The following discussion and analysis of our financial condition and results of
operations for the years ended March 31, 2021 and 2020 should be read in
conjunction with the Financial Statements and corresponding notes included in
this Annual Report on Form 10-K. 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 logistic service 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 segments. For the
fiscal year ended 2020 and in previous fiscal years: (i) garment manufacturing
and (ii) logistics services. During the fiscal year 2021, we developed two new
business segments: 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 four 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, the Company disposed of DT to a third party at fair value,
which was also its carrying value as of September 30, 2020.



Our logistics business consists of delivery and courier services covering
approximately seven provinces in China. Although we have our own motor vehicles
and drivers, we currently outsource some of the business to our contractors. We
believe outsourcing allows us to maximize our capacity and maintain flexibility
while reducing capital expenditures and the costs of keeping drivers during slow
seasons. We conduct our logistic operations through three wholly owned
subsidiaries, namely Shenzhen Xin Kuai Jie Transportation Co., Ltd
("XKJ"),Shenzhen Hua Peng Fa Logistic Co., Ltd ("HPF"), and Shenzhen Yingxi Peng
Fa Logistic Co., Ltd ("PF") which are located in the Guangdong province, China.
In November, 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 business 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 reselling of epidemic
prevention supplies purchased from third parties in both domestic and overseas
markets. We conduct our manufacturing of the epidemic prevention products in YS.
We conduct the trading of epidemic prevention suppliers through Addentax Group
Corp. ("ATXG") and Shenzhen Qianhai Yingxi Industrial Chain Services Co., Ltd
("YX"), an indirect wholly owned subsidiary of the Company.



  22







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. 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 March 31, 2021, we provide logistic service 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 of 2021.



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 logistic service revenue in our
third and fourth quarters. These trends primarily result from the timing of
seasonal garment manufacturing shipments and holiday periods in the logistic
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 the delivery of finished 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.



  23







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-line basis over the term of the relevant lease. Initial direct costs
incurred in negotiating and arranging an operating lease are added to the
carrying amount of the leased asset and recognized on a straight-line basis

over
the lease term.



  24






Recently issued and adopted 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.

Results of Operations for the years ended March 31, 2021 and 2020





The following tables summarize our results of operations for the years ended
March 31, 2021 and 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.



                                                                                                     Increase
                                                                                                  (decrease) in
                                                                                                 2021 compared to
                                              2021                           2020                      2020
                                          (In U.S. dollars, except for percentages)
Revenue                            $  24,734,759        100.0 %    $ 10,172,379         100 %    $     14,562,380        143.2 %
Cost of revenues                     (25,921,936 )     (104.8 )%     (8,787,018 )     (86.4 )%        (17,134,918 )     (195.0 )%
Gross (loss) profit                   (1,187,177 )       (4.8 )%      1,385,361        13.6 %          (2,572,538 )     (185.7 )%
Operating expenses                    (2,420,997 )       (9.8 )%     (2,249,679 )     (22.1 )%           (171,318 )       (7.6 )%
Loss from operations                  (3,608,174 )      (14.6 )%       (864,318 )      (8.5 )%         (2,743,856 )     (317.5 )%
Other income, net                         62,784          0.3 %         (79,560 )      (0.8 )%            142,344        178.9 %
Net finance cost                         (18,912 )       (0.1 )%        (20,669 )      (0.2 )               1,757          8.5 %
Income tax expense                       (25,867 )       (0.1 )%        (16,070 )      (0.2 )%             (9,797 )      (61.0 )%
Net loss                           $  (3,590,169 )      (14.5 )%   $   (980,617 )      (9.6 )%   $     (2,609,552 )     (266.1 )%




Revenue



Total revenue for the year ended March 31, 2021 significantly increased by
approximately $14.5 million, or approximately 143.2%, as compared with the year
ended March 31, 2020. The significant increase was mainly due to the increase of
garment manufacturing production capacity in YBY, a newly setup subsidiary in
2020, and the epidemic prevention supplies business newly developed in 2020.



Revenue generated from our garment manufacturing business contributed
approximately $6.9 million, or approximately 27.9%, of our total revenue for the
year ended March 31, 2021. Revenue generated from the segment contributed
approximately $4.3 million, or approximately 42.3%, of our total revenue for the
year ended March 31, 2020. The increase of approximately $2.6 million was mainly
due to an increase of $5.4 million in YBY's revenue, offset by the decrease of
approximately $0.6 million and $2.2 million in HSW's and DT's revenue,
respectively.



Revenue generated from our logistics services business contributed approximately
$4.6 million, or approximately 18.5%, of our total revenue for the year ended
March 31, 2021. Revenue generated from the segment contributed approximately
$5.9 million, or approximately 57.7%, of our total revenue for the year ended
March 31, 2020. The decrease of approximately $1.3 million was mainly due to
COVID-19, as we cannot complete timely logistics services deliveries.



