What changed in this filing

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Item 2. Management’s Discussion and Analysis

2022-02-14 compared with 2021-11-19 · 410 added, 408 removed, 254 unchanged (76% of the section changed)

Management’s Discussion and Analysis of Financial Condition and Results of Operations

following discussion and analysis of our financial condition and results of operations for the three and six months ended September

30, 2021 and 2020 should be read in conjunction with the Financial Statements and corresponding notes included in this Report on Form

Our discussion includes forward-looking statements based upon current expectations that involve risks and uncertainties, such as

our plans, objectives, expectations, and intentions.

following discussion and analysis of our financial condition and results of operations for the three and nine months ended December 31,

2021 and 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

28 unchanged sentences

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.

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.

business operations, customers and suppliers of DT and HPF were retained by the Company;

19 unchanged sentences

delivery and courier network in China.

As of September 30, 2021, we provide logistics services to over 79 cities in approximately seven

As of December 31, 2021, we provide logistics services to over 79 cities in approximately seven

provinces and two municipalities.

74 unchanged sentences

performance obligations are transferred to customers at a point in time, typically upon delivery.

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.

Company determines if an arrangement is a lease at inception.

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.

determines if an arrangement is a lease at inception.

Operating leases are included in operating lease right-of-use (“ROU”)

2 unchanged sentences

property and equipment, other current liabilities, and other long-term liabilities in the consolidated balance sheets.

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

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.

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

Rental income from operating leases is recognized on a straight line basis over the term of the relevant lease.

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.

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.

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

issued accounting pronouncements

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

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.

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.

of Operations for the three months ended September 30, 2021 and 2020

following tables summarize our results of operations for the three months ended September 30, 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.

Three Months Ended September 30,

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.

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.

Operations for the three months ended December 31, 2021 and 2020

The following

tables summarize our results of operations for the three months ended December 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.

Three Months Ended December 31,

Changes in 2021

1 unchanged sentence

dollars, except for percentages)

$ (8,926,465 )

Cost of revenues

(14,705,387 )

Gross profit (loss)

5 unchanged sentences

Net income (loss)

$ (3,460,525 )

revenue for the three months ended September 30, 2021 decreased by approximately $8.9 million, or 76.4%, as compared with the three months

ended September 30, 2020.

The significant decrease was mainly because of the decrease of epidemic supply business and logistics services

business offset by increases in garment manufacturing business and property management and leasing business.

generated from our garment manufacturing business contributed approximately $0.4 million (14.3%) and $1.6 million (13.9%) of total revenue

for the three months ended September 30, 2021 and 2020, respectively.

The decrease of $1.2 million was mainly due to factory re-decoration,

remaining factories cannot provide as much capacity as before, we estimate the capacity will recover at late 2021.

generated from our logistics services business contributed approximately $1.3 million or 47.8% of our total revenue for the three months

ended September 30, 2021.

Revenue generated from our logistic business contributed approximately $1.3 million or 11.2% of our total revenue

for the three months ended September 30, 2020.

YXPF, the new subsidiary has developed the business to replace the business of HPF, which

was disposed of in September 2020.

generated from our property management and subleasing business contributed approximately $1.0 million or 38.0% of our total revenue for

the three months ended September 30, 2021.

This is a new business segment developed in current period and there was no revenue for the

three months ended September 30, 2020.

was no revenue generated from our epidemic prevention supplies business for the three months ended September 30, 2021 because no 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.

Revenue generated from our epidemic prevention supplies business contributed

approximately $8.8 million, or 74.9% of our total revenue for the three months ended September 30, 2020.

Three months ended September 30,

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 approximately $0.03 million (0.9%) and $2.3 million (67.1%) of total revenue for the

three months ended December 31, 2021 and 2021, respectively.

The decrease of $2.3 million was mainly due to 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 approximately $1.7 million or 61.6% of our total revenue for the three months ended December

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.

YXPF, the new subsidiary has developed the business to replace the business of HPF, which was disposed

of in September 2020.

Revenue generated

from our property management and subleasing business contributed 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.

revenue generated from our epidemic prevention supplies business for the three months ended December 31, 2021 because no 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.

Revenue generated from our epidemic prevention supplies business contributed approximately $0.01 million,

or 0.1% of our total revenue for the three months ended December 31, 2020.

