectively. |
| The Company plans to initiate At-The-Market(ATM) Offering in August 2025 to raise funds. |
| The controlling shareholder undertakes to provide continuing financial support to the Company to support its operations and pay its debts as and when they fall due, for a minimum period of twelve months from the date of this report. |
| Obtain external financing. |

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**NOTE 2 – SIGNIFICANT ACCOUNTING POLICIES**

**Basis of Presentation and Principles of Consolidation**

The accompanying consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America ("U.S. GAAP") and have been consistently applied. The consolidated financial statements of the Company reflect the principal activities of the Company and its subsidiaries. All inter-company balances and transactions have been eliminated upon consolidation. The consolidated financial information as of March 31, 2025 and 2024 and for the two years ended March 31, 2025 have been prepared, pursuant to the rules and regulations of the Securities and Exchange Commission (the "SEC").

The results of subsidiaries acquired of disposed of are recorded in the consolidated income statements from the effective date of acquisition or up to the effective date of disposal, as appropriate. A subsidiary is an entity in which (i) the Company directly or indirectly controls more than 50% of the voting power, or (ii) the Company has the power to appoint or remove the majority of the members of the board of directors or to cast a majority of votes at the meetings of the board of directors or to govern the financial and operating policies of the investee pursuant to a statute or under an agreement among the shareholders or equity holders.

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| F-9 |
| *[**Table of Contents**](#Toc2)* |

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**Non-controlling interests**

For the Company's non-wholly owned subsidiaries, a non-controlling interest is recognized to reflect the portion of equity that is not attributable, directly or indirectly, to the Company. Non-controlling interests are classified as a separate line item in the equity section of the Company's consolidated balance sheets and have been separately disclosed in the Company's consolidated statements of operations and other comprehensive income (loss) to distinguish the interests from that of the Company. Cash flows related to transactions with non-controlling interests are presented under financing activities in the consolidated statements of cash flows.

**Use of Estimates**

In preparing the consolidated financial statements in conformity with US GAAP, management makes estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. These estimates are based on information as of the date of the consolidated financial statements. Significant estimates required to be made by management include, but are not limited to, the valuation of accounts receivable and related allowance for doubtful accounts, useful lives of property, plant and equipment, net and intangible assets, the recoverability of long-lived assets, inventory reserve, allowance for credit losses, goodwill impairment, income taxes related to realization of deferred tax assets and uncertain tax position, provisions necessary for contingent liabilities and purchase price allocation in connection with the business combination. The current economic environment has increased the degrees of uncertainty inherent in those estimates and assumptions, actual results could differ from those estimates.

**Business combination**

Business combinations are recorded using the acquisition method of accounting. The assets acquired, the liabilities assumed, and any non-controlling interests of the acquiree at the acquisition date, if any, are measured at their fair values as of the acquisition date. Goodwill is recognized and measured as the excess of the total consideration transferred plus the fair value of any non-controlling interest of the acquiree and fair value of previously held equity interest in the acquiree, if any, at the acquisition date over the fair values of the identifiable net assets acquired. Common forms of the consideration made in acquisitions include cash and common equity instruments. Consideration transferred in a business acquisition is measured at the fair value as of the date of acquisition. Acquisition-related expenses and restructuring costs are expensed as incurred.

Accounting Standards Codification ("ASC") 805 establishes a measurement period to provide the Company with a reasonable amount of time to obtain the information necessary to identify and measure various items in a business combination and cannot extend beyond one year from the acquisition date.

**Cash and Cash Equivalents**

The Company considers all highly liquid investment instruments with an original maturity of three months or less from the date of purchase to be cash equivalents. The Company maintains most of its bank accounts in the PRC. Cash balances in bank accounts in PRC are not insured by the Federal Deposit Insurance Corporation or other programs.

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| F-10 |
| *[**Table of Contents**](#Toc2)* |

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**Short-term investments**

Short-term investments consist primarily of investments in fixed deposits with original maturities between three months and one year and certain investments in wealth management products and other investments that the Company has the intention to redeem within one year.

**Inventories**

The Company holds inventory that is sold through retail, including e-commerce channels. Substantially all of the Company's inventories are comprised of finished goods and are reported at the lower of cost or net realizable value. Cost elements of inventories comprise the purchase price of products, shipping charges to receive products from the suppliers when they are embedded in the purchase price. Cost is determined using the first-in first-out method. The Company establishes provisions for inventories deemed excessive, slow-moving, expired, obsolete, or carried at amounts exceeding their net realizable value. Certain factors could impact the realizable value of inventory, so the Company continually evaluates the recoverability based on assumptions about customer demand and market conditions. The evaluation may take into consideration historical usage, inventory aging, expiration date, expected demand, anticipated sales price, product obsolescence and other factors. The reserve or write-down is equal to the difference between the cost of inventory and the estimated net realizable value based upon assumptions about future demand and market conditions. If actual market conditions are less favorable than those projected by management, additional inventory reserves or write-downs may be required that could negatively impact the Company's gross margin and operating results. If actual market conditions are more favorable, the Company may have higher gross margin when products that have been previously reserved or written down are eventually sold. As of March 31, 2025 and 2024, management compared the cost of inventories with their net realizable value and determined no inventory write-down was necessary.

**Prepaid expenses and other current assets**

Prepaid expenses and other current assets mainly represents cash prepaid to the technical providers. Prepaid expenses and other current assets are classified as current or non-current based on the terms of the respective agreements. These advances are unsecured and are reviewed periodically to determine whether their carrying value has become impaired. The Company considers the assets to be impaired if the collectability of the advance becomes doubtful. The Company uses the aging method to estimate the allowance for uncollectible balances. The allowance is also based on management's best estimate of specific losses on individual exposures, as well as a provision on historical trends of collections and utilizations. Actual amounts received or utilized may differ from management's estimate of credit worthiness and the economic environment.

**Goodwill**

Goodwill represents the excess of the purchase price over the fair value of the identifiable assets and liabilities acquired in a business combination.

Goodwill is not depreciated or amortized but is tested for impairment on an annual basis as of March 31, and in between annual tests when an event occurs or circumstances change that could indicate that the asset might be impaired. In accordance with the FASB ASC 350 guidance on "Testing of Goodwill for Impairment", a company first has the option to assess qualitative factors to determine whether it is more likely than not that the fair value of a reporting unit is less than its carrying amount. If the company decides, as a result of its qualitative assessment, that it is more likely than not that the fair value of a reporting unit is less than its carrying amount, the quantitative impairment test is mandatory. Otherwise, no further testing is required. The quantitative impairment test consists of a comparison of the fair value of each reporting unit with its carrying amount, including goodwill. If the carrying amount of each reporting unit exceeds its fair value, an impairment loss equal to the difference between the fair value of the reporting unit and the carrying amount will be recorded. Application of a goodwill impairment test requires significant management judgment, including the identification of reporting units, assigning assets and liabilities to reporting units, assigning goodwill to reporting units, and determining the fair value of each reporting unit. The judgment in estimating the fair value of reporting units includes estimating future cash flows, determining appropriate discount rates and making other assumptions. Changes in these estimates and assumptions could materially affect the determination of fair value for each reporting unit.

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| F-11 |
| *[**Table of Contents**](#Toc2)* |

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As of March 31, 2025, goodwill resulting from business acquisitions has two reporting units, including BW and 2Lab3. The Company evaluates whether there are indicators of goodwill impairment on a quarterly basis and performs the annual goodwill impairment assessment as of March 31. As of March 31, 2025, the Company qualitatively assessed relevant events and circumstances, including macroeconomics conditions, industry and market considerations, its overall financial performance, and concluded by weighing all these factors in their entirety that it was more likely than not the fair value of the Company's reporting unit was lower than its respective carrying value.

**Property, Plant and Equipment, net**

Property, plant and equipment, net are stated at historical cost (including all expenditures necessary to bring the asset to its intended use) less accumulated depreciation and impairment if any. Depreciation is computed using the straight-line method over the following estimated useful lives.

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|:---|:---|
|  | **Useful Lives** |
| Furniture, fixture and electronic equipment | 5 to 7 years |

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The cost and related accumulated depreciation of assets sold or otherwise retired are eliminated from the accounts and any gain or loss is included in the consolidated statements of operations and comprehensive income (loss). Expenditures for maintenance and repairs are charged to earnings as incurred, while additions, renewals and betterments, which are expected to extend the useful life of assets, are capitalized. The Company also re-evaluates the periods of depreciation to determine whether subsequent events and circumstances warrant revised estimates of useful lives.

**Intangible Assets**

Intangible assets with definite lives are initially recorded at cost. Amortization of definite-lived intangible assets is computed using the straight-line method over the estimated average useful lives. Intangible assets with indefinite lives should not be amortized but should be tested for impairment at least annually or when event occurs or circumstances that could indicate that the asset might be impaired.

The estimated useful lives of intangible assets are as follows:

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| | |
|:---|:---|
|  | **Useful life** |
| Proprietary technology | 5 years |
| Customer relationships | 5 years |

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**Impairment of Long-lived Assets other than goodwill**

The Company reviews long-lived assets, including definite-lived intangible assets, for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. If the estimated cash flows from the use of the asset and its eventual disposition are below the asset's carrying value, then the asset is deemed to be impaired and written down to its fair value. The Company recorded impairment of intangible asset amounted to $1,108,333 as of March 31, 2025 and there were no impairments of these assets as of March 31, 2024.

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| F-12 |
| *[**Table of Contents**](#Toc2)* |

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**Right-of-use assets**

The Company determines if an arrangement is a lease and determines the classification of the lease, as either operating or finance, at commencement. The Company has operating leases for office buildings and has no finance leases as of March 31, 2025 and 2024. Operating lease ROU assets and operating lease liabilities are recognized based on the present value of the lease payments over the lease term at commencement date.

As the Company's leases do not provide an implicit rate, an incremental borrowing rate is used based on the information available at the commencement date, to determine the present value of lease payments. The incremental borrowing rate approximates the rate the Company would pay to borrow in the currency of the lease payments for the weighted-average life of the lease.

The operating lease ROU assets also include any lease payments made prior to lease commencement and exclude lease incentives and initial direct costs incurred if any. Lease terms may include options to extend or terminate the lease when it is reasonably certain that the Company will exercise that option. Lease expense for minimum lease payments is recognized on a straight-line basis over the lease term.

The Company's lease agreements contain both lease and non-lease components, which are accounted for separately based on their relative standalone price.

**Fair Value of Financial Instruments**

The Financial Accounting Standards Board ("FASB") Accounting Standards Codification 820, *Fair Value Measurement and Disclosures*, requires certain disclosures regarding the fair value of financial instruments. Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. A three-level fair value hierarchy prioritizes the inputs used to measure fair value. The hierarchy requires entities to maximize the use of observable inputs and minimize the use of unobservable inputs. The three levels of inputs used to measure fair value are as follows:

● Level 1 - Quoted prices in active markets for identical assets and liabilities.

