What changed in this filing

/stocks — the workspaceLOADING

Item 2. Management’s Discussion and Analysis

2023-02-14 compared with 2022-11-14 · 243 added, 264 removed, 313 unchanged (62% of the section changed)

Management’s Discussion and Analysis of Financial Condition and Results of Operations

following discussion and analysis of our financial condition and results of operations for the three and six months ended September 30,

following discussion and analysis of our financial condition and results of operations for the three and nine months ended December 31,

2022 and 2021 should be read in conjunction with the Financial Statements and corresponding notes included in this Report on Form 10-Q.

9 unchanged sentences

are a garment manufacturer and logistics services provider based in China.

We are listed on the Nasdaq Capital Market under the

symbol of “ATXG”.

We classify our businesses into four segments:

Garment manufacturing, Logistics services, Property

management and subleasing, and Epidemic prevention supplies.

We are listed on the Nasdaq Capital Market under the symbol

We classify our businesses into three segments:

Garment manufacturing, Logistics services, and Property management

and subleasing.

We used to have an operating segment named “Epidemic prevention supplies”, which included manufacturing,

distribution and trading of epidemic prevention supplies.

As the COVID-19 pandemic is getting better, the Company ceased to operate in

the Epidemic prevention supplies business at the beginning of the quarter.

garment manufacturing business consists of sales made principally to wholesaler located in the People’s Republic of China (“PRC”).

16 unchanged sentences

Daying Commercial Co., Ltd (“DY”).

epidemic prevention supplies business consists of manufacturing and distribution of epidemic prevention products and resale of epidemic

prevention supplies purchased from third party in both domestic and overseas markets.

We conduct our manufacturing of the epidemic prevention

products in Dongguan Yushang Clothing Co., Ltd (“YS”).

We conduct the trading of epidemic prevention suppliers through Addentax

(“ATXG”) and Shenzhen Qianhai Yingxi Industrial Chain Services Co., Ltd (“YX”), a wholly owned subsidiary

of the Company.

Manufacturing Business

5 unchanged sentences

delivery and courier network in China.

As of September 30, 2022, we provide logistics services to over 79 cities in approximately seven

As of December 31, 2022, we provide logistics services to over 79 cities in approximately seven

provinces and two municipalities.

6 unchanged sentences

is to increase the occupancy rate of stores in the mall to more than 70%.

Prevention Supplies Business

primary objective of our epidemic prevention supplies business is to take the advantage of our resource in supply chain from the garment

manufacturing business segment to facilitate and maximize the production, distribution and resale of epidemic prevention supplies, in

order to increase our revenue base and improve our net profit.

business is affected by seasonal trends, with higher levels of garment sales in our second and third quarters and higher logistics services

11 unchanged sentences

property management and subleasing business, we generally collect rental and management fees of the following month each month in advance.

prevention supplies business

Epidemic prevention supplies business, we generally receive payment from the customers within 30 days following the delivery of finished

We would also give our long-term customers with a 12 months long credit term policy to maintain a good business relationship.

business is dependent on consumer demand for our products and services.

83 unchanged sentences

a significant impact on the Company’s consolidated financial statements.

of Operations for the three months ended September 30, 2022 and 2021

following tables summarize our results of operations for the three months ended September 30, 2022 and 2021.

of Operations for the three months ended December 31, 2022 and 2021

following tables summarize our results of operations for the three months ended December 31, 2022 and 2021.

The table and the discussion

below should be read in conjunction with our consolidated financial statements and the notes thereto appearing elsewhere in this report.

Three Months Ended September 30,

Three Months Ended December 31,

Changes in 2022

3 unchanged sentences

Operating expenses

Income from operations

(Loss) income from operations

Other income, net

1 unchanged sentence

Income tax expense

Net income (loss)

revenue for the three months ended September 30, 2022 decreased by approximately $0.6 million, or 22.3%, as compared with the three months

ended September 30, 2021.

The decrease was mainly due to a decrease of approximately $0.4 million in garment manufacturing, a decrease

Net (loss) income

revenue for the three months ended December 31, 2022 decreased by approximately $0.7 million, or 24.0%, as compared with the three months

ended December 31, 2021.

The decrease was mainly due to an increase of approximately $0.1 million in garment manufacturing, a decrease

of approximately $0.5 million in logistics services business, and a decrease of approximately $0.3 million in property management and

subleasing business.

was nearly no revenue generated from our garment manufacturing business for the three months ended September 30, 2022.

The revenue generated

from the segment was $0.4 million, or approximately 14.3%, of total revenue for the three months ended September 30, 2021.

of approximately $0.4 million was mainly due to factory facilities renewal and repair, remaining factories cannot provide as much capacity

as previously.

We estimate the capacity will appear to recover in the third quarter of FY2023.

revenue generated from our garment manufacturing business was $0.1 million, or approximately 4.7%, of total revenue for the three months

ended December 31, 2022.

The revenue generated from the segment was $0.03 million, or approximately 0.9%, of total revenue for the three

months ended December 31, 2021.

