Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange act of 1934 during the preceding 12 months (or such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). ☐ Yes ☒ No

As of ~~August 14, 2023,~~February 13, 2024, there were 4,294,979 shares outstanding of the registrant’s common stock.

	June 30, 2023			March 31, 2023			December 31, 2023 (unaudited)			March 31, 2023 (audited)

ASSETS

CURRENT ASSETS
Cash and cash equivalents	$	487,215		$	562,711		$	498,254		$	562,711
Restricted cash		5,750,000			-			3,250,000			-
Accounts receivables, net		1,963,293			1,858,889			2,182,465			1,858,889
Debt securities held-to-maturity		17,828,125			17,718,750			-			17,718,750
Inventories		265,742			285,528			304,400			285,528
Prepayments and other receivables		8,506,690			959,196			19,259,660			959,196
Advances to suppliers		1,903,164			1,281,075			2,008,023			1,281,075
Amount due from related party		510,708			375,092			2,809,116			375,092
Total current assets		37,214,937			23,041,241			30,311,918			23,041,241

NON-CURRENT ASSETS
Plant and equipment, net		586,492			649,120			607,311			649,120
Long-term prepayments		57,876			90,032			257,314			90,032
Restricted cash		-			14,750,000			-			14,750,000
Long-term receivables		2,500,000			2,500,000			2,500,000			2,500,000
Operating lease right of use asset		232,350			272,488			20,108,986			272,488
Total non-current assets		3,376,718			18,261,640			23,473,611			18,261,640
TOTAL ASSETS	$	40,591,655		$	41,302,881		$	53,785,529		$	41,302,881

LIABILITIES AND EQUITY

CURRENT LIABILITIES
Short-term loan	$	130,176		$	137,468		$	309,175		$	137,468
Accounts payable		254,288			267,501			466,184			267,501
Amount due to related parties		2,093,025			2,384,633			2,125,000			2,384,633
Advances from customers		-			2,152			195,755			2,152
Accrued expenses and other payables		462,469			606,843			1,251,839			606,843
Operating lease liability current portion		120,359			127,101			1,079,653			127,101
Total current liabilities		3,060,317			3,525,698			5,427,606			3,525,698

NON-CURRENT LIABILITIES
Convertible debts		8,510,226			11,219,519			2,376,112			11,219,519
Derivative liabilities		4,582,560			2,290,483			2,708,757			2,290,483
Operating lease liability		111,991			145,387			19,029,332			145,387
Total non-current liabilities		13,204,777			13,655,389			24,114,201			13,655,389
TOTAL LIABILITIES	$	16,265,094		$	17,181,087		$	29,541,807		$	17,181,087

EQUITY
Common stock ($0.001 par value, 250,000,000 shares authorized, 3,739,581 and 35,454,670 shares issued and outstanding at June 30 and March 31, 2023, respectively)	$	3,740		$	35,455
Common stock ($0.001 par value, 250,000,000 shares authorized, 4,494,979 and 35,454,670 shares issued and outstanding at December 31 and March 31, 2023, respectively)							$	4,495		$	35,455
Additional paid-in capital		32,406,317			29,528,564			33,606,949			29,528,564
Accumulated Deficit		(8,179,930	)		(5,451,209	)		(9,433,762	)		(5,451,209	)
Statutory reserve		28,457			28,457			37,027			28,457
Accumulated other comprehensive loss		67,977			(19,473	)		29,013			(19,473	)
Total equity		24,326,561			24,121,794	)		24,243,722			24,121,794	)
TOTAL LIABILITIES AND EQUITY	$	40,591,655		$	41,302,881		$	53,785,529		$	41,302,881

See ~~accompany~~accompanying notes to the unaudited condensed consolidated financial statements.

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS

	2023			2022			2023			2022			2023			2022
	Three months ended June 30,						Three months ended December 31,						Nine months ended December 31,
	2023			2022			2023			2022			2023			2022

REVENUES	$	1,052,506		$	2,386,384		$	1,468,496		$	2,122,242		$	3,856,316		$	6,652,645

COST OF REVENUES		(815,597	)		(1,929,700	)		(1,306,169	)		(1,514,780	)		(3,054,193	)		(5,023,338	)

GROSS PROFIT		236,909			456,684			162,327			607,462			802,123			1,629,307

OPERATING EXPENSES
Selling and marketing		-			(5,642	)		(95,321	)		(24,511	)		(132,533	)		(60,155	)
General and administrative		(497,858	)		(404,940	)		(516,598	)		(675,918	)		(1,685,063	)		(1,545,865	)
Total operating expenses		(497,858	)		(410,582	)		(611,919	)		(700,429	)		(1,817,596	)		(1,606,020	)

(LOSS) INCOME FROM OPERATIONS		(260,949	)		46,102
INCOME (LOSS) FROM OPERATIONS								(449,592	)		(92,967	)		(1,015,473	)		23,287

Fair value gain or loss		(1,288,003	)		-			(1,738,593	)		-			(172,001	)		-
Interest income		1,724			3,238			1,712			1,687			5,129			6,687
Interest expenses		(1,292,715	)		(2,458	)		(529,530	)		(1,986	)		(2,426,064	)		(6,653	)
Other income (expense), net		112,486			51,083			111,566			19,232			(357,848	)		93,288

(LOSS) INCOME BEFORE INCOME TAX EXPENSE		(2,727,457	)		97,965
INCOME (LOSS) BEFORE INCOME TAX EXPENSE								(2,604,437	)		(74,034	)		(3,966,257	)		116,609
INCOME TAX EXPENSE		(1,264	)		(1,294	)		(3,225	)		(8,184	)		(7,726	)		(18,939	)

NET (LOSS) INCOME		(2,728,721	)		96,671
Foreign currency translation gain (loss)		87,450			105,149
TOTAL COMPREHENSIVE (LOSS) INCOME	$	(2,641,271	)	$	201,820
NET (LOSS)/INCOME								(2,607,662	)		(82,218	)		(3,973,983	)		97,670
Foreign currency translation gain								(41,266	)		(43,032	)		48,486			159,660
TOTAL COMPREHENSIVE INCOME (LOSS)							$	(2,648,928	)	$	(125,250	)	$	(3,925,497	)	$	257,330

EARNINGS (LOSS) PER SHARE
EARNINGS PER SHARE
Basic and diluted		(0.83	)		0.00			(0.66	)		(0.00	)		(1.00	)		0.00
Weighted average number of shares outstanding – Basic and diluted		3,273,964			26,693,004			3,980,714			28,377,936			3,980,714			28,377,936

See ~~accompany~~accompanying notes to the unaudited condensed consolidated financial statements.

BALANCe																						Share		$	Value		$	Share		$	Value	)	$	Value	$	Value	)	$	Total
																					Common Stock						Additional paid-in			Retained earnings (accumulated deficit)					Accumulated other comprehensive			Total
	Common Stock						Additional			Retained earnings (accumulated deficit)					Accumulated other						Shares			Amount			capital			Unrestricted			Statutory reserve		loss			Equity
BALANCE AT OCTOBER 1, 2022																						31,693,004		$	31,693		$	29,532,326		$	(6,576,342	)	$	13,821	$	31,708	)	$	23,033,206
Appropriation to Statutory Reserves																						-			-			-			(14,631	)		14,631		-			-
Foreign currency translation																						-			-			-			-			-		(43,032	)		(43,032	)
Net loss for the period																						-			-			-			(82,218	)		-		-			(82,218	)
BALANCE AT DECEMBER 31, 2022																						31,693,004		$	31,693		$	29,532,326		$	(6,673,191	)	$	28,452	$	(11,324	)	$	22,907,956
	Shares			Amount			paid-in capital			Unrestricted			Statutory reserve		comprehensive loss			Total Equity
BALANCE AT MARCH 31, 2022		26,693,004		$	26,693		$	6,815,333		$	(6,756,230	)	$	13,821	$	(170,984	)	$	(71,367	)
BALANCE AT OCTOBER 1, 2023																						4,494,979		$	4,495		$	33,558,928		$	(6,817,530	)	$	28,457	$	70,279		$	26,844,629
Additional paid-in capital from conversion of convertible debts																						-			-			48,021			-			-		-			48,021
Appropriation to Statutory Reserves																						-			-			-			(8,570	)		8,570		-			-
Foreign currency translation																						-			-			-			-			-		(41,266	)		(41,266	)
Net loss for the period																						-			-			-			(2,607,662	)		-		-			(2,607,662	)
BALANCE AT DECEMBER 31, 2023																						4,494,979		$	4,495		$	33,606,949		$	(9,433,762	)	$	37,027	$	29,013		$	24,243,722

BALANCE AT APRIL 1, 2022																						26,693,004		$	26,693		$	6,815,333		$	(6,756,230	)	$	13,821	$	(170,984	)	$	(71,367	)
Issuance of new shares																						5,000,000			5,000			22,716,993			-			-		-			22,721,993
Appropriation to Statutory Reserves																						-			-			-			(14,631	)		14,631		-			-
Foreign currency translation																105,149			105,149			-			-			-			-			-		159,660			159,660
Net income for the period		-			-			-			96,671			-		-			96,671			-			-			-			97,670			-		-			97,670
BALANCE AT JUNE 30, 2022		26,693,004		$	26,693		$	6,815,333		$	(6,659,559	)	$	13,821	$	(65,835	)	$	130,453
BALANCE AT DECEMBER 31, 2022																						31,693,004		$	31,693		$	29,532,326		$	(6,673,191	)	$	28,452	$	(11,324	)	$	22,907,956

