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Item 2. Management’s Discussion and Analysis

2024-08-14 compared with 2024-02-14 · 248 added, 398 removed, 210 unchanged (75% 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,

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.

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.

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 People’s

Republic of China, or 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

We are a holding company and do not directly own any substantive

business operations in China.

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, property management and subleasing.

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.

The Company previously engaged in the provision of

epidemic prevention supplies, which included manufacturing, distribution and trading of epidemic prevention supplies.

As the COVID-19

pandemic is near an endemic, the Company ceased to operate in this business in the first quarter of 2023.

The remaining assets of this

business segment were reclassified into the “Corporate and others” segment.

The corresponding items of segment information

for the earlier periods were restated to reflect the change of the new segment structure.

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

2 unchanged sentences

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”);

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) 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

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

Dongguan Au Te Si Garments Co., Ltd., a PRC company (“AOT”), (xii) Dongguan Hongxiang Commercial Co., Ltd., a PRC company

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

6 unchanged sentences

(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”), (xi) Dongguan

(viii) Zhuang Hao Jia (Dongguan) Decoration Engineering

Co.,Ltd, a PRC company (“ZHJ”), and (ix) Dongguan Aotesi Garments Co., Ltd.,, a PRC company (“AOT”), (x) Dongguan

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

7 unchanged sentences

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.

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 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.

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 two wholly owned subsidiaries, namely Shenzhen Xin Kuai Jie Transportation Co., Ltd

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

We currently have an aggregate of 56,238 square meters floor space and provide approximately 1,300

shop space to clients.

In February 2023, the Company disposed of DY to an independent third party at fair value in February, 2023.

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.

To focus on the core businesses of the Group, the

Company dissolved one of its subsidiaries, Shenzhen Yingxi Tongda Logistic Co., Ltd, in April 2024 and received approval from RPC authorities.

As at the date of this report, the Company is in the

process of dissolving another subsidiary, ZHJ.

Manufacturing Business

5 unchanged sentences

delivery and courier network in China.

As of December 31, 2023, we provide logistics services to over 86 cities in approximately 11 provinces

As of June 30, 2024, we provide logistics services to over 44 cities in approximately 10 provinces

and 2 municipalities.

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

profit in the year 2024.

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

profit for the remainder of 2024.

Management and Subleasing Business

1 unchanged sentence

and the Internet celebrity economy together to drive to increase the value of the stores in the area.

The short-term goal for the year

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

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.

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.

third party and conduct the business through a wholly owned subsidiary acquired in September 2023, namely Dongguan Hongxiang Commercial

Co., Ltd., a PRC company (“HX”).

Manufacturing Business

generally receive more purchase orders during our second and third quarters and fewer manufacture orders during May and June.

Services Business

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.

Management and Subleasing Business

is no significant seasonality in our business.

manufacturing business

our new customers, we generally require orders placed to be backed by advances or deposits.

77 unchanged sentences

basis over the lease term.

receivable, net

receivable, net are stated at the historical carrying amount net of allowance for doubtful accounts.

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.

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.

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.

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.

written off may still be subject to enforcement activities under the Company’s recovery procedures, considering legal advice where

Any recoveries made are recognized in profit or loss.

issued accounting pronouncements

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.

The Company is currently evaluating the impact the adoption

of this ASU will have on its consolidated financial statements.

for Convertible Instruments:

16 unchanged sentences

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

of Operations for the three months ended December 31, 2023 and 2022

following tables summarize our results of operations for the three months ended December 31, 2023 and 2022.

of Operations for the three months ended June 30, 2024 and 2023

following table summarize our results of operations for the three months ended June 30, 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.

Three Months Ended

Changes in 2023

compared to 2022

Months Ended June 30,

dollars, except for percentages)

1 unchanged sentence

Operating expenses

(Loss) Income from operations

Loss from operations

Other income, net

Fair value gain

Fair value gain or loss

Net finance cost

Income tax expense

Net (loss) income

$ (1,221,111 )

$ (2,728,721 )

revenue for the three months ended December 31, 2023 decreased by approximately $0.7 million, or 30.8%, as compared with the three months

ended December 31, 2022.

The decrease was mainly due to the decrease of $0.6 million in property management and subleasing business and

$0.1 million decrease in garment manufacturing business.

