UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

~~[X]~~☒

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended: December 31, ~~2020~~2021

~~[ ]~~☐

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. 333-206097

ADDENTAX GROUP CORP.

(Exact name of registrant as specified in its charter)

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

Kingkey 100, Block A, Room 4805,

Luohu District, Shenzhen City, China518000

(Address of principal executive offices)

+ (86)755 ~~86961 405~~8233 0336

(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
Common Stock		ATXG		OTC Markets

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.

~~[X]~~ ☒ Yes ~~[ ]~~ ☐ No

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).

~~[X]~~ ☒ Yes ~~[ ]~~ ☐ No

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 ~~[ ]~~☐
Non-accelerated filer ~~[X]~~ ☒	Smaller reporting company ~~[X]~~☒
Emerging growth ~~[X]~~☒

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 ~~[X]~~☒ No

As of, February ~~22, 2021,~~14, 2022, there were ~~26,093,004~~ 26,693,004 shares outstanding of the registrant’s common stock.

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	17

Item 4.	Controls and Procedures	17

	PART II – OTHER INFORMATION

Item 1.	Legal Proceedings	18

Item 1A.	Risk Factors	18

Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	18

Item 3.	Defaults Upon Senior Securities	18

Item 4.	Mine Safety Disclosures	18

Item 5.	Other Information	18

Item 6.	Exhibits	18

PART I – FINANCIAL INFORMATION

Item 1. Financial Statements and Supplementary Data

ADDENTAX GROUP CORP.

FINANCIAL STATEMENTS

For the nine months ended December 31, ~~2020~~2021 and ~~2019~~2020

TABLE OF CONTENTS

Condensed Consolidated Balance sheets as of December 31, ~~2020 (unaudited)~~2021 and March 31, ~~2020~~2021 (unaudited)	F-2
Condensed Consolidated Statements of Income and Comprehensive Income for the Nine months ended December 31, 2021 and 2020 ~~and 2019~~ (unaudited)	F-3
Condensed Consolidated Statements of Changes in Equity for the nine months ended December 31, 2021 and 2020 ~~and 2019~~ (unaudited)	F-4
Condensed Consolidated Statements of Cash Flows for the nine months ended December 31, 2021 and 2020 ~~and 2019~~ (unaudited)	F-5
Notes to Condensed Consolidated Financial Statements for the nine months ended December 31, 2021 and 2020 ~~and 2019~~ (unaudited)	F-6 – ~~F-15~~F-14

F-1

ADDENTAX GROUP CORP. AND SUBSIDIARIES

UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS

(In U.S. Dollars, except share data or otherwise stated)

~~AS OF DECEMBER 31, 2020 AND MARCH 31, 2020~~ (UNAUDITED)

	December 31, 2020			March 31, 2020			December 31, 2021			March 31, 2021

ASSETS

CURRENT ASSETS
Cash and cash equivalents	$	356,728		$	531,681		$	506,342		$	1,845,077
Accounts receivables, net		3,024,627			4,500,116			1,718,991			4,757,518
Inventories		163,233			347,531			298,196			270,434
Other receivables - disposal of subsidiaries		822,933			-
Other receivables - other		203,605			231,974
Prepayments and other receivables								610,621			684,161
Advances to suppliers		208,324			389,940			1,522,370			355,454
Amount due from related party								171,364			84,838
Total current assets		4,779,450			6,001,242			4,827,884			7,997,482

NON-CURRENT ASSETS
Plant and equipment, net		894,388			585,019			869,603			793,977
Long-term prepayments								9,348			-
Operating lease right of use asset		11,604,526			1,835,717			7,307,883			9,632,625
Total non-current assets		12,498,914			2,420,736			8,186,834			10,426,602
TOTAL ASSETS	$	17,278,364		$	8,421,978		$	13,014,718		$	18,424,084

LIABILITIES AND EQUITY

CURRENT LIABILITIES
Short-term loan	$	153,172		$	353,114		$	157,354		$	152,607
Accounts payable		1,700,062			3,620,583			1,221,731			3,121,373
Amount due to related parties		6,448,905			5,429,440			3,536,615			4,913,964
Advances from customers		26,192			18,931			34,683			3,029
Accrued expenses and other payables		411,316			230,917			778,260			681,984
Operating lease liability current portion		3,922,214			443,543			3,701,925			3,555,458
Total current liabilities		12,661,861			10,096,528			9,430,568			12,428,415

NON-CURRENT LIABILITIES
Operating lease liability		7,682,312			1,392,174			3,605,958			6,077,167
TOTAL LIABILITIES	$	20,344,173		$	11,488,702		$	13,036,526		$	18,505,582

EQUITY
Common stock ($0.001 par value, 50,000,000 shares authorized, 26,093,004 and 25,346,004 shares issued and outstanding at December 31, 2020 and March 31, 2020, respectively)	$	26,093		$	25,346
EQUITY (deficit)
Common stock ($0.001 par value, 50,000,000 shares authorized, 26,693,004 shares issued and outstanding at December 31, 2021 and March 31, 2021)							$	26,693		$	26,693
Additional paid-in capital		3,815,933			61,050			6,815,333			6,815,333
Retained earnings		(6,804,107	)		(3,233,122	)
Accumulated Deficit								(6,711,641	)		(6,834,228	)
Statutory reserve		13,663			23,514			13,821			13,821
Accumulated other comprehensive loss		(117,391	)		56,488			(166,014	)		(103,117	)
Total deficit		(3,065,809	)		(3,066,724	)		(21,808	)		(81,498	)
TOTAL LIABILITIES AND EQUITY	$	17,278,364		$	8,421,978		$	13,014,718		$	18,424,084

See accompany notes to the unaudited condensed consolidated financial statements.

F-2

ADDENTAX GROUP CORP. AND SUBSIDIARIES

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF ~~LOSS~~OPERATIONS AND COMPREHENSIVE LOSS

(In U.S. Dollars, except share data or otherwise stated)

~~FOR THE THREE AND NINE MONTHS ENDED DECEMBER 31, 2020 AND 2019~~


	Three months ended December 31,						Nine months ended December 31,
	2021			2020			2021			2020

REVENUES	$	2,791,470		$	3,411,552		$	9,835,733		$	21,014,064

COST OF REVENUES		(2,323,716	)		(2,950,124	)		(8,314,149	)		(22,776,087	)

GROSS PROFIT (LOSS)		467,754			461,428			1,521,584			(1,762,023	)

OPERATING EXPENSES
Selling and marketing		(43,118	)		(217,942	)		(135,310	)		(376,975	)
General and administrative		(452,312	)		(532,012	)		(1,375,513	)		(1,454,017	)
Total operating expenses		(495,430	)		(749,954	)		(1,510,823	)		(1,830,992	)

(LOSS) INCOME FROM OPERATIONS		(27,676	)		(288,526	)		10,761			(3,593,015	)

Interest income		72			102			2,135			102
Interest expenses		(2,526	)		(646	)		(5,375	)		(6,586	)
Other income (expense), net		43,958			1,273			132,959			62,489

INCOME (LOSS) BEFORE INCOME TAX EXPENSE		13,828			(287,797	)		140,480			(3,537,010	)
INCOME TAX EXPENSE		(2,209	)		(15,784	)		(17,893	)		(23,196	)

NET INCOME (LOSS)		11,619			(303,581	)		122,587			(3,560,206	)
Foreign currency translation loss		(28,755	)		(85,728	)		(62,897	)		(173,879	)
TOTAL COMPREHENSIVE INCOME (LOSS)	$	(17,136	)	$	(389,309	)	$	59,690		$	(3,734,085	)

EARNINGS (LOSS) PER SHARE
Basic and diluted		0.00			(0.01	)		0.00			(0.14	)
Weighted average number of shares outstanding – Basic and diluted		26,556,566			25,712,713			26,556,566			25,712,713

Three months ended
December 31, Nine months ended
December 31,
2020 2019 2020 2019

REVENUES $ 3,411,552 $ 4,027,902 $ 21,014,064 $ 8,182,396

COST OF REVENUES (2,950,124 ) (3,746,040 ) (22,776,087 ) (7,221,683 )

GROSS (LOSS) PROFIT 461,428 281,862 (1,762,023 ) 960,713

OPERATING EXPENSES
Selling and marketing (217,942 ) (960 ) (376,975 ) (11,826 )
General and administrative (532,012 ) (526,194 ) (1,454,017 ) (1,857,288 )
Total operating expenses (749,954 ) (527,154 ) (1,830,992 ) (1,869,113 )

LOSS FROM OPERATIONS (288,526 ) (245,292 ) (3,593,015 ) (908,400 )

Interest income 87 10 102 58
Interest expenses (631 ) (3,974 ) (6,586 ) (16,304 )

Other income (expense), net 1,273 66 62,489 (10,753 )

LOSS BEFORE INCOME TAX EXPENSE (287,797 ) (249,190 ) (3,537,010 ) (935,399 )
INCOME TAX EXPENSE (15,784 ) (9,022 ) (23,196 ) (12,086 )

NET LOSS (303,581 ) (258,212 ) (3,560,206 ) (947,485 )
Foreign currency translation gain (loss) (85,728 ) (50,440 ) (173,879 ) 58,715
TOTAL COMPREHENSIVE LOSS $ (389,309 ) $ (308,652 ) (3,734,085 ) (888,770 )

LOSS PER SHARE
Basic and diluted (0.01 ) (0.01 ) (0.14 ) (0.04 )
Weighted average number of shares outstanding – Basic and diluted 25,712,713 25,346,004 25,712,713 25,346,004

See accompany 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)

~~FOR THE THREE AND NINE MONTHS ENDED DECEMBER 31, 2020 AND 2019~~

	Shares		Amount		paid-in capital		Unrestricted			Statutory reserve			comprehensive loss			Total Equity
	Common Stock				Additional		Retained earnings (accumulated deficit)						Accumulated other
	Shares		Amount		paid-in capital		Unrestricted			Statutory reserve			comprehensive loss			Total Equity
BALANCE AT OCTOBER 31, 2020		25,346,004	$	26,093	$	3,795,303	$	(6,489,747	)	$	23,514		$	(31,663	)	$	(2,676,500	)
Paid in capital
Paid in capital, shares
Movement of Statutory reserve		-		-		20,630		(10,779	)		(9,851	)		-			-
Foreign currency translation		-		-		-		-			-			(85,728	)		(85,728	)
Net income for the period		-		-		-		(303,581	)		-			-			(303,581	)
BALANCE AT DECEMBER 31, 2020		26,093,004	$	26,093	$	3,815,933	$	(6,804,107	)	$	13,663		$	(117,391	)	$	(3,065,809	)

BALANCE AT OCTOBER 31, 2021		26,693,004	$	26,093	$	6,815,333	$	(6,723,260	)	$	13,821		$	(137,259	)	$	(4,672	)
Foreign currency translation														(28,755	)		(28,755	)
Net income for the period		-		-		-		11,619			-			-			11,619
BALANCE AT DECEMBER 31, 2021		26,693,004	$	26,693	$	6,815,333	$	(6,711,641	)	$	13,821		$	(166,014	)	$	(21,808	)

BALANCE AT MARCH 31, 2020		25,346,004	$	25,346	$	61,050		(3,233,122	)		23,514			56,488			(3,066,724	)
Paid in capital		747,000		747		3,734,253		-			-			-			3,735,000
Movement of Statutory reserve		-		-		20,630		(10,779	)		(9,851	)		-			-
Foreign currency translation		-		-		-		-			-			(173,879	)		(173,879	)
Net income for the period		-		-		-		(3,560,206	)		-			-			(3,560,206	)
BALANCE AT DECEMBER 31, 2020		26,093,004		26,093		3,815,933		(6,804,107	)		13,663			(117,391	)		(3,065,809	)

BALANCE AT MARCH 31, 2021		26,693,004	$	26,693	$	6,815,333	$	(6,834,228	)	$	13,821		$	(103,117	)	$	(81,498	)
Foreign currency translation		-		-		-		-			-			(62,897	)		(62,897	)
Net income for the period		-		-		-		122,587			-			-			122,587
BALANCE AT DECEMBER 31, 2021		26,693,004	$	26,693	$	6,815,333	$	(6,711,641	)	$	13,821		$	(166,014	)	$	(21,808	)

Common Stock Additional Retained earnings Accumulated other
Shares Amount paid-in
capital Unrestricted Statutory reserve comprehensive loss Total Equity
BALANCE AT OCTOBER 1, 2019 (Restated) 25,346,004 $ 25,346 $ 61,050 $ (2,940,044 ) $ 21,779 $ 74,201 $ (2,757,668 )
Foreign currency translation - - - - - (50,440 ) (50,440 )
Movement of Statutory reserve - - - (1,735 ) 1,735 - -
Net loss for the period - - - (258,212 ) - (258,212 )
BALANCE AT DECEMBER 31, 2019 25,346,004 $ 25,346 $ 61,050 $ (3,199,991 ) $ 23,514 $ 23,761 $ (3,066,320 )

BALANCE AT OCTOBER 1, 2020 25,346,004 $ 26,093 $ 3,795,303 $ (6,489,747 ) $ 23,514 $ (31,663 ) $ (2,676,500 )
Movement of Statutory reserve - - 20,630 (10,779 ) (9,851 ) - -
Foreign currency translation - - - - - (85,728 ) (85,728 )
Net loss for the period - - - (303,581 ) - - (303,581 )
BALANCE AT DECEMBER 31, 2020 26,093,004 $ 26,093 $ 3,815,933 $ (6,804,107 ) $ 13,663 $ (117,391 ) $ (3,065,809 )

BALANCE AT MARCH 31, 2019 (Restated) 25,346,004 $ 25,346 $ 61,050 $ (2,250,770 ) $ 21,779 $ (34,955 ) $ (2,177,550 )
Movement of Statutory reserve - - - (1,735 ) 1,735 - -
Foreign currency translation - - - (1 ) - 58,716 58,715
Net loss for the period - - - (947,485 ) - - (947,485 )
BALANCE AT DECEMBER 31, 2019 25,346,004 $ 25,346 $ 61,050 $ (3,199,991 ) $ 23,514 $ 23,761 $ (3,066,320 )

BALANCE AT MARCH 31, 2020 25,346,004 $ 25,346 $ 61,050 $ (3,233,122 ) $ 23,514 $ 56,488 $ (3,066,724 )
Issuance of common stocks 747,000 747 3,734,253 - - - 3,735,000
Movement of Statutory reserve - - 20,630 (10,779 ) (9,851 ) -
Foreign currency translation - - - - - (173,879 ) (173,879 )
Net loss for the period - - - (3,560,206 ) - - (3,560,206 )
BALANCE AT DECEMBER 31, 2020 26,093,004 $ 26,093 $ 3,815,933 $ (6,804,107 ) $ 13,663 $ (117,391 ) $ (3,065,809 )

See accompany notes to the unaudited condensed consolidated financial statements.