The low revenue was mainly due to factory facilities renewals and repairs, and the remaining factories

cannot provide as much capacity as previously.

We estimate the manufacturing capacity will recover at end of the fiscal year 2023.

generated from our logistics services business contributed approximately $1.2 million, or 57.2%, of our total revenue for the three months

ended September 30, 2022.

ended December 31, 2022.

Revenue generated from our logistic business contributed approximately $1.7 million, or 61.6%, of our total

revenue for the three months ended September 30, 2021.

revenue for the three months ended December 31, 2021.

generated from our property management and subleasing business contributed approximately $0.8 million, or 37.5%, of our total revenue

for the three months ended September 30, 2022.

for the three months ended December 31, 2022.

The revenue from this business segment was $1.0 million, or 37.5%, of our total revenue

of this business for the three months ended September 30, 2021.

was only $1,299 generated from our epidemic prevention supplies business for the three months ended September 30, 2022 because

no other orders were obtained in the quarter.

The Company accepted sales orders very cautiously to make sure the sales orders can be

matched with stable suppliers to secure profitability of each order.

There was no revenue generated from this business for the three

months ended September 30, 2021.

Three months ended September 30,

of this business for the three months ended December 31, 2021.

Three months ended December 31,

Increase (decrease) in

14 unchanged sentences

Gross Profit for property management and subleasing

Net revenue for epidemic prevention supplies

Net revenue for corporate and others

Merchandise/Finished goods/Raw materials

Total cost of revenue for epidemic prevention supplies

Gross (loss) income for epidemic prevention supplies

Total cost of revenue for corporate and others

Gross income (loss) for corporate and others

Total cost of revenue

our garment manufacturing business, we purchased the majority of our raw materials directly from numerous local fabric and accessories

material costs for our garment manufacturing business was nil in the three months ended September 30, 2022, as compared with approximately

$0.3 million in the three months ended September 30, 2021.

costs for our garment manufacturing business was approximately 90.5% of our total garment manufacturing business revenue in the three

months ended September 30, 2022, as compared with approximately 21.9% in the three months ended September 30, 2021.

The increase was

mainly due to the rising wages in the PRC.

and other expenses for our garment manufacturing business accounted for approximately 67.8% of our total garment business

revenue for the three months ended September 30, 2022, compared with approximately 0.5% of total garment business revenue for the three

months ended September 30, 2021.

material costs for our garment manufacturing business was $771 in the three months ended December 31, 2022, as compared with $8,829

in the three months ended December 31, 2021.

Labor costs for our garment manufacturing business

was $64,108, approximately 63.7% of our total garment manufacturing business revenue in the three months ended December 31, 2022, as compared

with $12,783, approximately 49.9% in the three months ended December 31, 2021.

The increase was mainly due to the rising wages in the

Overhead and other expenses for our garment manufacturing

business accounted for $2,761, approximately 2.7% of our total garment business revenue for the three months ended December 31, 2022,

as compared with $6,306, approximately 24.6% of total garment business revenue for the three months ended December 31, 2021.

our logistic business, we outsource some of the business to our contractors.

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subcontracting fees to our largest contractor represented approximately 20.9% and 29.9% of total cost of revenues for our service segment

for the three months ended September 30, 2022 and 2021, respectively.

for the three months ended December 31, 2022 and 2021, respectively.

The decrease was mainly due to our usage of our own logistics more

2 unchanged sentences

maintain good relationships with our contract logistics services provider.

toll and other costs for our service business for the three months ended September 30, 2022 were approximately $0.7 million as compared

with $0.4 million for the three months ended September 30, 2021.

toll and other costs for our service business for the three months ended December 31, 2022 were approximately $0.6 million as compared

with $0.6 million for the three months ended December 31, 2021.

Fuel, toll and other costs for our service business accounted for approximately

54.4% of our total service revenue for the three months ended September 30, 2022, as compared with approximately 34.1% for the three

months ended September 30, 2021.

The increase was primarily attributable to a decrease in the use of subcontractors under the COVID-19

epidemic circumstance.

53.5% of our total service revenue for the three months ended December 31, 2022, as compared with approximately 33.1% for the three months

ended December 31, 2021.

The increase was primarily attributable to a decrease in the use of subcontractors under the COVID-19 epidemic

circumstance.

Subcontracting

fees for our service business for the three months ended September 30, 2022 decreased significantly by approximately 63.6% to approximately

$0.2 million from $0.5 million for the three months ended September 30, 2021.

fees for our service business for the three months ended December 31, 2022 decreased significantly by approximately 69.9% to approximately

$0.3 million from $0.8 million for the three months ended December 31, 2021.

Subcontracting fees accounted for approximately 20.9% and

40.9% of our total service business revenue in the three months ended September 30, 2022 and 2021, respectively.

49.0% of our total service business revenue in the three months ended December 31, 2022 and 2021, respectively.

