| SIGNIFICANT ACCOUNTING POLICIES | NOTE 2 – SIGNIFICANT ACCOUNTING POLICIES Risks in relation to the VIE structure It is possible that the Company’s operation
of certain of its operations and businesses through its VIE could be found by PRC authorities to be in violation of PRC law and regulations
prohibiting or restricting foreign ownership of companies that engage in such operations and businesses. While the Company’s management
considers the possibility of such a finding by PRC regulatory authorities under current law and regulations to be remote. On January 19,
2015, the Ministry of Commerce of the PRC, or (the “MOFCOM”) released on its Website for public comment a proposed PRC law
(the “Draft FIE Law”) that appears to include VIE within the scope of entities that could be considered to be foreign invested
enterprises (or “FIEs”) that would be subject to restrictions under existing PRC law on foreign investment in certain categories
of industry. Specifically, the Draft FIE Law introduces the concept of “actual control” for determining whether an entity
is considered to be an FIE. In addition to control through direct or indirect ownership or equity, the Draft FIE Law includes control
through contractual arrangements within the definition of “actual control.” If the Draft FIE Law was passed by the People’s
Congress of the PRC and went into effect in its current form and as a result the Company’s VIE could become explicitly subject to
the current restrictions on foreign investment in certain categories of industry. The Draft FIE Law includes provisions that would exempt
from the definition of foreign invested enterprises entities where the ultimate controlling shareholders are either entities organized
under PRC law or individuals who are PRC citizens. The Draft FIE Law is silent as to what type of enforcement action might be taken against
existing VIEs that operate in restricted or prohibited industries and are not controlled by entities organized under PRC law or individuals
who are PRC citizens. If a finding were made by PRC authorities, under existing law and regulations or under the Draft FIE Law if it becomes
effective, about the Company’s operation of certain of its operations and businesses through its VIEs, regulatory authorities with
jurisdiction over the licensing and operation of such operations and businesses would have broad discretion in dealing with such a violation,
including levying fines, confiscating the Company’s income, revoking the business or operating licenses of the affected businesses,
requiring the Company to restructure its ownership structure or operations, or requiring the Company to discontinue all or any portion
of its operations. Any of these actions could cause significant disruption to the Company’s business operations and have a severe
adverse impact on the Company’s cash flows, financial position and operating performance. In addition, it is possible that the contracts
among Taizhou Suxuantang, WFOE, and the nominee shareholders of Taizhou Suxuantang would not be enforceable in China if PRC government
authorities or courts were to find that such contracts contravene PRC laws and regulations or are otherwise not enforceable for public
policy reasons. In the event that the Company was unable to enforce these contractual arrangements, the Company would not be able to exert
effective control over the VIEs. Consequently, the VIEs’ results of operations, assets and liabilities would not be included in
the Company’s condensed consolidated financial statements. If such were the case, the Company’s cash flows, financial position,
and operating performance would be materially adversely affected. The Company’s contractual arrangements Taizhou Suxuantang, WFOE,
and the nominee shareholders of Taizhou Suxuantang are approved and in place. Management believes that such contracts are enforceable
and considers the possibility remote that PRC regulatory authorities with jurisdiction over the Company’s operations and contractual
relationships would find the contracts to be unenforceable. The Company’s operations and businesses
rely on the operations and businesses of its VIEs, which hold certain recognized revenue-producing assets. The VIEs also have an assembled
workforce, focused primarily on research and development, whose costs are expensed as incurred. The Company’s operations and businesses
may be adversely impacted if the Company loses the ability to use and enjoy assets held by its VIE. Foreign currency translation Transactions denominated in currencies other than
the functional currency are translated into the functional currency at the exchange rates prevailing at the dates of the transaction.
