What changed in this filing

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Item 2. Management’s Discussion and Analysis

2023-11-14 compared with 2023-08-14 · 360 added, 180 removed, 249 unchanged (68% 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 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.

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

29 unchanged sentences

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

company (“AOT”).

company (“AOT”), (xiv) Dongguan Hongxiang Commercial Co., Ltd., a PRC company (“HX”).

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

8 unchanged sentences

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”).

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

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

32 unchanged sentences

delivery and courier network in China.

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

and two municipalities.

As of September 30, 2023, we provide logistics services to over 86 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 by the year end of 2023.

profit in the year 2024.

Management and Subleasing Business

5 unchanged sentences

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

holiday periods in the logistics services segment.

In September 2023, we finished the acquisition

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 holiday periods in the logistics services segment.

manufacturing business

79 unchanged sentences

issued accounting pronouncements

June 2016, the FASB issued ASU No.

2016-13, Financial Instruments – Credit Losses (Topic 326), Measurement of Credit Losses on

Financial Instruments.

This standard requires a financial asset (or group of financial assets) measured at amortized cost basis to be

presented at the net amount expected to be collected.

The allowance for credit losses is a valuation account that is deducted from the

amortized cost basis of the financial asset(s) to present the net carrying value at the amount expected to be collected on the financial

September 2016, the FASB issued ASU No.

2016-13, Financial Instruments – Credit Losses (Topic 326), Measurement of Credit Losses

on Financial Instruments.

This standard requires a financial asset (or group of financial assets) measured at amortized cost basis to

be presented at the net amount expected to be collected.

The allowance for credit losses is a valuation account that is deducted from

the amortized cost basis of the financial asset(s) to present the net carrying value at the amount expected to be collected on the financial

This standard will be effective for the Company on April 1, 2023.

19 unchanged sentences

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

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.

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

following tables summarize our results of operations for the three months ended September 30, 2023 and 2022.

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 June 30,

Three Months Ended

September 30,

Changes in 2023

compared to 2022

dollars, except for percentages)

$ (1,333,878 )

Cost of revenues

Operating expenses

(Loss) Income from operations

Other income, net

Fair value gain or loss

Fair value gain

Net finance cost

$ (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.

Income tax expense

Net (loss) income

revenue for the three months ended September 30, 2023 decreased by approximately $0.8 million, or 37.7%, as compared with the three months

ended September 30, 2022.

The decrease was mainly due to the decrease of $0.9 million in property management and subleasing business

and $0.1 million increase in garment manufacturing business.

generated from our garment manufacturing business contributed approximately $0.1 million or 6.8% of our total revenue for the three months

ended September 30, 2023.

Revenue generated from garment manufacturing business contributed approximately $0.4 million or 14.3% of our

total revenue for the three months ended September 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.

We estimate the capacity will recover at the

last quarter of the fiscal year ending 2024.

generated from our logistics services business contributed approximately $1.2 million or 88.8% of our total revenue for the three months

ended June 30, 2023.

ended September 30, 2023.

Revenue generated from our logistic business contributed approximately $1.2 million or 57.0% 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,

for the three months ended September 30, 2022.

generated from our property management and subleasing business was $0.06 million or 4.3% of our total revenue for the three months ended

September 30, 2023.

The revenue from this business segment was $0.9 million or 42.9% of our total revenue of this business for the three

months ended September 30, 2022.

Three months ended

September 30,

(decrease) in

2023 compared

dollars, except for percentages)

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

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

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 epidemic prevention supplies

Other and Overhead

Total cost of revenue for epidemic prevention supplies

Gross (loss) income for epidemic prevention supplies

Total 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 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.

material costs for our garment manufacturing business was approximately 28.9% of our total garment manufacturing business revenue for

the three months ended September 30, 2023, as compared with nil for the three months ended September 30, 2022.

costs for our garment manufacturing business was approximately 50.9% 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.

months ended September 30, 2023, as compared with 90.5% for the three months ended September 30, 2022.

and other expenses for our garment manufacturing business accounted for approximately 2.9% 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 three months ended September 30, 2023, as compared with 67.8% of total garment business revenue for the three months ended September

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

The Company relied on a few subcontractors, which the subcontracting

fees to our largest contractor represented approximately 35.1% and 26.7% 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

months ended September 30, 2023 and 2022, respectively.