The decrease was primarily

due to the Company used less subcontractors under the COVID-19 epidemic circumstance.

property management and subleasing business, the cost of revenue was mainly the amortization of operating lease assets for the subleasing

epidemic prevention supplies business, we have trading and own production segments.

The cost of revenue was predominately the cost of

merchandise and cost of our own products.

manufacturing business gross loss for the three months ended September 30, 2022 was approximately $502, as compared with a gross profit

of approximately $31,670 for the three months ended September 30, 2021.

Gross loss accounted for -58.3% of our total Garment manufacturing

business revenue for the three months ended September 30, 2022, as compared with a gross profit of 8.1% for the three months ended September

profit in our logistics services business for the three months ended September 30, 2022 was approximately $0.4 million and gross margin

Gross profit in our logistics services business for the three months ended September 30, 2021 was approximately $0.3 million

For property management and subleasing business, the

cost of revenue was mainly the amortization of operating lease assets for the subleasing business.

The cost of revenue for property management

and subleasing business for the three months ended December 31, 2022 was $536,732, approximately 67.4% of our total property management

and subleasing business revenue, as compared with $884,556, approximately 84.5% of total property management and subleasing business revenue

for the three months ended December 31, 2022.

manufacturing business gross profit for the three months ended December 31, 2022 was approximately $33,082, as compared with a gross

loss of approximately $2,278 for the three months ended December 31, 2021.

Gross profit accounted for 32.8% of our total Garment manufacturing

business revenue for the three months ended December 31, 2022, as compared with a gross loss of 8.9% for the three months ended December

profit in our logistics services business for the three months ended December 31, 2022 was approximately $0.3 million and gross margin

Gross profit in our logistics services business for the three months ended December 31, 2021 was approximately $0.3 million

and gross margin was 17.9%.

The increase of gross profit margin was mainly attributable to a decrease of operating expenses

due to replacement of old vehicles and shifting our strategic focus on high margin customers.

profit in our property management and subleasing business for the three months ended September 30, 2022 was approximately $0.2 million,

The increase of gross profit margin was mainly attributable to a decrease of operating expenses due to replacement

of old vehicles and shifting our strategic focus on high margin customers.

profit in our property management and subleasing business for the three months ended December 31, 2022 was approximately $0.3 million,

or 32.6%, of our total property management and subleasing business revenue.

It was approximately $0.2 million, or 15.5%, for the three

months ended September 30, 2021.

Three months ended September 30,

months ended December 31, 2021.

Three months ended December 31,

Increase (decrease) in

4 unchanged sentences

General and administrative expenses

Income from operations

Loss from operations

General and administrative expenses

1 unchanged sentence

It was approximately $0.02 million and $0.04

million for the three months ended September 30, 2022 and 2021, respectively.

million for the three months ended December 31, 2022 and 2021, respectively.

Selling expenses consist primarily of advertisement, local

transportation, unloading charges and product inspection charges.

general and administrative expenses in our Garment manufacturing business segment for the three months ended September 30, 2022 and 2021

general and administrative expenses in our garment manufacturing business segment for the three months ended December 31, 2022 and 2021

was both approximately $0.03 million.

Our general and administrative expenses in our logistics services segment, for the three months

ended September 30, 2022 and 2021 was both approximately $0.2 million.

ended December 31, 2022 and 2021 was both approximately $0.2 million.

The general and administrative expenses in our property management

and subleasing business remained stable at approximately $0.09 million for the three months ended September 30, 2022 and 2021.

and administrative expenses in our epidemic prevention supplies segment was both nil for the three months ended September 30, 2022 and

2021, respectively.

Our general and administrative expenses in our corporate office for the three months ended September 30, 2022 and

2021 remained stable at approximately $0.1 million.

General and administrative expenses consist primarily of administrative salaries,

office expense, certain depreciation and amortization charges, repairs and maintenance, legal and professional fees, warehousing costs

and other expenses that are not directly attributable to our revenues.

general and administrative expenses for the three months ended September 30, 2022 increased by approximately 0.5% to approximately $0.47

million from $0.46 million for the three months ended September 30, 2021.

(Loss) from operations

(loss) from operations for the three months ended September 30, 2022 and 2021 was approximately $0.07 million and ($0.04) million, respectively.

(Loss) Income from operations of approximately ($28,088) and $1,119 was attributed from our garment manufacturing segment

for the three months ended September 30, 2022 and 2021, respectively.

Income from operations of approximately $0.15 million and $0.1

million was attributed from our logistics services segment for the three months ended September 30, 2022 and 2021, respectively.

from operations of approximately $0.09 million and $0.02 million was attributed from our property management and subleasing business

for the three months ended September 30, 2022 and 2021, respectively.

There was a loss of approximately $974 and nil from operations

attributed from our epidemic prevention supplies segment for the three months ended September 30, 2022 and 2021, respectively.

a loss from operations in corporate office of approximately $0.1 million and $0.1 million for both the three months ended September 30,

2022 and 2021.

