What changed in this filing

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Item 2. Management’s Discussion and Analysis

2023-08-14 compared with 2023-02-14 · 269 added, 396 removed, 160 unchanged (81% 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 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.

Our discussion includes forward-looking statements based upon current expectations that involve risks and uncertainties, such as our

plans, objectives, expectations, and intentions.

Actual results and the timing of events could differ materially from those anticipated

in these forward-looking statements as a result of a number of factors, including those set forth under the Risk Factors and Special

Note Regarding Forward-Looking Statements in this report.

We use words such as “anticipate,” “estimate,” “plan,”

“project,” “continuing,” “ongoing,” “expect,” “believe,” “intend,”

“may,” “will,” “should,” “could,” “target”, “forecast” and similar

expressions to identify forward-looking statements.

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

We are listed on the Nasdaq Capital Market under the symbol

following discussion and analysis of our financial condition and results of operations for the three months ended June 30, 2023 and 2022

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

Our discussion

includes forward-looking statements based upon current expectations that involve risks and uncertainties, such as our plans, objectives,

expectations, and intentions.

Actual results and the timing of events could differ materially from those anticipated in these forward-looking

statements as a result of a number of factors, including those set forth under the Risk Factors and Special Note Regarding Forward-Looking

Statements in this report.

We use words such as “anticipate,” “estimate,” “plan,” “project,”

“continuing,” “ongoing,” “expect,” “believe,” “intend,” “may,”

“will,” “should,” “could,” “target”, “forecast” and similar expressions to

identify forward-looking statements.

(Addentax Group Corp.) are a Nevada holding company with no material operations of our own.

We conduct substantially all of our operations

through our operating companies established in the PRC, primarily Shenzhen Qianhai Yingxi Industrial Chain Service Co., Ltd.

our wholly owned subsidiary and its subsidiaries.

We are not a Chinese operating company.

We are a holding company and do not directly

own any substantive business operations in China.

Therefore, our investors will not directly hold any equity interests in our operating

Our holding company structure involves unique risks to investors.

Chinese regulatory authorities could disallow our operating

structure, which would likely result in a material change in our operations and/or the value of our common stock, including that it could

cause the value of such securities to significantly decline or become worthless.

Our holding company, Addentax Group Corp., is listed

on the Nasdaq Capital Market under the symbol “ATXG”.

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”).

We have our own manufacturing facilities, with sufficient production capacity and skilled workers on production lines to ensure that

we meet our high-quality control standards and timely delivery requirement for our customers.

We conduct our garment manufacturing operations

through three wholly owned subsidiaries, namely Dongguan Heng Sheng Wei Garments Co., Ltd (“HSW”), Dongguan Yushang Clothing

Co., Ltd (“YS”), and Shantou Yi Bai Yi Garments Co., Ltd (“YBY”) which are located in the Guangdong province,

logistic business consists of delivery and courier services covering approximately 79 cities in approximately seven provinces and two

municipalities in China.

Although we have our own motor vehicles and drivers, we currently outsource some of the business to our contractors.

We believe outsourcing allows us to maximize our capacity and maintain flexibility while reducing capital expenditures and the costs

of keeping drivers during slow seasons.

We conduct our logistic operations through three wholly owned subsidiaries, namely Shenzhen Xin

Kuai Jie Transportation Co., Ltd (“XKJ”), Shenzhen Yingxi Peng Fa Logistic Co., Ltd (“PF”) and Shenzhen Yingxi

Tongda Logistic Co., Ltd (“TD”), which are located in the Guangdong province, China.

property management and subleasing provides shops subleasing and property management services for garment wholesalers and retailers in

garment market.

We conduct our property management and subleasing operation through a wholly owned subsidiary, namely Dongguan Yingxi

Daying Commercial Co., Ltd (“DY”).

garment manufacturing,

logistics services, property management and subleasing.

the context otherwise requires, all references in this annual report to “ Addentax ” refer to Addentax Group Corp.,

a holding company, and references to “ we, ” “ us, ” “ our, ” the “ Registrant ”,

the “ Company, ” or “ our company ” refer to Addentax and/or its consolidated subsidiaries.