Monetary assets and liabilities denominated in currencies other than the functional currency are translated into the functional currency
using the applicable exchange rates at the balance sheet dates. The resulting exchange differences are recorded in the statement of operations. The reporting and functional currencies of the
Company and SXT HK are the United States Dollars (“US$”) and the accompanying financial statements have been expressed in
US$. In addition, the WFOE and the VIE maintain their books and records in their respective local currency, Renminbi (“RMB”),
which is also the respective functional currency for each subsidiary and VIE as they are the primary currency of the economic environment
in which each subsidiary operates. In general, for consolidation purposes, assets,
and liabilities of its subsidiaries whose functional currency is not the US$ are translated into US$, in accordance with ASC Topic 830-30,
“Translation of Financial Statement”, using the exchange rate on the balance sheet date. Revenues and expenses are translated
at average rates prevailing during the period. The gains and losses resulting from translation of financial statements of a foreign subsidiary
are recorded as a separate component of accumulated other comprehensive income within the statement of stockholders’ equity. Other
equity items are translated using the exchange rates on the transaction date. Translation of amounts from the local currencies
of the Company into US$ has been made at the following exchange rates for the respective periods:
September 30, March 31, September 30,
Balance sheet items, except for equity accounts 7.2960 6.8676 7.1135
Items in the statements of income(loss) and comprehensive income(loss), and statements of cash flows 7.1287 6.8516 6.7312 Measurement of credit losses on financial instruments On April 1, 2023, the Company adopted ASU 2016-13, “Financial
Instruments — Credit Losses (Topic 326) — Measurement of Credit Losses on Financial Instruments,” for financial assets
at amortized cost including accounts receivable, refundable deposits, other receivables, and retention receivable. This guidance replaced
the “incurred loss” impairment methodology with an approach based on “expected losses” to estimate credit losses
on certain types of financial instruments and requires consideration of a broader range of reasonable and supportable information to inform
credit loss estimates. The guidance requires financial assets to be presented at the net amount expected to be collected. The allowance
for credit losses is a valuation account that is deducted from the cost of the financial asset to present the net carrying value at the
amount expected to be collected on the financial asset. Use of estimates The preparation of condensed consolidated financial
statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets
and liabilities, disclosure of contingent assets and liabilities at the date of the financial statements, and the reported amounts of
revenue and expenses during the reporting period. Actual results could differ from those estimates. On an ongoing basis, management reviews
these estimates and assumptions using the currently available information. Changes in facts and circumstances may cause the
Company to revise its estimates. The Company bases its estimates on historical experience and on various other assumptions that are believed
to be reasonable, the results of which form the basis for making judgments about the carrying values of assets and liabilities. The following
are some of the areas requiring significant judgments and estimates as of September 30, 2023 and March 31, 2023: determinations of the
useful lives of long-lived assets, estimates of expected credit loss for accounts receivable and other receivables, estimates of inventory
provision, sales return rate, valuation assumptions in performing asset impairment tests of long-lived assets and determinations of fair
value of convertible notes (liability component, etc.) and warrants. Going Concern The condensed consolidated financial statements
for the six months ended September 30, 2023 and 2022 have been prepared on a going concern basis, which contemplates the realization of
assets and the settlement of liabilities and commitments in the normal course of business. As reflected in the consolidated financial statements,
the Company reported net loss of $9,696,158 and $1,494,609 for the six months ended September 30, 2023 and 2022, respectively. The Company
had accumulated deficits of $31,309,291 and $21,613,133 as of September 30, 2023 and March 31, 2023, respectively. The Company used funds
in operating activities of $579,568 and $549,125 for the six months ended September 30, 2023 and 2022, respectively. In addition, the
Company suffered a continuous decline in revenue for the six months ended September 30, 2023 and 2022. These factors raise substantial
doubt about the Company's ability to continue as a going concern. The Company is in the process of building its
customer base to generate more revenues as well as cutting expenses, and the Company is seeking to raise capital through additional debt
from equity financings to fund its operations. However, there can be no assurance that these plans and arrangements will be sufficient
to fund the Company's ongoing capital expenditure, working capital, and other requirements. The accompanying consolidated financial statements
do not include any adjustments related to the recoverability or classification of asset and the amounts or classification of liabilities
that may result from the outcome of this uncertainty. If the going concern assumption is not appropriate, material adjustments to the
financial statements could be required. Fair values of financial instruments ASC Topic 825, Financial Instruments (“Topic
825”) requires disclosure of fair value information of financial instruments, whether recognized in the balance sheets, for which
it is practicable to estimate that value. In cases where quoted market prices are not available, fair values are based on estimates using
present value or other valuation techniques. Those techniques are significantly affected by the assumptions used, including the discount
rate and estimates of future cash flows. In that regard, the derived fair value estimates cannot be substantiated by comparison to independent
markets and, in many cases, could not be realized in immediate settlement of the instruments. Topic 825 excludes certain financial instruments
and all nonfinancial asse ts and liabilities from its disclosure requirements.
