ADDENTAX GROUP CORP. 10-Q

Item 2. 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 three and six months ended September 30, 2025 and 2024 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. 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 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. Unless the context otherwise requires, all references in this quarter 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) ShenzhenYingxi 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) Shenzhen Yingxi Peng Fa Logistic Co., Ltd., a PRC company (“PF”); (viii) Shenzhen Xin Kuai Jie Transportation Co., Ltd, a PRC company (“XKJ”), (ix) Dongguan Aotesi Garments Co., Ltd.,, a PRC company (“AOT”), (x) Dongguan Hongxiang Commercial Co., Ltd., a PRC company (“HX”). Effective July 2025, Shenzhen Yingxi Industrial Chain Services Co., Ltd, previously known as Shenzhen Qianhai Yingxi Industrial Chain Services Co., Ltd, changed its name to Shenzhen Yingxi Industrial Chain Services Co., Ltd due to a relocation of its registered address. The name change did not result in any material change to the subsidiary’s operations, financial position, or results. “PRC Subsidiaries” refers to, collectively, YX, HSW, YS, PF, XKJ, AOT and HX. “ WFOE ” refers to Yingxi Textile & Garments Co., Ltd or “QYTG”, a wholly foreign-owned enterprise in China, which is indirectly wholly owned by Addentax Group Corp. Effective August 2025, Yingxi Textile & Garments Co., Ltd , previously known as Qianhai Yingxi Textile & Garments Co., Ltd , changed its name to Yingxi Textile & Garments Co., Ltd due to a relocation of its registered address. The name change did not result in any material change to the subsidiary’s operations, financial position, or results. Our garment manufacturing business consists of sales made principally to wholesalers 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 delivery requirements for our customers. We conduct our garment manufacturing operations through three wholly-owned subsidiaries, namely HSW, YS and AOT , which are located in the Guangdong province, China. In May 2025, the Company disposed of AOT to the management of AOT. 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 two wholly-owned subsidiaries, namely XKJ and PF, which are located in the Guangdong province, China. Our property management and subleasing business provides subleasing of shops and property management services to garment wholesalers and retailers in the garment market. We currently have an aggregate of 56,238 square meters floor space and provide approximately 1,300 shop space to clients. We conduct our property management and subleasing operation through a wholly-owned subsidiary acquired in September 2023, HX, which is located in the Guangdong province, China. On July 1, 2025, the Company disposed of HX to its management. As of date of disposal, the net assets of HX was $6,972. The consideration was $13,829, resulting in an income of $6,857 from disposal. 3 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 of our products. 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 logistics system and to build a nationwide delivery and courier network in China. As of September 30, 2024, we provide logistics services to over 44 cities in 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 2025. Property Management and Subleasing Business The business objective of our property management and subleasing segment was to integrate resources in a shopping mall, develop e-commerce and the Internet celebrity economy and increase the value of the stores in that area. The Company conducted the business through a wholly-owned subsidiary, HX. In July 2025, the Company disposed of HX to the management of HX. The property management and subleasing business was then classified as discontinued operation. Seasonality of Business Garment Manufacturing Business We generally receive more purchase orders during our second and third quarters and fewer manufacturing 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 the 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 their acknowledgement of receipt of 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. 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. 4 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. 5 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 uses 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. 6 Recently issued 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. 