Item
9.01 Financial Statements and Exhibits
CAUTIONARY
NOTE REGARDING FORWARD-LOOKING STATEMENTS
This
Current Report contains forward-looking statements, including, without limitation, in the sections captioned “Description
of Business,” “Risk Factors,” and “Management’s Discussion and Analysis of Financial Condition and
Plan of Operations,” and elsewhere. Any and all statements contained in this Report that are not statements of historical
fact may be deemed forward-looking statements. Terms such as “may,” “might,” “would,” “should,”
“could,” “project,” “estimate,” “pro-forma,” “predict,” “potential,”
“strategy,” “anticipate,” “attempt,” “develop,” “plan,” “help,”
“believe,” “continue,” “intend,” “expect,” “future,” and terms of
similar import (including the negative of any of the foregoing) may be intended to identify forward-looking statements. However,
not all forward-looking statements may contain one or more of these identifying terms. Forward-looking statements in this Report
may include, without limitation, statements regarding (i) the plans and objectives of management for future operations, including
plans or objectives relating to the development of commercially viable pharmaceuticals, (ii) a projection of income (including
income/loss), earnings (including earnings/loss) per share, capital expenditures, dividends, capital structure or other financial
items, (iii) our future financial performance, including any such statement contained in a discussion and analysis of financial
condition by management or in the results of operations included pursuant to the rules and regulations of the Securities and Exchange
Commission (the “SEC”), and (iv) the assumptions underlying or relating to any statement described in points (i),
(ii) or (iii) above.
The
forward-looking statements are not meant to predict or guarantee actual results, performance, events or circumstances and may
not be realized because they are based upon our current projections, plans, objectives, beliefs, expectations, estimates and assumptions
and are subject to a number of risks and uncertainties and other influences, many of which we have no control over. Actual results
and the timing of certain events and circumstances may differ materially from those described by the forward-looking statements
as a result of these risks and uncertainties. Factors that may influence or contribute to the inaccuracy of the forward-looking
statements or cause actual results to differ materially from expected or desired results may include, without limitation, our
inability to obtain adequate financing, the significant length of time associated with our platform development and related insufficient
cash flows and resulting illiquidity, our inability to expand our business, significant government regulation of the securities
industry, lack of product diversification, existing or increased competition, results of arbitration and litigation, stock volatility
and illiquidity, and our failure to implement our business plans or strategies. A description of some of the risks and uncertainties
that could cause our actual results to differ materially from those described by the forward-looking statements in this Report
appears in the section captioned “Risk Factors” and elsewhere in this Report.
Readers
are cautioned not to place undue reliance on forward-looking statements because of the risks and uncertainties related to them
and to the risk factors. We disclaim any obligation to update the forward-looking statements contained in this Report to reflect
any new information or future events or circumstances or otherwise.
Readers
should read this Report in conjunction with the discussion under the caption “Risk Factors,” our financial statements
and the related notes thereto in this Report, and other documents, which we may file from time to time with the SEC.
EXPLANATORY
NOTE
Addentax
Group Corp. was incorporated in the State of Nevada on October 28, 2014 and established a fiscal year-end of March 31. We are
in the development stage and were incorporated to produce images on multiple surfaces, such as glass, leather, plastic, ceramic,
textile, and others using a 3D sublimation vacuum heat transfer machine. Our business office is located at Floor 13th, Building
1, Block B, Zhihui Square, Nanshan District, Shenzhen City, China 518000. Our telephone number is +(86) 755 86961 405.
Effective
December 28, 2016, Addentax Group Corp. (“ATXG” or the “Company”) disclosed via a Form 8-K that it had
executed Sale & Purchase Agreement (“S&P”) for the acquisition of 100% of the shares and assets of Yingxi
Industrial Chain Group Co., Ltd., (YICG”) a company incorporated under the laws of the Republic of Seychelles. ATXG agreed
to issue five hundred million (500,000,000) shares of ATXG to Yingxi Industrial Chain Group Co., Ltd. to acquire the shares and
assets for a cost of US$0.30 per share or a total cost of US$150,000,000. However, effective March 6, 2017, due to the death of
Mr. Wu Linrui who served in the position of President, Secretary, Treasurer and as a Director during the execution of the above
noted S&P Agreement, both parties to the Agreement have consented to revise those portions of the S&P Agreement related
to the signatories to the Agreement. Other than changes to the signatories or items related to the signatories, no changes have
been made to the terms of the Agreement.
For
financial reporting purposes, the Agreement represents a “reverse merger”, and YICG is deemed to be the accounting
acquirer in the transaction. The Agreement is being accounted for as a reverse-merger and recapitalization. YICG is the acquirer
for financial reporting purposes, and ATXG is the acquired company. Consequently, the assets and liabilities and the operations
that will be reflected in the historical financial statements prior to the Agreement will be those of YICG, and will be recorded
at the historical cost basis of YICG. The consolidated financial statements after completion of the Agreement will include the
assets and liabilities of the Company and YICG, and the historical operations of YICG and operations of the combined company from
the closing date of the Agreement.
Item
2.01 COMPLETION OF ACQUISITION OR DISPOSITION OF ASSETS
The
Sale and Purchase Agreement and Related Transactions
:
Hong
Zhida is the president, secretary and a director of Addentax Group Corp.(ATXG). On December 28, 2016 ATXG executed Sale &
Purchase Agreement (“S&P”) for the acquisition of 100% of the shares and assets of Yingxi Industrial Chain Group
Co., Ltd., (YICG”) a company incorporated under the laws of the Republic of Seychelles. ATXG agreed to issue five hundred
million (500,000,000) shares of ATXG to Yingxi Industrial Chain Group Co., Ltd. to acquire the shares and assets for a cost of
US$0.30 per share or a total cost of US$150,000,000. However, effective March 6, 2017, due to the death of Mr. Wu Linrui who served
in the position of President, Secretary, Treasurer and as a Director during the execution of the above noted S&P Agreement,
both parties to the Agreement consented to revise those portions of the S&P Agreement related to the signatories to the Agreement.
Other than changes to the signatories or items related to the signatories, no changes have been made to the terms of the Agreement.
No third parties, brokers or agents played any role in arranging or facilitating the transactions and no benefits of any description
were given to any third parties.
Execution
of the Agreement was the first stage of the planned acquisition. Pursuant to the Agreement, closing was to occur on September
25th, 2017. Closing was contingent upon an audit of the shares and assets. All shares issued pursuant to the Agreement were held
in escrow and deemed to be in the full control of the Company until the closing.
As
of both the parties have now satisfied all of the closing conditions and we completed the terms of the Agreement. With the filing
of this report, the closing is now considered completed, and all shares issued pursuant to the Agreement have been delivered.
This constituted a change of control and reverse merger.
As
a result of the closing, the Company has terminated its previous business plan, and we are now pursuing the historical business
of Yingxi Industrial Chain Group Co., Ltd., an international industry chain service provider specializing in textile & garments
industry.
Identity
of the Persons Acquiring Control
Hengtian
Group Co., Ltd.
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89,650,412 Common Shares
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17.69
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%
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Beneficial Owner: Ma Huizhu
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Second Floor
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The Quadrant Manglier Street,
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Victoria, Mahe, Seychelles
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Hui Lian
Group Ltd.
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157,719,300 Common Shares
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31.11
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%
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Beneficial Owner:
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Ma Huijun
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The Quadrant Manglier Street,
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Victoria, Mahe, Seychelles
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Hong
Zhida
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30,159,000 Common Shares
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5.95
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%
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Floor 13, Building 1, Block B, Zhihui
Square,
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Nanshan District, Shenzhen, China 518000
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Zeng
Shufang
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42,000,000 Common Shares
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8.29
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%
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No. 2, Second Lane, Rentien Village
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Fuyong Town, Baoan Baoan District,
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Guangdong Province, China
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This
constituted a change of control of the Company.
Form
10 Information
Prior
to the closing of the Agreement, the Company had nominal operations. We were deemed a “shell company,” as defined
in Rule 12b-2 of the Securities Exchange Act of 1934, as amended and the rules and regulations promulgated thereunder (“Exchange
Act”), and are filing in light of the lack of operations prior to the completion of the Agreement. With the resulting change
in our business, we are voluntarily providing the information as is required pursuant to Item 2.01(f) of Form 8-K as if we were
filing a general form for registration of securities on Form 10 under the Exchange Act for our common stock, which is the only
class of our securities subject to the reporting requirements of Section 13 or Section 15(d) of the Exchange Act upon consummation
of the Agreement.
Description
of Business
Addentax
Group Corp. was incorporated in the State of Nevada on October 28, 2014. were originally incorporated to produce images on multiple
surfaces, such as glass, leather, plastic, ceramic, textile, and others using a 3D sublimation vacuum heat transfer machine. We
no longer pursue opportunities related to 3D printing positioning.
We
have a fiscal year-end of March 31. The business office is located at Floor 13
th
, Building 1, Block B, Zhihui Square,
Nanshan District, Shenzhen City, China 518000. Our telephone number is +(86) 755 8696 1405.
Current
Business
Effective
December 28, 2016 Addentax Group Corp. (“ATXG” or the “Company”) has executed a Sale & Purchase Agreement
(“S&P”) for the acquisition of 100% of the shares and assets of Yingxi Industrial Chain Group Co., Ltd., a company
incorporated under the laws of the Republic of Seychelles. Yingxi Industrial Chain Group Co., Ltd. is an international industry
supply chain service specialized in the textile & garments industry. We plan to assist clients to open textile and garment
sales outlets throughout China. The company will also provide assistance services in plan implementation. Pursuant to the Agreement,
the Company agreed to issue five hundred million (500,000,000) restricted common shares of the company to the owners of Yingxi
Industrial Chain Group Co., Ltd.
