ADDENTAX GROUP CORP. 10-K

Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations The following discussion and analysis of our financial condition and results of operations for the years ended March 31, 2024 and 2023 should be read in conjunction with the Financial Statements and corresponding notes included in this Annual Report on Form 10-K. 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. Overview Our Business We (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. (“YX”), 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 companies. 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 of “ATXG”. We classify our businesses into three main segments: garment manufacturing, logistics services, and property management and subleasing. 46 Unless 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. Addentax Group Corp., our Nevada holding company, is the entity in which our investors are investing. Our 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; (iv) 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) Zhuang Hao Jia (Dongguan) Decoration Engineering Co.,Ltd, a PRC company (“ZHJ”), and (xii) Dongguan Aotesi Garments Co., Ltd.,, a PRC company (“AOT”), (xiii) Dongguan Hongxiang Commercial Co., Ltd., a PRC company (“HX”). “ PRC 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) Zhuang Hao Jia (Dongguan) Decoration Engineering Co.,Ltd, a PRC company (“ZHJ”), and (x) Dongguan Aotesi Garments Co., Ltd.,, a PRC company (“AOT”), (xiii) Dongguan Hongxiang Commercial Co., Ltd., a PRC company (“HX”). “ WFOE ” refers to Qianhai Yingxi Textile & Garments Co., Ltd, a wholly foreign owned enterprise in China, which is indirectly wholly owned by Addentax Group Corp. Our 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, China. Our logistics business consists of delivery and courier services covering 44 cities in 10 provinces and 2 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. Our property management and subleasing business provides shops subleasing and property management services for garment wholesalers and retailers in the garment market. business provides shops subleasing and property management services for garment wholesalers and retailers in the garment market. In February 2023, the Company disposed of DY to an independent third party at fair value in February, 2023. We conduct our property management and subleasing operation through a wholly owned subsidiary acquired in September 2023, namely Dongguan Hongxiang Commercial Co., Ltd., a PRC company (“HX”), which is located in the Guangdong province, China. 47 Business Objectives Garment Manufacturing Business We believe the strength of our garment manufacturing business is mainly due to our consistent emphasis on exceptional quality and timely delivery. The primary business objective for our garment manufacturing segment is to expand our customer base and improve our profit. Logistics Services Business The business objective and future plan for our logistics services segment is to establish an efficient logistic system and to build a nationwide delivery and courier network in China. As of March 31, 2024, we provide logistic service to over 44 cities in approximately 10 provinces and 2 municipalities. We expect to develop 20 additional logistics routes in existing serving cities and improve the Company’s profit in the year 2024. Property Management and Subleasing Business The business objective of our property management and subleasing segment is to integrate resources in shopping mall, develop e-commerce bases and the Internet celebrity economy together to drive to increase the value of the stores in the area. In February 2023, the Company disposed of DY to an independent third party at fair value and conduct the business through a wholly owned subsidiary acquired in September 2023, namely Dongguan Hongxiang Commercial Co., Ltd., a PRC company (“HX”). Seasonality of Business Garment Manufacturing Business We generally receive more purchase orders during our second and third quarters and fewer manufacture orders during May and June. Logistics Services Business We generally receive more delivery orders in our third and fourth quarters and are more vulnerable to shipping delays in the PRC during Chinese New Year due to traffic and port congestion, border crossing delays and customs clearance issues. Property Management and Subleasing Business There is no significant seasonality in our business. Collection Policy Garment manufacturing business For our new customers, we generally require orders placed to be backed by advances or deposits. For our long-term and established customers with good payment track records, we generally provide payment terms between 30 to 180 days following the delivery of finished goods. Logistics Services business For logistics services, we generally receive payments from the customers between 30 to 90 days following the date of the registration of our receipt of packages. 