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 three months ended September 30, 2025 and 2024 The following table summarizes our results of operations for the three months ended September 30, 2025 and 2024. The table and the discussion below should be read in conjunction with our consolidated financial statements and the notes thereto appearing elsewhere in this report. Three Months Ended September 30, Changes in 2025 2025 2024 compared to 2024 (In U.S. dollars, except for percentages) Revenue $ 820,692 100.0 % $ 1,112,899 100 % $ (292,207 ) (26.3 )% Cost of revenues (595,545 ) (72.6 )% (641,819 ) (57.7 )% 46,274 (7.2 )% Gross profit 225,147 27.4 % 471,080 42.3 % (245,933 ) (52.2 )% Operating expenses (674,995 ) (82.2 )% (512,592 ) (46.1 )% (162,403 ) 31.7 % Loss from operations (449,848 ) (54.8 )% (41,512 ) (3.7 )% (408,336 ) 983.7 % Other income, net 82,832 10.1 % 84,137 ) 7.6 % (1,305 ) (1.6 )% Fair value gain or loss (452,983 ) (55.2 )% (531,614 ) (47.8 )% 78,631 (14.8 )% Net finance cost (11,789 ) (1.4 )% (57,596 ) (5.2 )% 45,807 (79.5 )% Income tax expense (70 ) (0.0 )% (1,062 ) (0.1 )% 992 (93.4 )% Loss from continuing operations (831,858 ) (101.4 )% (547,647 ) (49.2 )% (284,211 ) 51.9 % Income (loss) from discontinued operations 729,021 88.8 )% (173,885 ) (15.6 )% 902,906 (519.3 )% Net loss $ (102,837 ) (12.5 )% $ (721,532 ) (64.8 )% $ 618,695 (85.7 )% Revenue Total revenue for the three months ended September 30, 2025 decreased by approximately $0.3 million, or 26.3%, as compared with the three months ended September 30, 2024. The decrease was mainly due to the decrease of $0.1 million in garment manufacturing business revenue and decrease of $0.2 million in logistics services revenue. Revenue generated from our garment manufacturing business contributed approximately $0.01 million, or 1.6%, of our total revenue for the three months ended September 30, 2025. By comparison, revenue generated from garment manufacturing business contributed approximately $0.1 million or 11.1% of our total revenue for the three months ended September 30, 2024. The low level of sales was mainly due to a decrease in order volume and fierce market competition. 7 Revenue generated from our logistics services business contributed approximately $0.8 million, or 98.4%, of our total revenue for the three months ended September 30, 2025. By comparison, revenue generated from our logistic business contributed approximately $1.0 million or 71.9% of our total revenue for the three months ended September 30, 2024. Cost of revenue Three months ended September 30, Increase (decrease) in 2025 2024 2025 compared to 2024 (In U.S. dollars, except for percentages) Net revenue for garment manufacturing $ 12,935 100.0 % $ 148,470 100 % $ (135,535 ) (91.3 )% Raw materials 6,444 49.8 % 87,273 58.8 % (80,829 ) (92.6 )% Labor - - % 36,428 24.5 % (36,428 ) (100.0 )% Other and Overhead - - % 7,094 4.8 % (7,094 ) (100.0 )% Total cost of revenue for garment manufacturing 6,444 49.8 % 130,795 88.1 % (124,351 ) (95.1 )% Gross profit for garment manufacturing 6,491 50.2 % 17,675 11.9 % (11,184 ) (63.3 )% Net revenue for logistics services 807,757 100.0 % 964,429 100.0 % (156,672 ) (16.2 )% Fuel, toll and other cost of logistics services 504,265 62.4 % 511,024 53.0 % (6,759 ) (1.3 )% Subcontracting fees 84,835 10.5 % - - % 84,835 - Total cost of revenue for logistics services 589,100 72.9 % 511,024 53.0 % 78,077 15.3 % Gross profit for logistics services 218,657 27.1 % 453,405 47.0 % (234,749 ) (51.8 )% Total cost of revenue $ 595,544 72.6 % $ 641,819 57.7 % $ (46,275 ) (7.2 )% Gross profit $ 225,147 27.4 % $ 471,080 42.3 % $ (245,933 ) (52.2 )% For our garment manufacturing business, we purchase the majority of our raw materials directly from numerous local fabric and accessories suppliers. Raw material costs for our garment manufacturing business were approximately 49.8% of our total garment manufacturing business revenue for the three months ended September 30, 2025, as compared with 58.8% for the three months ended September 30, 2024. The decrease in percentage was mainly due to a reduction in the costs of the raw materials. Labor costs for our garment manufacturing business was nil for the three months ended September 30, 2025, as compared with 24.5% for the three months ended September 30, 2024. There was no production during the three months ended September 30, 2025 as we procured products from external manufacturers for resale instead of manufacturing. Overhead and other expenses for our garment manufacturing business was nil for the three months ended September 30, 2025, as compared with 4.8% of total garment business revenue for the three months ended September 30, 2024. There was no production during the three months ended September 30, 2025. For our logistic services business, we outsourced some of the business to our contractors. We relied on a few contractors, and the contracting fees to our largest contractor represented approximately 16.0% ($0.09 million) and nil% of