Group Corp., our Nevada holding company, is the entity in which our investors are investing.

subsidiaries include (i) Yingxi Industrial Chain Group Co., Ltd., a Republic of Seychelles company;

(ii) Yingxi Industrial Chain Investment

Co., Ltd., a Hong Kong company (“Yingxi HK”);

(iii) Qianhai Yingxi Textile & Garments Co., Ltd., a PRC company;

Shenzhen Qianhai Yingxi Industrial Chain Services Co., Ltd, a PRC company (“YX”), (v) Dongguan Heng Sheng Wei Garments Co.,

Ltd, a PRC company (“HSW”), (vi) Dongguan Yushang Clothing Co., Ltd, a PRC company (“YS”), (vii) Shantou Yi Bai

Yi Garment Co., Ltd, a PRC company (“YBY”), (viii) Shenzhen Yingxi Peng Fa Logistic Co., Ltd., a PRC company (“PF”);

(ix) Shenzhen Xin Kuai Jie Transportation Co., Ltd, a PRC company (“XKJ”), (x) Shenzhen Yingxi Tongda Logistic Co., Ltd,

a PRC company (“TD”), (xi) Dongguan Yingxi Daying Commercial Co., Ltd., a PRC company (“DY”), (xii) Zhuang Hao

Jia (Dongguan) Decoration Engineering Co.,Ltd, a PRC company (“ZHJ”), and (xiii) Dongguan Aotesi Garments Co., Ltd.,, a PRC

company (“AOT”).

Subsidiaries ” refer to, collectively, (i) Qianhai Yingxi Textile & Garments Co., Ltd.;

(ii) Shenzhen Qianhai Yingxi Industrial

Chain Services Co., Ltd (“YX”), (iii) Dongguan Heng Sheng Wei Garments Co., Ltd (“HSW”), (iv) Dongguan Yushang

Clothing Co., Ltd (“YS”);

(v) Shantou Yi Bai Yi Garment Co., Ltd (“YBY”);

(vi) Shenzhen Yingxi Peng Fa Logistic

Co., Ltd., a PRC company (“PF”);

(vii) Shenzhen Xin Kuai Jie Transportation Co., Ltd, a PRC company (“XKJ”),

(viii) Shenzhen Yingxi Tongda Logistic Co., Ltd, a PRC company (“TD”), (ix) Dongguan Yingxi Daying Commercial Co., Ltd.,

a PRC company (“DY”), (x) Zhuang Hao Jia (Dongguan) Decoration Engineering Co.,Ltd, a PRC company (“ZHJ”), and

(xi) Dongguan Aotesi Garments Co., Ltd.,, a PRC company (“AOT”).

February 2023, the Company disposed DY to an independent third party respectively.

refers to Qianhai Yingxi Textile & Garments Co., Ltd, a wholly foreign owned enterprise in China, which is indirectly wholly owned

by Addentax Group Corp.

garment manufacturing business consists of sales made principally to wholesaler located in the PRC.

We have our own manufacturing facilities,

with sufficient production capacity and skilled workers on production lines to ensure that we meet our high quality control standards

and timely meet the delivery requirements for our customers.

We conduct our garment manufacturing operations through five wholly owned

subsidiaries, namely Dongguan Heng Sheng Wei Garments Co., Ltd (“HSW”), Dongguan Yushang Clothing Co., Ltd (“YS”),

Shantou Yi Bai Yi Garment Co., Ltd (“YBY”), Zhuang Hao Jia (Dongguan) Decoration Engineering

Co.,Ltd (“ZHJ”), and Dongguan Aotesi Garments Co., Ltd., (“AOT”) , which are located in the Guangdong province,

logistics business consists of delivery and courier services covering 86 cities in 11 provinces and 3 municipalities in China.

we have our own motor vehicles and drivers, we currently outsource some of the business to our contractors.