BALANCE AT MARCH 31, 2023		35,454,670		$	35,455		$	29,528,564		$	(5,451,209	)	$	28,457	$	(19,473	)	$	24,121,794
Balance, value		35,454,670		$	35,455		$	29,528,564		$	(5,451,209	)	$	28,457	$	(19,473	)	$	24,121,794
Issuance of new shares		1,940,750			1,941			(1,941	)		-			-		-			-
BALANCE AT APRIL 1, 2023																						35,454,670		$	35,455		$	29,528,564		$	(5,451,209	)	$	28,457	$	(19,473	)	$	24,121,794
Issuance of new shares before reversed split																						1,940,750			1,941			(1,941	)		-			-		-			-
Reverse stock split		(33,655,878	)		(33,656	)		33,656			-			-		-			-			(33,655,878	)		(33,656	)		33,656			-			-		-			-
New shares for round up of fragmental shares		39			0			0			-			-		-			-			39			0			0			-			-		-			-
Issuance of new shares after reversed split																						755,398			755			(755	)		-			-		-			-
Additional paid-in capital from conversion of convertible debts		-			-			2,846,038			-			-		-			2,846,038			-			-			4,047,425			-			-		-			4,047,425
Appropriation to Statutory Reserves																						-			-			-			(8,570	)		8,570		-			-
Foreign currency translation		-			-			-			-			-		87,450			87,450			-			-			-			-			-		48,486			48,486
Net income for the period		-			-			-			(2,728,721	)		-		-			(2,728,721	)
BALANCE AT JUNE 30, 2023		3,739,581		$	3,740		$	32,406,317		$	(8,179,930	)	$	28,457	$	67,977		$	24,326,561
Balance, value		3,739,581		$	3,740		$	32,406,317		$	(8,179,930	)	$	28,457	$	67,977		$	24,326,561
Net loss for the period																						-			-			-			(3,972,983	)		-		-			(3,973,983	)
BALANCE AT DECEMBER 31, 2023																						4,494,979		$	4,495		$	33,606,949		$	(9,433,762	)	$	37,027	$	29,013		$	24,243,722

See accompanying notes to the unaudited condensed consolidated financial statements.

	2023			2022			2023			2022
	Three Months Ended June 30						Nine Months Ended December 31
	2023			2022			2023			2022
CASH FLOWS FROM OPERATING ACTIVITIES:
Net (loss) income	$	(2,728,721	)	$	96,671		$	(3,973,983	)	$	97,670
Adjustments to reconcile net income (loss) to net cash used in operating activities:
Depreciation		74,783			35,883
Non-cash financial cost		1,290,818			-
Depreciation and amortization								664,646			264,876
Amotization of convertible debt								2,402,972			-
Investment income		(109,375	)		-			(218,750	)		-
Fair value gain or loss		1,288,003			-			172,001			-
Loss on debts extinguishment								697,318			-
Gain on bargain purchase								(975	)		-
Changes in operating assets and liabilities
Accounts receivable		(104,404	)		27,217			(323,576	)		74,598
Inventories		19,786			3,337			(18,872	)		11,904
Advances to suppliers		(622,089	)		91,378			(726,948	)		126,639
Other receivables		(47,494	)		(443,140	)		(95,924	)		(1,789,539	)
Accounts payables		(25,659	)		(83,529	)		198,683			(1,309,228	)
Accrued expenses and other payables		(144,374	)		549,880			(402,381	)		992,046
Advances from customers		(2,152	)		321			103,987			2,916
Net cash (used in) provided by operating activities	$	(1,110,878	)	$	278,018
Net cash used in operating activities							$	(1,521,802	)	$	(1,528,118	)

CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of property and equipment and intangible assets								(135,299	)		-
Cash from acquired investee								226,162			-
Purchase of debt securities								-			(17,500,000	)
Net cash used in investing activities							$	90,863		$	(17,500,000	)

CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from issue of ordinary shares								-			20,221,993
Proceeds from related party borrowings		1,451,157			980,724			2,648,014			2,376,221
Repayment of related party borrowings		(1,831,373	)		(364,452	)		(5,341,671	)		(3,356,829	)
Release of restricted cash		1,350,000			-			3,850,000			-
Proceeds from bank borrowings								176,127			-
Repayment of bank borrowings		-			(424	)		-			(408	)
Net cash provided by financing activities	$	969,784		$	615,848		$	1,332,470		$	19,240,977

NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS		(141,094	)		893,866
NET INCREASE IN CASH AND CASH EQUIVALENTS								(98,469	)		212,859
Effect of exchange rate changes on cash and cash equivalents		65,598			(52,162	)		34,012			(15,118	)
Cash and cash equivalents, beginning of the period		562,711			1,390,644			562,711			1,390,644
CASH AND CASH EQUIVALENTS, END OF THE PERIOD	$	487,215		$	2,232,348		$	498,254		$	1,588,385

Supplemental disclosure of cash flow information:
Cash paid during the period for interest	$	-		$	-		$	-		$	-
Cash paid during the period for income tax	$	1,264		$	1,294		$	7,726		$	18,939
Supplemental disclosure of non-cash investing and financing activities:
Right-of-use assets obtained in exchange for operating lease obligations	$	1,219		$	-		$	19,934,673		$	-

See accompanying notes to the unaudited condensed consolidated financial statements.

ATXG and its subsidiaries (the “Company”) are engaged in the business of garments manufacturing, providing logistic services, property leasing and management service in the People’s Republic of China (“PRC” or “China”).

In the opinion of management, the unaudited condensed consolidated financial statements reflect all adjustments of a normal recurring nature that are necessary for a fair presentation of the results for the interim periods presented. All significant intercompany transactions and balances are eliminated in consolidation. However, the results of operations included in such financial statements may not necessarily be indicative of annual results.

The Company uses the same accounting policies in preparing quarterly and annual financial statements. Certain information and footnote disclosures normally included in the annual consolidated financial statements prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”) have been condensed or omitted. These unaudited condensed consolidated financial statements should be read in conjunction with the Company’s audited consolidated financial statements and notes thereto included in the Company’s Annual Report on Form 10-K for the year ended March 31, 2023 filed with the Securities and Exchange Commission (“SEC”) on June 29, 2023 (“2023 Form 10-K”).

The preparation of the consolidated financial statements in conformity with US GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenues and expenses during the reporting periods. Management makes these estimates using the best information available at the time the estimates are made; however actual results could differ materially from those estimates.

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.

There is no change in the accounting policies for the three months ended ~~June 30,~~December 31, 2023.

In June 2016, the FASB issued ASU No. 2016-13, Financial Instruments – Credit Losses (Topic 326), Measurement of Credit Losses on Financial Instruments. This standard requires a financial asset (or group of financial assets) measured at amortized cost basis to be presented at the net amount expected to be collected. The allowance for credit losses is a valuation account that is deducted from the amortized cost basis of the financial asset(s) to present the net carrying value at the amount expected to be collected on the financial asset. 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.

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.

In September 2023, the Company acquired a 100% equity interest of Dongguan Hongxiang Commercial Co., Ltd (HX), an entity engaged in property management and subleasing services in Dongguan, Guangdong Province, for cash consideration of $438,470 (RMB3.2 million). The Company recognized gain on bargain purchase of $996. The acquisition has been accounted under the acquisition method of accounting in accordance with ASC 805, “Business Combinations”. The results of HX’s operations have been included in the consolidated financial statements since its acquisition date.

The following table summarizes the fair values of the assets acquired and liabilities assumed as of the date of acquisition:

Pro forma results of operation for this acquisition have not been presented because the effects of the acquisition were not material to the Company’s consolidated financial results.

The Company had the following related party balances as of ~~June 30,~~December 31, 2023 and March 31, 2023:

Amount due from related party	June 30, 2023		March 31, 2023		December 31, 2023		March 31, 2023
Zhida Hong(1)	$	58,079	$	-	$	2,111,557	$	-
Bihua Yang		452,629		375,092		697,559		375,092
Amount due from related party	$	510,708	$	375,092	$	2,809,116	$	375,092

Related party borrowings	June 30, 2023		March 31, 2023		December 31, 2023		March 31, 2023
Zhida Hong ~~(1)~~	$	-	$	901,110	$	-	$	901,110
Hongye Financial Consulting (Shenzhen) Co., Ltd.		84,901		45,841		146,388		45,841
Dewu Huang (2)		1,917,581		1,305,758		1,862,446		1,305,758
Jinlong Huang		90,543		131,924		116,166		131,924
Total Related party borrowings	$	2,093,025	$	2,384,633	$	2,125,000	$	2,384,633

The borrowing balances with related parties are unsecured, non-interest bearing and repayable on demand.