total cost of revenues for our service segment for the three months ended September 30, 2025 and 2024, respectively. The increase was attributed to the use of contractors. We have not experienced any disputes with our contractors and we believe we maintain good relationships with our contract logistics services providers. Fuel, toll and other costs for our logistics services business for the three months ended September 30, 2025 were approximately $0.5 million as compared with $0.5 million for the three months ended September 30, 2024. Fuel, toll and other costs for our logistics services business accounted for approximately 62.4% of our total service revenue for the three months ended September 30, 2025, as compared with 53.0% for the three months ended September 30, 2024. The increase in percentage was primarily attributable to an increased use of contractors during the quarter. 8 Gross profit Garment manufacturing business gross profit for the three months ended September 30, 2025 was $6,491, as compared with $17,679 for the three months ended September 30, 2024. Gross profit accounted for 50.2% of our total garment manufacturing business revenue for the three months ended September 30, 2025, as compared to 47.0% for the three months ended September 30, 2024. The increase of gross profit ratio was mainly due to the procurement of products from external manufacturers for resale instead of manufacturing. Gross profit in our logistics services business for the three months ended September 30, 2025 was $218,656 and gross margin was 27.1%. Gross profit in our logistics services business for the three months ended September 30, 2024 was $453,406 and gross margin was 47.0%. The decrease of gross profit ratio was mainly due to a combination of cost and market factors: significantly higher toll expenses; and a competitive “low-margin, high-volume” pricing strategy adopted to maintain market share amid intense economic competition, despite year-over-year revenue growth in the 2025 period. Three months ended September 30, Increase (decrease) in 2025 2024 2025 compared to 2024 (In U.S. dollars, except for percentages) Gross profit $ 225,147 100 % $ 471,080 100 % (245,933 ) (52.2 % Operating expenses: Selling expenses (4,643 ) (2.1 )% (13,399 ) (2.8 )% 8,756 (65.3 )% General and administrative expenses (670,352 ) (297.7 )% (499,193 ) (106.0 )% (171,159 ) 34.3 % Total $ (674,995 ) (299.8 )% $ (512,592 ) (108.8 )% (162,403 ) 31.7 % (Loss) Income from operations $ (449,848 ) (199.8 )% $ (41,512 ) (8.8 )% (408,336 ) 983.7 % Selling, General and administrative expenses Our selling expenses for our garment manufacturing business for the three months ended September 30, 2025 and 2024 were $4,643 and $13,400, 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 September 30, 2025 and 2024 were $4,569 and $2,653, respectively. Our general and administrative expenses in our logistics services segment for the three months ended September 30, 2025 and 2024 were $155,397 and $223,375, respectively. Our general and administrative expenses in our corporate office for the three months ended September 30, 2025 and 2024 were $510,384 and $274,855, 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. Total general and administrative expenses for the three months ended September 30, 2025 increased by approximately 34.3% to $670,352 from $499,193 for the three months ended September 30, 2024. 9 Loss from operations Loss from operations for the three months ended September 30, 2025 and 2024 was $449,848 and $245,066, respectively. Loss from operations in our garment manufacturing segments was $2,723 and income from operation of $1,622 for the three months ended September 30, 2025 and 2024, respectively. The increase in losses was mainly due to the decrease in revenue. Income (loss) from operations in our logistics services segment was $63,258 and $229,558 for the three months ended September 30, 2025 and 2024, respectively. The decrease in income was mainly due to decreased sales. We incurred expenses from operations in corporate office of $510,383 and $274,381 for the three months ended September 30, 2025 and 2024, respectively. Income Tax Expenses Income tax expense for the three months ended September 30, 2025 and 2024 was $70 and $1,062, respectively. YX primarily 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 Seychelles, is not subject to income taxes. Yingxi 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 September 30, 2025 and 2024. QYTG and YX were incorporated in the PRC and is subject to the PRC Enterprise Income Tax (EIT) rate of 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 September 30, 2025 and 2024. The majority of our subsidiaries are governed by the Income Tax L aws of the PRC. All YX’s operating companies are subject to progressive EIT rates from 5% to 15% in 2025. The preferential tax rates will expire at end of year 2025. 