We believe outsourcing allows

us to maximize our capacity and maintain flexibility while reducing capital expenditures and the costs of keeping drivers during slow

We conduct our logistic operations through three wholly owned subsidiaries, namely Shenzhen Xin Kuai Jie Transportation Co.,

Ltd (“XKJ”), Shenzhen Yingxi Peng Fa Logistic Co., Ltd (“PF”) and Shenzhen Yingxi Tongda Logistic Co., Ltd (“TD”),

which are located in the Guangdong province, China.

property management and subleasing business provides shops subleasing and property management services for garment wholesalers and retailers

in the garment market.

We conduct our property management and subleasing operation through a wholly owned subsidiary, namely Dongguan

Yingxi Daying Commercial Co., Ltd.

(“DY”), which is located in the Guangdong province, China.

February 2023, the Company disposed of DY to an independent third party at fair value, which was also its carrying value as of February

business operations, customers and suppliers of DY were retained by the Company;

therefore, the disposition of the subsidiary did not

qualify as discontinued operations.

Manufacturing Business

5 unchanged sentences

delivery and courier network in China.

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

provinces and two municipalities.

As of June 30, 2023, we provide logistics services to over 79 cities in approximately seven provinces

and two municipalities.

We expect to develop an additional 20 logistics points in existing serving cities and improve the Company’s

profit in the year end of 2023.

profit by the year end of 2023.

Management and Subleasing Business

3 unchanged sentences

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

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

revenue in our third and fourth quarters.

In February 2023, the Company disposed of DY to an independent

third party at fair value, which was also its carrying value as of February 28, 2023.

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

revenue during our third and fourth quarters.

These trends primarily result from the timing of seasonal garment manufacturing shipments and

91 unchanged sentences

of this ASU will have on its consolidated financial statements.

for Convertible Instruments:

In August 2020, FASB issued ASU 2020-06, Accounting for Convertible Instruments and Contracts in an Entity’s

Own Equity (ASU 2020-06), as part of its overall simplification initiative to reduce costs and complexity of applying accounting standards

while maintaining or improving the usefulness of the information provided to users of financial statements.

Among other changes, the

new guidance removes from GAAP separation models for convertible debt that require the convertible debt to be separated into a debt and

equity component, unless the conversion feature is required to be bifurcated and accounted for as a derivative or the debt is issued

at a substantial premium.

As a result, after adopting the guidance, entities will no longer separately present such embedded conversion

features in equity and will instead account for the convertible debt wholly as debt.

The new guidance also requires use of the “if-converted”

method when calculating the dilutive impact of convertible debt on earnings per share, which is consistent with the Company’s current

accounting treatment under the current guidance.

The guidance is effective for financial statements issued for fiscal years beginning

after December 15, 2021, and interim periods within those fiscal years, with early adoption permitted, but only at the beginning of the

Company reviews new accounting standards as issued.

1 unchanged sentence

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

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.

of Operations for the three months ended June 30, 2023 and 2022

following tables summarize our results of operations for the three months ended June 30, 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 December 31,

Changes in 2022

compared to 2021

Months Ended June 30,

dollars, except for percentages)

$ (1,333,878 )

Cost of revenues

Operating expenses

(Loss) Income from operations

Other income, net

Fair value gain or loss

Net finance cost

Income tax expense

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.

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.

$ (2,728,721 )

$ (2,825,392 )

revenue for the three months ended June 30, 2023 decreased significantly by approximately $1.3 million, or 55.9%, as compared with

the three months ended June 30, 2022.

The significant decrease was mainly because of the decrease of $0.4 million in logistics

services and $0.9 million in property management and subleasing business.

generated from our garment manufacturing business contributed approximately $0.05 million or 5.1% of our total revenue for the three

months ended June 30, 2023.

Revenue generated from garment manufacturing business contributed approximately $0.04 million or 1.7% of

our total revenue for the three months ended June 30, 2022, respectively.

The low level of sales was mainly due to factory facilities

renewal and repair, remaining factories cannot provide the same capacity as previously.

We estimate the capacity will appear to recover

at second quarter of for the fiscal year ending 2024.

generated from our logistics services business contributed approximately $1.0 million or 94.9% of our total revenue for the three months

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 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 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 December 31, 2021.

Three months ended December 31,

Increase (decrease) in

2022 compared to 2021

ended June 30, 2023.