Revenue generated from our garment manufacturing business

contributed approximately $0.03 million or 1.8% of our total revenue for the three months ended December 31, 2023.

Revenue generated from

garment manufacturing business contributed approximately $0.1 million or 4.7% of our total revenue for the three months ended December

31, 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 recover at the last quarter of the fiscal year ending 2024.

revenue for the three months ended June 30, 2024 decreased by approximately $0.2 million, or 19.2%, as compared with the

three months ended June 30, 2023.

The decrease was mainly due to the decrease of $0.5 million in logistics services and

increase of $0.3 million in property management and subleasing business.

generated from our garment manufacturing business contributed approximately $0.09 million, or 10.2%, of our total revenue for the

three months ended June 30, 2024.

Revenue generated from garment manufacturing business contributed approximately $0.05 million or

5.1% of our total revenue for the three months ended June 30, 2023, respectively.

The low level of sales was mainly due to factory

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

We estimate the capacity

will recover at the fiscal year ending 2025.

generated from our logistics services business contributed approximately $0.5 million, or 57.2%, of our total revenue for the three months

ended December 31, 2023.

ended June 30, 2024.

Revenue generated from our logistic business contributed approximately $1.0 million or 94.9% of our total revenue

for the three months ended December 31, 2022.

for the three months ended June 30, 2023.

generated from our property management and subleasing business was 0.3 million, or 32.7%, of our total revenue for the three months ended

December 31, 2023.

The revenue from this business segment was $0.8 million or 37.5% of our total revenue of this business for the three

months ended December 31, 2022.

Three months ended

(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 (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 (loss) income for corporate and others

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 15.7% of our total garment manufacturing business revenue for

the three months ended December 31, 2023, as compared with 0.8% for the three months ended December 31, 2022.

costs for our garment manufacturing business was approximately 25.8% of our total garment manufacturing business revenue for the three

months ended December 31, 2023, as compared with 63.7% for the three months ended December 31, 2022.

and other expenses for our garment manufacturing business accounted for approximately (4.8)% of our total garment business

revenue for the three months ended December 31, 2023, as compared with 2.7% of total garment business revenue for the three months ended

December 31, 2022.

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 53.1% and 28.1 % of total cost of revenues for our service segment

for the three months ended December 31, 2023 and 2022, respectively.

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

as compared to the subcontractor.

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 December 31, 2023 was approximately $0.5 million as compared

with $0.6 million for the three months ended December 31, 2022.

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

41.6% of our total service revenue for the three months ended December 31, 2023, as compared with 53.5% for the three months ended December

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

Subcontracting

fees for our service business for the three months ended December 31, 2023 increased significantly by approximately 121.3% to $0.6 million

from $0.3 million for the three months ended December 31, 2022.

Subcontracting fees accounted for approximately 47.2% and 20.9% of our

total service business revenue in the three months ended December 31, 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 and acquired HX in September 2023.

Therefore, the revenue in the quarter was only

$0.3 million compared to $0.8 million for the three months ended December 31, 2022.

manufacturing business gross profit for the three months ended December 31, 2023 was approximately $17,113, as compared with gross profit

of approximately $33,082 for the three months ended December 31, 2022.

Gross profit accounted for approximately 63.3% of our total garment

manufacturing business revenue for the three months ended December 31, 2023.

profit in our logistics services business for the three months ended December 31, 2023 was approximately $132,917 and gross margin was

Gross profit in our logistics services business for the three months ended December 31, 2022 was approximately $311,300 and gross

margin was 25.6%.

The decrease of gross profit ratio was mainly because the subsidiary PF used more subcontractors to proceed the orders

which increase the cost of revenue.

profit in our property management and subleasing business for the three months ended December 31, 2023 was approximately $16,186, or

6.4% of revenue of the segment.

It was approximately $259,611, or 32.6% margin for the three months ended December 31, 2022.

Three months ended

(decrease) in

2023 compared

dollars, except for percentages)

Operating expenses:

Selling expenses

General and administrative expenses

(Loss) Income from operations

General and administrative expenses

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

It was $81,817 for property management and

subleasing business and $13,504 for garments manufacturing business for the three months ended December 31, 2023 It was approximately

$24,511 for property management and subleasing business for the three months ended December 31, 2022.

