ADDENTAX GROUP CORP. 10-Q

Item 1. Financial Statements and Supplementary Data ADDENTAX GROUP CORP. FINANCIAL STATEMENTS For the three months ended June 30, 2021 and 2020 TABLE OF CONTENTS Condensed Consolidated Balance sheets as of June 30, 2021 (unaudited) and March 31, 2021 (unaudited) F-2 Condensed Consolidated Statements of Income and Comprehensive Income for the Three months ended June 30, 2021 and 2020 (unaudited) F-3 Condensed Consolidated Statements of Changes in Equity for the three months ended June 30, 2021 and 2020 (unaudited) F-4 Condensed Consolidated Statements of Cash Flows for the three months ended June 30, 2021 and 2020 (unaudited) F-5 Notes to Condensed Consolidated Financial Statements for the three months ended June 30, 2021 and 2020 (unaudited) F-6 – F-15 F- 1 ADDENTAX GROUP CORP. AND SUBSIDIARIES UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS (In U.S. Dollars, except share data or otherwise stated) (UNAUDITED) June 30, 2021 March 31, 2021 ASSETS CURRENT ASSETS Cash and cash equivalents $ 972,171 $ 1,845,077 Accounts receivables, net 6,789,410 4,757,518 Inventories 408,328 270,434 Prepayments and other receivables 1,001,543 684,161 Advances to suppliers 738,687 355,454 Amount due from related party 238,743 84,838 Total current assets 10,148,882 7,997,482 NON-CURRENT ASSETS Plant and equipment, net 875,831 793,977 Operating lease right of use asset 8,941,288 9,632,625 Total non-current assets 9,817,119 10,426,602 TOTAL ASSETS $ 19,966,001 $ 18,424,084 LIABILITIES AND EQUITY CURRENT LIABILITIES Short-term loan $ 154,833 $ 152,607 Accounts payable 4,501,868 3,121,373 Amount due to related parties 5,636,053 4,913,964 Advances from customers - 3,029 Accrued expenses and other payables 765,027 681,984 Operating lease liability current portion 3,666,026 3,555,458 Total current liabilities 14,723,807 12,428,415 NON-CURRENT LIABILITIES Operating lease liability 5,275,261 6,077,167 TOTAL LIABILITIES $ 19,999,068 $ 18,505,582 EQUITY Common stock ($ 0.001 par value, 50,000,000 shares authorized, 26,693,004 shares issued and outstanding at June 30, 2021 and March 31, 2021) $ 26,693 $ 26,693 Additional paid-in capital 6,815,333 6,815,333 Retained earnings ( 6,755,281 ) ( 6,834,228 ) Statutory reserve 13,821 13,821 Accumulated other comprehensive loss ( 133,633 ) ( 103,117 ) Total deficit ( 33,067 ) ( 81,498 ) TOTAL LIABILITIES AND EQUITY $ 19,966,001 $ 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 OPERATIONS AND COMPREHENSIVE LOSS (In U.S. Dollars, except share data or otherwise stated) Three months ended June 30, 2021 2020 REVENUES $ 4,286,431 $ 5,918,215 COST OF REVENUES ( 3,703,026 ) ( 5,120,576 ) GROSS PROFIT 583,405 797,639 OPERATING EXPENSES Selling and marketing ( 46,390 ) ( 153,245 ) General and administrative ( 460,315 ) ( 455,962 ) Total operating expenses ( 506,705 ) ( 609,207 ) INCOME FROM OPERATIONS 76,700 188,432 Interest income 1,967 42 Interest expenses ( 2,232 ) ( 4,960 ) Other income (expense), net 13,237 23,745 INCOME BEFORE INCOME TAX EXPENSE 89,672 207,259 INCOME TAX EXPENSE ( 10,725 ) ( 3,359 ) NET INCOME 78,947 203,900 Foreign currency translation loss ( 30,516 ) ( 4,455 ) TOTAL COMPREHENSIVE INCOME $ 48,431 $ 199,445 EARNING PER SHARE Basic and diluted 0.00 0.01 Weighted average number of shares outstanding – Basic and diluted 26,153,818 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) Common Stock Additional Retained earnings Accumulated other Shares Amount paid-in capital Unrestricted Statutory reserve comprehensive loss Total Equity BALANCE AT MARCH 31, 2020 25,346,004 $ 25,346 $ 61,050 $ ( 3,233,122 ) $ 23,514 $ 56,488 $ ( 3,066,724 ) Foreign currency translation - - - - - ( 4,455 ) ( 4,455 ) Net income for the period - - - 203,900 - - 203,900 BALANCE AT JUNE 30, 2020 25,346,004 $ 25,346 $ 61,050 $ ( 3,029,222 ) $ 23,514 $ 52,033 $ ( 2,867,279 ) 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 - - - - - ( 30,516 ) ( 30,516 ) Net income for the period - - - 78,947 - - 78,947 BALANCE AT JUNE 30, 2021 26,693,004 $ 26,093 $ 6,815,333 $ ( 6,755,281 ) $ 13,821 $ ( 133,633 ) $ ( 33,067 ) See accompany notes to the unaudited condensed consolidated financial statements. F- 4 ADDENTAX GROUP CORP. AND SUBSIDIARIES UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (In U.S. Dollars, except share data or otherwise stated) Three Months Ended June 30 2021 2020 CASH FLOWS FROM OPERATING ACTIVITIES: Net income $ 78,947 $ 203,900 Adjustments to reconcile net income to net cash used in operating activities: Depreciation 33,986 23,473 Loss on disposal of plant and equipment - 4,947 Changes in operating assets and liabilities, net of effects from disposal of subsidiaries: Accounts receivable ( 2,031,892 ) 2,823,170 