The loss from our corporate office was mainly due to increase in legal and professional fees to comply with the SEC accounting,

disclosure and reporting requirements.

tax expense for the three months ended September 30, 2022 and 2021 was approximately $0.009 million and $0.005 million, respectively.

The Company operates in the PRC and files tax returns in the PRC jurisdictions.

and subleasing business remained stable at approximately $0.1 million for the three months ended December 31, 2022 and 2021.

and administrative expenses for the three months ended December 31, 2022 and 2021 was approximately $0.3 million and $0.1 million, respectively.

General and administrative expenses consist primarily of administrative salaries, office expense, certain depreciation and amortization

charges, repairs and maintenance, legal and professional fees, warehousing costs and other expenses that are not directly attributable

to our revenues.

general and administrative expenses for the three months ended December 31, 2022 increased by approximately 0.2% to approximately $0.68

million from $0.45 million for the three months ended December 31, 2021.

from operations

from operations for the three months ended December 31, 2022 and 2021 was approximately $0.09 million and $0.03 million, respectively.

Income (loss) from operations of approximately $7,745 and ($28,473) was attributed from our garment manufacturing segment for the three

months ended December 31, 2022 and 2021, respectively.

Income from operations of approximately $91,147 and $100,769 was attributed from

our logistics services segment for the three months ended December 31, 2022 and 2021, respectively.

Income from operations of approximately

$131,213 and $14,844 was attributed from our property management and subleasing business for the three months ended December 31, 2022

and 2021, respectively.

We incurred a loss from operations in corporate office of approximately $0.3 million and $0.1 million for the

three months ended December 31, 2022 and 2021.

The loss was mainly due to increase in administrative expenses.

tax expense for the three months ended December 31, 2022 and 2021 was approximately $8,184 and $2,209 million, respectively.

operates in the PRC and files tax returns in the PRC jurisdictions.

Industrial Chain Group Co., Ltd was incorporated in the Republic of Seychelles and, under the current laws of the British Virgin Islands,

2 unchanged sentences

No provision for income taxes

in Hong Kong have been made as Yingxi HK had no taxable income for the three months ended September 30, 2022 and 2021.

in Hong Kong have been made as Yingxi HK had no taxable income for the three months ended December 31, 2022 and 2021.

and YX were incorporated in the PRC and is subject to the PRC Enterprise Income Tax (“EIT”) rate is 25%.

No provision for

income taxes in the PRC have been made as QYTG and YX had no taxable income for the three months ended September 30, 2022 and 2021.

income taxes in the PRC have been made as QYTG and YX had no taxable income for the three months ended December 31, 2022 and 2021.

Company is governed by the Income Tax Laws of the PRC.

6 unchanged sentences

had no United States taxable income for the three months

ended September 30, 2022 and 2021.

ended December 31, 2022 and 2021.

Income (Loss)

incurred net income of approximately $0.08 million and $0.03 million for the three months ended September 30, 2022 and 2021, respectively.

Our basic and diluted earnings per share were $0.00 and $0.00 for the three months ended September 30, 2022 and 2021, respectively.

of Operations for the six months ended September 30, 2022 and 2021

following tables summarize our results of operations for the six months ended September 30, 2022 and 2021.

incurred net loss of approximately $0.08 million and net income of $0.01 million for the three months ended December 31, 2022 and 2021,

respectively.

Our basic and diluted earnings per share were $0.00 and $0.00 for the three months ended December 31, 2022 and 2021, respectively.

of Operations for the nine months ended December 31, 2022 and 2021

following tables summarize our results of operations for the nine months ended December 31, 2022 and 2021.

The table and the discussion

below should be read in conjunction with our consolidated financial statements and the notes thereto appearing elsewhere in this report.

months Ended September 30,

Nine months Ended December 31,

Changes in 2022

compared to 2021

dollars, except for percentages)

from operations

revenue for the six months ended September 30, 2022 decreased by approximately $2.5 million, or 35.7%, as compared with the six months

ended September 30, 2021.

$ (3,183,088 )

Cost of revenues

Operating expenses

Income from operations

Other income, net

Net finance cost

Income tax expense

revenue for the nine months ended December 31, 2022 decreased by approximately $3.2 million, or 32.4%, as compared with the nine months

ended December 31, 2021.

The decrease was mainly due to the significant decrease of Garment Manufacturing Business.

generated from our garment manufacturing business contributed approximately $0.04 million (0.9%) and $2.5 million (35.0%) of total losses

for the six months ended September 30, 2022 and 2021, respectively.

The decrease mainly due to factory facilities renewal and repair, remaining factories cannot provide as much capacity as previously.

We estimate the capacity will

appear to recover in the third quarter of FY2023.

generated from our logistics services business contributed approximately $2.6 million, or 57.7%, of our total revenue for the six months

ended September 30, 2022.

generated from our garment manufacturing business contributed approximately $0.1 million (4.7%) and $2.5 million (25.3%) of total revenue

for the nine months ended December 31, 2022 and 2021, respectively.

The decrease mainly due to factory facilities renewal and repair,

remaining factories cannot provide as much capacity as previously.