● Level 2 - Quoted prices in active markets for similar assets and liabilities, or other inputs that are observable for the asset or liability, either directly or indirectly, for substantially the full term of the financial instrument.

● Level 3 - Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets and liabilities. This includes certain pricing models, discounted cash flow methodologies and similar techniques that use significant unobservable inputs.

The Company considers the recorded value of its financial assets and liabilities, which consist primarily of short-term investments, accounts receivable, other receivable, accounts payable, short-term borrowings, accounts payable, income tax assets and liabilities and income taxes payable and to approximate the fair value of the respective assets and liabilities as of March 31, 2025 and 2024 based upon the short-term nature of the assets and liabilities.

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| F-13 |
| *[**Table of Contents**](#Toc2)* |

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**Discontinued operations**

In accordance with ASC 205-20, Reporting Discontinued Operations and Disclosures of Disposals of Components of an Entity, a disposal of a component of an entity or a group of components of an entity is required to be reported as a discontinued operation if the disposal represents a strategic shift that has (or will have) a major effect on an entity's operations and financial results when the components of an entity meets the criteria in paragraph 205-20-45-1E to be classified as held for sale. When all of the criteria to be classified as held for sale are met, including management, having the authority to approve the action, commits to a plan to sell the entity, the major current assets, other assets, current liabilities, and non-current liabilities shall be reported as components of total assets and liabilities separate from those balances of the continuing operations. At the same time, the results of all discontinued operations, less applicable income taxes (benefit), shall be reported as components of net income (loss) separate from the net income (loss) of continuing operations in accordance with ASC 205-20-45.

**Revenue Recognition**

The Company generates its revenue mainly from sales of healthcare products, automobiles, online store sales and internet information and advertising services.

The core principle of the guidance is that an entity should recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. Revenue is the transaction price the Company expects to be entitled to in exchange for the promised services in a contract in the ordinary course of the Company's activities and is recorded net of value-added tax ("VAT"). To achieve that core principle, the Company applies the following steps:

Step 1: Identify the contract (s) with a customer

Step 2: Identify the performance obligations in the contract

Step 3: Determine the transaction price

Step 4: Allocate the transaction price to the performance obligations in the contract

Step 5: Recognize revenue when (or as) the entity satisfies a performance obligation

Company generates revenues from sales of healthcare products, automobiles, online store sales and internet information and advertising services. No practical expedients were used when adoption ASC 606. Revenue recognition policies for each type of revenue stream are as follow:

*Healthcare products*

The Company sells nutraceutical and dietary supplements to third-party distributors and experience stores. Experience stores are owned by third parties, which are located in tourist sites where the sales consultants gave in-depth presentation of the origin, tradition and history of the Company's products. Tourists are guided to enjoy a presentation of traditional Chinese herb culture offered by the distributors in the experience store and be presented with the Company's healthcare products. The Company is a principal for the healthcare product sales as i) the Company produce or obtain control of the specified goods before transferring to the customers; ii) the Company has the right to determine the sales price; iii) the Company bears the risk of inventories and collection of consideration. For all sales, the Company requires a signed contract and sales order, which specifies pricing, quantity and product specifications. Under ASC 606, the Company recognizes revenue upon the satisfaction of its performance obligation, which is to transfer the control of the promised products to customers in an amount that reflects the consideration to which the Company expects to be entitled to in exchange for those products, excluding amounts collected on behalf of third parties (e.g., value-added taxes). The transfer of control of the products is satisfied at a point in time, which is the delivery of the products to distributors' or the experience stores' premises and evidenced by signed acknowledgment. The selling price, which is specified in the signed sales orders, is fixed. The Company has unconditional right to receive full payment of the sales price, upon the delivery of the products to distributors or experience stores and the signing of their acknowledgment. Distributors and experience stores are required to pay under the customary payment terms, which is generally less than six months. According to the sales agreement, the healthcare product sold cannot be returned after the acknowledgement.

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| F-14 |
| *[**Table of Contents**](#Toc2)* |

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*Automobile*

The Company sold automobiles in fiscal year 2022. For all sales, the Company requires a signed contract and sales order, which specifies pricing, quantity and product specifications. The Company is a principal for the automobiles sales as i) the Company produce or obtain control of the specified goods before transferring to the customers; ii) the Company has the right to determine the sales price; iii) the Company bears the risk of inventories and collection of consideration. Under ASC 606, the Company recognizes revenue upon the satisfaction of its performance obligation, which is to transfer the control of the promised products to customers in an amount that reflects the consideration to which the Company expects to be entitled to in exchange for those products, excluding amounts collected on behalf of third parties (e.g., value-added taxes). The transfer of control of the products is satisfied at a point in time, which is the delivery of the products to customers' premises and evidenced by signed customer acknowledgment. According to the contract, the automobile sold cannot be returned after the customer acknowledgement. The selling price, which is specified in the signed sales orders, is fixed. The Company has unconditional right to receive full payment of the sales price, upon the delivery of the products to customers and the signing of the customer acknowledgment, which is within 3 months after sales.

*Online store*

The Company sells various goods through its online store business in fiscal year 2022. For all sales, the Company requires a sales order generated by the online store platform, which specifies pricing, quantity and product specifications. The Company is a principal for the online store sales as i) the Company produce or obtain control of the specified goods before transferring to the customers; ii) the Company has the right to determine the sales price; iii) the Company bears the risk of inventories and collection of consideration. Under ASC 606, the Company recognizes revenue upon the satisfaction of its performance obligation, which is to transfer the control of the promised products to customers in an amount that reflects the consideration to which the Company expects to be entitled to in exchange for those products, excluding amounts collected on behalf of third parties (e.g., value-added taxes). The transfer of control of the products is satisfied at a point in time, which is the delivery of the products to customers' premises and evidenced by signed customer acknowledgment. The selling price, which is specified in the signed sales orders, is fixed. The Company has unconditional right to receive full payment of the sales price, upon the delivery of the products to customers and the signing of the customer acknowledgment unless the customers require sales return within 7 days after the acknowledgement. Customers are required to pay to the third-party platform before the goods were send out and the Company will receive the amount from the third-party platform after the customer sign off the acceptance form on the platform.

*Internet information and advertising service*

The Company provides internet information and advertising services online. For all sales, the Company requires a signed contract and sales order, which specifies the price and service range. The Company is a principal for the services as i) the Company has the right to determine the sales price; ii) the Company bears the collection risks; iii) the Company is responsible to the service provided. Under ASC 606, the Company recognizes revenue upon the satisfaction of its performance obligation, which is to provide specified information and advertising service to customers in an amount that reflects the consideration to which the Company expects to be entitled to in exchange for those services, excluding amounts collected on behalf of third parties (e.g., value-added taxes). The information and advertising service provided is satisfied at a point in time, which is the time when the information and advertising service is performed. No sales return is permitted after the service performed according to the contract signed. The selling price per click, which is specified in the signed sales orders, is fixed. The Company has unconditional right to receive full payment of the sales price, upon the completion of the service. Customers are required to pay to the Company in advance according to the contract.

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| F-15 |
| *[**Table of Contents**](#Toc2)* |

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All of the Company's revenues from contracts with customers represent products transferred at a point in time as control is transferred to the customer and are generated in PRC. All of the Company's revenues are recognized on a gross basis and presented as revenue on the consolidated statements of operations and comprehensive income/(loss).

The following table presents an overview of our sales from our product lines for the years ended March 31, 2025, 2024 and 2023:

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|:---|:---|:---|:---|
|  | **For the years ended March 31,** | **For the years ended March 31,** | **For the years ended March 31,** |
|  | **2025** | **2024** | **2023** |
| Internet information and advertising service | $71542 | $- | $- |
| **Revenue** | $**71542** | $**-** | $**-** |

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**Cost of Revenues**

*Healthcare products*

Cost of revenue of healthcare product is mainly composed of the cost of product sales, employees, depreciation expenses and other manufacturing overhead expenses that are directly attributable to the business.

*Automobile*

Cost of revenue of automobile is mainly composed of the cost of automobile and other miscellaneous expenses that are directly attributable to the business.

*Online store*

Cost of revenue of online store is mainly composed of the cost of goods sales and other miscellaneous expenses that are directly attributable to the business.

*Internet information and advertising service*

Cost of revenue of internet information and advertising service is mainly composed of the cost of service provided and other miscellaneous expenses that are directly attributable to the business.

**Government Grants**

Government grants are recognized when received and all the conditions for their receipt have been met. Government grants are in connection with the Company's contributions to research and development activities.

**Research and Development Costs**

Research and development activities are directed toward the development of new products as well as improvements in existing processes. These costs, which primarily include salaries, contract services, raw materials, and supplies, are expensed as incurred.

**Advertising Costs**

Advertising costs are expensed as economic benefits are consumed in accordance with ASC 720-35, "Other Expenses-Advertising Costs".

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| F-16 |
| *[**Table of Contents**](#Toc2)* |

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**Option**

The fair value of options issued pursuant to the Company's option plans at the grant date was estimated using the Black-Scholes option pricing model. This model was developed for use in estimating the fair value of traded options that have no vesting restrictions and are fully transferable. In addition, option-pricing models require the input of highly subjective assumptions, including the expected term of the options, the estimated forfeiture rates and the expected stock price volatility. The expected term of options granted represents the period of time that options granted are expected to be outstanding. The Company uses projected volatility rates based upon the Company's historical volatility rates. These assumptions are inherently uncertain. Different assumptions and judgments would affect the Company's calculation of the fair value of the underlying ordinary shares for the options granted, and the valuation results and the amount of option would also vary accordingly.

**Income Taxes**

The Company follows the liability method of accounting for income taxes in accordance with ASC 740, Income Taxes. Under this method, deferred tax assets and liabilities are determined based on the difference between the financial reporting and tax bases of assets and liabilities using enacted tax rates that will be in effect in the period in which the differences are expected to reverse. The Company records a valuation allowance to offset deferred tax assets if based on the weight of available evidence, it is more-likely-than-not that some portion, or all, of the deferred tax assets will not be realized. The effect on deferred taxes of a change in tax rate is recognized in tax expense in the period that includes the enactment date of the change in tax rate.

The Company accounted for uncertainties in income taxes in accordance with ASC 740. Interest and penalties related to unrecognized tax benefit recognized in accordance with ASC 740 are classified in the consolidated statements of operations and comprehensive income (loss) as income tax benefit (expense).

**Earnings/ Loss per Share**

Basic earnings/loss per share is computed by dividing net profit/loss attributable to holders of ordinary shares by the weighted average number of ordinary shares outstanding during the year using the two-class method. Using the two class method, net profit/loss is allocated between Class A ordinary shares, Class B ordinary shares and other participating securities (i.e. preferred shares) based on their participating rights.