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 three months ended September 30, 2025 and 2024. Net Loss We incurred net loss of approximately $0.1 million and net loss of approximately $0.7million for the three months ended September 30, 2025 and 2024, respectively. Our basic and diluted loss per share were ($0.01) and ($0.13) for the three months ended September 30, 2025 and 2024, respectively. Results of Operations for the six months ended September 30, 2025 and 2024 The following table summarizes our results of operations for the six months ended September 30, 2025 and 2024. 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 2025 2025 2024 compared to 2024 (In U.S. dollars, except for percentages) Revenue $ 1,647,046 100.0 % $ 1,686,008 100 % $ (38,962 ) (2.3 )% Cost of revenues (1,231,485 ) (74.8 )% (950,450 ) (56.4 )% (281,035 ) 29.6 % Gross profit 415,561 25.2 % 735,558 43.6 % (319,997 ) (43.5 )% Operating expenses (1,220,284 ) (74.1 )% (1,076,097 ) (63.8 )% (144,187 ) 13.4 % Loss from operations (804,723 ) (48.9 )% (340,539 ) (20.2 )% (464,184 ) 136.3 % Other income, net 436,483 26.5 % 66,096 3.9 % 370,387 560.4 % Fair value gain or loss 465 0.0 % (397,397 ) (23.6 )% 397,862 (100.1 )% Net finance cost (594,521 ) (36.1 )% (904,924 ) (53.7 )% 310,403 (34.3 )% Income tax expense (834 ) (0.1 )% (1,527 ) (0.1 )% 693 (45.4 )% Loss from continuing operations (963,130 ) (58.5 )% (1,578,291 ) (93.6 )% 615,161 (39.0 )% Income (loss) from discontinued operations 467,855 28.4 % (364,352 ) (21.6 )% 832,207 (228.4 )% Net loss $ (495,275 ) (30.1 )% $ (1,942,643 ) (115.2 )% $ 1,447,368 (74.5 )% Revenue Total revenue for the six months ended September 30, 2025 decreased by $38,962, or 2.3%, as compared with the six months ended September 30, 2024. The decrease was mainly due to the increase of $0.16 million in logistics services revenue and a decrease of $0.20 million in garment manufacturingrevenue. Revenue generated from our garment manufacturing business contributed $32,831, or 2.0%, of our total revenue for the six months ended September 30, 2025. By comparison, revenue generated from garment manufacturing business contributed approximately $0.2 million or 10.7% of our total revenue for the six months ended September 30, 2024. The low level of sales was mainly due to a decrease in order volume and fierce market competition. 10 Revenue generated from our logistics services business contributed approximately $1.6 million, or 98.0%, of our total revenue for the six months ended September 30, 2025. By comparison, revenue generated from our logistic business contributed approximately $1.5 million or 66.2% of our total revenue for the six months ended September 30, 2024. Cost of revenue Six months ended September 30, Increase (decrease) in 2025 2024 2025 compared to 2024 (In U.S. dollars, except for percentages) Net revenue for garment manufacturing $ 32,831 100.0 % $ 235,072 100 % $ (202,241 ) (86.0 )% Raw materials 13,418 40.9 % 124,959 53.2 % (111,541 ) (89.3 )% Labor 8,162 24.8 % 54,524 23.2 % (46,362 ) (85.0 )% Other and Overhead 1,237 3.8 % 10,648 4.5 % (9,411 ) (88.4 )% Total cost of revenue for garment manufacturing 22,817 69.5 % 190,131 80.9 % (167,314 ) (88.0 )% Gross profit for garment manufacturing 10,014 30.5 % 44,941 19.1 % (34,927 ) (77.7 )% Net revenue for logistics services 1,614,215 100.0 % 1,450,936 100.0 % 163,279 11.3 % Fuel, toll and other cost of logistics services 1,075,348 66.6 % 760,319 52.4 % 315,029 41.4 % Subcontracting fees 133,320 8.3 % - - 133,320 - Total cost of revenue for logistics services 1,208,668 74.9 % 760,319 52.4 % 448,349 59.0 % Gross profit for logistics services 405,547 25.1 % 690,617 47.6 % (285,070 ) (41.3 )% Total cost of revenue $ 1,231,485 74.8 % $ 950,450 56.4 % $ 281,035 29.6 % Gross profit $ 415,561 25.2 % $ 735,558 43.6 % $ (319,997 ) (43.5 )% For our garment manufacturing business, we purchase the majority of our raw materials directly from numerous local fabric and accessories suppliers. Raw material costs for our garment manufacturing business were approximately 40.9% of our total garment manufacturing business revenue for the six months ended September 30, 2025, as compared with 53.2% for the six months ended September 30, 2024. The decrease in percentage was mainly due to a reduction in the costs of the raw materials. Labor costs for our garment manufacturing business was approximately 24.8% of our total garment manufacturing business revenue for the six months ended September 30, 2025, as compared with 23.2% for the six months ended September 30, 2024. We maintained a