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 December 31, 2023 and 2022

was approximately $34,008 and $25,228, respectively.

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

three months ended December 31, 2023 and 2022 was approximately $174,618 and $220,052, respectively.

The general and administrative expenses

in our property management and subleasing business was approximately $132,336 and $103,999 for the three months ended December 31, 2023

and 2022, respectively.

Our general and administrative expenses in our corporate office for the three months ended December 31, 2023

and 2022 was approximately $175,636 and $326,639, 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 December 31, 2023 decreased by approximately 23.6% to $516,598 from $675,918

for the three months ended December 31, 2022.

Income from operations

from operations for the three months ended December 31, 2023 was approximately $449,592, while loss from operations for the three months

ended December 31, 2022 was $92,967.

Loss from operations of approximately $30,398 and income from operations of $7,745 was attributed

from our garment manufacturing segment for the three months ended December 31, 2023 and 2022, respectively.

Loss from operations of approximately

$41,699 and income from operations of approximately $91,147 was attributed from our logistics services segment for the three months ended

December 31, 2023 and 2022, respectively.

Loss from operations of approximately $168,012 and income from operations of $131,213 for the

three months ended December 31, 2023 and 2022 was attributed from our property management and subleasing business, respectively.

expenses from operations in corporate office of approximately $209,483 and $324,046 for the three months ended December 31, 2023 and

2022, respectively.

The decrease of expenses from our corporate office was mainly due to decrease in legal and professional fees to comply

with the SEC accounting, disclosure and reporting requirements.

tax expense for the three months ended December 31, 2023 and 2022 was approximately $3,255 and $8,184, 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 three months ended December 31, 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 December 31, 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 three months

ended December 31, 2023 and 2022.

Income (Loss)

incurred net loss of approximately $2.6 million for the three months ended December 31, 2023 and a net loss of approximately $0.08 million

for the three months ended December 31, 2022.

Our basic and diluted loss per share were $0.66 and $0.00 for the three months ended December

31, 2023 and 2022, respectively.

of Operations for the nine months ended December 31, 2023 and 2022

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

Nine Months Ended

Changes in 2023

June 30, 2024.

The revenue from this business segment was nil for the three months ended June 30, 2023.

Three months ended June 30,

Increase (decrease) in

2024 compared to 2023

dollars, except for percentages)

$ (2,796,329 )

Cost of revenues

Operating expenses

(Loss) Income from operations

Other income, net

Fair value gain

Net finance cost

Income tax expense

Net (loss) income

$ (3,973,983 )

$ (4,071,653 )

revenue for the nine months ended December 31, 2023 decreased by approximately $2.8 million, or 42.0%, as compared with the nine months

ended December 31, 2022.

The decrease was mainly due to the decrease of $0.4 million in logistics services and $2.3 million in property

management and subleasing business.

generated from our garment manufacturing business contributed approximately $0.2 million or 4.5% of our total revenue for the nine months

ended December 31, 2023.

Revenue generated from garment manufacturing business contributed approximately $0.1 million or 2.1% of our

total revenue for the nine months ended December 31, 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 $3.4 million or 87.5% of our total revenue for the nine months

ended December 31, 2023.

Revenue generated from our logistic business contributed approximately $3.8 million or 57.5% of our total revenue

for the nine months ended December 31, 2022.

generated from our property management and subleasing business was $0.3 million or 8.1% of our total revenue for the nine months ended

December 31, 2023.

The revenue from this business segment was $2.7 million or 40.2% of our total revenue of this business for the nine

months ended December 31, 2022.

Nine months ended

(decrease) in

2023 compared

dollars, except for percentages)

Net revenue for garment manufacturing

11 unchanged sentences

Gross Profit for property management and subleasing

Net revenue for supplies corporate and others

Other and Overhead

Total cost of revenue for corporate and others

(loss) income for corporate and others

Total cost of revenue

$ (1,969,145 )

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 17.5% of our total garment manufacturing business revenue for

the nine months ended December 31, 2023, as compared with 19.9% for the nine months ended December 31, 2022.

The decrease in percentages

was mainly due to the company develop new raw material suppliers..

costs for our garment manufacturing business was approximately 58.2% of our total garment manufacturing business revenue for the nine

months ended December 31, 2023, as compared with 51.7% for the nine months ended December 31, 2022.