The increase was attributed to a decrease usage of our own logistics as compared

to the subcontractors after the COVID-19 epidemic.

We have not experienced any dispute 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.

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

with $0.7 million for the three months ended September 30, 2022.

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

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.

43.3% of our total service revenue for the three months ended September 30, 2023, as compared with 54.4% for the three months ended September

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

Subcontracting

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.

fees for our service business for the three months ended September 30, 2023 increased significantly by approximately 72.7% to $0.3 million

from $0.2 million for the three months ended September 30, 2022.

Subcontracting fees accounted for approximately 28.6% and 16.1% of our

total service business revenue in the three months ended September 30, 2023 and 2022, respectively.

The increase was primarily attributable

to a decrease usage of our own logistics as compared to the subcontractors after 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 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

The Company disposed of DY in February 2023 and acquired HX in September 2023.

Therefore, there was minor revenue from this

segment in the quarter.

manufacturing business gross profit for the three months ended September 30, 2023 was approximately $15.8 thousand, as compared with

a loss of approximately $0.5 thousand for the three months ended September 30, 2022.

Gross profit accounted for approximately 17.3% of

our total garment manufacturing business revenue for the three months ended September 30, 2023.

profit in our logistics services business for the three months ended September 30, 2023 was approximately $333,700 and gross

margin was 28.1%.

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,

Gross profit in our logistics services business for the three months ended September 30, 2022 was approximately $360,200

and gross margin was 29.5%.

The decrease of gross profit ratio was mainly because.

profit in our property management and subleasing business for the three months ended September 30, 2023 was approximately $53,500 .

It was approximately $206,300 , or 22.4% margin for the three months ended September 30, 2022.

Three months ended

September 30,

(decrease) in

2023 compared

dollars, except for percentages)

1 unchanged sentence

Selling expenses

and administrative expenses

(Loss) Income

from operations

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

General and administrative expenses

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

It was $37,200 and approximately $30,000

for the three months ended September 30, 2023 and 2022, respectively.

Selling expenses consisted 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, 2023 and 2022

was approximately $34,400 and $27,700, respectively.

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

three months ended September 30, 2023 and 2022 was approximately $160,700 and $207,800, respectively.

The general and administrative

expenses in our property management and subleasing business was approximately nil and $86,700 for the three months ended September 30,

2023 and 2022, respectively.

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

2023 and 2022 was approximately $475,600 and $142,800, 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 September 30, 2023 increased by approximately 44.2% to $670,600 from $465,000

for the three months ended September 30, 2022.

Income from operations

from operations for the three months ended September 30, 2023 was approximately $304,900, while income from operations for the three

months ended September 30, 2022 was $70,200.

Loss from operations of approximately $19,000 and $28,100 for the three months ended September

30, 2023 and 2022, respectively.

Income from operations of approximately $172,300 thousand and $152,400 thousand was attributed from

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

Loss from operations of approximately

$13,400 and income from operations of $89,600 for the three months ended September 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.

We incurred expenses from operations in corporate office of approximately $444,900

and $143,800 for the three months ended September 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 September 30, 2023 and 2022 was approximately $3,200 and $9,500, respectively.

The Company operates

4 unchanged sentences

No provision for income taxes

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%.

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

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

No provision for income taxes

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

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

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 June 30, 2023 and 2022.

ended September 30, 2023 and 2022.

Income (Loss)

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.

incurred net income of approximately $1.4 million for the three months ended September 30, 2023 and a net income of approximately $0.08

million for the three months ended September 30, 2022.

Our basic and diluted earnings per share were $0.37 and $0.00 for the three months

ended September 30, 2023 and 2022, respectively.

of Operations for the six months ended September 30, 2023 and 2022

following tables summarize our results of operations for the six months ended September 30, 2023 and 2022.

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.