F-4

ADDENTAX GROUP CORP. AND SUBSIDIARIES

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

~~FOR THE NINE MONTHS ENDED DECEMBER 31, 2020 AND 2019~~

(In U.S. Dollars, except share data or otherwise stated)

							2021			2020
							Nine Months Ended December 31
	2020			2019			2021			2020
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss	$	(3,560,206	)	$	(947,485	)
Adjustments to reconcile net income to net cash used in operating activities:
Net income (loss)							$	122,587		$	(3,560,206	)
Adjustments to reconcile net income (loss) to net cash used in operating activities:
Depreciation		83,210			84,277			115,561			83,210
Loss on disposal of plant and equipment		1,472			3,323			-			1,472
Changes in operating assets and liabilities, net of effects from disposal of subsidiaries:
Changes in operating assets and liabilities
Accounts receivable		1,367,371			(1,880,493	)		3,038,527			1,367,371
Inventories		174,487			(924	)		(27,762	)		174,487
Advances to suppliers		(320,771	)		(252,620	)		(1,166,916	)		(320,771	)
Other receivables		(65,150	)		(80,870	)		73,540			(65,150	)
Accounts payables		(1,688,272	)		1,661,429			(1,899,642	)		(1,688,272	)
Accrued expenses and other payables		173,582			373,429			96,276			173,582
Advances from customers		52,161			(19,002	)		31,654			52,161
Net cash provided by (used in) operating activities	$	(3,782,116	)	$	(1,058,936	)	$	383,825		$	(3,782,116	)

CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of plant and equipment		(392,108	)		(94,864	)
Purchase of plant and equipment and other assets								(176,268	)		(392,108	)
Proceeds from sale of property and equipment		2,243			-			-			2,243
Cash decreased in disposal of subsidiaries		(704,479	)		-			-			(704,479	)
Net cash used in investing activities	$	(1,094,344	)	$	(94,864	)	$	(176,268	)	$	(1,094,344	)

CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from issuance of common stocks		3,735,000			-			-			3,735,000
Proceeds from related party borrowings		7,697,827			1,828,042			3,797,473			7,697,827
Repayment of related party borrowings		(6,605,044	)		(665,323	)		(5,341,046	)		(6,605,044	)
Proceeds from bank borrowings		86,886			515,816			-			86,886
Repayment of bank borrowings		(196,456	)		(372,135	)		-			(196,456	)
Net cash provided by financing activities	$	4,718,213		$	1,306,400
Net cash (used in) provided by financing activities							$	(1,543,573	)	$	4,718,213

NET INCREASE IN CASH AND CASH EQUIVALENTS		(158,247	)		152,600
NET (DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS								(1,336,016	)		(158,247	)
Effect of exchange rate changes on cash and cash equivalents		(16,706	)		(5,843	)		(2,719	)		(16,706	)
Cash and cash equivalents, beginning of the period		531,681			277,264			1,845,077			531,681
CASH AND CASH EQUIVALENTS, END OF THE PERIOD	$	356,728		$	424,021		$	506,342		$	356,728

Supplemental disclosure of cash flow information:
Cash paid during the year for interest	$	4,523		$	11,244		$	-		$	4,523
Cash paid during the year for income tax	$	23,196		$	12,086		$	17,893		$	23,196
Supplemental disclosure of non-cash investing and financing activities:
Right-of-use assets obtained in exchange for operating lease obligations	$	10,404,962		$	1,966,535		$	342,457		$	10,404,962
Net assets of subsidiaries disposed of recorded as Other Receivables	$	118,454			-		$	-		$	118,454

See accompany notes to the unaudited condensed consolidated financial statements.

F-5

ADDENTAX GROUP CORP. AND SUBSIDIARIES

NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

~~FOR THE THREE AND NINE MONTHS ENDED DECEMBER 31, 2020 AND 2019~~

1.	ORGANIZATION AND BUSINESS ACQUISITIONS

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

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 necessary 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, ~~2020~~2021 filed with the Securities and Exchange Commission (“SEC”) on June 29, ~~2020~~2021 (“2020 Form 10-K.”) ~~and Form S-1/A filed with SEC on January 22, 2021.~~.

GOING CONCERN UNCERTAINTY

The accompanying unaudited condensed consolidated financial statements are presented on the basis that the Company is a going concern. The going concern assumption contemplates the realization of assets and the satisfaction of liabilities in the normal course of business.

F-6

The Company incurred net income of $11,619 and net loss of ~~$303,581 and $258,212~~$303,581 for the three months ended December 31, ~~2020~~2021 and ~~2019,~~2020, respectively, and ~~$3,560,206~~net income of $122,587 and ~~$947,485~~net loss of $3,560,206 for the nine months ended December 31, ~~2020~~2021 and ~~2019,~~2020, respectively. As of December 31, ~~2020~~2021 and March 31, ~~2020,~~2021, the Company had net current liability of ~~$7,882,411~~$4,602,684 and ~~$4,095,286,~~$4,430,933, respectively, and a deficit on total equity of ~~$3,065,809~~$21,808 and ~~$3,066,724,~~$81,498, respectively. These conditions raise substantial doubt about the Company’s ability to continue as a going concern.

The ability to continue as a going concern is dependent upon the Company’s profit generating operations in the future and/or obtaining the necessary financing to meet its obligations and repay its liabilities arising from normal business operations when they become due. These consolidated financial statements do not include any adjustments to the recoverability and classification of recorded asset amounts and classification of liabilities that might be necessary should the Company be unable to continue as a going concern.

The Company expects to finance operations primarily through cash flow from revenue and capital contributions from the CEO. During the year, the CEO has provided financial support for the operations of the Company. In the event that the Company requires additional funding to finance the growth of the Company’s current and expected future operations as well as to achieve our strategic objectives, the CEO has indicated the intent and ability to provide additional equity financing.

3.	SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

~~Use of Estimates~~

Use of Estimates

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

There is no change on the accounting policies ~~from~~for the ~~year~~three months ended ~~March~~December 31, ~~2020.~~2021.

Recently issued accounting pronouncements

In June 2016, the FASB issued ASU No. 2016-13, Financial Instruments – Credit Losses (Topic 326), Measurement of Credit Losses on Financial Instruments. This standard requires a financial asset (or group of financial assets) measured at amortized cost basis to be presented at the net amount expected to be collected. The allowance for credit losses is a valuation account that is deducted from the amortized cost basis of the financial asset(s) to present the net carrying value at the amount expected to be collected on the financial asset. This standard will be effective for the Company on April 1, 2023. The Company is currently evaluating the impact the adoption of this ASU will have on its consolidated financial statements.

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-7

~~4. RISKS AND UNCERTAINTIES~~

~~(a)~~4.

RELATED PARTY TRANSACTIONS

SCHEDULE OF RELATED PARTIES RELATIONSHIP WITH THE COMPANY

Name of Related Parties		Relationship with the Company
Zhida Hong		President, CEO, and a director of the Company
Zhongpeng Chen		A legal representative of HPF, became not a related party when HPF was disposed of in November, 2020
Bihua Yang		A legal representative of XKJ
Zhiyong Zhou		General Manager of XKJ
Dewu Huang		A legal representative of YBY
Jinlong Huang		A spouse of legal representative of HSW

The Company leases Shenzhen XKJ office rent-free from Bihua Yang.

The Company had the following related party balances as of December 31, 2021 and March 31, 2021:

SCHEDULE OF RELATED PARTY TRANSACTION

Amount due from related party	December 31, 2021		March 31, 2021
Hongye Financial Consulting (Shenzhen) Co., Ltd.	$	154,210	$	84,838
Zhiyong Zhou (1)		17,154		-
	$	171,364	$	84,838

Related party borrowings	December 31, 2021		March 31, 2021
Zhida Hong (2)	$	3,208,463	$	3,727,371
Bihua Yang (3)		-		370,523
Dewu Huang (4)		177,755		712,064
Jinlong Huang		150,397		104,006
	$	3,536,615	$	4,913,964

	(1)	Being cash advance to Zhiyong Zhou to pay for daily operating expenditures of XKJ.

	(2)	The decrease was due to net repayment of debt due to Zhida Hong. During the three and nine months ended December 31, 2021, the Company received financial support of $0.03 million and 0.27 million from Zhida Hong and repaid $0.3 million and $0.9 million of debts due to him.

	(3)	Being financial support from Bihua Yang for XKJ’s daily operation.

	(4)	The decrease was due to net repayment of debt due to Dewu Huang. During the nine months ended December 31, 2021, the company received interest free advanced loan as financial support of approximately $1.5 million from Dewu Huang and repaid approximately $2.0 million of debts due to him. The related party debt was additional financial support provided by Dewu Huang for YBY’s daily operation.

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

5.	INVENTORIES

Inventories consist of the following as of December 31, 2021 and March 31, 2021:

SCHEDULE OF INVENTORIES

	December 31, 2021		March 31, 2021
Raw materials	$	242,644	$	234,870
Work in progress		3,916		-
Finished goods		51,636		35,564
Total inventories	$	298,196	$	270,434

There is no inventory write-off for the three and nine months ended December 31, 2021 and 2020.

F-8

6.	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.

7.	PREPAYMENTS AND OTHER RECEIVABLES

Prepayments and other receivables consist of the following as of December 31, 2021 and March 31, 2021:

SCHEDULE OF PREPAYMENTS AND OTHER RECEIVABLES

	December 31, 2021		March 31, 2021
Prepayment		34,248		-
Deposit		79,447		155,830
Receivable of consideration on disposal of subsidiaries		269,057		258,929
Other receivables		227,869		269,402
Total Prepayment	$	610,621	$	684,161

8.	PROPERTY, PLANT AND EQUIPMENT

Property, plant and equipment consists of the following as of December 31, 2021 and March 31, 2021:

SCHEDULE OF PROPERTY, PLANT AND EQUIPMENT

	December 31, 2021			March 31, 2021
Production plant	$	73,871		$	71,642
Motor vehicles		1,189,673			1,020,893
Office equipment		28,129			14,073
		1,291,673			1,106,608
Less: accumulated depreciation		(422,070	)		(312,631	)
Plant and equipment, net	$	869,603		$	793,977

F-9

Depreciation expense for the three and nine months ended December 31, 2021 and 2020 was $44,164 and $32,051, $115,561 and $83,210, respectively.

9.	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 $153,172 (RMB1,000,000) for daily operations. The loans are guaranteed at no cost by the legal representative of HSW. As of December 31, 2021, the Company has borrowed $157,354 (RMB1,000,000) (March 31, 2021: $152,607) under this line of credit with various annual interest rates from 4.84% to 4.9%. The outstanding loan balance was due on September 30, 2021. The Company was not able to renew the loan facility with the bank. The Company is negotiating with the bank on repayment schedule of the loan balance and interest payable. In January 2022, Ding Yinping, underwriter of the loan, partly repaid $6,596 (RMB41,921) on behalf of the Company.

10.

INCOME TAXES

(a)	Enterprise Income Tax (“EIT”)

The Company operates in the PRC and files tax returns in the PRC jurisdictions.

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

Yingxi HK was incorporated in Hong Kong and is subject to Hong Kong income tax at a progressive 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 and nine months ended December 31, 2021 and 2020.

YX were incorporated in the PRC and is subject to the EIT tax rate of 25%. No provision for income taxes in the PRC has been made as YX had no taxable income for the three and nine months ended December 31, 2021 and 2020.