48 Property management and subleasing business For property management and subleasing business, we generally collect rental and management fees of the following month each month in advance. Economic Uncertainty Our business is dependent on consumer demand for our products and services. We believe that the significant uncertainty in the economy in China has increased our clients’ sensitivity to the cost of our products and services. We have experienced continued pricing pressure. If the economic environment becomes weak, the economic conditions could have a negative impact on our sales growth and operating margins, cash position and collection of accounts receivable. Additionally, business credit and liquidity have tightened in China. Some of our suppliers and customers may face credit issues and could experience cash flow problems and other financial hardships. These factors currently have not had an impact on the timeliness of receivable collections from our customers. We cannot predict at this time how this situation will develop and whether accounts receivable may need to be allowed for or written off in the coming quarters. Despite the various risks and uncertainties associated with the current economy in China, we believe our core strengths will continue to allow us to execute our strategy for long-term sustainable growth in revenue, net income and operating cash flow. Summary of Critical Accounting Policies We have identified critical accounting policies that, as a result of judgments, uncertainties, uniqueness and complexities of the underlying accounting standards and operation involved could result in material changes to our financial position or results of operations under different conditions or using different assumptions. Estimates and Assumptions We regularly evaluate the accounting estimates that we use to prepare our financial statements. In general, management’s estimates are based on historical experience, on information from third party professionals, and on various other assumptions that are believed to be reasonable under the facts and circumstances. Actual results could differ from those estimates made by management. Revenue Recognition Revenue is generated through sale of goods and delivery services. Revenue is recognized when a customer obtains control of promised goods or services and is recognized in an amount that reflects the consideration that the Company expects to receive in exchange for those goods or services. In addition, the standard requires disclosure of the nature, amount, timing, and uncertainty of revenue and cash flows arising from contracts with customers. The amount of revenue that is recorded reflects the consideration that the Company expects to receive in exchange for those goods and services. The Company applies the following five-step model in order to determine this amount: (i) identification of the promised goods and services in the contract; (ii) determination of whether the promised goods and services are performance obligations, including whether they are distinct in the context of the contract; (iii) measurement of the transaction price, including the constraint on variable consideration; (iv) allocation of the transaction price to the performance obligations; and (v) recognition of revenue when (or as) the Company satisfies each performance obligation. 49 The Company only applies the five-step model to contracts when it is probable that the Company will collect the consideration it is entitled to in exchange for the goods or services it transfers to the customer. Once a contract is determined to be within the scope of ASC 606 at contract inception, the Company reviews the contract to determine which performance obligations the Company must deliver and which of these performance obligations are distinct. The Company recognizes as revenues the amount of the transaction price that is allocated to the respective performance obligation when the performance obligation is satisfied or as it is satisfied. Generally, the Company’s performance obligations are transferred to customers at a point in time, typically upon delivery. For all reporting periods, the Company has not disclosed the value of unsatisfied performance obligations for all product and service revenue contracts with an original expected length of one year or less, which is an optional exemption that is permitted under the adopted rules. Leases Lessee The Company determines if an arrangement is a lease at inception. Operating leases are included in operating lease right-of-use (“ROU”) assets, other current liabilities, and operating lease liabilities in our consolidated balance sheets. Finance leases are included in property and equipment, other current liabilities, and other long-term liabilities in the consolidated balance sheets. ROU assets represent the right to use an underlying asset for the lease term and lease liabilities represent the obligation to make lease payments arising from the lease. Operating lease ROU assets and liabilities are recognized at commencement date based on the present value of lease payments over the lease term. As most of the leases do not provide an implicit rate, The Company generally use the incremental borrowing rate based on the estimated rate of