Six Months Ended

September 30,

Changes in 2023

compared to 2022

dollars, except for percentages)

$ (2,142,583 )

Cost of revenues

Operating expenses

(Loss) Income from operations

Other income, net

Fair value gain

Net finance cost

Income tax expense

Net (loss) income

$ (1,366,321 )

$ (1,546,209 )

revenue for the six months ended September 30, 2023 decreased by approximately $2.1 million, or 47.3%, as compared with the six months

ended September 30, 2022.

The decrease was mainly due to the increase of $0.1 million in garment manufacturing business, the decrease

of $0.4 million in logistics services and $1.8 million in property management and subleasing business.

generated from our garment manufacturing business contributed approximately $0.1 million or 6.1% of our total revenue for the six months

ended September 30, 2023.

Revenue generated from garment manufacturing business contributed approximately $0.04 million or 0.9% of our

total revenue for the six months ended September 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 last quarter of for the fiscal year ending 2024.

generated from our logistics services business contributed approximately $2.2 million or 91.5% of our total revenue for the six months

ended September 30, 2023.

Revenue generated from our logistic business contributed approximately $2.6 million or 57.7% of our total revenue

for the six months ended September 30, 2022.

generated from our property management and subleasing business was $0.06 million for the six months ended September 30, 2023.

from this business segment was $1.9 million or 41.4% of our total revenue of this business for the six months ended September 30, 2022.

Six months ended

September 30,

(decrease) in

2023 compared

dollars, except for percentages)

Net revenue for garment manufacturing

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 epidemic prevention supplies

Other and Overhead

Total cost of revenue for epidemic prevention supplies

Gross (loss) income for epidemic prevention supplies

Total 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 was approximately 17.9% of our total garment manufacturing business revenue for

the six months ended September 30, 2023, as compared with 66.7% for the six months ended September 30, 2022.

The decrease in percentages

was mainly due to.

costs for our garment manufacturing business was approximately 64.2% of our total garment manufacturing business revenue for the six

months ended September 30, 2023, as compared with 22.4% for the six months ended September 30, 2022.

The increase was mainly due to.

and other expenses for our garment manufacturing business accounted for approximately 1.8% of our total garment business revenue for

the six months ended September 30, 2023, as compared with 3.9% of total garment business revenue for the six months ended September 30,

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

The Company relied on a few subcontractors, which the subcontracting

fees to our largest contractor represented approximately 36.1% and 24.4% of total cost of revenues for our service segment for the six

months ended September 30, 2023 and 2022, respectively.

The increase was attributed to a decrease usage of our own logistics as compared

to the subcontractors after 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 six months ended September 30, 2023 was approximately $1.0 million as compared

with $1.3 million for the six months ended September 30, 2022.

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

45.8% of our total service revenue for the six months ended September 30, 2023, as compared with 48.5% for the six months ended September

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

Subcontracting

fees for our service business for the six months ended September 30, 2023 decreased approximately 2.6% to $0.62 million from $0.64 million

for the six months ended September 30, 2022.

Subcontracting fees accounted for 28.4% and 24.4% of our total service business revenue

in the six months ended September 30, 2023 and 2022, respectively.

The increase was primarily attributable a decrease usage of our own

logistics as compared to the subcontractors after 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 Company disposed of DY in February 2023 and acquired HX in September 2023.

Therefore, there was no revenue from this segment

in the quarter.

manufacturing business gross profit for the six months ended September 30, 2023 was approximately $23,300, as compared with approximately

$2,800 for the six months ended September 30, 2022.

Gross profit accounted for 16.1% of our total garment manufacturing business revenue

for the six months ended September 30, 2023, as compared to 6.9% for the six months ended September 30, 2022.

profit in our logistics services business for the six months ended September 30, 2023 was approximately $563,000 and gross margin was

Gross profit in our logistics services business for the six months ended September 30, 2022 was approximately $707,300 and gross

margin was 27.1%.

The decrease of gross profit ratio was mainly because.

profit in our property management and subleasing business for the six months ended September 30, 2023 was $53,500.

It was approximately

$312,700, or 16.7% for the six months ended September 30, 2022.