The Company is governed by the Income Tax Laws of the PRC. All Yingxi’s operating companies were subject to progressive EIT rates from 5% to 15% in 2021 and 2020. The preferential tax rate will be expired at end of year 2022 and the EIT rate will be 25% from year 2023.

The Company’s parent entity, Addentax Group Corp. is a U.S entity and is subject to the United States federal income tax. No provision for income taxes in the United States has been made as Addentax Group Corp. had no United States taxable income for the three and nine months ended December 31, 2021 and 2020.

F-10

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

SCHEDULE OF EFFECTIVE INCOME TAX RATE RECONCILIATION

	Three months ended						Nine months ended
	December 31,						December 31,
	2021			2020			2021			2020
PRC statutory tax rate		25	%		25	%		25	%		25	%
Computed expected benefits (expense)		3,457			(71,949	)		35,120			(884,253	)
Temporary differences		(30,951	)		29,440			(87,797	)		629,954
Permanent difference		1,444			6,640			1,691			131,595
Changes in valuation allowance		28,259			51,654			68,879			145,900
Income tax expense	$	2,209		$	(15,784	)		17,893			23,196

(b)	Value Added Tax (“VAT”)

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

For services, the applicable VAT rate is 9% under the relevant tax category for logistic company, except the branch of HPF enjoyed the preferential VAT rate of 3% in 2021 and 2020. The Company is required to pay the full amount of VAT calculated at the applicable VAT rate of the invoiced value of sales as required. A credit is available whereby VAT paid on gasoline and toll charges can be used to offset the VAT due on service income.

11.

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 4 segments:

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

	(b)	Logistics services. Providing logistic services; and

(c)

Epidemic prevention supplies. Including manufacturing, distribution and trading of epidemic prevention supplies.

(d)

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

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

Selected information for period ended December 31, 2021 in the segment structure is presented in the following tables:

SCHEDULE OF SEGMENT REPORTING

F-11

	Garment		Logistics Services		Property management and leasing		Epidemic prevention supplies		Corporate and other			Totals
Revenue from external customers		2,488,173		4,144,604		3,202,956		-		-			9,835,733
Intersegment revenue		-		-		-		-		-			-
Interest income		1,925		63		140		-		6			2,135
Interest expense		4,181		506		456		-		232			5,375
Depreciation and amortization		1,981		90,655		18,443		4,482		-			115,561
Operating income (loss)		96,275		210,878		47,935		-		(344,327	)		10,761
Segment assets		1,833,807		2,433,062		7,770,529		87,597		947,253			13,072,248
Expenditures for segment assets		-		148,604		27,664		-		-			176,268

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.

SCHEDULE OF GEOGRAPHICAL INFORMATION

Geographic Information

	Three months ended December 31,				Nine months ended December 31,
	2021		2020		2021		2020
Revenues
United States		-		4,787		-		11,868,854
China		2,791,470		3,406,766		9,835,733		9,145,210
Total		2,791,470		3,411,552		9,835,733		21,014,064

	December 31, 2021		March 31, 2020
Long-Lived Assets
China		8,186,834		10,426,602

F-12

12.

LEASE 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, 2021, with discounted rate of 4.75%. A single lease cost is recognized over the lease term on a generally straight-line basis. All cash payments of operating lease cost are classified within operating activities in the statement of cash flows.

The Company leases its head office. The lease period is 5 years with an option to extend the lease. The Company leases its plant and dormitory for 4.5 years with an option to extend the lease. The Company leased several floors in a commercial building for its sublease business for 3 years with an option to extend the lease.

The Following table summarizes the components of lease expense:

SCHEDULE OF LEASE COST

	2021		2020		2021		2020
	Three months ended December 31,				Nine months ended December 31,
	2021		2020		2021		2020
Operating lease cost		968,170		444,162		2,878,730		668,883
Short-term lease cost		20,955		-		62,799		-
Lease Cost	$	989,125	$	444,162		2,941,529		668,883

The following table summarizes supplemental information related to leases:

SCHEDULE OF SUPPLEMENTAL INFORMATION RELATED TO LEASES

	2021			2020			2021			2020
	Three months ended December 31,						Nine months ended December 31,
	2021			2020			2021			2020
Cash paid for amounts included in the measurement of lease liabilities
Operating cash flow from operating leases	$	989,170		$	444,162			2,941,529			668,883
Right-of-use assets obtained in exchange for new operating leases liabilities		(3,390	)		10,378,042			3,42,457			10,404,962
Weighted average remaining lease term - Operating leases (years)		2.0			3.1			2.0			3.1
Weighted average discount rate - Operating leases		4.75	%		4.35	%		4.75	%		4.35	%

The following table summarizes the maturity of operating lease liabilities:

SCHEDULE OF OPERATING LEASE LIABILITY

Years ending December 31	Lease cost
2022	$	3,877,767
2023		3,857,516
2024		103,853

Total lease payments		7,839,136
Less: Interest		(531,253	)
Total	$	7,307,883

13.

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 6.355and ~~revenue~~6.553 as of December 31, 2021 and March 31, 2021, respectively. Revenue and expenses are translated at the average yearly exchange rates, which was 6.442and ~~equity~~6.779 for the nine months ended December 31, 2021 and 2020, respectively. Equity is translated at historical exchange rates. Any translation adjustments resulting are not included in determining net income but are included in foreign exchange adjustments to other comprehensive loss, a component of equity.

(c)

Concentration Risks

The followings are the percentages of accounts receivable balance of the top ~~five~~ customers over accounts receivable for each segment as of December 31, ~~2020~~2021 and March 31, ~~2020.~~2021.

SCHEDULE OF CONCENTRATION RISKS

F-13

Garment manufacturing segment

	December 31, 2020			March 31, 2020			December 31, 2021			March 31, 2021
Customer A		97.2	%		85.5	%		87.0	%		98.4	%
Customer B		2.7	%		Nil	%		13.0	%		1.6	%

The high concentration as of ~~March~~December 31, ~~2020~~2021 was mainly due to business development of a large distributor of garments.

Logistics services segment

	December 31, 2021			March 31, 2021
Customer A		12.2	%		16.6	%
Customer B		11.0	%		Nil	%
Customer C		10.0	%		30.2	%
Customer D		7.3	%		Nil	%
Customer E		6.5	%		12.7	%

Property management and subleasing

No accounts receivables in this segment.

Epidemic prevention supplies segment

No accounts receivables in this segment.

For the three months ended December 31, 2021, there was no single customer provided more than 10% of total revenue of the Company. For nine months ended December 31, 2021, one customer from garment segment provided more than 10% of total revenue of the Company, represented 24.8% for the nine months. For the three months ended December 31, 2020, there was no customer provided more than 10% of total revenue of the Company. For nine months ended December 31, 2020, one customer from garment segment and one customer from epidemic prevention supplies segment provided more than 10% of total revenue of the Company.

The high concentration in nine months ended December 31, 2021 was mainly due to concentration of distributors in garment segment. Management believes that should the Company lose any one of its major customers, it was able to sell similar products to other customers.

~~Logistics services segment~~

December 31, 2020 March 31, 2020
Customer A 24.9 % 22.4 %
Customer B 13.0 % 0.0 %
Customer C 11.4 % 18.3 %
Customer D 10.0 % 0.6 %
Customer E 7.6 % 2.4 %

~~Epidemic prevention supplies segment~~

~~No accounts receivables in this segment.~~

For the three months ended December 31, 2020, one customer from garment segment provided more than 10% of total revenue of the Company, represented 62.8% of total revenue of the Company for the three months. For the nine months ended December 31, 2020, two customers provided more than 10% of our total revenue, with one from garments segment and the other one from epidemic prevention supplies segment, represented 14.0% and 49.6% of total revenue of the Company for the nine months, respectively.

~~F-8~~

The high concentration in three and nine months ended December 31, 2020 was mainly due to concentration of distributors in trading of epidemic prevention supplies. Management believes that should the Company lose any one of its major customers, it was able to sell similar products to other customers.

The following tables summarized the purchases from five largest suppliers of each of the reportable segment for the three and nine months ended December 31, ~~2020~~2021 and ~~2019.~~2020.

SCHEDULE OF PURCHASES FROM SUPPLIERS

	Three months ended						Nine months ended						Three months ended						Nine months ended
	December 31,						December 31,						December 31,						December 31,
	2020			2019			2020			2019			2021			2020			2021			2020
Garment manufacturing segment		100.0	%		98.7	%		97.7	%		91.2	%		100.0	%		100.0	%		99.8	%		97.7	%
Logistics services segment		79.1	%		90.4	%		99.7	%		69.0	%		100.0	%		79.1	%		92.2	%		99.7	%
Property management and subleasing		100.0	%		-	%		100.0	%		-	%		100.0	%		100.0	%		100.0	%		100.0	%
Epidemic prevention supplies		100.0	%		-	%		100.0	%		-	%		Nil	%		100.0	%		Nil	%		100	%

~~Management believes that should the Company lose any one of its major suppliers, other suppliers are available that could provide similar products to the Company.~~

(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, ~~2020,~~2021, the total outstanding borrowings amounted to ~~$153,172 (RMB1,000,000)~~$157,354 (RMB1,000,000) with various interest rate from 4.84% to 6.96% p.a. (Note 10)

(e)

COVID-19

The Coronavirus Disease (COVID-19) outbreak and the measures taken to contain the spread of the pandemic have created a high level of uncertainty to global economic prospects and this has impacted the Company’s operations and its financial performance in the last three quarters of the financial year and subsequent to the financial year end.

As the situation continues to evolve with significant level of uncertainty, the Company is unable to reasonably estimate the full financial impact of the COVID-19 outbreak. The Company is monitoring the situation closely and to mitigate the financial impact, it is conscientiously managing its cost by adopting an operating cost reduction strategy and conserving liquidity by working with major creditors to align repayment obligations with receivable collections.

5.	~~RELATED PARTY TRANSACTIONS~~

~~Name of Related Parties~~		~~Relationship with the Company~~
~~Zhida Hong~~		~~President, CEO, and a director of the Company~~
~~Zhongpeng Chen~~		~~A legal representative of HPF, became not a related party when HPF was disposed of in November, 2020~~
~~Bihua Yang~~		~~A legal representative of XKJ~~
~~Dewu Huang~~		~~A legal representative of DT~~
~~Jinlong Huang~~		~~A spouse of legal representative of HSW~~

~~The Company leases Shenzhen XKJ office rent-free from Bihua Yang.~~

~~In September, the Company disposed of $114,229 aged inventories in HSW to Mr. Jinlong Huang at cost with no gain or loss recognized.~~

~~F-9~~

~~The Company had the following related party balances as of December 31, 2020 and March 31, 2020:~~

Related parties borrowings December 31, 2020 March 31, 2020
Zhida Hong $ 5,698,498 $ 5,043,489
Bihua Yang 244,094 -
Dewu Huang 379,253 81,287
Zhongpeng Chen - 160,427
Jinlong Huang 127,060 144,237
$ 6,448,905 $ 5,429,440

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

6.	~~INVENTORIES~~

~~Inventories consist of the following as of December 31, 2020 and March 31, 2020:~~

December 31, 2020 March 31, 2020
Raw materials $ 122,354 $ 230,742
Work in progress 11,745 62,150
Finished goods 29,134 54,639
Total inventories $ 163,233 $ 347,531

~~There is no inventory write-off for the three and nine months ended December 31, 2020 and 2019.~~

7.	~~ADVANCES TO SUPPLIERS~~

8.	~~PROPERTY, PLANT AND EQUIPMENT~~

~~Property, plant and equipment consists of the following as of December 31, 2020 and March 31, 2020:~~

December 31, 2020 March 31, 2020
Production plant $ 84,685 $ 67,247
Motor vehicles 1,228,746 868,743
Office equipment 23,243 19,471
1,336,674 955,461
Less: accumulated depreciation (442,286 ) (370,442 )
Plant and equipment, net $ 894,388 $ 585,019

~~F-10~~

During the nine months ended December 31, 2020, the Company acquired two production lines amounted to $54,327 to manufacture masks for the epidemic prevention supplies business and seven new motor truckers amounted to $315,920 for the logistic service business. During the period, the Company disposed of old machinery with original cost of $19,303 and accumulated depreciation of $18,661, and two old motor truckers with original cost of $22,505 and accumulated depreciation of $15,791. The Company also replaced a few small items of old machinery and office equipment.

~~Depreciation expense for the three and nine months ended December 31, 2020 and 2019 was $32,051 and $27,648, $83,210 and $84,277, respectively.~~

9.	~~SHORT-TERM BANK LOAN~~

In September 2018, HSW, a subsidiary of the Company entered into a facility agreement with Dongguan Agricultural Commercial Bank and obtained a line of credit, which allows the Company to borrow up to approximately $212,334 (RMB1,500,000) for daily operations with fixed interest rate of 6.96% per annum. The loans are guaranteed at no cost by legal representative of HSW. In September 2020, the Company fully repaid the outstanding loan and this line of credit was cancelled (March 31, 2020: $211,868).

In August 2020, DT entered into a new facility agreement with Webank and obtained a credit facility of $88,358 (RMB600,000) for daily operations with various annual interest rate from 16.2% to 16.29%. The loans are guaranteed at no cost by the legal representative of DT. The loan borrowing was $86,886 (RMB590,000) as of September 30, 2020 (March 31, 2020: Nil). The loan was transferred to the buyer with the disposal of DT on September 30, 2020.

