Addentax(ATXG) - 2023 Q4 - Annual Report

Garment Manufacturing Business - The company's garment manufacturing business operates through five wholly owned subsidiaries located in Guangdong province, China, with sufficient production capacity and skilled workers to meet high-quality control standards and timely delivery requirements[245] - The company's garment manufacturing segment aims to expand its customer base and improve profitability, leveraging its emphasis on quality and timely delivery[249] - For new garment manufacturing customers, orders require advances or deposits, while long-term customers receive payment terms of 30 to 180 days post-delivery[251] - Revenue from the garment manufacturing business decreased by $2.3 million (93.0$0.7 million (13.3%) in 2023, contributing 58.2% of total revenue, up from 42.0% in 2022[269] - Subcontracting fees for the logistics business decreased by $1.2 million (53.0$0.28 million in FY2023, up from $0.24 million in FY2022[284] Property Management and Subleasing Business - The property management and subleasing business was restructured in February 2023, with the disposal of subsidiary DY to an independent third party at fair value, while retaining its business operations, customers, and suppliers[247][249] - Property management fees are collected monthly in advance[252] - Property management and subleasing revenue decreased by$1.2 million (27.4%) in 2023, contributing 39.0% of total revenue, down from 33.6% in 2022[269] - The property management and subleasing business reported income from operations of $0.27 million in FY2023, compared to$0.1 million in FY2022[284] Financial Performance and Revenue Recognition - Total revenue for the year ended March 31, 2023 decreased by $4.7 million (37.4$222,193 (10.8%) in 2023, with the gross profit margin declining from 16.3% to 23.2%[271] - Operating expenses increased by $183,717 (8.7$311,199 (16.3%)[279] - Net income increased significantly by $1,241,659 (1,591.9$2,983,538[267] - General and administrative expenses increased by 16.3% to $2.2 million in FY2023 from$1.9 million in FY2022[283] - Net profit for FY2023 was $1.3 million, compared to$0.08 million in FY2022, with basic and diluted earnings per share of $0.04 and$0.00, respectively[287] - The company's revenue recognition follows a five-step model under ASC 606, recognizing revenue when control of goods or services is transferred to customers, typically upon delivery[257][259] Cash Flow and Financial Position - Net cash provided by operating activities decreased by $2.7 million to$(1,569,159) in FY2023, primarily due to lower net profit adjustments and cash outflows from operating assets and liabilities[290] - Net cash used in investing activities increased by $21.0 million to$(21,168,153) in FY2023, driven by $17.5 million in debt securities purchases and$2.5 million in long-term loan payments[291] - Net cash provided by financing activities increased by $23.2 million to$21,845,838 in FY2023, mainly due to $22.7 million from the IPO and$15.0 million from Notes and warrants issuance[292] - Cash on hand as of March 31, 2023, was $0.6 million, with restricted cash of$14.8 million, total current assets of $37.8 million, and current liabilities of$3.5 million[293] Economic and Market Conditions - The company faces economic uncertainty in China, with potential impacts on sales growth, operating margins, cash position, and accounts receivable collection due to pricing pressure and tightened credit conditions[253] Seasonal Business Trends - The company's business is seasonal, with higher garment sales in the second and third quarters and higher logistics revenue in the third and fourth quarters[250] Foreign Currency and Off-Balance Sheet Arrangements - Foreign currency translation gain for FY2023 was $0.2 million, compared to a loss of$(0.1) million in FY2022[294] - The company has no off-balance sheet arrangements as of March 31, 2023[295]