Six months ended

September 30,

(decrease) in

2023 compared

dollars, except for percentages)

Operating expenses:

Selling expenses

General and administrative expenses

$ (1,205,677 )

(Loss) Income from operations

General and administrative expenses

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

It was $37,200 and approximately $35,600 for

the six months ended September 30, 2023 and 2022, respectively.

Selling expenses consisted primarily of advertisement, local transportation,

unloading charges and product inspection charges.

general and administrative expenses in our garment manufacturing business segment for the six months ended September 30, 2023 and 2022

was approximately $64,100 and $59,600, respectively.

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

six months ended September 30, 2023 and 2022 was approximately $388,100 and $434,800, respectively.

The general and administrative expenses

in our property management and subleasing business was approximately nil and $153,400 for the six months ended September 30, 2023 and

2022, respectively.

Our general and administrative expenses in our corporate office for the six months ended September 30, 2023 and 2022

was approximately $716,300 and $222,200, 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 six months ended September 30, 2023 increased by approximately 34.3% to $1.2 million from

$0.9 million for the six months ended September 30, 2022.

Income from operations

from operations for the six months ended September 30, 2023 was approximately $565,900, while income from operations for the six months

ended September 30, 2022 was $116,300.

Loss from operations of approximately $41,100 and $56,700 for the six months ended September 30,

2023 and 2022 was attributed from our garment manufacturing segment, respectively.

Income from operations of approximately $174,200 and

$272,400 was attributed from our logistics services segment for the six months ended September 30, 2023 and 2022, respectively.

from operations of approximately $13,400 and income of $123,700 for the six months ended September 30, 2023 and 2022 was attributed from

our property management and subleasing business, respectively.

We incurred expenses from operations in corporate office of approximately

$685,600 and $223,100 for the six months ended September 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 six months ended September 30, 2023 and 2022 was approximately $4,500 and $10,800, respectively.

The Company 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,

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 has been made as Yingxi HK had no taxable income for the six months ended September 30, 2023 and 2022.

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

No provision for income taxes

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

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 2023.

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

Company’s parent entity, Addentax Group Corp.

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 six months ended

September 30, 2023 and 2022.

Income (Loss)

incurred net loss of approximately $1.4 million for the six months ended September 30, 2023 and a net income of approximately $0.2 million

for the six months ended September 30, 2022.

Our basic and diluted earnings per share were ($0.37) and $0.00 for the six months ended

September 30, 2023 and 2022, respectively.

of cash flows

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

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

Six months ended

September 30,

Net cash used in operating activities

$ (1,579,486 )

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.

$ (1,526,530 )

Net cash used in investing activities

$ (17,500,000 )

Net cash provided by financing activities

cash used in operating activities in the six months ended September 30, 2023 was nearly the same as that of the three months ended September

cash used in investing activities in the six months ended September 30, 2023 was for purchase of property and equipment.

Net cash used

in investing activities in the six months ended September 30, 2022 was for investment in debt securities.

cash provided by financing activities for the six months ended September 30, 2023 included $3.9 million released from restricted cash

and net repayment of $1.1 million to related parties.

Net cash provided by financing activities for the six months ended September 30,

2022 included $20.2 million proceeds from its public offering and $0.6 million net repayment to related parties.

Condition, Liquidity and Capital Resources

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

of September 30, 2023, we had cash on hand of approximately $1.7 million, total current assets of approximately $30.2 million and current

liabilities of approximately $4.9 million.

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Currency Translation Risk

operations are located in China, which may give rise to significant foreign currency risks from fluctuations and the degree of volatility

in foreign exchange rates between the U.S.

operations are located in China, which may give rise to significant foreign currency risks from fluctuations and the degree of

volatility in foreign exchange rates between the U.S.

dollar and the Chinese Renminbi (“RMB”).

All of our sales are in RMB.

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

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

All of our sales are in

In last year, RMB depreciated against the U.S.

As of September 30, 2023, the market foreign exchange rate

was RMB 7.28 to one U.S.

Our financial statements are translated into U.S.

dollars using the closing rate method.

The balance sheet items are translated

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 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.

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.

The foreign currency translation gain (loss) for the six months ended September 30,

2023 and 2022 was approximately $0.09 million and $0.2 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 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.

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, 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