~~10.~~

~~INCOME TAXES~~

~~(a)~~

~~Enterprise Income Tax (“EIT”)~~

~~The Company operates in the PRC and files tax returns in the PRC jurisdictions.~~

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

The Company is governed by the Income Tax Laws of the PRC. All Yingxi’s operating companies were subject to progressive EIT rates from 5% to 15% in 2020 and 2019. The preferential tax rate will be expired at end of year 2022 and the EIT rate will be 25% from year 2023.

The Company’s parent entity, Addentax Group Corp. is an 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 and nine months ended December 31, 2020 and 2019.

~~F-11~~

~~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,
2020 2019 2020 2019
PRC statutory tax rate 25 % 25 % 25 % 25 %
Computed expected benefits (71,949 ) (62,297 ) (884,253 ) (233,850 )
Temporary differences 29,440 22,942 629,954 32,028
Permanent difference 6,640 - 131,595 -
Changes in valuation allowance 51,653 48,377 145,900 213,908
Income tax expense $ 15,784 $ 9,022 $ 23,196 $ 12, 086

~~(b)~~

~~Value Added Tax (“VAT”)~~

For services, the applicable VAT rate is 9% under the relevant tax category for logistic company, except the branch of HPF enjoyed the preferential VAT rate of 3% in 2020 and 2019. The Company is required to pay the full amount of VAT calculated at the applicable VAT rate of the invoiced value of sales as required. A credit is available whereby VAT paid on gasoline and toll charges can be used to offset the VAT due on service income.

~~11.~~

~~CONSOLIDATED SEGMENT DATA~~

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

	~~(b)~~	~~Logistics services~~~~. Providing logistic services; and~~

~~(c)~~

~~Epidemic prevention supplies~~~~. Including manufacturing, distribution and trading of epidemic prevention supplies.~~

~~(d)~~

~~Property management and subleasing.~~ ~~Providing shops subleasing and property management services for garment wholesalers and retailers in garment market.~~

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

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

~~F-12~~

~~Revenues by segment for the three and nine months ended December 31, 2020 and 2019 are as follows:~~

Three months ended
December 31, Nine months ended
December 31,
Revenues 2020 2019 2020 2019
Garments manufacturing segment $ 2,287,981 $ 2,643,560 $ 5,186,042 $ 3,517,009
Logistics services segment 824,025 1,384,342 3,664,409 4,665,387
Property management and subleasing 294,759 - 294,759 -
Epidemic prevention supplies segment 4,787 - 11,868,854 -
Total of reportable segments and consolidated revenue $ 3,411,552 $ 4,027,902 $ 21,014,064 $ 8,182,396

~~Income from operations by segment for the three and nine months ended December 31, 2020 and 2019 are as follows:~~

Three months ended Nine months ended
December 31, December 31,
2020 2019 2020 2019
Garment manufacturing segment $ 98,905 $ 158,268 ) $ 240,423 $ 187,803
Logistics services segment 57,222 (176,350 ) 92,506 (168,634 )
Property management and subleasing 5,966 - 5,966 -
Epidemic prevention supplies (201,147 ) - (3,297,265 ) -
Total of reportable segments (39,054 ) (18,082 ) (2,958,370 ) 19,169
Reconciliation – Corporate (249,472 ) (227,210 ) (634,645 ) (927,569 )
Total consolidated loss from operations $ (288,526 ) $ (245,292 ) $ (3,593,015 ) $ (908,400 )

~~Total assets by segment as at December 31, 2020 and March 31, 2020 are as follows:~~

Total assets December 31, 2020 March 31, 2020
Garment manufacturing segment $ 2,628,877 $ 4,098,758
Logistics services segment 1,877,949 2,422,140
Property management and subleasing 9,993,744 -
Epidemic prevention supplies 243,075 -
Total of reportable segments 14,743,645 6,520,898
Reconciliation – Corporate 2,534,719 1,901,080
Consolidated total assets $ 17,278,364 $ 8,421,978

~~F-13~~

~~12.~~

~~ACCRUED EXPENSES AND OTHER PAYABLES~~

~~Accrued expenses and other payables consist of the following as of December 31, 2020 and March 31, 2020:~~

December 31, 2020 March 31, 2020
Accrued wages and welfare 58,874 61,776
Other tax payable 51,387 25,206
Rental payable 52,833 24,972
Customers’ deposits 210,785 -
Other payables 37,437 118,963
$ 411,316 $ 230,917

~~13.~~

~~LEASE RIGHT-OF-USE ASSET AND LEASE LIABILITIES~~

The Company implemented new accounting policy according to the ASC 842, Leases, on April 1, 2019 on a modified retrospective basis and did not restate comparative periods. Under the new policy, the Company recognized approximately $0.06 million lease liability as well as right-of-use asset for all leases (with the exception of short-term leases) at the commencement date. Lease liabilities are measured at present value of the sum of remaining rental payments as of December 31, 2020, with discounted rate of 4.35%. A single lease cost is recognized over the lease term on a generally straight-line basis. All cash payments of operating lease cost are classified within operating activities in the statement of cash flows.

~~The Following table summarizes the components of lease expense:~~

Three months ended
December 31, Nine months ended
December 31,
2020 2019 2020 2019
Operating lease cost 444,162 126,053 668,883 325,664
Short-term lease cost - 6,445 - 70,231
$ 444,162 $ 132,498 668,883 395,895

~~The following table summarizes supplemental information related to leases:~~

Three months ended
December 31, Nine months ended
December 31,
2020 2019 2020 2019
Cash paid for amounts included in the measurement of lease liabilities
Operating cash flow from operating leases $ 444,162 $ 132,498 $ 668,883 $ 395,895
Right-of-use assets obtained in exchange for new operating leases liabilities 10,378,042 65,527 10,404,962 1,966,535
Weighted average remaining lease term - Operating leases (years) 3.1 4.5 3.1 4.5
Weighted average discount rate - Operating leases 4.35 % 4.35 % 4.35 % 4.35 %

~~The following table summarizes the maturity of operating lease liabilities:~~

Years ending December 31 Lease cost
2021 $ 4,092,830
2022 4,107,892
2023 4,145,246
2024 310,197
Total lease payments 12,656,165
Less: Interest (1,051,639 )
Total $ 11,604,526

F-14

~~14. SHARE CAPITAL~~

~~In August 2020, the Company offered 747,000 common stocks to an individual investor. The subscription price was $5.00 per share. The proceeds were all received in August 2020.~~

~~15. DISPOSITION OF SUBSIDIARIES~~

The Company sold its subsidiary DT, a manufacturing company in garment manufacturing segment on October 1 to a third party and sold HPF, a subsidiary in logistics services segment in November 2020 to another third party. After disposition, the two subsidiaries became third parties to the Company. The Company will not have any businesses with the two subsidiaries nor the buyers. The business operations, customers and suppliers of DT and HPF were retained by the Company; therefore, the disposition of the two subsidiaries 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 DT September 30, 2020, date of disposal
Current assets $ 675,515
Noncurrent assets -
Current liabilities (70,742 )
Net assets $ 604,773

~~The consideration was at the fair value as of date of disposal, which was also the carrying value of DT, resulting no gain or loss recognized on the disposal.~~

~~Logistics Services Segment~~

Financial position of HPF November 16, 2020, date of disposal
Current assets $ 742,798
Noncurrent assets 42,816
Current liabilities (567,454 )
Net assets $ 218,160

~~The consideration was at the fair value as of date of disposal, which was also the carrying value of HPF, resulting no gain or loss recognized on the disposal.~~

~~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, ~~2020~~2021 and ~~2019~~2020 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 are a garment manufacturer and logistics services provider based in China. We are listed on the OTCQB under the symbol of “ATXG”. We classify our businesses into four segments: Garment manufacturing, Logistics services, Property management and subleasing, and Epidemic prevention supplies.

Our garment manufacturing business consists of sales made principally to wholesaler located in the People’s Republic of China (“PRC”). We have our own manufacturing facilities, with sufficient production capacity and skilled workers on production lines to ensure that we meet our high quality control standards and timely delivery requirement for our customers. We conduct our garment manufacturing operations through five wholly owned subsidiaries, namely Dongguan Heng Sheng Wei Garments Co., Ltd (“HSW”), Shantou Chenghai Dai Tou Garments Co., Ltd (“DT”), Dongguan Yushang Clothing Co., Ltd (“YS”), and Shantou Yi Bai Yi Garments Co., Ltd (“YBY”) which are located in the Guangdong province, China. In October 2020, the Company disposed of DT to a third party at fair value, which was also its carrying value as of September 30, 2020.

Our logistic business consists of delivery and courier services covering approximately 79 cities in approximately seven provinces and two 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 logistics services operations through ~~three~~four wholly owned subsidiaries, namely Shenzhen Xin Kuai Jie Transportation Co., Ltd (“XKJ”), Shenzhen Yingxi Peng Fa Logistic Co., Ltd., which was incorporated in November 2020, and Shenzhen Hua Peng Fa Logistic Co., Ltd (“HPF”), Shenzhen Yingxi Tongda Logistic Co., Ltd (“TD”), which are located in the Guangdong province, China. In November 2020, the Company disposed of HPF to a third party at fair value, which was also its carrying value as of November 30, 2020.

The business operations, customers and suppliers of DT and HPF were retained by the Company; therefore, the disposition of the two subsidiaries did not qualify as discontinued operations.

Our property management and subleasing provides shops subleasing and property management services for garment wholesalers and retailers in garment market. We conduct our property management and subleasing operation through a wholly owned subsidiary, namely Dongguan Yingxi Daying Commercial Co., Ltd (“DY”).

Our epidemic prevention supplies business consists of manufacturing and distribution of epidemic prevention products and resale of epidemic prevention supplies purchased from third party in both domestic and overseas markets. We conduct our manufacturing of the epidemic prevention products in Dongguan Yushang Clothing Co., Ltd (“YS”). We conduct the trading of epidemic prevention suppliers through Addentax Group Corp. (“ATXG”) and Shenzhen Qianhai Yingxi Industrial Chain Services Co., Ltd (“YX”), a wholly owned subsidiary of the Company.

~~Business Objectives~~

~~Garment Manufacturing Business~~

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 logistic system and to build a nationwide delivery and courier network in China. As of December 31, ~~2020,~~2021, we provide logistics services to over 79 cities in approximately seven provinces and two municipalities. We expect to develop an additional 20 logistics points in existing serving cities and improve the Company’s profit in the year end of ~~2021.~~2022.

Property Management and Subleasing Business

The business objective of our property management and subleasing segment is to integrate resources in shopping mall, develop e-commerce bases and the Internet celebrity economy together to drive to increase the value of the stores in the area. The short-term goal for the year is to increase the occupancy rate of stores in the mall to more than 70%.

Epidemic Prevention Supplies Business

The primary objective of our epidemic prevention supplies business is to take the advantage of our resource in supply chain from the garment manufacturing business segment to facilitate and maximize the production, distribution and resale of epidemic prevention supplies, in order to increase our revenue base and improve our net profit.

Seasonality of Business

Our business is affected by seasonal trends, with higher levels of garment sales in our second and third quarters and higher logistics services revenue in our third and fourth quarters. These trends primarily result from the timing of seasonal garment manufacturing shipments and holiday periods in the logistics services segment.

Collection Policy

Garment manufacturing business

For our new customers, we generally require orders placed to be backed by advances or deposits. For our long-term and established customers with good payment track records, we generally provide payment terms between 30 to 180 days following their acknowledgement of receipt of goods.

Logistics services business

For logistics services, we generally receive payments from the customers between 30 to 90 days following the date of the registration of our receipt of packages.

Property management and subleasing business

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

Epidemic prevention supplies business

For Epidemic prevention supplies business, we generally receive payment from the customers within 30 days following the delivery of finished goods. We would also give our long-term customers with a 12 months long credit term policy to maintain a good business relationship.

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.

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 use the incremental borrowing rate based on the estimated rate of interest for collateralized borrowing over a similar term of the lease payments at commencement date. The operating lease ROU asset also includes any lease payments made and excludes lease incentives. Lease expense for lease payments is recognized on a straight-line basis over the lease term.

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‑~~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‑~~straight line basis over the lease term.