The increase was mainly due to rising

material costs for our garment manufacturing business were approximately 43.5% of our total garment manufacturing business revenue for

the three months ended June 30, 2024, as compared with 49.0% for the three months ended June 30, 2023.

The decrease in percentage was

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

costs for our garment manufacturing business was approximately 20.9% of our total garment manufacturing business revenue for the

three months ended June 30, 2024, as compared with 32.0% for the three months ended June 30, 2023.

We maintained a sustainable level

in wages, the decrease in portion of labor cost was mainly due to the increased in revenue.

and other expenses for our garment manufacturing business accounted for approximately 4.1% of our total garment business revenue for

the nine months ended December 31, 2023, as compared with 3.1% of total garment business revenue for the nine months ended December 31,

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 39.9% and 25.8% of total cost of revenues for our service segment for the nine months

ended December 31, 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 nine months ended December 31, 2023 was approximately $1.5 million as compared

with $1.9 million for the nine months ended December 31, 2022.

the three months ended June 30, 2024, as compared with 5.0% of total garment business revenue for the three months ended June 30, 2023.

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

We relied on a few subcontractors, which the

subcontracting fees to our largest contractor represented approximately nil% and 37.2% of total cost of revenues for our service

segment for the three months ended June 30, 2024 and 2023, respectively.

The decrease was attributed to an increase usage of our own

logistics as compared to the subcontractor.

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 three months ended June 30, 2024 were approximately $0.2 million as compared with

$0.5 million for the three months ended June 30, 2023.

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

44.4% of our total service revenue for the nine months ended December 31, 2023, as compared with 50.1% for the nine months ended December

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

51.2% of our total service revenue for the three months ended June 30, 2024, as compared with 48.3% for the three months ended June 30,

The increase was primarily attributable to a decrease of usage of subcontractors during the quarter.

Subcontracting

fees for our service business for the nine months ended December 31, 2023 increased approximately 32.6% to $1.2 million from $0.9 million

for the nine months ended December 31, 2022.

Subcontracting fees accounted for 35.0% and 23.3% of our total service business revenue

in the nine months ended December 31, 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.

fees for our service business for the three months ended June 30, 2024 decreased approximately 100.0% to $nil from $0.3 million

for the three months ended June 30, 2023.

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

the three months ended June 30, 2024 and 2023, respectively.

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

during the quarter.

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

manufacturing business gross profit for the nine months ended December 31, 2023 was approximately $40,433, as compared with approximately

$35,931 for the nine months ended December 31, 2022.

The cost of revenue for property management and subleasing business for the three months ended June 30, 2024 was $0.3 million,

approximately (122.3)% of our total property management and subleasing business revenue, as compared with nil for the three months ended

June 30, 2023.

manufacturing business gross profit for the three months ended June 30, 2024 was $27,267, as compared with $7,553 for the three months ended June 30, 2023.

Gross profit accounted for 31.5% of our total garment manufacturing business revenue

for the nine months ended December 31, 2023, as compared to 25.3% for the nine months ended December 31, 2022.

profit in our logistics services business for the nine months ended December 31, 2023 was approximately $695,940 and gross margin was

Gross profit in our logistics services business for the nine months ended December 31, 2022 was approximately $1,018,453 and gross

margin was 26.6%.

The decrease of gross profit ratio was mainly because the subsidiary PF used more subcontractors to proceed the orders

which increase the cost of revenue.

profit in our property management and subleasing business for the nine months ended December 31, 2023 was $69,639, or 22.4% gross margin.

It was approximately $572,329, or 21.4% for the nine months ended December 31, 2022.

The decrease was due to disposal of DY.

Nine months ended

for the three months ended June 30, 2024, as compared to 14.0% for the three months ended June 30, 2023.

The increase of gross profit ratio was mainly due to increased sales.

profit in our logistics services business for the three months ended June 30, 2024 was approximately $237,211 and gross margin was 48.8%.

Gross profit in our logistics services business for the three months ended June 30, 2023 was approximately $229,356 and gross margin

The increase of gross profit ratio was mainly because the Company re-allocated the orders received and reduced fuel cost.

loss in our property management and subleasing business for the three months ended June 30, 2024 was $61,883.

Gross profit was nil for

the three months ended June 30, 2023.