Currently,
our business model is in the infancy stage. However, we already have over 30 potential clients that seek our services. All the
clients are located in China.
To
guarantee the quality of our business, we conduct strict rules for our potential clients.
Client
Qualifications: To sign the servicing contract with ATXG, a potential client must:
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1.
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Be
established and validly existing pursuant to relevant laws and regulations;
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2.
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Demonstrate
that they have a good business reputation and operating performance, and comply with professional ethics;
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3.
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Have
not breached any law or regulation, or have received any administrative penalty from a regulatory body or other department
in the past twenty-four months;
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Our
industry chain service refers to companies meeting the requirement for development and inclusion as a supply chain outlet. Medium
and small-sized enterprises all over the world can search for our service, but our current focus is on helping clients in China.
Many
medium-small sized enterprises in China experience the problem of business maintenance or expansion in the textile and garments
industry where increasing operational costs cause decreasing profit. Most seek to employ new business models that can increase
a company’s competitive advantage and bring a powerful sales engine to the company. With possible limitation of resources
and information, management of these enterprises find it hard to design a suitable plan for their company’s sustainable
development.
To
assist these enterprises, we set up a research team to carry out extensive investigation and integrate necessary industry information
and resources which can help us to work out the best plan for our clients.
The
research will include:
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1.
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Client
diligence: To collect the details of the client including its financial reports, management, planned business model, internal
system, operation flows and other important information;
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2.
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Relevant
business partner research: Focus on the raw material supplier and product buyer, conduct comprehensive analysis;
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3.
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Market
research: To discover the actual market demands and market shares;
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4.
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Environment
research: Research and analyze the environment of policy, economy, technology and legal;
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We
developed a multi-task Industrial Chain Service System which we call “Adden Chain” not only for providing business
solutions to clients, but also assisting the clients to fully realize their business plan and potential.
Our
company’s service can be divided into three parts:
Consulting
& Plan Design
There
are four main services within this part:
Promotion
Service
We
will design a “Promotion Plan” for our clients depending on their requirements to improve their marketing plans.
Operation
Assistance Service
We
can help the clients to sort out all the individual parts (i.e.: Raw Materials Supply, Manufacturing, Product Design, Marketing)
within the whole operation chain, and assist them to fix weaknesses. We can also help the clients to reallocate the resources
they own and improve their operational efficiency.
Logistics
and International Trading Service
We
developed and applied our “YX logistics system” to improve our client’s transportation efficiency. Our YX logistics
system mainly provides three services to our clients: transportation service; storage & distribution service; bulk purchasing
service.
We
also work with qualified international trading companies to help expand clients’ global market shares. Currently we already
built the trading routes to various areas like America, Australia and Africa which can help clients lower the international trading
costs.
Financial
Services
We
will offer financial services to the selected clients. The services including long term & short term loans, financing services
and inventory pledge services. Also, we plan to build a third part payment center which can improve clients’ capital turnover.
Clients can employ the third part payment center to process the transaction should accept the payment terms and payment period
we set. As the third part guarantee, we could help our clients to pay or receive t payments on time.
Plan
implementation Assistance:
We
have already built strategic cooperative relationships with over 40 textile and garments industry related entities that can provide
us enriched resources. With the advantage in resources and information, we are available to assist our clients to deal with various
issues and problems before and after the implementation of their respective outlets.
Additional
Services
Team
Establishment:
In
accordance with the conditions of the clients, we will assist the clients to establish an organizational structure and a management
team best suited for their business plan.
Headhunting”
Services:
We
work with headhunting companies, i.e. companies that provide employment or recruiting services to find the most qualified managers
and professionals to meet the specific needs of our clients.
Follow-up
Service:
We
provide clients with continuous consultancy and following-up services throughout the entire startup and service period.
Markets
Currently,
our market will focus on small and medium-sized enterprises in China who have business expansion plans.
Seasonality
The
nature of our products and services does not appear to be affected by seasonal variations.
Government
Regulations
Currently
there are no government regulations regarding our type of services in China. The Chinese government encourages the small-medium
sized traditional industry companies to conduct business model transformation and technology updates, which may help companies
gain more competitive advantages in international market.
Other
than the required adherence to general business laws and regulatory disclosure, our services do not appear to be affected by any
specific additional Chinese government regulations. However, this does not preclude the possibility that China will institute
regulations that will make it difficult or impossible for us to operate successfully, if at all, in China, and we would have to
focus our business on companies located outside China.
Intellectual
Property
We
do not have any intellectual property currently. We are in the process of registering high-tech industry based on our new business
model. We expect to receive approval of our registration in China by the end of 2017.
Research
& Development
Currently,
we have no expenses for Research and Development. We plan to spend 10% of our profits to develop our multi-task industrial chain
service system.
Environmental
Matters
Our
operations are not subject to environmental laws, including any laws addressing air and water pollution and management of hazardous
substances and wastes and we do not anticipate capital expenditures for environmental control facilities.
Employees
As
of July 17, 2017, we have 6 full-time employees, of which 1 is in the administrative department, 2 in the consultancy service
department, 2 in the research & analysis department and 1 in the technological department. We will employ qualified staff
from time to time to meet our development needs.
Properties
Our
principal place of business is located at Floor 13
th
, Building 1, Block B, Zhihui Square, Nanshan District, Shenzhen
City, China 518000 and the telephone number is +(86) 755 8696 1405. Our president, Mr. Hong Zhida, supplies our office space and
telephone at no costs to us.
Additional
Information
We
are required to file quarterly, annual and current reports. The Company files its reports electronically with SEC. The SEC maintains
an Internet site that contains reports, proxy and information statements, and other electronic information regarding issuers that
file electronically with the SEC at http://www.sec.gov.
Historical
Background
Change
in Authorized Capital
On
December 24, 2016, the Board of Director approved an amendment to our Articles of Incorporation to increase our authorized capital
from 150,000,000 common shares to 1,000,000,000 common shares. A majority of the holders of our common stock consented to the
amendment to our Article of Incorporation. On December 27, 2016, we filed our Certificate of Amendment to Articles of Incorporation
with the state of Nevada.
Change
in Directors & Officers
Effective
December 28, 2016, ATXG accepted the resignation of Mr. Yu Keying from the position of President, Secretary and Treasurer.
He will remain on the Board as a director.
Effective December 28, 2016, the company announced the appointment of Mr.
Wu Linrui, to the Board of Directors in the position of President Secretary, Treasurer and as a Director.
Effective
February 8, 2017, the company reported the death of Mr. Wu Linrui who served in the position of President, Secretary, Treasurer
and as a Director. Mr Yu Keying, who served as a director, replaced Mr. Wu Linrui in the position of President, Secretary and
Treasurer.
Effective
March 10, 2017, management of ATXG will affected the appointment of Mr. Hong Zhida to replace Mr. Yu Keying in the positions of
President, Secretary, Chief Executive Officer and Treasurer. Mr. Yu Keying will remain as a Director of ATXG.
In
the future, we are plan to raise funds through the registered offering of our equity stock. If we are unable to secure adequate
capital to continue our business, our shareholders may lose some or all of their investment.
Our
officers and directors continue to provide their labor at no charge. We plan to hire up to 10 additional staff members during
the next 12 months of operation.
RISK
FACTORS
We
believe that there are certain risks involved in our operations, many of which are beyond our control. These risks can be categorized
into (i) risks associated with our company; (ii) general risks associated with business operations in China; (iii) dependence
on our current officers; and (iv) risks associated with our common stock. Additional risks and uncertainties presently not known
to us or not expressed or implied below, or that we currently deem immaterial could also harm our business, financial condition,
and operational results. You should consider our business and prospects in light of the challenges we face, including the ones
discussed in this section.
Risks
Associated with Our Company
Our
independent auditors have issued an audit opinion for our company, which includes a statement describing our going concern status.
Our financial status creates a doubt whether we will be able to continue as a going concern.
Our
auditors have issued a going concern opinion regarding our company. This means there is substantial doubt we can continue as an
ongoing business for the next twelve months. The financial statements do not include any adjustments that might result from the
uncertainty regarding our ability to continue in business. As such we may have to cease operations and investors could lose part
or all of their investment in our company.
As
our business represents a new experiment in the garments & textiles industry and there is no comparable competitor, it is
difficult to determine if the model can be successfully implemented.
Our
company focuses on the garments & textiles industry, providing consulting services and solutions intended to transform client
companies. We have already built cooperative relationships with more than 40 companies. We are also building a research &
investigation team to assist us in devising the most suitable development plans for our clients. This is a new, experimental business
model in China, but we are confident that the market demand for transformation assistance services is high, especially with medium-small
sized entities. At this time, there is no comparable company that could provide relevant market performance data that would be
relevant in forecasting our success. We cannot yet predict whether or not we will be able to satisfy our clients’ needs
and effectively implement our business model.
Research
& development expenses are high and we will not generate profits immediately.
In
order to increase the clients’ competitive advantage and provide them with a powerful platform, our company will need to
employ a professional staff that can provide excellent service for our clients. This requires the company to invest heavily in
developing a research team and establishing a sustainable service operation. However, it will take time to effectively develop
the client businesses that are utilizing our service. This means that, even after a large initial investment, it is unlikely that
we will begin realizing substantial profits immediately. If our company is not careful in allocating capital and resources, the
result might be failure of our venture.