The proceeds from issuance of the convertible note and warrants were deposited in a Holder Master Restricted Account controlled by the holders of the convertible note and warrants. The restricted cash will be released, over the period from the issuance date to the maturity date of the convertible note, when control account release events occur, which includes: (i) the Company’s receipt of a notice by the Holder electing to voluntarily effect a release of cash to the Company; (ii) the shareholder approval and registration of the new authorized shares according to the Securities Purchase Agreement; and (iii) any conversion of the convertible note.

The Company purchased a note issued by a third-party investment company on August 24, 2022. The principal amount of the note is $17,500,000. The note is renewable with one-year tenor on August 23, 2023 and ~~2.5%~~2.5% p.a. coupon. As of ~~June 30,~~December 31, and March 31, 2023, the coupon receivable was $~~328,125~~437,500 and $218,750, respectively.

~~Inventories consist of the following as of June 30,~~ The note was matured on August 23, 2023 and ~~March 31, 2023:~~was reclassified to Other receivables (Note 10). The Company is discussing with the issuer and will determine whether to renew the note.

Inventories consist of the following as of December 31, 2023 and March 31, 2023:

The Company has made advances to third-party suppliers in advance of receiving inventory parts. These advances are generally made to expedite the delivery of required inventory when needed and to help to ensure priority and preferential pricing on such inventory. The amounts advanced to suppliers are fully refundable on demand.

The Company reviews a supplier’s credit history and background information before advancing a payment. If the financial condition of its suppliers were to deteriorate, resulting in an impairment of their ability to deliver goods or provide services, the Company would recognize bad debt expense in the period they are considered unlikely to be collected.

Prepayments and other receivables consist of the following as of ~~June 30,~~December 31, 2023 and March 31, 2023:

	June 30, 2023		March 31, 2023		December 31, 2023		March 31, 2023
Prepayment		16,031		10,913		36,761		10,913
Deposit		42,337		40,341		750,932		40,341
Receivable of consideration on disposal of subsidiaries		667,342		708,457		233,956		708,457
Receivable of consideration of convertible note issued (Note)		7,500,000		-
Receivable of matured debt security (Note)						17,937,500		-
Other receivables		280,980		199,485		300,511		199,485
Total Prepayment	$	8,506,690	$	959,196	$	19,259,660	$	959,196

Note: ~~In June, one of the holder of the convertible note withdrawn the consideration of $7.5~~ ~~million paid for the convertible note issued from the escrow account.~~The debt security held-to-maturity was matured and was reclassified to Other receivables. The Company ~~was negotiating~~is discussing with the ~~holder on this matter. In July,~~issuer and will determine whether to renew the ~~Company entered into a Waiver and Ratification Agreement with this holder of the Convertible Note. According to the agreement, the holder redeemed the full amount of $7.5~~note. (Note 7) ~~million for the Convertible Note and irrevocably waives any past, present or future claims, rights and obligations under the Note and the Warrant.~~

Property, plant and equipment consists of the following as of ~~June 30,~~December 31, 2023 and March 31, 2023:

	June 30, 2023			March 31, 2023			December 31, 2023			March 31, 2023
Production plant	$	64,720		$	68,345		$	107,573		$	68,345
Motor vehicles		1,042,298			1,100,683			1,065,287			1,100,683
Office equipment		24,645			26,025			53,143			26,025
Total gross		1,131,663			1,195,053			1,226,003			1,195,053
Less: accumulated depreciation		(545,171	)		(545,933	)		(618,692	)		(545,933	)
Plant and equipment, net	$	586,492		$	649,120		$	607,311		$	649,120

Depreciation expense for the three and nine months ended ~~June 30,~~December 31, 2023 and 2022 was $~~33,982~~29,004 and $~~35,883~~33,817, $86,005 and $102,649, respectively.

The Company entered into a long-term loan agreement with an independent third party in September 2022. The principal to the borrower is $2.5 million. The loan is interest free and will ~~be expired~~expire in August 2025.

In August 2019, HSW entered into a facility agreement with Agricultural Bank of China and obtained a line of credit, which allows the Company to borrow up to approximately $153,172 (RMB~~1,000,000~~1,000,000)) for daily operations. The loans are guaranteed at no cost by the legal representative of HSW. As of ~~June 30,~~December 31, 2023, the Company has borrowed $~~130,176~~133,047 (RMB944,255) (March 31, 2023: $137,468) under this line of credit with various annual interest rates from ~~4.34%~~4.34% to ~~4.9%~~4.9%. The outstanding loan balance was due on ~~September 30,~~December 31, 2021. The Company was not able to renew the loan facility with the bank. The Company is negotiating with the bank on repayment schedule of the loan balance and interest payable.

In February 2023, XKJ entered into a facility agreement with China Construction Bank and obtained a line of revolving credit, which allows the Company to borrow up to approximately $1,268,118 (RMB9,000,000) for daily operations, with Loan Prime Rate of the day prior to the draw down day. The loans are guaranteed by the legal representative of XKJ at no cost. The first borrow was happened in October 2023, before that, the company didn’t exercise the agreement. As of December 31, 2023, the Company has borrowed $105,677 (RMB750,000) (March 31, 2023: Nil) under this line of credit with annual interest rate of 3.9%. The revolving credit facility will be expired on February 1, 2026.

In December 2023, PF entered into a facility agreement with Sichuan Xinwang Bank Co., Ltd. and obtained a line of credit, which allows the Company to borrow up to approximately $70,451 (RMB500,000) for daily operations. As of December 31, 2023, the Company has borrowed $70,451 (RMB500,000) (March 31, 2023: Nil) under this line of credit with annual interest rate of 6.72%. The loan facility will be expired on December 26, 2025.

Yingxi Industrial Chain Group Co., Ltd was incorporated in the Republic of Seychelles and, under the current laws of the British Virgin Islands, is not subject to income taxes. It’s wholly owned subsidiary of Addentax Group Corp.

Yingxi HK (Yingxi Industrial Chain Investment Co., Ltd.) was incorporated in Hong Kong which is indirectly wholly owned by Addentax Group Corp., and is subject to Hong Kong income tax at a progressive rate of ~~16.5%~~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 ~~June 30,~~December 31, 2023 and 2022.

YX, our wholly owned subsidiary, were incorporated in the PRC and is subject to the EIT tax rate of ~~25%~~25%. No provision for income taxes in the PRC has been made as YX had no taxable income for the three months ended ~~June 30,~~December 31, 2023 and 2022.

The Company is governed by the Income Tax Laws of the PRC. All Yingxi’s operating companies were subject to progressive EIT rates from 5%5% to ~~15%~~15% in 2023 and 2022. The preferential tax rate will be expired at end of year 2023 and the EIT rate will be 25% from year ~~2024.~~2024.

The Company’s parent entity, Addentax Group Corp. is a U.S entity and is subject to the United States federal income tax. No provision for income taxes in the United States has been made as Addentax Group Corp. had no United States taxable income for the three months ended ~~June 30,~~December 31, 2023 and 2022.

The reconciliation of income taxes computed at the PRC statutory tax rate applicable to the PRC, to income tax expenses are as follows:

	2023			2022			2023			2022			2023			2022
	Three months ended						Three months ended						Nine months ended
	June 30,						December 31,						December 31,
	2023			2022			2023			2022			2023			2022
PRC statutory tax rate		25	%		25	%		25	%		25	%		25	%		25	%
Computed expected benefits (expense)		(681,864	)		24,491
Computed expected benefits								(651,109	)		(18,509	)		(991,564	)		29,152
Temporary differences		6,150			(40,566	)		37,772			(54,616	)		13,003			(148,387	)
Permanent difference		82,125			(2,561			93,336			9,933			99,648			13,278
Changes in valuation allowance		594,853			19,930			523,226			71,376			886,639			124,896
Income tax expense	$	1,264		$	1,294		$	3,225		$	8,184			7,726			18,939

Deferred tax assets had not been recognized in respect of any potential tax benefit that may be derived from non-capital loss carry forward and property and equipment due to past negative evidence of previous cumulative net losses and uncertainty upon restructuring. The management will continue to assess at each reporting period to determine the realizability of deferred tax assets.

In accordance with the relevant taxation laws in the PRC, the normal VAT rate for domestic sales is ~~13%~~13%, which is levied on the invoiced value of sales and is payable by the purchaser. The subsidiaries HSW, YBY, AOT, ZHJ and YS enjoyed preferential VAT rate of ~~13%~~13%. The companies are required to remit the VAT they collect to the tax authority. A credit is available whereby VAT paid on purchases can be used to offset the VAT due on sales.

For services, the applicable VAT rate is 9%9% under the relevant tax category for logistic company, except the branch of ~~YXPF~~PF enjoyed the preferential VAT rate of 3%3% in 2023 and 2022. The Company is required to pay the full amount of VAT calculated at the applicable VAT rate of the invoiced value of sales as required. A credit is available whereby VAT paid on gasoline and toll charges can be used to offset the VAT due on service income.

Segment information is consistent with how chief operating decision maker reviews the businesses, makes investing and resource allocation decisions and assesses operating performance. The segment data presented reflects this segment structure. The Company reports financial and operating information in the following four segments:

The Company also provides general corporate services to its segments and these costs are reported as “Corporate and others”.

