UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

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

For the quarterly period ended: June 30, 2023

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

For the transition period from _____________ to _________________

Commission File No. 333-206097

ADDENTAX GROUP CORP.

(Exact name of registrant as specified in its charter)

Nevada		35-2521028
(State or other jurisdiction of		(I.R.S. Employer
incorporation or formation)		Identification Number)

Kingkey 100, Block A, Room 4805,

Luohu District, Shenzhen City, China 518000

(Address of principal executive offices)

+ (86) 755 86961 405

(Registrant’s telephone number)

Securities registered pursuant to Section 12(b) of the Act:

Title of each class		Trading Symbol(s)		Name of each exchange on which registered
Common Stock		ATXG		Nasdaq Capital Markets

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 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, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer ☐	Accelerated filer ☐
Non-accelerated filer ☒	Smaller reporting company ☒
Emerging growth ☒

If an emerging growth company, 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. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). ☐ Yes ☒ No

As of August 14, 2023, there were 4,294,979 shares outstanding of the registrant’s common stock.

TABLE OF CONTENTS

	PART I – FINANCIAL INFORMATION

Item 1.	Financial Statements (Unaudited)	F-1

Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	3

Item 3.	Quantitative and Qualitative Disclosures About Market Risk	13

Item 4.	Controls and Procedures	13

	PART II – OTHER INFORMATION

Item 1.	Legal Proceedings	14

Item 1A.	Risk Factors	14

Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	14

Item 3.	Defaults Upon Senior Securities	14

Item 4.	Mine Safety Disclosures	14

Item 5.	Other Information	14

Item 6.	Exhibits	14

PART I – FINANCIAL INFORMATION

Item 1. Financial Statements and Supplementary Data

ADDENTAX GROUP CORP.

FINANCIAL STATEMENTS

For the three months ended June 30, 2023 and 2022

TABLE OF CONTENTS

Condensed Consolidated Balance sheets as of June 30, 2023 and March 31, 2023 (unaudited)	F-2
Condensed Consolidated Statements of Income and Comprehensive Income for the Three months ended June 30, 2023 and 2022 (unaudited)	F-3
Condensed Consolidated Statements of Changes in Equity for the three months ended June 30, 2023 and 2022 (unaudited)	F-4
Condensed Consolidated Statements of Cash Flows for the three months ended June 30, 2023 and 2022 (unaudited)	F-5
Notes to Condensed Consolidated Financial Statements for the three months ended June 30, 2023 and 2022 (unaudited)	F-6 – F-14

F-1

ADDENTAX GROUP CORP. AND SUBSIDIARIES

UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS

(In U.S. Dollars, except share data or otherwise stated)

(UNAUDITED)

	June 30, 2023			March 31, 2023

ASSETS

CURRENT ASSETS
Cash and cash equivalents	$	487,215		$	562,711
Restricted cash		5,750,000			-
Accounts receivables, net		1,963,293			1,858,889
Debt securities held-to-maturity		17,828,125			17,718,750
Inventories		265,742			285,528
Prepayments and other receivables		8,506,690			959,196
Advances to suppliers		1,903,164			1,281,075
Amount due from related party		510,708			375,092
Total current assets		37,214,937			23,041,241

NON-CURRENT ASSETS
Plant and equipment, net		586,492			649,120
Long-term prepayments		57,876			90,032
Restricted cash		-			14,750,000
Long-term receivables		2,500,000			2,500,000
Operating lease right of use asset		232,350			272,488
Total non-current assets		3,376,718			18,261,640
TOTAL ASSETS	$	40,591,655		$	41,302,881

LIABILITIES AND EQUITY

CURRENT LIABILITIES
Short-term loan	$	130,176		$	137,468
Accounts payable		254,288			267,501
Amount due to related parties		2,093,025			2,384,633
Advances from customers		-			2,152
Accrued expenses and other payables		462,469			606,843
Operating lease liability current portion		120,359			127,101
Total current liabilities		3,060,317			3,525,698

NON-CURRENT LIABILITIES
Convertible debts		8,510,226			11,219,519
Derivative liabilities		4,582,560			2,290,483
Operating lease liability		111,991			145,387
Total non-current liabilities		13,204,777			13,655,389
TOTAL LIABILITIES	$	16,265,094		$	17,181,087

EQUITY
Common stock ($0.001 par value, 250,000,000 shares authorized, 3,739,581 and 35,454,670 shares issued and outstanding at June 30 and March 31, 2023, respectively)	$	3,740		$	35,455
Additional paid-in capital		32,406,317			29,528,564
Accumulated Deficit		(8,179,930	)		(5,451,209	)
Statutory reserve		28,457			28,457
Accumulated other comprehensive loss		67,977			(19,473	)
Total equity		24,326,561			24,121,794	)
TOTAL LIABILITIES AND EQUITY	$	40,591,655		$	41,302,881

See accompany notes to the unaudited condensed consolidated financial statements.