Our
business model requires the use and training of outside personnel, some of whom may not be available to provide qualified services
when needed.
As
new employees transition into their positions, the process may lead to delays or interruptions of productive work and inefficient
formal orientation programs often fail to provide measurable benefits for the company. Staff turnover can also cause loss to the
company. Our business model requires us to contract services from our business partners in other countries. These partners will
be selected in accordance with specific standards and provided with adequate training to ensure that they will be familiar with
all relevant aspects of our company’s business. Individual levels of trainability, professionalism, and work ethic will
vary and may not always meet the strict requirements of our business. Additionally, outside personnel may not be available when
needed, which may affect customer satisfaction, the company’s public image, and future business development opportunities.
If we are not able to recruit and effectively train the required personnel, our company may face significant challenges and, ultimately,
fail.
Our
company’s industrial chain service is based on a professional investigation program.
We
will need to build a research & investigation team with the high degree of professionalism that is necessary to implement
our program and meet our operational needs. The research & investigation team should have expertise in client care, business
model analysis, market research, and other relevant environmental research. We will make every reasonable effort to enhance the
professionalism of our team, but it will still be difficult to guarantee that our research & investigation team can, in practice,
satisfy all of our clients’ requirements.
The
company’s research & investigation capabilities may not match company’s operational requirements.
Our
working partners might not have the skills, experience, or qualifications necessary to match our clients’ requirements.
We have established cooperation relationships with various business partners with the expectation that these resources will allow
us to assist our clients as they implement our transformation plans and we are continually pursuing cooperation relationships
with various outstanding business partners that can fulfill each client’s requirements. There is always a chance that the
products or services our business partners are capable of providing will not match our clients’ specific needs. We are currently
developing strict guidelines for our business partnerships that will allow us to provide the best possible service to our clients.
We will continually monitor the quality of our business partners’ products, services, capacity, internal management systems,
and other relevant indicators.
Employees
with a weak sense of moral hazard may negatively influence our company’s business and reputation.
Employee
with good professional ethics are important for any company’s development. An employee with poor work ethic might, either
intentionally or unintentionally disclose confidential information about our company or our clients and particularly unscrupulous
employees might endeavor to sell material information to industry competitors. While it is impossible to completely eliminate
this risk, we will establish a series of policies to reduce the likelihood of such events.
We
will:
1.
Organize ethics training for all employees
2.
Establish and employ a comprehensive security system to protect important files and data
The
Company may not be able to establish sufficient business partnerships to effectively serve our target market.
Our
business model involves promoting our products and services through our business partners in targeted countries and regions. These
partners will be more familiar with local markets and may be able to help us attract clients quickly. However, it takes time to
recruit qualified business partners and those selected may not always turn out to be the right fit, which may have a negative
effect on our business development. Due to the inconvenience and logistical challenges posed by the locations of the companies
in our group, there is always a chance that we may miss out on opportunities for cooperation between companies.
Cultural
differences between our company and local partners may pose a risk to our expansion.
As
an international company, we will need to consider the numerous cultural differences that have the potential to influence our
business. Culture-based misunderstandings and conflicts may arise, not only between our company and the local partners, but within
our staff as well. Such conflicts would have a negative effect on morale and could diminish the quality of our final products.
Valuable
resources may be lost if there is a problem with our patents.
Our
“Adden Chain” multi-task industrial chain service system has not yet been granted for a patent that would protect
the model within the textile and garment industry. We could potentially lose corresponding resources and miss out on some business
opportunities, despite our best efforts to protect our rights via legal means when our model is stolen or copied. The entry barrier
for our business is high due to the large amount of resources and energy that it requires, which can prevent some small and medium-sized
companies from engaging in this business. However, we cannot guarantee that our business model won’t be copied by other
groups or companies with access to sufficient resources and industry information. If such an event occurs, we will face the challenges
from the powerful competitors and our performance in the market could be negatively affected.
Large
competitors could steal our market share by offering lower prices.
We
endeavor to provide the highest possible quality service to our clients at the best possible price, however, large competitors
might steal some of our market share by offering lower prices, causing us to lose some of our clients. If this happens, we might
not be able to generate adequate income and will soon find ourselves lacking the capital that is required to continue operations.
We
currently have a limited number of clients and customers and we cannot guarantee we will ever have more. Even if we obtain additional
clients or customers, there is no assurance that we will make a profit.
We
currently have a limited number of clients and customers. We have identified additional potential clients, but we cannot guarantee
that we will be able to secure them as clients. Even if we obtain additional clients and customers, there is no guarantee that
we will be able develop products and/or services that our clients and customers will want to purchase. If we are unable to attract
enough customers and clients to purchase services (and any products we may develop or sell) it will have a negative effect on
our ability to generate the revenue that is necessary to operate or expand our business. The lack of sufficient revenue will have
a negative effect on the ability of our company to continue operations and could force us to cease operations.
Our
business partners may fail to effectively promote our business, thus hindering development.
We
cannot guarantee that we will be able to satisfy all of our clients. If we do not meet our clients’ expectations, it will
likely have a negative impact on our future business development. A failed cooperation will not only subject us to pecuniary loss,
but could also diminish the sense of goodwill between the parties, which would not be good for our business development.
If
we are not able to increase and maintain our brand influence, we may face difficulties in attracting new business partners and
clients.
Our
brand is still being nurtured. It is of critical importance that we increase and maintain our brand influence in order to attract
new clients and business partners. Our major competitors have built well-known brands and continue to increase their influence.
Our failure to increase and maintain brand influence for any reason may result in a material adverse effects on our business,
operational results, and financial position.
General
Risks Associated with Business Operations in China
Foreign
exchange fluctuations may affect our business.
We
accept the payment of listed service fees in CNY, HKD, and USD. Therefore, foreign exchange fluctuations may influence our business
in unpredictable ways.
Inflation
could pose a risk to our business.
Inflation
is important factor must be considered as we move forward. A change in the rate of inflation could influence the profits that
we generate from our business. When the rate of inflation rises, the operational costs of running our company would increase,
affecting our ability to provide our services at competitive prices. An increased in the rate of inflation would force our clients
to search for other service providers, causing us to lose business and revenue.
It
is difficult to predict the Chinese government’s financial policies.
Financial
regulations in China are very strict. The government controls all financial institutions, including those involved in equity financing.
Government interference could seriously damage or completely destroy our company.
Dependence
Upon Our Current Officers
Our
business depends on the continued contributions made by our officers and employees, loss of whom may result in a severe impediment
to our business.
Our
success is dependent upon the continued contributions made by our officers, especially our founders. We rely on their expertise
in business operations when we are developing all new products and services. The company has no “Key Man” insurance
to cover the resulting losses in the event that any of our officers should die or resign.
If
one or more of our officers cannot serve the company or is no longer willing to do so, the company may not be able to find alternatives
in a timely manner or at all. This would result in a severe damage to our business operations and would have an adverse material
impact on our financial position and operational results. To continue as a viable operation, the company may have to recruit and
train replacement personnel at a higher cost.
Additionally,
if our officers join our competitors or develop similar businesses that are in competition with our company, our business may
also be negatively impacted.
Our
future success depends on our ability to attract and retain qualified long-term staff to fill management, technology, sales, marketing,
and customer services positions. We have a great need for qualified talent, but we may not be successful in attracting, hiring,
developing, and retaining the talent required for our success.
Asymmetric
information access entails inherent ethical risk.
Our
employees may need to develop privileged relationships with our business partners may acquire the ability to harm the interests
of our partners. If this should happen, our clients might lose faith in our expertise entirely.
While
we can never eliminate these ethical risks entirely, we will do everything in our power to reduce the likelihood of breaches of
trust and mitigate their impacts of it by hiring highly professional employees and establishing strong internal information management
systems.
Risks
Associated with Our Common Stock
Our
controlling shareholders may make decisions that differ from those that might be made our corporate officers and directors.
Through
a controlling ownership share in our company, shareholders have significant influence in determining the outcome of all corporate
transactions, including the power to prevent or cause a change in control. Their interests may differ from the interests of other
stockholders and thus result in corporate decisions that are disadvantageous to other shareholders.
We
may never be able to pay dividends and are unlikely to do so.
To
date, we have not paid, nor do we intend to pay in the foreseeable future, dividends on our common stock, even if we become profitable.
Earnings, if any, are expected to be used to advance our activities and for general corporate purposes, rather than to make distributions
to stockholders. Since we are not in a financial position to pay dividends on our common stock and future dividends are not presently
being contemplated, investors are advised that return on investment in our common stock is restricted to an appreciation in the
share price. The potential or likelihood of an increase in share price is uncertain.
There
is no active trading market for our common stock and if a market for our common stock does not develop, our investors will be
unable to sell their shares.
