UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM
| QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For
the quarterly period ended:
| TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the transition period from _____________ to _________________
Commission
File No.
(Exact name of registrant as specified in its charter)
| (State or other jurisdiction of | (I.R.S. Employer | |
| incorporation or formation) | Identification Number) |
(Address of principal executive offices) (Zip Code)
+
(Registrant’s telephone number)
Securities registered pursuant to Section 12(b) of the Act:
| Title of each class | Trading Symbol(s) | Name of each exchange on which registered | ||
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.
| Large accelerated filer ☐ | Accelerated filer ☐ |
| Smaller
reporting company | |
| Emerging
growth company |
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
APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY PROCEEDINGS
DURING THE PRECEDING FIVE YEARS:
Indicate by check mark whether the registrant has filed all documents and reports required to be filed by Sections 12, 13 or 15(d) of the Securities Exchange Act of 1934 subsequent to the distribution of securities under a plan confirmed by a court. ☐ Yes ☐ No
APPLICABLE ONLY TO CORPORATE ISSUERS:
Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date.
As of February 13, 2026, there were shares outstanding of the registrant’s shares of common stock issued and outstanding.
TABLE OF CONTENTS
| 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 | 15 |
| Item 4. | Controls and Procedures | 15 |
| PART II – OTHER INFORMATION | ||
| Item 1. | Legal Proceedings | 16 |
| Item 1A. | Risk Factors | 16 |
| Item 2. | Unregistered Sales of Equity Securities and Use of Proceeds | 16 |
| Item 3. | Defaults Upon Senior Securities | 16 |
| Item 4. | Mine Safety Disclosures | 16 |
| Item 5. | Other Information | 16 |
| Item 6. | Exhibits | 16 |
| 2 |
PART I – FINANCIAL INFORMATION
Item 1. Financial Statements.
ADDENTAX GROUP CORP.
FINANCIAL STATEMENTS
For the nine months ended December 31, 2025 and 2024
TABLE OF CONTENTS
| F-1 |
ADDENTAX GROUP CORP. AND SUBSIDIARIES
UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS
(In U.S. Dollars, except share data or otherwise stated)
(UNAUDITED)
| December 31, 2025 | March 31, 2025 | |||||||
| ASSETS | ||||||||
| CURRENT ASSETS | ||||||||
| Cash and cash equivalents | $ | $ | ||||||
| Restricted cash | ||||||||
| Accounts receivables, net | ||||||||
| Debt securities held-to-maturity | ||||||||
| Inventories | ||||||||
| Prepayments and other receivables | ||||||||
| Advances to suppliers | ||||||||
| Amount due from related party | ||||||||
| Total current assets | ||||||||
| NON-CURRENT ASSETS | ||||||||
| Plant and equipment, net | ||||||||
| Operating lease right of use asset | ||||||||
| Long-term prepayments | ||||||||
| Total non-current assets | ||||||||
| TOTAL ASSETS | $ | $ | ||||||
| LIABILITIES AND EQUITY | ||||||||
| CURRENT LIABILITIES | ||||||||
| Short-term loan | $ | $ | ||||||
| Accounts payable | ||||||||
| Amount due to related parties | ||||||||
| Advances from customers | ||||||||
| Accrued expenses and other payables | ||||||||
| Operating lease liability current portion | ||||||||
| Total current liabilities | ||||||||
| NON-CURRENT LIABILITIES | ||||||||
| Convertible debts | ||||||||
| Derivative liabilities | ||||||||
| Operating lease liability | ||||||||
| Total non-current liabilities | ||||||||
| TOTAL LIABILITIES | $ | $ | ||||||
| EQUITY | ||||||||
| Common stock ($ par value, shares authorized, and shares issued and outstanding at December 31 and March 31, 2025, respectively) | $ | $ | ||||||
| Additional paid-in capital | ||||||||
| Accumulated Deficit | ( | ) | ( | ) | ||||
| Statutory reserve | ||||||||
| Accumulated other comprehensive loss | ( | ) | ||||||
| Total equity | ||||||||
| TOTAL LIABILITIES AND EQUITY | $ | $ | ||||||
See accompanying notes to the unaudited condensed consolidated financial statements.
| F-2 |
ADDENTAX GROUP CORP. AND SUBSIDIARIES
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS
(In U.S. Dollars, except share data or otherwise stated)
Three months ended December 31, | Nine months ended December 31, | |||||||||||||||
| 2025 | 2024 | 2025 | 2024 | |||||||||||||
| REVENUES | $ | $ | $ | $ | ||||||||||||
| COST OF REVENUES | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| GROSS PROFIT | ||||||||||||||||
| OPERATING EXPENSES | ||||||||||||||||
| Selling and marketing | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| General and administrative | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| Total operating expenses | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| INCOME (LOSS) FROM OPERATIONS | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| Fair value gain or loss | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| Interest income | ||||||||||||||||
| Interest expenses | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| Other income, net | ||||||||||||||||
| (LOSS) INCOME BEFORE INCOME TAX EXPENSE | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| INCOME TAX EXPENSE | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| LOSS FROM CONTINUING OPERATIONS, NET OF INCOME TAXES | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| Income (loss) on discontinued operations | ( | ) | ( | ) | ||||||||||||
| NET (LOSS) INCOME | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| Foreign currency translation gain | ( | ) | ( | ) | ||||||||||||
| TOTAL COMPREHENSIVE INCOME (LOSS) | $ | ( | ) | $ | ( | ) | $ | ( | ) | $ | ( | ) | ||||
| LOSS PER SHARE FROM CONTINUING OPERATIONS - Basic and diluted | ) | ) | ) | ) | ||||||||||||
| EARNINGS (LOSS) PER SHARE FROM DISCONTINUED OPERATIONS - Basic and diluted | ) | ) | ||||||||||||||
| Weighted average number of shares outstanding – Basic and diluted | ||||||||||||||||
See accompanying notes to the unaudited condensed consolidated financial statements.
| F-3 |
ADDENTAX GROUP CORP. AND SUBSIDIARIES
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY
(In U.S. Dollars, except share data or otherwise stated)
| Retained earnings | Accumulated | |||||||||||||||||||||||||||
| Additional | (accumulated deficit) | other | ||||||||||||||||||||||||||
| Common Stock | paid-in | Statutory | comprehensive | Total | ||||||||||||||||||||||||
| Shares | Amount | capital | Unrestricted | reserve | loss | Equity | ||||||||||||||||||||||
| BALANCE AT OCTOBER 1, 2024 | $ | $ | $ | ( | ) | $ | $ | $ | ||||||||||||||||||||
| Appropriation for Statutory reserve | - | ( | ) | |||||||||||||||||||||||||
| Foreign currency translation | - | ) | ||||||||||||||||||||||||||
| Net income for the period | - | ( | ) | ( | ) | |||||||||||||||||||||||
| BALANCE AT DECEMBER 312024 | $ | $ | $ | ( | ) | $ | $ | $ | ||||||||||||||||||||
| BALANCE AT OCTOBER1, 2025 | $ | $ | $ | ( | ) | $ | $ | $ | ||||||||||||||||||||
| Additional paid-in capital from conversion of convertible debts | - | |||||||||||||||||||||||||||
| Foreign currency translation | - | ( | ) | ( | ) | |||||||||||||||||||||||
| Net income for the period | - | ( | ) | ( | ) | |||||||||||||||||||||||
| BALANCE AT DECEMBER 31, 2025 | $ | $ | $ | ( | ) | $ | $ | ( | ) | $ | ||||||||||||||||||
| BALANCE AT APRIL 1, 2024 | $ | $ | $ | ( | ) | $ | $ | $ | ||||||||||||||||||||
| Issuance of new shares | ||||||||||||||||||||||||||||
| Additional paid-in capital from conversion of convertible debts | - | |||||||||||||||||||||||||||
| Appropriation for Statutory reserve | - | ( | ) | |||||||||||||||||||||||||
| Foreign currency translation | - | |||||||||||||||||||||||||||
| Net income for the period | - | ( | ) | ( | ) | |||||||||||||||||||||||
| BALANCE AT DECEMBER 31, 2024 | $ | $ | $ | ( | ) | $ | $ | $ | ||||||||||||||||||||
| BALANCE AT APRIL 1, 2025 | $ | $ | $ | ( | ) | $ | $ | $ | ||||||||||||||||||||
| Issuance of new shares | ||||||||||||||||||||||||||||
| Additional paid-in capital from conversion of convertible debts | - | |||||||||||||||||||||||||||
| Apropriation for Statutory reserve | - | ( | ) | ( | ) | |||||||||||||||||||||||
| Foreign currency translation | - | ( | ) | ( | ) | |||||||||||||||||||||||
| Net income for the period | - | ( | ) | ( | ) | |||||||||||||||||||||||
| BALANCE AT DECEMBER 31, 2025 | $ | $ | $ | ( | ) | $ | $ | ( | ) | $ | ||||||||||||||||||
See accompanying notes to the unaudited condensed consolidated financial statements.