Selected information in the segment structure is presented in the following tables:

Revenues by segment for the three and nine months ended ~~June 30,~~December 31, 2023 and 2022 are as follows:

(Loss) Income from operations by segment for the three ended December 31, 2023 and 2022 are as follows:

~~(Loss) Income from operations by segment for the three ended June 30, 2023 and 2022 are as follows:~~

Total assets by segment as of ~~June 30,~~December 31, 2023 and March 31, 2023 are as follows:

Total assets	June 30, 2023		March 31, 2023		December 31, 2023		March 31, 2023
Garment manufacturing segment	$	2,699,607	$	2,169,973	$	2,622,846	$	2,169,973
Logistics services segment		2,272,917		2,476,841		2,999,261		2,476,841

Property management and subleasing						21,111,864		-
Total of reportable segments		4,972,524		4,646,814		26,733,971		4,646,814
Corporate and other		35,619,131		36,656,067		27,051,558		36,656,067
Consolidated total assets	$	40,591,655	$	41,302,881	$	53,785,529	$	41,302,881

The Company operates predominantly in China. In presenting information on the basis of geographical location, revenue is based on the geographical location of customers and long-lived assets are based on the geographical location of the assets.

	Three months ended June 30,				Three months ended December 31,				Nine months ended December 31,
	2023		2022		2023		2022		2023		2022
Revenues
China		1,052,506		2,386,384		1,468,496		2,122,242		3,856,316		6,652,645
Total						1,468,496		2,122,242		3,856,316		6,652,645

	June 30, 2023		March 31, 2023		December 31, 2023		March 31, 2023
Long-Lived Assets
China		3,376,718		3,511,640		23,473,610		3,511,640

On January 4, 2023, the Company entered into a series of agreements with certain accredited investors, pursuant to which the Company received a net proceed of $15,000,000 in consideration of the issuance of:

The Warrant is considered a freestanding instrument issued together with the Convertible Note and measured at its issuance date fair value. Proceeds received were first allocated to the Warrant based on its initial fair value. The initial fair value of the Warrant was $3.9 million. The Warrant were marked to the market with the changes in the fair value of warrant recorded in the consolidated statements of operations and comprehensive loss. As of ~~March~~December 31, 2023, the ~~balance~~fair value of the Warrant was $268,435 (March 31, 2023: approximately $2.0 ~~million.~~million).

The Convertible Note is classified as a liability and is subsequently stated at amortized cost with any difference between the initial carrying value and the repayment amount as interest expenses using the effective interest method over the period from the issuance date to the maturity date. The embedded conversion feature should be bifurcated and separately accounted for using fair value, as this embedded feature is considered not clearly and closely related to the debt host. The bifurcated conversion feature was recorded at fair value with the changes recorded in the consolidated statements of operations and comprehensive loss. The initial fair value of the embedded conversion feature was $1.2 ~~million. As of March 31, 2023, the fair value of the conversion option was $0.3~~million.

The Company determined that the other embedded features do not require bifurcation as they either are clearly and closely related to the Convertible Note or do not meet the definition of a derivative.

The total proceeds of the Convertible Note and the Warrants, net of issuance cost, of $15.0 million was received by the Company in January 2023, and allocated to each of the financial instruments as following:

	As of January 4, 2023		As of January 4, 2023

Derivative liabilities – Fair value of the Warrants	$	3,858,521	$	3,858,521
Derivative liabilities – Embedded conversion feature		1,247,500		1,247,500
Convertible Note		9,893,979		9,893,979
Total	$	15,000,000
			$	15,000,000

In January 2023, the Company also granted to the placement agent a warrant as partial of agent fee to purchase0.7 million shares of common stock of the Company. The warrant is matured in five years with exercise price of $1.25 subject to adjustments under different conditions. The warrant was recognized as derivative liability and the initial fair value was $0.168 million.

The movement of the Company’s convertible notes obligations were as the following for the three and nine months ended ~~March~~December 31, 2023 and 2022:

During the three months ended December 31 2023, approximately $51,530 of the convertible notes was converted into approximately 50,298 ordinary shares, with average effective conversion price of $1.0245 per share.

During the ~~period,~~nine months ended December 31 2023, approximately $~~1.5~~4.6 million of the convertible notes was converted into approximately ~~2.3~~3.11 million ordinary shares, with average effective conversion price of $~~0.6795~~1.4896 per share.

On July 13, 2023, the Company entered into a Waiver and Ratification Agreement with one of the holders of the Convertible Note. According to the agreement, the holder redeemed the full amount of $7.5 million for the Convertible Note and irrevocably waives any past, present or future claims, rights and obligations under the Convertible Note.

The Company’s derivative liabilities were as the following for the three and nine months ended ~~March~~December 31, 2023 and 2022:

The Company recognized right-of-use asset as well as lease liability according to the ASC 842, Leases (with the exception of short-term leases). Lease liabilities are measured at present value of the sum of remaining rental payments as of ~~June 30,~~December 31, 2023, with average discounted rate of ~~4.75%~~4.9%. A single lease cost is recognized over the lease term on a generally straight-line basis. All cash payments of operating lease cost are classified within operating activities in the statement of cash flows.

The Company leases its head office. The lease period is 5 years with an option to extend the lease. The Company leases its plant and dormitory for 4.5 years with an option to extend the lease. The Company leased several floors in a commercial building for its sublease business for 316 years with an option to extend the lease.

	2023		2022		2023		2022		2023		2022
	Three months ended June 30,				Three months ended December 31,				Nine months ended December 31,
	2023		2022		2023		2022		2023		2022
Operating lease cost		43,438		944,549		362,991		902,455		437,791		2,723,514
Short-term lease cost		23,557		20,444		36,830		19,540		94,881		58,955
Lease Cost	$	66,995	$	964,993	$	399,821	$	921,995	$	532,672	$	2,782,469

	2023			2022			2023			2022			2023			2022
	Three months ended June 30,						Three months ended December 31,						Nine months ended December 31,
	2023			2022			2023			2022			2023			2022
Cash paid for amounts included in the measurement of lease liabilities
Operating cash flow from operating leases	$	66,995		$	964,993		$	399,821		$	921,995			532,672			2,782,469
Right-of-use assets obtained in exchange for new operating leases liabilities		1,219			-			671,059			159,758			20,183,459			(332,682	)
Weighted average remaining lease term - Operating leases (years)		2.0			1.5			14.6			1.1			14.6			1.1
Weighted average discount rate - Operating leases		4.75	%		4.75	%		4.90	%		4.75	%		4.90	%		4.75	%

Years ending June 30	Lease cost
Years ending December 31				Lease cost
2024	$	126,076		$	1,132,384
2025		114,096			1,077,906
2026		9,205			1,012,052

2027					1,177,909
2028 and there after					26,030,167
Total lease payments		249,377			30,430,418
Less: Interest		(17,027	)		(10,321,433	)
Total	$	232,350		$	20,108,985

The Company effected the amendment and combination to the outstanding shares of our common stock into a lesser number of outstanding shares (the “Reverse Stock Split Amendment”) on a ratio of one-for-ten, with effected date on June 26, 2023. ~~After the reverse stock split,~~ ~~3,739,581~~ ~~ordinary shares are issued and outstanding as of June 30, 2023.~~

The Company’s operations are conducted in the PRC. Accordingly, the Company’s business, financial condition and results of operations may be influenced by the political, economic and legal environment in the PRC, and by the general state of the PRC economy.

The Company’s operations in the PRC are subject to special considerations and significant risks not typically associated with companies in North America and Western Europe. These include risks associated with, among others, the political, economic and legal environment and foreign currency exchange. The Company’s results may be adversely affected by changes in the political and social conditions in the PRC, and by changes in governmental policies with respect to laws and regulations, anti-inflationary measures, currency conversion, remittances abroad, and rates and methods of taxation.

The Company’s reporting currency is the U.S. dollar. The functional currency of the parent company is the U.S. dollar and the functional currency of the Company’s operating subsidiaries is the Chinese Renminbi (“RMB”). For the subsidiaries whose functional currencies are the RMB, all assets and liabilities are translated at exchange rates at the balance sheet date, which was ~~7.25~~7.10 and 6.87 as of ~~June 30,~~December 31, 2023 and March 31, 2023, respectively. Revenue and expenses are translated at the average yearly exchange rates, which was ~~7.004~~7.148 and 6.603 for the three months ended ~~June 30,~~December 31, 2023 and 2022, respectively. Equity is translated at historical exchange rates. Any translation adjustments resulting are not included in determining net income but are included in foreign exchange adjustments to other comprehensive loss, a component of equity.

The followings are the percentages of accounts receivable balance of the top customers over accounts receivable for each segment as of ~~June 30,~~December 31, 2023 and March 31, 2023.

	June 30, 2023			March 31, 2023			December 31, 2023			March 31, 2023
Customer A		88.4	%		85.3	%		89.3	%		82.5	%
Customer B		10.6	%		11.4	%		10.7	%		9.9	%

The high concentration as of ~~June 30,~~December 31, 2023 was mainly due to business development of a large distributor of garments. Management believes that should the Company lose any one of its major customers, it was able to sell similar products to other customers.

