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Addentax(ATXG) - 2025 Q1 - Quarterly Report
ATXGAddentax(ATXG)2024-08-14 20:06

Business Operations - Addentax Group Corp. operates primarily through its wholly owned subsidiary, Shenzhen Qianhai Yingxi Industrial Chain Service Co., Ltd., and has ceased operations in the epidemic prevention supplies segment as of Q1 2023[89]. - The garment manufacturing segment focuses on expanding the customer base and improving profit, with operations supported by five wholly owned subsidiaries in Guangdong province, China[93][97]. - The logistics services segment currently covers 44 cities across 10 provinces and 2 municipalities in China, with plans to develop 20 additional logistics routes by the end of 2024[94][97]. - The property management and subleasing segment provides approximately 1,300 shop spaces and has a total floor space of 56,238 square meters, with operations conducted through a newly acquired subsidiary in September 2023[95][98]. Financial Performance - Total revenue for the three months ended June 30, 2024, decreased by approximately 0.2million,or19.20.2 million, or 19.2%, compared to the same period in 2023[118]. - Revenue from logistics services contributed approximately 0.5 million, or 57.2%, of total revenue for the three months ended June 30, 2024, down from 1.0million,or94.91.0 million, or 94.9%, in 2023[120]. - Gross profit for garment manufacturing increased to 27,267, representing 31.5% of total garment manufacturing revenue for the three months ended June 30, 2024, compared to 14.0% in 2023[127]. - Gross profit in logistics services for the three months ended June 30, 2024, was approximately 237,211,withagrossmarginof48.8237,211, with a gross margin of 48.8%, up from 23.0% in 2023[127]. - Gross loss in property management and subleasing business for the three months ended June 30, 2024, was (61,883), accounting for 22.3% of total revenue in this segment[128]. - Net loss for the three months ended June 30, 2024, was (1,221,111),adecreaseof55.2(1,221,111), a decrease of 55.2% compared to a net loss of (2,728,721) in 2023[116]. - Loss from operations for the three months ended June 30, 2024, was approximately 505,016,comparedtoalossof505,016, compared to a loss of 260,949 in 2023, representing an increase of 110.1%[134]. - Net loss for the three months ended June 30, 2024, was approximately 1.2million,downfrom1.2 million, down from 2.7 million in 2023[137]. Cost Management - Total cost of revenue for the three months ended June 30, 2024, was 648,438,adecreaseof20.5648,438, a decrease of 20.5% from 815,597 in 2023[121]. - Raw material costs for garment manufacturing were approximately 43.5% of total garment manufacturing revenue for the three months ended June 30, 2024, down from 49.0% in 2023[122]. - Labor costs for garment manufacturing were approximately 20.9% of total garment manufacturing revenue for the three months ended June 30, 2024, compared to 32.0% in 2023[122]. - Total general and administrative expenses increased by approximately 14.1% to 568,251from568,251 from 497,858 for the same period in 2023[133]. - General and administrative expenses in the logistics services segment for the three months ended June 30, 2024, were approximately 216,250,downfrom216,250, down from 227,423 in 2023[131]. - Selling expenses for the garment manufacturing business for the three months ended June 30, 2024, were approximately 82,603,comparedtonilin2023[130].CashFlowandAssets−Netcashusedinoperatingactivitieswasapproximately82,603, compared to nil in 2023[130]. Cash Flow and Assets - Net cash used in operating activities was approximately 193,185 for the three months ended June 30, 2024, significantly reduced from 1,110,878in2023[140].−Netcashprovidedbyfinancingactivitieswasapproximately1,110,878 in 2023[140]. - Net cash provided by financing activities was approximately 306,461 for the three months ended June 30, 2024, compared to 969,784in2023[141].−AsofJune30,2024,thecompanyhadcashonhandofapproximately969,784 in 2023[141]. - As of June 30, 2024, the company had cash on hand of approximately 0.9 million and total current assets of approximately 29.3million[142].RevenueRecognitionandPolicies−Thecompanyrecognizesrevenuewhencontrolofgoodsorservicesistransferredtocustomers,followingafive−stepmodelforrevenuerecognition[105][107].−Thecompanyhasimplementedacollectionpolicyrequiringadvancesordepositsfromnewcustomersandofferspaymenttermsof30to180daysforestablishedcustomers[100].RisksandChallenges−ThecompanyhasexperiencedcontinuedpricingpressureduetoeconomicuncertaintyinChina,whichmaynegativelyimpactsalesgrowthandoperatingmargins[101].−Thecompanyissubjecttouniquerisksduetoitsholdingcompanystructure,whichmayaffectthevalueofitscommonstock[89].−ThecompanydissolvedonesubsidiaryinApril2024andisintheprocessofdissolvinganothertofocusoncorebusinessoperations[96].−Thecompanyestimatesthatgarmentmanufacturingcapacitywillrecoverbythefiscalyearending2025duetofactoryfacilitiesrenewalandrepairs[118].FutureOutlook−AsofJune30,2024,thecompanyaimstoimproveprofitabilityinitslogisticsservicessegmentfortheremainderoftheyear[97].−TheforeigncurrencytranslationgainforthethreemonthsendedJune30,2024,wasapproximately29.3 million[142]. Revenue Recognition and Policies - The company recognizes revenue when control of goods or services is transferred to customers, following a five-step model for revenue recognition[105][107]. - The company has implemented a collection policy requiring advances or deposits from new customers and offers payment terms of 30 to 180 days for established customers[100]. Risks and Challenges - The company has experienced continued pricing pressure due to economic uncertainty in China, which may negatively impact sales growth and operating margins[101]. - The company is subject to unique risks due to its holding company structure, which may affect the value of its common stock[89]. - The company dissolved one subsidiary in April 2024 and is in the process of dissolving another to focus on core business operations[96]. - The company estimates that garment manufacturing capacity will recover by the fiscal year ending 2025 due to factory facilities renewal and repairs[118]. Future Outlook - As of June 30, 2024, the company aims to improve profitability in its logistics services segment for the remainder of the year[97]. - The foreign currency translation gain for the three months ended June 30, 2024, was approximately 0.01 million, compared to a gain of $0.09 million in 2023[143].