Addentax Group (ATXG) risk factors, FY2025 10-K

Other

1. 01Our success depends on our customers’ ability to market and sell their products manufactured by us
2. 02Our future expansion plans are subject to uncertainties and risks
3. 03If we are unable to create brand influence, we may face difficulties in attracting new business partners and clients
4. 04Our ability to adequately protect our trade names, trademarks and patents could have an impact on our brand images and ability to penetrate new markets
5. 05We may be impacted by our ability to adequately source, distribute and sell merchandise and other materials in China
6. 06Future price increases in raw materials or changes in the supply of raw materials may materially and adversely affect our business, financial condition and results of operations
7. 07Our top customers accounted for a major portion of our total revenue for the years ended March 31, 2025 and 2024 and may materially adversely affect our financial condition and results of operations
8. 08We are exposed to concentration risk due to heavy reliance on our major supplier for the supply of our products, and any shortage of, or delay in, the supply may significantly impact our business and results of operation
9. 09Any labor shortages, increased labor costs or other factors affecting labor supply for our production materials may materially and adversely affect our business operations
10. 10We may be impacted by our ability to attract, develop and retain qualified associates and manage labor-related costs
11. 11We purchase raw materials from third-party vendors. Factors outside our control, such as production or shipping delays or quality problems, could disrupt merchandise deliveries and result in lost sales, cancellation charges or excessive markdowns
12. 12Large and similar sized competitors could steal our market share by offering lower prices
13. 13If we are unable to attract additional customers and clients to purchase our services (and future products we may develop or sell), it will have a negative effect on our ability to generate the revenue
14. 14We may be adversely affected by the performance of third-party contractors
15. 15We may be exposed to concentration risk due to heavy reliance on third-party contractors for our logistic business, and any shortage of third-party contractors may significantly impact our business and results of operation
16. 16If we are unable to control the reliance of third-party contractors efficiently and effectively, our business prospects and results of operations may be materially and adversely affected
17. 17Our insurance may not be sufficient
18. 18Competition for tenants could impact our occupancy rates
19. 19Our performance depends on our ability to collect rent from tenants, including anchor tenants, our tenants’ financial condition and our tenants maintaining leases for our properties
20. 20Subleasing to smaller and growth-oriented businesses could adversely affect our cash flow and results of operations
21. 21Our business depends on the continued contributions made by Mr. Hong Zhida, as our key executive officer, the loss of whom may result in a severe impediment to our business
22. 22Additionally, if Mr. Hong Zhida joins our competitors or develops similar businesses that are in competition with our Company, our business may also be negatively impacted
23. 23We may be adversely impacted by certain compliance or legal matters
24. 24Unauthorized disclosure, destruction or modification of data, through cybersecurity breaches, computer viruses or otherwise or disruption of our services could expose us to liability, protracted and costly litigation and damage our reputation
25. 25Failure to make adequate contributions to various employee benefits plans as required by PRC regulations may subject us to penalties
26. 26There are uncertainties under the PRC Securities Law relating to the procedures and requisite timing for the U.S. securities regulatory agencies to conduct investigations and collect evidence within the territory of the PRC
27. 27We are exposed to liabilities relating to environmental protection and safety laws and regulations
28. 28If our employees do not maintain a strong work ethic and comply with our code of ethics, including our confidentiality requirements, their actions may negatively influence our business and reputation
29. 29We also plan to establish a series of policies to reduce the likelihood of such events
30. 30Currently there are no government regulations in China regarding our type of services. The Chinese government encourages small-medium sized traditional industry companies to conduct business model transformation and technology updates, which may help companies gain more competitive advantages in international markets
31. 31We may require additional financing in the future and our operations could be curtailed if we are unable to obtain required additional financing when needed
32. 32Natural disasters and other events beyond our control could materially adversely affect us
33. 33We are an “emerging growth company” and we cannot be certain if the reduced disclosure requirements applicable to emerging growth companies will make our common stock less attractive to investors
34. 34General Risks Associated with Business Operations in China
35. 35To the extent cash in the business is in the PRC or a PRC entity, the funds may not be available to fund operations or for other use outside of the PRC due to interventions in or the imposition of restrictions and limitations on the ability of our Company or our subsidiaries by the PRC government to transfer cash
36. 36You may have difficulty enforcing judgments against us
37. 37Foreign exchange fluctuations may affect our business
38. 38Inflation could pose a risk to our business
39. 39Changes in the policies, regulations, rules and the enforcement of laws of the PRC government may be quick with little advance notice and could have a significant impact upon the business we may be able to conduct in the PRC and the profitability of such business
40. 40There are uncertainties regarding the interpretation and enforcement of PRC laws, rules and regulations
41. 41PRC regulations regarding acquisitions impose significant regulatory approval and review requirements, which could make it more difficult for us to pursue growth through acquisitions
42. 42Our business may be subject to a variety of PRC laws and other obligations regarding cybersecurity and data protection
43. 43We may be treated as a resident enterprise for PRC tax purposes under the PRC Enterprise Income Tax Law, and we may therefore be subject to PRC income tax on our global income
44. 44Restrictions on currency exchange may limit our ability to utilize our PRC revenue effectively
45. 45The disclosures in our reports and other filings with the SEC and our other public pronouncements are not subject to the scrutiny of any regulatory bodies in the PRC
46. 46Introduction of new laws or changes to existing laws by the PRC government may adversely affect our business

Risks Relating to Our Holding Company Structure

1. 47Substantial uncertainties exist with respect to the interpretation and implementation of the newly enacted Foreign Investment Law and how it may impact the viability of our current corporate structure, corporate governance and business operations
2. 48We may rely on dividends and other distributions on equity paid by our PRC Subsidiaries to fund any cash and financing requirements we may have, and any limitation on the ability of our PRC Subsidiaries to make payments to us could have a material and adverse effect on our ability to conduct our business
3. 49A portion of our revenue was generated by our PRC Subsidiaries in Renminbi, which is not freely convertible into other currencies. As a result, any restriction on currency exchange may limit the ability of our PRC Subsidiaries to use their Renminbi revenues to pay dividends to us

Risks Related to our Common Stock

1. 50We may never be able to pay dividends and are unlikely to do so
2. 51Shareholders may be diluted significantly through our efforts to obtain financing and satisfy obligations through the issuance of securities
3. 52In the event that our shares are traded, they may trade under $5.00 per share and thus will be a penny stock. Trading in penny stocks has many restrictions and these restrictions could severely affect the price and liquidity of our shares
4. 53Depending on market liquidity at the time, issuances and any subsequent sales of our common stock may cause the trading price of our common stock to fall
5. 54You may experience future dilution as a result of future equity offerings and other issuances of our securities
6. 55Any additional capital raised through the sale of equity or equity-backed securities may dilute our stockholders’ ownership percentages and could also result in a decrease in the market value of our equity securities
7. 56Future sales of substantial amounts of the shares of common stock by existing stockholders could adversely affect the price of our common stock
8. 57The market price of our Common Stock may be subject to fluctuation and you could lose all or part of your investment