	June 30, 2023			March 31, 2023			December 31, 2023			March 31, 2023
Customer A		24.2	%		11.4	%		23.4	%		11.4	%
Customer B		17.0	%		14.1	%		16.9	%		10.2	%
Customer C		8.8	%		7.3	%		11.0	%		6.4	%
Customer D		7.1	%		2.5	%		9.1	%		14.1	%
Customer E		6.9	%		6.4	%		4.8	%		Nil

There is no account receivable for Property management and subleasing segment as for ~~June 30,~~December 31, and March 31, 2023.

~~The accounts receivable of Epidemic prevention supplies segment as of June 30, 2022 was from one customer only. There was no more sales in year ended June 30, 2023.~~

For the three months ended ~~June 30,~~December 31, 2023, ~~three~~two customers from Logistics services segment provided more than 10% of total revenue of the Company, ~~represented~~together representing ~~40.6~~31.8% of total revenue of the Company for the three months.

For the three months ended ~~June 30,~~December 31, 2022, one customer provided more than 10% of total revenue of the Company, representing 11.8% of total revenue of the Company for the three months. For the nine months ended December 31, 2023, one customer from Logistics services segment provided more than ~~10%~~10% of total revenue of the Company, representing ~~13.1%~~16.5% of total revenue of the Company for the nine months. For the nine months ended December 31, 2022, one customer provided more than 10% of total revenue of the Company, representing 10.8% of total revenue of the Company for the ~~three~~nine months.

Management believes that should the Company lose any one of its major customers, it was able to sell similar products to other customers.

The following tables summarized the purchases from five largest suppliers of each of the reportable ~~segment~~segments for the three and nine months ended ~~June 30,~~December 31, 2023 and 2022.

	Three months ended						Three months ended						Nine months ended
	June 30,						December 31,						December 31,
	2023			2022			2023			2022			2023			2022
Garment manufacturing segment		Nil	%		Nil	%		Nil	%		Nil	%		Nil	%		Nil	%
Logistics services segment		100.0	%		100.0	%		100	%		100.0	%		100	%		100.0	%
Property management and subleasing		Nil	%		100.0	%		100.0	%		100.0	%		100.0	%		100.0	%

The Company’s exposure to interest rate risk primarily relates to the interest expenses on our outstanding bank borrowings and the interest income generated by cash invested in cash deposits and liquid investments. As of ~~June 30,~~December 31, 2023, the total outstanding borrowings amounted to $~~130,176~~309,175 (RMB~~944,255~~2,194,255) with various interest rate from ~~4.3%~~3.9% to ~~4.9%~~6.72% p.a. (Note ~~10)~~13)

~~On July 13, 2023, the Company entered into a Waiver and Ratification Agreement with one of the holders of the Convertible Note. According to the agreement,~~ ~~the holder redeemed the full amount of $7.5 million for the Convertible Note and irrevocably waives any past, present or future claims, rights and obligations under the Note and the Warrant.~~

~~In July 2023, approximately $2.4~~ ~~million of convertible note including principal and related accrued interest were converted into approximately~~ ~~0.44~~ ~~million common stock. The effective average conversion price was $5.74~~ ~~per share.~~

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 nine months ended ~~June 30,~~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.

We, ~~(Addentax~~Addentax Group Corp.), are a Nevada holding company with no material operations of our own. We conduct substantially all of our operations through our operating companies established in the PRC, primarily Shenzhen Qianhai Yingxi Industrial Chain Service Co., Ltd. (“YX”), our wholly owned subsidiary and its subsidiaries. We are not a Chinese operating company. We are a holding company and do not directly own any substantive business operations in China. Therefore, our investors will not directly hold any equity interests in our operating companies. Our holding company structure involves unique risks to investors. Chinese regulatory authorities could disallow our operating structure, which would likely result in a material change in our operations and/or the value of our common stock, including that it could cause the value of such securities to significantly decline or become worthless. Our holding company, Addentax Group Corp., is listed on the Nasdaq Capital Market under the symbol “ATXG”. We classify our businesses into three segments: garment manufacturing, logistics services, property management and subleasing.

Unless the context otherwise requires, all references in this annual report to “Addentax” refer to Addentax Group Corp., a holding company, and references to “we,” “us,” “our,” the “Registrant”, the “Company,” or “our company” refer to Addentax and/or its consolidated subsidiaries. Addentax Group Corp., our Nevada holding company, is the entity in which our investors are investing.

Our subsidiaries include (i) Yingxi Industrial Chain Group Co., Ltd., a Republic of Seychelles company; (ii) Yingxi Industrial Chain Investment Co., Ltd., a Hong Kong company (“Yingxi HK”); (iii) Qianhai Yingxi Textile & Garments Co., Ltd., a PRC company; (iv) Shenzhen Qianhai Yingxi Industrial Chain Services Co., Ltd, a PRC company (“YX”), (v) Dongguan Heng Sheng Wei Garments Co., Ltd, a PRC company (“HSW”), (vi) Dongguan Yushang Clothing Co., Ltd, a PRC company (“YS”), (vii) Shantou Yi Bai Yi Garment Co., Ltd, a PRC company (“YBY”), (viii) Shenzhen Yingxi Peng Fa Logistic Co., Ltd., a PRC company (“PF”); (ix) Shenzhen Xin Kuai Jie Transportation Co., Ltd, a PRC company (“XKJ”), (x) Shenzhen Yingxi Tongda Logistic Co., Ltd, a PRC company (“TD”), (xi) ~~Dongguan Yingxi Daying Commercial Co., Ltd., a PRC company (“DY”), (xii)~~ Zhuang Hao Jia (Dongguan) Decoration Engineering Co.,Ltd, a PRC company (“ZHJ”), and ~~(xiii)~~(xii) Dongguan Aotesi Garments Co., Ltd., a PRC company (“AOT”), (xiii) Dongguan Hongxiang Commercial Co., Ltd., a PRC company (“~~AOT”~~HX”).

“PRC Subsidiaries” refer to, collectively, (i) Qianhai Yingxi Textile & Garments Co., Ltd.; (ii) Shenzhen Qianhai Yingxi Industrial Chain Services Co., Ltd (“YX”), (iii) Dongguan Heng Sheng Wei Garments Co., Ltd (“HSW”), (iv) Dongguan Yushang Clothing Co., Ltd (“YS”); (v) Shantou Yi Bai Yi Garment Co., Ltd (“YBY”); (vi) Shenzhen Yingxi Peng Fa Logistic Co., Ltd., a PRC company (“PF”); (vii) Shenzhen Xin Kuai Jie Transportation Co., Ltd, a PRC company (“XKJ”), (viii) Shenzhen Yingxi Tongda Logistic Co., Ltd, a PRC company (“TD”),,(ix) ~~Dongguan Yingxi Daying Commercial Co., Ltd., a PRC company (“DY”), (x)~~ Zhuang Hao Jia (Dongguan) Decoration Engineering Co.,Ltd, a PRC company (“ZHJ”), and ~~(xi)~~(x) Dongguan Aotesi Garments Co., Ltd., a PRC company (“AOT”), (xi) Dongguan Hongxiang Commercial Co., Ltd., a PRC company (“~~AOT”~~HX”).

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

“WFOE” refers to Qianhai Yingxi Textile & Garments Co., Ltd, a wholly foreign owned enterprise in China, which is indirectly wholly owned by Addentax Group Corp.

Our garment manufacturing business consists of sales made principally to wholesaler located in the PRC. We have our own manufacturing facilities, with sufficient production capacity and skilled workers on production lines to ensure that we meet our high quality control standards and timely meet the delivery requirements for our customers. We conduct our garment manufacturing operations through five wholly owned subsidiaries, namely Dongguan Heng Sheng Wei Garments Co., Ltd (“HSW”), Dongguan Yushang Clothing Co., Ltd (“YS”), Shantou Yi Bai Yi Garment Co., Ltd (“YBY”), Zhuang Hao Jia (Dongguan) Decoration Engineering Co.,Ltd (“ZHJ”), and Dongguan Aotesi Garments Co., Ltd., (“AOT”), which are located in the Guangdong province, China.

Our logistics business consists of delivery and courier services covering 86 cities in 11 provinces and 3 municipalities in China. Although we have our own motor vehicles and drivers, we currently outsource some of the business to our contractors. We believe outsourcing allows us to maximize our capacity and maintain flexibility while reducing capital expenditures and the costs of keeping drivers during slow seasons. We conduct our logistic operations through three wholly owned subsidiaries, namely Shenzhen Xin Kuai Jie Transportation Co., Ltd (“XKJ”), Shenzhen Yingxi Peng Fa Logistic Co., Ltd (“PF”) and Shenzhen Yingxi Tongda Logistic Co., Ltd (“TD”), which are located in the Guangdong province, China.

Our property management and subleasing business provides shops subleasing and property management services for garment wholesalers and retailers in the garment market. 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.

~~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.~~

~~The business operations, customers and suppliers of DY were retained by the Company; therefore, the disposition of the subsidiary did not qualify as discontinued operations.~~

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.