We estimate the capacity will appear to recover by end of FY2023.

generated from our logistics services business contributed approximately $3.8 million, or 57.5%, of our total revenue for the nine months

ended December 31, 2022.

Revenue generated from our logistic business contributed approximately $4.1 million, or 42.1%, of our total

revenue for the six months ended September 30, 2021.

The increase of $0.2 million was due to XKJ’s sales were $0.3 million higher

than the six months ended September 30, 2021.

revenue for the nine months ended December 31, 2021.

The decrease of $0.3 million was due to decrease of revenue from YXPF compared to

the nine months ended December 31, 2021.

generated from our property management and subleasing business contributed approximately $2.7 million, or 40.2%, of our total revenue

for the six months ended September 30, 2022.

for the nine months ended December 31, 2022.

Revenue generated from our property management and subleasing business contributed approximately

$2.2 million, or 30.6%, of our total revenue for the six months ended September 30, 2021.

was only a minor sale of $1,540 of epidemic prevention supplies products for the six months ended September 30, 2022.

There was no revenue

generated from our epidemic prevention supplies business for the six months ended September 30, 2021 because no profitable orders were

obtained in the quarter.

The Company accepted sales orders very cautiously to ensure the sales orders can be matched with stable suppliers

to secure profitability of each order.

Six months ended September 30,

$3.2 million, or 32.6%, of our total revenue for the nine months ended December 31, 2021.

Nine months ended December 31,

Increase (decrease) in

15 unchanged sentences

Gross Profit for property management and subleasing

Net revenue for epidemic prevention supplies

Merchandise/Finished goods/Raw materials

Total cost of revenue for epidemic prevention supplies

Gross loss for epidemic prevention supplies

Net revenue for corporate and others

Other and Overhead

Total cost of revenue for corporate and others

Gross profit (loss) for corporate and others

Total cost of revenue

1 unchanged sentence

our garment manufacturing business, we purchase the majority of our raw materials directly from numerous local fabric and accessories

material costs for our garment manufacturing business were approximately66.7% of our total garment manufacturing business revenue in

the six months ended September 30, 2022, as compared with 69.5% in the six months ended September 30, 2021.

The decrease was mainly due

to the decrease of the average purchase cost of the raw materials.

costs for our garment manufacturing business were approximately 22.4% of our total garment manufacturing business revenue in the six

months ended September 30, 2022, as compared with 21.5% in the six months ended September 30, 2021.

The increase was mainly due to the

rising wages in the PRC.

and other expenses for our garment manufacturing business accounted for approximately 3.9% of our total garment business revenue for

the six months ended September 30, 2022, as compared with 0.7% of total garment business revenue for the six months ended September 30,

material costs for our garment manufacturing business were $28,313, approximately 19.9% of our total garment manufacturing business revenue

in the nine months ended December 31, 2022, as compared with $1,719,420, approximately 69.1% in the nine months ended December 31, 2021.

The decrease was mainly due to the decrease of the average purchase cost of the raw materials.

costs for our garment manufacturing business were $73,376, approximately 51.7% of our total garment manufacturing business revenue in

the nine months ended December 31, 2022, as compared with $542,118, approximately 21.8% in the nine months ended December 31, 2021.

increase was mainly due to the rising wages in the PRC.

and other expenses for our garment manufacturing business accounted for $4,380, approximately 3.1% of our total garment business revenue

for the nine months ended December 31, 2022, as compared with $23,124, 0.9% of total garment business revenue for the nine months ended

December 31, 2021.

our logistic business, we outsourced some of the business to our contractors.

1 unchanged sentence

subcontracting fees to our largest subcontractor represented approximately 25.8% and 30.3% of total cost of revenues for our service

segment for the six months ended September 30, 2022 and 2021, respectively.

The percentage decreased due to the usage of our own logistics

more than usage of the subcontractors under COVID-19 epidemic.

We have not experienced any disputes with our subcontractors and we believe

we maintain good relationships with our contract logistics services providers.

toll and other costs for our service business for the six months ended September 30, 2022 were approximately $1.3 million compared with

$0.8 million for the six months ended September 30, 2021.

segment for the nine months ended December 31, 2022 and 2021, respectively.

The percentage decreased was due to the usage of our own

logistics more than usage of the subcontractors under COVID-19 epidemic.

We have not experienced any disputes with our subcontractors

and we believe we maintain good relationships with our contract logistics services providers.

toll and other costs for our service business for the nine months ended December 31, 2022 were approximately $1.9 million compared with

$1.4 million for the nine months ended December 31, 2021.

Fuel, toll and other costs for our service business accounted for approximately

48.5% of our total service revenue for the six months ended September 30, 2022, as compared with 34.7% for the six months ended September

The increase was primarily attributable to decrease of use of subcontractors under the epidemic circumstance.

50.1% of our total service revenue for the nine months ended December 31, 2022, as compared with 34.0% for the nine months ended December

The increase was primarily attributable to the decrease of use of subcontractors under the COVID-19 epidemic circumstance.