The Company computes earnings per share ("EPS") in accordance with ASC 260, "Earnings per Share". ASC 260 requires companies with complex capital structures to present basic and diluted EPS. Basic EPS is measured as Net profit divided by the weighted average common shares outstanding for the period. Diluted earnings/loss per share is calculated by dividing net profit/loss attributable to ordinary shareholders as adjusted for the effect of dilutive ordinary equivalent shares, if any, by the weighted average number of ordinary and dilutive ordinary equivalents shares outstanding during the year/period. Dilutive equivalent shares are excluded from the computation of diluted earnings/loss per share if their effects would be anti-dilutive. Ordinary share equivalents consist of the ordinary shares issuable in connection with the Company's convertible redeemable preferred shares using the if-converted method, and ordinary shares issuable upon the conversion of the stock options, using the treasury stock method. Except for voting rights, the Class A and Class B ordinary shares have all the same rights and therefore the earning/loss per share for both classes of shares are identical. The earning/loss per share amounts are the same for Class A and Class B ordinary shares because the holders of each class are entitled to equal per share dividends or distributions in liquidation.

---

| |
|:---|
| F-17 |
| *[**Table of Contents**](#Toc2)* |

---

**Foreign Currency Translation**

The Company and its subsidiaries' principal country of operations is the United States. The Company maintained its financial record using the United States dollar ("US dollar") as the functional currency, while the subsidiaries of the Company in Hong Kong and mainland China maintained their financial records using RMB as the functional currencies. The consolidated statements of operations and other comprehensive income (loss) and cash flows denominated in foreign currency are translated at the average rate of exchange during the reporting period. Assets and liabilities denominated in foreign currencies at the balance sheet date are translated at the applicable rates of exchange in effect at that date. The equity denominated in the functional currency is translated at the historical rate of exchange at the time of capital contribution. Because cash flows are translated based on the average rate of exchange, amounts related to assets and liabilities reported on the consolidated statements of cash flows will not necessarily agree with changes in the corresponding balances on the consolidated balance sheets. Translation adjustments arising from the use of different exchange rates from period to period are included as a separate component of accumulated other comprehensive income (loss) included in consolidated statements of changes in shareholders' equity. Gains and losses from foreign currency transactions are included in the consolidated statement of operations and comprehensive income (loss).

The value of RMB against US$ and other currencies may fluctuate and is affected by, among other things, changes in the PRC's political and economic conditions. Any significant revaluation of RMB may materially affect the Company's financial condition in terms of US$ reporting. The following table outlines the currency exchange rates that were used in creating the consolidated financial statements in this report:

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| | | | |
|:---|:---|:---|:---|
|  | **March 31,**<br>**2025** | **March 31,**<br>**2024** | **March 31,**<br>**2023** |
| Period-end spot rate | US$1=RMB 7.1782 | US$1=RMB 7.0950 | US$1=RMB 6.8717 |
| Average rate | US$1=RMB 7.1349 | US$1=RMB 7.1157 | US$1=RMB 6.8855 |

---

**Comprehensive income (loss)**

Comprehensive income (loss) includes net loss and foreign currency translation adjustments and is reported in the consolidated statements of operations and other comprehensive income (loss).

**Segment Reporting**

An operating segment is a component of the Company that engages in business activities from which it may earn revenue and incur expenses and is identified on the basis of the internal financial reports that are provided to and regularly reviewed by the Company's chief operating decision maker ("CODM") in order to allocate resources and assess performance of the segment.

In accordance with ASC 280, Segment Reporting, operating segments are defined as components of an enterprise about which separate financial information is available that is evaluated regularly by the CODM in deciding how to allocate resources and in assessing performance. The Company uses the "management approach" in determining reportable operating segments. The management approach considers the internal organization and reporting used by the Company's CODM for making operating decisions and assessing performance as the source for determining the Company's reportable segments. The Company's CODM has been identified as the chief executive officer (the "CEO"), who reviews consolidated results when making decisions about allocating resources and assessing performance of the Company. The Company has determined that there is only one reportable operating segment.

---

| |
|:---|
| F-18 |
| *[**Table of Contents**](#Toc2)* |

---

**Concentration of Risks**

*Exchange Rate Risks*

The Company operates in China, which may give rise to significant foreign currency risks from fluctuations and the degree of volatility of foreign exchange rates between the US$ and the RMB.

*Currency Convertibility Risks*

Substantially all of the Company's operating activities are transacted in RMB, which is not freely convertible into foreign currencies. All foreign exchange transactions take place either through the People's Bank of China or other banks authorized to buy and sell foreign currencies at the exchange rates quoted by the People's Bank of China. Approval of foreign currency payments by the People's Bank of China or other regulatory institutions requires submitting a payment application form together with other information such as suppliers' invoices, shipping documents and signed contracts.

*Concentration of Credit Risks*

Financial instruments that potentially subject the Company to concentration of credit risks consist primarily of cash and cash equivalents and accounts receivable, the balances of which are stated on the consolidated balance sheets which represent the Company's maximum exposure. The Company places its cash and cash equivalents in good credit quality financial institutions in China. Concentration of credit risks with respect to accounts receivables is linked to the concentration of revenue. To manage credit risk, the Company performs ongoing credit evaluations of customers' financial condition.

*Interest Rate Risks*

The Company is subject to interest rate risk. Bank interest bearing loans are charged at variable interest rates within the reporting period. The Company is subject to the risk of adverse changes in the interest rates charged by the banks when these loans are refinanced.

**Risks and Uncertainties**

The operations of the Company are located in the PRC. Accordingly, the Company's business, financial condition, and results of operations may be influenced by political, economic, and legal environments in the PRC, as well as by the general state of the PRC economy. The Company's results may be adversely affected by changes in the political, regulatory and social conditions in the PRC. Although the Company has not experienced losses from these situations and believes that it is in compliance with existing laws and regulations including its organization and structure disclosed in Note 1, this may not be indicative of future results.

**Related Parties**

A related party is generally defined as (i) any person and or their immediate family hold 10% or more of the Company's securities (ii) the Company's management, (iii) someone that directly or indirectly controls, is controlled by or is under common control with the Company, or (iv) anyone who can significantly influence the financial and operating decisions of the Company. A transaction is considered to be a related party transaction when there is a transfer of resources or obligations between related parties. Related parties may be individuals or corporate entities.

Transactions involving related parties cannot be presumed to be carried out on an arm's-length basis, as the requisite conditions of competitive, free market dealings may not exist. Representations about transactions with related parties, if made, shall not imply that the related party transactions were consummated on terms equivalent to those that prevail in arm's-length transactions unless such representations can be substantiated. It is not, however, practical to determine the fair value of amounts due from/to related parties due to their related party nature.

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| |
|:---|
| F-19 |
| *[**Table of Contents**](#Toc2)* |

---

**Recent Accounting Pronouncements**

The Company considers the applicability and impact of all accounting standards updates ("ASUs"). Management periodically reviews new accounting standards that are issued. Under the Jumpstart Our Business Startups Act of 2012, as amended (the "JOBS Act"), the Company meets the definition of an emerging growth company, or EGC, and has elected the extended transition period for complying with new or revised accounting standards, which delays the adoption of these accounting standards until they would apply to private companies.

In November 2024, the FASB issued ASU 2024-03, "Income Statement—Reporting Comprehensive Income (Subtopic 220-40): Disaggregation of Income Statement Expenses." This pronouncement introduces new disclosure requirements aimed at enhancing transparency in financial reporting by requiring disaggregation of specific income statement expense captions. Under the new guidance, entities are required to disclose a breakdown of certain expense categories, such as: employee compensation; depreciation; amortization, and other material components. The disaggregated information can be presented either on the face of the income statement or in the notes to the financial statements, often using a tabular format. The ASU is effective for fiscal years beginning after December 15, 2025, and interim periods within those fiscal years. Early adoption is permitted. The Company is currently evaluating these new disclosure requirements and does not expect the adoption to have a material impact. In January 2025, the FASB issued ASU 2025-01, which revises the effective date of ASU 2024-03 (on disclosures about disaggregation of income statement expenses) "to clarify that all public business entities are required to adopt the guidance in annual reporting periods beginning after December 15, 2026, and interim periods within annual reporting periods beginning after December 15, 2027." Entities within the ASU's scope are permitted to early adopt the ASU.

In December 2023, the FASB issued ASU 2023-09, which is an update to Topic 740, Income Taxes. The amendments in this update related to the rate reconciliation and income taxes paid disclosures improve the transparency of income tax disclosures by requiring (1) adding disclosures of pretax income (or loss) and income tax expense (or benefit) to be consistent with U.S. Securities and Exchange Commission (the "SEC") Regulation S-X 210.4-08(h), Rules of General Application — General Notes to Financial Statements: Income Tax Expense, and (2) removing disclosures that no longer are considered cost beneficial or relevant. For public business entities, the amendments in this Update are effective for annual periods beginning after December 15, 2024. For entities other than public business entities, the amendments are effective for annual periods beginning after December 15, 2025. Early adoption is permitted for annual financial statements that have not yet been issued or made available for issuance. The amendments in this update should be applied on a prospective basis. Retrospective application is permitted. The Company does not plan to early adopt ASU 2023-09 and is evaluating the impact of adoption of ASU 2023-09 on the consolidated financial statements.

In March 2024, the FASB issued ASU 2024-01, "Compensation-Stock Compensation (Topic 718): Scope Application of Profits Interest and similar Awards". For public business entities, the amendments in this Update are effective for annual periods beginning after December 15.2024, and interim periods within those annual periods. For all other entities, the amendments are effective for annual periods beginning after December 15, 2025, and interim periods within those annual periods. Early adoption is permitted for both interim and annual financial statements that have not yet been issued or made available for issuance. If an entity adopts the amendments in an interim period, it should adopt them as of the beginning of the annual period that includes that interim period.

In October 2023, the FASB issued ASU 2023-06, Disclosure Improvements — Codification Amendments in Response to SEC's Disclosure Update and Simplification Initiative which amend the disclosure or presentation requirements of codification subtopic 230-10 Statement of Cash Flows — Overall, 250-10 Accounting Changes and Error Corrections — Overall, 260-10 Earnings Per Share — Overall, 270-10 Interim Reporting — Overall, 440-10 Commitments — Overall, 470-10 Debt — Overall, 505-10 Equity — Overall, 815-10 Derivatives and Hedging — Overall, 860-30 Transfers and Servicing — Secured Borrowing and Collateral, 932-235 Extractive Activities — Oil and Gas — Notes to Financial Statements, 946-20 Financial Services — Investment Companies — Investment Company Activities, and 974-10 Real Estate — Real Estate Investment Trusts — Overall. The amendments represent changes to clarify or improve disclosure and presentation requirements of the above subtopics. Many of the amendments allow users to more easily compare entities subject to the SEC's existing disclosures with those entities that were not previously subject to the SEC's requirements. Also, the amendments align the requirements in the codification with the SEC's regulations. For entities subject to existing SEC disclosure requirements or those that must provide financial statements to the SEC for securities purposes without contractual transfer restrictions, the effective date aligns with the date when the SEC removes the related disclosure from Regulation S-X or Regulation S-K. Early adoption is not allowed. For all other entities, the amendments will be effective two years later from the date of the SEC's removal.