Revenue generated from our logistic business contributed approximately $1.4 million or 58.3% of our total revenue

for the three months ended June 30, 2022.

generated from our property management and subleasing business was nil for the three months ended June 30, 2023.

The revenue from this

business segment was $0.9 million or 40.0% of our total revenue of this business for the three months ended June 30, 2022.

months ended June 30,

(decrease) in

dollars, except for percentages)

Net revenue for garment manufacturing

Raw materials

Other and Overhead

Total cost of revenue for garment manufacturing

Gross profit (loss) for garment manufacturing

Net revenue for logistics services

Fuel, toll and other cost of logistics services

Subcontracting fees

Total cost of revenue for logistics services

Gross Profit for logistics services

Net revenue for property management and subleasing

Total cost of revenue for property management and subleasing

Gross Profit for property management and subleasing

Net revenue for corporate and others

Merchandise/Finished goods/Raw materials

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 $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.

The Company relied on a few subcontractors, in which the

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 December 31, 2022 and 2021, respectively.

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

than the subcontractors during the COVID-19 epidemic.

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

maintain good relationships with our contract logistics services provider.

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

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.

revenue for garment manufacturing

cost of revenue for garment manufacturing

profit for garment manufacturing

revenue for logistics services

toll and other cost of logistics services

Subcontracting

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

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.

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 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 December 31, 2021.

Three months ended December 31,

Increase (decrease) in

2022 compared to 2021

dollars, except for percentages)

Operating expenses:

Selling expenses

General and administrative expenses

Loss from operations

General and administrative expenses

selling expenses were mainly incurred for our property management and subleasing business.

It was approximately $0.02 million and $0.04

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 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 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 $0.1 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,

and is not subject to income taxes.

HK was incorporated in Hong Kong and is subject to Hong Kong income tax at a progressive tax rate of 16.5%.

No provision for income taxes

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 December 31, 2022 and 2021.

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

All Yingxi’s operating companies are subject to progressive EIT rates from

5% to 15% in 2022.

The preferential tax rates will be expired at end of year 2022 and the EIT rate will be 25% from year 2023.

Company’s parent entity, Addentax Group Corp.

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 Group Corp.

had no United States taxable income for the three months

ended December 31, 2022 and 2021.

Income (Loss)

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.

Nine months Ended December 31,

Changes in 2022

compared to 2021

dollars, except for percentages)

$ (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 $0.1 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 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 nine months ended December 31, 2022.

Revenue generated from our property management and subleasing business contributed approximately

$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

2022 compared to 2021

dollars, except for percentages)

Net revenue for garment manufacturing

$ (2,346,163 )

Raw materials

Other and Overhead

Total cost of revenue for garment manufacturing

Gross profit for garment manufacturing

Net revenue for logistics services

Fuel, toll and other cost of logistics services

Subcontracting fees

Total cost of revenue for logistics services

Gross Profit for logistics services

Net revenue for property management and subleasing

Total cost of revenue for property management and subleasing

Gross Profit for property management and subleasing

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

$ (3,290,811 )

cost of revenue for logistics services

Profit for logistics services

revenue for property management and subleasing

cost of revenue for property management and subleasing

Profit for property management and subleasing

revenue for epidemic prevention supplies

cost of revenue for epidemic prevention supplies

(loss) income for epidemic prevention supplies

cost of revenue

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 $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.

The Company relied on a few subcontractors, in which the

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

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.

material costs for our garment manufacturing business were approximately 49.0% of our total garment manufacturing business revenue for

the three months ended June 30, 2023, as compared with 69.1% for the three months ended June 30, 2022.

The decrease in percentages was

mainly due to the purchase cost of the raw materials dropped.

costs for our garment manufacturing business was approximately 32.0% of our total garment manufacturing business revenue for the three

months ended June 30, 2023, as compared with 21.1% for the three months ended June 30, 2022.

The increase was mainly due to the rising

wages in the PRC.

and other expenses for our garment manufacturing business accounted for approximately 5.0% of our total garment business revenue for

the three months ended June 30, 2023, as compared with 1.4% of total garment business revenue for the three months ended June 30, 2022.