Gross loss accounted for 22.3% of our total property management and subleasing

business revenue for the three months ended June 30, 2024, as compared to nil% for the three months ended June 30, 2023.

of gross profit ratio was mainly because the property management and subleasing business still in preliminary stage.

months ended June 30,

(decrease) in

2023 compared

compared to 2023

dollars, except for percentages)

1 unchanged sentence

Selling expenses

General and administrative expenses

$ (1,817,596 )

$ (1,606,020 )

(Loss) Income from operations

$ (1,015,473 )

and administrative expenses

Income from operations

General and administrative expenses

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

It consisted of $13,857 for garments manufacturing

segment and approximately $118,676 for our property management and subleasing business for the nine months ended December 31, 2023.

was $60,155 for property management and subleasing business for the nine months ended December 31, 2022.

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 nine months ended December 31, 2023 and 2022

was approximately $98,117 and $84,821, respectively.

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

nine months ended December 31, 2023 and 2022 was approximately $562,696 and $654,883, respectively.

The general and administrative expenses

in our property management and subleasing business was approximately $132,336 and $257,351 for the nine months ended December 31, 2023

selling expenses for our garment manufacturing business for the three months ended June 30, 2024 and 2023 was approximately $82,603 and

nil, respectively.

The selling expenses for property management and subleasing business for the three months ended June 30, 2024 and

2023 was approximately $56,757 and nil, 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 June 30, 2024 and 2023 was

approximately $8,310 and $29,708, respectively.

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

months ended June 30, 2024 and 2023 was approximately $216,250 and $227,423, respectively.

The general and administrative expenses in

our property management and subleasing business was approximately $85,793 and nil for the three months ended June 30, 2024 and 2023,

respectively.

Our general and administrative expenses in our corporate office for the three months ended June 30, 2024 and 2023 was approximately

$257,898 and $240,727, respectively.

Our general and administrative expenses in our corporate office for the nine months ended December 31, 2023 and

2022 was approximately $891,914 and $548,810, 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 nine months ended December 31, 2023 increased by approximately 9.0% to $1.7 million from

$1.5 million for the nine months ended December 31, 2022.

Income from operations

from operations for the nine months ended December 31, 2023 was approximately $1.0 million, while income from operations for the nine

months ended December 31, 2022 was $23,287.

Loss from operations of approximately $71,541 and $48,999 for the nine months ended December

31, 2023 and 2022 was attributed from our garment manufacturing segment, respectively.

Income from operations of approximately $132,530

and $363,569 was attributed from our logistics services segment for the nine months ended December 31, 2023 and 2022, respectively.

from operations of approximately $181,372 and income of $254,934 for the nine months ended December 31, 2023 and 2022 was attributed

from our property management and subleasing business, 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, 2024 increased by approximately 14.1% to $568,251 from $497,858

for the three months ended June 30, 2023.

from operations

from operations for the three months ended June 30, 2024 and 2023 was approximately $505,016 and $260,949, respectively.

operations of approximately $63,645 and $22,155 for the three months ended June 30, 2024 and 2023, respectively, which was

attributed from our garment manufacturing segment.

Income from operations of approximately $20,879 and $1,934 was attributed from

our logistics services segment for the three months ended June 30, 2024 and 2023, respectively.

Loss from operations of

approximately $204,433 and nil for the three months ended June 30, 2024 and 2023, respectively, which was attributed from our

property management and subleasing business.

We incurred expenses from operations in corporate office of approximately

$895,090 and $546,217 for the nine months ended December 31, 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 nine months ended December 31, 2023 and 2022 was approximately $7,726 and $18,939, respectively.

The Company operates

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

$257,817 and $240,728 for the three months ended June 30, 2024 and 2023, respectively.

tax expense for the three months ended June 30, 2024 and 2023 was approximately $484 and $1,264, respectively.

Yingxi primarily operates in

the PRC and files tax returns in the PRC jurisdictions.

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

2 unchanged sentences

No provision for income taxes

in Hong Kong has been made as Yingxi HK had no taxable income for the nine months ended December 31, 2023 and 2022.

and YX were incorporated in the PRC and are 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 June 30, 2024 and 2023.

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 has been made as QYTG and YX had no taxable income for the nine months ended December 31, 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.

in the PRC has been made as QYTG and YX had no taxable income for the three months ended June 30, 2024 and 2023.

majority of our subsidiaries are 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 2024.