Recently issued accounting pronouncements

Results of Operations for the three months ended December 31, ~~2020~~2021 and ~~2019~~2020

The following tables summarize our results of operations for the three months ended December 31, ~~2020~~2021 and ~~2019.~~2020. 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,											Increase (decrease) in 2020					Three Months Ended December 31,										Changes in 2021
	2020					2019						compared to 2019					2021					2020					compared to 2020
	(In U.S. dollars, except for percentages)																(In U.S. dollars, except for percentages)
Revenue	$	3,411,552		100.0	%		$	4,027,902		100	%	$	(616,350	)	(15.3	)%	$	2,791,470		100.0	%	$	3,411,552		100	%	$	(620,082	)	(18.2	)%
Cost of revenues		(3,150,124	)	(92.3	)%			(3,746,040	)	(93.0	)%		595,916		(15.9	)%		(2,323,716	)	(83.2	)%		(2,950,124	)	(86.5	)%		626,408		21.2	%
Gross profit		261,428		7.7	%			281,862		7.0	%		(20,434		(7.2	)%
Gross profit (loss)																		467,754		16.8	%		461,428		13.5	%		6,326		1.4	%
Operating expenses		(549,954	)	(16.1	)%			(527,154	)	(13.1	)%		(22,800	)	4.3	%		(495,430	)	(17.8	)%		(749,954	)	(22.0	)%		254,524	)	33.9	%
Loss from operations		(288,526	)	(8.5	)%			(245,292	)	(6.1	)%		(43,234	)	17.6	%		(27,676	)	(1.0	)%		(288,526	)	(8.5	)%		260,850		90.4	%
Other income, net		1,273		0.0	%			66		(0.0	)%		1,207	)	1,828.8	%		43,958		1.6	%		1,273		0.0	%		42,685		3,353.4	%
Net finance cost		(544	)	(0.0	)%			(3,964	)	(0.1	)%		3,420		(86.3	)%		(2,454	)	(0.1	)%		(544	)	(0.0	)%		1,910		262.0	%
Income tax expense		(15,784	)	(0.5	)%			(9,022	)	(0.2	)%		(6,762	)	75.0	%		(2,209	)	(0.1	)%		(15,784	)	(0.4	)%		13,575		86.0	%
Net loss	$	(303,581	)	(8.9	)%		$	(258,212	)	(6.4	)%	$	(45,369	)	17.6	%
Net income (loss)																	$	11,619		0.4	%	$	(303,581	)	(8.9	)%	$	315,200		103.8	%

Revenue

Total revenue for the three months ended December 31, 2021 decreased by approximately $0.6 million, or 18.2%, as compared with the three months ended December 31, 2020. The significant decrease was mainly because of the decrease in garment manufacturing business offset by increases in logistics services business and property management and leasing business.

Revenue generated from our garment manufacturing business contributed ~~$2,287,981 or 67.1%~~approximately $0.03 million (0.9%) and $2.3 million (67.1%) of ~~our~~ total revenue for the three months ended December 31, ~~2020. Revenue generated from our garment manufacturing business contributed $2,643,560 or 65.6% of our total revenue for the three months ended December 31, 2019.~~2021 and 2021, respectively. The decrease of ~~$0.4~~$2.3 million was mainly due to ~~adverse effects of COVID-19.~~factory re-decoration, remaining factories cannot provide as much capacity as before, we estimate the capacity will recover in early 2022.

Revenue generated from our logistics services business contributed ~~$824,025~~approximately $1.7 million or 61.6% of our total revenue for the three months ended December 31, 2021. Revenue generated from our logistic business contributed approximately $0.8 million or 24.2% of our total revenue for the three months ended December 31, 2020. ~~Revenue generated from our logistic~~YXPF, the new subsidiary has developed the business ~~contributed $1,384,342 or 34.4%~~to replace the business of ~~our total revenue for the three months ended December 31, 2019. The decrease~~HPF, which was disposed of ~~$0.6 million mainly because of the adverse effects of COVID-19, we cannot smoothly go through the logistics business.~~in September 2020.

Revenue generated from our property management and subleasing business contributed ~~$294,759~~approximately $1.0 million or 37.5% of our total revenue for the three months ended December 31, 2021. This is a new business segment developed in current period. Revenue of the segment contributed approximately $0.3 million, or 8.6% of our total revenue for the three months ended December 31, 2020. ~~This is a new business segment developed in current period and there was no revenue for the three months ended December 31, 2019.~~

There was ~~minor~~no revenue generated from our epidemic prevention supplies business for the three months ended December 31, ~~2020~~2021 because no ~~profitable~~ orders were obtained in the quarter. The Company accepted sales orders very cautiously to make sure the sales orders can be matched with stable suppliers to secure profitability of each order. ~~This is a new~~Revenue generated from our epidemic prevention supplies business ~~developed and there was no~~contributed approximately $0.01 million, or 0.1% of our total revenue for the three months ended December 31, ~~2019.~~2020.

Total revenue for the three months ended December 31, 2020 and 2019 were $3,411,552 and $4,027,902, respectively, a 15.3% decrease compared with the three months ended December 31, 2019. The decrease was mainly because of the decrease of logistics services business which was adversely affected by the COVID-19.

Cost of revenue

Three months ended December 31, Increase
(decrease) in
2020 2019 2020 compared to 2019
(In U.S. dollars, except for percentages)
Net revenue for garment manufacturing $ 2,287,981 100.0 % $ 2,643,560 100 % $ (355,579 ) (13.5 )%
Raw materials 1,620,775 70.8 % 1,946,455 73.6 % (325,680 ) (16.7 )%
Labor 467,478 20.4 % 469,268 17.8 % (1,790 ) (0.4 )%
Other and Overhead 16,747 0.7 % 21,934 0.8 % (5,187 ) (23.6 )%
Total cost of revenue for garment manufacturing 2,105,000 92.0 % 2,437,657 92.2 % (332,657 ) (13.6 )%
Gross profit for garment manufacturing 182,981 8.0 % 205,903 7.8 % (22,922 ) (11.1 )%
0
Net revenue for logistics services 824,025 100.0 % 1,384,342 100.0 % (560,317 ) (40.5 )%
Fuel, toll and other cost of logistics services 482,568 58.6 % 464,583 33.5 % 17,985 3.9 %
Subcontracting fees 85,766 10.4 % 843,800 61.0 % (758,034 ) (89.8 )%
Total cost of revenue for logistics services 568,334 69.0 % 1,308,383 94.5 % (740,049 ) (56.6 )%
Gross Profit for logistics services 255,691 31.0 % 75,959 5.5 % 179,732 236.6 %

Net revenue for property management and subleasing 294,759 100.0 % - - 294,759
Total cost of revenue for property management and subleasing 272,759 92.5 % - - 272,759
Gross Profit for property management and subleasing 22,000 7.5 % - - 22,000

Net revenue for epidemic prevention supplies $ 4,786 100.0 % $ - - 4,786
Merchandise/Finished goods/Raw materials 4,030 84.2 % - - 4,030
Total cost of revenue for epidemic prevention supplies 4,030 84.2 % - - 4,030
Gross profit for epidemic prevention supplies 756 15.8 % - - 756
Total cost of revenue $ 2,950,123 125.9 % $ 3,746,040 93.0 % $ (795,917 ) (21.2 )%
Gross profit $ 461,428 (25.9 )% $ 281,862 7.0 % $ 179,566 63.7 %

	Three months ended December 31,									Increase (decrease) in
	2021					2020				2021 compared to 2020
	(In U.S. dollars, except for percentages)
Net revenue for garment manufacturing	$	25,641		100.0	%	$	2,287,981	100	%	$	(2,262,340	)	(98.9	)%
Raw materials		8,829		34.4	%		1,620,775	70.8	%		(1,611,946	)	(99.5	)%
Labor		12,783		49.9	%		467,478	20.5	%		(454,695	)	(97.3	)%
Other and Overhead		6,306		24.6	%		16,747	0.7	%		(10,441	)	(62.3	)%
Total cost of revenue for garment manufacturing		27,918		108.9	%		2,105,000	92.0	%		(2,077,082	)	(98.7	)%
Gross profit for garment manufacturing		(2,277	)	(8.9	)%		182,981	8.0	%		(185,258	)	(101.2	)%

Net revenue for logistics services		1,719,202		100.0	%		824,025	100.0	%		895,177		108.6	%
Fuel, toll and other cost of logistics services		568,726		33.1	%		482,568	58.6	%		86,158	)	17.9	%
Subcontracting fees		842,510		49.0	%		85,766	10.4	%		756,744		882.3	%
Total cost of revenue for logistics services		1,411,236		82.1	%		568,334	69.0	%		842,902		148.3	%
Gross Profit for logistics services		307,967		17.9	%		255,691	31.0	%		52,276		20.4	%

Net revenue for property management and subleasing		1,046,627		100.0	%		294,759	100.0	%		751,868		255.1	%
Total cost of revenue for property management and subleasing		884,556		84.5	%		272,759	92.5	%		611,797		224.3	%
Gross Profit for property management and subleasing		162,071		15.5	%		22,000	7.5	%		140,071		636.7	%

Net revenue for epidemic prevention supplies	$	-				$	4,786	100.0	%		(4,786	)	(100.0	)%
Merchandise/Finished goods/Raw materials		6					4,030	84.2	%		(4,024	)	(99.9	)%
Total cost of revenue for epidemic prevention supplies		6					4,030	84.2	%		(4,024	)	(99.9	)%
Gross (loss) income for epidemic prevention supplies		(6	)				756	15.8	%		(762	)	(100.8	)%
Total cost of revenue	$	2,323,716		83.2	%	$	2,950,123	86.5	%	$	(626,407	)	(21.2	)%
Gross profit	$	467,754		16.8	%	$	461,428	13.5	%	$	6,326		1.4	%

For our garment manufacturing business, we purchase the majority of our raw materials directly from numerous local fabric and accessories suppliers. Aggregate purchases from our five largest raw material suppliers represented approximately 100.0% and 98.7% of raw materials purchases for the three months ended December 31, 2020 and 2019, respectively. One supplier provided more than 10% of our raw materials purchases for the three months ended December 31, 2020 and 2019. We have not experienced difficulty in obtaining raw materials essential to our business, and we believe we maintain good relationships with our suppliers.

Raw material costs for our garment manufacturing business were ~~70.8%~~34.4% of our total garment manufacturing business revenue in the three months ended December 31, ~~2020,~~2021, compared with ~~73.6%~~70.8% in the three months ended December 31, ~~2019.~~2020. The decreased in percentages was mainly due to the purchase cost of the raw materials dropped.

Labor costs for our garment manufacturing business were ~~20.4%~~49.9% of our total garment manufacturing business revenue in the three months ended December 31, ~~2020,~~2021, compared with ~~17.8%~~20.5% in the three months ended December 31, ~~2019.~~2020. The increase in percentages was mainly due to the rising wages in the PRC.

Overhead and other expenses for our garment manufacturing business accounted for ~~0.7%~~24.6% of our total garment business revenue for the three months ended December 31, ~~2020,~~2021, compared with ~~0.8%~~0.7% of total garment business revenue for the three months ended December 31, ~~2019.~~2020.

For our logistic business, we outsource some of the business to our contractors. The Company relied on a few subcontractors, in which the subcontracting fees to our largest contractor represented approximately ~~10.4%~~29.9% and ~~61.0%~~10.4% of total cost of revenues for our service segment for the three months ended December 31, ,2021 and 2020, ~~and 2019,~~ respectively. The percentage ~~decreased~~increased as we used more subcontractors than our own logistics ~~more than~~when COVID-19 epidemic was under controlled and aggregated subcontracting service to the ~~subcontractors under COVID-19 epidemic.~~largest supplier. We have not experienced any disputes with our subcontractor and we believe we maintain good relationships with our contract logistics services provider.

Fuel, toll and other costs for our service business for the three months ended December 31, ~~2020~~2021 were ~~$482,568~~approximately $0.6 million compared with ~~$464,583~~$0.5 million for the three months ended December 31, ~~2019.~~2020. Fuel, toll and other costs for our service business accounted for ~~58.6%~~33.1% of our total service revenue for the three months ended December 31, ~~2020,~~2021, compared with ~~33.5%~~58.6% for the three months ended December 31, ~~2019.~~2020. The ~~increase~~decrease in percentages was primarily attributable to decrease of use of ~~subcontractors under the epidemic circumstance.~~our own logistics.

Subcontracting fees for our service business for the three months ended December 31, ~~2020 decreased 89.8%~~2021 increased 8.8 times to ~~$85,766~~approximately $0.8 million from ~~$843,800~~$0.1 million for the three months ended December 31, ~~2019.~~2020. Subcontracting fees accounted for ~~10.4%~~49.0% and ~~61.0%~~10.4% of our total service business revenue in the three months ended December 31, 2021 and 2020, ~~and 2019,~~ respectively. ~~This decrease~~The significant increase in percentages was primarily because the Company used ~~less~~more subcontractors ~~under~~when the epidemic ~~circumstance.~~was getting controlled.

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

For epidemic prevention supplies business, we have trading and own production. The cost of revenue included cost of merchandise and cost of our own products. The other cost of ~~merchandise was $4,030,~~the quarter represented ~~84.2%~~depreciation of ~~total cost of revenue of the epidemic prevention supplies business.~~machinery.

~~Total cost of revenue~~Gross profit

Garment manufacturing business gross loss for the three months ended December 31, ~~2020~~2021 was ~~$2,950,123, compared with the amount~~approximately $0.002 million, or -8.9% of ~~$3,746,040 for the three months ended December 31, 2019. Total cost of sales as a percentage of~~our total sales for the three months ended December 31, 2020 was 86.5%, compared with 93.0% for the three months ended December 31, 2019. Gross margin for the three months ended December 31, 2020 was 13.5% compared with 7.0% for the three months ended December 31, 2019.