There
is currently no active trading market for our common stock and such a market may not develop or be sustained. We plan to have
our common stock quoted on the OTC Bulletin Board upon the effectiveness of this registration statement of which this prospectus
forms a part. In order to do this, a market maker must file a Form 15c-211 to allow the market maker to make a market in our shares
of common stock. At the date hereof we are not aware that any market maker has any such intention. We cannot provide our investors
with any assurance that our common stock will be traded on the OTC Bulletin Board or any other exchange, or, if traded, that a
public market will materialize. Further, the OTC Bulletin Board is not a listing service or exchange, but is instead a dealer
quotation service for subscribing members. If our common stock is not quoted on the OTC Bulletin Board or if a public market for
our common stock does not develop, then investors may not be able to resell the shares of our common stock that they have purchased
and may lose all of their investment. If we establish a trading market for our common stock, the market price of our common stock
may be significantly affected by factors such as actual or anticipated fluctuations in our operation results, general market conditions
and other factors. In addition, the stock market has from time to time experienced significant price and volume fluctuations that
have particularly affected the market prices for the shares of developmental stage companies, which may materially adversely affect
the market price of our common stock.
Sales
of a substantial number of shares of our common stock into the public market by the selling stockholders may result in significant
downward pressure on the price of our common stock and could affect the ability of our stockholders to realize any current trading
price of our common stock.
Sales
of a substantial number of shares of our common stock in the public market could cause a reduction in the market price of our
common stock, when and if such market develops. When this registration statement is declared effective, the selling stockholders
may be reselling up to 32.8% of the issued and outstanding shares of our common stock. As a result of such registration statement,
a substantial number of our shares of common stock which have been issued may be available for immediate resale when and if a
market develops for our common stock, which could have an adverse effect on the price of our common stock. As a result of any
such decreases in price of our common stock, purchasers who acquire shares from the selling stockholders may lose some or all
of their investment.
Any
significant downward pressure on the price of our common stock as the selling stockholders sell the shares of our common stock
could encourage short sales by the selling stockholders or others. Any such short sales could place further downward pressure
on the price of our common stock.
Our
stock is a penny stock. Trading of our stock may be restricted by the SEC’s penny stock regulations and the NASD’s
sales practice requirements, which may limit a stockholder’s ability to buy and sell our stock.
Our
stock is a penny stock. The Securities and Exchange Commission (the “SEC”) has adopted Rule 15g-9 which generally
defines “penny stock” to be any equity security that has a market price (as defined) less than $5.00 per share or
an exercise price of less than $5.00 per share, subject to certain exceptions. Our securities are covered by the penny stock rules,
which impose additional sales practice requirements on broker-dealers who sell to persons other than established customers and
“accredited investors”. The term “accredited investor” refers generally to institutions with assets in
excess of $5,000,000 or individuals with a net worth in excess of $1,000,000 or annual income exceeding $200,000, or $300,000
jointly with their spouse. The penny stock rules require a broker-dealer, prior to a transaction in a penny stock not otherwise
exempt from the rules, to deliver a standardized risk disclosure document in a form prepared by the SEC which provides information
about penny stocks and the nature and level of risks in the penny stock market. The broker-dealer also must provide the customer
with current bid and offer quotations for the penny stock, the compensation of the broker-dealer and its salesperson in the transaction,
and monthly account statements showing the market value of each penny stock held in the customer’s account. The bid and
offer quotations, and the broker-dealer and salesperson compensation information, must be given to the customer orally or in writing
prior to effecting the transaction and must be given to the customer in writing before or with the customer’s confirmation.
In addition, the penny stock rules require that prior to a transaction in a penny stock not otherwise exempt from these rules,
the broker-dealer must make a special written determination that the penny stock is a suitable investment for the purchaser, and
receive the purchaser’s written agreement to the transaction. These disclosure requirements may have the effect of reducing
the level of trading activity in the secondary market for the stock that is subject to these penny stock rules. Consequently,
these penny stock rules may affect the ability of broker-dealers to trade our securities. We believe that the penny stock rules
discourage investor interest in and limit the marketability of our common stock.
In
addition to the “penny stock” rules promulgated by the SEC, the NASD has adopted rules that require that in recommending
an investment to a customer, a broker-dealer must have reasonable grounds for believing that the investment is suitable for that
customer. Prior to recommending speculative low-priced securities to their non-institutional customers, broker-dealers must make
reasonable efforts to obtain information about the customer’s financial status, tax status, investment objectives and other
information. Under interpretations of these rules, the NASD believes that there is a high probability that speculative low priced
securities will not be suitable for at least some customers. The NASD requirements make it more difficult for broker-dealers to
recommend that their customers buy our common stock, which may limit your ability to buy and sell our stock and have an adverse
effect on the market for our shares.
Please
read this prospectus carefully. You should rely only on the information contained in this prospectus. We have not authorized anyone
to provide you with different information. You should not assume that the information provided by the prospectus is accurate as
of any date other than the date on the front of this prospectus.
FORWARD-LOOKING
STATEMENTS
This
prospectus contains forward-looking statements that involve risks and uncertainties, including statements regarding our capital
needs, business plans and expectations. Such forward-looking statements involve risks and uncertainties regarding the market price
of gold and copper, availability of funds, government regulations, operating costs, exploration costs, outcomes of exploration
programs and other factors. Forward-looking statements are made, without limitation, in relation to operating plans, property
exploration and development, availability of funds, environmental reclamation, operating costs and permit acquisition. Any statements
contained herein that are not statements of historical facts may be deemed to be forward-looking statements. In some cases, you
can identify forward-looking statements by terminology such as “may”, “will”, “should”, “expect”,
“plan”, “intend”, “anticipate”, “believe”, “estimate”, “predict”,
“potential” or “continue”, the negative of such terms or other comparable terminology. Actual events or
results may differ materially. In evaluating these statements, you should consider various factors, including the risks outlined
in this prospectus. These factors may cause our actual results to differ materially from any forward-looking statement. While
these forward-looking statements, and any assumptions upon which they are based, are made in good faith and reflect our current
judgment regarding our business plans, our actual results will almost always vary, sometimes materially, from any estimates, predictions,
projections, assumptions or other future performance suggested herein. We do not intend to update any of the forward-looking statements
to conform these statements to actual results, except as required by applicable law, including the securities laws of the United
States.
MANAGEMENT’S
DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Results
of Operations
The
following discussion of our financial condition and results of operation for the period ended June 30, 2017 and 2016 and the years
ended December 31, 2016 and 2015 should be read in conjunction with the financial statements and the notes to those statements
that are included elsewhere in this report on Form 8-K.
For
the three months ended June 30, 2017 compared to 2016
|
|
Three Months Ended
|
|
|
|
|
|
|
June
30,
|
|
|
|
|
|
|
2017
|
|
|
2016
|
|
|
Change
|
|
Revenue
|
|
$
|
4,208,819
|
|
|
$
|
3,615,869
|
|
|
$
|
592,950
|
|
Cost of revenue
|
|
|
(3,937,257
|
)
|
|
|
(3,136,863
|
)
|
|
|
(800,394
|
)
|
Gross profit
|
|
|
271,562
|
|
|
|
479,006
|
|
|
|
(207,444
|
)
|
Gross profit (%)
|
|
|
6
|
%
|
|
|
13
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating expense
|
|
|
(382,167
|
)
|
|
|
(404,877
|
)
|
|
|
22,710
|
|
Other expense
|
|
|
(1,888
|
)
|
|
|
(4,737
|
)
|
|
|
2,849
|
|
Provision
for income taxes
|
|
|
(2,176
|
)
|
|
|
(10,486
|
)
|
|
|
8,310
|
|
Net income
(loss)
|
|
$
|
(114,669
|
)
|
|
$
|
58,906
|
|
|
$
|
(173,575
|
)
|
Revenue
Net
revenues totaled $4,208,819 for the three months ended June 30, 2017, an increase of $592,950 compared to 2016. The increase was
primarily a result of expansion of business. The company developed some new customers that bring more revenue to the company.
Cost
of revenue
Cost
of revenue totaled $3,937,257 for the three months ended June 30, 2017, an increase of $800,394 compared to 2016, primarily as
the result of the rise of manufacturing cost and materials cost. Our cost of revenues consisted mainly of labor cost and materials
cost. The labor costs for three months ended June 30, 2017 was $138,883, respectively. The material cost for three months ended
June 30, 2017 was $1,918,261, respectively. The transportation cost for three months ended June 30, 2017 was $1,832,220, respectively.
The manufacturing cost for three months ended June 30, 2017 was $39,570, respectively. The operation tax for three months ended
June 30, 2017 was $8,323, respectively.
Gross
profit
Gross
profit was 6% ($271,562) and 13% ($479,006) for the three months ended June 30, 2017 and 2016, respectively.
The
decrease in gross profit was primarily a result of strategic business expansion plan.
Operating
expense
General
and administrative expenses totaled $382,167 for the three months ended June 30, 2017, a decrease of $22,710, compared to 2016.
Operating expenses for three months ended June 30, 2017 included sales expense of $12,192, administration expense of $369,161
and financial expense of $814, respectively. Operating expenses for three months ended June 30, 2016 included sales expense of
$14,668, administration expense of $389,710 and financial expense of $499, respectively.
Other
expense
Total
other expenses totaled $1,888 for the three months ended June 30, 2017, a decrease of $2,849 compared to 2016. Other expense consisted
mainly of government subsidy.
Net
income
Net
loss totaled $114,669 for the three months ended June 30, 2017, a decrease from net income of $58,906, compared to 2016, primarily
as the result of a decrease in gross profit of $207,444.