The preferential tax rates will be expired at end of year 2025.

Company’s parent entity, Addentax Group Corp.

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 nine months ended

December 31, 2023 and 2022.

Income (Loss)

incurred net loss of approximately $4.0 million for the nine months ended December 31, 2023 and a net income of approximately $0.1 million

for the nine months ended December 31, 2022.

Our basic and diluted earnings per share were ($1.0) and $0.00 for the nine months ended

December 31, 2023 and 2022, respectively.

had no United States taxable income for the three months

ended June 30, 2024 and 2023.

incurred net loss of approximately $1.2 million and $2.7 million for the three months ended June 30, 2024 and 2023, respectively.

basic and diluted earnings per share were ($0.25) and ($0.83) for the three months ended June 30, 2024 and 2023, respectively.

of cash flows

cash flows information for the nine months ended December 31, 2023 and 2022 is as follow:

Nine months ended

cash flows information for the three months ended June 30, 2024 and 2023 is as follow:

Three months ended June 30,

Net cash used in operating activities

$ (1,110,878 )

$ (1,528,118 )

Net cash provided by (used in) investing activities

$ (17,500,000 )

Net cash provided by financing activities

cash used in operating activities in the nine months ended December 31, 2023 was $1.5 million, nearly the same as that of the nine months ended

December 31, 2022.

cash provided by investing activities in the nine months ended December 31, 2023 was consist of $0.1 million purchase of property

and equipment and long-term prepayment and $0.2 million cash from acquired investee.

Net cash used in investing activities in the

nine months ended December 31, 2022 was for investment in debt securities.

cash provided by financing activities for the nine months ended December 31, 2023 included $3.9 million released from restricted cash,

proceeds from bank borrowings of $0.2 million and net repayment of $2.7 million to related parties.

Net cash used in investing activities

Net cash provided by financing activities

for the nine months ended December 31, 2022 included $20.2 million proceeds from its public offering and $1.0 million net repayment to

related parties.

cash used in operating activities in the three months ended June 30, 2024 was approximately $0.2 million as compared to $1.1 million

in the three months ended June 30, 2023, which was approximately $0.9 million less than that of the three months ended June 30,

The decrease was mainly due to (i) net loss adjusted to operating cash flow for the three months ended June 30, 2024 was $0.1

million less than that of the three months ended June 30, 2023;

(ii) the movement of operating assets and liabilities of the three

months ended June 30, 2024 resulted in cash outflow of approximately $0.1 million, which was $0.8 million less than that of

cash used in investing activities for the three months ended June 30, 2024 was approximately $0.3 million, which was mainly due to

purchase of property, plant and equipment.

Net cash provided by financing activities for the three months ended June

30, 2024 was approximately $0.3 million as compared to $1.0 million in the three months ended June 30, 2023, which was approximately $0.7

million less than the three months ended June 30, 2023.

The decrease was mainly because in the three months ended June 30, 2024, the Company

received proceeds of $0.7 million from a private placement, while the Company had release of restricted cash of $1.4 million in the three

months ended June 30, 2023.

Condition, Liquidity and Capital Resources

of December 31, 2023, we had cash on hand of approximately $0.5 million, total current assets of approximately $30.3 million and current

of June 30, 2024, we had cash on hand of approximately $0.9 million, total current assets of approximately $29.3 million and current

liabilities of approximately $4.4 million.

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

proceeds and capital contributions from our chief executive officer, Mr.

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

and private placement proceeds and capital contributions from our chief executive officer, Mr.

Hong Zhida (the “CEO”).

6 unchanged sentences

All of our sales are in RMB.

year, RMB depreciated against the U.S.

As of December 31, 2023, the market foreign exchange rate was RMB 7.10 to one U.S.

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

As of June 30, 2024, the market foreign exchange rate was RMB 7.27 to one

Our financial statements are translated into U.S.

dollars using the closing rate method.

The balance sheet items are translated into

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.

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.

currency translation gain (loss) for the nine months ended December 31, 2023 and 2022 was approximately $0.05 million and $0.2 million

respectively.

foreign currency translation gain (loss) for the three months ended June 30, 2024 and 2023 was approximately $0.01 million and $0.09

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, 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 June 30, 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.

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