| F-4 |
ADDENTAX GROUP CORP. AND SUBSIDIARIES
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In U.S. Dollars, except share data or otherwise stated)
Nine Months Ended December 31 | ||||||||
| 2025 | 2024 | |||||||
| CASH FLOWS FROM OPERATING ACTIVITIES: | ||||||||
| Net profit (loss) | $ | ( | ) | $ | ( | ) | ||
| Adjustments to reconcile net income (loss) to net cash used in operating activities: | ||||||||
| Depreciation | ||||||||
| Non-cash financial cost | ||||||||
| Stock-Based Compensation Expense | ( | ) | ||||||
| Investment income | ( | ) | ||||||
| Fair value gain or loss | ( | ) | ||||||
| Gain on debts extinguishment | ( | ) | ||||||
| (Gain) Loss from sale of property and equipment | ( | ) | ||||||
| Loss on disposal of subsidiaries | ||||||||
| Changes in operating assets and liabilities | ||||||||
| Accounts receivable | ||||||||
| Inventories | ( | ) | ( | ) | ||||
| Advances to suppliers | ( | ) | ( | ) | ||||
| Other receivables | ( | ) | ||||||
| Accounts payables | ( | ) | ||||||
| Accrued expenses and other payables | ( | ) | ( | ) | ||||
| Advances from customers | ||||||||
| Net cash used in operating activities | $ | ( | ) | $ | ||||
| CASH FLOWS FROM INVESTING ACTIVITIES | ||||||||
| Purchase of property and equipment and intangible assets | ( | ) | ( | ) | ||||
| Proceeds from sale of property and equipment and intangible assets | ||||||||
| Cash decreased in disposal of subsidiaries | ( | ) | ( | ) | ||||
| Net cash used in investing activities | $ | ( | ) | $ | ( | ) | ||
| CASH FLOWS FROM FINANCING ACTIVITIES: | ||||||||
| Proceeds from related party borrowings | ||||||||
| Repayment of related party borrowings | ( | ) | ( | ) | ||||
| Proceeds from bank borrowings | ||||||||
| Repayment of bank borrowings | ( | ) | ( | ) | ||||
| Cash advance to related parties | ( | ) | ( | ) | ||||
| Repayment from related parties | ||||||||
| Redemption of convertible debt | ( | ) | ( | ) | ||||
| Release of restricted cash | ||||||||
| Net cash provided by financing activities | $ | $ | ( | ) | ||||
| NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS | ( | ) | ( | ) | ||||
| Effect of exchange rate changes on cash and cash equivalents | ( | ) | ||||||
| Cash and cash equivalents, beginning of the period | ||||||||
| CASH AND CASH EQUIVALENTS, END OF THE PERIOD | $ | $ | ||||||
| Supplemental disclosure of cash flow information: | ||||||||
| Cash paid during the period for interest | $ | $ | ||||||
| Cash paid during the period for income tax | $ | $ | ||||||
See accompanying notes to the unaudited condensed consolidated financial statements.
| F-5 |
ADDENTAX GROUP CORP. AND SUBSIDIARIES
NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
1. ORGANIZATION AND BUSINESS ACQUISITIONS
Addentax Group Corp. and its subsidiaries (“ATXG” or the “Company”) are engaged in the business of garment manufacturing, providing logistic services, property leasing and management services in the People’s Republic of China (“PRC” or “China”).
2. BASIS OF PRESENTATION
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, 2025 filed with the Securities and Exchange Commission (“SEC”) on June 30 2025 (“2024 Form 10-K”).
3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Use of Estimates
The preparation of the consolidated financial statements in conformity with U.S. 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.
The compensation expense for all share-based payment awards made to employees and directors, including stock options and restricted stock units (“RSUs”) is measured and recognized based on the fair value of the awards on the date of grant. The compensation expense, net of estimated forfeitures, is recognized on a straight-line basis over the requisite service period, which is generally the vesting period of the award. The fair value of RSUs is determined based on the closing market price of our common stock on the date of grant.
There is no change in the accounting policies for the nine months ended December 31, 2025.
Recently issued accounting pronouncements
Accounting for Convertible Instruments: In August 2020, FASB issued ASU 2020-06, Accounting for Convertible Instruments and Contracts in an Entity’s Own Equity (ASU 2020-06), as part of its overall simplification initiative to reduce costs and complexity of applying accounting standards while maintaining or improving the usefulness of the information provided to users of financial statements. Among other changes, the new guidance removes from GAAP separation models for convertible debt that require the convertible debt to be separated into a debt and equity component, unless the conversion feature is required to be bifurcated and accounted for as a derivative or the debt is issued at a substantial premium. As a result, after adopting the guidance, entities will no longer separately present such embedded conversion features in equity and will instead account for the convertible debt wholly as debt. The new guidance also requires use of the “if-converted” method when calculating the dilutive impact of convertible debt on earnings per share, which is consistent with the Company’s current accounting treatment under the current guidance. The guidance is effective for financial statements issued for fiscal years beginning after December 15, 2021, and interim periods within those fiscal years, with early adoption permitted, but only at the beginning of the fiscal year.
The Company reviews new accounting standards as issued. Management has not identified any other new standards that it believes will have a significant impact on the Company’s consolidated financial statements.
| F-6 |
4. DISPOSITION OF SUBSIDIARIES AND DISCONTINUED OPERATIONS
In May 2025, the Company disposed of Dongguan Aotesi Garments Co., Ltd., (“AOT”). The Company will carry on the garment manufacturing segment business through other subsidiaries. The disposition of AOT did not qualify as discontinued operations.
Financial position of the entities at disposal date and gain or loss on disposal:
Garment Manufacturing Segment
| Financial position of AOT | May 6, 2025, date of disposal | |||
| Current assets | $ | |||
| Current liabilities | ( | ) | ||
| Net assets | $ | |||
The
consideration was $
At end of June 2025, the Company disposed of Dongguan Hongxiang Commercial Co., Ltd., a PRC company (“HX”) to the management of the subsidiary. The property management and subleasing business was then classified as discontinued operation. Comparative period amounts have been restated retrospectively.
Financial position of the entities at disposal date and gain or loss on disposal:
Property Management and Subleasing Business Segment
| Financial position of HX | July 1, 2025, date of disposal | |||
| Current assets | $ | |||
| Noncurrent assets | ||||
| Current liabilities | ( | ) | ||
| Net assets | $ | |||
The
consideration was $
5. RELATED PARTY TRANSACTIONS
| Name of Related Parties | Relationship with the Company | |
The Company leases XKJ’s office rent-free from Bihua Yang.
Hongye Financial Consulting (Shenzhen) Co., Ltd. provided a guarantee to the consideration receivable for the transfer of a debt security to a third party.
The Company had the following related party balances as of December 31, 2025 and March 31, 2025:
| Amount due from related party | December 31, 2025 | March 31, 2025 | ||||||
| Zhida Hong (1) | $ | $ | ||||||
| Bihua Yang (2) | ||||||||
| $ | $ | |||||||
| Related party borrowings | December 31, 2025 | March 31, 2025 | ||||||
| Hongye Financial Consulting (Shenzhen) Co., Ltd. | ||||||||
| Jinlong Huang | ||||||||
| $ | $ | |||||||
| (1) | ||
| (2) |
The borrowing balances with related parties are unsecured, non-interest bearing and repayable on demand.
| F-7 |
6. DEBT SECURITIES HELD-TO-MATURITY
| December 31, 2025 | March 31, 2025 | |||||||
| Debt securities held-to-maturity | $ | $ | ||||||
The
Company purchased a note issued by a third-party investment company on August 24, 2022. The principal amount of the note was $
7. INVENTORIES
Inventories consist of the following as of December 31, and March 31, 2025:
| December 31, 2025 | March 31, 2025 | |||||||
| Raw materials | $ | $ | ||||||
| Finished goods | ||||||||
| Total inventories | $ | $ | ||||||
8. ADVANCES TO SUPPLIERS
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.
9. PREPAYMENTS AND OTHER RECEIVABLES
Prepayments and other receivables consist of the following as of December 31 and March 31, 2025:
| December 31, 2025 | March 31, 2025 | |||||||
| Prepayment | ||||||||
| Deposit | ||||||||
| Receivable of consideration on disposal of subsidiaries | ||||||||
| Coupon receivable of debt security held-to-maturity | ||||||||
| Loan to third party | ||||||||
| Other receivables | ||||||||
| $ | $ | |||||||
10. PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment consists of the following as of December 31 and March 31, 2025:
| December 31, 2025 | March 31, 2025 | |||||||
| Production plant | $ | $ | ||||||
| Motor vehicles | ||||||||
| Office equipment | ||||||||
| Less: accumulated depreciation | ( | ) | ( | ) | ||||
| Plant and equipment, net | $ | $ | ||||||
Depreciation
expense for the three and nine months ended December 31, 2025 and 2024 was $
| F-8 |
11. SHORT-TERM BANK LOAN
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 $
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 $
In
December 2023, Shenzhen Yingxi Peng Fa Logistic Co., Ltd (“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 $
In
March 2024, PF entered into a new facility agreement with WeBank Co., Ltd. and obtained a line of credit, which allows the Company to
borrow up to approximately $
12. TAXATION
| (a) | Enterprise Income Tax (“EIT”) |
The Company operates in the PRC and files tax returns in the PRC.
Yingxi Industrial Chain Group Co., Ltd was incorporated in the Republic of Seychelles and, under the current laws of Seychelles, is not subject to income taxes. It is a wholly owned subsidiary of Addentax Group Corp.