For
the six months ended June 30, 2017 compared to 2016
|
|
Six Months Ended
|
|
|
|
|
|
|
June
30,
|
|
|
|
|
|
|
2017
|
|
|
2016
|
|
|
Change
|
|
Revenue
|
|
$
|
7,292,010
|
|
|
$
|
6,850,617
|
|
|
$
|
441,393
|
|
Cost of revenue
|
|
|
(6,746,056
|
)
|
|
|
(5,942,449
|
)
|
|
|
(803,607
|
)
|
Gross profit
|
|
|
545,954
|
|
|
|
908,168
|
|
|
|
(362,214
|
)
|
Gross profit (%)
|
|
|
7
|
%
|
|
|
13
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating expense
|
|
|
(676,827
|
)
|
|
|
(767,546
|
)
|
|
|
90,719
|
|
Other expense
|
|
|
(2,173
|
)
|
|
|
(7,670
|
)
|
|
|
5,497
|
|
Provision for
income taxes
|
|
|
(2,328
|
)
|
|
|
(17,361
|
)
|
|
|
15,033
|
|
Net income (loss)
|
|
$
|
(135,374
|
)
|
|
$
|
115,591
|
|
|
$
|
(250,965
|
)
|
Revenue
Net
revenues totaled $7,292,010 for the six months ended June 30, 2017, an increase of $441,393 compared to 2016. The increase was
primarily a result of expansion of business. The company developed some new customers that bring more revenue to the company.
Cost
of revenue
Cost
of revenue totaled $6,746,056 for the six months ended June 30, 2017, an increase of $803,607 compared to 2016, primarily as the
result of the rise of manufacturing cost and materials cost. Our cost of revenues consisted mainly of labor cost, raw material
cost, manufacturing cost, transportation cost and operation tax.
The
labor cost for six months ended June 30, 2017 and 2016 was $210,703 and $290,550, respectively.
The
raw material cost for six months ended June 30, 2017 and 2016 was $2,852,129 and $3,227,290, respectively.
The
manufacturing cost for six months ended June 30, 2017 and 2016 was $123,223 and $133,953, respectively.
The
transportation cost six months ended June 30, 2017 and 2016 was $3,548,079 and $2,272,211, respectively.
The
operation tax for six months ended June 30, 2017 and 2016 was $11,922 and $18,445, respectively.
Gross
profit
Gross
profit was 7% ($545,954) and 13% ($908,168) for the six months ended June 30, 2017 and 2016, respectively.
The
decrease in gross profit was primarily a result of strategic business expansion plan .
Operating
expense
General
and administrative expenses totaled $676,827 for the six months ended June 30, 2017, a decrease of $90,719, compared to 2016.
Operating expenses for six months ended June 30, 2017 included sales expense of $18,925, administration expense of $656,775 and
financial expense of $1,127, respectively. Operating expenses for six months ended June 30, 2016 included sales expense of $29,362,
administration expense of $734,390 and financial expense of $3,794, respectively
Other
expense
|
|
Six Months Ended
|
|
|
|
|
|
|
June
30,
|
|
|
|
|
Other Expense
|
|
2017
|
|
|
2016
|
|
|
Change
|
|
Interest expense
|
|
$
|
-
|
|
|
$
|
(2,701
|
)
|
|
$
|
2,701
|
|
Other expense
|
|
|
(2,173
|
)
|
|
|
(4,969
|
)
|
|
|
2,796
|
|
Total Other
Income
|
|
$
|
(2,173
|
)
|
|
$
|
(7,670
|
)
|
|
$
|
5,497
|
|
Total
other expenses totaled $2,173 for the six months ended June 30, 2017, a decrease of $5,497 compared to 2016. Other expense consisted
mainly of government subsidy.
Net
income
Net
loss totaled $135,374 for the six months ended June 30, 2017, a decrease from net income of $115,591, compared to 2016, primarily
as the result of a decrease in gross profit of $362,214.
Liquidity
and Capital Resources
Working
Capital
|
|
June 30,
|
|
|
December 31,
|
|
|
|
|
|
|
2017
|
|
|
2016
|
|
|
Change
|
|
Cash
|
|
$
|
1,098,254
|
|
|
$
|
227,687
|
|
|
$
|
870,567
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total current assets
|
|
$
|
8,511,970
|
|
|
$
|
7,341,329
|
|
|
$
|
1,170,641
|
|
Total current
liabilities
|
|
|
8,582,130
|
|
|
|
7,325,574
|
|
|
|
1,256,556
|
|
Working capital
(deficiency)
|
|
$
|
(70,160
|
)
|
|
$
|
15,755
|
|
|
$
|
(85,915
|
)
|
The
change in working capital deficiency during the period ended June 30, 2017 was primarily from an increase in short-term loan payable
of $2,655,000 and reduced by an increase in cash of $870,567 and a decrease in due to related parties of $1,148,496.
Cash
Flows
|
|
Six Months Ended
|
|
|
|
|
|
|
June
30,
|
|
|
|
|
|
|
2017
|
|
|
2016
|
|
|
Change
|
|
Cash Flows Provided by (Used
in) Operating Activities
|
|
$
|
(196,256
|
)
|
|
$
|
754,388
|
|
|
$
|
(950,644
|
)
|
Cash Flows Used in Investing Activities
|
|
|
(1,793,786
|
)
|
|
|
(1,051,917
|
)
|
|
|
(741,869
|
)
|
Cash Flows Provided by Financing Activities
|
|
|
2,847,238
|
|
|
|
322,298
|
|
|
|
2,524,940
|
|
Effects on changes in foreign exchange
rate
|
|
|
13,371
|
|
|
|
6,402
|
|
|
|
6,969
|
|
Net Increase in Cash During Period
|
|
$
|
870,567
|
|
|
$
|
31,171
|
|
|
$
|
839,396
|
|
Cash
Flow from Operating Activities
For
the six months ended June 30, 2017, net cash flows used in operating activities consisted of a net loss of $135,374 and was decreased
by depreciation of $52,652, and increased by a net increase in change of operating assets and liabilities of $113,591. For the
six months ended June 30, 2016, net cash flows used in operating consisted of a net income of $115,544 and was increased by depreciation
of $35,185 and a net increase in the change of operating assets and liabilities of $603,612.
Cash
Flow from Investing Activities
For
the six months ended June 30, 2017, we used $1,458,000 for acquisition of subsidiary, provided loans of $312,173 and loans to
related parties of $23,613. For the six months ended June 30, 2016, we used $20,434 for purchases of equipment, provided loans
of $990,070 and loans to related parties of $41,413.
Cash
Flow from Financing Activities
For
the six months ended June 30, 2017, we received $4,082,400 from loan payable and used $1,235,162 for repayments of loans to related
parties. For the six months ended June 30, 2016, we received loans from related parties of $506,018 and used $183,720 for repayments
of loan payable.
For
the year ended December 31, 2016 compared to 2015
|
|
Years Ended
|
|
|
|
|
|
|
December
31,
|
|
|
|
|
|
|
2016
|
|
|
2015
|
|
|
Change
|
|
Revenue
|
|
$
|
14,427,141
|
|
|
$
|
9,294,356
|
|
|
$
|
5,132,785
|
|
Cost of revenue
|
|
|
(12,751,777
|
)
|
|
|
(7,950,642
|
)
|
|
|
4,801,135
|
|
Gross profit
|
|
|
1,675,364
|
|
|
|
1,343,714
|
|
|
|
331,650
|
|
Gross profit (%)
|
|
|
12
|
%
|
|
|
14
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating expense
|
|
|
(1,516,876
|
)
|
|
|
(1,474,278
|
)
|
|
|
42,598
|
|
Other income
|
|
|
7,326
|
|
|
|
157,232
|
|
|
|
(149,906
|
)
|
Provision for
income taxes
|
|
|
(35,989
|
)
|
|
|
(20,439
|
)
|
|
|
15,550
|
|
Net income
|
|
$
|
129,825
|
|
|
$
|
6,229
|
|
|
$
|
123,596
|
|
Revenue
Net
revenues totaled $14,427,141 for the year ended December 31, 2016, an increase of $5,132,785 compared to 2015. The increase was
primarily a result of expansion of business. The company developed some new customers that bring more revenue to the company.
Cost
of revenue
Cost
of revenue totaled $12,751,777 for the year ended December 31, 2016, an increase of $4,801,135 compared to 2015, primarily as
the result of the rise of manufacturing cost and materials cost. Our cost of revenues consisted mainly of raw material cost, labor
cost, manufacturing cost, transportation cost and operation tax.
The
labor cost for years ended December 31, 2016 and 2015 was $74,712 and $55,162, respectively. The raw material cost for years ended
December 31, 2016 and 2015 was $6,114,993 and $2,461,463, respectively. The manufacturing cost for years ended December 31, 2016
and 2015 was $787,125 and $374,737, respectively. The transportation cost for years ended December 31, 2016 and 2015 was $5,745,303
and $5,043,639, respectively. The operation tax for years ended December 31, 2016 and 2015 was $29,044 and $15,641, respectively.
Gross
profit
Gross
profit was 12% ($1,675,364) and 14% ($1,343,714) for the year ended December 31, 2016 and 2015, respectively.
Operating
expense
General
and administrative expenses totaled $1,516,876 for the year ended December 31, 2016, an increase of $42,598, compared to 2015.
Operating expenses mainly consist of sales expense, administration expense and financial expense. The operating expense for years
ended December 31, 2016 included administration expense of $1,477,012, sales expense of $35,476, financial expense of $4,388,
respectively. The operating expense for years ended December 31, 2015 included administration expense of $1,380,249; sales expense
of $71,822; financial expense of $22,207, respectively.