~~Gross profit~~

Garment manufacturing business revenue, as compared with gross profit ~~for the three months ended December 31, 2020 was $182,981 compared with $205,903 for the three months ended December 31, 2019. Gross profit accounted for~~of approximately $0.2 million, or 8.0% of our total Garment manufacturing business revenue for the three months ended December 31, ~~2020, compared with 7.8% for the three months ended December 31, 2019.~~2020. The gross margin was ~~slightly~~16.9% lower due to higher raw material cost in the ~~same for both periods.~~quarter ended December 31, 2021.

Gross profit in our logistics services business for the three months ended December 31, ~~2020~~2021 was ~~$255,691~~approximately $0.3 million and gross margin was ~~31.0%~~17.9%. Gross profit in our logistics services business for the three months ended December 31, ~~2019~~2020 was ~~$75,959~~approximately $0.3 million and gross margin was ~~5.5%~~31.0%. The ~~increase~~decrease of gross ~~margin~~profit ratio was mainly ~~due to use less~~because of the increased cost of subcontractors ~~strict control of logistic cost and focus on high profitable customers.~~in recent period.

Gross profit in our property management and subleasing business for the three months ended December 31, ~~2020~~2021 was ~~$22,000,~~approximately $0.2 million, or ~~7.5%~~15.5% of our total property management and subleasing business revenue. ~~This is a new business developed in current period.~~

Gross profit ~~in our epidemic prevention supplies business~~of the segment for the three months ended December 31, 2020 was ~~$756.~~approximately $0.02 million, or 7.5% of the revenue of the segment.

	Three months ended December 31,										Increase (decrease) in					Three months ended December 31,										Increase (decrease) in
	2020					2019					2020 compared to 2019					2021					2020					2021 compared to 2020
	(In U.S. dollars, except for percentages)															(In U.S. dollars, except for percentages)
Gross profit	$	461,428		100	%	$	281,862		100	%		179,566		63.7	%	$	467,754		100	%	$	461,428		100	%		6,326	1.4	%
Operating expenses:
Selling expenses		(217,942	)	(47.2	)%		(960	)	(0.3	)%		(216,982	)	22,602.3	%		(43,118	)	(9.2	)%		(217,942	)	(47.2	)%		174,824	80.2	%
General and administrative expenses		(532,012	)	(115.3	)%		(526,194	)	(186.7	)%		(5,818	)	1.1	%		(452,312	)	(96.7	)%		(532,012	)	(115.3	)%		79,700	15.0	%
Total	$	(749,954	)	(162.5	)%	$	(527,154	)	(187.0	)%		(222,800	)	42.3	%	$	(495,430	)	(105.9	)%	$	(749,954	)	(162.5	)%		254,524	33.9	%
Loss from operations	$	(288,526	)	(62.5	)%	$	(245,292	)	(87.0	)%		(43,234	)	17.6	%	$	(27,676	)	(5.9	)%	$	(288,526	)	(62.5	)%		260,850	90.4	%

Selling, General and administrative expenses

Our selling expenses in our Garment manufacturing business segment for the three months ended December 31, 2021 and 2020 was approximately $0.001 million and ~~2019 was $883 and $960,~~$0.001 million, respectively. Our selling expenses in our logistics services segment was ~~$nil~~nil for the three months ended December 31, ~~2020~~2021 and ~~2019,~~2020, respectively. Selling expenses in our property management and subleasing business was ~~$15,490~~approximately $0.04 million and ~~nil~~$0.02 million for the three months ended December 31, ~~2020~~2021 and ~~2019,~~2020, respectively. Selling expenses in our epidemic prevention supplies segment was ~~$201,569~~nil and ~~nil~~approximately $0.2 million for the three months ended December 31, 2021 and 2020, ~~and 2019,~~ respectively. ~~The selling expense for the three months ended December 31, 2020 mainly was consist of $200,000 free goods to customers as a marketing expense.~~ Selling expenses consist primarily of advertisement, local transportation, unloading charges and product inspection charges. Total selling expenses for the three months ended December 31, ~~2020 increased 22.6 times~~2021 decreased 80.2% to ~~$217,942~~approximately $0.04 million from ~~$960~~$0.2 million for the three months ended December 31, ~~2019.~~2020. It was mainly due to ~~increase~~decrease of marketing expenses of epidemic prevention supplies ~~business and the marketing expenses in the new property management and subleasing business segment.~~business.

Our general and administrative expenses in our Garment manufacturing business segment for the three months ended December 31, 2021 and 2020 was approximately $0.03 million and ~~2019 was $83,188 and $46,675,~~$0.08 million, respectively. Our general and administrative expenses in our logistics services segment, for the three months ended December 31, 2021 and 2020 ~~and 2019~~ was ~~$198,469 and $252,309, respectively.~~both approximately $0.2 million. The general and administrative expenses in our property management and subleasing business was ~~$544~~approximately $0.1 million and $0.001 million for the three months ended December 31, ~~2020.~~2021 and 2020, respectively. Our general and administrative expenses in our epidemic prevention supplies segment was ~~$338~~nil and approximately $0.001 million for the three months ended December 31, ~~2020.~~2021 and 2020, respectively. Our general and administrative expenses in our corporate office for the three months ended December 31, 2021 and 2020 was approximately $0.1 million and ~~2019 was $249,473 and $227,210,~~$0.2 million, respectively. General and administrative expenses consist primarily of administrative salaries, office expense, certain depreciation and amortization charges, repairs and maintenance, legal and professional fees, warehousing costs and other expenses that are not directly attributable to our revenues.

Total general and administrative expenses for the three months ended December 31, ~~2020 increased slightly~~2021 decreased by ~~1.1%~~15.0% to ~~$532,012~~approximately $0.45 million from ~~$526,194~~$0.53 million for the three months ended December 31, ~~2019.~~2020.

~~Income (loss)~~Loss from operations

Loss from operations for the three months ended December 31, 2021 and 2020 was approximately $0.03 million and ~~2019 was $288,526 and $245,292,~~$0.3 million, respectively. ~~Income~~Loss from operations of ~~$98,905~~approximately $0.03 million and ~~$158,268~~income of $0.1 million was attributed from our garment manufacturing segment for the three months ended December 31, ~~2020~~2021 and ~~2019,~~2020, respectively. Income ~~(loss)~~ from operations of ~~$57,222~~approximately $0.1 million and ~~$(176,350)~~$0.06 million was attributed from our logistics services segment for the three months ended December 31, ~~2020~~2021 and ~~2019,~~2020, respectively. Income from operations of ~~$5,966~~approximately $0.01 million and $0.006 million was attributed from our newly developed property management and subleasing ~~business. Loss~~business for the three months ended December 31, 2021 and 2020, respectively. Income (loss) from operations of ~~$(201,147)~~nil and approximately ($0.2) million was attributed from our epidemic prevention supplies segment for the three months ended December 31, ~~2020.~~2021 and 2020, respectively. We incurred a loss from operations in corporate office of ~~$249,472~~approximately $0.1 million and ~~$227,210~~$0.2 million for the three months ended December 31, ~~2020~~2021 and ~~2019,~~2020, respectively. The loss from our corporate office was mainly due to increase in legal and professional fees to comply with the SEC accounting, disclosure and reporting requirements.

Income Tax Expenses

Income tax expense for the three months ended December 31, 2021 and 2020 was approximately $0.002 million and ~~2019 was $15,784 and $9,022,~~$0.016 million, respectively, ~~a 74.9% increase~~86.0% decrease compared to ~~2019.~~2020. The Company operates in the PRC and files tax returns in the PRC jurisdictions.

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

Yingxi HK was incorporated in Hong Kong and is subject to Hong Kong income tax at a progressive tax rate of 16.5%. No provision for income taxes in Hong Kong has been made as Yingxi HK had no taxable income for the three months ended December 31, ~~2020~~2021 and ~~2019.~~2020.

QYTG and YX were incorporated in the PRC and is subject to the PRC Enterprise Income Tax (EIT) rate is 25%. No provision for income taxes in the PRC has been made as QYTG and YX had no taxable income for the three months ended December 31, ~~2020~~2021 and ~~2019.~~2020.

The Company is governed by the Income Tax Laws of the PRC. All Yingxi’s operating companies are subject to progressive EIT rates from 5% to 15% in ~~2020.~~2021. The preferential tax rates will be expired at end of year 2022 and the EIT rate will be 25% from year 2023.

Net ~~Loss~~Income (Loss)

We incurred a net income of approximately $0.01 million and a net loss of ~~$303,581 and $258,212~~$0.3 million for the three months ended December 31, ~~2020~~2021 and ~~2019,~~2020, respectively. Our basic and diluted ~~loss~~earnings per share were ~~$(0.01)~~$0.00 and ~~$(0.01)~~($0.01) for the three months ended December 31, ~~2020~~2021 and ~~2019,~~2020, respectively.

Results of Operations for the nine months ended December 31, ~~2020~~2021 and ~~2019~~2020

The following tables summarize our results of operations for the nine months ended December 31, ~~2020~~2021 and ~~2019.~~2020. 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,										Increase (decrease) in					Nine months Ended December 31,										Changes in 2021
	2020					2019					2020 compared to 2019					2021					2020					compared to 2020
	(In U.S. dollars, except for percentages)															(In U.S. dollars, except for percentages)
Revenue	$	21,014,064		100.0	%	$	8,182,396		100	%	$	12,831,668		156.8	%	$	9,835,733		100.0	%	$	21,014,064		100.0	%	$	(11,178,331	)	(53.2	)%
Cost of revenues		(22,776,087	)	(108.4	)%		(7,221,683	)	(88.3	)%		15,554,404		215.4	%		(8,314,149	)	(84.5	)%		(22,776,087	)	(108.4	)%		14,461,938		63.5	%
Gross profit		(1,762,023	)	(8.4	)%		960,713		11.7	%		(2,722,736	)	(283.4	)%
Gross profit (loss)																	1,521,584		15.5	%		(1,762,023	)	(8.4	)%		3,283,607		(186.4	)%
Operating expenses		(1,830,992	)	(8.7	)%		(1,869,113	)	(22.8	)%		(38,121	)	(2.0	)%		(1,510,823	)	(15.4	)%		(1,830,992	)	(8.7	)%		320,169		17.5	%
(Loss) Income from operations		(3,593,015	)	(17.1	)%		(908,400	)	(11.1	)%		(2,684,615	)	(295.5	)%
Income (loss) from operations																	10,761		0.1	%		(3,593,015	)	(17.1	)%		3,603,776		100.3	%
Other income, net		62,489		0.3	%		(10,753	)	(0.1	)%		73,242		681.1	%		132,959		1.3	%		62,489		0.3	%		70,470		112.8	%
Net finance cost		(6,484	)	0.0	%		(16,246	)	(0.2	)%		(9,762	)	(60.1	)%		(3,240	)	(0.0	)%		(6,484	)	0.0	%		3,244		50.0	%
Income tax expense		(23,196	)	(0.1	)%		(12,086	)	(0.1	)%		11,110		91.9	%		(17,893	)	(0.2	)%		(23,196	)	(0.1	)%		5,303	)	22.9	%
Net loss	$	(3,560,206	)	(16.9	)%	$	(947,485	)	(11.6	)%	$	(2,612,721	)	(275.8	)%
Net income (loss)																$	122,587		1.2	%	$	(3,560,206	)	(16.9	)%	$	3,682,793		103.4	%

Revenue

Total revenue for the nine months ended December 31, 2021 decreased by approximately $11.2 million, or 53.2%, as compared with the nine months ended December 31, 2020. The significant decrease was mainly because of the decrease of epidemic supply business and garment manufacturing business offset by increases in logistics services business and property management and leasing business.

Revenue generated from our garment manufacturing business contributed ~~$5,186,042~~approximately $2.5 million (25.3%) and $5.2 million (24.7%) of total revenue for the nine months ended December 31, 2021 and 2020, respectively. The decrease of approximately $2.7 million mainly due to factory re-decoration which caused a capacity decrease. We estimate the capacity will recover in the first quarter of 2022.

Revenue generated from our logistics services business contributed approximately $4.1 million or ~~24.7%~~42.1% of our total revenue for the nine months ended December 31, 2020. Revenue generated from our garment manufacturing business contributed $3,517,009 or 34.0% of our total revenue for the nine months ended December 31, 2019. The increase of $1.7 million was mainly because revenue in production capacity increased from newly setup subsidiary YBY.

2021. Revenue generated from our logistic business contributed ~~$3,664,409~~approximately $3.7 million or 17.4% of our total revenue for the nine months ended December 31, 2020. ~~Revenue generated from our logistic~~The increase of $0.4 million was because YXPF, the new subsidiary was developing the business ~~contributed $4,665,387 or 57.0%~~to replace the business of ~~our total revenue for the nine months ended December 31, 2019. The decrease mainly due to adverse effects from COVID-19, we cannot smoothly go through the logistics business.~~HPF, which was disposed of in September 2020.

Revenue generated from our property management and subleasing business contributed ~~$294,759~~approximately $3.2 million or ~~1.4%~~32.6% of our total revenue for the nine months ended December 31, ~~2020. This is a new business segment developed in current period and there~~2021.