Accordingly, the aggregate fair value amounts do not represent the underlying value of the Company.
● Level
1 - inputs to the valuation methodology are quoted prices (unadjusted) for identical assets or liabilities in active markets.
● Level
2 - inputs to the valuation methodology include quoted prices for similar assets and liabilities inactive markets, and inputs that
are observable for the assets or liability, either directly or indirectly, for substantially the full term of the financial instruments.
● Level
3 - inputs to the valuation methodology are unobservable and significant to the fair value. As of September 30, 2023 and March 31, 2023, financial
instruments of the Company primarily comprised of cash and cash equivalents, accounts receivables, receivables and other current assets
(exclude prepayments and deposits), borrowings (current and non-current portion), accounts payable, amounts due to related parties and
accrued expenses, lease liabilities and other liabilities. The carrying amounts of these financial instruments approximated their fair
values because of their generally short maturities. For lease liabilities, fair value approximates
their carrying value at the period end as the interest rates used to discount the host contracts approximate market rates. The carrying
amount of the long-term borrowings approximates its fair value due to the fact that the related interest rate approximates the interest
rates currently offered by financial institutions for similar debt instruments of comparable maturities. The Company noted no transfers between levels
during any of the periods presented. The Company did not have any instruments that were measured at fair value on a recurring nor non-recurring
basis as of September 30, 2023 and March 31, 2023, respectively. 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 the bank accounts in the PRC. Cash balances in bank accounts in PRC are not insured by the Federal Deposit Insurance Corporation
or other programs. Accounts receivable, net Accounts receivable are recorded at the invoiced
amount less an allowance for any uncollectible accounts and do not bear interest, which are due on demand. Management reviews the adequacy
of the allowance for doubtful accounts on an ongoing basis, using historical collection trends and aging of receivables. Management also
periodically evaluates individual customer’s financial condition, credit history, and the current economic conditions to adjust
in the allowance when it is considered necessary. Account balances are charged off against the allowance after all means of collection
have been exhausted and the potential for recovery is considered remote. The Company use a loss rate method to estimate
the allowance for credit losses. For those past due balances over one year and other higher risk receivables identified by the Company
are reviewed individually for collectability. The Company evaluates the expected credit loss of accounts receivable based on historical
collection experience, the financial condition of its customers and assumptions for the future movement of different economic drivers
and how these drivers will affect each other. The Company writes off potentially uncollectible accounts receivable against the allowance
for credit losses if it is determined that the amounts will not be collected or if a settlement with respect to a disputed receivable
is reached for an amount that is less than the carrying value. As of September 30, 2023 and March 31, 2023, the
Company assessed the recoverability of its accounts receivable and record an allowance of $1,459,238 and $1,522,739, respectively. Inventories Inventories primarily include raw materials and
finished goods. Inventories are stated at the lower of cost or
net realizable value. Cost is determined by the weighted-average method. Raw material cost is based on purchase costs while work-in-progress
and finished goods comprise direct materials, direct labor and an allocation of manufacturing overhead costs. Net realizable value represents
the anticipated selling price, net of distribution cost, less estimated costs to completion for inventories. As of September 30, 2023
and March 31, 2023, the Company assessed the net realizable value of its inventories and record a provision of $149,507 and $158,834,
respectively. Advance to suppliers Advance to suppliers represent amounts advanced
to suppliers for future purchases of raw materials and for other services. The suppliers usually require advance payments when the Company
makes purchase or orders service, and the advanced payments will be utilized to offset the Company’s future payments. Property, plant and equipment, net Property and equipment are stated at cost. The
straight-line depreciation method is used to compute depreciation over the estimated useful lives of the assets, as follows:
Residual Useful
Machinery 5 % 10 years
Electric equipment 5 % 3-5 years
Office equipment 5 % 5 years
Vehicles 5 % 4 years
Leasehold improvement cost 5 % 3-10 years (shorter of the lease term and the remaining useful life) The Company reviews property, plant and equipment