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| |
|:---|
| F-20 |
| *[**Table of Contents**](#Toc2)* |

---

In January 2025, the FASB issued ASU 2025-01 Income Statement—Reporting Comprehensive Income—Expense Disaggregation Disclosures (Subtopic 220-40). The Board issued Update 2024-03 on November 4, 2024. Update 2024-03 states that the amendments are effective for public business entities for annual reporting periods beginning after December 15, 2026, and interim reporting periods beginning after December 15, 2027. Following the issuance of Update 2024-03, the Board was asked to clarify the initial effective date for entities that do not have an annual reporting period that ends on December 31 (referred to as non-calendar year-end entities). Because of how the effective date guidance was written, a non-calendar year-end entity may have concluded that it would be required to initially adopt the disclosure requirements in Update 2024-03 in an interim reporting period, rather than in an annual reporting period. The Board's intent in the basis for conclusions of Update 2024-03 is clear that all public business entities should initially adopt the disclosure requirements in the first annual reporting period beginning after December 15, 2026, and interim reporting periods within annual reporting periods beginning after December 15, 2027. However, the Board acknowledges that there was ambiguity between the intent in the basis for conclusions in Update 2024-03 and the transition guidance that was included in the Codification when Update 2024-03 was issued. We do not expect the adoption of this accounting standard to have an impact on our consolidated financial statements.

Except for the above-mentioned pronouncements, there are no new recent issued accounting standards that will have a material impact on the consolidated financial position, statements of operations and cash flows.

**NOTE 3 – PREPAID EXPENSES AND OTHER CURRENT ASSETS**

Prepaid expenses and other current assets consisted of the following as of March 31, 2025 and 2024:

---

| | | |
|:---|:---|:---|
|  | **As of**<br>**March 31,**<br>**2025** | **As of** <br>**March 31,**<br>**2024** |
| Advance payment of intangible asset | $1500000 | $1500000 |
| Others | 12208 | 1651 |
| **Total** | $**1512208** | $**1501651** |

---

**NOTE 4 – PROPERTY, PLANT AND EQUIPMENT, NET**

Property, plant and equipment consisted of the following as of March 31, 2025 and 2024:

---

| | | |
|:---|:---|:---|
|  | **As of** <br>**March 31,**<br>**2025** | **As of** <br>**March 31,**<br>**2024** |
| Furniture, fixture and electronic equipment | $24856 | $- |
| Total property plant and equipment, at cost | 24856 |  |
| Less: accumulated depreciation | - | - |
| **Property, plant and equipment, net** | $**24856** | $**-** |

---

As of March 31, 2025 and 2024, no property, plant and equipment has been pledged.

There was no depreciation expense recognized for the years ended March 31, 2025, 2024 and 2023.

There was no disposed property, plant and equipment recognized for the years ended March 31, 2025 and 2024.

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| |
|:---|
| F-21 |
| *[**Table of Contents**](#Toc2)* |

---

**NOTE 5 – INTANGIBLE ASSETS, NET**

---

| | | |
|:---|:---|:---|
|  | **As of** <br>**March 31,**<br>**2025** | **As of** <br>**March 31,**<br>**2024** |
| Proprietary technology | 1900000 | 1900000 |
| Customer relationship | 10751426 |  |
| Total intangible assets, at cost | 12651426 | 1900000 |
| Less: accumulated amortization | (791667) | (411667) |
| Less: impairment | (1108333) | - |
| **Intangible assets, net** | $**10751426** | $**1488333** |

---

As of March 31, 2025 and 2024, no intangible assets were pledged. Additions to intangible assets for the year ended March 31, 2025 amounting to $10,751,426 were acquired from combination of BW.

For the years ended March 31, 2025 and 2024, no new intangible assets were purchased. For the years ended March 31, 2025 and 2024, the Company recorded no disposal of intangible assets.

As of March 31, 2025 and 2024, the company recognized impairment of intangible assets amounted to $1,108,333 and $0, respectively.

Amortization expense was $380,000, $380,000 and $31,667 for the years ended March 31, 2025, 2024 and 2023, respectively.

Estimated future amortization expense is as follows as of March 31, 2025:

---

| | |
|:---|:---|
| **Years ending March 31,** | **Amortization**<br>**expense** |
| 2026 | $2150285 |
| 2027 | 2150285 |
| 2028 | 2150285 |
| 2029 | 2150285 |
| 2030 | 2150285 |
| **Total** | $**10751426** |

---

---

| |
|:---|
| F-22 |
| *[**Table of Contents**](#Toc2)* |

---

**NOTE 6 – GOODWILL**

Goodwill consisted of the following as of March 31, 2025 and 2024:

---

| | | |
|:---|:---|:---|
|  | **As of** <br>**March 31,**<br>**2025** | **As of** <br>**March 31,**<br>**2024** |
| Goodwill, gross (Note 11) | $20876787 | $5184036 |
| Less: impairment | (3376186) | (1807850) |
| **Goodwill, net** | $**17500601** | $**3376186** |

---

The changes in the carrying amount of goodwill for the years ended March 31, 2025 and 2024 were as follow:

---

| | | |
|:---|:---|:---|
|  | **As of** <br>**March 31,**<br>**2025** | **As of** <br>**March 31,**<br>**2024** |
| Goodwill | $3376186 | $5184036 |
| Acquisitions (Note 11) | 17500601 |  |
| Impairment | (3376186) | (1807850) |
| **Goodwill, net** | $**17500601** | $**3376186** |

---

The goodwill generated from the expected synergies from the output capacity of the transaction and service scenario of E-commerce sales and developing AI-powered applications, respectively.

The Company assessed qualitative factors and performed the quantitative impairment test. As of March 31, 2025 and 2024, the Company recognized impairment amounted to $3,376,186 and $1,807,850, respectively.

---

| |
|:---|
| F-23 |
| *[**Table of Contents**](#Toc2)* |

---

**NOTE 7 – LEASES**

Effective on January 1, 2021, the Company adopted Topic 842. At the inception of a contract, the Company determines if the arrangement is, or contains, a lease. ROU assets represent the Company's right to use an underlying asset over the lease term and lease liability represent the Company's obligation to make lease payments derived from the lease.

Operating lease ROU asset and liability are recognized at commencement date based on the present value of lease payments over the lease terms. Rent expense is recognized on a straight-line basis over the lease terms.

As of March 31, 2025, the Company had the following non-cancellable lease contract.

---

| | |
|:---|:---|
| **Description of the lease** | **Lease term** |
| Office premises | 2 to 3 years |

---

Balance sheet information related to operating leases right-of-use assets and lease liabilities is as follows:

(a) Amount recognized in the consolidated balance sheet:

---

| | | |
|:---|:---|:---|
|  | **As of** <br>**March 31,**<br>**2025** | **As of** <br>**March 31,**<br>**2024** |
| Right-of-use assets | $101588 | $- |
| Right-of-use assets - accumulated amortization | - | - |
| **Right-of-use assets, net** | $**101588** | $**-** |

---

---

| | | |
|:---|:---|:---|
|  | **As of** <br>**March 31,**<br>**2025** | **As of** <br>**March 31,**<br>**2024** |
| Lease liabilities, current | $101588 | $- |
| Lease liabilities, non-current | - | - |
| **Total operating lease liabilities** | $**101588** | $**-** |

---

---

| |
|:---|
| F-24 |
| *[**Table of Contents**](#Toc2)* |

---

(b) The weighted average remaining lease terms and discount rates for the operating lease as of March 31, 2025 and 2024 are as follows:

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| | | |
|:---|:---|:---|
|  | **As of** <br>**March 31,**<br>**2025** | **As of** <br>**March 31,**<br>**2024** |
| Remaining lease term and discount rate: |  |  |
| Weighted average remaining lease term (years) | 0.46 |  |
| Weighted average discount rate | 7.5% |  |

---

Maturity analysis of operating lease liability as of March 31, 2025 is as follows:

---

| | |
|:---|:---|
| **Operating lease payment** | **As of**<br>**March 31,**<br>**2025** |
| Within one year | 106105 |
| One to three years | - |
| Total future minimum lease payments | $106105 |
| Less: imputed interest | (4517) |
| **Total** | **101588** |

---

**NOTE 8 – RELATED PARTY TRANSACTIONS AND BALANCES**

*a.* *Nature of relationships with related parties*

---

| | |
|:---|:---|
| **Name of related parties** | **Relationship with the Company** |
| Minzhu Xu | Chairperson of the Board |
| Shunqi Du | Legal representative of Paranovus Hainan |
| Shuang Wu | Former CEO of Bomie Wookoo Inc. |

---

*b.* *Dues to the related parties*

---

| | | |
|:---|:---|:---|
|  | **As of** <br>**March 31,** | **As of** <br>**March 31,** |
| Due to the related parties | **2025** | **2024** |
| Minzhu Xu | 1777512 |  |
| Shunqi Du | 70646 |  |
| Shuang Wu | 98469 | - |
| **Total** | $**1946627** | $**-** |

---

Balances due to Minzhu Xu, Shunqi Du and Shuang Wu are the result of the normal business transactions stated above. The balances were all unsecured, non-interest bearing and payable on demand.

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| |
|:---|
| F-25 |
| *[**Table of Contents**](#Toc2)* |

---

**NOTE 9 – OTHER PAYABLES AND ACCRUED LIABILITIES**

Other payables and accrued liabilities consisted of the following as of March 31, 2025 and 2024:

---

| | | |
|:---|:---|:---|
|  | **As of**<br>**March 31,**<br>**2025** | **As of**<br>**March 31,**<br>**2024** |
| Advances from customers | $73321 | $73953 |
| Loan payable to the third party | 2250000 | 2250000 |
| Interest payable | 218630 | 39167 |
| Deposit | 50000 | 50000 |
| Others | 29612 | 32955 |
| **Total** | $**2621563** | $**2446075** |

---

**NOTE 10 – SHAREHOLDERS' EQUITY**

**Ordinary shares**

Paranovus Cayman was incorporated under the laws of the Cayman Islands on February 9, 2018. The Company issued 50,000 ordinary shares with par value of $1 to exchange for the ownership in Fujian Happiness from the former shareholders to Happiness Fuzhou.

A Reorganization of the legal structure was completed in August 2018. The Reorganization involved the incorporation of Paranovus Entertainment Technology Limited, a Cayman Islands holding company; Happiness Biology Technology Group Limited, a holding company established in Hong Kong, PRC; Happiness (Fuzhou) E-commerce Co., Ltd, a holding company established in Fujian, PRC; and the transfer of 100% ownership of Fujian Happiness from the former shareholders to Happiness Fuzhou.