Yingxi
HK (Yingxi Industrial Chain Investment Co., Ltd.) was incorporated in Hong Kong, is indirectly wholly-owned by Addentax Group Corp.,
and is subject to Hong Kong income tax at a progressive rate of
Shenzhen
Yingxi Industrial Chain Services Co., Ltd (“YX”), our wholly-owned subsidiary, was incorporated in the PRC and is subject
to the EIT tax rate of
YX
is governed by the Income Tax Laws of the PRC. All YX’s operating companies were subject to progressive EIT rates from
YX’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 U.S. taxable income for the nine months ended December 31, 2025 and 2024.
| F-9 |
The reconciliation of income taxes computed at the PRC statutory tax rate applicable to the PRC, to income tax expenses are as follows:
| Three months ended | Nine months ended | |||||||||||||||
| December 31, | December 31, | |||||||||||||||
| 2025 | 2024 | 2025 | 2024 | |||||||||||||
| PRC statutory tax rate | % | % | % | % | ||||||||||||
| Computed expected benefits (expense) | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| Temporary differences | ||||||||||||||||
| Permanent difference | ( | ) | ||||||||||||||
| Changes in valuation allowance | ||||||||||||||||
| Income tax expense | $ | $ | ||||||||||||||
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.
| (b) | Value Added Tax (“VAT”) |
In
accordance with the relevant taxation laws in the PRC, the normal VAT rate for domestic sales is
For
services, the applicable VAT rate is
13. CONSOLIDATED SEGMENT DATA
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 three segments:
| (a) | Garment manufacturing. Including manufacturing and distribution of garments; | |
| (b) | Logistics services. Providing logistic services; and | |
| (c) | Property management and subleasing. Providing subleasing of shops and property management services for garment wholesalers and retailers in garment market. At end of June 2025, the Company disposed of HX to the management of the subsidiary. The property management and subleasing business was then classified as discontinued operation. |
The Company also provides general corporate services to its segments and these costs are reported as “Corporate and others”.
| F-10 |
Selected information in the segment structure is presented in the following tables:
Revenues
by
| Three months ended | Nine months ended | |||||||||||||||
| December 31, | December 31, | |||||||||||||||
| Revenues from external customers | 2025 | 2024 | 2025 | 2024 | ||||||||||||
| Garments manufacturing segment | ||||||||||||||||
| Logistics services segment | ||||||||||||||||
| Total of reportable segments and consolidated revenue | $ | $ | $ | $ | ||||||||||||
| Intersegment revenue | ||||||||||||||||
| Garments manufacturing segment | ||||||||||||||||
Income (Loss) from operations by segment for the three and nine ended December 31, 2025 and 2024 is as follows:
| Three months ended | Nine months ended | |||||||||||||||
| December 31, | December 31, | |||||||||||||||
| 2025 | 2024 | 2025 | 2024 | |||||||||||||
| Garments manufacturing segment | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| Logistics services segment | ||||||||||||||||
| Total of reportable segments | $ | $ | ( | ) | $ | $ | ||||||||||
| Corporate and other | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| Total consolidated income (loss) from operations | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
Total assets by segment as of December 30 and March 31, 2025 are as follows:
| Total assets | December 31, 2025 | March 31, 2025 | ||||||
| Garment manufacturing segment | $ | $ | ||||||
| Logistics services segment | ||||||||
| Property management and subleasing | ||||||||
| Total of reportable segments | ||||||||
| Corporate and other | ||||||||
| Consolidated total assets | $ | $ | ||||||
Geographical Information
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.
Geographic Information
Three months ended December 31, | Nine months ended December 31, | |||||||||||||||
| 2025 | 2024 | 2025 | 2024 | |||||||||||||
| Revenues | ||||||||||||||||
| China | ||||||||||||||||
| December 31, 2025 | March 31, 2025 | |||||||
| Long-Lived Assets | ||||||||
| China | ||||||||
| F-11 |
14. FINANCIAL INSTRUMENTS
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 $
| ● | senior
secured convertible notes in the aggregate original principal amount of approximately $ | |
| ● | warrants
(“Warrants”) to purchase up to approximately |
The
Warrants are considered a freestanding instrument issued together with the Convertible Notes and measured at their issuance date fair
value. Proceeds received were first allocated to the Warrants based on their initial fair value. The initial fair value of the Warrants
was $
The
Convertible Notes are 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 $
The Company determined that the other embedded features do not require bifurcation as they either are clearly and closely related to the Convertible Notes or do not meet the definition of a derivative.
The
total proceeds of the Convertible Notes and the Warrants, net of issuance cost, of $
| As
of January 4, 2023 | ||||
| Derivative liabilities – Fair value of the Warrants | $ | |||
| Derivative liabilities – Embedded conversion feature | ||||
| Convertible Notes | ||||
| $ | ||||
In
January 2023, the Company also granted to the placement agent a warrant as partial payment of an agency fee to purchase million shares
of Common Stock of the Company. The warrant matures in five years with an exercise price of $
The Company’s Convertible Notes’ obligations were as the following for the three and nine months ended December 31, 2025 and 2024:
| Three months ended | Nine months ended | |||||||||||||||
| December 31, | December 31, | |||||||||||||||
| 2025 | 2024 | 2025 | 2024 | |||||||||||||
| Carrying value – beginning balance | $ | $ | $ | $ | ||||||||||||
| Converted to ordinary shares | ( | ) | ( | ) | ||||||||||||
| Redemption | ( | ) | ( | ) | ( | ) | ||||||||||
| Amortization of debt discount | ||||||||||||||||
| Deferred debt discount and cost of issuance | ( | ) | ||||||||||||||
| Interest charge | ||||||||||||||||
| Carrying value – ending balance | $ | $ | $ | $ | ||||||||||||
During
the nine months ended December 31, 2025, approximately $
During
the three and nine months ended December 30, 2024, $ and $
| F-12 |
The Company’s derivative liabilities were as the following for the three and nine months ended December 31, 2025 and 2024:
| Three months ended | Nine months ended | |||||||||||||||
| December 31, | December 31, | |||||||||||||||
| 2025 | 2024 | 2025 | 2024 | |||||||||||||
| Derivative liabilities –Warrants | $ | $ | $ | $ | ||||||||||||
| Beginning balance | ||||||||||||||||
| Marked to the market | ||||||||||||||||
| Ending fair value | ||||||||||||||||
| Derivative liabilities – Embedded conversion feature | ||||||||||||||||
| Beginning balance | ||||||||||||||||
| Converted to shares of Common Stock | ( | ) | ( | ) | ||||||||||||
| Remeasurement on change of convertible price | ( | ) | ||||||||||||||
| Redemption | ( | ) | ( | ) | ( | ) | ||||||||||
| Marked to the market | ( | ) | ||||||||||||||
| Ending fair value | Nil | Nil | ||||||||||||||
| Total Derivative fair value at end of period | $ | $ | $ | $ | ||||||||||||
15. LEASE
As a lessee
Right-of-use asset and lease liabilities
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 December 31, 2025, with a discounted rate
of
The
Company leases its head office. The lease period is
The following table summarizes the components of lease expense:
Three months ended December 31, | Nine months ended December 31, | |||||||||||||||
| 2025 | 2024 | 2025 | 2024 | |||||||||||||
| Operating lease cost | ||||||||||||||||
| Short-term lease cost | ||||||||||||||||
| $ | $ | $ | $ | |||||||||||||
The following table summarizes supplemental information related to leases:
Three months ended December 31, | Nine months ended December 31, | |||||||||||||||
| 2025 | 2024 | 2025 | 2024 | |||||||||||||
| Cash paid for amounts included in the measurement of lease liabilities | ||||||||||||||||
| Operating cash flow from operating leases | $ | $ | ||||||||||||||
| Right-of-use assets obtained in exchange for new operating leases liabilities | ||||||||||||||||
| Weighted average remaining lease term - Operating leases (years) | - | - | ||||||||||||||
| Weighted average discount rate - Operating leases | - | % | % | |||||||||||||
There are no operating lease liabilities for the following five years and the years after due to disposal of the subsidiary, HX, on July 1, 2025.
As a lessor
The Company subleased its leased commercial building by entering into operating leases with third party garment wholesalers and retailers. These leases are negotiated for terms ranging from one to five years. All leases include the term to enable upward revision of the rental charge on an annual basis according to prevailing market conditions.
Rental income from subleasing is disclosed in Note 13 segment data.
There will be no future rental income as HX, the subsidiary conducting the subleasing and property management services business was disposed of on July 1, 2025.
| F-13 |
Common Stock
In
August 2022, the Company completed its IPO and shares of Common Stock were issued and sold to the public, with proceeds of
approximately $
In September, 2022, shares of Common Stock were issued upon cashless exercise of Underwriter Warrants.
On February 3, 2023, shares of Common Stock were issued as pre-delivery shares to the placement agents.
In
January 2023, the Company increased its authorized share capital and the authorized share capital is $
The Company effected the amendment and combination to the outstanding shares of its Common Stock into fewer number of outstanding shares (the “Reverse Stock Split Amendment”) at a ratio of one-for-ten, with effect on September 26, 2023. As a result, the number of shares was reduced by shares.
After the Reverse Stock Split Amendment, the Company issued shares of Common Stock with par value of US$ per share.
On
April 29, 2024, the Company entered into two private placement agreements (the “Agreements”) with certain individual investors
(the “Investors”) who are independent third parties, pursuant to which the Company issued to each of the Investors
shares of its Common Stock, par value $ per share, at a price of $per share, resulting in aggregate gross proceeds to the Company
of $
There are and shares of Common Stock issued and outstanding at December 31, 2025 and March 31, 2025, respectively.
Statutory reserve
17. 2024 EQUITY INCENTIVE PLAN
On August 11, 2025, shares of Common Stock were issued and granted to the directors and executive officers pursuant to the 2024 Equity Incentive Plan. These incentive shares were vested immediately. The stock-based payment was measured at fair value using closing market price of the day prior to the grant date. The fair value was charged to income statement when the common stocks were granted. During the three months ended December 31, 2025, the stock-based payment expense was $ (2024: ).