interest for collateralized borrowing over a similar term of the lease payments at commencement date. The operating lease ROU asset also includes any lease payments made and excludes lease incentives. Lease expense for lease payments is recognized on a straight-line basis over the lease term. Lessor As a lessor, the Company’s leases are classified as operating leases under ASC 842. Leases, in which the Company is the lessor, are substantially all accounted for as operating leases and the lease components and non-lease components are accounted for separately. Rental income from operating leases is recognized on a straight-line basis over the term of the relevant lease. Initial direct costs incurred in negotiating and arranging an operating lease are added to the carrying amount of the leased asset and recognized on a straight-line basis over the lease term. Accounts receivable, net Accounts receivable, net are stated at the historical carrying amount net of allowance for doubtful accounts. Account receivables are classified as financial assets subsequently measured at amortized cost. Account receivables are recognized when the Company becomes a party to the contractual provisions of the receivables. They are measured, at initial recognition, at fair value plus transaction costs, if any and are subsequently measured at amortized cost. The amortized cost is the amount recognized on the receivable initially, minus principal repayments, plus cumulative amortization (interest) using the effective interest method of any difference between the initial amount and the maturity amount, adjusted for any loss allowance. A loss allowance for expected credit losses is recognized on account receivables and is updated at each reporting date. The Company determines the expected credit losses provisions based on ASU No. 2016-13, Financial Instruments—Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments (‘‘ASC 326’’) using a modified retrospective approach which did not have a material impact on the opening balance of accumulated deficit. To determine expected credit losses on account receivables, the Company will consider the historic credit loss experience, adjusted for factors that are specific to the debtors, general economic conditions, and an assessment of both the current and forecasted direction of conditions at the reporting date, including the time value of money, where appropriate. The loss allowance is calculated on a collective basis for all trade and other receivables in totality. An impairment gain or loss is recognized in profit or loss with a corresponding adjustment to the carrying amount of account receivables, through use of a loss allowance account. The impairment loss is included in operating expenses as a movement in credit loss allowance. Receivables are written off when there is information indicating that the counterparty is in severe financial difficulty and there is no realistic prospect of recovery, e.g., when the counterparty has been placed under liquidation or has entered into bankruptcy proceedings. Receivables written off may still be subject to enforcement activities under the Company’s recovery procedures, considering legal advice where appropriate. Any recoveries made are recognized in profit or loss. Recently issued and adopted accounting pronouncements Accounting 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 fiscal year. 50 The Company reviews new accounting standards as issued. Management has not identified any other new standards that it believes will have a significant impact on the Company’s consolidated financial statements. Results of Operations for the years ended March 31, 2024 and 2023 The following tables summarize our results of operations for the years ended March 31, 2024 and 2023. 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. 2024 2023 Changes in 2024 compared to 2023 % Change (In U.S. dollars, except for percentages) Revenue $ 5,153,753 100.0 % $ 7,944,171 100 % $ (2,790,418 ) (35.1 )% Cost of revenues (4,038,668 ) (78.4 )% (6,103,110 ) (76.8 )% 2,064,442 33.8 % Gross profit (loss) 1,115,085 21.6 % 1,841,061 23.2 % (725,976 ) (39.4 )% Operating expenses (2,246,281 ) (43.6 )% (2,303,976 ) (29.0 )% 57,695 2.5 % Loss from operations (1,131,196 ) (21.9 )% (462,915 ) (5.8 )% (668,281 ) (144.4 )% Other income, net (307,577 ) (6.0 )% 320,556 4.0 % (628,133 ) (196.0 )% Fair value gain or loss 1,986,886 38.6 % 2,983,538 37.6 (996,653 ) 33.4 % Net finance cost (3,645,926 ) (70.7 )% (1,499,379 ) (18.9 ) (2,146,547 ) 143.2 % Income tax expense (11,605 ) (0.2 )% (22,143 ) (0.3 )% 10,538 47.6 % Net income $ (3,109,418 ) (60.3 )% $ 1,319,657 16.6 % $ (4,429,075 ) 335.6 % Revenue Total revenue for the year ended March 31, 2024 significantly decreased by approximately $2.8 million, or approximately 35.1%, as compared with the year ended March 31, 2023. The decrease was mainly due to the decrease of revenue from the garment manufacturing business. Revenue generated from our garment manufacturing business contributed approximately $0.2 million, or approximately 4.5%, of our total revenue for the year