F-2

ADDENTAX GROUP CORP. AND SUBSIDIARIES

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS

(In U.S. Dollars, except share data or otherwise stated)

	2023			2022
	Three months ended June 30,
	2023			2022

REVENUES	$	1,052,506		$	2,386,384

COST OF REVENUES		(815,597	)		(1,929,700	)

GROSS PROFIT		236,909			456,684

OPERATING EXPENSES
Selling and marketing		-			(5,642	)
General and administrative		(497,858	)		(404,940	)
Total operating expenses		(497,858	)		(410,582	)

(LOSS) INCOME FROM OPERATIONS		(260,949	)		46,102

Fair value gain or loss		(1,288,003	)		-
Interest income		1,724			3,238
Interest expenses		(1,292,715	)		(2,458	)
Other income (expense), net		112,486			51,083

(LOSS) INCOME BEFORE INCOME TAX EXPENSE		(2,727,457	)		97,965
INCOME TAX EXPENSE		(1,264	)		(1,294	)

NET (LOSS) INCOME		(2,728,721	)		96,671
Foreign currency translation gain (loss)		87,450			105,149
TOTAL COMPREHENSIVE (LOSS) INCOME	$	(2,641,271	)	$	201,820

EARNINGS (LOSS) PER SHARE
Basic and diluted		(0.83	)		0.00
Weighted average number of shares outstanding – Basic and diluted		3,273,964			26,693,004

See accompany notes to the unaudited condensed consolidated financial statements.

F-3

ADDENTAX GROUP CORP. AND SUBSIDIARIES

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY

(In U.S. Dollars, except share data or otherwise stated)


	Common Stock						Additional			Retained earnings (accumulated deficit)					Accumulated other
	Shares			Amount			paid-in capital			Unrestricted			Statutory reserve		comprehensive loss			Total Equity
BALANCE AT MARCH 31, 2022		26,693,004		$	26,693		$	6,815,333		$	(6,756,230	)	$	13,821	$	(170,984	)	$	(71,367	)
Foreign currency translation																105,149			105,149
Net income for the period		-			-			-			96,671			-		-			96,671
BALANCE AT JUNE 30, 2022		26,693,004		$	26,693		$	6,815,333		$	(6,659,559	)	$	13,821	$	(65,835	)	$	130,453

BALANCE AT MARCH 31, 2023		35,454,670		$	35,455		$	29,528,564		$	(5,451,209	)	$	28,457	$	(19,473	)	$	24,121,794
Balance, value		35,454,670		$	35,455		$	29,528,564		$	(5,451,209	)	$	28,457	$	(19,473	)	$	24,121,794
Issuance of new shares		1,940,750			1,941			(1,941	)		-			-		-			-
Reverse stock split		(33,655,878	)		(33,656	)		33,656			-			-		-			-
New shares for round up of fragmental shares		39			0			0			-			-		-			-
Additional paid-in capital from conversion of convertible debts		-			-			2,846,038			-			-		-			2,846,038
Foreign currency translation		-			-			-			-			-		87,450			87,450
Net income for the period		-			-			-			(2,728,721	)		-		-			(2,728,721	)
BALANCE AT JUNE 30, 2023		3,739,581		$	3,740		$	32,406,317		$	(8,179,930	)	$	28,457	$	67,977		$	24,326,561
Balance, value		3,739,581		$	3,740		$	32,406,317		$	(8,179,930	)	$	28,457	$	67,977		$	24,326,561

See accompanying notes to the unaudited condensed consolidated financial statements.

F-4

ADDENTAX GROUP CORP. AND SUBSIDIARIES

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(In U.S. Dollars, except share data or otherwise stated)

	2023			2022
	Three Months Ended June 30
	2023			2022
CASH FLOWS FROM OPERATING ACTIVITIES:
Net (loss) income	$	(2,728,721	)	$	96,671
Adjustments to reconcile net income (loss) to net cash used in operating activities:
Depreciation		74,783			35,883
Non-cash financial cost		1,290,818			-
Investment income		(109,375	)		-
Fair value gain or loss		1,288,003			-
Changes in operating assets and liabilities
Accounts receivable		(104,404	)		27,217
Inventories		19,786			3,337
Advances to suppliers		(622,089	)		91,378
Other receivables		(47,494	)		(443,140	)
Accounts payables		(25,659	)		(83,529	)
Accrued expenses and other payables		(144,374	)		549,880
Advances from customers		(2,152	)		321
Net cash (used in) provided by operating activities	$	(1,110,878	)	$	278,018

CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from related party borrowings		1,451,157			980,724
Repayment of related party borrowings		(1,831,373	)		(364,452	)
Release of restricted cash		1,350,000			-
Repayment of bank borrowings		-			(424	)
Net cash provided by financing activities	$	969,784		$	615,848

NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS		(141,094	)		893,866
Effect of exchange rate changes on cash and cash equivalents		65,598			(52,162	)
Cash and cash equivalents, beginning of the period		562,711			1,390,644
CASH AND CASH EQUIVALENTS, END OF THE PERIOD	$	487,215		$	2,232,348

Supplemental disclosure of cash flow information:
Cash paid during the period for interest	$	-		$	-
Cash paid during the period for income tax	$	1,264		$	1,294
Supplemental disclosure of non-cash investing and financing activities:
Right-of-use assets obtained in exchange for operating lease obligations	$	1,219		$	-

See accompanying notes to the unaudited condensed consolidated financial statements.