18. RISKS AND UNCERTAINTIES
| (a) | Economic and Political Risks |
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.
| (b) | Foreign Currency Translation |
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
| (c) | Concentration Risks |
The followings are the percentages of accounts receivable balance of the top customers over accounts receivable for each segment as of December 31, 2025 and March 31, 2025.
Garment manufacturing segment
| December 31, 2025 | March 31, 2025 | |||||||
| Customer A | % | % | ||||||
| F-14 |
The high concentration as of December 31, 2025 was mainly due to business development of a large distributor of garments.
Logistics services segment
| December 31, 2025 | March 31, 2025 | |||||||
| Customer A | % | % | ||||||
| Customer B | % | % | ||||||
| Customer C | % | % | ||||||
| Customer D | % | % | ||||||
| Customer E | % | % | ||||||
Property management and subleasing segment
There was no account receivable for the property management and subleasing segment as of December 31, 2025 and March 31, 2025.
Concentration on customers
For
the three months ended December 31, 2025, three customers from the logistics services segment provided more than 10% of total revenue
of the Company, representing
For
the three months ended December 31, 2024, three customers from the logistics services segment provided more than 10% of total revenue
of the Company, representing
Concentration on suppliers
The following tables summarize the purchases from five largest suppliers of each of the reportable segments for the three and nine months ended December 31, 2025 and 2024.
| Three months ended | Nine months ended | |||||||||||||||
| December 31, | December 31, | |||||||||||||||
| 2025 | 2024 | 2025 | 2024 | |||||||||||||
| Garment manufacturing segment | Nil | % | % | % | % | |||||||||||
| Logistics services segment | % | % | % | % | ||||||||||||
| (d) | Interest Rate Risk |
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 December 31, 2025, the total outstanding borrowings
amounted to $
19. SUBSEQUENT EVENTS
Subsequent to December 31, 2025, the Company evaluated subsequent events through the date the financial statements are issued.
On January 30, 2026, the Company held
its annual stockholders’ meeting. Stockholders elected five directors and authorized the board to effect a
On February 6, 2026, the Company announced a proposed strategic acquisition of the offshore wealth management and cross-border service business of Riches Group.
On
February 10, 2026, the Company entered into non-binding Memoranda of Understanding (“MOUs”) with two institutional investors
for a potential strategic equity investment of up to $
On February 11, 2026, the Company announced a proposed strategic acquisition of a Hong Kong–based AI-enabled licensed digital lending platform. The transaction, if completed, would expand the Company’s Asia-Pacific digital finance presence through AI credit technologies and digital asset-related capabilities.
On
February 12, 2026, the Company announced advanced discussions with a significant global Bitcoin investor to explore collaboration on
a sovereign-aligned, regulatory-compliant stablecoin initiative in Southeast Asia. These discussions align with its July 2025 disclosed
plan to pursue a strategic investment involving up to
Other than the foregoing, there were no material subsequent events requiring recognition or disclosure in the financial statements as of December 31, 2025.
| F-15 |
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 December 31, 2025 and 2024 should be read in conjunction with the Financial Statements and corresponding notes included in this Report on Form 10-Q. Our discussion includes forward-looking statements based upon current expectations that involve risks and uncertainties, such as our plans, objectives, expectations, and intentions. Actual results and the timing of events could differ materially from those anticipated in these forward-looking statements as a result of a number of factors, including those set forth under the Risk Factors and Special Note Regarding Forward-Looking Statements in this report. We use words such as “anticipate,” “estimate,” “plan,” “project,” “continuing,” “ongoing,” “expect,” “believe,” “intend,” “may,” “will,” “should,” “could,” “target”, “forecast” and similar expressions to identify forward-looking statements.
Overview
Our Business
We (“Addentax Group Corp.”) are a Nevada holding company with no material operations of our own. We conduct substantially all of our operations through our operating companies established in the PRC, primarily YX, our wholly-owned subsidiary and its subsidiaries. We are not a Chinese operating company. We are a holding company and do not directly own any substantive business operations in China. Therefore, our investors will not directly hold any equity interests in our operating companies. Our holding company structure involves unique risks to investors. Chinese regulatory authorities could disallow our operating structure, which would likely result in a material change in our operations and/or the value of our common stock, including that it could cause the value of such securities to significantly decline or become worthless. Our holding company, Addentax Group Corp., is listed on the Nasdaq Capital Market under the symbol of “ATXG”. We classify our businesses into three main segments: garment manufacturing, logistics services, and property management and subleasing.
Unless the context otherwise requires, all references in this quarter report to “Addentax” refer to Addentax Group Corp., a holding company, and references to “we,” “us,” “our,” the “Registrant”, the “Company,” or “our company” refer to Addentax and/or its consolidated subsidiaries. Addentax Group Corp., our Nevada holding company, is the entity in which our investors are investing.
Our subsidiaries include (i) Yingxi Industrial Chain Group Co., Ltd., a Republic of Seychelles company; (ii) Yingxi Industrial Chain Investment Co., Ltd., a Hong Kong company (“Yingxi HK”); (iii) Yingxi Textile & Garments Co., Ltd., a PRC company; (iv) ShenzhenYingxi Industrial Chain Services Co., Ltd, a PRC company (“YX”), (v) Dongguan Heng Sheng Wei Garments Co., Ltd, a PRC company (“HSW”), (vi) Dongguan Yushang Clothing Co., Ltd, a PRC company (“YS”), (vii) Shenzhen Yingxi Peng Fa Logistic Co., Ltd., a PRC company (“PF”); (viii) Shenzhen Xin Kuai Jie Transportation Co., Ltd, a PRC company (“XKJ”), (ix) Dongguan Aotesi Garments Co., Ltd., a PRC company (“AOT”), and (x) Dongguan Hongxiang Commercial Co., Ltd., a PRC company (“HX”).
Effective July 2025, Shenzhen Yingxi Industrial Chain Services Co., Ltd, previously known as Shenzhen Qianhai Yingxi Industrial Chain Services Co., Ltd, changed its name to Shenzhen Yingxi Industrial Chain Services Co., Ltd due to a relocation of its registered address. The name change did not result in any material change to the subsidiary’s operations, financial position, or results.
“PRC Subsidiaries” refers to, collectively, YX, HSW, YS, PF, XKJ, AOT and HX.
“WFOE” refers to Yingxi Textile & Garments Co., Ltd or “QYTG”, a wholly foreign-owned enterprise in China, which is indirectly wholly owned by Addentax Group Corp.
Effective August 2025, Yingxi Textile & Garments Co., Ltd, previously known as Qianhai Yingxi Textile & Garments Co., Ltd, changed its name to Yingxi Textile & Garments Co., Ltd due to a relocation of its registered address. The name change did not result in any material change to the subsidiary’s operations, financial position, or results.
Our garment manufacturing business consists of sales made principally to wholesalers located in the PRC. We have our own manufacturing facilities, with sufficient production capacity and skilled workers on production lines to ensure that we meet our high quality control standards and delivery requirements for our customers. We conduct our garment manufacturing operations through three wholly-owned subsidiaries, namely HSW, YS and AOT, which are located in the Guangdong province, China.
In May 2025, the Company disposed of AOT to the management of AOT.
Our logistics business consists of delivery and courier services covering 44 cities in 10 provinces and 2 municipalities in China. Although we have our own motor vehicles and drivers, we currently outsource some of the business to our contractors. We believe outsourcing allows us to maximize our capacity and maintain flexibility while reducing capital expenditures and the costs of keeping drivers during slow seasons. We conduct our logistic operations through two wholly-owned subsidiaries, namely XKJ and PF, which are located in the Guangdong province, China.
Our property management and subleasing business provides subleasing of shops and property management services to garment wholesalers and retailers in the garment market. We currently have an aggregate of 56,238 square meters floor space and provide approximately 1,300 shop space to clients. We conduct our property management and subleasing operation through a wholly-owned subsidiary acquired in September 2023, HX, which is located in the Guangdong province, China. On July 1, 2025, the Company disposed of HX to its management. As of date of disposal, the net assets of HX was $6,972. The consideration was $13,829, resulting in an income of $6,857 from disposal.
| 3 |
Business Objectives
Garment Manufacturing Business
We believe the strength of our garment manufacturing business is mainly due to our consistent emphasis on exceptional quality and timely delivery of our products. The primary business objective for our garment manufacturing segment is to expand our customer base and improve our profit.
Logistics Services Business
The business objective and future plan for our logistics services segment is to establish an efficient logistics system and to build a nationwide delivery and courier network in China. As of December 31, 2025, we provide logistics services to over 44 cities in 10 provinces and 2 municipalities. We expect to develop 20 additional logistics routes in existing serving cities and improve the Company’s profit in the year 2026.
Property Management and Subleasing Business
The business objective of our property management and subleasing segment was to integrate resources in a shopping mall, develop e-commerce and the Internet celebrity economy and increase the value of the stores in that area.
The Company conducted the business through a wholly-owned subsidiary, HX. In July 2025, the Company disposed of HX to the management of HX. The property management and subleasing business was then classified as discontinued operation.
Seasonality of Business
Garment Manufacturing Business
We generally receive more purchase orders during our second and third quarters and fewer manufacturing orders during May and June.
Logistics Services Business
We generally receive more delivery orders in our third and fourth quarters and are more vulnerable to shipping delays in the PRC during the Chinese New Year due to traffic and port congestion, border crossing delays and customs clearance issues.
Property Management and Subleasing Business
There is no significant seasonality in our business.