for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. An asset
is considered impaired if its carrying amount exceeds the future net undiscounted cash flows that the asset is expected to generate. If
such asset is considered to be impaired, the impairment recognized is the amount by which the carrying amount of the asset, if any, exceeds
its fair value determined using a discounted cash flow model. For the six months ended September 30, 2023 and 2022, there was no impairment
of property, plant and equipment. Costs of repairs and maintenance are expensed
as incurred and asset improvements are capitalized. The cost and related accumulated depreciation and amortization of assets disposed
of or retired are removed from the accounts, and any resulting gain or loss is reflected in the condensed consolidated income statements. Intangible assets, net Intangible assets are stated at cost less accumulated
amortization. Intangible assets represented the trademark registered in the PRC and purchased software which are amortized on a straight-line
basis over a useful life of 10 years. The Company follows ASC Topic 350 in accounting
for intangible assets, which requires impairment losses to be recorded when indicators of impairment are present and the undiscounted
cash flows estimated to be generated by the assets are less than the assets’ carrying amounts. For the six months ended September
30, 2023 and 2022, the Company record no impairment of intangible assets. Impairment of long-lived assets Long-lived assets primarily include property,
plant and equipment and intangible assets. In accordance with the provision of ASC Topic 360-10-5, “Impairment or Disposal of Long-Lived
Assets”, the Company generally conducts its annual impairment evaluation to its long-lived assets, usually in the fourth quarter
of each year, or more frequently if indicators of impairment exist, such as a significant sustained change in the business climate. The
recoverability of long-lived assets is measured at the reporting unit level, which is an operating segment or one level below an operating
segment. If the total of the expected undiscounted future net cash flows is less than the carrying amount of the asset, a loss is recognized
for the difference between the fair value and carrying amount of the asset. The Company record no impairment charge for the six months
ended September 30, 2023 and 2022, respectively. Convertible note, net ASU 2020-06, Accounting for Convertible Instruments
and Contracts in an Entity’s Own Equity Under the new framework, the reporting entity
will decide the accounting for its convertible notes in the following steps: (1) a reporting entity will first decide whether to elect
the fair value option under ASC 825-10 (convertible debt issued with a substantial premium may be ineligible for the fair value option);
(2) if the fair value option is not elected, the reporting entity must assess whether the conversion feature requires bifurcation pursuant
to ASC 815; (3) if bifurcation is not required, the reporting entity must evaluate whether the convertible debt was issued with a substantial
premium; (4) if the fair value option is not elected, the conversion option is not required to be bifurcated, and the convertible debt
was not issued with a substantial premium, the convertible debt will be accounted for as a single unit of account under the “traditional
convertible security” model. Debt discount is amortized over the period during which the convertible note is expected to be outstanding
(through the maturity date) as additional non-cash interest expense. Revenue recognition The Company adopted ASC Topic 606 Revenue from
Contracts with Customers (“ASC 606”), on April 1, 2018, using the modified retrospective method. Revenue is recognized when control of promised
goods is transferred to the Company’s customers in an amount of consideration of which the Company expect to be entitled to in exchange
for the goods, and the Company can reasonably estimates return provision for the goods. The product return provisions are estimated based
on (1) historical rates, (2) specific identification of outstanding returns not yet received from customers and outstanding discounts
and claims and (3) estimated returns, discounts and claims expected, but not yet finalized with customers. As of September 30, 2023 and
March 31, 2023, sales return provision recorded in refund liabilities were $146,049 and $111,951. For the six months ended September 30, 2023 and
2022, the Company did not have any significant incremental costs of obtaining contracts with customers incurred or costs incurred in fulfilling
contracts with customers within the scope of ASC Topic 606, that shall be recognized as an asset and amortized to expenses in a pattern
that matches the timing of the revenue recognition of the related contract. The Company does not have amounts of contract
assets since revenue is recognized as control of goods is transferred. The contract liabilities consist of advance payments from customers.