The business objective and future plan for our logistics services segment is to establish an efficient logistic system and to build a nationwide delivery and courier network in China. As of ~~June 30,~~December 31, 2023, we provide logistics services to over 7986 cities in approximately ~~seven~~11 provinces and ~~two municipalities.~~3 municipalities . We expect to develop an additional 20 logistics points in existing serving cities and improve the Company’s profit byin the year ~~end of 2023.~~2024.

The business objective of our property management and subleasing segment is to integrate resources in shopping mall, develop e-commerce bases and the Internet celebrity economy together to drive to increase the value of the stores in the area. 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 of HX.

Our 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.

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.

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.

For property management and subleasing business, we generally collect rental and management fees of the following month each month in advance.

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.

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.

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 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:

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.

The Company determines if an arrangement is a lease at inception. Operating leases are included in operating lease right-of-use (“ROU”) assets, other current liabilities, and operating lease liabilities in our consolidated balance sheets. Finance leases are included in property and equipment, other current liabilities, and other long-term liabilities in the consolidated balance sheets.

ROU assets represent the right to use an underlying asset for the lease term and lease liabilities represent the obligation to make lease payments arising from the lease. Operating lease ROU assets and liabilities are recognized at commencement date based on the present value of lease payments over the lease term. As most of the leases do not provide an implicit rate, The Company generally use the incremental borrowing rate based on the estimated rate of interest for collateralized borrowing over a similar term of the lease payments at commencement date. The operating lease ROU asset also includes any lease payments made and excludes lease incentives. Lease expense for lease payments is recognized on a straight-line basis over the lease term.

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.

In ~~June~~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 asset. 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.

Results of Operations for the three months ended ~~June 30,~~December 31, 2023 and 2022

The following tables summarize our results of operations for the three months ended ~~June 30, 2022~~December 31, 2023 and ~~2021.~~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.

	Three Months Ended June 30,										Changes in 2023					Three Months Ended December 31,										Changes in 2023
	2023					2022					compared to 2022					2023					2022					compared to 2022
	(In U.S. dollars, except for percentages)															(In U.S. dollars, except for percentages)
Revenue	$	1,052,506		100.0	%	$	2,386,384		100	%	$	(1,333,878	)	(55.9	)%	$	1,468,496		100.0	%	$	2,122,242		100	%	$	(653,746	)	(30.8	)%
Cost of revenues		(815,597	)	(77.5	)%		(1,929,700	)	(80.9	)%		1,114,103		57.7	%		(1,306,169	)	(88.9	)%		(1,514,780	)	(71.4	)%		208,611		13.8	%
Gross profit		236,909		22.5	%		456,684		19.1	%		(219,775	)	(48.1	)%		162,327		11.1	%		607,462		28.6	%		(445,135	)	(73.3	)%
Operating expenses		(497,858	)	(47.3	)%		(410,582	)	(17.2	)%		(87,276	)	(21.3	)%		(611,919	)	(41.7	)%		(700,429	)	(33.0	)%		(88,510	)	12.6	%
(Loss) Income from operations		(260,949	)	(24.8	)%		46,102		1.9	%		(307,051	)	666.0	%		(449,592	)	(30.6	)%		(92,967	)	4.4	%		(356,625	)	(383.6	)%
Other income, net		112,486		10.7	%		51,083		2.2	%		61,403		120.2	%		111,566		7.6	%		19,232		0.9	%		92,334		480.1	%
Fair value gain or loss		(1,288,003	)				-		-			(1,288,003	)
Fair value gain																	(1,738,593	)	(118.4	)%		-		-			(1,738,593	)
Net finance cost		(1,290,991	)	(122.7	)%		780		(0.1	)%		(1,291,771	)	52492.1	%		(527,818	)	(35.9	)%		(299	)	(0.0	)%		(527,519	)	(26563.1	)%
Income tax expense		(1,264	)	(0.1	)%		(1,294	)	(0.1	)%		30		2.3	%		(3,225	)	(0.2	)%		(8,184	)	(0.4	)%		4,959		60.6	%
Net (loss) income	$	(2,728,721	)	(259.3	)%	$	96,671		4.1	%	$	(2,825,392	)	2922.7	%	$	(2,607,662	)	(177.6	)%	$	(82,218	)	(3.9	)%	$	(2,525,444	)	(3071.6	)%

Total revenue for the three months ended ~~June 30,~~December 31, 2023 decreased ~~significantly~~ by approximately ~~$1.3~~$0.7 million, or ~~55.9%~~30.8%, as compared with the three months ended ~~June 30,~~December 31, 2022. The ~~significant~~ decrease was mainly ~~because of~~due to the decrease of ~~$0.4 million in logistics services and $0.9~~$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 ~~$0.05~~$0.03 million or ~~5.1%~~1.8% of our total revenue for the three months ended ~~June 30,~~December 31, 2023. Revenue generated from garment manufacturing business contributed approximately ~~$0.04~~$0.1 million or ~~1.7%~~4.7% of our total revenue for the three months ended ~~June 30,~~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 ~~second~~the last quarter of ~~for~~ the fiscal year ending 2024.

Revenue generated from our logistics services business contributed approximately ~~$1.0~~$1.2 million or ~~94.9%~~81.0% of our total revenue for the three months ended ~~June 30,~~December 31, 2023. Revenue generated from our logistic business contributed approximately ~~$1.4~~$1.2 million or ~~58.3%~~57.2% of our total revenue for the three months ended ~~June 30,~~December 31, 2022.

Revenue generated from our property management and subleasing business was ~~nil~~$0.3 million or 17.2% of our total revenue for the three months ended ~~June 30,~~December 31, 2023. The revenue from this business segment was ~~$0.9~~$0.8 million or ~~40.0%~~37.5% of our total revenue of this business for the three months ended ~~June 30,~~December 31, 2022.

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~~was approximately ~~49.0%~~15.7% of our total garment manufacturing business revenue for the three months ended ~~June 30,~~December 31, 2023, as compared with ~~69.1%~~0.8% for the three months ended ~~June 30,~~December 31, 2022. ~~The decrease in percentages was mainly due to the purchase cost of the raw materials dropped.~~

Labor costs for our garment manufacturing business was approximately ~~32.0%~~25.8% of our total garment manufacturing business revenue for the three months ended ~~June 30,~~December 31, 2023, as compared with ~~21.1%~~63.7% for the three months ended ~~June 30,~~December 31, 2022. ~~The increase was mainly due to the rising wages in the PRC.~~

Overhead and other expenses for our garment manufacturing business accounted for approximately ~~5.0%~~(4.8)% of our total garment business revenue for the three months ended ~~June 30,~~December 31, 2023, as compared with ~~1.4%~~2.7% of total garment business revenue for the three months ended ~~June 30,~~December 31, 2022.

For our logistic business, we outsource some of ~~the~~our business to our contractors. The Company relied on a few subcontractors, which the subcontracting fees to our largest contractor represented approximately ~~37.2%~~53.1% and ~~35.6%~~28.1 % of total cost of revenues for our service segment for the three months ended ~~June 30,~~December 31, 2023 and 2022, respectively. The ~~decreased~~increase was attributed to ~~an increase~~a decrease usage of our own logistics as compared to the ~~subcontractors during the COVID-19 epidemic.~~subcontractor. We have not experienced any ~~disputes~~dispute with our subcontractors and we believe we maintain good relationships with our contract logistics services provider.

Fuel, toll and other costs for our service business for the three months ended ~~June 30,~~December 31, 2023 ~~were~~was approximately $0.5 million as compared with $0.6 million for the three months ended ~~June 30,~~December 31, 2022. Fuel, toll and other costs for our service business accounted for approximately ~~48.3%~~41.6% of our total service revenue for the three months ended ~~June 30,~~December 31, 2023, as compared with ~~44.3%~~53.5% for the three months ended ~~June 30,~~December 31, 2022. The ~~increase~~decrease was primarily attributable to ~~a decrease of usage~~an increase of subcontractors ~~during~~usage after the COVID-19 epidemic.

Subcontracting fees for our service business for the three months ended ~~June 30,~~December 31, 2023 ~~decreased~~increased significantly by approximately ~~35.1%~~121.3% to ~~$0.3~~$0.6 million from ~~$0.4~~$0.3 million for the three months ended ~~June 30,~~December 31, 2022. Subcontracting fees accounted for ~~28.7%~~approximately 47.2% and ~~31.7%~~20.9% of our total service business revenue in the three months ended ~~June 30,~~December 31, 2023 and 2022, respectively. The ~~decrease~~increase was primarily attributable to a decrease of usage of our own logistics as compared to the subcontractors ~~during~~after the COVID-19 epidemic.

For property management and subleasing business, the cost of revenue was mainly the amortization of operating lease assets for the subleasing business. The Company disposed of DY in February 2023 and acquired HX in September 2023. Therefore, ~~there was no~~the revenue ~~from this segment~~ in the ~~quarter.~~quarter was only $0.3 million compared to $0.8 million for the three months ended December 31, 2022.

Garment manufacturing business gross profit for the three months ended ~~June 30,~~December 31, 2023 was approximately ~~$8,000,~~$17,113, as compared with gross profit of approximately ~~$3,000~~ $33,082 for the three months ended ~~June 30,~~December 31, 2022. Gross profit accounted for ~~14.0%~~approximately 63.3% of our total garment manufacturing business revenue for the three months ended ~~June 30, 2023, as compared to 8.3% for the three months ended June 30, 2022.~~December 31, 2023.