Collection Policy
Garment manufacturing business
For our new customers, we generally require orders placed to be backed by advances or deposits. For our long-term and established customers with good payment track records, we generally provide payment terms between 30 to 180 days following their acknowledgement of receipt of goods.
Logistics services business
For logistics services, we generally receive payments from the customers between 30 to 90 days following the date of the registration of our receipt of packages.
Property management and subleasing business
For property management and subleasing business, we generally collect rental and management fees for the following month each month in advance.
| 4 |
Economic Uncertainty
Our business is dependent on consumer demand for our products and services. We believe that the significant uncertainty in the economy in China has increased our clients’ sensitivity to the cost of our products and services. We have experienced continued pricing pressure. If the economic environment becomes weak, the economic conditions could have a negative impact on our sales growth and operating margins, cash position and collection of accounts receivable. Additionally, business credit and liquidity have tightened in China. Some of our suppliers and customers may face credit issues and could experience cash flow problems and other financial hardships. These factors currently have not had an impact on the timeliness of receivable collections from our customers. We cannot predict at this time how this situation will develop and whether accounts receivable may need to be allowed for or written off in the coming quarters.
Despite the various risks and uncertainties associated with the current economy in China, we believe our core strengths will continue to allow us to execute our strategy for long-term sustainable growth in revenue, net income and operating cash flow.
Summary of Critical Accounting Policies
We have identified critical accounting policies that, as a result of judgments, uncertainties, uniqueness and complexities of the underlying accounting standards and operation involved could result in material changes to our financial position or results of operations under different conditions or using different assumptions.
Estimates and Assumptions
We regularly evaluate the accounting estimates that we use to prepare our financial statements. In general, management’s estimates are based on historical experience, on information from third party professionals, and on various other assumptions that are believed to be reasonable under the facts and circumstances. Actual results could differ from those estimates made by management.
Revenue Recognition
Revenue is generated through sale of goods and delivery services. Revenue is recognized when a customer obtains control of promised goods or services and is recognized in an amount that reflects the consideration that the Company expects to receive in exchange for those goods or services. In addition, the standard requires disclosure of the nature, amount, timing, and uncertainty of revenue and cash flows arising from contracts with customers. The amount of revenue that is recorded reflects the consideration that the Company expects to receive in exchange for those goods and services. The Company applies the following five-step model in order to determine this amount:
| (i) | identification of the promised goods and services in the contract; | |
| (ii) | determination of whether the promised goods and services are performance obligations, including whether they are distinct in the context of the contract; | |
| (iii) | measurement of the transaction price, including the constraint on variable consideration; | |
| (iv) | allocation of the transaction price to the performance obligations; and | |
| (v) | recognition of revenue when (or as) the Company satisfies each performance obligation. |
| 5 |
The Company only applies the five-step model to contracts when it is probable that the Company will collect the consideration it is entitled to in exchange for the goods or services it transfers to the customer. Once a contract is determined to be within the scope of ASC 606 at contract inception, the Company reviews the contract to determine which performance obligations the Company must deliver and which of these performance obligations are distinct. The Company recognizes as revenues the amount of the transaction price that is allocated to the respective performance obligation when the performance obligation is satisfied or as it is satisfied. Generally, the Company’s performance obligations are transferred to customers at a point in time, typically upon delivery.
For all reporting periods, the Company has not disclosed the value of unsatisfied performance obligations for all product and service revenue contracts with an original expected length of one year or less, which is an optional exemption that is permitted under the adopted rules.
Leases
Lessee
The Company determines if an arrangement is a lease at inception. Operating leases are included in operating lease right-of-use (“ROU”) assets, other current liabilities, and operating lease liabilities in our consolidated balance sheets. Finance leases are included in property and equipment, other current liabilities, and other long-term liabilities in the consolidated balance sheets.
ROU assets represent the right to use an underlying asset for the lease term and lease liabilities represent the obligation to make lease payments arising from the lease. Operating lease ROU assets and liabilities are recognized at commencement date based on the present value of lease payments over the lease term. As most of the leases do not provide an implicit rate, the Company generally uses the incremental borrowing rate based on the estimated rate of interest for collateralized borrowing over a similar term of the lease payments at commencement date. The operating lease ROU asset also includes any lease payments made and excludes lease incentives. Lease expense for lease payments is recognized on a straight-line basis over the lease term.
Lessor
As a lessor, the Company’s leases are classified as operating leases under ASC 842. Leases, in which the Company is the lessor, are substantially all accounted for as operating leases and the lease components and non-lease components are accounted for separately. Rental income from operating leases is recognized on a straight line basis over the term of the relevant lease. Initial direct costs incurred in negotiating and arranging an operating lease are added to the carrying amount of the leased asset and recognized on a straight line basis over the lease term.
Accounts receivable, net
Accounts receivable, net are stated at the historical carrying amount net of allowance for doubtful accounts.
Account receivables are classified as financial assets subsequently measured at amortized cost. Account receivables are recognized when the Company becomes a party to the contractual provisions of the receivables. They are measured, at initial recognition, at fair value plus transaction costs, if any and are subsequently measured at amortized cost. The amortized cost is the amount recognized on the receivable initially, minus principal repayments, plus cumulative amortization (interest) using the effective interest method of any difference between the initial amount and the maturity amount, adjusted for any loss allowance.
A loss allowance for expected credit losses is recognized on account receivables and is updated at each reporting date. The Company determines the expected credit losses provisions based on ASU No. 2016-13, Financial Instruments—Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments (‘‘ASC 326’’) using a modified retrospective approach which did not have a material impact on the opening balance of accumulated deficit. To determine expected credit losses on account receivables, the Company will consider the historic credit loss experience, adjusted for factors that are specific to the debtors, general economic conditions, and an assessment of both the current and forecasted direction of conditions at the reporting date, including the time value of money, where appropriate.
The loss allowance is calculated on a collective basis for all trade and other receivables in totality. An impairment gain or loss is recognized in profit or loss with a corresponding adjustment to the carrying amount of account receivables, through use of a loss allowance account. The impairment loss is included in operating expenses as a movement in credit loss allowance.
Receivables are written off when there is information indicating that the counterparty is in severe financial difficulty and there is no realistic prospect of recovery, e.g., when the counterparty has been placed under liquidation or has entered into bankruptcy proceedings. Receivables written off may still be subject to enforcement activities under the Company’s recovery procedures, considering legal advice where appropriate. Any recoveries made are recognized in profit or loss.
| 6 |
Recently issued accounting pronouncements
Accounting for Convertible Instruments: In August 2020, FASB issued ASU 2020-06, Accounting for Convertible Instruments and Contracts in an Entity’s Own Equity (ASU 2020-06), as part of its overall simplification initiative to reduce costs and complexity of applying accounting standards while maintaining or improving the usefulness of the information provided to users of financial statements. Among other changes, the new guidance removes from GAAP separation models for convertible debt that require the convertible debt to be separated into a debt and equity component, unless the conversion feature is required to be bifurcated and accounted for as a derivative or the debt is issued at a substantial premium. As a result, after adopting the guidance, entities will no longer separately present such embedded conversion features in equity and will instead account for the convertible debt wholly as debt. The new guidance also requires use of the “if-converted” method when calculating the dilutive impact of convertible debt on earnings per share, which is consistent with the Company’s current accounting treatment under the current guidance. The guidance is effective for financial statements issued for fiscal years beginning after December 15, 2021, and interim periods within those fiscal years, with early adoption permitted, but only at the beginning of the fiscal year.
The Company reviews new accounting standards as issued. Management has not identified any other new standards that it believes will have a significant impact on the Company’s consolidated financial statements.
Results of Operations for the three months ended December 30, 2025 and 2024
The following table summarizes our results of operations for the three months ended December 31, 2025 and 2024. The table and the discussion below should be read in conjunction with our consolidated financial statements and the notes thereto appearing elsewhere in this report.
| Three Months Ended December 31, | Changes in 2025 | |||||||||||||||||||||||
| 2025 | 2024 | compared to 2024 | ||||||||||||||||||||||
| (In U.S. dollars, except for percentages) | ||||||||||||||||||||||||
| Revenue | $ | 975,823 | 100.0 | % | $ | 864,876 | 100 | % | $ | 110,947 | 12.8 | % | ||||||||||||
| Cost of revenues | (680,910 | ) | (69.8 | )% | (674,709 | ) | (78.0 | )% | (6,201 | ) | 0.9 | % | ||||||||||||
| Gross profit | 294,913 | 30.2 | % | 190,167 | 22.0 | % | 104,746 | 55.1 | % | |||||||||||||||
| Operating expenses | (363,706 | ) | (37.3 | )% | (340,202 | ) | (39.3 | )% | (23,504 | ) | 6.9 | % | ||||||||||||
| Loss from operations | (68,793 | ) | (7.0 | )% | (150,035 | ) | (17.3 | )% | 81,242 | (54.1 | )% | |||||||||||||
| Other income, net | 24,337 | 2.5 | % | 31,807 | 3.7 | % | (7,470 | ) | (23.5 | )% | ||||||||||||||
| Fair value gain or loss | (4,141,237 | ) | (424.4 | )% | (648,051 | ) | (74.9 | )% | (3,493,186 | ) | (539.0 | )% | ||||||||||||
| Net finance cost | (10,281 | ) | (1.1 | )% | (124,676 | ) | (14.4 | )% | 114,395 | (91.8 | )% | |||||||||||||
| Income tax expense | (248 | ) | (0.0 | )% | (3,116 | ) | (0.4 | )% | 2,868 | (92.0 | )% | |||||||||||||
| Loss from continuing operations | (4,196,222 | ) | (430.0 | )% | (894,071 | ) | (103.4 | )% | (3,302,151 | ) | (369.3 | )% | ||||||||||||
| Income (loss) from discontinued operations | - | - | % | (191,650 | ) | (22.2 | )% | 191,650 | (100.0 | )% | ||||||||||||||
| Net loss | $ | (4,196,222 | ) | (430.0 | )% | $ | (1,085,721 | ) | (125.5 | )% | $ | (3,110,501 | ) | (286.5 | )% | |||||||||
Revenue
Total revenue for the three months ended December 31, 2025 increased by approximately $0.1 million, or 12.8%, as compared with the three months ended December 31, 2024. The increase was mainly due to the increase of $0.2 million in logistics services revenue.