Subcontracting

fees for our service business for the six months ended September 30, 2022 decreased approximately 37.9% to approximately $0.6 million

from $1.0 million for the six months ended September 30, 2021.

fees for our service business for the nine months ended December 31, 2022 decreased approximately 52.3% to approximately $0.9 million

from $1.9 million for the nine months ended December 31, 2021.

Subcontracting fees accounted for approximately 23.3% and 45.1% of our

total service business revenue in the six months ended September 30, 2022 and 2021, respectively.

total service business revenue in the nine months ended December 31, 2022 and 2021, respectively.

This decrease was primarily because

1 unchanged sentence

property management and subleasing business, the cost of revenue was mainly the amortization of operating lease assets for the subleasing

epidemic prevention supplies business, we have trading and own production.

The cost of revenue included cost of merchandise and cost

of our own products.

manufacturing business generated a gross profit of approximately $2,849 for the six months ended September 30, 2022.

The cost of revenue for property management and subleasing business for the nine months ended December 31, 2022 was $2,099,050,

approximately 78.6% of our total property management and subleasing business revenue, as compared with $2,749,114, approximately 85.8%

of total property management and subleasing business revenue for the nine months ended December 31, 2022.

manufacturing business generated a gross profit of approximately $35,931 for the nine months ended December 31, 2022.

There was approximately

$0.2 million gross profit for the six months ended September 30, 2021.

$0.2 million gross profit for the nine months ended December 31, 2021.

Gross profit accounted for 25.3% of our total Garment manufacturing

business revenue for the six months ended September 30, 2022, as compared with a gross profit of 8.4% for the six months

ended September 30, 2021.

profit in our logistics services business for the six months ended September 30, 2022 was approximately $0.7 million and gross margin

Gross profit in our logistics services business for the six months ended September 30, 2021 was approximately $0.6 million

business revenue for the nine months ended December 31, 2022, as compared to a gross profit of 8.2% for the nine months ended December

profit in our logistics services business for the nine months ended December 31, 2022 was approximately $1.0 million and gross margin

Gross profit in our logistics services business for the nine months ended December 31, 2021 was approximately $0.9 million

and gross margin was 20.9%.

2 unchanged sentences

on high margin customers.

profit in our property management and subleasing business for the six months ended September 30, 2022 and 2021was both approximately

$0.3 million.

It accounted for approximately 16.7% and 13.5% of our total property management and subleasing business revenue for the

six months ended September 30, 2022 and 2021, respectively.

months ended September 30,

profit in our property management and subleasing business for the nine months ended December 31, 2022 and 2021was approximately $0.6

million and $0.5 million, respectively.

It accounted for approximately 21.4% and 14.2% of our total property management and subleasing

business revenue for the nine months ended December 31, 2022 and 2021, respectively.

Nine months ended December 31,

(decrease) in

2022 compared to 2021

dollars, except for percentages)

and administrative expenses

from operations

Operating expenses:

Selling expenses

General and administrative expenses

selling expenses in our Garment manufacturing business segment for the six months ended September 30, 2022 and 2021 was nil and approximately

$0.001 million, respectively.

Our selling expenses in our logistics services segment was nil for the six months ended September

$ (1,606,020 )

$ (1,510,823 )

Income from operations

General and administrative expenses

selling expenses in our Garment manufacturing business segment for the nine months ended December 31, 2022 and 2021 was approximately

$110 and $261, respectively.

Selling expenses in our property management and subleasing business was $0.04 million and $0.09 million

for the six months ended September 30, 2022 and 2021, respectively.

Selling expenses in our epidemic prevention supplies segment was

nil for both the six months ended September 30, 2021 and 2020.

Selling expenses consist primarily of advertisement, local transportation,

unloading charges and product inspection charges.

Total selling expenses for the six months ended September 30, 2022 decreased approximately

61.3% to $0.04 million from $0.09 million for the six months ended September 30, 2021.

Our selling expenses in our logistics services segment was nil for the nine months ended December 31, 2022

Selling expenses in our property management and subleasing business was $0.06 million and $0.1 million for the nine months

ended December 31, 2022 and 2021, respectively.

Selling expenses consist primarily of advertisement, local transportation, unloading

charges and product inspection charges.

Total selling expenses for the nine months ended December 31, 2022 decreased significantly by

approximately 64.1% to $0.1 million from $0.4 million for the nine months ended December 31, 2021.

general and administrative expenses in our Garment manufacturing business segment was approximately $0.08 million and $0.1 million for

the six months ended September 30, 2022 and 2021, respectively.

the nine months ended December 31, 2022 and 2021, respectively.

Our general and administrative expenses in our logistics services segment,

for the six months ended September 30, 2022 and 2021 was both approximately $0.4 million.

for the nine months ended December 31, 2022 and 2021 was both approximately $0.7 million.

The general and administrative expenses in

our property management and subleasing business was approximately $0.2 million for both the six months ended September 30, 2022 and 2021.