sustainable level in wages. The increase in portion of labor cost against revenue was mainly due to the decrease in revenue. Overhead and other expenses for our garment manufacturing business accounted for approximately 3.8% of our total garment business revenue for the six months ended September 30, 2025, as compared with 4.5% of total garment business revenue for the six months ended September 30, 2024. For our logistic services business, we outsourced some of the business to our contractors. We relied on a few contractors, and the contracting fees to our largest contractor represented approximately 7.8% ($0.09 million) and nil% of total cost of revenues for our service segment for the six months ended September 30, 2025 and 2024, respectively. The increase was attributed to the use of contractors. We have not experienced any disputes with our contractors and we believe we maintain good relationships with our contract logistics services providers. Fuel, toll and other costs for our logistics services business for the six months ended September 30, 2025 were approximately $1.1 million as compared with $0.8 million for the six months ended September 30, 2024. Fuel, toll and other costs for our logistics services business accounted for approximately 66.6% of our total service revenue for the six months ended September 30, 2025, as compared with 52.4% for the six months ended September 30, 2024. The increase was primarily attributable to an increased use of contractors during the quarter ended September 30, 2025. 11 Gross profit Garment manufacturing business gross profit for the six months ended September 30, 2025 was $10,014, as compared with $44,942 for the six months ended September 30, 2024. Gross profit accounted for 30.5% of our total garment manufacturing business revenue for the six months ended September 30, 2025, as compared to 19.1% for the six months ended September 30, 2024. The increase of gross profit ratio was mainly due to the procurement of products from external manufacturers for resale instead of manufacturing. Gross profit in our logistics services business for the six months ended September 30, 2025 was $405,547 and gross margin was 25.1%. Gross profit in our logistics services business for the six months ended September 30, 2024 was $690,617 and gross margin was 47.6%. The decrease of gross profit ratio was mainly due to a combination of cost and market factors: significantly higher toll expenses; and a competitive “low-margin, high-volume” pricing strategy adopted to maintain market share amid intense economic competition, despite year-over-year revenue growth in the 2025 period. Six months ended September 30, Increase (decrease) in 2025 2024 2025 compared to 2024 (In U.S. dollars, except for percentages) Gross profit $ 415,561 100.0 % $ 735,558 100 % (319,997 ) (43.5 )% Operating expenses: Selling expenses (11,304 ) (2.7 )% (96,002 ) (13.1 )% 84,698 (88.2 )% General and administrative expenses (1,208,980 ) (290.9 )% (980,095 ) (133.2 )% (228,885 ) 23.4 % Total $ (1,220,284 ) (293.6 )% $ (1,076,097 ) (146.3 )% (144,187 ) 13.4 % (Loss) Income from operations $ (804,723 ) (193.6 )% $ (340,539 ) (46.3 )% (464,184 ) 136.3 % Selling, General and administrative expenses Our selling expenses for our garment manufacturing business for the six months ended September 30, 2025 and 2024 were $11,304 and $96,002, 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 six months ended September 30, 2025 and 2024 were $31,019 and $10,963, respectively. Our general and administrative expenses in our logistics services segment for the six months ended September 30, 2025 and 2024 were $355,769 and $439,625, respectively. Our general and administrative expenses in our corporate office for the six months ended September 30, 2025 and 2024 were $822,192 and $532,753, 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. Total general and administrative expenses for the six months ended September 30, 2025 increased by approximately 23.4% to $1.2 million from $1.0 million for the six months ended September 30, 2024. 