Revenue generated from our garment manufacturing business contributed approximately $0.01 million, or 0.5%, of our total revenue for the three months ended December 31, 2025. By comparison, revenue generated from garment manufacturing business contributed approximately $0.1 million or 1.6% of our total revenue for the three months ended December 31, 2024. The low level of sales was mainly due to a decrease in order volume and fierce market competition.
| 7 |
Revenue generated from our logistics services business contributed approximately $1.0 million, or 99.5%, of our total revenue for the three months ended December 31, 2025. By comparison, revenue generated from our logistic business contributed approximately $0.8 million or 98.4% of our total revenue for the three months ended December 31, 2024.
Cost of revenue
| Three months ended December 31, | Increase (decrease) in | |||||||||||||||||||||||
| 2025 | 2024 | 2025 compared to 2024 | ||||||||||||||||||||||
| (In U.S. dollars, except for percentages) | ||||||||||||||||||||||||
| Net revenue for garment manufacturing | $ | 4,764 | 100.0 | % | $ | 33,773 | 100 | % | $ | (29,009 | ) | (86.0 | )% | |||||||||||
| Raw materials | 4,474 | 93.9 | % | 11,907 | 35.3 | % | (7,433 | ) | (86.9 | )% | ||||||||||||||
| Labor | - | - | % | 12,884 | 38.1 | % | (12,884 | ) | (87.9 | )% | ||||||||||||||
| Other and Overhead | - | - | % | 3,361 | 10.0 | % | (3,361 | ) | (91.2 | )% | ||||||||||||||
| Total cost of revenue for garment manufacturing | 4,474 | 93.9 | % | 28,152 | 83.4 | % | (23,678 | ) | (87.5 | )% | ||||||||||||||
| Gross profit for garment manufacturing | 290 | 6.1 | % | 5,621 | 16.6 | % | (5,331 | ) | (79.6 | )% | ||||||||||||||
| Net revenue for logistics services | 971,059 | 100.0 | % | 831,103 | 100.0 | % | 139,956 | 13.3 | % | |||||||||||||||
| Fuel, toll and other cost of logistics services | 563,880 | 58.1 | % | 528,883 | 63.6 | % | 34,997 | 27.2 | % | |||||||||||||||
| Subcontracting fees | 112,556 | 11.6 | % | 117,674 | 14.2 | % | (5,118 | ) | 108.9 | % | ||||||||||||||
| Total cost of revenue for logistics services | 676,436 | 69.7 | % | 646,557 | 77.8 | % | 29,879 | 34.0 | % | |||||||||||||||
| Gross profit for logistics services | 294,623 | 30.3 | % | 184,546 | 22.2 | % | 110,077 | (20.0 | )% | |||||||||||||||
| Total cost of revenue | $ | 680,910 | 69.8 | % | $ | 674,709 | 78.0 | % | $ | 6,201 | 17.7 | % | ||||||||||||
| Gross profit | $ | 294,913 | 30.2 | % | $ | 190,167 | 22.0 | % | $ | 104,746 | (23.3 | )% | ||||||||||||
For our garment manufacturing business, we purchase the majority of our raw materials directly from numerous local fabric and accessories suppliers.
Raw material costs for our garment manufacturing business were approximately 93.9% of our total garment manufacturing business revenue for the three months ended December 31, 2025, as compared with 35.3% for the three months ended December 31, 2024. The increase in percentage was mainly because there was no production thus no labor cost in the quarter ended December 31, 2025 as we procured products from external manufacturers for resale instead of manufacturing.
Labor costs for our garment manufacturing business was nil for the three months ended December 31, 2025, as compared with 38.1% for the three months ended December 31, 2024. There was no production during the three months ended December 31, 2025 as we procured products from external manufacturers for resale instead of manufacturing.
Overhead and other expenses for our garment manufacturing business was nil for the three months ended December 31, 2025, as compared with 10.0% of total garment business revenue for the three months ended December 31, 2024. There was no production during the three months ended December 31, 2025.
For our logistic services business, we outsourced some of the business to our contractors. We relied on a few contractors, and the contracting fees to our largest contractor represented approximately 12.8% ($0.09 million) and 18.2% of total cost of revenues for our service segment for the three months ended December 31, 2025 and 2024, respectively. The decrease was attributed to less use of contractors. We have not experienced any disputes with our contractors and we believe we maintain good relationships with our contract logistics services providers.
Fuel, toll and other costs for our logistics services business for the three months ended December 31, 2025 were approximately $0.6 million as compared with $0.5 million for the three months ended December 31, 2024. Fuel, toll and other costs for our logistics services business accounted for approximately 58.1% of our total service revenue for the three months ended December 31, 2025, as compared with 63.6% for the three months ended December 31, 2024. The decrease in percentage was primarily attributable to decreased prices of fuel, toll and other costs during the quarter.
| 8 |
Gross profit
Garment manufacturing business gross profit for the three months ended December 31, 2025 was $290, as compared with $5,620 for the three months ended December 31, 2024. Gross profit accounted for 6.1% of our total garment manufacturing business revenue for the three months ended December 31, 2025, as compared to 16.6% for the three months ended December 30, 2024. The decrease in gross profit ratio was mainly due to a decline in segment revenue, primarily driven by reduced sales on the Taobao platform, which resulted in less efficient absorption of fixed and variable costs across operations.
Gross profit in our logistics services business for the three months ended December 31, 2025 was $294,623 and gross margin was 30.3%. Gross profit in our logistics services business for the three months ended December 31, 2024 was $184,545 and gross margin was 22.2%. The increase in gross profit ratio was mainly due to optimized logistics routes and integrated transportation of goods.
| Three months ended December 31, | Increase (decrease) in | |||||||||||||||||||||||
| 2025 | 2024 | 2025 compared to 2024 | ||||||||||||||||||||||
| (In U.S. dollars, except for percentages) | ||||||||||||||||||||||||
| Gross profit | $ | 294,913 | 100 | % | $ | 190,167 | 100 | % | 104,746 | 55.1 | % | |||||||||||||
| Operating expenses: | ||||||||||||||||||||||||
| Selling expenses | (9,109 | ) | (3.1 | )% | (28,819 | ) | (15.2 | )% | 19,710 | (68.4 | )% | |||||||||||||
| General and administrative expenses | (354,597 | ) | (120.2 | )% | (311,383 | ) | (163.7 | )% | (43,214 | ) | 13.9 | % | ||||||||||||
| Total | $ | (363,706 | ) | (123.3 | )% | $ | (340,202 | ) | (178.9 | )% | (23,504 | ) | 6.9 | % | ||||||||||
| (Loss) Income from operations | $ | (68,793 | ) | (23.3 | )% | $ | (150,035 | ) | (78.9 | )% | 81,242 | (54.1 | )% | |||||||||||
Selling, General and administrative expenses
Our selling expenses for our garment manufacturing business for the three months ended December 31, 2025 and 2024 were $9,109 and $28,819, respectively. The decrease in selling expenses was primarily due to strategic adjustments within the garment manufacturing segment, which led to a reduction in advertising and marketing-related expenditures. Our logistics services segment had no selling expenses for the three months ended December 31, 2005 and 2024. 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 December 31, 2025 and 2024 were $2,739 and $8,021, respectively. Our general and administrative expenses in our logistics services segment for the three months ended December 31, 2025 and 2024 were $151,967 and $175,837, respectively. Our general and administrative expenses of our corporate office for the three months ended December 31, 2025 and 2024 were $199,891 and $127,522, respectively. Total general and administrative expenses for the three months ended December 31, 2025 increased by approximately 13.9% to $354,597 from $311,383 for the three months ended December 31, 2024. The increase was primarily attributable to higher general operating maintenance expenses. 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.
| 9 |
Loss from operations
Loss from operations for the three months ended December 31, 2025 and 2024 was $68,793 and $381,054, respectively. Loss from operations in our garment manufacturing segments was $10,859 and $31,220 for the three months ended December 31, 2025 and 2024, respectively. The reduction in operating loss was primarily attributable to strategic adjustments implemented in the garment manufacturing segment, which resulted in lower marketing and operating expenses during the current period. Income from operations in our logistics services segment was $141,921 and $8,707 for the three months ended December 31, 2025 and 2024, respectively. The increase in income was mainly due to increased sales and gross profit.
Income Tax Expenses
Income tax expense for the three months ended December 31, 2025 and 2024 was $248 and $3,116, respectively. YX primarily operates in the PRC and files tax returns in the PRC.
Yingxi Industrial Chain Group Co., Ltd is incorporated in the Republic of Seychelles and, under the current laws of Seychelles, is not subject to income taxes.
Yingxi HK is incorporated in Hong Kong and is subject to Hong Kong income tax at a progressive tax rate of 16.5%. No provision for income taxes in Hong Kong has been made as Yingxi HK had no taxable income for the three months ended December 31, 2025 and 2024.