ended March 31, 2024. Revenue generated from the segment contributed approximately $0.2 million, or approximately 2.2%, of our total revenue for the year ended March 31, 2023. The low amount of sales was mainly due to insufficient customer volume, we cannot receive as large order quantity from remaining customers as before while new developed customer still at the start stage. Revenue generated from our logistics services business contributed approximately $4.3 million, or approximately 84.3%, of our total revenue for the year ended March 31, 2024. Revenue generated from the segment contributed approximately $4.6 million, or approximately 58.2%, of our total revenue for the year ended March 31, 2023. The decrease of approximately $0.3 million was mainly due to market volatility. Revenue generated from our property management and subleasing business contributed approximately $0.6 million, or approximately 11.3%, of our total revenue for the year ended March 31, 2024. Revenue generated from our property management and subleasing business contributed approximately $3.1 million, or approximately 39.0%, of our total revenue for the year ended March 31, 2023. The decrease of approximately $2.5 million was mainly due to the disposal of DY. 51 Cost of revenue 2024 2023 Increase (decrease) in 2024 compared to 2023 % Change (In U.S. dollars, except for percentages) Net revenue for garment manufacturing $ 229,539 100.0 % $ 177,549 100.0 % $ 51,990 29.3 % Raw materials 33,466 14.6 % 28,333 16.0 % 5,133 18.1 % Labor 130,231 56.7 % 97,065 54.7 % 33,166 34.2 % Other and Overhead 2,298 1.0 % 6,942 3.9 % (4,644 ) (66.9 )% Total cost of revenue for garment manufacturing 165,995 72.3 % 132,340 74.5 % 33,655 25.4 % Gross profit for garment manufacturing 63,544 27.7 % 45,209 25.5 % 18,335 40.6 % 　 　 Net revenue for logistics services 4,342,326 100.0 % 4,621,125 100.0 % (278,799 ) (6.0 )% Fuel, toll and other cost of logistics services 1,881,755 43.3 % 2,428,462 52.6 % (546,707 ) (22.5 )% Subcontracting fees 1,513,533 34.9 % 1,074,846 23.2 % 438,687 40.8 % Total cost of revenue for logistics services 3,395,288 78.2 % 3,503,308 75.8 % (108,020 ) (3.1 )% Gross Profit for logistics services 947,038 21.8 % 1,117,817 24.2 % (170,779 ) (15.3 )% Net revenue for property management and subleasing 581,888 100.0 % 3,096,914 100.0 % (2,515,026 ) (81.2 )% Total cost of revenue for property management and subleasing 473,500 81.4 % 2,444,962 78.9 % (1,971,462 ) (80.6 )% Gross Profit for property management and subleasing 108,388 18.6 % 651,952 21.1 % (543,564 ) (83.4 )% Net revenue for corporate and others - 48,583 100.0 % (48,583 ) (100.0 )% Other and Overhead 3,885 22,500 46.3 % (18,615 ) (82.7 )% Total cost of revenue for corporate and others 3,885 22,500 46.3 % (18,615 ) (82.7 )% Gross profit for corporate and others (3,885 ) 26,083 53.7 % (29,968 ) (114.9 )% Total cost of revenue $ 4,038,668 78.4 % $ 6,103,110 76.8 % $ 2,064,442 33.8 % Gross profit $ 1,115,085 21.6 % $ 1,841,061 23.2 % $ (725,976 ) (39.4 )% 52 For our garment manufacturing business, we purchased the majority of our raw materials directly from numerous local fabric and accessories suppliers. Raw materials cost for our garment manufacturing business was approximately 14.6% of our total garment manufacturing business revenue in the year ended March 31, 2024, as compared with approximately 16.0% in the year ended March 31, 2023. The decrease in raw materials cost for our garment manufacturing business was mainly due to decrease of manufacturing during renovation of the factory. Labor costs for our garment manufacturing business were approximately 56.7% of our total garment manufacturing business revenue in the year ended March 31, 2024, as compared with 54.7% in the year ended March 31, 2023. The increase in labor costs for our garment manufacturing business was mainly due to the increase of sub-contracting business in AOT. Overhead and other expenses for our garment manufacturing business accounted for approximately 1.0% and 3.9% of our total garment manufacturing business revenue for the years ended March 31, 2024 and 2023, respectively. For our logistic services business, we outsource some of the business to our subcontractors. Our subcontractors are contract logistic service providers. The Company relied on a few subcontractors, which the subcontracting fees to our largest contractor represented approximately 42.0% and 25.2% of total cost of revenues for our logistics services segment for the years ended March 31, 2024 and 2023, respectively. The increase in subcontracting fee to the largest contractor was mainly to optimize resources and cost efficiencies. We have not experienced any disputes with our subcontractors and we believe we maintain good relationships with our contract logistic service provider. Fuel, toll and other costs for our logistics business for the year ended March 31, 2024 was approximately $1.9 million, as compared with $2.4 million for the year ended March 31, 2023. Fuel, toll and other costs for our logistics business accounted for approximately 43.3% of our total service revenue for the year ended March 31, 2024, as compared with approximately 52.6% for the year ended March 31, 2023. Subcontracting fees for our logistics business for the year ended March 31, 2024 increased to approximately $1.5 million from $1.1 million for the year ended March 31, 2023, representing an increase of approximately 33.0%. Subcontracting fees accounted for 34.9% and 23.2% of our total logistics business revenue in the years ended March 31, 2024 and 2023, respectively. 