Other
income (expense)
|
|
Years Ended
|
|
|
|
|
|
|
December
31,
|
|
|
|
|
|
|
2016
|
|
|
2015
|
|
|
Change
|
|
Other income
|
|
$
|
17,755
|
|
|
$
|
193,248
|
|
|
$
|
(175,493
|
)
|
Interest expense
|
|
|
(2,701
|
)
|
|
|
(21,874
|
)
|
|
|
19,173
|
|
Other expense
|
|
|
(7,728
|
)
|
|
|
(14,142
|
)
|
|
|
6,414
|
|
Total
Other Income
|
|
$
|
7,326
|
|
|
$
|
157,232
|
|
|
$
|
(149,906
|
)
|
Total
other income (expenses) totaled $7,326 for the year ended December 31, 2016, a decrease of $149,906 compared to 2015 mainly due
to a decrease of $175,493 in other income. The difference is mainly due to the allowance of disposal of heavy-polluting vehicles
granted by the Government in 2015.
Net
income
Net
income totaled $129,825 for the year ended December 31, 2016, an increase of $123,596, compared to 2015, primarily as the result
of an increase in gross profit of $331,650.
Liquidity
and Capital Resources
Working
Capital
|
|
December 31,
|
|
|
December 31,
|
|
|
|
|
|
|
2016
|
|
|
2015
|
|
|
Change
|
|
Cash
|
|
$
|
227,687
|
|
|
$
|
123,133
|
|
|
$
|
104,554
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total current assets
|
|
$
|
7,341,329
|
|
|
$
|
4,614,904
|
|
|
$
|
2,726,425
|
|
Total current liabilities
|
|
|
7,325,574
|
|
|
|
3,155,457
|
|
|
|
4,170,117
|
|
Working capital
|
|
$
|
15,755
|
|
|
$
|
1,459,447
|
|
|
$
|
(1,443,692
|
)
|
Cash
Flows
|
|
Years Ended
|
|
|
|
|
|
|
December 31,
|
|
|
|
|
|
|
2016
|
|
|
2015
|
|
|
Change
|
|
Cash Flows Provided by (Used in) Operating Activities
|
|
$
|
65,191
|
|
|
$
|
(1,222,934
|
)
|
|
$
|
1,288,125
|
|
Cash Flows Used in Investing Activities
|
|
|
(339,622
|
)
|
|
|
(776,515
|
)
|
|
|
436,893
|
|
Cash Flows Provided by Financing Activities
|
|
|
387,824
|
|
|
|
1,992,145
|
|
|
|
(1,604,321
|
)
|
Effects on changes in foreign exchange rate
|
|
|
(8,839
|
)
|
|
|
(5,765
|
)
|
|
|
(3,074
|
)
|
Net Increase (decrease) in Cash During Period
|
|
$
|
104,554
|
|
|
$
|
(13,069
|
)
|
|
$
|
117,623
|
|
The
change in working capital during 2016 was primarily from an increase in accounts receivable of $2,206,153 and reduced by an increase
in account payable and accrued liabilities of $2,019,490 and increase in due to related parties of $1,893,775.
Cash
Flow from Operating Activities
For
the year ended December 31, 2016 net cash flows provided by operating activities consisted of a net income of $129,825 and was
increased by depreciation of $102,967, and reduced by a net increase in change of operating assets and liabilities of $167,601.
For the year ended December 31, 2015, net cash flows used in operating consisted of a net income of $6,229 and was increased by
depreciation of $91,368 and a net decrease in the change of operating assets and liabilities of $1,320,531.
Cash
Flow from Investing Activities
For
the year ended December 31, 2016, we used $102,629 for purchases of equipment, provided loans of $769,654 and received $10,829
from sale of property and equipment and $521,832 from repayment of loan to related parties. For the year ended December 31, 2015,
we used $158,033 for purchases of equipment, provided loans of $66,653 and loans to related parties of $551,829.
Cash
Flow from Financing Activities
For
the year ended December 31, 2016, we received $100,000 for the issuance of common shares and $468,424 from loan from related party
and used $180,600 for repayments of loan payable. For the year ended December 31, 2015, we received loans from related parties
of $2,073,365 and used $81,220 for repayments of loan payable.
Critical
Accounting Policy and Estimates
In
the ordinary course of business, we make a number of estimates and assumptions relating to the reporting of results of operations
and financial condition in the preparation of our financial statements in conformity with U.S. generally accepted accounting principles.
We base our estimates on historical experience, when available, and on other various assumptions that are believed to be reasonable
under the circumstances. Actual results could differ significantly from those estimates under different assumptions and conditions.
Off-Balance
Sheet Arrangements
We
do not have any off-balance sheet arrangements that have or are reasonably likely to have a current or future effect on our financial
condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures, or capital
resources that is material to investors.
Security
Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters
The
following table sets forth, as of August 9, 2017, certain information with respect to the beneficial ownership of our common shares
by each shareholder known by us to be the beneficial owner of more than 5% of our common shares, as well as by each of our current
directors and executive officers as a group. To the best of our knowledge, except as otherwise indicated each person has sole
voting and investment power with respect to the shares of common stock except to the extent such power may be shared with a spouse.
Beneficial ownership consists of a direct interest in the shares of common stock, except as otherwise indicated.
Name and Address of Beneficial Owner
(1)
|
|
Amount and Nature of Beneficial Ownership
|
|
Percentage
(2)
of Class
|
Hong Zhida: President, Secretary, Director Floor 13, Building 1, Block B, Zhihui
Square, Nanshan District, Shenzhen, China 518000
|
|
30,159,000
(Direct)
|
|
5.95%
Common
|
Yu Keying: Director Floor 13, Building 1, Block B, Zhihui Square, Nanshan District, Shenzhen,
China 518000
|
|
3,800,000
(Direct)
|
|
0.75%
Common
|
Hengtian Group Co., Ltd. Beneficial Owner: Ma Huizhu Second Floor, The Quadrant Manglier
Street, Victoria, Mahe, Seychelles
|
|
89,650,412
(Indirect)
|
|
17.69%
Common
|
Hui Lian Group Ltd.: Beneficial Owner: Ma Huijun The Quadrant Manglier Street, Victoria, Mahe,
Seychelles
|
|
157,719,300
(Indirect)
|
|
31.11%
Common
|
Zeng Shufang No. 2, Second Lane, Rentien Village Fuyong Town, Baoan Baoan District, Guangdong
Province, China
|
|
42,000,000
(Direct)
|
|
8.29%
Common
|
Directors and Executive Officers as a Group (2 people)
|
|
33,959,000
|
|
6.70%
|
(1)
The persons named above may be deemed to be a “promoter” of the Company, within the meaning of such terms under the
Securities Act of 1933, as amended, by virtue of his direct holdings in the Company.
(2)
Based on 506,920,000 shares issued and outstanding as of September 20th, 2017.
Directors,
Executive Officers, Promoters and Control Persons
All
directors of our company hold office until the next annual meeting of the security holders or until their successors have been
elected and qualified. The officers of our company are appointed by the board of directors and hold office until their death,
resignation or removal from office. The directors and executive officers, their ages, positions held, and duration as such, are
as follows:
The
name, address, age and position of our officers and directors is set forth below:
Name
and Address
|
|
Age
|
|
Position(s)
|
Hong
Zhida
Floor
13, Building 1, Block B, Zhihui Square, Nanshan District, Shenzhen, China 518000
|
|
27
|
|
President,
Chief Executive Officer, Chief Financial Officer Secretary and Director Appointed: March, 2017.
|
|
|
|
|
|
Keying
Yu
Floor
13, Building 1, Block B, Zhihui Square, Nanshan District, Shenzhen, China 518000
|
|
68
|
|
Director.
Appointed March 10, 2017.
|
The
officers and directors set forth herein are our only officers, directors and control persons, as that term is defined in the rules
and regulations promulgated under the Securities and Exchange Act of 1933.
Background
of Officers and Directors
Hong
Zhida, Secretary, Treasurer
Mr.
Hong Zhida received his Bachelor’s Degree in Electronic Information Science and Technology from Sun Yat-sen University in
July 2013. From June 2014 to Present, he served as the Director of China Huiying Joint Supply Chain Group Co.Ltd. He was responsible
for assisting the company’s chairman to plan development strategy. From September 2013 to May 2014, he served as Head of
Membership Department of the Guangzhou Haifeng Chamber of Commerce. In that position he was responsible for the membership management
of the institution.
Yu
Keying, Director
From
July 1986 to present, Mr. Yu has worked in Shenzhen Mailang Garments Co. Ltd as Manager. Shenzhen Mailang Garments Co. Ltd is
an enterprise responsible for developing, producing and selling garments of two main leisure men’s brands called Mylooo
and Tannoy covering T-shirts, sweaters, windbreaker and other product lines. There are numbers of sales outlets in Guangzhou,
Beijing, Shanghai, Hong Kong, Taiwan and other overseas market. Mr Yu has been responsible for company operations related to product
development and sales management.
Mr.
Hong devotes 75% of his time each week for planning and organizing activities of Addentax Group Corp.
Mr.
Yu devotes 75% of his time each week for planning and organizing activities of Addentax Group Corp.
During
the past ten years, neither Mr. Hong nor Mr. Yu have been the subject to any of the following events:
1.
Any bankruptcy petition filed by or against any business of which Mr. Hong or Mr. Yu was a general partner or executive officer
either at the time of the bankruptcy or within two years prior to that time.
2.
Any conviction in a criminal proceeding or being subject to a pending criminal proceeding.