12 Loss from operations Loss from operations for the six months ended September 30, 2025 and 2024 was $804,723 and $750,082, respectively. Loss from operations in our garment manufacturing segments was $32,310 and $62,023 for the six months ended September 30, 2025 and 2024, respectively. The decrease in losses was mainly due to implementing operational cost-saving measures. Income (loss) from operations in our logistics services segment was $49,777 and $250,437 for the six months ended September 30, 2025 and 2024, respectively. The decrease in income was mainly due to decreased sales. We incurred expenses from operations in corporate office of $822,190and $532,198 for the six months ended September 30, 2025 and 2024, respectively. Income Tax Expenses Addentax incorporated in the US is dormant ( No income, no expenses except for listing/ administrative expenses). Addentax has no current US tax. All the taxable income are generated by the foreign subsidiaries and the income tax computation is disclosed in Note 12 Income tax expense for the six months ended September 30, 2025 and 2024 was $834 and $1,527, respectively. YX primarily 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 Seychelles, is not subject to income taxes. Yingxi 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, 2025 and 2024. QYTG and YX were incorporated in the PRC and is subject to the PRC Enterprise Income Tax (EIT) rate of 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, 2025 and 2024. The majority of our subsidiaries are governed by the Income Tax Laws of the PRC. All YX’s operating companies are subject to progressive EIT rates from 5% to 15% in 2025. The preferential tax rates will expire at end of year 2025. 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 six months ended September 30, 2025 and 2024. Net Loss We incurred net loss of approximately $0.5 million and $1.9 million for the six months ended September 30, 2025 and 2024, respectively. Our basic and diluted loss per share were ($0.06) and ($0.36) for the six months ended September 30, 2025 and 2024, respectively. 13 Summary of cash flows Summary cash flows information for the six months ended September 30, 2025 and 2024 is as follow: Six months ended September 30, 2025 2024 (In U.S. dollars) Net cash (used in) provided by operating activities $ (967,518 ) $ 528,998 Net cash used in investing activities (272,009 ) (115,651 ) Net cash provided by (used in) financing activities $ 1,364,394 $ (415,566 ) Net cash used in operating activities in the six months ended September 30, 2025 was approximately $0.9 million as compared to cash of $0.5 million provided by operating activities in the six months ended September 30, 2024, which was approximately $1.5 million less than that of the six months ended September 30, 2024. The decrease was mainly due to (i) net income adjusted to operating cash flow for the six months ended September 30, 2025 was $0.4 million more than that of the six months ended September 30, 2024; (ii) the movement of operating assets and liabilities in the six months ended September 30, 2025 resulted in cash outflow of approximately $1.2 million, which was $1.1 million more than that of the corresponding period in 2024;. Net cash used in investing activities for the six months ended September 30, 2025 was approximately $0.27 million, which was $0.15 million more than the six months ended September 30, 2024. The cash outflow was mainly due to purchase of property, plant and equipment of $0.12 million and cash decrease of $0.16 million in disposal of subsidiaries. Net cash provided by financing activities for the six months ended September 30, 2025 was approximately $1.4 million as compared to cash used in financing activities of $0.4 million in the six months ended September 30, 2024, which was approximately $1.8 million less than the six months ended September 30, 2025. The increase was mainly because in the six months ended September 30, 2025, the Company had release of restricted cash of $2.7 million, paid net cash advance of $1.0 million to related parties, and payment of $0.39 million for redemption of convertible notes. While in the six months ended September 30, 2024, the Company released restricted cash of $1.3 million, paid $0.9 million net cash advance to related parties, and received net proceeds from bank loans of $0.1 million. Financial Condition, Liquidity and Capital Resources As of September 30, 2025, we had cash on hand of approximately $0.4 million, total current assets of approximately $27.8 million and current liabilities of approximately $1.1 million. 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. Zhida Hong. 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, Mr. Hong has indicated the intent and ability to provide additional equity financing. Foreign Currency Translation Risk Our 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. In the past years, RMB continued to appreciate against the U.S. dollar. As of September 30, 2025, the market foreign exchange rate was RMB 7.12 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 six months ended September 30, 2025 and 2024 was approximately $(0.08) million and $(0.05) 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 September 30, 2025 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. 14 Item 3. Quantitative and Qualitative Disclosures About Market Risk Not applicable to smaller reporting companies.