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

The Company relied on a few subcontractors, which the subcontracting

fees to our largest contractor represented approximately 37.2% and 35.6% of total cost of revenues for our service segment for the three

months ended June 30, 2023 and 2022, respectively.

The decreased was attributed to an increase usage of our own logistics as compared

to the subcontractors during the COVID-19 epidemic.

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

good relationships with our contract logistics services provider.

toll and other costs for our service business for the three months ended June 30, 2023 were approximately $0.5 million as compared with

$0.6 million for the three months ended June 30, 2022.

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

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.

48.3% of our total service revenue for the three months ended June 30, 2023, as compared with 44.3% for the three months ended June 30,

The increase was primarily attributable to a decrease of usage of subcontractors during the COVID-19 epidemic.

Subcontracting

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

This decrease was primarily because

the Company used less subcontractors under the epidemic circumstance.

fees for our service business for the three months ended June 30, 2023 decreased approximately 35.1% to $0.3 million from $0.4 million

for the three months ended June 30, 2022.

Subcontracting fees accounted for 28.7% and 31.7% of our total service business revenue in

the three months ended June 30, 2023 and 2022, respectively.

The decrease was primarily attributable to a decrease of usage of subcontractors

during the COVID-19 epidemic.

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

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 nine months ended December 31, 2021.

Gross profit accounted for 25.3% of our total Garment manufacturing

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%.

The increase of gross profit ratio was mainly attributable to a decrease of subcontracting fees under the

COVID-19 epidemic circumstances and 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 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,

The Company disposed of DY in February, 2023.

Therefore, there was no revenue from this segment in the quarter.

Garment manufacturing business gross profit

for the three months ended June 30, 2023 was approximately $8,000, as compared with approximately $3,000 for

the three months ended June 30, 2022.

Gross profit accounted for 14.0% of our total garment manufacturing business revenue for the three

months ended June 30, 2023, as compared to 8.3% for the three months ended June 30, 2022.

profit in our logistics services business for the three months ended June 30, 2023 was approximately $229,000 and gross margin was

Gross profit in our logistics services business for the three months ended June 30, 2022 was approximately $347,000 and gross

margin was 25.0%.

The decrease of gross profit ratio was mainly because the Company did not generate as many orders as before but the

operating expenses is fixed which caused a decrease in gross profit.

profit in our property management and subleasing business for the three months ended June 30, 2023 was nil.

It was approximately $106,000, or 11.1% for the three months ended June 30, 2022.

months ended June 30,

(decrease) in

2022 compared to 2021

dollars, except for percentages)

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Selling expenses

General and administrative expenses

$ (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.

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

Our general and administrative expenses in our logistics services segment,

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 $0.3 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.

and administrative expenses

(Loss) Income

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

Our property management and subleasing business segment generated

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.

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.

General and administrative expenses

Our selling expenses were mainly incurred for our

property management and subleasing business.

It was nil and approximately $6,000 for the three months ended June 30, 2023 and 2022,

respectively.

Selling expenses consisted primarily of advertisement, local transportation, unloading charges and product inspection charges.

Our general and administrative expenses in our garment

manufacturing business segment for the three months ended June 30, 2023 and 2022 was both approximately $32,000, respectively.

general and administrative expenses in our logistics services segment for the three months ended June 30, 2023 and 2022 was both approximately

$227,000, respectively.

The general and administrative expenses in our property management and subleasing business was approximately

nil and $67,000 for the three months ended June 30, 2023 and 2022, respectively.

Our general and administrative expenses in our corporate

office for the three months ended June 30, 2023 and 2022 was approximately $241,000 and $79,000, respectively.

General and administrative

expenses consisted 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 June 30, 2023 increased by approximately 22.9% to $498,000 from $405,000 for the three months ended June 30, 2022.

(Loss) Income from operations

from operations for the three months ended June 30, 2023 was approximately $261,000, while income from operations for the three

months ended June 30, 2022 was $46,000.

Loss from operations of approximately $22,000 and $29,000 for the three

months ended June 30, 2023 and 2022 was attributed from our garment manufacturing segment, respectively.

