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: September 30, 2024

☐	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. 001-41478

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 November 14, 2024, there were 6,043,769 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	18

Item 4.	Controls and Procedures	18

	PART II – OTHER INFORMATION

Item 1.	Legal Proceedings	19

Item 1A.	Risk Factors	19

Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	19

Item 3.	Defaults Upon Senior Securities	19

Item 4.	Mine Safety Disclosures	19

Item 5.	Other Information	19

Item 6.	Exhibits	19

PART I – FINANCIAL INFORMATION

Item 1. Financial Statements and Supplementary Data

ADDENTAX GROUP CORP.

FINANCIAL STATEMENTS

For the three and six months ended September 30, 2024 and 2023

TABLE OF CONTENTS

Condensed Consolidated Balance sheets as of September 30, 2024 (unaudited) and March 31, 2024 (audited)	F-2
Condensed Consolidated Statements of Income and Comprehensive Income for the three and six months ended September 30, 2024 and 2023 (unaudited)	F-3
Condensed Consolidated Statements of Changes in Equity for the three and six months ended September 30, 2024 and 2023 (unaudited)	F-4
Condensed Consolidated Statements of Cash Flows for the six months ended September 30, 2024 and 2023 (unaudited)	F-5
Notes to Condensed Consolidated Financial Statements for the three and six months ended September 30, 2024 and 2023 (unaudited)	F-6 – F-15

F-1

ADDENTAX GROUP CORP. AND SUBSIDIARIES

UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS

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

(UNAUDITED)

	September 30, 2024			March 31, 2024

ASSETS

CURRENT ASSETS
Cash and cash equivalents	$	810,545		$	816,186
Restricted cash		2,750,000			2,750,000
Accounts receivables, net		1,207,409			2,106,451
Debt securities held-to-maturity		17,500,000			17,500,000
Inventories		191,708			63,505
Prepayments and other receivables		1,667,814			1,922,996
Advances to suppliers		320,964			1,009,362
Amount due from related party		3,840,154			3,012,892
Total current assets		28,288,594			29,181,392

NON-CURRENT ASSETS
Plant and equipment, net		491,706			568,854
Operating lease right of use asset		19,060,635			19,796,564
Long-term prepayments		291,027			291,938
Long-term receivables		2,500,000			2,500,000
Total non-current assets		22,343,368			23,157,356
TOTAL ASSETS	$	50,631,962		$	52,338,748

LIABILITIES AND EQUITY

CURRENT LIABILITIES
Short-term loan	$	465,067		$	440,671
Accounts payable		79,364			359,488
Amount due to related parties		177,750			1,146,745
Advances from customers		243,717			202,567
Accrued expenses and other payables		417,273			1,372,962
Operating lease liability current portion		1,068,257			1,059,497
Total current liabilities		2,451,428			4,581,930

NON-CURRENT LIABILITIES
Convertible debts		3,214,514			2,684,697
Derivative liabilities		949,791			287,955
Operating lease liability		19,226,050			18,737,066
Total non-current liabilities		23,390,355			21,709,718
TOTAL LIABILITIES	$	25,841,783		$	26,291,648

EQUITY
Common stock ($0.001 par value, 250,000,000 shares authorized, 6,043,769 and 5,383,769 shares issued and outstanding at September 30 and March 31, 2024, respectively)	$	6,044		$	5,384
Additional paid-in capital		35,240,981			34,510,869
Accumulated Deficit		(10,511,833	)		(8,569,190	)
Statutory reserve		37,020			37,020
Accumulated other comprehensive loss		17,967			63,017
Total equity		24,790,179			26,047,100
TOTAL LIABILITIES AND EQUITY	$	50,631,962		$	52,338,748

See accompanying 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)


	Three months ended September 30,						Six months ended September 30,
	2024			2023			2024			2023

REVENUES	$	1,341,478		$	1,335,314		$	2,192,511		$	2,387,820

COST OF REVENUES		(1,012,837	)		(932,427	)		(1,661,275	)		(1,748,024	)

GROSS PROFIT		328,641			402,887			531,236			639,796

OPERATING EXPENSES
Selling and marketing		(22,351	)		(37,212	)		(161,711	)		(37,212	)
General and administrative		(551,356	)		(670,607	)		(1,119,607	)		(1,168,465	)
Total operating expenses		(573,707	)		(707,819	)		(1,281,318	)		(1,205,677	)