There was no revenue generated from our epidemic prevention supplies business for the nine months ended December 31, ~~2019.~~

2021 because no profitable orders were obtained in the period. The Company accepted sales orders very cautiously to make sure the sales orders can be matched with stable suppliers to secure profitability of each order. Revenue generated from our epidemic prevention supplies business contributed ~~$11,868,854,~~approximately $11.9 million, or 56.5% of our total revenue for the nine months ended December 31, 2020. This is a new business developed in the current period. It included revenue from trading of merchandise and revenue from sales of our own products. The revenue from trading of merchandise was $11,791,672, representing 99.3% of total revenue from the epidemic prevention suppliers business.

Total revenue for the nine months ended December 31, 2020 and 2019 were $21,014,064 and $ 8,182,396, respectively, a 156.8% increase compared with the nine months ended December 31, 2019. The increase was mainly because the increase of garment manufacturing production capacity in YBY, a newly setup subsidiary, and the epidemic prevention supplies business newly developed in current period.

Cost of revenue

	Nine months ended December 31,									Increase (decrease) in					Nine months ended December 31,										Increase (decrease) in
	2020					2019				2020 compared to 2019					2021					2020					2021 compared to 2020
	(In U.S. dollars, except for percentages)														(In U.S. dollars, except for percentages)
Net revenue for garment manufacturing	$	5,186,042		100.0	%	$	3,517,009	100.0	%	$	1,669,034		47.5	%	$	2,488,173		100.0	%	$	5,186,042		100.0	%	$	(2,697,869	)	(52.0	)%
Raw materials		3,709,275		71.5	%		2,551,508	72.5			1,157,767		45.4	%		1,719,420		69.1	%		3,709,275		71.5	%		(1,989,855	)	(53.6	)%
Labor		1,030,350		19.9	%		570,182	16.2			460,169		80.7	%		542,118		21.8	%		1,030,350		19.9	%		(488,232	)	(47.4	)%
Other and Overhead		30,918		0.6	%		53,992	1.5			(23,074	)	(42.7	)%		23,124		0.9	%		30,918		0.6	%		(7,794	)	(25.2	)%
Total cost of revenue for garment manufacturing		4,770,543		92.0	%		3,175,682	90.3	%		1,594,862		50.2	%		2,284,662		91.8	%		4,770,543		92.0	%		(2,485,881	)	(52.1	)%
Gross profit for garment manufacturing		415,499		8.0	%		341,327	9.7	%		74,172		21.7	%		203,511		8.2	%		415,499		8.0	%		(211,988	)	(51.0	)%

Net revenue for logistics services		3,664,409		100.0	%		4,665,387	100.0	%		(1,000,979	)	(21.5	)%		4,144,604		100.0	%		3,664,409		100.0	%		480,195		13.1	%
Fuel, toll and other cost of logistics services		1,367,753		37.3	%		1,385,870	29.7	%		(18,117	)	(1.3	)%		1,410,231		34.0	%		1,367,753		37.3	%		42,478		3.1	%
Subcontracting fees		1,576,228		43.0	%		2,660,131	57.0	%		(1,083,904	)	(40.7	)%		1,868,648		45.1	%		1,576,228		43.0	%		292,420		18.6	%
Total cost of revenue for logistics services		2,943,981		80.3	%		4,046,001	86.7	%		(1,102,021	)	(27.2	)%		3,278,879		79.1	%		2,943,981		80.3	%		334,898		11.4	%
Gross Profit for logistics services		720,428		19.7	%		619,386	13.3	%		101,042		16.3	%		865,725		20.9	%		720,428		19.7	%		145,297		20.2	%

Net revenue for property management and subleasing		294,759		100.0	%		-	-			294,759					3,202,956		100.0	%		294,759		100	%		2,908,197		986.6	%
Total cost of revenue for property management and subleasing		272,759		92.5	%		-	-			272,759					2,749,114		85.8	%		272,759		92.5	%		2,476,355		907.9	%
Gross Profit for property management and subleasing		22,000		7.5	%		-	-			22,000					453,842		14.2	%		22,000		7.5	%		431,842		1,962.9	%

Net revenue for epidemic prevention supplies	$	11,868,854		100	%	$	-	-	%	$	11,868,854				$	-				$	11,868,854		100.0	%		(11,868,854	)	(100.0	)%
Merchandise/Finished goods/Raw materials		14,684,284		123.8	%		-	-	%		14,684,284					-					14,684,284		123.7	%		(14,684,284	)	(100.0	)%
Labor		64,946		0.5	%		-	-	%		64,946					-					64,946		0.5	%		(64,946	)	(100.0	)%
Other and Overhead		39,574		0.3	%		-	-	%		39,574					1,494					39,574		0.3	%		(38,080	)	(96.2	)%
Total cost of revenue for epidemic prevention supplies		14,788,804		124.6	%		-	-	%		14,788,804					1,494					14,788,804		124.6	%		(14,787,310	)	(100.0	)%
Gross profit for epidemic prevention supplies		(2,919,950	)	(24.6	)%		-	-			(2,919,950	)
Gross loss for epidemic prevention supplies																(1,494	)				(2,919,950	)	(24.6	)%		2,918,456		(99.9	)%
Total cost of revenue	$	22,776,087		108.4	%	$	7,221,683	88.3	%	$	15,554,404		215.4	%	$	8,314,149		84.5	%	$	22,776,087		108.4	%	$	(14,461,938	)	(63.5	)%
Gross profit	$	(1,762,023	)	(8.4	)%	$	960,713	11.7	%	$	(2,722,736	)	(283.4	)%	$	1,521,584		15.5	%	$	(1,762,023	)	(8.4	)%	$	3,283,607		186.4	%

For our garment manufacturing business, we purchase the majority of our raw materials directly from numerous local fabric and accessories suppliers. Aggregate purchases from our five largest raw material suppliers represented approximately 97.7% and 91.2% of raw materials purchases for the nine months ended December 31, 2020 and 2019, respectively. One suppliers provided more than 10% of our raw materials purchases for both nine months ended December 31, 2020 and 2019, respectively. We have not experienced difficulty in obtaining raw materials essential to our business, and we believe we maintain good relationships with our suppliers.

Raw material costs for our garment manufacturing business were ~~71.5%~~69.1% of our total garment manufacturing business revenue in the nine months ended December 31, ~~2020,~~2021, compared with ~~72.5%~~71.5% in the nine months ended December 31, ~~2019.~~2020. The decreased in percentages was mainly due to the purchase cost of the raw materials dropped.

Labor costs for our garment manufacturing business were ~~19.9%~~21.8% of our total garment manufacturing business revenue in the nine months ended December 31, ~~2020,~~2021, compared with ~~16.2%~~19.9% in the nine months ended December 31, ~~2019.~~2020. The increase in percentages was mainly due to the rising wages in the PRC.

Overhead and other expenses for our garment manufacturing business accounted for ~~0.6%~~8.2% of our total garment ~~manufacturing~~ business revenue for the nine months ended December 31, ~~2020,~~2021, compared with ~~1.5%~~8.0% of total garment ~~manufacturing~~ business revenue for the nine months ended December 31, ~~2019.~~2020.

For our logistic business, we outsource some of the business to our contractors. The Company relied on a few subcontractors, in which the subcontracting fees to our largest contractor represented approximately ~~43.0%~~30.3% and ~~57.0%~~43.0% of total cost of revenues for our service segment for the nine months ended December 31, ~~2020~~2021 and ~~2019,~~2020, respectively. The percentage decreased as we used ~~less~~our own logistics more than the subcontractors ~~during the~~under COVID-19 ~~epidemic circumstance.~~epidemic. We have not experienced any disputes with our subcontractor and we believe we maintain good relationships with our contract logistics services provider.

Fuel, toll and other costs for our service business for the nine months ended December 31, ~~2020~~2021 were ~~$1,367,753~~approximately $1.4 million compared with ~~$1,385,870~~$1.4 million for the nine months ended December 31, ~~2019.~~2020. Fuel, toll and other costs for our service business accounted for ~~37.3%~~34.0% of our total service revenue for the nine months ended December 31, ~~2020,~~2021, compared with ~~29.7%~~37.3% for the nine months ended December 31, ~~2019. The increase in percentages was primarily attributable to decrease of use of subcontractors under the epidemic circumstance.~~2020.

Subcontracting fees for our service business for the nine months ended December 31, ~~2020 decreased 40.7%~~2021 increased 18.6% to ~~$1,576,228~~approximately $1.9 million from ~~$2,660,132~~$1.6 million for the nine months ended December 31, ~~2019.~~2020. Subcontracting fees accounted for ~~43.0%~~45.1% and ~~57.0%~~43.0% of our total service business revenue in the nine months ended December 31, 2021 and 2020, ~~and 2019,~~ respectively. ~~This decrease in percentages was primarily because the Company used less subcontractors under the epidemic circumstance.~~

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

For epidemic prevention supplies business, we have trading and own production. The cost of revenue included cost of merchandise and cost of our own products. The other cost of ~~merchandise was $14,684,284,~~the quarter represented ~~99.3%~~depreciation of ~~total cost of revenue of the epidemic prevention supplies business.~~machinery.

~~Total cost~~Gross profit

Garment manufacturing business gross profit was approximately $0.2 million, accounted for 8.2% of our total Garment manufacturing business revenue for the nine months ended December 31, 2020 was $22,776,087, compared with the amount of $7,221,683 for the nine months ended December 31, 2019. Total cost of sales as a percentage of total sales for the nine months ended December 31, 2020 was 108.4%, compared with 88.3% for the nine months ended December 31, 2019. Gross (loss) margin for the nine months ended December 31, 2020 was (8.4)% compared with 11.7% for the nine months ended December 31, 2019.

~~Gross profit~~

~~Gross profit of Garment manufacturing business for the nine months ended December 31, 2020 was $415,499 compared with $341,327 for the nine months ended December 31, 2019. Gross profit~~2021 and approximately $0.4 million, accounted for 8.0% of our total Garment manufacturing business revenue for the nine months ended December 31, ~~2020, compared with 9.7% for~~2020. The gross margin was 0.2% higher due to lower raw material cost in the ~~nine~~ months ended December 31, ~~2019. The decrease of gross margin was due to increase of labor cost.~~2021.

Gross profit in our logistics services business for the nine months ended December 31, ~~2020~~2021 was ~~$720,428~~approximately $0.9 million and ~~gross margin was 19.7%.~~accounted for 20.9% of our total Logistics services business revenue. Gross profit in our logistics services business for the nine months ended December 31, ~~2019~~2020 was ~~$619,386~~approximately $0.7 million and accounted for 19.7% of our total Logistics services business revenue. The increase of gross profit ratio was mainly because of a decrease of operating expenses due to replacement of old vehicles and shifting our strategic focus on high margin ~~was 13.3%.~~customers.

Gross profit in our property management and subleasing business for the nine months ended December 31, 2021 was approximately $0.5 million, or 14.2% of our total property management and subleasing business revenue. Gross profit in our property management and subleasing business for the nine months ended December 31, 2020 was ~~$22,000,~~$0.02 million, or 7.5% of our total property management and subleasing business revenue. ~~This is a new business developed in current period.~~

Gross loss in our epidemic prevention supplies business for the nine months ended December 31, 2020 was $2,919,950 and gross margin was (24.6)%. The large lost was mainly because the cost of materials increased significantly and rapidly while the selling price was fixed in the sales agreement with the customers.

	Nine months ended December 31,										Increase (decrease) in					Nine months ended December 31,										Increase (decrease) in
	2020					2019					2020 compared to 2019					2021					2020					2021 compared to 2020
	(In U.S. dollars, except for percentages)															(In U.S. dollars, except for percentages)
Gross (loss) profit	$	(1,762,023	)	100	%	$	960,713		100	%		(2,722,736	)	(283.4	)%
Gross profit																$	1,521,584		100	%	$	(1,762,023	)	(100	)%		3,283,607		186.4	%
Operating expenses:
Selling expenses		(376,975	)	21.4	%		(11,825	)	(1.2	)%		365,150		3,087.8	%		(135,310	)	(8.9	)%		(376,975	)	(21.4	)%		241,665		64.1	%
General and administrative expenses		(1,454,017	)	82.5	%		(1,857,288	)	(193.3	)%		(403,271	)	(21.7	)%		(1,375,513	)	(90.4	)%		(1,454,017	)	(82.5	)%		78,504	)	5.4	%
Total	$	(1,830,992	)	103.9	%	$	(1,869,113	)	(194.6	)%		(38,121	)	(2.0	)%	$	(1,510,823	)	(99.3	)%	$	(1,830,992	)	(103.9	)%		320,169		17.5	%
Loss from operations	$	(3,593,015	)	203.9	%	$	(908,400	)	(94.6	)%		2,684,615		295.5	%
Income from operations																$	10,761		(0.7	)%	$	(3,593,015	)	(203.9	)%		3,603,776		100.3	%

Selling, General and administrative expenses

Our selling expenses in our Garment manufacturing business segment for the nine months ended December 31, 2021 and 2020 was $0.0003 million and ~~2019 was $2,606 and $11,826,~~approximately $0.003 million, respectively. Our selling expenses in our logistics services segment was ~~$nil~~nil for the nine months ended December 31, ~~2020~~2021 and ~~2019,~~2020, respectively. Selling expenses in our property management and subleasing business was ~~$15,490 and nil~~$0.1 million for the nine months ended December 31, ~~2020 and 2019, respectively.~~2021. Selling expenses in our epidemic prevention supplies segment was ~~$358,879~~nil and approximately $0.4 million for the nine months ended December 31, ~~2020.~~2021 and 2020, respectively. Selling expenses consist primarily of advertisement, local transportation, unloading charges and product inspection charges. Total selling expenses for the nine months ended December 31, ~~2020 increased 30.9 times~~2021 decreased 64.1% to ~~$376,975~~$0.1 million from ~~$11,825~~$0.4 million for the nine months ended December 31, ~~2019,~~2020. It was mainly due to ~~the selling and~~decrease of marketing expenses ~~in the newly developed~~of epidemic prevention supplies ~~segment and property management and subleasing segment.~~business.