Revenue generated from our property management and subleasing business contributed approximately $1.3 million, or approximately 5.2%, of our total revenue for the year ended March 31, 2021. This is a new business segment developed in 2020.





Revenue generated from our epidemic prevention supplies business contributed
approximately $12.0 million, or approximately 48.4%, of our total revenue for
the year ended March 31, 2021. This is a new business developed in the 2020. It
included revenue from trading of merchandise and revenue from sales of our own
products. The revenue from trading of merchandise was approximately $11.7
million, representing approximately 97.5% of total revenue from the epidemic
prevention supplies business.



  25







Cost of revenue



                                                                                                   Increase
                                                                                                 (decrease) in
                                                                                                 2021 compared
                                               2021                          2020                   to 2020
                                     (In U.S. dollars, except for percentages)
Net revenue for garment
manufacturing                        $   6,896,410       100.0 %    $ 4,298,518         100 %   $     2,597,892         60.4 %
Raw materials                            4,892,837        70.9 %      3,127,959        72.8 %         1,764,878         56.4
Labor                                    1,388,069        20.1 %        704,104        16.4 %           683,965         97.1
Other and Overhead                          58,417         0.9 %         70,381         1.6 %           (11,964 )      (17.0 )%
Total cost of revenue for garment
manufacturing                            6,339,323        91.9 %      3,902,444        90.8 %         2,436,879         62.4 %
Gross profit for garment
manufacturing                              557,087         8.1 %        396,074         9.2 %           161,013         40.7 %

Net revenue for logistics services       4,580,733       100.0 %      5,873,861       100.0 %        (1,293,128 )      (22.0 )%
Fuel, toll and other cost of
logistics services                       1,763,441        38.5 %      1,932,149        32.9 %          (168,708 )       (8.7 )%
Subcontracting fees                      1,817,975        39.5 %      2,952,425        50.3 %        -1,134,450 )      (38.4 )%
Total cost of revenue for
logistics services                       3,581,416        78.0 %      4,884,574        83.2 %        (1,303,158 )      (26.7 )%
Gross Profit for logistics
services                                   999,317        22.0 %        989,287        16.8 %            10.030          1.0 %

Net revenue for property
management and subleasing                1,278,517       100.0 %              -           -           1,278,517
Total cost of revenue for property
management and subleasing                1,120,632        87.3 %              -           -           1,120,632
Gross Profit for property
management and subleasing                  157,885        12.7 %              -           -             157,885

Net revenue for epidemic
prevention supplies                     11,979,099       100.0 %              -           -          11,979,099
Merchandise/Finished goods/Raw
materials                               14,771,316       123.3                -           -          14,771,316
Labor                                       67,885         0.6                -           -              67,885
Other and Overhead                          41,364         0.3                -           -              41,364
Total cost of revenue for epidemic
prevention supplies                     14,880,565       124.2 %              -           -          14,880,565
Gross profit for epidemic
prevention supplies                     (2,901,466 )     (24.2 )%             -           -          (2,901,466 )

Total cost of revenue                $  25,921,936       104.9 %    $ 8,787,018        86.4 %   $    17,134,918        195.0 %
Gross profit                         $  (1,187,177 )      (4.7 )%   $ 1,385,361        13.6 %   $    (2,572,538 )     (185.7 )%




For our garment manufacturing business, we purchased 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 98.7% and 92.7% of raw materials purchases for the years ended
March 31, 2021 and 2020, respectively. Two and one suppliers provided more than
10% of our raw materials purchases for the years ended March 31, 2021 and 2020,
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 materials cost for our garment manufacturing business was approximately
70.9% of our total garment manufacturing business revenue in the year ended
March 31, 2021, as compared with approximately 72.8% in the year ended March 31,
2020. The decrease in raw materials cost for our garment manufacturing business
was mainly due to the purchase cost of the raw materials remained consistent,
offset by the continued rising labor costs in the PRC.



Labor costs for our garment manufacturing business was approximately 20.1% of
our total garment manufacturing business revenue in the year ended March 31,
2021, as compared with 16.4% in the year ended March 31, 2020. The increase in
labor costs for our garment manufacturing business was mainly due to the
continued rising labor costs in the PRC.



Overhead and other expenses for our garment manufacturing business accounted for
approximately 0.9% of our total garment manufacturing business revenue for the
year ended March 31, 2021, as compared with 1.6% of total garment manufacturing
business revenue for the year ended March 31, 2020.