Three months ended December 31,

(decrease) in

2021 compared to 2020

2021 compared

dollars, except for percentages)

Net revenue for garment manufacturing

$ (1,229,864 )

Raw materials

12 unchanged sentences

Merchandise/Finished goods/Raw materials

(12,133,298 )

Total cost of revenue for epidemic prevention supplies

(12,133,298 )

Gross (loss) income for epidemic prevention supplies

Total cost of revenue

$ (12,417,980 )

$ (3,021,090 )

our garment manufacturing business, we purchase the majority of our raw materials directly from numerous local fabric and accessories

material costs for our garment manufacturing business were 68.4% of our total garment manufacturing business revenue in the three months

ended September 30, 2021, compared with 70.3% in the three months ended September 30, 2020.

The decreased in percentages was mainly due

to the purchase cost of the raw materials dropped.

For our garment

manufacturing business, we purchase the majority of our raw materials directly from numerous local fabric and accessories suppliers.

costs for our garment manufacturing business were 34.4% of our total garment manufacturing business revenue in the three months ended

September 30, 2021, compared with 20.6% in the three months ended September 30, 2020.

The increase in percentages was mainly due to the

rising wages in the PRC.

and other expenses for our garment manufacturing business accounted for 1.6% of our total garment business revenue for the three months

ended September 30, 2021, compared with 0.4% of total garment business revenue for the three months ended September 30, 2020.

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 35.6% and 32.8% of total cost of revenues for our service segment

for the three months ended September 30, 2021 and 2020, respectively.

The percentage decreased as we used our own logistics more than

the subcontractors under COVID-19 epidemic.

We have not experienced any disputes with our subcontractor and we believe we maintain good

relationships with our contract logistics services provider.

toll and other costs for our service business for the three months ended September 30, 2021 were approximately $0.4 million compared

with $0.5 million for the three months ended September 30, 2020.

Fuel, toll and other costs for our service business accounted for 34.1%

of our total service revenue for the three months ended September 30, 2021, compared with 38.3% for the three months ended September

The decrease in percentages was primarily attributable to decrease of use of subcontractors under the epidemic circumstance.

December 31, 2021, compared with 70.8% in the three months ended December 31, 2020.

The decreased in percentages was mainly due to the

purchase cost of the raw materials dropped.

for our garment manufacturing business were 49.9% of our total garment manufacturing business revenue in the three months ended December

31, 2021, compared with 20.5% in the three months ended December 31, 2020.

The increase in percentages was mainly due to the rising wages

other expenses for our garment manufacturing business accounted for 24.6% of our total garment business revenue for the three months ended

December 31, 2021, compared with 0.7% of total garment business revenue for the three months ended December 31, 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 29.9% and 10.4% of total cost of revenues for our service segment for the three

months ended December 31, 2021 and 2020, respectively.

The percentage increased as we used more subcontractors than our own logistics

when COVID-19 epidemic was under controlled and aggregated subcontracting service to the 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, 2021 were approximately $0.6 million compared with $0.5 million

for the three months ended December 31, 2020.

Fuel, toll and other costs for our service business accounted for 33.1% of our total service

revenue for the three months ended December 31, 2021, compared with 58.6% for the three months ended December 31, 2020.

The decrease in

percentages was primarily attributable to decrease of use of our own logistics.

Subcontracting

fees for our service business for the three months ended September 30, 2021 decreased 8.3% to approximately $0.5 million from $0.6 million

for the three months ended September 30, 2020.

Subcontracting fees accounted for 40.9% and 45.0% of our total service business revenue

in the three months ended September 30, 2021 and 2020, respectively.

This decrease in percentages was primarily because the Company used

less subcontractors under the epidemic circumstance.

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

epidemic prevention supplies business, we have trading and own production.

The cost of revenue included cost of merchandise and cost

of our own products.

fees for our service business for the three months ended December 31, 2021 increased 8.8 times to approximately $0.8 million from $0.1

million for the three months ended December 31, 2020.

Subcontracting fees accounted for 49.0% and 10.4% of our total service business

revenue in the three months ended December 31, 2021 and 2020, respectively.

The significant increase in percentages was primarily because

the Company used more subcontractors when the epidemic was getting controlled.

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

prevention supplies business, we have trading and own production.

The cost of revenue included cost of merchandise and cost of our own

The other cost of the quarter represented depreciation of machinery.

manufacturing business gross profit for the three months ended September 30, 2021 was approximately $0.03 million, as compared with approximately

$0.1 million for the three months ended September 30, 2020.

Gross profit accounted for 8.1% of our total Garment manufacturing business

revenue for the three months ended September 30, 2021, compared with 8.7% for the three months ended September 30, 2020.