Gross profit in our logistics services business for the three months ended ~~June 30,~~December 31, 2023 was approximately ~~$229,000~~$132,917 and gross margin was ~~23.0%~~11.2%. Gross profit in our logistics services business for the three months ended ~~June 30,~~December 31, 2022 was approximately ~~$347,000~~$311,300 and gross margin was ~~25.0%~~25.6%. The decrease of gross profit ratio was mainly because the ~~Company did not generate as many~~subsidiary PF used more subcontractors to proceed the orders ~~as before but~~which increase the ~~operating expenses is fixed which caused a decrease in gross profit.~~cost of revenue.

Gross profit in our property management and subleasing business for the three months ended ~~June 30,~~December 31, 2023 was ~~nil.~~approximately $16,186, or 6.4% of revenue of the segment. It was approximately ~~$106,000,~~$259,611, or ~~11.1%~~32.6% margin for the three months ended ~~June 30,~~December 31, 2022.

	Three months ended June 30,										Increase (decrease) in					Three months ended December 31,										Increase (decrease) in
	2023					2022					2023 compared to 2022					2023					2022					2023 compared to 2022
	(In U.S. dollars, except for percentages)															(In U.S. dollars, except for percentages)
Gross profit	$	236,909		100	%	$	456,684		100	%		(219,775	)	(48.1	)%	$	162,327		100	%	$	607,462		100	%		(445,135	)	(73.3	)%
Operating expenses:
Selling expenses		-		-			(5,642	)	(1.2	)%		5,642		100.0	%		(95,321	)	(58.7	)%		(24,511	)	(4.0	)%		(70,810	)	288.9	%
General and administrative expenses		(497,858	)	(210.1	)%		(404,940	)	(88.7	)%		92,918		22.9	%		(516,598	)	(318.2	)%		(675,918	)	(111.3	)%		159,320		(23.6	)%
Total	$	(497,858	)	(210.1	)%	$	(410,582	)	(89.9	)%		87,276		21.3	%	$	(611,919	)	(377.0	)%	$	(700,429	)	(115.3	)%		88,510		(12.6	)%
(Loss) Income from operations	$	(260,949	)	(110.1	)%	$	46,102		10.1	%		(307,051	)	(666.0	)%	$	(449,592	)	(277.0	)%	$	(92,967	)	(15.3	)%		(356,625	)	383.6	%

Our selling expenses were mainly incurred for our property management and subleasing business. It was ~~nil~~$81,817 for property management and ~~approximately $6,000~~subleasing business and $13,504 for garments manufacturing business for the three months ended ~~June 30,~~December 31, 2023 It was approximately $24,511 for property management and ~~2022, respectively.~~subleasing business for the three months ended December 31, 2022. Selling expenses consisted primarily of advertisement, local transportation, unloading charges and product inspection charges.

Our general and administrative expenses in our garment manufacturing business segment for the three months ended ~~June 30,~~December 31, 2023 and 2022 was ~~both~~ approximately ~~$32,000,~~$34,008 and $25,228, respectively. Our general and administrative expenses in our logistics services segment for the three months ended ~~June 30,~~December 31, 2023 and 2022 was ~~both~~ approximately ~~$227,000,~~$174,618 and $220,052, respectively. The general and administrative expenses in our property management and subleasing business was approximately ~~nil~~$132,336 and ~~$67,000~~$103,999 for the three months ended ~~June 30,~~December 31, 2023 and 2022, respectively. Our general and administrative expenses in our corporate office for the three months ended ~~June 30,~~December 31, 2023 and 2022 was approximately ~~$241,000~~$175,636 and ~~$79,000,~~$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.

Total general and administrative expenses for the three months ended ~~June 30,~~December 31, 2023 ~~increased~~decreased by approximately ~~22.9%~~23.6% to ~~$498,000~~$516,598 from ~~$405,000~~$675,918 for the three months ended ~~June 30,~~December 31, 2022.

Loss from operations for the three months ended ~~June 30,~~December 31, 2023 was approximately ~~$261,000,~~$449,592, while ~~income~~loss from operations for the three months ended ~~June 30,~~December 31, 2022 was ~~$46,000.~~$92,967. Loss from operations of approximately ~~$22,000~~$30,398 and ~~$29,000 for the three months ended June 30, 2023 and 2022~~income from operations of $7,745 was attributed from our garment manufacturing segment for the three months ended December 31, 2023 and 2022, respectively. ~~Income~~Loss from operations of approximately ~~$2,000~~ $41,699 and ~~$120,000~~income from operations of approximately $91,147 was attributed from our logistics services segment for the three months ended ~~June 30,~~December 31, 2023 and 2022, respectively. ~~Income~~Loss from operations of approximately ~~nil~~$168,012 and ~~$34,000~~income from operations of $131,213 for the three months ended ~~June 30,~~December 31, 2023 and 2022 was attributed from our property management and subleasing business, respectively. We incurred expenses from operations in corporate office of approximately ~~$241,000~~$209,483 and ~~$79,000~~$324,046 for the three months ended ~~June 30,~~December 31, 2023 and 2022, respectively. The ~~increase~~decrease of expenses from our corporate office was mainly due to ~~increase~~decrease in legal and professional fees to comply with the SEC accounting, disclosure and reporting requirements.

Income tax expense for the three months ended ~~June 30,~~December 31, 2023 and 2022 was ~~both~~ approximately ~~$1,000,~~$3,255 and $8,184, respectively. The Company operates in the PRC and files tax returns in the PRC jurisdictions.

Yingxi Industrial Chain Group Co., Ltd was incorporated in the Republic of Seychelles and, under the current laws of the British Virgin Islands, is not subject to income taxes.

Yingxi HK was incorporated in Hong Kong and is subject to Hong Kong income tax at a 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 ~~June 30,~~December 31, 2023 and 2022.

QYTG and YX were incorporated in the PRC and isare subject to the PRC Enterprise Income Tax (EIT) rate is 25%. No provision for income taxes in the PRC has been made as QYTG and YX had no taxable income for the three months ended ~~June 30,~~December 31, 2023 and 2022.

The 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.

The Company’s parent entity, Addentax Group Corp. is a U.S. entity and is subject to the United States federal income tax. No provision for income taxes in the United States has been made as Addentax Group Corp. had no United States taxable income for the three months ended ~~June 30,~~December 31, 2023 and 2022.

We incurred net loss of approximately ~~$2.7~~$2.6 million for the three months ended ~~June 30,~~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.

The 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.

Total 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.

Revenue 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.

Revenue 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.

Revenue 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.

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 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..

Labor 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 of salary.

Overhead and other expenses for our garment manufacturing business accounted for approximately 0.8% 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, 2022.

For 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.

Fuel, 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. 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 31, 2022. The decrease was primarily attributable to an increase of usage of subcontractors after the COVID-19 epidemic.

Subcontracting fees for our service business for the 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.

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

Garment 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. Gross profit accounted for 23.5% 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.

Gross profit in our logistics services business for the nine months ended December 31, 2023 was approximately $695,940 and gross margin was 20.6%. 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.

Gross 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.

Our 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. It 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.

Our 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 and 2022, 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.

Total 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.

Loss 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. Loss 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. 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.

Income 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.

Yingxi Industrial Chain Group Co., Ltd was incorporated in the Republic of Seychelles and, under the current laws of the British Virgin Islands, is not subject to income taxes.

QYTG 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 nine months ended December 31, 2023 and 2022.

We incurred net loss of approximately $4.0 million for the nine months ended December 31, 2023 and a net income of approximately $0.1 million for the ~~three~~nine months ended ~~June 30,~~December 31, 2022. Our basic and diluted earnings per share were ($~~0.83)~~1.0) and $0.00 for the ~~three~~nine months ended ~~June 30,~~December 31, 2023 and 2022, respectively.

Summary cash flows information for the ~~three~~nine months ended ~~June 30,~~December 31, 2023 and 2022 is as follow:

	Three months ended June 30,					Nine months ended December 31,
	2023			2022		2023			2022
	(In U.S. dollars)					(In U.S. dollars)
Net cash provided by (used in) operating activities	$	(1,110,878	)	$	278,018
Net cash used in operating activities						$	(1,521,802	)	$	(1,528,118	)
Net cash provided by (used in) investing activities						$	90,863		$	(17,500,000	)
Net cash provided by financing activities	$	969,784		$	615,848	$	1,332,470		$	19,240,977

Net cash ~~(used in) provided by~~used in operating activities in the ~~three~~nine months ended ~~June 30,~~December 31, 2023 was ~~approximately $1.4~~$1.5 million, ~~less than~~nearly the same as that of the ~~three~~nine months ended ~~June 30,~~December 31, 2022. ~~It was mainly due to (i) net loss with adjustments to reconcile net loss to~~

Net cash ~~flow of $0.2 million for~~provided by investing activities in the ~~three~~nine months ended ~~June 30,~~December 31, 2023 ~~compared to the net income after adjustments to cash flow~~was consist of $0.1 million ~~for~~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 ~~three~~nine months ended ~~June 30,~~December 31, 2022 ~~(ii) the movement of operating assets and liabilities of the three months ended June 30, 2023 resulted~~was for investment in cash outflow of approximately $0.93 million, while the movement of operating assets and liabilities of the three months ended June 30, 2022 resulted in cash inflow of approximately $0.14 million. We will continue to improve our operating cash flow by closely monitoring the timely collection of accounts and other receivables. We generally do not hold any significant inventory for more than ninety days, as we typically manufacture upon customers’ order.debt securities.