F-5

ADDENTAX GROUP CORP. AND SUBSIDIARIES

NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

1. ORGANIZATION AND BUSINESS ACQUISITIONS

ATXG and its subsidiaries (the “Company”) are engaged in the business of garments manufacturing, providing logistic services, property leasing and management service in the People’s Republic of China (“PRC” or “China”).

2. BASIS OF PRESENTATION

In the opinion of management, the unaudited condensed consolidated financial statements reflect all adjustments of a normal recurring nature that are necessary for a fair presentation of the results for the interim periods presented. All significant intercompany transactions and balances are eliminated in consolidation. However, the results of operations included in such financial statements may not necessarily be indicative of annual results.

The Company uses the same accounting policies in preparing quarterly and annual financial statements. Certain information and footnote disclosures normally included in the annual consolidated financial statements prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”) have been condensed or omitted. These unaudited condensed consolidated financial statements should be read in conjunction with the Company’s audited consolidated financial statements and notes thereto included in the Company’s Annual Report on Form 10-K for the year ended March 31, 2023 filed with the Securities and Exchange Commission (“SEC”) on June 29, 2023 (“2023 Form 10-K”).

3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Use of Estimates

The preparation of the consolidated financial statements in conformity with US GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenues and expenses during the reporting periods. Management makes these estimates using the best information available at the time the estimates are made; however actual results could differ materially from those estimates.

There is no change in the accounting policies for the three months ended June 30, 2023.

Recently issued accounting pronouncements

In June 2016, the FASB issued ASU No. 2016-13, Financial Instruments – Credit Losses (Topic 326), Measurement of Credit Losses on Financial Instruments. This standard requires a financial asset (or group of financial assets) measured at amortized cost basis 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 amortized cost basis of the financial asset(s) to present the net carrying value at the amount expected to be collected on the financial asset. This standard will be effective for the Company on April 1, 2023. The Company is currently evaluating the impact the adoption of this ASU will have on its consolidated financial statements.

Accounting for Convertible Instruments: In August 2020, FASB issued ASU 2020-06, Accounting for Convertible Instruments and Contracts in an Entity’s Own Equity (ASU 2020-06), as part of its overall simplification initiative to reduce costs and complexity of applying accounting standards while maintaining or improving the usefulness of the information provided to users of financial statements. Among other changes, the new guidance removes from GAAP separation models for convertible debt that require the convertible debt to be separated into a debt and equity component, unless the conversion feature is required to be bifurcated and accounted for as a derivative or the debt is issued at a substantial premium. As a result, after adopting the guidance, entities will no longer separately present such embedded conversion features in equity and will instead account for the convertible debt wholly as debt. The new guidance also requires use of the “if-converted” method when calculating the dilutive impact of convertible debt on earnings per share, which is consistent with the Company’s current accounting treatment under the current guidance. The guidance is effective for financial statements issued for fiscal years beginning after December 15, 2021, and interim periods within those fiscal years, with early adoption permitted, but only at the beginning of the fiscal year.

The Company reviews new accounting standards as issued. Management has not identified any other new standards that it believes will have a significant impact on the Company’s consolidated financial statements.

F-6

4. RELATED PARTY TRANSACTIONS

Name of Related Parties		Relationship with the Company
Zhida Hong		President, CEO, and a director of the Company
Hongye Financial Consulting (Shenzhen) Co., Ltd.		A company controlled by CEO, Mr. Zhida Hong
Bihua Yang		A legal representative of XKJ
Dewu Huang		A legal representative of YBY
Jinlong Huang		Management of HSW

The Company leases Shenzhen XKJ office rent-free from Bihua Yang.

The Company had the following related party balances as of June 30, 2023 and March 31, 2023:

Amount due from related party	June 30, 2023		March 31, 2023
Zhida Hong	$	58,079	$	-
Bihua Yang		452,629		375,092
Amount due from related party	$	510,708	$	375,092

SCHEDULE OF RELATED PARTIES BORROWINGS

Related party borrowings	June 30, 2023		March 31, 2023
Zhida Hong (1)	$	-	$	901,110
Hongye Financial Consulting (Shenzhen) Co., Ltd.		84,901		45,841

SEC Form 10-Q filed by Addentax Group Corp.