The gross margin

was 0.6% lower due to higher raw material cost in the quarter ended September 30, 2021.

profit in our logistics services business for the three months ended September 30, 2021 was approximately $0.3 million and gross margin

Gross profit in our logistics services business for the three months ended September 30, 2020 was approximately $0.2 million

and gross margin was 16.7%.

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.

profit in our property management and subleasing business for the three months ended September 30, 2021 was approximately $0.1 million,

or 10.4% of our total property management and subleasing business revenue.

This is a new business developed in last quarter.

Three months ended September 30,

(decrease) in

2021 compared to 2020

Garment manufacturing

business gross loss for the three months ended December 31, 2021 was approximately $0.002 million, or -8.9% of our total Garment manufacturing

business revenue, as compared with gross profit of approximately $0.2 million, or 8.0% of our total Garment manufacturing business revenue

for the three months ended December 31, 2020.

The gross margin was 16.9% lower due to higher raw material cost in the quarter ended December

in our logistics services business for the three months ended December 31, 2021 was approximately $0.3 million and gross margin was 17.9%.

Gross profit in our logistics services business for the three months ended December 31, 2020 was approximately $0.3 million and gross

margin was 31.0%.

The decrease of gross profit ratio was mainly because of the increased cost of subcontractors in recent period.

in our property management and subleasing business for the three months ended December 31, 2021 was approximately $0.2 million, or 15.5%

of our total property management and subleasing business revenue.

Gross profit of the segment for the three months ended December 31,

2020 was approximately $0.02 million, or 7.5% of the revenue of the segment.

Three months ended December 31,

2021 compared

dollars, except for percentages)

$ (3,021,090 )

Operating expenses:

1 unchanged sentence

General and administrative expenses

Income from operations

$ (3,492,921 )

Loss from operations

General and administrative expenses

selling expenses in our Garment manufacturing business segment for the three months ended September 30, 2021 and 2020 was approximately

expenses in our Garment manufacturing business segment for the three months ended December 31, 2021 and 2020 was approximately $0.001

million and $0.001 million, respectively.

Our selling expenses in our logistics services segment was nil for the three months

ended September 30, 2021 and 2020, respectively.

Selling expenses in our property management and subleasing business was approximately

$0.05 million for the three months ended September 30, 2021 and 2020, respectively.

Our selling expenses in our logistics services segment was nil for the three months ended December

31, 2021 and 2020, respectively.

Selling expenses in our property management and subleasing business was approximately $0.04 million and

$0.02 million for the three months ended December 31, 2021 and 2020, respectively.

Selling expenses in our epidemic prevention supplies

segment was nil and approximately $0.005 million for the three months ended September 30, 2021 and 2020, respectively.

Selling expenses

consist primarily of advertisement, local transportation, unloading charges and product inspection charges.

Total selling expenses for

the three months ended September 30, 2021 increased 691.2% to approximately $0.04 million from $0.006 million for the three months ended

September 30, 2020.

segment was nil and approximately $0.2 million for the three months ended December 31, 2021 and 2020, respectively.

Selling expenses consist

primarily of advertisement, local transportation, unloading charges and product inspection charges.

Total selling expenses for the three

months ended December 31, 2021 decreased 80.2% to approximately $0.04 million from $0.2 million for the three months ended December 31,

It was mainly due to decrease of marketing expenses of epidemic prevention supplies business.

general and administrative expenses in our Garment manufacturing business segment for the three months ended September 30, 2021 and 2020

was approximately $0.03 million and $0.06 million, respectively.

Our general and administrative expenses in our logistics services segment,

for the three months ended September 30, 2021 and 2020 was both approximately $0.2 million.

The general and administrative expenses in

our property management and subleasing business was approximately $0.09 million for the three months ended September 30, 2021.

and administrative expenses in our epidemic prevention supplies segment was nil and approximately $0.001 million for the three months

ended September 30, 2021 and 2020, respectively.

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 $0.08 million, respectively.

Our general and administrative expenses in our logistics services segment, for the three

months ended December 31, 2021 and 2020 was both approximately $0.2 million.

The general and administrative expenses in our property management

and subleasing business was approximately $0.1 million and $0.001 million for the three months ended December 31, 2021 and 2020, respectively.

Our general and administrative expenses in our epidemic prevention supplies segment was nil and approximately $0.001 million for the three

months ended December 31, 2021 and 2020, respectively.