Inventories ( 137,894 ) ( 249,262 ) Advances to suppliers ( 383,233 ) ( 168,478 ) Other receivables ( 317,382 ) 85,722 Accounts payables 1,380,495 ( 2,087,678 ) Accrued expenses and other payables 129,338 17,042 Advances from customers ( 3,029 ) 145,555 Net cash (used in) provided by operating activities $ ( 1,250,664 ) $ 798,391 CASH FLOWS FROM INVESTING ACTIVITIES: Purchase of plant and equipment and other assets ( 104,235 ) ( 143,148 ) Net cash used in investing activities $ ( 104,235 ) $ ( 143,148 ) CASH FLOWS FROM FINANCING ACTIVITIES: Proceeds from related party borrowings 1,292,956 3,302,608 Repayment of related party borrowings ( 806,994 ) ( 2,942,222 ) Net cash provided by financing activities $ 485,962 $ 360,386 NET (DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS ( 868,937 ) 1,015,629 Effect of exchange rate changes on cash and cash equivalents ( 3,969 ) 2,099 Cash and cash equivalents, beginning of the period 1,845,077 531,681 CASH AND CASH EQUIVALENTS, END OF THE PERIOD $ 972,171 $ 1,549,409 Supplemental disclosure of cash flow information: Cash paid during the year for interest $ 1,936 $ 3,765 Cash paid during the year for income tax $ 10,725 $ 3,359 Supplemental disclosure of non-cash investing and financing activities: Right-of-use assets obtained in exchange for operating lease obligations $ 178,189 $ - 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 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, 2021 filed with the Securities and Exchange Commission (“SEC”) on June 29, 2021 (“2020 Form 10-K.”). 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 $ 78,947 and $ 203,900 for the three months ended June 30, 2021 and 2020, respectively. As of June 30, 2021 and March 31, 2021, the Company had net current liability of $ 4,574,925 and $ 4,430,933 , respectively, and a deficit on total equity of $ 33,067 and $ 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 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 for the three months ended June 30, 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. RELATED PARTY TRANSACTIONS SCHEDULE OF RELATED PARTIES 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 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 June 30, 2021 and March 31, 2021: SCHEDULE OF RELATED PARTIES TRANSACTION Amount due from related party June 30, 2021 March 31, 2021 Hongye Financial Consulting (Shenzhen) Co., Ltd. 238,743 84,838 $ 238,743 $ 84,838 Related party borrowings June 30, 2021 March 31, 2021 Zhida Hong (1) $ 3,705,193 $ 3,727,371 Bihua Yang (2) 382,437 370,523 Dewu Huang (3) 1,420,186 712,064 Jinlong Huang 128,237 104,006 $ 5,636,053 $ 4,913,964 (1) The decrease was due to net repayment of debt due to Zhida Hong. During the three months ended June 30, 2021, the Company received financial support of $ 0.2 million from Zhida Hong and repaid $ 0.2 million of debts due to him. (2) Being financial support from Bihua Yang for XKJ’s daily operation. (3) The increase of 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. F- 8 5. INVENTORIES Inventories consist of the following as of June 30, 2021 and March 31, 2021: SCHEDULE OF INVENTORIES June 30, 2021 March 31, 2021 Raw materials $ 365,679 $ 234,871 Work in progress 13,199 - Finished goods 29,450 35,564 Total inventories $ 408,328 $ 270,434 There is no inventory write-off for the three months ended June 30, 2021 and 2020. 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 June 30, 2021 and March 31, 2021: SCHEDULE OF PREPAYMENTS AND OTHER RECEIVABLES June 30, 2021 March 31, 2021 Prepayment 476,453 - Deposit 48,544 155,830 Receivable of consideration on disposal of subsidiaries 263,679 258,929 Other receivables 212,867 269,402 Prepayments and other receivables $ 1,001,543 $ 684,161 8. PROPERTY, PLANT AND EQUIPMENT Property, plant and equipment consists of the following as of June 30, 2021 and March 31, 2021: SCHEDULE OF PROPERTY, PLANT AND EQUIPMENT June 30, 2021 March 31, 2021 Production plant $ 72,687 $ 71,642 Motor vehicles 1,099,061 1,020,893 Office equipment 50,673 14,073 1,222,421 1,106,608 Less: accumulated depreciation ( 346,590 ) ( 312,631 ) Plant and equipment, net $ 875,831 $ 793,977 F- 9 Depreciation expense for the three months ended June 30, 2021 and 2020 was $ 29,389 and $ 23,473 , 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 (RMB 1,000,000 ) for daily operations. The loans are guaranteed at no cost by the legal representative of HSW. As of June 30, 2021, the Company has borrowed $ 154,833 (RMB 1,000,000 ) (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 will be due on September 30, 2021. In August 2020, DT entered into a new facility agreement with Webank and obtained a credit facility of $ 88,358 (RMB 600,000 ) 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 (RMB 590,000 ) 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. 