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 year ended March 31, 2024 was $0.5 million, approximately 81.4% of our total property management and subleasing business revenue, as compared with $2.4 million, approximately 78.9% of total property management and subleasing business revenue for the year ended March 31, 2023. 53 Gross profit Gross profit of garment manufacturing business for the year ended March 31, 2024 was approximately $63,544, as compared with approximately $0.2 million for the year ended March 31, 2023. Gross profit ratio was approximately 27.7% of revenue of the segment, as compared with approximately 25.5% for the year ended March 31, 2023. Gross profit of our logistics services business for the year ended March 31, 2024 was approximately $0.9 million and gross profit ratio was approximately 21.8%. Gross profit of the segment for the year ended March 31, 2023 was approximately $1.1 million and gross profit ratio was approximately 24.2%. The decrease in the gross profit ratio was mainly because we did not have enough delivery orders to fill the trucks every time which increased our cost. Gross profit of our property management and subleasing business for the year ended March 31, 2024 was approximately $0.1 million, representing approximately 18.6% of our total property management and subleasing business revenue. Gross profit in our property management and subleasing business for the year ended March 31, 2023 was $0.7 million, or 21.1% of our total property management and subleasing business revenue. Changes in 2024 2024 2023 compared to 2023 (In U.S. dollars, except for percentages) Gross profit $ 1,115,085 100 % $ 1,841,061 100 % (725,976 ) (39.4 )% Operating expenses: Selling expenses (130,603 ) (4.3 )% (78,769 ) (4.3 )% (51,834 ) (65.8 )% General and administrative expenses (2,115,678 ) (120.9 )% (2,225,207 ) (120.9 )% 109,529 4.9 % Total $ (2,246,281 ) (125.1 )% $ (2,303,976 ) (125.1 )% 57,695 2.5 % Loss from operations $ (1,131,196 ) (25.1 )% $ (462,915 ) (25.1 )% (668,281 ) (144.4 )% Selling, General and administrative expenses Our selling expenses were mainly incurred for our property management and subleasing business. It was $83,987 for property management and subleasing business and $46,617 for garments manufacturing business for the year ended March 31, 2024. It was approximately $78,769 for property management and subleasing business for the year ended March 31, 2023. Selling expenses consist primarily of local transportation, unloading charges and product inspection charges. 54 Our general and administrative expenses in our garment manufacturing segment for the years ended March 31, 2024 and 2023 were approximately $160,800 and $113,208, respectively. Our general and administrative expenses in our logistics services segment for the year ended March 31, 2024 and 2023 was approximately $766,960 and $832,722, respectively. The general and administrative expenses in our property management and subleasing business were approximately $310,134 and $306,040 for the years ended March 31, 2024 and 2023. Our general and administrative expenses in our corporate office for the years ended March 31, 2024 and 2023 were approximately $961,771 and $973,237, 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. Total general and administrative expenses for the year ended March 31, 2024 decreased approximately 4.9% to approximately $2.1 million from approximately $2.2 million for the year ended March 31, 2023. Loss from operations Loss from operations for the years ended March 31, 2024 and 2023 was approximately $1.1 million and $0.5 million, respectively. Loss from operations of approximately $143,872 and $68,215 was attributed from our garment manufacturing segment for the years ended March 31, 2024 and 2023, respectively. Income from operations of approximately $179,450 and $284,911 was attributed from our logistics services segment for the years ended March 31, 2024 and 2023, respectively. (Loss) / Income from operations of $(201,746) and $267,359 was attributed from our property management and subleasing business for the years ended March 31, 2024 and 2023. We incurred general and administrative expenses in corporate office of approximately $965,028 and approximately $946,970 for the years ended March 31, 2024 and 2023, respectively. Income Tax Expenses Income tax expense for the years ended March 31, 2024 and 2023 was $11,605 and $22,143, respectively. The Company operates in the PRC and files tax returns in the PRC jurisdictions. Yingxi 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. Yingxi HK was incorporated in Hong Kong and is subject