INCOME (LOSS) FROM OPERATIONS		(245,066	)		(304,932	)		(750,082	)		(565,881	)

Fair value gain or loss		(531,614	)		2,854,595			(397,397	)		1,566,592
Interest income		342			1,693			710			3,417
Interest expenses		(58,045	)		(603,819	)		(905,727	)		(1,896,534	)
Other income, net		113,913			(581,900	)		111,399			(469,414	)

(LOSS) INCOME BEFORE INCOME TAX EXPENSE		(720,470	)		1,365,637			(1,941,097	)		(1,361,820	)
INCOME TAX EXPENSE		(1,062	)		(3,237	)		(1,546	)		(4,501	)

NET (LOSS) INCOME		(721,532	)		1,362,400			(1,942,643	)		(1,366,321	)
Foreign currency translation gain		(59,460	)		2,302			(45,050	)		89,752
TOTAL COMPREHENSIVE INCOME (LOSS)	$	(780,992	)	$	1,364,702		$	(1,987,693	)	$	(1,276,569	)

EARNINGS PER SHARE
Basic and diluted		(0.13	)		0.37			(0.36	)		(0.37	)
Weighted average number of shares outstanding – Basic and diluted		5,360,143			3,656,442			5,360,143			3,656,442

See accompanying 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)


										Retained earnings					Accumulated
							Additional			(accumulated deficit)					other
	Common Stock						paid-in						Statutory		comprehensive			Total
	Shares			Amount			capital			Unrestricted			reserve		loss			Equity
BALANCE AT JULY 1, 2023		3,739,581		$	3,740		$	32,406,317		$	(8,179,930	)	$	28,457	$	67,977		$	24,326,561
Issuance of new shares		755,398			755			(755	)		-			-		-			-
Additional paid-in capital from conversion of convertible debts		-			-			1,153,366			-			-		-			1,153,366
Foreign currency translation		-			-			-			-			-		2,302			2,302
Net income for the period		-			-			-			1,362,400			-		-			1,362,400
BALANCE AT SEPTEMBER 30, 2023		4,494,979		$	4,495		$	33,558,928		$	(6,817,530	)	$	28,457	$	70,279		$	26,844,629

BALANCE AT JULY 1, 2024		6,043,769		$	6,044		$	35,157,009		$	(9,790,301	)	$	37,020	$	77,427		$	25,487,199
Additional paid-in capital from conversion of convertible debts		-			-			83,972			-			-		-			83,972
Foreign currency translation		-			-			-			-			-		(59,460	)		(59,460	)
Net income for the period		-			-			-			(721,532	)		-		-			(721,532	)
BALANCE AT SEPTEMBER 30, 2024		6,043,769		$	6,044		$	35,240,981		$	(10,511,833	)	$	37,020	$	17,967		$	24,790,179

BALANCE AT APRIL 1, 2023		35,454,670		$	35,455		$	29,528,564		$	(5,451,209	)	$	28,457	$	(19,473	)	$	24,121,794
Issuance of new shares before reversed split		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			-			-		-			-
Issuance of new shares after reversed split		755,398			755			(755	)		-			-		-			-
Additional paid-in capital from conversion of convertible debts		-			-			3,999,404			-			-		-			3,999,404
Foreign currency translation		-			-			-			-			-		89,752			89,752
Net income for the period		-			-			-			(1,366,321	)		-		-			(1,366,321	)
BALANCE AT SEPTEMBER 30, 2023		4,494,979		$	4,495		$	33,558,928		$	(6,817,530	)	$	28,457	$	70,279		$	26,844,629

BALANCE AT APRIL 1, 2024		5,383,769		$	5,384		$	34,510,869		$	(8,569,190	)	$	37,020	$	63,017		$	26,047,100
Balance		5,383,769		$	5,384		$	34,510,869		$	(8,569,190	)	$	37,020	$	63,017		$	26,047,100
Issuance of new shares		660,000			660			646,140			-			-		-			646,800
Additional paid-in capital from conversion of convertible debts		-			-			83,972			-			-		-			83,972
Foreign currency translation		-			-			-			-			-		(45,050	)		(45,050	)
Net income for the period		-			-			-			(1,942,643	)		-		-			(1,942,643	)
BALANCE AT SEPTEMBER 30, 2024		6,043,769		$	6,044		$	35,240,981		$	(10,511,833	)	$	37,020	$	17,967		$	24,790,179
Balance		6,043,769		$	6,044		$	35,240,981		$	(10,511,833	)	$	37,020	$	17,967		$	24,790,179