Our general and administrative expenses in our epidemic prevention supplies segment was nil for both the six months ended September 30,

2022 and 2021.

Our general and administrative expenses in our corporate office for the six months ended September 30, 2022 and 2021 was

both approximately $0.2 million.

General and administrative expenses consist primarily of administrative salaries, office expense, certain

depreciation and amortization charges, repairs and maintenance, legal and professional fees, warehousing costs and other expenses that

are not directly attributable to our revenues.

general and administrative expenses for the six months ended September 30, 2022 was nearly the same as that for the six months ended

September 30, 2021.

(loss) from operations

from operations was approximately $0.1 million and $0.04 million for the six months ended September 30, 2022 and 2021, respectively.

Loss from operations of approximately $0.06 million was attributed from our garment manufacturing segment for the six months ended September

Income from operations of approximately $0.1 million was attributed from our garment manufacturing segment for the six months

ended September 30, 2021.

our property management and subleasing business was approximately $0.3 million for both the nine months ended December 31, 2022 and 2021.

Our general and administrative expenses in our corporate office for the nine months ended December 31, 2022 and 2021 was approximately

$0.5 million and $0.3 million, respectively.

General and administrative expenses consist primarily of administrative salaries, office

expense, certain depreciation and amortization charges, repairs and maintenance, legal and professional fees, warehousing costs and other

expenses that are not directly attributable to our revenues.

general and administrative expenses for the nine months ended December 31, 2022 was as approximately $0.2 million, or 12.4% higher than

as compared to the nine months ended December 31, 2021.

from operations

from operations was approximately $0.02 million and $0.01 million for the nine months ended December 31, 2022 and 2021, respectively.

Loss from operations of approximately $0.05 million was attributed from our garment manufacturing segment for the nine months ended December

Income from operations of approximately $0.1 million was attributed from our garment manufacturing segment for the nine months

ended December 31, 2021.

Income from operations of approximately $0.4 million and $0.2 million was attributed from our logistics services

segment for the six months ended September 30, 2022 and 2021, respectively.

segment for the nine months ended December 31, 2022 and 2021, respectively.

Our property management and subleasing business segment generated

approximately $0.1 million income from operations and approximately $0.03 million loss from operations for the six months ended September

approximately $0.3 million and $0.05 million income from operations for the nine months ended December 31, 2022 and 2021, respectively.

We incurred a loss from operations in corporate office of approximately $0.5 million and $0.3 million for the nine months ended December

31, 2022 and 2021, respectively.

Loss from operations of $974 and nil was attributed from our epidemic prevention supplies

segment for the six months ended September 30, 2022 and 2021, respectively.

We incurred a loss from operations in corporate office of

approximately $0.2 million for both the six months ended September 30, 2022 and 2021.

The loss from our corporate office was mainly due

to an increase in legal and professional fees to comply with the SEC accounting, disclosure and reporting requirements.

tax expense for the six months ended September 30, 2022 and 2021 was approximately $10,755 and $15,684, respectively.

The loss was mainly due to an increase in administrative expenses.

tax expense for the nine months ended December 31, 2022 and 2021 was approximately $18,939 and $17,893, respectively.

The Company operates

4 unchanged sentences

No provision for income taxes

in Hong Kong have been made as Yingxi HK had no taxable income for the six months ended September 30, 2022 and 2021.

in Hong Kong have been made as Yingxi HK had no taxable income for the nine months ended December 31, 2022 and 2021.

and YX were incorporated in the PRC and is subject to the PRC Enterprise Income Tax (EIT) rate is 25%.

No provision for income taxes

in the PRC have been made as QYTG and YX had no taxable income for the six months ended September 30, 2022 and 2021.

in the PRC have been made as QYTG and YX had no taxable income for the nine months ended December 31, 2022 and 2021.

Company is governed by the Income Tax Laws of the PRC.

4 unchanged sentences

is a U.S entity and is subject to the United States federal income tax.

for income taxes in the United States have been made as Addentax aGroup Corp.

had no United States taxable income for the six months

ended September 30, 2022 and 2021.

for income taxes in the United States have been made as Addentax Group Corp.

had no United States taxable income for the nine months

ended December 31, 2022 and 2021.

Income (Loss)

incurred a net income of approximately $0.2 million and $0.1 million for the six months ended September 30, 2022 and 2021, respectively.

Our basic and diluted earnings per share were $0.01 and $0.00 for the six months ended September 30, 2022 and 2021, respectively.

incurred a net income of approximately $0.1 million for both the nine months ended December 31, 2022 and 2021.

Our basic and diluted

earnings per share were $0.00 and $0.00 for the nine months ended December 31, 2022 and 2021, respectively.

of cash flows

cash flows information for the six months ended September 30, 2022 and 2021 is as follow:

months ended September 30,

cash (used in) provided by operating activities

cash flows information for the nine months ended December 31, 2022 and 2021 is as follow:

Nine months ended December 31,

Net cash (used in) provided by operating activities

$ (1,528,118 )

cash used in investing activities

Net cash used in investing activities

$ (17,500,000 )

cash provided by (used in) financing activities

Net cash provided by (used in) financing activities

$ (1,543,573 )

cash provided by operating activities in the six months ended September 30, 2022 was approximately $1.7 million less than that of the

six months ended September 30, 2021.