In May 2018, the Company received $627,628 (RMB 4.0 million) from two investors into Fujian Happiness.

On March 4, 2019, the Company subdivided its 50,000 ordinary shares into 90,000,000 Ordinary shares and 10,000,000 Preferred shares. The authorized ordinary shares became 100,000,000 shares and the par value changed from $1 to $0.0005. On the same day, the Company cancelled 77,223,100 ordinary shares and sold additional 223,100 ordinary shares. The Company has retrospectively reflected the stock subdivision and cancellation in all periods presented in these financial statements.

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| |
|:---|
| F-26 |
| *[**Table of Contents**](#Toc2)* |

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On October 25, 2019, the Company announced the closing of its initial public offering of 2,000,000 ordinary shares, US$0.0005 par value per share ("Ordinary Shares") at an offering price of $5.50 per share for a total of $11,000,000 in gross proceeds. The Company raised total net proceeds of $9,342,339 after deducting underwriting discounts and commissions and offering expenses.

The Company entered several Securities Purchase Agreement from September 2020 through March 2021. Pursuant to which, the Company issued 5,100,000 ordinary shares to the purchasers with a total consideration amounted $10,965,703. The Company collected total net proceeds of $10,725,700 after deducting commissions and offering expenses.

On March 15, 2021, the Company issued 381,580 ordinary shares to its management and employees for their service. The Company recorded compensation cost $778,423 according to the fair value of the shares issued.

On June 21, 2021, the Company issued an aggregate of 231,445 Class A ordinary shares of the Company to certain employees and a director for their services. The total compensation cost was $351,796.

On June 25, 2021, the Company entered several Securities Purchase Agreement with non-US investors. Pursuant to which, the Company issued 1,240,000 Class A ordinary shares to the purchasers with a total consideration amounted $2,157,600. The Company collected total net proceeds of $2,157,600 after deducting commissions and offering expenses.

On October 14, 2021, the Company issued an aggregate of 113,458 Class A ordinary shares of the Company to certain employees and a director for their services. The total compensation cost was $99,843.

On October 20, 2021, the Company entered into a certain equity agreement with Shennong for the purchase of 70% of the equity interest of Shennong at a consideration of RMB 103.0 million (approximately $16.1 million). The total consideration paid for the Equity Interests are RMB 48.0 million (approximately $7.5 million) in cash and 4,200,000 Class A ordinary shares of the Company. The Company issued an aggregate of 4,200,000 ordinary shares of the Company to certain transaction on November 12, 2021. The total compensation cost was $3,736,320.

On October 21, 2021, the Company held its annual meeting of shareholders for its fiscal year ending March 31, 2021. The Company approved as a special resolution an alteration to the share capital of the Company by: a: the conversion of each issued paid up Ordinary Share with a par value of $0.0005 each into stock (the "Stock"); b: the alteration of the authorized issued share capital of the Company from (i) US$50,000 divided into 90,000,000 Ordinary Shares with a par value of US$0.0005 each and 10,000,000 Preferred Shares with a par value of US$0.0005 each; to (ii) 70,000,000 Class A Ordinary Shares with a par value of $0.0005 each, 20,000,000 Class B Ordinary Shares with a par value of US$0.0005 each and 10,000,000 Preferred Shares with a par value of US$0.0005 each. Class A Ordinary Shares was entitled to one vote per share and to receive notice of, attend at and vote as a member at any general meeting of the Company; and be entitled to such dividends as the Board may from time to time declare; and generally be entitled to enjoy all of the rights attaching to shares. Class B Ordinary Shares was entitled to twenty (20) votes per share and to receive notice of, attend at and vote as a member at any general meeting of the Company; be entitled to such dividends as the Board may from time to time declare; and generally be entitled to enjoy all of the rights attaching to shares.

On January 12, 2022, the Company issued an aggregate of 1,133,200 Class A ordinary shares of the Company to certain employees for their services. The total compensation cost was $634,592.

On January 20, 2022, the Company entered several Securities Purchase Agreement with non-US persons. Pursuant to which, the Company issued 12,500,000 Class A ordinary shares to the purchasers with a total consideration amounted $10,000,000. The Company collected total net proceeds of $10,000,000 after deducting commissions and offering expenses.

On March 4, 2022, the Company entered into a certain equity transfer agreement with Hekangyuan for the purchase of 100% of the equity interest of Hekangyuan at a consideration of $12.0 million. The total consideration paid for the Equity Interests are $8.0 million in cash and 10,000,000 Class A ordinary shares of the Company. The Company issued an aggregate of 10,000,000 ordinary shares of the Company to certain transaction on March 7, 2022. The total compensation cost was $3,560,000.

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| |
|:---|
| F-27 |
| *[**Table of Contents**](#Toc2)* |

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On March 10, 2022, the Company entered several Securities Purchase Agreement with non-US investors. Pursuant to which, the Company issued 19,200,000 Class A ordinary shares to the purchasers with a total consideration amounted $6,720,000. The Company collected total net proceeds of $6,720,000 after deducting commissions and offering expenses.

On April 21, 2022, 150,000 Class A Ordinary Shares owned by Xuezhu Wang were reconverted into Class B Ordinary Shares.

On October 10, 2022, a Share Consolidation of the Company's ordinary shares at a ratio of one-for-twenty (the "Share Consolidation") was effected as determined by the Board of Directors. At the time the Share Consolidation is effective, our authorized ordinary shares will be consolidated at the same ratio. The authorized share capital of the Company shall be decreased from an authorized share capital of US$50,000 divided into 70,000,000 Class A ordinary shares, par value US$0.0005 each, 20,000,000 Class B ordinary shares, par value US$0.0005 each, and 10,000,000 preferred shares with a par value of US$0.0005 each to an authorized share capital of US$50,000 divided into 3,500,000 Class A ordinary shares, par value US$0.01 each, 1,000,000 Class B ordinary shares, par value US$0.01 each, and 500,000 preferred shares, par value US$0.01 each.

On December 27, 2022, the Company entered into certain securities purchase agreement (the "SPA") with certain sophisticated purchasers (the "Purchasers"), pursuant to which the Company agreed to sell 3,000,000 Class A ordinary shares, par value $0.01 per share, at a per share purchase price of $2.00. On April 10, 2023, the Company cancelled the 1,000,000 Class A Ordinary shares issued to the two Purchasers. The gross proceeds to the Company from this transaction were approximately $4 million.

On March 14, 2022, the Company entered into a certain equity transfer agreement with 2Lab3 LLC for the purchase of 100% of the equity interest of 2Lab3 LLC at a consideration of approximately $6 million. The total consideration paid for the Equity Interests is 1,375,000 Class A ordinary shares of the Company. The Company issued an aggregate of 1,375,000 Class A ordinary shares of the Company to certain transaction on March 28, 2023. The total compensation cost was $7,081,250.

On July 17, 2024, the Company entered into a certain securities purchase agreement (the "SPA") with certain investors (the "Purchasers"), pursuant to which the Company agreed to sell up to 60,000,000 Class A ordinary shares, par value $0.01 each (the "Class A Ordinary Shares"), at a per share purchase price of $0.45 (the "Offering"). The gross proceeds to the Company from this Offering are approximately $27,000,000, before deducting any fees or expenses. The transaction was closed on August 1, 2024.

**Non-controlling Interest**

Non-controlling interests represent the interest of non-controlling shareholders in Paranovus Entertainment Technology Limited based on their proportionate interests in the equity of that company adjusted for their proportionate share, which is 39% to 49% of the particular subsidiaries, of income or losses from operations. See *Note 1* for details of the Company and its operating subsidiaries ownership.

**Statutory reserve**

The Company is required to make appropriations to certain reserve funds, comprising the statutory reserve and the discretionary reserve, based on after-tax net income determined in accordance with generally accepted accounting principles of the PRC ("PRC GAAP"). Appropriations to the statutory surplus reserve are required to be at least 10% of the after-tax net income determined in accordance with PRC GAAP until the reserve is equal to 50% of the entity's registered capital. Appropriations to the discretionary surplus reserve are made at the discretion of the Board of Directors.

---

| |
|:---|
| F-28 |
| *[**Table of Contents**](#Toc2)* |

---

**Warrants**

In October 2019, the Company granted to the underwriters warrants to purchase up to a total of 184,000 ordinary shares (equal to 8% of the aggregate number of ordinary shares sold in the offering, if over-allotment shares are placed by the underwriters. Without over-allotment share issuance, a total of 160,000 warrants will be granted). The warrants will be exercisable at an exercise price equal to one hundred twenty percent (120%) of the offering price, in whole or in parts, at any time from issuance and expire five (5) years from the effective date of the offering.

The Company's outstanding and exercisable warrants as of March 31, 2025 are presented below:

---

| | | | | |
|:---|:---|:---|:---|:---|
|  | **Number**<br>**Outstanding** | **Weighted**<br>**Average**<br>**Exercise**<br>**Price** | **Contractual**<br>**Life in Years** | **Intrinsic**<br>**Value** |
| Warrants Outstanding as of March 31, 2020 | 160000 | $6.60 | 4.6 | $- |
| Warrants granted |  | $- |  |  |
| Warrants forfeited |  |  |  |  |
| Warrants exercised |  | $- |  |  |
| Warrants Outstanding as of March 31, 2021 | 160000 | $6.60 | 3.6 | $- |
| Warrants Outstanding as of March 31, 2022 | 160000 | $6.60 | 2.6 | $- |
| Warrants Outstanding as of March 31, 2023 | 8000 | 132.00 | 1.6 |  |
| Warrants Outstanding as of March 31, 2024 | 8000 | 132.00 | 0.6 |  |
| Warrants Outstanding as of March 31, 2025 |  |  |  |  |

---

**NOTE 11 – BUSINESS COMBINATION**

*Acquisition of 2Lab3*

On March 28, 2023, the Company acquired 100% equity interest of 2Lab3 with 1,375,000 Class A Ordinary Shares of the Company for investing with non-cash transactions. The Class A Ordinary Shares were valued at $5.15 per share. 2Lab3 is a company incorporated in Delaware of United States. It used to consulting, marketing, design, and software development services to empower its clients to adapt and thrive in the Web 3.0 era, and now has transitioned to developing AI-powered applications. The results of 2Lab3 have been included in the consolidated financial statements of the Company since the acquisition date of March 28, 2023.

The Company engaged an independent valuation firm to assist management in valuing assets acquired, liabilities assumed, intangible assets identified and contingent consideration as of the acquisition day.

The identifiable intangible assets acquired upon acquisition were proprietary technology with definite useful life. All other current assets and current liabilities carrying value approximated fair value at the time of acquisition. The fair value of the consideration was based on the closing market price of the Company's common share on the acquisition date.