  26







For our logistic business, we outsource some of the business to our
subcontractors. Our subcontractors are contract logistic service provides. The
Company relied on a few subcontractors, which the subcontracting fees to our
largest contractor represented approximately 7.6% and 25.6% of total cost of
revenues for our service segment for the years ended March 31, 2021 and 2020,
respectively. The decrease in subcontracting fee was mainly due to less usage of
subcontractors during the COVID-19 epidemic circumstance. We have not
experienced any disputes with our subcontractors and we believe we maintain good
relationships with our contract logistic service provider.



Fuel, toll and other costs for our logistics business for the year ended March
31, 2021 was approximately $1.8 million, as compared with $1.9 million for the
year ended March 31, 2020. Fuel, toll and other costs for our logistics business
accounted for approximately 38.5% of our total service revenue for the year
ended March 31, 2021, as compared with approximately 32.9% for the year ended
March 31, 2020. The decrease in fuel, toll and other costs was primarily
attributable to the decreased usage of subcontractors during the COVID-19
epidemic circumstance.



Subcontracting fees for our logistics business for the year ended March 31, 2021
decreased to approximately $1.8 million from $2.9 million for the year ended
March 31, 2020, representing a decrease of approximately 38.7%. Subcontracting
fees accounted for 39.7% and 50.3% of our total logistics business revenue in
the years ended March 31, 2021 and 2020, respectively. The decrease in
subcontracting fees was primarily because we used less subcontractors during the
COVID-19 epidemic circumstance.



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





  27







For epidemic prevention supplies business, we have sales of our own branded
products as well as purchases and resale of goods of other brands. The cost of
revenue included cost of merchandise and cost of our own products. The cost of
merchandise was approximately $14.7 million, representing approximately 98.6% of
our total cost of revenue of the epidemic prevention supplies business.



Gross profit



Gross profit of garment manufacturing business for the year ended March 31, 2021
was approximately $0.6 million, as compared with approximately $0.4 million for
the year ended March 31, 2020. Gross profit ratio was approximately 8.1% of
revenue of the segment, as compared with approximately 9.2% for the year ended
March 31, 2020. The decrease of gross margin was due to an increase of raw
materials costs and labor costs.



Gross profit of our logistics services business for the year ended March 31,
2021 was approximately $1.0 million and gross profit ratio was approximately
22.0%. Gross profit of the segment for the year ended March 31, 2020 was
approximately $1.0 million and gross profit ratio was approximately 16.8%. 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 customers.



Gross profit of our property management and subleasing business for the year
ended March 31, 2021 was approximately $0.2 million, representing approximately
12.7% of our total property management and subleasing business revenue. This is
a new business developed in 2021.



Gross loss of our epidemic prevention supplies business for the year ended March
31, 2021 was approximately $2.9 million and gross margin was approximately
negative 24.2%. The significant loss was mainly due to the significant increase
cost of materials while the selling price was fixed in the sales agreement with
the customers.



                                                                                       Increase (decrease) in
                                  2021                          2020                    2021compared to 2020
                               (In U.S. dollars, except for percentages)

Gross (loss) profit     $ (1,187,177 )        100 %   $  1,385,361          100 %       (2,572,538 )      (185.7 )%
Operating expenses:
Selling expenses            (413,654 )       34.5 %        (13,406 )       (1.0 )%        (400,248 )     (2985.6 )%
General and
administrative
expenses                  (2,007,343 )      165.3 %     (2,236,273 )     (161.4 )%         228,930          10.2 %
Total                   $ (2,420,997 )      199.8 %   $ (2,249,679 )

(162.4 )% (171,318 ) (7.6 )% Loss from operations $ (3,608,174 ) 299.8 % $ (864,318 ) (62.4 )% (2,743,856 ) (317.5 )%

Selling, General and administrative expenses





Our selling expenses in our garment manufacturing segment for the years ended
March 31, 2021 and 2020 was $0.04 million and $0.013 million, respectively. Our
selling expenses in our logistics services segment for the year ended March 31,
2021 and 2020 was nil and nil, respectively. Selling expenses in our property
management and subleasing business was $0.05 million and nil for the year ended
March 31, 2021 and 2020, respectively. Selling expenses in our epidemic
prevention supplies business segment was approximately $0.36 million and nil for
the year ended March 31, 2021 and 2020. Selling expenses consist primarily of
local transportation, unloading charges and product inspection charges. Total
selling expenses for the year ended March 31, 2021 significantly increased by
approximately 215.4%to approximately $0.41 million from approximately $0.13
million for the year ended March 31, 2020.