3.
An order, judgment, or decree, not subsequently reversed, suspended or vacated, or any court of competent jurisdiction, permanently
or temporarily enjoining, barring, suspending or otherwise limiting Mr. Hong’s or Mr. Yu’s involvement in any type
of business, securities or banking activities.
4.
Found by a court of competent jurisdiction (in a civil action), the Securities and Exchange Commission or the Commodity Future
Trading Commission to violate a federal or state securities or commodities law, and the judgment has not been reversed, suspended
or vacated.
5.
Was the subject of any order, judgment or decree, not subsequently reversed, suspended or vacated, of any Federal or State authority
barring, suspending or otherwise limiting for more than 60 days the right to engage in any activity described in paragraph (f)(3)(i)
of this section, or to be associated with persons engaged in any such activity;
Director
Independence
We
are not currently subject to listing requirements of any national securities exchange or inter-dealer quotation system which has
requirements that a majority of the board of directors be “independent” and, as a result, we are not at this time
required to have our Board of Directors comprised of a majority of “independent directors.”
Family
Relationships
There
are no family relationships among our Directors or executive officers.
Director
or Officer Involvement in Certain Legal Proceedings
None
of our directors or executive officers has been involved in any of the following events during the past ten years:
|
●
|
any
bankruptcy petition filed by or against any business of which such person was a general partner or executive officer either
at the time of the bankruptcy or within two years prior to that time;
|
|
|
|
|
●
|
any
conviction in a criminal proceeding or being subject to a pending criminal proceeding (excluding traffic violations and other
minor offences);
|
|
|
|
|
●
|
being
subject to any order, judgment, or decree, not subsequently reversed, suspended or vacated, of any court of competent jurisdiction,
permanently or temporarily enjoining, barring, suspending or otherwise limiting his or her involvement in any type of business,
securities or banking activities; or
|
|
|
|
|
●
|
being
found by a court of competent jurisdiction (in a civil action), the Commission or the Commodity Futures Trading Commission
to have violated a federal or state securities or commodities law, and the judgment has not been reversed, suspended, or vacated.
|
Board
Committees
The
Company currently has not established any committees of the Board of Directors. Our Board of Directors may designate from among
its members an executive committee and one or more other committees in the future. We do not have a nominating committee or a
nominating committee charter. Further, we do not have a policy with regard to the consideration of any director candidates recommended
by security holders. To date, other than as described above, no security holders have made any such recommendations. The entire
Board of Directors performs all functions that would otherwise be performed by committees. Given the present size of our board
it is not practical for us to have committees. If we are able to grow our business and increase our operations, we intend to expand
the size of our board and allocate responsibilities accordingly.
Audit
Committee Financial Expert
We
have no separate audit committee at this time. The entire Board of Directors oversees our audits and auditing procedures. The
Board of Directors has at this time not determined whether any director is an “audit committee financial expert” within
the meaning of Item 407(d)(5) for SEC regulation S-K.
Code
of Ethics
We
have adopted a Code of Business Conduct and Ethics that applies to, among other persons, members of our board of directors, our
Company’s officers including our President, Chief Executive Officer and Chief Financial Officer, employees, consultants
and advisors. As adopted, our Code of Business Conduct and Ethics sets forth written standards that are designed to deter wrongdoing
and to promote:
|
1.
|
honest
and ethical conduct, including the ethical handling of actual or apparent conflicts of interest between personal and professional
relationships;
|
|
|
|
|
2.
|
full,
fair, accurate, timely, and understandable disclosure in reports and documents that we file with, or submit to, the US Securities
and Exchange Commission and in other public communications made by us;
|
|
|
|
|
3.
|
compliance
with applicable governmental laws, rules and regulations;
|
|
|
|
|
4.
|
the
prompt internal reporting of violations of the Code of Business Conduct and Ethics to an appropriate person or persons identified
in the Code of Business Conduct and Ethics; and;
|
|
|
|
|
5.
|
accountability
for adherence to the Code of Business Conduct and Ethics.
|
Our
Code of Business Conduct and Ethics requires, among other things, that all of our company’s senior officers commit to timely,
accurate and consistent disclosure of information; that they maintain confidential information; and that they act with honesty
and integrity.
In
addition, our Code of Business Conduct and Ethics emphasizes that all employees, and particularly senior officers, have a responsibility
for maintaining financial integrity within our company, consistent with generally accepted accounting principles, and federal
and state securities laws. Any senior officer, who becomes aware of any incidents involving financial or accounting manipulation
or other irregularities, whether by witnessing the incident or being told of it, must report it to our Company. Any failure to
report such inappropriate or irregular conduct of others is to be treated as a severe disciplinary matter. It is against our Company
policy to retaliate against any individual who reports in good faith the violation or potential violation of our company’s
Code of Business Conduct and Ethics by another.
Executive
Compensation
The
following tables set forth, for each of the last two completed fiscal years of the Company, the total compensation awarded to,
earned by or paid to any person who was a principal executive officer during the preceding fiscal year and every other highest
compensated executive officers earning more than $100,000 during the last fiscal year (together, the “Named Executive Officers”).
The tables set forth below reflect the compensation of the Named Executive Officer.
SUMMARY COMPENSATION TABLE
|
Name
and Principal Position
|
|
Year
|
|
Salary
($)
|
|
Bonus
($)
|
|
Stock Awards
($)
|
|
Option Awards
($)
|
|
Non-Equity Incentive Plan Compensation
($)
|
|
Change in Pension Value and Nonqualified Deferred Compensation Earnings
($)
|
|
All Other Compensation (3)
($)
|
|
Total
($)
|
Hong Zhida
(1)
President, Chief Executive Officer, Officer, Treasurer and Director
|
|
2017
2016
|
|
Nil
Nil
|
|
Nil
Nil
|
|
Nil
Nil
|
|
Nil
Nil
|
|
Nil
Nil
|
|
Nil
Nil
|
|
Nil
Nil
|
|
Nil
Nil
|
Yu Keying
(2)
Director
|
|
2017
2016
|
|
Nil
Nil
|
|
Nil
Nil
|
|
Nil
Nil
|
|
Nil
Nil
|
|
Nil
Nil
|
|
Nil
Nil
|
|
Nil
Nil
|
|
Nil
Nil
|
Otmane Tajmouati
President, Secretary and Director
|
|
2015
2016
|
|
Nil
Nil
|
|
Nil
Nil
|
|
Nil
Nil
|
|
Nil
Nil
|
|
Nil
Nil
|
|
Nil
Nil
|
|
Nil
Nil
|
|
Nil
Nil
|
(1)
|
Mr.
Hong was appointed as President, Chief Executive Officer, Chief Financial Officer and Treasurer of the company on March 10,
2017.
|
(2)
|
Mr.
Yu was appointed as President CEO, Secretary Chief Financial Officer, Treasurer and as a Director of the company on November
21, 2016, He resigned as resident CEO, Secretary Chief Financial Officer, Treasurer on March 10, 2017. He remains as a director.
|
(3)
|
Mr.
Tajmouati was appointed as President, Chief Executive Officer, and Treasurer of the company on October 28, 2014. He resigned
from these position on November 21, 2016.
|
Narrative
Disclosure to Summary Compensation Table
Other
than set out below, there are no arrangements or plans in which we provide pension, retirement or similar benefits for directors
or executive officers. Our directors and executive officers may receive share options at the discretion of our board of directors
in the future. We do not have any material bonus or profit sharing plans pursuant to which cash or non-cash compensation is or
may be paid to our directors or executive officers, except that share options may be granted at the discretion of our board of
directors.
Stock
Option Plan
Currently,
we do not have a stock option plan in favor of any director, officer, consultant or employee of our company.
Grants
of Plan-Based Awards
To
date, there have been no grants or plan-based awards.
Outstanding
Equity Awards
To
date, there have been no outstanding equity awards.
Option
Exercises and Stock Vested
To
date, there have been no options exercised by our named officers.
Compensation
of Directors
We
do not have any agreements for compensating our directors for their services in their capacity as directors.
Pension,
Retirement or Similar Benefit Plans
There
are no arrangements or plans in which we provide pension, retirement or similar benefits for directors or executive officers.
We have no material bonus or profit sharing plans pursuant to which cash or non-cash compensation is or may be paid to our directors
or executive officers, except that stock options may be granted at the discretion of the board of directors or a committee thereof.
Employment
Agreements
We
have no formal employment agreements with any of our employees, directors or officers.
Certain
Relationships and Related Transactions Certain Relationships and Related Transactions
SEC
rules require us to disclose any transaction or currently proposed transaction in which the Company is a participant and in which
any related person has or will have a direct or indirect material interest involving the lesser of $120,000.00 or one percent
(1%) of the average of the Company’s total assets as of the end of last two completed fiscal years. A related person is
any executive officer, director, nominee for director, or holder of 5% or more of the Company’s common stock, or an immediate
family member of any of those persons.
None
of our officers or directors has any direct or indirect relationship to any additional current or proposed transactions.
During
the year ended March 31, 2017, we had not entered into any transactions with our officers or directors, or persons nominated for
these positions, beneficial owners of 5% or more of our common stock, or family members of these persons wherein the amount involved
in the transaction or a series of similar transactions exceeded the lesser of $120,000 or 1% of the average of our total assets
for the last three fiscal years.