Our general and administrative expenses in our Garment manufacturing business segment for the nine months ended December 31, 2021 and 2020 was approximately $0.1 million and ~~2019 was $172,138 and $141,698,~~$0.2 million, respectively. Our general and administrative expenses in our logistics services segment, for the nine months ended December 31, 2021 and 2020 was approximately $0.7 million and ~~2019 was $627,922 and $788,021, respectively.~~$0.6 million. The general and administrative expenses in our property management and subleasing business was ~~$544~~approximately $0.3 million and $0.001 million for the nine months ended December 31, ~~2020.~~2021 and 2020, respectively. Our general and administrative expenses in our epidemic prevention supplies segment was ~~$18,767~~nil and approximately $0.02 million for the nine months ended December 31, ~~2020.~~2021 and 2020, respectively. Our general and administrative expenses in our corporate office for the nine months ended December 31, 2021 and 2020 was approximately $0.3 million and ~~2019 was $634,645 and $927,569,~~$0.6 million, respectively. General and administrative expenses consist 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, 2021 and 2020 ~~decreased 21.7% to $1,454,017~~was approximately $1.4 million and $1.5 million, respectively.

Income (loss) from ~~$1,857,288~~operations

Income from operations for the nine months ended December 31, ~~2019. The amount~~2021 was ~~$403,271 higher than in the nine months ended December 31, 2019 was mainly due to the professional fees for Form S1 filing.~~

~~Income (loss) from operations~~

~~Loss~~approximately $0.01 million and loss from operations for the nine months ended December 31, 2020 ~~and 2019~~ was ~~$(3,593,015) and $(908,400), respectively.~~approximately $3.6 million. Income from operations of ~~$240,423~~approximately $0.1 million and ~~$187,803~~$0.2 million was attributed from our garment manufacturing segment for the nine months ended December 31, ~~2020~~2021 and ~~2019,~~2020, respectively. Income ~~(loss)~~ from operations of ~~$92,506~~approximately $0.2 million and ~~$(168,634)~~$0.1 million was attributed from our logistics services segment for the nine months ended December 31, ~~2020~~2021 and ~~2019,~~2020, respectively. Income from operations of ~~$5,966~~approximately $0.05 million and $0.006 million was attributed from our ~~newly developed~~ property management and subleasing business for the nine months ended December 31, ~~2020. Loss~~2021 and 2020, respectively. Income (loss) from operations of ~~$3,297,265~~nil and approximately ($3.3) million was attributed from our epidemic prevention supplies segment for the nine months ended December 31, ~~2020.~~2021 and 2020, respectively. We incurred a loss from operations in corporate office of ~~$634,645~~approximately $0.3 million and ~~$927,569~~$0.6 million for the nine months ended December 31, ~~2020~~2021 and ~~2019,~~2020, respectively. The loss from our corporate office was mainly due to increase in legal and professional fees to comply with the SEC accounting, disclosure and reporting requirements.

Income Tax Expenses

Income tax expense for the nine months ended December ~~31,~~10, 2021 and 2020 was approximately $0.018 million and ~~2019 was $23,196 and $12,086,~~$0.023 million, respectively, ~~a 91.9% increase~~22.9% decrease compared to ~~2019.~~2020. The Company operates in the PRC and files tax returns in the PRC jurisdictions.

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

Yingxi HK was incorporated in Hong Kong and is subject to Hong Kong income tax ~~jurisdiction and income~~at a progressive tax rate of ~~each entity was described~~16.5%. No provision for income taxes in ~~the above section of analysis of three months’ results. Addentax,~~Hong Kong has been made as Yingxi ~~Yingxi~~ HK ~~QYTG, YX, HXPF, HPF and YS~~ had no taxable income for the nine months ended December 31, ~~2020~~2021 and ~~2019.~~2020.

~~Net~~QYTG and YX were incorporated in the PRC and is subject to the PRC Enterprise Income ~~(Loss)~~

~~We incurred a net loss of $3,560,206~~Tax (EIT) rate is 25%. No provision for income taxes in the PRC has been made as QYTG and ~~$947,485~~YX had no taxable income for the nine months ended December 31, ~~2020~~2021 and ~~2019, respectively. Our basic~~2020.

The Company is governed by the Income Tax Laws of the PRC. All Yingxi’s operating companies are subject to progressive EIT rates from 5% to 15% in 2021. The preferential tax rates will be expired at end of year 2022 and ~~diluted (loss) per share were $(0.14)~~the EIT rate will be 25% from year 2023.

The Company’s parent entity, Addentax Group Corp. is a U.S entity and ~~$(0.04)~~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, 2021 and 2020.

Net Income (Loss)

We incurred a net income of approximately $0.1 million and a net loss of $3.6 million for the nine months ended December 31, 2021 and 2020, respectively. Our basic and ~~2019,~~diluted earnings per share were $0.00 and ($0.14) for the nine months ended December 31, 2021 and 2020, respectively.

Summary of cash flows

Summary cash flows information for the nine months ended December 31, ~~2020~~2021 and ~~2019~~2020 is as follow:

Nine months ended December 31,
2020 2019
(In U.S. dollars)
Net cash used in operating activities $ (3,782,116 ) $ (1,058,936 )
Net cash used in investing activities $ (1,094,344 ) $ (94,864 )
Net cash provided by financing activities $ 4,718,213 $ 1,306,400

	Nine months ended December 31,
	2021			2020
	(In U.S. dollars)
Net cash provided by (used in) operating activities	$	383,825		$	(3,782,116	)
Net cash used in investing activities	$	(176,268	)	$	(1,094,344	)
Net cash (used in) provided by financing activities	$	(1,543,573	)	$	4,718,213

Net cash used in operating activities ~~consist~~in the nine months ended December 31, 2021 was approximately $4.2 million more than that of the nine months ended December 31, 2020. It was mainly because the net income of the nine months ended December 31, 2021 was approximately $0.1 million while it was a net loss of ~~$3,560,206, increased by depreciation and amortization of $83,210, loss on disposal of property and equipment of $1,472, and decrease in change~~approximately $3.6 million for the nine months ended December 31, 2020. The movement of operating assets and liabilities of ~~$306,592.~~the nine months ended December 31, 2021 resulted in cash inflow of approximately $0.1 million, while the movement of operating assets and liabilities of the nine months ended December 31, 2020 resulted in cash outflow of approximately $0.3 million. We will continue to improve our operating cash flow by closely monitoring the timely collection of accounts and other receivables. We generally do not hold any significant inventory for more than ninety days, as we typically manufacture upon customers’ order.

Net cash used in investing activities ~~consist~~for the nine months ended December 31, 2021 was approximately $0.9 million less than that of the nine months ended December 31, 2020. It was mainly because the purchase of plant and equipment ~~of $392,108~~ and ~~proceeds from disposal~~other assets in the nine months ended December 31, 2021 was approximately $0.2 million less than the purchase of plant and equipment in the nine months ended December 31, 2020. Moreover, there was a cash decrease of ~~$2,243, and cash decreased of $704,479 in~~approximately $0.7 million due to disposal of two ~~subsidiaries.~~subsidiaries in the nine months ended December 31, 2020.

Net cash ~~provided by~~of financing activities ~~consist~~for the nine months ended December 31, 2021 was approximately $6.2 million less than the nine months ended December 31, 2020. It was mainly because there was proceeds of $3.7 million from issue of ordinary shares in the nine months ended December 31, 2020; the net repayment of related party borrowings in current period was approximately $2.6 million more than that of ~~$6,605,044~~the nine months ended December 31, 2020; and ~~we received related party proceeds of $7,697,827; Repayment~~there was repayment of bank ~~loan~~borrowing of ~~$196,456 and draw down of new bank loan of $86,886; and Proceeds of $3,735,000 from subscription of ordinary shares offered to a shareholder.~~$0.1 million in the nine months ended December 31, 2020.

Financial Condition, Liquidity and Capital Resources

As of December 31, ~~2020,~~2021, we had cash on hand of ~~$356,728,~~approximately $0.5 million, total current assets of ~~$4,779,450~~approximately $4.8 million and current liabilities of ~~$12,661,861.~~approximately $9.5 million. We presently finance our operations ~~primarily from~~by using the cash flows ~~from borrowings~~borrowed from related parties and third parties. ~~We also raised equity fund of $3,735,000 by issuance of common stocks in August 2020.~~ We aim to improve our operating cash flows and anticipate that cash flows from our operations and borrowings from related parties and third parties will continue to be our primary source of funds to finance our short-term cash needs. The Company’s financial conditions raise substantial doubt about the Company’s ability to continue as a going concern. The ability to continue as a going concern is dependent upon the Company’s profit generating operations in the future and/or obtaining the necessary financing to meet its obligations and repay its liabilities arising from normal business operations when they become due. The Company expects to finance operations primarily through cash flow from revenue and capital contributions from the CEO. During the year, the CEO has provided financial support for the operations of the Company. In the event that the Company requires additional funding to finance the growth of the Company’s current and expected future operations as well as to achieve our strategic objectives, the CEO has indicated the intent and ability to provide additional equity financing.

The growth and development of our business will require a significant amount of additional working capital. We currently have limited financial resources and based on our current operating plan, we will need to raise additional capital in order to continue as a going concern. We currently do not have adequate cash to meet our short or long-term objectives. In the event additional capital is raised, it may have a dilutive effect on our existing stockholders.

We are subject to all the substantial risks inherent in the development of a new business enterprise within an extremely competitive industry. Due to the absence of a long standing operating history and the emerging nature of the markets in which we compete, we anticipate operating losses until we can successfully implement our business strategy, which includes all associated revenue streams. Our revenue model is new and evolving, and we cannot be certain that it will be successful. The potential profitability of this business model is unproven. We may never ever achieve profitable operations. Our future operating results depend on many factors, including demand for our services, the level of competition, and the ability of our officers to manage our business and growth. As a result of the emerging nature of the market in which we compete, we may incur operating losses until such time as we can develop a substantial and stable revenue base. Additional development expenses may delay or negatively impact the ability of the Company to generate profits. Accordingly, we cannot assure you that our business model will be successful or that we can sustain revenue growth, achieve or sustain profitability, or continue as a going concern.

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, ~~2020,~~2021, the market foreign exchange rate ~~had decreased to~~was RMB ~~6.53~~6.355 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 ~~(loss) gain~~loss for the ~~three and~~ nine months ended December 31, 2021 and 2020 was approximately $0.06 million and ~~2019 was $(85,728) and $(50,440), (173,879) and $58,715,~~$0.2 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, ~~2020~~2021 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.

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, ~~2020.~~2021. Based on the evaluation of these disclosure controls and procedures, and in light of the material weaknesses found in our internal controls over financial reporting, our Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures were not effective.

Changes in Internal Controls over Financial Reporting

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

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		XBRL Instance Document
101.SCH		XBRL Taxonomy Extension Schema Document
101.CAL		XBRL Taxonomy Extension Calculation Linkbase Document
101.DEF		XBRL Taxonomy Extension Definition Linkbase Document
101.LAB		XBRL Taxonomy Extension Label Linkbase Document
101.PRE		XBRL Taxonomy Extension Presentation Linkbase Document

*Filed herewith.

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 ~~22, 2021~~14, 2022	By:	/s/ Hong Zhida
		Hong Zhida
		President, Chief Executive Officer and Director,
		(Principal Executive Officer)

Date: February ~~22, 2021~~14, 2022	By:	/s/ Huang Chao
		Huang Chao
		Chief Financial Officer and Treasurer
		(Principal Financial and Accounting Officer)

Related parties borrowings	December 31, 2020		March 31, 2020
Zhida Hong	$	5,698,498	$	5,043,489
Bihua Yang		244,094		-
Dewu Huang		379,253		81,287
Zhongpeng Chen		-		160,427
Jinlong Huang		127,060		144,237
	$	6,448,905	$	5,429,440

	December 31, 2020		March 31, 2020
Accrued wages and welfare		58,874		61,776
Other tax payable		51,387		25,206
Rental payable		52,833		24,972
Customers’ deposits		210,785		-
Other payables		37,437		118,963
	$	411,316	$	230,917

Financial position of DT	September 30, 2020, date of disposal
Current assets	$	675,515
Noncurrent assets		-
Current liabilities		(70,742	)
Net assets	$	604,773

Financial position of HPF	November 16, 2020, date of disposal
Current assets	$	742,798
Noncurrent assets		42,816
Current liabilities		(567,454	)
Net assets	$	218,160