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)


	Six Months Ended September 30
	2024			2023
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss	$	(1,942,643	)	$	(1,366,321	)
Adjustments to reconcile net income (loss) to net cash used in operating activities:
Depreciation		365,733			146,106
Non-cash financial cost		878,228			1,884,984
Investment income		330,000			(218,750	)
Fair value gain or loss		397,398			(1,566,592	)
Loss on debts extinguishment		-			697,318
Gain on bargain purchase		-			(975	)
Loss from sale of property and equipment		43,081			-
Loss on disposal of subsidiary		334,135			-
Changes in operating assets and liabilities
Accounts receivable		489,599			(202,150	)
Inventories		(137,062	)		35,155
Advances to suppliers		(50,236	)		(816,464	)
Other receivables		(74,993	)		(76,100	)
Accounts payables		(280,124	)		(12,460	)
Accrued expenses and other payables		134,732			(65,645	)
Advances from customers		41,150			(17,592	)
Net cash provided by (used in) operating activities	$	528,998		$	(1,579,486	)

CASH FLOWS FROM INVESTING ACTIVITIES
Purchase of property and equipment and intangible assets		(107,432	)		(5,274	)
Cash decreased in disposal of subsidiary		(8,219	)		-
Net cash used in investing activities	$	(115,651	)	$	(5,274	)

CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from related party borrowings		151,574			1,960,902
Repayment of related party borrowings		(273,632	)		(3,112,467	)
Release of restricted cash		-			3,850,000
Proceeds from bank borrowings		695,343			-
Repayment of bank borrowings		(683,638	)		-
Cash advance to related parties		(2,962,753	)		-
Repayment from related parties		2,010,740			-
Proceeds from issue of ordinary shares		646,800			-
Net cash provided by (used in) financing activities	$	(415,566	)	$	2,698,435

NET INCREASE (DECREASE) IN CASH AND RESTRICTED CASH		(2,219	)		1,113,675
Effect of exchange rate changes on cash and cash equivalents		(3,422	)		67,889
Cash and restricted cash, beginning of the period		816,186			562,711
CASH AND RESTRICTED CASH, END OF THE PERIOD	$	810,545		$	1,744,275

Supplemental disclosure of cash flow information:
Cash paid during the period for interest	$	26,731		$	-
Cash paid during the period for income tax	$	1,546		$	4,501
Supplemental disclosure of non-cash investing and financing activities:
Right-of-use assets obtained in exchange for operating lease obligations	$	1,233,672		$	19,512,400

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, 2024 filed with the Securities and Exchange Commission (“SEC”) on July 15, 2024 (“2023 Form 10-K”).

3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Use of Estimates

The preparation of the 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 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 six months ended September 30, 2024.

Recently issued accounting pronouncements

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. DISPOSITION OF SUBSIDIARIES

The Company disposed of its subsidiary Shantou Yi Bai Yi Garment Co., Ltd, a PRC Company (“YBY”), a manufacturing company in garment manufacturing segment at end of August 2024 to the local management of YBY. After disposition, YBY became third party to the Company. The Company will not have any businesses with YBY. The Company will carry on the garment manufacturing segment business through other subsidiaries. The disposition of YBY did not qualify as discontinued operations.

Financial position of the entities at disposal date and gain or loss on disposal:

Garment Manufacturing Segment

Financial position of YBY	August 31, 2024, date of disposal
Current assets	$	1,165,329
Noncurrent assets		134
Current liabilities		(863,205	)
Net assets	$	302,258

The consideration was Nil, with the reversal of related foreign currency translation reserve brought forward, resulting in a loss of $334,135 recognized on the disposal.

5. 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, ceased to be related party at August 31, 2024 when YBY was disposed.
Jinlong Huang		Management of HSW

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

Hongye Financial Consulting (Shenzhen) Co., Ltd. provided guarantee to the consideration receivable of transfer of a debt security to a third party.