  28







Our general and administrative expenses in our garment manufacturing segment for
the years ended March 31, 2021 and 2020 was approximately $0.23 million and
$0.17 million, respectively. Our general and administrative expenses in our
logistics services segment for the year ended March 31, 2021 and 2020 was
approximately $0.81 million and $0.91 million, respectively. The general and
administrative expenses in our property management and subleasing business was
approximately $0.10 million for the year ended March 31, 2021. The general and
administrative expenses in our epidemic prevention supplies business segment was
$0.02 million for the year ended March 31, 2021. Our general and administrative
expenses in our corporate office for the year ended March 31, 2021 and 2020 was
approximately $0.85 million and $1.16 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 year ended March 31, 2021
decreased approximately 10.2% to approximately $2.01 million from approximately
$2.24 million for the year ended March 31, 2020. It was mainly due to the
professional fees for the uplisting Form S-1 filing in the year ended March 31,
2019 and lower administrative expenses in XKJ resulting from shifting more
business to outside subcontractors in the year ended March 31, 2021.



Loss from operations



Loss from operations for the years ended March 31, 2021 and 2020 was
approximately $3.61 million and $0.86, respectively. Income from operations of
approximately $0.33 million and $0.22 million was attributed from our garment
manufacturing segment for the years ended March 31, 2021 and 2020, respectively.
Income from operations of approximately $0.19 million and $0.08 million was
attributed from our logistics services segment for the years ended March 31,
2021 and 2020, respectively. Income from operations of $0.004 million was
attributed from our newly developed property management and subleasing business
for the year ended March 31, 2021. Loss from operations of approximately $3.28
million was attributed from our epidemic prevention supplies business segment
for the year ended March 31, 2021. We incurred general and administrative
expenses in corporate office of approximately $0.85 million and approximately
$1.16 million for the year ended March 31, 2021 and 2020, respectively.



Income Tax Expenses



Income tax expense for the years ended March 31, 2021 and 2020 was $0.03 million
and $0.02 million, respectively, a 61.0% increase compared to 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 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 years ended March 31, 2021 and 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 years ended March 31, 2021 and
2020.



The Company is governed by the Income Tax Laws of the PRC. Yingxi's operating
companiesare subject to progressive EIT rate from 5% to 15% in year ended March
31, 2021. The preferential tax rates 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 years ended March 31, 2021 and 2020.



  29







Net Loss



We incurred a net loss of approximately $3.59 million and $0.98 million for the
years ended March 31, 2021 and 2020, respectively. Our basic and diluted
earnings per share were $0.14 and $0.04 for the year ended March 31, 2021 and
2020, respectively.



Summary of cash flows



Summary cash flows information for the years ended March 31, 2021 and 2020 is as
follow:



                                                2021             2020
                                                  (In U.S. dollars)

Net cash used in operating activities $ (4,223,008 ) $ (1,150,853 ) Net cash used in investing activities $ (563,052 ) $ (136,001 ) Net cash provided by financing activities $ 6,099,656 $ 1,555,984


Net cash used in operating activities in the year ended March 31, 2021 was
approximately $3.1 million more than that of the year ended March 31, 2020. It
was mainly because the net loss of fiscal year ended March 31, 2021 was
approximately $2.6 million more than the net loss of the fiscal year ended March
31, 2020. The movement of operating assets and liabilities of the year ended
March 31, 2021 resulted in negative cash flow of approximately $0.8 million,
while the movement of operating assets and liabilities of the year ended March
31, 2020 resulted in negative cash flow of approximately $0.3 million. We shall
try 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 for the year ended March 31, 2021 was
approximately $0.4 million more than that of the year ended March 31, 2020. It
was mainly because the purchase of plant and equipment in the year ended March
31, 2021, which mainly motor truckers, was approximately $0.3 million more than
the purchase of plant and equipment in prior year. The Company had a cash
decrease of approximately $0.7 million in disposal of one subsidiary in garment
manufacturing segment and one subsidiary in logistics services segment. The
Company also had proceeds of approximately $0.5 million from the disposal of the
two subsidiaries.



Net cash provided by financing activities for the year ended March 31, 2021 was
approximately $4.5 million more than the year ended March 31, 2020. It was
mainly because the Company had net cash decrease of approximately $2.5 million
to related parties' borrowings, net cash decrease of approximately $0.3 million
attributable to bank borrowings and a proceeds of approximately $6.7 million
from issue of ordinary shares.



Financial Condition, Liquidity and Capital Resources





As of March 31, 2021, we had cash on hand of approximately $1.8 million, total
current assets of approximately $8.0 million and current liabilities of
approximately $12.4 million. We presently finance our operations primarily from
cash flows from borrowings from related parties and third parties. We also
raised equity fund of approximately $3.74 million and approximately $3.0 million
from the issuance of common stocks in August 2020 and March 2021, respectively.
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 the 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 March 31, 2021, the market foreign exchange rate had
increased to RMB 6.55 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 for the years ended March 31, 2021 and 2020 was $(0.2)
million and $0.1 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 March 31, 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.

© Edgar Online, source Glimpses