The contract liabilities are reported in a net position on a customer-by-customer basis at the end of each reporting period. All contract
liabilities are included in advance from customers in the condensed consolidated balance sheets. As of September 30, 2023 and March 31,
2023, the Company record advance from customers of $190,193 and $165,534, respectively Cost of revenue Cost of revenue consists primarily of cost of
materials, direct labors, overhead, and other related incidental expenses that are directly attributable to the Company’s principal
operations. Market development fees Market development fees relate mainly to market
development and advertisements of our pharmaceutical products. For the six months ended September 30, 2023 and 2022, marketing and advertising
expenses are $134,558 and $150,046, respectively, which are included in selling expenses in our unaudited condensed consolidated statements
of income (loss) and comprehensive income (loss). Income Taxes Current income tax expenses are provided for in
accordance with the laws of the relevant taxing authorities. As part of the process of preparing the condensed consolidated financial
statements, the Company is required to estimate its income taxes in each of the jurisdictions in which it operates. The Company accounts
for income taxes using the liability method, under which deferred income taxes are recognized for future tax consequences attributable
to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases. Deferred
tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary
differences are expected to be recovered or settled. The effect on deferred taxes of a change in tax rates is recognized as income or
expense in the period that includes the enactment date. Valuation allowance is provided on deferred tax assets to the extent that it is
more likely than not that the asset will not be realizable in the foreseeable future. The Company adopts ASC 740-10-25 “Income
Taxes” which prescribes a more likely than not threshold for financial statement recognition and measurement of a tax position taken
or expected to be taken in a tax return. It also provides guidance on derecognition of income tax assets and liabilities, classification
of current and deferred income tax assets and liabilities, accounting for interest and penalties associated with tax positions, accounting
for income taxes in interim periods and income tax disclosures. The Company did not have significant unrecognized uncertain tax positions
or any unrecognized liabilities, interest or penalties associated with unrecognized tax benefit as of September 30, 2023 and March 31,
2023. Comprehensive income (loss) Comprehensive income includes net income and foreign
currency adjustments. Comprehensive income is reported in the condensed consolidated statements of operations and comprehensive income.
Accumulated other comprehensive income, as presented on the balance sheets are the cumulative foreign currency translation adjustments.
As of September 30, 2023 and March 31, 2023, the balances of accumulated other comprehensive loss amounted to $1,018,811 and $197,571,
respectively. Leases Leases are classified at lease commencement date
as either a finance lease or an operating lease. A lease is a finance lease if it meets any of the following criteria: (a) the lease transfers
ownership of the underlying asset to the lessee by the end of the lease term. (b) the lease grants the lessee an option to purchase the
underlying asset that the lessee is reasonably certain to exercise, (c) the lease term is for the major part of the remaining economic
life of the underlying asset, (d) the present value of the sum of the lease payments and any residual value guaranteed by the lessee that
is not already reflected in the lease payments equals or exceeds substantially all of the fair value of the underlying asset or (e) the
underlying asset is of such a specialized nature that it is expected to have no alternative use to the lessor at the end of the lease
term. When none of the criteria meets, the lease shall be classified as an operating lease. For lessee, a lease is recognized as a right-of-use
asset with a corresponding liability at lease commencement date. The lease liability is calculated at the present value of the lease payments
not yet paid by using the lease term and discount rate determined at lease commencement. The right-of-use asset is calculated as the lease
liability, increased by any initial direct costs and prepaid lease payments, reduced by any lease incentives received before lease commencement.
The right-of-use asset itself is amortized on a straight-line basis unless another systematic method better reflects how the underlying
asset will be used by and benefits the lessee over the lease term. In February 2016, the Financial Accounting Standards
Board (“FASB”) issued Accounting Standards Update (“ASU”) No. 2016-02, Leases (Topic 842). The amendments in this
ASU require an entity to recognize a right-of-use asset and lease liability for all leases with terms of more than 12 months. Recognition,
measurement and presentation of expenses will depend on classification as a finance or operating lease. The amendments also require certain
quantitative and qualitative disclosures about leasing arrangements. The Company adopted ASC 842 effective as of the beginning of the
year ended March 31, 2023 by using a modified retrospective transition approach in the accompanying financial statements of the Company.