Income from operations of

approximately $2,000 and $120,000 was

attributed from our logistics services segment for the three months ended June 30, 2023 and 2022, respectively.

operations of approximately nil and $34,000 for the three months ended June 30, 2023 and 2022 was attributed from our property

management and subleasing business, respectively.

We incurred expenses from operations in corporate office of approximately $241,000 and $79,000 for the three months ended June 30, 2023 and 2022, respectively.

The increase of expenses 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 June 30, 2023 and 2022 was both approximately $1,000, respectively.

The Company operates

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

and is not subject to income taxes.

is not subject to income taxes.

HK was incorporated in Hong Kong and is subject to Hong Kong income tax at a progressive tax rate of 16.5%.

No provision for income taxes

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

in Hong Kong has been made as Yingxi HK had no taxable income for the three months ended June 30, 2023 and 2022.

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 nine months ended December 31, 2022 and 2021.

in the PRC has been made as QYTG and YX had no taxable income for the three months ended June 30, 2023 and 2022.

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

1 unchanged sentence

5% to 15% in 2023.

The preferential tax rates will be expired at end of year 2022 and the EIT rate will be 25% from year 2023.

The preferential tax rates will be expired at end of year 2023.

Company’s parent entity, Addentax Group Corp.

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 Group Corp.

had no United States taxable income for the nine months

ended December 31, 2022 and 2021.

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

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

had no United States taxable income for the three months

ended June 30, 2023 and 2022.

Income (Loss)

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.

incurred net loss of approximately $2.7 million for the three months ended June 30, 2023 and a net income of approximately $0.1 million

for the three months ended June 30, 2022.

Our basic and diluted earnings per share were ($0.83) and $0.00 for the three months ended June

30, 2023 and 2022, respectively.

of cash flows

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 )

Net cash used in investing activities

$ (17,500,000 )

Net cash provided by (used in) financing activities

cash flows information for the three months ended June 30, 2023 and 2022 is as follow:

months ended June 30,

Net cash provided

by (used in) operating activities

$ (1,110,878 )

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

cash flow by closely monitoring the timely collection of accounts and other receivables.

We generally do not hold any significant inventory

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.

Net cash provided by financing

cash (used in) provided by operating activities in the three months ended June 30, 2023 was approximately $1.4 million less than that

of the three months ended June 30, 2022.

It was mainly due to (i) net loss with adjustments to reconcile net loss to cash flow of $0.2

million for the three months ended June 30, 2023 compared to the net income after adjustments to cash flow of $0.1 million for the three

months ended June 30, 2022, (ii) the movement of operating assets and liabilities of the three months ended June 30, 2023 resulted in

cash outflow of approximately $0.93 million, while the movement of operating assets and liabilities of the three months ended June 30,

2022 resulted in cash inflow of approximately $0.14 million.

We will continue to improve our operating cash flow by closely monitoring

the timely collection of accounts and other receivables.

We generally do not hold any significant inventory for more than ninety days,

as we typically manufacture upon customers’ order.

cash provided by financing activities for the three months ended June 30, 2023 was approximately $0.4 million more than the three months

ended June 30, 2022.

It was mainly due to the release of restricted cash of approximately $1.6 million more than that of the three months

ended June 30, 2022.

Condition, Liquidity and Capital Resources

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

of June 30, 2023, we had cash on hand of approximately $0.5 million, total current assets of approximately $37.2 million and current

liabilities of approximately $3.1 million.

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.

We presently finance our operations from revenue, fund raising from our initial public offering

proceeds 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

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.

5 unchanged sentences

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

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

As of June 30, 2023, the market foreign exchange rate was RMB 7.25 to one

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

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 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.

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 equity.

foreign currency translation gain (loss) for the three months ended June 30, 2023 and 2022 was approximately $0.09 million and $0.11

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 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

or expenses, results of operations, liquidity, capital expenditures or capital resources.

have no off-balance sheet arrangements (as that term is defined in Item 303(a)(4)(ii) of Regulation S-K) as of June 30, 2023 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.

Quantitative and Qualitative Disclosures About Market Risk

1 unchanged sentence

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