QYTG and YX are incorporated in the PRC and are subject to PRC Enterprise Income Tax (EIT) rate of 25%. No provision for income taxes in the PRC has been made as QYTG and YX had no taxable income for the three months ended December 31, 2025 and 2024.
The majority of our subsidiaries are governed by the Income Tax Laws of the PRC. All YX’s operating companies are subject to progressive EIT rates from 5% to 15% in 2025. The preferential tax rates will expire at end of 2026.
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 December 31, 2025 and 2024.
Net Loss
We incurred net loss of approximately $4.2 million and net loss of approximately $1.1million for the three months ended December 31, 2025 and 2024, respectively. The net loss for the three months ended December 31, 2005 was mainly due to $4.1 million loss from fair value evaluation from derivative liabilities. The net loss for the three months ended December 31, 2024 was mainly due to $0.2 million loss from operations, $0.7 million fair value loss, $0.1 million financial cost, and $0.2 million loss from discontinued operations. Our basic and diluted loss per share was $0.45 and $0.19 for the three months ended December 31, 2025 and 2024, respectively.
Results of Operations for the nine months ended December 31, 2025 and 2024
The following table summarizes our results of operations for the nine months ended December 31, 2025 and 2024. The table and the discussion below should be read in conjunction with our consolidated financial statements and the notes thereto appearing elsewhere in this report.
| Nine Months Ended December 31, | Changes in 2025 | |||||||||||||||||||||||
| 2025 | 2024 | compared to 2024 | ||||||||||||||||||||||
| (In U.S. dollars, except for percentages) | ||||||||||||||||||||||||
| Revenue | $ | 2,622,869 | 100.0 | % | $ | 2,550,884 | 100 | % | $ | 71,985 | 2.8 | % | ||||||||||||
| Cost of revenues | (1,912,395 | ) | (72.9 | )% | (1,625,159 | ) | (63.7 | )% | (287,236 | ) | 17.7 | % | ||||||||||||
| Gross profit | 710,474 | 27.1 | % | 925,725 | 36.3 | % | (215,251 | ) | (23.3 | )% | ||||||||||||||
| Operating expenses | (1,583,990 | ) | (60.4 | )% | (1,416,299 | ) | (55.5 | )% | (167,691 | ) | 11.8 | % | ||||||||||||
| Loss from operations | (873,516 | ) | (33.3 | )% | (490,574 | ) | (19.2 | )% | (382,942 | ) | 78.1 | % | ||||||||||||
| Other income, net | 460,820 | 17.6 | % | 97,903 | 3.8 | % | 362,917 | 370.7 | % | |||||||||||||||
| Fair value gain or loss | (4,140,772 | ) | (157.9 | )% | (1,045,448 | ) | (41.0 | )% | (3,095,324 | ) | (296.1 | )% | ||||||||||||
| Net finance cost | (604,802 | ) | (23.1 | )% | (1,029,600 | ) | (40.4 | )% | 424,798 | (41.3 | )% | |||||||||||||
| Income tax expense | (1,082 | ) | (0.0 | )% | (4,643 | ) | (0.2 | )% | 3,561 | (76.7 | )% | |||||||||||||
| Loss from continuing operations | (5,159,352 | ) | (196.7 | )% | (2,472,362 | ) | (96.9 | )% | (2,686,990 | ) | (108.7 | )% | ||||||||||||
| Income (loss) from discontinued operations | 467,855 | 17.8 | % | (556,002 | ) | (21.8 | )% | 1,023,857 | (184.1 | )% | ||||||||||||||
| Net loss | $ | (4,691,497 | ) | (178.9 | )% | $ | (3,028,364 | ) | (118.7 | )% | $ | (1,663,133 | ) | (54.9 | )% | |||||||||
Revenue
Total revenue for the nine months ended December 31, 2025 increased by $71,985, or 2.8%, as compared with the nine months ended December 31, 2024. The increase was mainly due to the increase of $0.30 million in logistics services revenue, offset by a decrease of $0.23 million in garment manufacturing revenue.
Revenue generated from our garment manufacturing business contributed $37,595, or 1.4%, of our total revenue for the nine months ended December 31, 2025. By comparison, revenue generated from garment manufacturing business contributed approximately $0.3 million or 8.3% of our total revenue for the nine months ended December 31, 2024. The low level of sales was mainly due to a decrease in order volume as a result of fierce market competition.
| 10 |
Revenue generated from our logistics services business contributed approximately $2.6 million, or 98.6%, of our total revenue for the nine months ended December 31, 2025. By comparison, revenue generated from our logistic business contributed approximately $2.3 million or 70.2% of our total revenue for the nine months ended December 31, 2024.
Cost of revenue
| Nine months ended December 31, | Increase (decrease) in | |||||||||||||||||||||||
| 2025 | 2024 | 2025 compared to 2024 | ||||||||||||||||||||||
| (In U.S. dollars, except for percentages) | ||||||||||||||||||||||||
| Net revenue for garment manufacturing | $ | 37,595 | 100.0 | % | $ | 268,845 | 100 | % | $ | (231,250 | ) | (86.0 | )% | |||||||||||
| Raw materials | 17,892 | 47.6 | % | 136,866 | 50.9 | % | (118,974 | ) | (86.9 | )% | ||||||||||||||
| Labor | 8,162 | 21.7 | % | 67,409 | 25.1 | % | (59,247 | ) | (87.9 | )% | ||||||||||||||
| Other and Overhead | 1,237 | 3.3 | % | 14,008 | 5.2 | % | (12,771 | ) | (91.2 | )% | ||||||||||||||
| Total cost of revenue for garment manufacturing | 27,291 | 72.6 | % | 218,283 | 81.2 | % | (190,992 | ) | (87.5 | )% | ||||||||||||||
| Gross profit for garment manufacturing | 10,304 | 27.4 | % | 50,562 | 18.8 | % | (40,258 | ) | (79.6 | )% | ||||||||||||||
| Net revenue for logistics services | 2,585,274 | 100.0 | % | 2,282,039 | 100.0 | % | 303,235 | 13.3 | % | |||||||||||||||
| Fuel, toll and other cost of logistics services | 1,639,228 | 63.4 | % | 1,289,202 | 56.5 | % | 350,026 | 27.2 | % | |||||||||||||||
| Subcontracting fees | 245,876 | 9.5 | % | 117,674 | 5.2 | % | 128,202 | 108.9 | % | |||||||||||||||
| Total cost of revenue for logistics services | 1,885,104 | 72.9 | % | 1,406,876 | 61.6 | % | 478,228 | 34.0 | % | |||||||||||||||
| Gross profit for logistics services | 700,170 | 27.1 | % | 875,163 | 38.4 | % | (174,993 | ) | (20.0 | )% | ||||||||||||||
| Total cost of revenue | $ | 1,912,395 | 72.9 | % | $ | 1,625,159 | 63.7 | % | $ | 287,236 | 17.7 | % | ||||||||||||
| Gross profit | $ | 710,474 | 27.1 | % | $ | 925,725 | 36.3 | % | $ | (215,251 | ) | (23.3 | )% | |||||||||||
For our garment manufacturing business, we purchase the majority of our raw materials directly from numerous local fabric and accessories suppliers.
Raw material costs for our garment manufacturing business were approximately 47.6% of our total garment manufacturing business revenue for the nine months ended December 31, 2025, as compared with 50.9% for the nine months ended December 31, 2024. The decrease in percentage was mainly due to a reduction in the costs of the raw materials. This decrease was driven by our shift to purchasing finished garments amid lower order volumes in the nine months ended December 31, 2025. At smaller scale, direct sourcing is more cost-efficient than in-house manufacturing. Additionally, our small-batch, diversified product mix resulted in lower average unit costs, which reduced the overall ratio.
Labor costs for our garment manufacturing business were approximately 21.7% of our total garment manufacturing business revenue for the nine months ended December 31, 2025, as compared with 25.1% for the nine months ended December 31, 2024. We maintained a sustainable level in wages. The decrease in portion of labor cost against revenue was mainly due to the decrease in revenue.
Overhead and other expenses for our garment manufacturing business accounted for approximately 3.3% of our total garment business revenue for the nine months ended December 31, 2025, as compared with 5.2% of total garment business revenue for the nine months ended December 31, 2024.
For our logistic services business, we outsourced some of the business to our contractors. We relied on a few contractors, and the contracting fees to our largest contractor represented approximately 9.6% ($0.2 million) and nil% of total cost of revenues for our service segment for the nine months ended December 31, 2025 and 2024, respectively. The increase was attributed to the use of contractors. We have not experienced any disputes with our contractors and we believe we maintain good relationships with our contract logistics services providers.
Fuel, toll and other costs for our logistics services business for the nine months ended December 31, 2025 were approximately $1.6 million as compared with $1.3 million for the nine months ended December 31, 2024. Fuel, toll and other costs for our logistics services business accounted for approximately 63.4% of our total service revenue for the nine months ended December 31, 2025, as compared with 56.5% for the nine months ended December 31, 2024. The increase was primarily attributable to increased revenue during the nine months ended December 31, 2025.
| 11 |
Gross profit
Garment manufacturing business gross profit for the nine months ended December 31, 2025 was $10,304, as compared with $50,562 for the nine months ended December 31, 2024. Gross profit accounted for 27.4% of our total garment manufacturing business revenue for the nine months ended December 31, 2025, as compared to 18.8% for the nine months ended December 31, 2024. The increase in gross profit ratio was mainly due to the procurement of products from external manufacturers for resale instead of manufacturing for the nine months ended December 31, 2025.