Market
Price of and Dividends on Common Equity and Related Stockholder Matters
Market
Information
Our
company’s common stock is quoted on the OTCBB under the symbol “ATXG”. We received our trading symbol on September
12, 2016 and were first quoted on September 12, 2016 but no shares were traded until December 12, 2016. There is a public trading
market our common stock.
The
following table sets forth the quarterly high and low bid prices for the common stock from September 12, 2016, to June 30, 2017.
The prices set forth below represent inter-dealer quotations, without retail markup, markdown or commission and may not be reflective
of actual transactions.
|
|
High
|
|
|
Low
|
|
Quarter ended September 30, 2016
|
|
$
|
100.00
|
|
|
$
|
0.01
|
|
Quarter ended December 31, 2016
|
|
$
|
50.005
|
|
|
$
|
1.01
|
|
Quarter ended March 31, 2017
|
|
$
|
2.00
|
|
|
$
|
1.05
|
|
Quarter ended June 30, 2017
|
|
$
|
2.05
|
|
|
$
|
1.30
|
|
Holders
As
September 20th, 2017 there were 279 stockholders of record, and an aggregate of 506,920,000 shares of our common stock was issued
and outstanding.
Dividend
Policy
We
have not paid any cash dividends on our common stock and have no present intention of paying any dividends on the shares of our
common stock. Our current policy is to retain earnings, if any, for use in our operations and in the development of our business.
Our future dividend policy will be determined from time to time by our board of directors.
Equity
Compensation Plan Information
We
do not have in effect any compensation plans under which our equity securities are authorized for issuance and we do not have
any outstanding stock options.
Recent
Sales of Unregistered Securities
We
did not sell any equity securities which were not registered under the Securities Act during the year ended March 31, 2016 and
the quarter ended June 30, 2017, that were not otherwise disclosed on our quarterly reports on Form 10-Q or our current reports
on Form 8-K filed during the year ended March 31, 2016, and any Form 10-Q subsequent to that date.
Purchase
of Equity Securities by the Issuer and Affiliated Purchasers
We
have not purchased any of our shares of common stock or other securities during our fourth quarter of our fiscal year ended March
31, 2017 or during the interim quarterly period ended June 30, 2017.
Description
of Securities
The
authorized capital stock of our company consists of 1,000,000,000 shares of common stock, at $0.001 par value.
Common
Stock
Holders
of common stock are entitled to one vote for each share held on all matters submitted to a vote of stockholders. There is no cumulative
voting of the election of directors then standing for election. The common stock is not entitled to pre-emptive rights and is
not subject to conversion or redemption. Upon liquidation, dissolution or winding up of our company, the assets legally available
for distribution to stockholders are distributable ratably among the holders of the common stock after payment of liquidation
preferences, if any, on any outstanding payment of other claims of creditors. Each outstanding share of common stock is duly and
validly issued, fully paid and non-assessable.
i.
Diluting the voting power of the common stock;
ii.
Impairing the liquidation rights of the common stock; or
Delaying
or preventing a change in control of the Company without further action by the stockholders.
iii.
Other than in connection with shares of preferred stock (as explained above), which preferred stock is not currently designated
nor contemplated by us, we do not believe that any provision of our charter or By-Laws would delay, defer or prevent a change
in control.
Transfer
Agent
The
transfer agent of our company’s common stock is Transfer Online, Inc. at SE 512 Salmon Street, Portland OR 97214.
LEGAL
PROCEEDINGS
From
time to time, we may become involved in various lawsuits and legal proceedings which arise in the ordinary course of business.
However, litigation is subject to inherent uncertainties, and an adverse result in these or other matters may arise from time
to time that may harm business.
We
are currently not aware of any pending legal proceedings to which we are a party or of which any of our properties or assets is
the subject, nor are we aware of any such proceedings that are contemplated by any civil entity, any regulatory agency or governmental
authority.
INDEMNIFICATION
OF DIRECTORS AND OFFICERS
Nevada
Corporation Law, our Articles of Incorporation and Bylaws of the corporation, allow us to indemnify our officers and directors
from certain liabilities and our Bylaws state that we shall indemnify every (i) present or former director or officer of us, (ii)
any person who while serving in any of the capacities referred to in clause (i) served at our request as a director, officer,
partner, venturer, proprietor, trustee, employee, agent or similar functionary of another foreign or domestic corporation, partnership,
joint venture, trust, employee benefit plan or other enterprise, and (iii) any person nominated or designated by (or pursuant
to authority granted by) the Board of Directors or any committee thereof to serve in any of the capacities referred to in clauses
(i) or (ii) (each an “Indemnitee”).
Our
Bylaws provide that we shall indemnify an Indemnitee against all judgments, penalties (including excise and similar taxes), fines,
amounts paid in settlement and reasonable expenses actually incurred by the Indemnitee in connection with any proceeding in which
he was, is or is threatened to be named as defendant or respondent, or in which he was or is a witness without being named a defendant
or respondent, by reason, in whole or in part, of his serving or having served, or having been nominated or designated to serve,
if it is determined that the Indemnitee (a) conducted himself in good faith, (b) reasonably believed, in the case of conduct in
his official capacity, that his conduct was in our best interests and, in all other cases, that his conduct was at least not opposed
to our best interests, and (c) in the case of any criminal proceeding, had no reasonable cause to believe that his conduct was
unlawful; provided, however, that in the event that an Indemnitee is found liable to us or is found liable on the basis that personal
benefit was improperly received by the Indemnitee, the indemnification (i) is limited to reasonable expenses actually incurred
by the Indemnitee in connection with the proceeding and (ii) shall not be made in respect of any proceeding in which the Indemnitee
shall have been found liable for willful or intentional misconduct in the performance of his duty to us.
Other
than in the limited situation described above, our Bylaws provide that no indemnification shall be made in respect to any proceeding
in which such Indemnitee has been (a) found liable on the basis that personal benefit was improperly received by him, whether
or not the benefit resulted from an action taken in the Indemnitee’s official capacity, or (b) found liable to us. The termination
of any proceeding by judgment, order, settlement or conviction, or on a plea of nolo contendere or its equivalent, is not of itself
determinative that the Indemnitee did not meet the requirements set forth in clauses (a) or (b) above. An Indemnitee shall be
deemed to have been found liable in respect of any claim, issue or matter only after the Indemnitee shall have been so adjudged
by a court of competent jurisdiction after exhaustion of all appeals therefrom. Reasonable expenses shall, include, without limitation,
all court costs and all fees and disbursements of attorneys for the Indemnitee. The indemnification provided shall be applicable
whether or not negligence or gross negligence of the Indemnitee is alleged or proven.
In
addition to our Bylaws and our Articles of Incorporation, we have entered into an Indemnification Agreement with each of our directors
pursuant to which we will be obligated to maintain liability insurance in favor of the directors serving the Company and its subsidiaries
and affiliates. We will also be required to indemnify, and to advance expenses on behalf of, such persons to the fullest extent
permitted by applicable law and our governing documents. We believe that entering into the contemplated agreements will help attract
and retain highly competent and qualified persons to serve the Company.
Other
than discussed above, none of our Bylaws, our Articles of Incorporation or any indemnification agreement with any director of
the Company includes any specific indemnification provisions for our officers or directors against liability under the Securities
Act. Additionally, insofar as indemnification for liabilities arising under the Securities Act may be permitted to directors,
officers and controlling persons of the Company pursuant to the foregoing provisions, or otherwise, the Company has been advised
that, in the opinion of the United States SEC, such indemnification is against public policy as expressed in the Securities Act
and is, therefore, unenforceable.[ ]
Item
3.02: SHARES ISSUED IN CONNECTION WITH THE SALE AND PURCHASE AGREEMENT
Each
of these securities issuances took place outside of the United States in private transactions to non-U.S. persons.
Item 5.01:
CHANGES IN CONTROL OF REGISTRANT.
Prior
to the Closing dated of September 25
th
, 2017 all shares issued pursuant to the Agreement were held in escrow and deemed
to be in full control of the company. As of the date of the closing, all shares of and required documents were delivered to the
Company and the 500,000,000 shares were delivered out of escrow to the following entities in the amounts and percentages set opposite
their names.
This
constitutes a change of control of the Company. Other than the transactions and agreements previously described, our officers
and directors know of no arrangements that may result in a change in control of the Company at a subsequent date.
The
information regarding change of control of the Company in connection with the Agreement is also set forth in Item 2.01, “Completion
of Acquisition or Disposition of Assets.
Item 5.06
:
CHANGE IN SHELL COMPANY STATUS.
Prior
to the closing of the Sale and Purchase Agreement, we were a “shell company” (as such term is defined in Rule 12b-2
under the Securities Exchange Act of 1934, as amended (the “Exchange Act”)). As a result of the closing of the Sale
and Purchase Agreement, we have ceased to be a shell company. The information contained in this Current Report constitutes the
current Form 10 information necessary to satisfy the conditions contained in Rule 144(i)(2) under the Securities Act of 1933,
as amended (the “Securities Act”).
Item
9.01 FINANCIAL STATEMENTS AND EXHIBITS
Reference
is made to the shares of ATXG, acquired under the Sale and Purchase Agreement, as described in Item 2.01, which is incorporated
herein by reference. As a result of the closing of the Sale and Purchase Agreement, our primary operations consist of the business
and operations of YICG Accordingly, we are presenting the audited financial statements of YICG for the period from December 31,
2015 to December 31, 2016, unaudited financial statements of ATXG for the quarter ended June 30, 2017 and unaudited pro forma
financial information for the quarter ended June 30, 2017