---

| |
|:---|
| F-29 |
| *[**Table of Contents**](#Toc2)* |

---

According to the independent valuation report, the purchase price was allocated to the assets acquired and liabilities assumed based on their fair values was as follows:

---

| | |
|:---|:---|
| **Fair value of total consideration transferred:** |  |
| Equity instrument (1.374 million Class A Ordinary Shares issued) | $7081250 |
| **Subtotal** | $**7081250** |
| **Recognized amounts of identifiable assets acquired and liability assumed:** |  |
| Cash | $555 |
| Intangible asset –proprietary technology | 1900000 |
| Current liabilities | (3341) |
| **Total identifiable net assets** | $**1897214** |
| Fair value of non-controlling interests | - |
| **Goodwill<sup>\*</sup>** | $**5184036** |

---

\* The goodwill generated from the expected synergies from the output capacity of the transaction and service scenario of developing AI-powered applications.

*Acquisition of BW*

On March 25, 2025, the Company acquired 51% equity interest of BW and its subsidiaries with total cash consideration of $22.44 million. BW is a company incorporated in New York, the United States and has no substantive operations other than holding all of the equity interest of Wookoo and Bomie. Wookoo is focus on e-commerce sales and Bomie US is focus on trading and providing E-commerce solutions. The acquisition has further strengthened the E-commerce network of the Company. The results of BW and its subsidiaries have been included in the consolidated financial statements of the Company since the acquisition date of March 25, 2025.

The Company engaged an independent valuation firm to assist management in valuing assets acquired, liabilities assumed, intangible assets identified and contingent consideration as of the acquisition day.

The identifiable intangible assets acquired upon acquisition were customer relationships with definite useful life. All other current assets and current liabilities carrying value approximated fair value at the time of acquisition. The fair value of the consideration was based on closing market price of the Company's common share on the acquisition date.

According to the independent valuation report, the purchase price was allocated to the assets acquired and liabilities assumed based on their fair values was as follows:

---

| | |
|:---|:---|
| **Fair value of total consideration transferred:** |  |
| Cash consideration | $22440000 |
| **Subtotal** | $22440000 |
| **Recognized amounts of identifiable assets acquired and liability assumed:** |  |
| Cash | $152456 |
| Current assets other than cash | 665180 |
| Property, plant and equipment, net | 24856 |
| Intangible asset – customer relationships | 10751426 |
| Operating lease assets | 101588 |
| Current liabilities | (2010410) |
| **Total identifiable net assets** | $9685096 |
| Fair value of non-controlling interests | 4745697 |
| **Goodwill<sup>\*</sup>** | $**17500601** |

---

\* The goodwill generated from the expected synergies from the cooperation of providing TikTok-related e-commerce solutions for customers, leveraging its network in the e-commerce industry and utilizing influencer collaboration, live-streaming sales, advertising campaigns, and data-driven strategic consulting to increased visibility and engagement with BW.

The business combination accounting is provisionally complete for all assets and liabilities acquired on the acquisition date and the Company will continue to evaluate the asset values within the 1-year timeframe according to ASC 805.

---

| |
|:---|
| F-30 |
| *[**Table of Contents**](#Toc2)* |

---

**NOTE 12 – DISCONTINUED OPERATIONS**

*Disposition of the automobile segment*

On July 5, 2024, the Company terminated the automobile business and transferred the 100% of the equity interests of Happiness Hong Kong and its subsidiaries together with the automobile-related business to a third party for HK$10,000 consideration by the strategic decision.

*Disposition of the healthcare and E-commerce segment*

On April 10, 2023, the Company entered into an agreement to transfer 100% of the equity interests in the Fujian Happiness Biotech Co., Limited ("Fujian Happiness") and its subsidiaries to the third-party Fujian Hengda Beverage Co., Ltd ("Fujian Hengda"), a PRC company which is not affiliate of the Company or any of its directors or officers. Pursuant to the Disposition SPA, the Purchaser agreed to purchase the Fujian Happiness in exchange for cash consideration of RMB 78 million (approximately $11.3 million, the "Purchase Price"). Upon the closing of the transaction (the "Disposition") contemplated by the Disposition SPA, Fujian Hengda will become the sole shareholder of Fujian Happiness and as a result, assume all assets and liabilities of Fujian Happiness and subsidiaries owned or controlled by Fujian Happiness. The closing was approved by a majority of the Company's shareholders on July 31, 2023.

On August 28, 2023, the Company's indirect wholly owned subsidiary (the "Seller"), Happy Buy (Fujian) Network Technology Co., Ltd. ("Happy Buy") and Shunchang Jinyifu trading Co., Ltd ("Shunchang Jinyi"), a PRC company which is not affiliate of the Company or any of its directors or officers (the "Purchaser") entered into certain share purchase agreement (the "Disposition SPA"). Pursuant to the Disposition SPA, the Purchaser agreed to purchase the Happy Buy in exchange for cash consideration of RMB 5 million (approximately $0.7 million, the "Purchase Price"). Upon the closing of the transaction (the "Disposition") contemplated by the Disposition SPA, the Buyer will become the sole shareholder of Happy Buy and as a result, assume all assets and liabilities of Happy Buy and subsidiaries owned or controlled by Happy Buy. The transaction was closed on September 1, 2023.

On July 31, 2023, the Company disposed all of healthcare business for approximately $11.3 million (RMB 78 million) consideration.

On September 30, 2023, the Company disposed all of E-commerce business for approximately $0.7 million (RMB 5 million) consideration.

The Company no longer retained any financial interest over automobiles sales, healthcare and online store business from July 6, 2024, August 1, 2023 and October 1, 2023, respectively, and accordingly deconsolidated both businesses' financial statements from the Company's consolidated financial statements. The disposal of these businesses represented a strategic shift and has a major effect on the Company's result of operations.

---

| |
|:---|
| F-31 |
| *[**Table of Contents**](#Toc2)* |

---

The Company calculated a loss incurred from the above-mentioned dispositions as follows:

---

| | |
|:---|:---|
|  | **For the year**<br>**ended**<br>**March 31,** <br>**2025** |
| Consideration | $1280 |
| Cash and cash equivalents | 86954 |
| Accounts receivable, net | 11297 |
| Prepaid expenses and other current assets | 830120 |
| Property, plant and equipment, net | 11974 |
| Long-term investment | 1812920 |
| Other payables and accrued liabilities | (2783388) |
| Net assets of discontinued operations | (30123) |
| Non-controlling interest of discontinued operations | $409875 |
| Foreign exchange gain or losses | (11249) |
| Less: net assets of discontinued operations contributable to the Company | 368503 |
| Loss on disposal of discontinued operations | $(367223) |

---

The assets and liabilities for discontinued operations comprised the following items as of March 31, 2024:

---

| | |
|:---|:---|
|  | **March 31,** <br>**2024** |
| *Current assets for discontinued operations* |  |
| Cash and cash equivalents | $602463 |
| Accounts receivable, net | 11360 |
| Prepaid expenses and other current assets | 394458 |
| Total | $1008281 |
| *Non-current assets for discontinued operations* |  |
| Property, plant and equipment, net | $12596 |
| Total | $12596 |
| **Total assets** | $**1020877** |
| *Current liabilities for discontinued operations* |  |
| Other payables and accrued liabilities | $114306 |
| Total | $114306 |
| **Total liabilities** | $**114306** |

---

---

| |
|:---|
| F-32 |
| *[**Table of Contents**](#Toc2)* |

---

The operating results from discontinued operations included in the Company's consolidated statements of operations and other comprehensive income (loss) were as follows for the years ended March 31, 2025, 2024 and 2023:

---

| | | | |
|:---|:---|:---|:---|
|  | **For the years ended March 31,** | **For the years ended March 31,** | **For the years ended March 31,** |
|  | **2025** | **2024** | **2023** |
| Major classes of line items constituting net loss of discontinued operations |  |  |  |
| Revenues | $- | $26408122 | $98152825 |
| Cost of revenues | (15) | (25148902) | (93098463) |
| Selling and marketing | (905694) | (12258710) | (53790207) |
| General and administrative | (29774) | (1900701) | (6386621) |
| Research and development |  | (190575) | (1397118) |
| Goodwill impairment |  |  | (7872696) |
| Other expense that are not major | (76) | (190421) | (57880) |
| Loss from discontinued operations, before income tax | (935559) | (13281187) | (64450160) |
| Income tax benefit (expense) |  | 95630 | (3457080) |
| Loss from discontinued operations, net of income tax | (935559) | (13185557) | (67907240) |
| (Loss) gain on disposal of discontinued operations | (367223) | 7547428 |  |
| Net loss from discontinued operations, net of income tax | $(1302782) | $(5638129) | $(67907240) |

---

**NOTE 13 – COMMITMENTS AND CONTINGENCIES**

As of March 31, 2025 and 2024, Company has no significant leases or unused letters of credit.

From time to time, the Company is involved in various legal proceedings, claims and other disputes arising from commercial operations, employees, and other matters which, in general, are subject to uncertainties and in which the outcomes are not predictable. The Company determines whether an estimated loss from a contingency should be accrued by assessing whether a loss is deemed probable and can be reasonably estimated. Although the Company can give no assurances about the resolution of pending claims, litigation or other disputes and the effect such outcomes may have on the Company, the Company believes that any ultimate liability resulting from the outcome of such proceedings, to the extent not otherwise provided or covered by insurance, will not have a material adverse effect on our consolidated financial position or results of operations or liquidity. As of March 31, 2025 and 2024, Company has no pending legal proceedings.

**NOTE 14 – CUSTOMER AND SUPPLIER CONCENTRATION**

Significant customers and suppliers are those that account for greater than 10% of the Company's revenues and purchases.

The Company's sales are made to customers that are located primarily in China. For the years ended March 31, 2025, 2024 and 2023, no individual customer accounted for more than 10% of the Company's total revenues.

For the year ended March 31, 2025, 2024 and 2023, no individual supplier accounted for more than 10% of the Company's total purchase.

**NOTE 15 – SUBSEQUENT EVENTS** 

The Company evaluated all events and transactions that occurred after March 31, 2024 through the date of the issuance of the consolidated financial statements on August 4, 2025 and noted that there were no other material subsequent events.