Gross profit in our logistics services business for the nine months ended December 31, 2025 was $700,710 and gross margin was 27.1%. Gross profit in our logistics services business for the nine months ended December 31, 2024 was $875,162 and gross margin was 38.4%. The decrease in gross profit ratio was mainly due to a combination of cost and market factors: significantly higher toll expenses; and a competitive “low-margin, high-volume” pricing strategy adopted to maintain market share amid intense economic competition, despite year-over-year revenue growth in the 2025 period.
| Nine months ended December 31, | Increase (decrease) in | |||||||||||||||||||||||
| 2025 | 2024 | 2025 compared to 2024 | ||||||||||||||||||||||
| (In U.S. dollars, except for percentages) | ||||||||||||||||||||||||
| Gross profit | $ | 710,474 | 100.0 | % | $ | 925,725 | 100 | % | (215,251 | ) | (23.3 | )% | ||||||||||||
| Operating expenses: | ||||||||||||||||||||||||
| Selling expenses | (20,413 | ) | (2.9 | )% | (124,821 | ) | (13.5 | )% | 104,408 | (83.6 | )% | |||||||||||||
| General and administrative expenses | (1,563,577 | ) | (220.1 | )% | (1,291,478 | ) | (139.5 | )% | (272,099 | ) | 21.1 | % | ||||||||||||
| Total | $ | (1,583,990 | ) | (222.9 | )% | $ | (1,416,299 | ) | (153.0 | )% | (167,691 | ) | 11.8 | % | ||||||||||
| (Loss) Income from operations | $ | (873,516 | ) | (122.9 | )% | $ | (490,574 | ) | (53.0 | )% | (382,942 | ) | 78.1 | % | ||||||||||
Selling, General and administrative expenses
Our selling expenses for our garment manufacturing business for the nine months ended December 31, 2025 and 2024 were $19,714 and $124,821, respectively. Selling expenses consisted primarily of advertisement, local transportation, unloading charges and product inspection charges.
Our general and administrative expenses in our garment manufacturing business segment for the nine months ended December 31, 2025 and 2024 were $33,758 and $18,984, respectively. Our general and administrative expenses in our logistics services segment for the nine months ended December 31, 2025 and 2024 were $507,736 and $615,462, respectively. Our general and administrative expenses for our corporate office for the nine months ended December 31, 2025 and 2024 were $1,022,083 and $657,032, 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, 2025 increased by approximately 21.1% to $1.6 million from $1.3 million for the nine months ended December 31, 2024.
| 12 |
Loss from operations
Loss from operations for the nine months ended December 31, 2025 and 2024 was $873,516 and $490,574, respectively. Loss from operations in our garment manufacturing segments was $43,169 and $93,243 for the nine months ended December 31, 2025 and 2024, respectively. The reduction in operating loss was primarily attributable to strategic adjustments implemented in the garment manufacturing segment, which resulted in lower marketing and operating expenses during the current period. Income (loss) from operations in our logistics services segment was $191,698 and $259,144 for the nine months ended December 31, 2025 and 2024, respectively. The decrease in income was mainly due to increase in cost of fuel, toll and other costs.
Income Tax Expenses
Income tax expense for the nine months ended December 30, 2025 and 2024 was $1,082 and $4,643, respectively. YX primarily operates in the PRC and files tax returns in the PRC.
Yingxi Industrial Chain Group Co., Ltd is incorporated in the Republic of Seychelles and, under the current laws of Seychelles, is not subject to income taxes.
Yingxi HK is 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 nine months ended December 31, 2025 and 2024.
QYTG and YX are incorporated in the PRC and are subject to PRC Enterprise Income Tax (EIT) rate of 25%. No provision for income taxes in the PRC has been made as QYTG and YX had no taxable income for the nine months ended December 31, 2025 and 2024.
The majority of our subsidiaries are governed by the Income Tax Laws of the PRC. All YX’s operating companies are subject to progressive EIT rates from 5% to 15% in 2025. The preferential tax rates will expire at end of year 2026.
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 nine months ended December 31, 2025 and 2024.
Net Loss
We incurred net loss of approximately $4.7 million and net loss of $3.0 million for the nine months ended December 31, 2025 and 2024, respectively. Our basic and diluted loss per share were $0.50 and $0.53 for the nine months ended December 31, 2025 and 2024, respectively.
| 13 |
Summary of cash flows
Summary cash flows information for the nine months ended December 31, 2025 and 2024 is as follow:
| Nine months ended December 31, | ||||||||
| 2025 | 2024 | |||||||
| (In U.S. dollars) | ||||||||
| Net cash (used in) provided by operating activities | $ | (1,082,373 | ) | $ | 802,379 | |||
| Net cash used in investing activities | (281,080 | ) | (153,739 | ) | ||||
| Net cash provided by (used in) financing activities | $ | 1,282,337 | $ | (986,341 | ) | |||
Net cash used in operating activities in the nine months ended December 31, 2025 was approximately $1.1 million as compared to cash of $0.8 million provided by operating activities in the nine months ended December 31, 2024, which was approximately $1.9 million less than that of the nine months ended December 31, 2024. The difference in cash flow between the two periods was mainly because of the movement of operating assets and liabilities in the nine months ended December 31, 2025, resulted in cash outflow of approximately $1.3 million, while the movement of operating assets and liabilities in the nine months ended December 31, 2024 resulted in cash inflow of approximately $0.6 million.
Net cash used in investing activities for the nine months ended December 31, 2025 was approximately $0.28 million, which was $0.13 million more than the nine months ended December 31, 2024. The cash outflow was mainly due to purchase of property, plant and equipment of $0.15 million and cash decrease of $0.15 million in disposal of subsidiaries.
Net cash provided by financing activities for the nine months ended December 31, 2025 was approximately $1.3 million as compared to cash used in financing activities of $1.0 million in the nine months ended December 31, 2024, which was approximately $0.34 million less than the nine months ended December 31, 2025. The difference in cash flow between the two periods was mainly because in the nine months ended December 31, 2025, the Company released of $2.7 million of restricted cash from the issuance and conversion of certain convertible notes, paid net cash advance of $2.6 million to related parties, and paid $0.39 million for the redemption of convertible notes not converted. By comparison, in the nine months ended December 31, 2024, the Company did not have released restricted cash, paid $1.1 million net cash advance to related parties, and received net proceeds from bank loans of $0.2 million.
Financial Condition, Liquidity and Capital Resources
As of December 31, 2025, we had cash on hand of approximately $0.2 million, total current assets of approximately $27.9 million and current liabilities of approximately $1.3 million. We expect to fund our operations through revenue generated by our business, proceeds from prior fundraising activities, and capital contributions from our chief executive officer, Mr. Zhida Hong.
In the event that the Company requires additional funding to finance the growth of the Company’s current and expected future operations as well as to achieve our strategic objectives, Mr. Hong has indicated the intent and ability to provide additional equity financing.
Foreign Currency Translation Risk
Our operations are located in China, which may give rise to significant foreign currency risks from fluctuations and the degree of volatility in foreign exchange rates between the U.S. dollar and the Chinese Renminbi (“RMB”). All of our sales are in RMB. In the past years, RMB continued to appreciate against the U.S. dollar. As of December 31, 2025, the market foreign exchange rate was RMB 7.02 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 nine months ended December 31, 2025 and 2024 was approximately $(0.12) million and $0.06 million, respectively.
Off-Balance Sheet Arrangements
We have no off-balance sheet arrangements (as that term is defined in Item 303(a)(4)(ii) of Regulation S-K) as of December 31, 2025 that have or are reasonably likely to have a current or future effect on our financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources.
| 14 |
Item 3. Quantitative and Qualitative Disclosures About Market Risk
Not applicable to smaller reporting companies.
Item 4. Controls and Procedures
Disclosure Controls and Procedures
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 December 31, 2025. Based on the evaluation of these disclosure controls and procedures, our Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures were effective .
Changes in Internal Controls over Financial Reporting
In response to the previously identified internal control weaknesses, the Company has implemented improvements to its internal controls, including:
1. hiring a reporting manager (“Internal Finance Manager”) who has the requisite relevant U.S. GAAP and SEC reporting experience and qualifications;
2. making an overall assessment of the current finance and accounting resources and hiring additional accounting members with appropriate levels of accounting knowledge and experience;
3. streamlining our accounting department structure and enhancing our staff’s U.S. GAAP and SEC reporting requirements on a continuous basis through internal training provided by our Internal Finance Manager;
4. participating in trainings and seminars provided by professional services firms on a regular basis to gain knowledge on regular U.S. GAAP /SEC reporting requirements updates.
As a result of these actions, we believe we have successfully remediated the identified weaknesses, and internal controls over financial reporting are now considered effective.
| 15 |
PART II - OTHER INFORMATION
Item 1. Legal Proceedings
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.
Item 1A. Risk Factors
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.
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
None.
Item 3. Defaults Upon Senior Securities
None.
Item 4. Mine Safety Disclosures
Not Applicable.
Item 5. Other Information
There is no other information required to be disclosed under this item, which was not previously disclosed.
Item 6. Exhibits
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) |
*Filed herewith.
| 16 |
SIGNATURES
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.
| Addentax Group Corp. | ||
| Date: February 13, 2026 | By: | /s/ Zhida Hong |
| Zhida Hong | ||
| President, Chief Executive Officer and Director, | ||
| (Principal Executive Officer) | ||
| Date: February 13, 2026 | By: | /s/ Chao Huang |
| Chao Huang | ||
| Chief Financial Officer and Treasurer | ||
| (Principal Financial and Accounting Officer) | ||
| 17 |