Net cash provided by financing activities for the ~~three~~nine months ended ~~June 30,~~December 31, 2023 ~~was approximately $0.4~~included $3.9 million ~~more than~~released from restricted cash, proceeds from bank borrowings of $0.2 million and net repayment of $2.7 million to related parties. Net cash provided by financing activities for the ~~three~~nine months ended ~~June 30, 2022. It was mainly due~~December 31, 2022 included $20.2 million proceeds from its public offering and $1.0 million net repayment to ~~the release of restricted cash of approximately $1.6 million more than that of the three months ended June 30, 2022.~~related parties.

As of ~~June 30,~~December 31, 2023, we had cash on hand of approximately $0.5 million, total current assets of approximately ~~$37.2~~$30.3 million and current liabilities of approximately ~~$3.1~~$5.4 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. Hong Zhida (the “CEO”).

In the event that the Company requires additional funding to finance the growth of the Company’s current and expected future operations as well as to achieve our strategic objectives, the CEO has indicated the intent and ability to provide additional equity financing.

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,~~last year, RMB ~~continued to appreciate~~depreciated against the U.S. dollar. As of ~~June 30,~~December 31, 2023, the market foreign exchange rate was RMB ~~7.25~~7.10 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 ~~three~~nine months ended ~~June 30,~~December 31, 2023 and 2022 was approximately ~~$0.09~~$0.05 million and ~~$0.11~~$0.2 million respectively.

We 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,~~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.

We maintain disclosure controls and procedures, as defined in Rule 13a-15(e) promulgated under the Securities Exchange Act of 1934 (the “Exchange Act”), that are designed to ensure that information required to be disclosed by us in the reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission’s rules and forms and that such information is accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer, as appropriate to allow timely decisions regarding required disclosure.

We carried out an evaluation, under the supervision and with the participation of our management, including our Chief Executive Officer and Chief Financial Officer, of the effectiveness of our disclosure controls and procedures as of ~~June 30,~~December 31, 2023. Based on the evaluation of these disclosure controls and procedures, and in light of the material weaknesses found in our internal controls over financial reporting, our Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures were not effective.

There was no change in the Company’s internal control over financial reporting period covered by this report that has materially affected, or is reasonably likely to materially affect, the Company’s internal control over financial reporting.

From time to time, we may become involved in legal proceedings or be subject to claims arising in the ordinary course of our business. We are not presently a party to any legal proceedings that in the opinion of our management, if determined adversely to us, would individually or taken together have a material adverse effect on our business, operating results, financial condition, or cash flows.

As a smaller reporting company (as defined in Rule 12b-2 of the Exchange Act), we are not required to provide the information called for by this Item 1A.

There is no other information required to be disclosed under this item, which was not previously disclosed.

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

Nevada		35-2521028
(State or other jurisdiction of		(I.R.S. Employer
incorporation or formation)		Identification Number)

Title of each class		Trading Symbol(s)		Name of each exchange on which registered
Common Stock		ATXG		Nasdaq Capital Markets

Large accelerated filer ☐	Accelerated filer ☐

Non-accelerated filer ☒	Smaller reporting company ☒

Emerging growth ☒

	PART I – FINANCIAL INFORMATION

Item 1.	Financial Statements (Unaudited)	F-1

Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	3

Item 3.	Quantitative and Qualitative Disclosures About Market Risk	1316

Item 4.	Controls and Procedures	1316

	PART II – OTHER INFORMATION

Item 1.	Legal Proceedings	1417

Item 1A.	Risk Factors	1417

Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	1417

Item 3.	Defaults Upon Senior Securities	1417

Item 4.	Mine Safety Disclosures	1417

Item 5.	Other Information	1417

Item 6.	Exhibits	1417

Condensed Consolidated Balance sheets as of ~~June 30,~~December 31, 2023 (unaudited) and March 31, 2023 ~~(unaudited)~~(audited)	F-2
Condensed Consolidated Statements of Income and Comprehensive Income for the ~~Three~~three and nine months ended ~~June 30,~~December 31, 2023 and 2022 (unaudited)	F-3
Condensed Consolidated Statements of Changes in Equity for the three and nine months ended ~~June 30,~~December 31, 2023 and 2022 (unaudited)	F-4
Condensed Consolidated Statements of Cash Flows for the ~~three~~nine months ended ~~June 30,~~December 31, 2023 and 2022 (unaudited)	F-5
Notes to Condensed Consolidated Financial Statements for the three and nine months ended ~~June 30,~~December 31, 2023 and 2022 (unaudited)	F-6 – ~~F-14~~F-15

	September 5, 2023
Cash in bank	$	226,162
Other receivables		705,510
Fixed assets, net		58,493
Long-term prepayments		192,391
Advance from customers		(89,616	)
Payroll payable		(19,239	)
Other tax payable		(4,633	)
Other payables		(629,602	)
Net book value at acquisition date		439,466
Gain on bargain purchase		(996	)
Purchase price	$	438,470

Name of Related Parties		Relationship with the Company
Zhida Hong		President, CEO, and a director of the Company
Hongye Financial Consulting (Shenzhen) Co., ~~Ltd.~~Ltd.		A company controlled by CEO, Mr. Zhida Hong
Bihua Yang		A legal representative of XKJ
Dewu Huang		A legal representative of YBY
Jinlong Huang		Management of HSW

	(1)	Being ~~interest free loan as financial support from~~cash advance to Zhida Hong to ~~daily operation~~pay for new brand development fee of the Company.

	(2)	Being interest free loan as financial support from Dewu Huang to pay for daily operating expenditures of YBY.

	June 30, 2023		March 31, 2023
Raw materials	$	16,147	$	19,484
Work in progress		17,756		9,373
Finished goods		231,839		256,671
Total inventories	$	265,742	$	285,528

	(a)	Garment manufacturing. Including manufacturing and distribution of garments;

	(b)	Logistics services. Providing logistic services; and

	(c)	Property management and subleasing. Providing shops subleasing and property management services for garment wholesalers and retailers in garment market.

Revenues from external customers	2023		2022		2023		2022
	Three months ended				Nine months ended
	December 31,				December 31,
Revenues from external customers	2023		2022		2023		2022
Garments manufacturing segment		27,015		100,723		172,106		142,010
Logistics services segment		1,189,004		1,213,530		3,373,670		3,826,070
Property management and subleasing		252,477		796,343		310,540		2,671,379
Total of reportable segments		1,468,496	$	2,110,596	$	3,856,316	$	6,639,459
Corporate and other		-		11,646		-		13,186
Total consolidated revenue	$	1,468,496	$	2,122,242	$	3,856,316	$	6,652,645
Revenues from external customers		-		-		-		-

	●	senior secured convertible notes in the aggregate original principal amount of approximately $16.7 million with interest rate of 5% per annum (the “Convertible Notes”); The Convertible Notes shall be matured on July 4, 2024. The conversion price is $1.25, subject to adjustment under several conditions.
	●	warrants to purchase up to approximately 16.1 million shares of common stock of the Company (the “Common Stock”) until on or prior to 11:59 p.m. (New York time) on the five-year anniversary of the closing date at an exercise price of $1.25 per share, also subject to adjustment under several conditions.

	(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.

Exhibit Number		Description
(31)		Rule 13a-14 (d)/15d-14d) Certifications
31.1*		Section 302 Certification by the Principal Executive Officer
31.2*		Section 302 Certification by the Principal Financial Officer and Principal Accounting Officer
(32)		Section 1350 Certifications
32.1*		Section 906 Certification by the Principal Executive Officer
32.2*		Section 906 Certification by the Principal Financial Officer and Principal Accounting Officer
101*		Interactive Data File
101.INS		~~Inline~~ XBRL Instance Document
101.SCH		~~Inline~~ XBRL Taxonomy Extension Schema Document
101.CAL		~~Inline~~ XBRL Taxonomy Extension Calculation Linkbase Document
101.DEF		~~Inline~~ XBRL Taxonomy Extension Definition Linkbase Document
101.LAB		~~Inline~~ XBRL Taxonomy Extension Label Linkbase Document
101.PRE		~~Inline~~ XBRL Taxonomy Extension Presentation Linkbase Document
~~104~~		~~Cover Page Interactive Data File (embedded within the Inline XBRL document)~~

Addentax Group Corp.

Date: ~~August~~February 14, ~~2023~~2024	By:	/s/ Hong Zhida
		Hong Zhida
		President, Chief Executive Officer and Director,
		(Principal Executive Officer)

Date: ~~August~~February 14, ~~2023~~2024	By:	/s/ Huang Chao
		Huang Chao
		Chief Financial Officer and Treasurer
		(Principal Financial and Accounting Officer)