---

| |
|:---|
| F-33 |
| [*Table of Contents*](#toc) |

---

**ITEM 19. EXHIBITS**

**EXHIBIT INDEX**

---

| | | | | | |
|:---|:---|:---|:---|:---|:---|
| | | **Incorporated by**<br>**reference to** | **Incorporated by**<br>**reference to** | **Incorporated by**<br>**reference to** | |
| <br>**Exhibit No.** | <br>**Description** | **Form Exhibit Filing Date** | **Form Exhibit Filing Date** | **Form Exhibit Filing Date** | **Filed**<br>**herewith** |
| [1.1](http://www.sec.gov/Archives/edgar/data/1751876/000121390019006673/ff12019a2ex3-1_happiness.htm) | [Original Memorandum and Articles of Association dated March 4, 2019](http://www.sec.gov/Archives/edgar/data/1751876/000121390019006673/ff12019a2ex3-1_happiness.htm) | F-1 | 3.1 | March 8, 2019 |  |
| [1.2](http://www.sec.gov/Archives/edgar/data/1751876/000121390019005114/ff12019a1ex3-1_happiness.htm) | [Amended and Restated Articles of Association, effective on March 28, 2019](http://www.sec.gov/Archives/edgar/data/1751876/000121390019005114/ff12019a1ex3-1_happiness.htm) | F-1 | 3.1 | March 28, 2019 |  |
| [1.3](http://www.sec.gov/Archives/edgar/data/1751876/000121390019005114/ff12019a1ex3-2_happiness.htm) | [First Amended and Restated Memorandum of Association, effective on March 28, 2019](http://www.sec.gov/Archives/edgar/data/1751876/000121390019005114/ff12019a1ex3-2_happiness.htm) | F-1 | 3.2 | March 28, 2019 |  |
| [1.4](http://www.sec.gov/Archives/edgar/data/1751876/000121390022048236/f20f2022ex1-4_happiness.htm) | [Amended and Restated Memorandum and Articles of Association, effective on October 21, 2021](http://www.sec.gov/Archives/edgar/data/1751876/000121390022048236/f20f2022ex1-4_happiness.htm) | 20-F | 1.4 | August 15, 2022 |  |
| [1.5](http://www.sec.gov/Archives/edgar/data/1751876/000121390023026272/f20f2022a2ex1-5_paranovus.htm) | [Amended and Restated Memorandum and Articles of Association, effective on October 7, 2022](http://www.sec.gov/Archives/edgar/data/1751876/000121390023026272/f20f2022a2ex1-5_paranovus.htm) | 20-F/A | 1.5 | April 3, 2023 |  |
| [1.6](http://www.sec.gov/Archives/edgar/data/1751876/000121390023026272/f20f2022a2ex1-6_paranovus.htm) | [Amended and Restated Memorandum and Articles of Association, effective on March 10, 2023](http://www.sec.gov/Archives/edgar/data/1751876/000121390023026272/f20f2022a2ex1-6_paranovus.htm) | 20-F/A | 1.6 | April 3, 2023 |  |
| [1.7](http://www.sec.gov/Archives/edgar/data/1751876/000192998024000320/pavs_ex17.htm) | [Amended and Restated Memorandum and Articles of Association, effective on January 19, 2024](http://www.sec.gov/Archives/edgar/data/1751876/000192998024000320/pavs_ex17.htm) | 20-F | 1.7 | July 31, 2024 |  |
| [2.1](http://www.sec.gov/Archives/edgar/data/1751876/000192998024000320/pavs_ex21.htm) | [Specimen Certificate for Class A Ordinary Shares](http://www.sec.gov/Archives/edgar/data/1751876/000192998024000320/pavs_ex21.htm) | 20-F | 2.1 | July 31, 2024 |  |
| [2.2](http://www.sec.gov/Archives/edgar/data/1751876/000192998024000320/pavs_ex22.htm) | [Description of Securities](http://www.sec.gov/Archives/edgar/data/1751876/000192998024000320/pavs_ex22.htm) | 20-F | 2.2 | July 31, 2024 |  |
| [4.1](http://www.sec.gov/Archives/edgar/data/1751876/000121390023030648/ea177001ex10-1_paranovus.htm) | [Form of Securities Purchase Agreement, by and between the Company and the Purchaser, dated April 10, 2023](http://www.sec.gov/Archives/edgar/data/1751876/000121390023030648/ea177001ex10-1_paranovus.htm) | 6-K | 10.1 | April 18, 2023 |  |
| [4.2](http://www.sec.gov/Archives/edgar/data/1751876/000121390023087297/ea188318ex10-1_paranovus.htm) | [Software Development Agreement, by and between the Company and Blueline Studios Inc., dated November 12, 2023](http://www.sec.gov/Archives/edgar/data/1751876/000121390023087297/ea188318ex10-1_paranovus.htm) | 6-K | 10.1 | November 15, 2023 |  |
| [4.3](http://www.sec.gov/Archives/edgar/data/1751876/000192998024000320/pavs_ex43.htm) | [Promissory Note Purchase Agreement, by and between the Company and the Investor, dated November 9, 2023](http://www.sec.gov/Archives/edgar/data/1751876/000192998024000320/pavs_ex43.htm) | 20-F | 4.3 | July 31, 2024 |  |
| [4.4](http://www.sec.gov/Archives/edgar/data/1751876/000192998024000320/pavs_ex44.htm) | [Promissory Note, dated November 14, 2023](http://www.sec.gov/Archives/edgar/data/1751876/000192998024000320/pavs_ex44.htm) | 20-F | 4.4 | July 31, 2024 |  |
| [4.5](http://www.sec.gov/Archives/edgar/data/1751876/000192998024000320/pavs_ex45.htm) | [Promissory Note Purchase Agreement, by and between the Company and the Investor, dated January 18, 2024](http://www.sec.gov/Archives/edgar/data/1751876/000192998024000320/pavs_ex45.htm) | 20-F | 4.5 | July 31, 2024 |  |
| [4.6](http://www.sec.gov/Archives/edgar/data/1751876/000192998024000320/pavs_ex46.htm) | [Promissory Note, dated January 18, 2024](http://www.sec.gov/Archives/edgar/data/1751876/000192998024000320/pavs_ex46.htm) | 20-F | 4.6 | July 31, 2024 |  |
| [4.7](http://www.sec.gov/Archives/edgar/data/1751876/000192998024000320/pavs_ex47.htm) | [Promissory Note Purchase Agreement, by and between the Company and the Investor, dated March 12, 2024](http://www.sec.gov/Archives/edgar/data/1751876/000192998024000320/pavs_ex47.htm) | 20-F | 4.7 | July 31, 2024 |  |
| [4.8](http://www.sec.gov/Archives/edgar/data/1751876/000192998024000320/pavs_ex48.htm) | [Promissory Note, dated March 12, 2024](http://www.sec.gov/Archives/edgar/data/1751876/000192998024000320/pavs_ex48.htm) | 20-F  | 4.8  | July 31, 2024  |  |
| [4.9](http://www.sec.gov/Archives/edgar/data/1751876/000192998024000151/pavs_ex101.htm) | [Employment Agreement, by and between the Company and Ms. Ling Guo, dated April 29, 2024](http://www.sec.gov/Archives/edgar/data/1751876/000192998024000151/pavs_ex101.htm) | 6-K | 10.1 | May 3, 2024 |  |
| [4.10](http://www.sec.gov/Archives/edgar/data/1751876/000192998024000151/pavs_ex102.htm) | [Employment Agreement, by and between the Company and Ms. Xiaoyue Zhang, dated April 29, 2024](http://www.sec.gov/Archives/edgar/data/1751876/000192998024000151/pavs_ex102.htm) | 6-K | 10.2 | May 3, 2024 |  |
| [4.11](http://www.sec.gov/Archives/edgar/data/1751876/000192998024000151/pavs_ex103.htm) | [Director Offer Letter, by and between the Company and Ms. Xiaoyue Zhang, dated April 29, 2024](http://www.sec.gov/Archives/edgar/data/1751876/000192998024000151/pavs_ex103.htm) | 6-K | 10.3 | May 3, 2024 |  |
| [4.12](http://www.sec.gov/Archives/edgar/data/1751876/000192998024000151/pavs_ex104.htm) | [Director Offer Letter, by and between the Company and Ms. Minzhu Xu, dated April 29, 2024](http://www.sec.gov/Archives/edgar/data/1751876/000192998024000151/pavs_ex104.htm) | 6-K | 10.4 | May 3, 2024 |  |
| [4.13](http://www.sec.gov/Archives/edgar/data/1751876/000192998024000189/pavs_ex101.htm) | [Director Offer Letter, by and between the Company and Mr. George Yijian Xu, dated May 15, 2024](http://www.sec.gov/Archives/edgar/data/1751876/000192998024000189/pavs_ex101.htm) | 6-K | 10.1 | May 15, 2024 |  |
| [4.14](http://www.sec.gov/Archives/edgar/data/1751876/000192998024000213/pavs_ex101.htm) | [Promissory Note Purchase Agreement, by and between the Company and Ms. Minzhu Xu, dated May 20, 2024](http://www.sec.gov/Archives/edgar/data/1751876/000192998024000213/pavs_ex101.htm) | 6-K | 10.1 | May 20, 2024 |  |
| [4.15](http://www.sec.gov/Archives/edgar/data/1751876/000192998024000213/pavs_ex102.htm) | [Promissory Note, dated May 20, 2024](http://www.sec.gov/Archives/edgar/data/1751876/000192998024000213/pavs_ex102.htm) | 6-K | 10.2 | May 20, 2024 |  |
| [4.16](http://www.sec.gov/Archives/edgar/data/1751876/000192998024000310/pavs_ex101.htm) | [Form of Securities Purchase Agreement, dated July 17, 2024](http://www.sec.gov/Archives/edgar/data/1751876/000192998024000310/pavs_ex101.htm) | 6-K | 10.1 | July 23, 2024 |  |
| [4.18](http://www.sec.gov/Archives/edgar/data/1751876/000192998024000347/pavs_ex101.htm) | [Amended Offer Letter, dated August 12, 2024, by and between Ms. Minzhu Xu and the Company](http://www.sec.gov/Archives/edgar/data/1751876/000192998024000347/pavs_ex101.htm) | 6-K | 10.1 | August 13, 2024 |  |
| [4.19](http://www.sec.gov/Archives/edgar/data/1751876/000192998024000461/pavs_ex101.htm) | [Promissory Note Purchase Agreement, by and between the Company and Ms. Minzhu Xu, dated September 30, 2024](http://www.sec.gov/Archives/edgar/data/1751876/000192998024000461/pavs_ex101.htm) | 6-K | 10.1 | October 3, 2024 |  |
| [4.20](http://www.sec.gov/Archives/edgar/data/1751876/000192998024000461/pavs_ex102.htm) | [Promissory Note, dated September 30, 2024](http://www.sec.gov/Archives/edgar/data/1751876/000192998024000461/pavs_ex102.htm) | 6-K | 10.2 | October 3, 2024 |  |
| [4.21](http://www.sec.gov/Archives/edgar/data/1751876/000192998025000019/pavs_ex101.htm) | [Promissory Note Purchase Agreement, by and between the Company and Ms. Minzhu Xu, dated January 13, 2025](http://www.sec.gov/Archives/edgar/data/1751876/000192998025000019/pavs_ex101.htm) | 6-K | 10.1 | January 17, 2025 |  |
| [4.22](http://www.sec.gov/Archives/edgar/data/1751876/000192998025000019/pavs_ex102.htm) | [Promissory Note, dated January 13, 2025](http://www.sec.gov/Archives/edgar/data/1751876/000192998025000019/pavs_ex102.htm) | 6-K | 10.2  | January 17, 2025 |  |
|  | [Form of Share Purchase Agreement, dated February 28, 2025, by and among PAVS, BW and stockholders of BW](http://www.sec.gov/Archives/edgar/data/1751876/000192998025000106/pavs_ex101.htm) | 6-K | 10.1 | March 3, 2025 |  |
| [4.23](http://www.sec.gov/Archives/edgar/data/1751876/000192998025000197/pavs_ex101.htm) | [Promissory Note Purchase Agreement, by and between the Company and Mr. Guangrong Ao, dated April 3, 2025](http://www.sec.gov/Archives/edgar/data/1751876/000192998025000197/pavs_ex101.htm) | 6-K | 10.1 | April 3, 2025 |  |
| [4.24](http://www.sec.gov/Archives/edgar/data/1751876/000192998025000197/pavs_ex102.htm) | [Promissory Note, dated April 3, 2025](http://www.sec.gov/Archives/edgar/data/1751876/000192998025000197/pavs_ex102.htm) | 6-K | 10.2 | April 3, 2025 |  |
| [4.25](http://www.sec.gov/Archives/edgar/data/1751876/000192998025000491/pavs_ex101.htm) | [Promissory Note Purchase Agreement, by and between the Company and Mr. Guangrong Ao, dated May 30, 2025](http://www.sec.gov/Archives/edgar/data/1751876/000192998025000491/pavs_ex101.htm) | 6-K | 10.1 | May 30, 2025 |  |
| [4.26](http://www.sec.gov/Archives/edgar/data/1751876/000192998025000491/pavs_ex102.htm) | [Promissory Note, dated May 30, 2025](http://www.sec.gov/Archives/edgar/data/1751876/000192998025000491/pavs_ex102.htm) | 6-K | 10.2 | May 30, 2025 |  |
| [8.1](pavs_ex81.htm) | [List of Subsidiaries](pavs_ex81.htm) |  |  |  | X |
| [11.1](http://www.sec.gov/Archives/edgar/data/1751876/000121390019007826/ff12019a3ex99-1_happiness.htm) | [Code of Business Conduct and Ethics of the Registrant](http://www.sec.gov/Archives/edgar/data/1751876/000121390019007826/ff12019a3ex99-1_happiness.htm) | F-1 | 99.1 | May 3, 2019 |  |
| [11.2](http://www.sec.gov/Archives/edgar/data/1751876/000192998024000320/pavs_ex112.htm) | [Insider Trading Policy](http://www.sec.gov/Archives/edgar/data/1751876/000192998024000320/pavs_ex112.htm) | 20-F | 11.2 | July 31, 2024 |  |
| [12.1](pavs_ex121.htm) | [Certification of the Chief Executive Officer (Principal Executive Officer) pursuant to Rule 13a-14(a) of the Securities Exchange Act, as amended.](pavs_ex121.htm) |  |  |  | X |
| [12.2](pavs_ex122.htm) | [Certification of the Chief Financial Officer (Principal Financial Officer) pursuant to Rule 13a-14(a) of the Securities Exchange Act, as amended](pavs_ex122.htm) |  |  |  | X |
| [13.1](pavs_ex131.htm) | [Certification of the Chief Executive Officer and Chief Financial Officer pursuant to 18 U.S.C. 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002](pavs_ex131.htm) |  |  |  | X |
| [23.1](pavs_ex231.htm) | [Consent of Enrome LLP](pavs_ex231.htm) |  |  |  | X |
| [97.1](http://www.sec.gov/Archives/edgar/data/1751876/000192998024000320/pavs_ex971.htm) | [Compensation Recovery Policy](http://www.sec.gov/Archives/edgar/data/1751876/000192998024000320/pavs_ex971.htm) | 20-F | 97.1 | July 31, 2024 | X |
| [99.1](pavs_ex991.htm) | [Consent of Jingtian & Gongcheng LLP](pavs_ex991.htm) |  |  |  | X |