to Hong Kong income tax at a 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 years ended March 31, 2024 and 2023. WFOE 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 WFOE and YX had no taxable income for the years ended March 31, 2024 and 2023. Yingxi’s operating companies are governed by the Income Tax Laws of the PRC and subject to progressive EIT rate from 5% to 15% in year ended March 31, 2024. The preferential tax rates will be expired at the end of year 2025. Income taxes of the PRC companies were $11,605 and $22,143 for the year ended March 31, 2024 and 2023, respectively. The Company’s parent entity, Addentax Group Corp. is a U.S. entity and is subject to the United States federal income tax. No provision for income taxes in the United States has been made as Addentax Group Corp. had no United States taxable income for the years ended March 31, 2024 and 2023. Net Profit We incurred a net loss of approximately $3.1 million and a net profit of approximately $1.3 million for the years ended March 31, 2024 and 2023, respectively. Our basic and diluted (loss) earnings per share were $(0.71) and $0.04 for the year ended March 31, 2024 and 2023, respectively. 55 Summary of cash flows Summary cash flows information for the years ended March 31, 2024 and 2023 is as follow: 2024 2023 (In U.S. dollars) Net cash used in operating activities $ (411,473 ) $ (1,569,159 ) Net cash provided by (used in) investing activities $ 90,731 $ (21,168,153 ) Net cash provided by (used in) financing activities $ 521,704 $ 21,845,838 Net cash used in operating activities in the year ended March 31, 2024 decreased by approximately $1.1 million compared with that of the year ended March 31, 2023. It was mainly because the net loss adjusted to cash provided (used in) operating activities of fiscal year ended March 31, 2024 was approximately $0.8 million less than the amount of the fiscal year ended March 31, 2023. The movement of operating assets and liabilities of the year ended March 31, 2024 resulted in cash inflow of approximately $0.5 million compared to cash outflow of approximately $1.5 million in the movement of operating assets and liabilities of the year ended March 31, 2023. We aim 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. Net cash provided by investing activities for the year ended March 31, 2024 was approximately $0.09 million, compared to cash used of $21.2 million in investing activities for the year ended March 31, 2023. It was mainly due to the purchase of debt securities of $17.5 million in the year ended March 31, 2023, payment of long-term loan of $2.5 million to an independent third party, and a cash decrease of approximately $1.2 million in disposal of one subsidiary in property management and subleasing segment. Net cash provided by financing activities for the year ended March 31, 2024 was approximately $21.3 million less than the year ended March 31, 2023. It was mainly because in the year ended March 31 2023, the Company received the proceeds of $22.7 million from its initial public offering (“IPO”), the proceeds of $15.0 million from issuance of the Notes and warrants and deposit of $14.75 million to the restricted cash account pursuant to the PIPE Securities Purchase Agreement. Financial Condition, Liquidity and Capital Resources As of March 31, 2024, we had cash on hand of approximately $0.8 million and restricted cash of approximately $2.8 million, total current assets of approximately $29.2 million and current liabilities of approximately $4.6 million. We presently finance our operations primarily from cash flows from revenue, fund raising from our IPO 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 as well as to achieve our strategic objectives, the CEO has indicated the intent and ability to provide additional equity financing. Foreign Currency Translation Risk Our operations are located in the mainland 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. In last year, RMB depreciated against the U.S. dollar. As of March 31, 2024, the market foreign exchange rate had decreased to RMB7.22 to one U.S. dollar. Our financial statements are translated into U.S. dollars using the closing rate method. The balance sheet items are translated into U.S. dollars using the exchange rates at the respective balance sheet dates. The capital and various reserves are translated at historical exchange rates prevailing at the time of the transactions while income and expenses items are translated at the average exchange rate for the period. All translation adjustments are included in accumulated other comprehensive income in the statement of equity. The foreign currency translation gain (loss) for the years ended March 31, 2024 and 2023 was $0.1 million and $0.2 million, respectively. Off-Balance Sheet Arrangements We have no off-balance sheet arrangements (as that term is defined in Item 303(a)(4)(ii) of Regulation S-K) as of March 31, 2024 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. Item 7A. Quantitative and Qualitative Disclosures about Market Risk Not applicable to smaller reporting companies. 56