The Company had the following related party balances as of September 30, 2024 and March 31, 2024:

Amount due from related party	September 30, 2024		March 31, 2024
Zhida Hong (1)	$	2,847,417	$	2,154,759
Bihua Yang (2)		992,737		858,133
Amount due from related party	$	3,840,154	$	3,012,892

Related party borrowings	September 30, 2024		March 31, 2024
Hongye Financial Consulting (Shenzhen) Co., Ltd.		40,527		170,967
Dewu Huang (3)		-		864,599
Jinlong Huang		137,223		111,179
Related party borrowings	$	177,750	$	1,146,745

	(1)	The increase of related party debt from Hong Zhida was short term loan to Hong Zhida, which is interest free and to be repaid in one year.

	(2)	The increase of related party debt from Yang Bihua was mainly due to the cash paid in advance to Yang Bihua. During the quarter ended September 30, 2024, the Company provided a short term loan of approximately $0.31 million to Yang Bihua and received repayment of approximately $0.3 million from him.

	(3)	The Company received financial support from Huang Dewu to fund company’s daily operation. The decrease is because YBY was disposed of in August 2024.

The borrowing balances with related parties are unsecured, non-interest bearing and repayable on demand.

F-7

6. DEBT SECURITIES HELD-TO-MATURITY

	September 30, 2024		March 31, 2024

Debt securities held-to-maturity	$	17,500,000	$	17,500,000

The Company purchased a note issued by a third-party investment company on August 24, 2022. The principal amount of the note is $17,500,000. The note is renewable with one-year tenor on August 23, 2023 and 2.5% p.a. coupon. On August 23, 2023, the Company entered into an agreement to transfer the principal and coupon receivable to a third party. During the quarter ended September 30, 2024, the Company received interest payment of $545,000. As of September 30, and March 31, 2024, the coupon receivable was $330,000 and $437,500. The debt is guaranteed by Hongye Financial Consulting (Shenzhen) Co., Ltd., the company controlled by our CEO, Mr. Hong Zhida.

7. INVENTORIES

Inventories consist of the following as of September 30, 2024 and March 31, 2024:

SCHEDULE OF INVENTORIES

	September 30, 2024		March 31, 2024
Raw materials	$	9,939	$	20,947
Work in progress		6,836		-
Finished goods		174,933		42,558
Total inventories	$	191,708	$	63,505

8. ADVANCES TO SUPPLIERS

The Company has made advances to third-party suppliers in advance of receiving inventory parts. These advances are generally made to expedite the delivery of required inventory when needed and to help to ensure priority and preferential pricing on such inventory. The amounts advanced to suppliers are fully refundable on demand.

The Company reviews a supplier’s credit history and background information before advancing a payment. If the financial condition of its suppliers were to deteriorate, resulting in an impairment of their ability to deliver goods or provide services, the Company would recognize bad debt expense in the period they are considered unlikely to be collected.

9. PREPAYMENTS AND OTHER RECEIVABLES

Prepayments and other receivables consist of the following as of September 30 and March 31, 2024:

	September 30, 2024		March 31, 2024
Prepayment		29,091		34,693
Deposit		755,345		741,465
Receivable of consideration on disposal of subsidiaries		-		152,882
Receivable of interest income from debt security		330,000		437,500
Other receivables		553,378		556,456
Prepayments and other receivables	$	1,667,814	$	1,922,996

10. PROPERTY, PLANT AND EQUIPMENT

Property, plant and equipment consists of the following as of September 30 and March 31, 2024:

	September 30, 2024		March 31, 2024
Production plant	$	106,809	$	105,738
Motor vehicles		846,852		1,047,121
Office equipment		53,997		52,486
Property, plant and equipment gross		1,007,659

	(1)	The increase of related party from Hong Zhida was short term loan to Hong Zhida, which is interest free and would be repaid in one year.

	(2)	The increase of related party debt from Yang Bihua was mainly due to the cash paid in advance to Yang Bihua. During the quarter ended September 30, 2024, the Company provided a short term loan of approximately $0.31 million to Yang Bihua and received repayment of approximately $0.30 million from him.

SEC Form 10-Q filed by Addentax Group Corp.