The adoption of this standard had a material impact on the Company’s financial position as increased its assets and liabilities
due to the recognition of right-of-use assets and lease liabilities on its consolidated balance sheets, and no material impact on its
consolidated statements of comprehensive loss and cash flows. Segment reporting Operating segments are reported in a manner consistent
with the internal reporting provided to the chief operating decision-maker, which is a strategic committee comprised of members of the
Company’s management team. In the respective periods presented, the Company had one single operating and reportable segment, namely
the manufacture and distribution of TCMP. Although TCMP consist of different business units of the Company, information provided to the
chief operating decision-maker is at the revenue level and the Company does not allocate operating costs or assets across business units,
as the chief operating decision-maker does not use such information to allocate resources or evaluate the performance of the business
units. As the Company’s long-lived assets are substantially all located in the PRC and substantially all of the Company’s
revenue is derived from within the PRC, no geographical information is presented. Earnings per share Earnings (loss) per share is calculated in accordance
with ASC 260 Earnings per Share. Basic earnings (loss) per share is computed by dividing the net income (loss) attributable to shareholders
of the Company by the weighted average number of ordinary shares outstanding during the year. Diluted earnings per share is computed in
accordance with the treasury stock method and based on the weighted average number of ordinary shares and dilutive ordinary share equivalents.
Dilutive ordinary share equivalents are excluded from the computation of diluted earnings per share if their effects would be anti-dilutive.
There were no dilutive ordinary share equivalents outstanding during the six months ended September 30, 2023 and 2022. Related party transactions In general, related parties exist when there is
a relationship that offers the potential for transactions at less than arm’s-length, favorable treatment, or the ability to influence
the outcome of events different from that which might result in the absence of that relationship. A related party may be any of the following:
a) an affiliate, which is a party that directly or indirectly controls, is controlled by, or is under common control with another party;
b) a principle owner, owner of record or known beneficial owner of more than 10% of the voting interest of an entity; c) management, which
are persons having responsibility for achieving objectives of the entity and requisite authority to make decision; d) immediate family
of management or principal owners; e) a parent company and its subsidiaries; and f) other parties that have ability to significant influence
the management or operating policies of the entity. Significant risks and uncertainties Credit risk Assets that potentially subject the Company to
significant concentration of credit risk primarily consist of cash and cash equivalents, accounts receivable, other receivables, advances
to suppliers. The maximum exposure of such assets to credit risk is their carrying amount as at the balance sheet dates. As of September
30, 2023 and March 31, 2023 the Company held cash and cash equivalents of $11,465,020 and $17,368,478, respectively, which were primarily
deposited in financial institutions located in Mainland China, which were uninsured by the government authority. To limit exposure to
credit risk relating to deposits, the Company primarily place cash deposits with large financial institutions in China which management
believes are of high credit quality. The Company’s operations are carried out in Mainland China. Accordingly, the Company’s
business, financial condition and results of operations may be influenced by the political, economic, and legal environments in the PRC
as well as by the general state of the PRC’s economy. In addition, the Company’s business may be influenced by changes in
governmental policies with respect to laws and regulations, anti-inflationary measures, currency conversion and remittance abroad, and
rates and methods of taxation, among other factors. The Company conducts credit evaluations of its
customers and suppliers and generally does not require collateral or other security from them. The Company use a loss rate method to estimate
the allowance for credit losses. For those past due balances over one year and other higher risk receivables identified by the Company
are reviewed individually for collectability. The Company evaluates the expected credit loss of receivables based on historical collection
experience, the financial condition of its customers and assumptions for the future movement of different economic drivers and how these
drivers will affect each other. The Company writes off potentially uncollectible receivables against the allowance for credit losses if
it is determined that the amounts will not be collected or if a settlement with respect to a disputed receivable is reached for an amount
that is less than the carrying value. As of September 30, 2023 and March 31, 2023 |