---

---

| | |
|:---|:---|
| 101.INS | Inline XBRL Instance Document. |
| 101.SCH | Inline XBRL Taxonomy Extension Schema Document. |
| 101.CAL | Inline XBRL Taxonomy Extension Calculation Linkbase Document. |
| 101.DEF | Inline XBRL Taxonomy Extension Definition Linkbase Document. |
| 101.LAB | Inline XBRL Taxonomy Extension Label Linkbase Document. |
| 101.PRE | Inline XBRL Taxonomy Extension Presentation Linkbase Document. |
| 104 | Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101). |

---

---

| |
|:---|
| 88 |
| *[**Table of Contents**](#toc)* |

---

**SIGNATURE**

The registrant hereby certifies that it meets all of the requirements for filing on Form 20-F and that it has duly caused and authorized the undersigned to sign this annual report on its behalf.

---

| | |
|:---|:---|
|  | **PARANOVUS ENTERTAINMENT TECHNOLOGY LTD.** |
| Date: August 4, 2025 | /s/ Xiaoyue Zhang |
|  | Xiaoyue Zhang |
|  | Chief Executive Officer  |

---

## Exhibit 8.1

**EXHIBIT 8.1**

**SUBSIDIARIES OF AND CONSOLIDATED ENTITIES OF** 

**PARANOVUS ENTERTAINMENT TECHNOLOGY LTD. ("Paranovus")**

**As of the date of the annual report\***

---

| | | | |
|:---|:---|:---|:---|
| **Name of Subsidiary** | **Jurisdiction of Incorporation or Organization** | **Incorporation Time** | **% of Ownership** |
| Paranovus Entertainment Technology Limited ("Paranovus Hong Kong") | Hong Kong | May 6, 2024 | 100% by Paranovus  |
| Paranovus Entertainment Technology Ltd.  | New York | December 8, 2022 | 100% by Paranovus |
| 2lab3 LLC | Delaware | August 12, 2022 | 100% by Paranovus  |
| Bomie WooKoo Inc. ("BW") | New York | September 6, 2022 | 51% by Paranovus |
| Bomie US LLC | New Jersey | November 19, 2024 | 100% owned by BW |
| WooKoo LLC | Texas | May 25, 2023 | 100% owned by BW |
| Hainan Paranovus Entertainment Technology Limited ("Paranovus PRC") | P.R. China | June 17, 2024 | 100% owned by Paranous Hong Kong |

---

\*Other subsidiaries and consolidated entities of Paranovus Entertainment Technology Ltd. have been omitted because, in the aggregate, they would not be a "significant subsidiary" as defined in rule 1-02(w) of Regulation S-X as of the end of the fiscal year covered by this report.

## Exhibit 12.1

**EXHIBIT 12.1**

**Certification by the Principal Executive Officer pursuant to Securities Exchange Act Rules 13a-14(a) and** 

**15d-14(a) as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002**

I, Xiaoyue Zhang, certify that:

1. I have reviewed this annual report on Form 20-F of Paranovus Entertainment Technology Ltd. (the "**Company** ");

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the Company as of, and for, the periods presented in this report;

4. The Company's other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the Company and have:

a. Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the Company, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b. Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c. Evaluated the effectiveness of the Company's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d. Disclosed in this report any change in the Company's internal control over financial reporting that occurred during the period covered by the annual report that has materially affected, or is reasonably likely to materially affect, the Company's internal control over financial reporting; and

5. The Company's other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the Company's auditors and the audit committee of the Company's board of directors (or persons performing the equivalent functions):

a. All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the Company's ability to record, process, summarize and report financial information; and

b. Any fraud, whether or not material, that involves management or other employees who have a significant role in the Company's internal control over financial reporting.

---

| | |
|:---|:---|
| Date: | August 4, 2025 |
|  | /s/ Xiaoyue Zhang |
| Name: | Xiaoyue Zhang |
| Title: | Chief Executive Officer *(Principal Executive Officer)* |

---

## Exhibit 12.2

**EXHIBIT 12.2**

**Certification by the Principal Financial Officer pursuant to Securities Exchange Act Rules 13a-14(a) and** 

**15d-14(a) as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002**

I, Ling Guo, certify that:

1. I have reviewed this annual report on Form 20-F of Paranovus Entertainment Technology Ltd. (the "**Company** ");

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the Company as of, and for, the periods presented in this report;

4. The Company's other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the Company and have:

a. Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the Company, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b. Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c. Evaluated the effectiveness of the Company's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d. Disclosed in this report any change in the Company's internal control over financial reporting that occurred during the period covered by the annual report that has materially affected, or is reasonably likely to materially affect, the Company's internal control over financial reporting; and

5. The Company's other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the Company's auditors and the audit committee of the Company's board of directors (or persons performing the equivalent functions):

a. All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the Company's ability to record, process, summarize and report financial information; and

b. Any fraud, whether or not material, that involves management or other employees who have a significant role in the Company's internal control over financial reporting.

Date: August 4, 2025

---

| | |
|:---|:---|
| By: | /s/ Ling Guo |
| Name: | Ling Guo |
| Title: | Chief Financial Officer (*Principal Financial Officer*) |

---

## Exhibit 13.1

**EXHIBIT 13.1**

**Certifications Pursuant to 18 U.S.C. Section 1350**

Pursuant to U.S.C. Section 1350 of the Sarbanes-Oxley Act of 2002 (subsections (a) and (b) of Section 1350, Chapter 63 of Title 18, United States Code), each of the undersigned officers of Paranovus Entertainment Technology Ltd. (the "Company"), does hereby certify, to such officer's knowledge, that:

The Annual Report on Form 20-F for the year ended March 31, 2025 of the Company fully complies, in all material respects, with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934 and information contained in the Form 20-F fairly presents, in all material respects, the financial condition and results of operations of the Company.

Date: August 4, 2025

---

| | |
|:---|:---|
| By: | /s/ Xiaoyue Zhang |
|  | Name: Xiaoyue Zhang |
|  | Title: Chief Executive Officer |

---

Date: August 4, 2025

---

| | |
|:---|:---|
| By: | /s/ Ling Guo |
|  | Name: Ling Guo |
|  | Title: Chief Financial Officer |

---

## Exhibit 23.1

&nbsp;&nbsp;&nbsp;&nbsp;**EXHIBIT 23.1**

![](pavs_ex231img3.jpg)

**Consent of Independent Registered Public Accounting **Firm**

We consent to the use of our report dated August 4, 2025 with respect to the consolidated financial statements of Paranovus Entertainment Technology Ltd., for the three-years period ended March 31, 2025, 2024 and 2023 on Form S-8 (File No. 333-284276), and Form F-3 (File No. 333-282103) of Paranovus Entertainment Technology Ltd. filed with the Securities and Exchange Commission.

![](pavs_ex231img2.jpg)

/s/ Enrome LLP

Singapore

August 4, 2025

## Exhibit 99.1

**EXHIBIT 99.1**

![](pavs_ex991img1.jpg)