The decrease mainly because the movement of operating assets and liabilities of the six months ended

September 30, 2022 resulted in cash outflow of approximately $1.9 million, while the movement of operating assets and liabilities of

the six months ended September 30, 2021 resulted in cash inflow of approximately $0.5 million.

cash provided by operating activities in the nine months ended December 31, 2022 was approximately $1.7 million less as compared to the

nine months ended December 31, 2021.

The decrease was predominately due to the movement of operating assets and liabilities of the nine

months ended December 31, 2022 resulted in cash outflow of approximately $1.9 million, while the movement of operating assets and liabilities

of the nine months ended December 31, 2021 resulted in cash inflow of approximately $0.2 million.

We will continue to improve our operating

1 unchanged sentence

We generally do not hold any significant inventory

for more than ninety days, as we typically manufacture upon customers’ order.

cash used in investing activities for the six months ended September 30, 2022 was approximately $17.5 million, approximately $17.4 million

more than that of the six months ended September 30, 2021.

The increase was mainly because there was a purchase of debt securities in

the six months ended September 30, 2022.

cash provided by financing activities for the six months ended September 30, 2022 was approximately $20.8 million more than the six months

ended September 30, 2021.

The increase was mainly because the Company received approximately $20.2 million proceeds from its public offering,

and the net cash repayment of related party borrowings in current period was approximately $1.1 million less than that of the six months

ended September 30, 2021.

for more than ninety days, as we typically manufacture upon customers’ orders.

cash used in investing activities for the nine months ended December 31, 2022 was approximately $17.5 million, which was approximately

$17.3 million more as compared to the nine months ended December 31, 2021.

The increase was predominately due to a purchase of debt securities

in the nine months ended December 31, 2022.

cash provided by financing activities for the nine months ended December 31, 2022 was approximately $20.8 million more than the nine

months ended December 31, 2021.

The increase was predominately due to the Company received approximately $20.2 million proceeds from

its initial public offering, and the net cash repayment of related party borrowings in current period was approximately $0.5 million

less as compared to the nine months ended December 31, 2021.

Condition, Liquidity and Capital Resources

of September 30, 2022, we had cash on hand of approximately $2.0 million, total current assets of approximately $27.4 million and current

of December 31, 2022, we had cash on hand of approximately $1.6 million, total current assets of approximately $27.3 million and current

liabilities of approximately $8.5 million.

We presently finance our operations by using the cash flows from revenue, fund raising from

IPO proceedings and capital contributions from the CEO.

In the event that the Company requires additional funding to finance the growth

of the Company’s current and expected future operations as well as to achieve our strategic objectives, the CEO has indicated the

intent and ability to provide additional equity financing.

Currently, we finance our operations by using the cash flows from revenue, fund raising from

our initial public offering proceedings and capital contributions from our chief executive officer, Mr.

Hong Zhida (the “CEO”).

In the event that the Company requires additional funding to finance the growth of the Company’s current and expected future operations

as well as to achieve our strategic objectives, the CEO has indicated the intent and ability to provide additional equity financing.

Currency Translation Risk

4 unchanged sentences

years, RMB continued to appreciate against the U.S.

As of September 30, 2022, the market foreign exchange rate was RMB 7.116

As of December 31, 2022, the market foreign exchange rate was RMB6.909 to

Our financial statements are translated into U.S.

dollars using the closing rate method.

The balance sheet items

are translated into U.S.

The balance sheet items are

translated into U.S.

dollars using the exchange rates at the respective balance sheet dates.

The capital and various reserves are

translated at historical exchange rates prevailing at the time of the transactions while income and expenses items are translated at

the average exchange rate for the period.

All translation adjustments are included in accumulated other comprehensive income in the statement

The foreign currency translation gain (loss) for the six months ended September 30, 2022 and 2021 was approximately $0.2 million

The capital and various reserves are translated

at historical exchange rates prevailing at the time of the transactions while income and expenses items are translated at the average

exchange rate for the period.

All translation adjustments are included in accumulated other comprehensive income in the statement of

The foreign currency translation gain (loss) for the nine months ended December 31, 2022 and 2021 was approximately $0.2 million

and $(0.06) million respectively.

Sheet Arrangements

have no off-balance sheet arrangements (as that term is defined in Item 303(a)(4)(ii) of Regulation S-K) as of September 30, 2022 that

have no off-balance sheet arrangements (as that term is defined in Item 303(a)(4)(ii) of Regulation S-K) as of December 31, 2022 that

have or are reasonably likely to have a current or future effect on our financial condition, changes in financial condition, revenues

3 unchanged sentences

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 2. Management’s Discussion and Analysis