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 months ended June 30, 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 months ended June 30, 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 months ended June 30, 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 RECONCILIATION OF INCOME TAXES Three months ended June 30, 2021 2020 PRC statutory tax rate 25 % 25 % Computed expected benefits 22,418 51,815 Temporary differences ( 39,459 ) ( 103,932 ) Permanent difference 1,478 - Changes in valuation allowance 26,288 55,476 Income tax expense $ 10,725 $ 3,359 (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 four 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 in the segment structure is presented in the following tables: SCHEDULE OF SEGMENT REPORTING INFORMATION, BY SEGMENT F- 11 Garment Logistics Services Property management and leasing Epidemic prevention supplies Corporate and other Totals Revenue from external customers 2,069,141 1,108,042 1,109,248 - - 4,286,431 Intersegment revenue 2,417 - - - - 2,417 Interest income 1,860 21 81 - 5 1,967 Interest expense 1,993 165 - - 74 2,232 Depreciation and amortization 659 27,240 4,597 1,490 - 33,986 Operating income (loss) 123,629 4,863 57,211 - ( 109,003 ) 76,700 Segment assets 6,384,543 2,559,283 9,256,608 76,691 1,688,876 19,966,001 Expenditures for segment assets - 76,650 27,585 - - 104,235 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 REVENUE AND LONG-LIVED ASSETS, BY GEOGRAPHICAL LOCATION Geographic Information Revenues Long-Lived Assets China 4,286,431 9,817,118 Total 4,286,431 9,817,118 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 June 30, 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 COMPONENTS OF LEASE EXPENSE Three months ended June 30, 2021 2020 Operating lease cost 934,666 111,706 Short-term lease cost 20,902 - Lease cost $ 955,568 $ 111,706 The following table summarizes supplemental information related to leases: SCHEDULE OF SUPPLEMENTAL INFORMATION RELATED TO LEASES Three months ended June 30, 2021 2020 Cash paid for amounts included in the measurement of lease liabilities Operating cash flow from operating leases $ 955,568 $ 111,706 Right-of-use assets obtained in exchange for new operating leases liabilities 178,189 - Weighted average remaining lease term - Operating leases (years) 2.5 4.0 Weighted average discount rate - Operating leases 4.75 % 4.35 % The following table summarizes the maturity of operating lease liabilities: SCHEDULE OF MATURITY OF OPERATING LEASE LIABILITIES Years ending June 30 Lease cost 2021 $ 3,840,163 2022 3,851,328 2023 2,014,865 2024 14,798 Total lease payments 9,721,154 Less: Interest ( 779,866 ) Total $ 8,941,288 F- 13 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 6.459 and 6.553 as of June 30 June, 2021 and March 31, 2021, respectively. Revenue and expenses are translated at the average yearly exchange rates, which was 6.461 and 6.779 for the three months ended June 30, 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 customers over accounts receivable for each segment as of June 30, 2021 and March 31, 2021. SCHEDULE OF CONCENTRATION OF RISK BY CUSTOMERS Garment manufacturing segment June 30, 2021 March 31, 2021 Customer A 98.8 % 98.4 % Customer B 1.1 % 1.6 % Customer C 0.1 % - The high concentration as of June 30, 2021 was mainly due to business development of a large distributor of garments. Logistics services segment June 30, 2021 March 31, 2021 Customer A 19.8 % 16.6 % Customer B 17.8 % 30.2 % Customer C 7.7 % 5.5 % Customer D 6.7 % 5.5 % Customer E 6.5 % 1.8 % Property management and subleasing SCHEDULE OF PROPERTY MANAGEMENT AND SUBLEASING June 30, 2021 March 31, 2021 Customer A 100 % - Epidemic prevention supplies segment No accounts receivables in this segment. For the three months ended June 30, 2021, one customer from garment segment provided more than 10 % of total revenue of the Company, represented 98.8 % of total revenue of the Company for the three months (2020: 62.8 % ). F- 14 The high concentration in three months ended June 30, 2021 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 months ended June 30, 2021 and 2020. SCHEDULE OF INVENTORY PURCHASES FROM SUPPLIERS Three months ended June 30, 2021 2020 Garment manufacturing segment 100.0 % 97.9 % Logistics services segment 61.6 % 97.87 % Property management and subleasing 100.0 % - % Epidemic prevention supplies - % 100.0 % (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 June 30, 2021, the total outstanding borrowings amounted to $ 154,833 (RMB 1,000,000 ) 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. O F- 15