Our general and administrative expenses in our corporate office for the three months

ended September 30, 2021 and 2020 was approximately $0.1 million and $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.

general and administrative expenses for the three months ended September 30, 2021 decreased slightly by 0.7% to approximately $0.46 million

from $0.47 million for the three months ended September 30, 2020.

from operations

from operations for the three months ended September 30, 2021 and 2020 was approximately $0.04 million and $3.5 million, respectively.

Income from operations of approximately $0.001 million and $0.08 million was attributed from our garment manufacturing segment for the

three months ended September 30, 2021 and 2020, respectively.

Income from operations of approximately $0.1 million and $0.03 million

was attributed from our logistics services segment for the three months ended September 30, 2021 and 2020, respectively.

ended December 31, 2021 and 2020 was approximately $0.1 million and $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, 2021 decreased by 15.0% to approximately $0.45 million from $0.53

million for the three months ended December 31, 2020.

Loss from operations

of approximately $0.02 million was attributed from our newly developed property management and subleasing business.

Income (loss) from

operations of nil and approximately ($3.4) million was attributed from our epidemic prevention supplies segment for the three months

ended September 30, 2021 and 2020, respectively.

We incurred a loss from operations in corporate office of approximately $0.1 million

and $0.2 million for the three months ended September 30, 2021 and 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.

tax expense for the three months ended September 30, 2021 and 2020 was approximately $0.005 million and $0.004 million, respectively,

22.4% increase compared to 2020.

for the three months ended December 31, 2021 and 2020 was approximately $0.03 million and $0.3 million, respectively.

Loss from operations

of approximately $0.03 million and income of $0.1 million was attributed from our garment manufacturing segment for the three months ended

December 31, 2021 and 2020, respectively.

Income from operations of approximately $0.1 million and $0.06 million was attributed from our

logistics services segment for the three months ended December 31, 2021 and 2020, respectively.

Income from operations of approximately

$0.01 million and $0.006 million was attributed from our newly developed property management and subleasing business for the three months

ended December 31, 2021 and 2020, respectively.

Income (loss) from operations of nil and approximately ($0.2) million was attributed from

our epidemic prevention supplies segment for the three months ended December 31, 2021 and 2020, respectively.

We incurred a loss from

operations in corporate office of approximately $0.1 million and $0.2 million for the three months ended December 31, 2021 and 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 expense

for the three months ended December 31, 2021 and 2020 was approximately $0.002 million and $0.016 million, respectively, 86.0% decrease

compared to 2020.

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

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.

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 September 30, 2021 and 2020.

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 September 30, 2021 and 2020.

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.

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, 2021 and 2020.

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, 2021 and 2020.

is governed by the Income Tax Laws of the PRC.

All Yingxi’s operating companies are subject to progressive EIT rates from 5% to

The preferential tax rates will be expired at end of year 2022 and the EIT rate will be 25% from year 2023.

Company’s parent entity, Addentax Group Corp.

The Company’s

parent entity, Addentax Group Corp.

is a U.S entity and is subject to the United States federal income tax.

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 September 30, 2021 and 2020.

Income (Loss)

incurred a net income of approximately $0.03 million and a net loss of $3.5 million for the three months ended September 30, 2021 and

2020, respectively.

Our basic and diluted earnings per share were $0.00 and ($0.14) for the three months ended September 30, 2021 and

2020, respectively.

of Operations for the six months ended September 30, 2021 and 2020

following tables summarize our results of operations for the six months ended September 30, 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.

Six months Ended September 30,

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 December 31,

2021 and 2020.

a net income of approximately $0.01 million and a net loss of $0.3 million for the three months ended December 31, 2021 and 2020, respectively.

Our basic and diluted earnings per share were $0.00 and ($0.01) for the three months ended December 31, 2021 and 2020, respectively.

Operations for the nine months ended December 31, 2021 and 2020

The following

tables summarize our results of operations for the nine months ended December 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.

Nine months Ended December 31,

Changes in 2021

1 unchanged sentence

dollars, except for percentages)

$ (10,558,249 )

Cost of revenues

(19,825,963 )

Gross profit (loss)

5 unchanged sentences

Net income (loss)

$ (3,256,625 )

revenue for the six months ended September 30, 2021 decreased by approximately $10.6 million, or 60.0%, as compared with the six months

ended September 30, 2020.

The significant decrease was mainly because of the decrease of epidemic supply business and logistics services

business offset by increases in property management and leasing business.

generated from our garment manufacturing business contributed approximately $2.5 million (35.0%) and $2.9 million (16.5%) of total revenue

for the six months ended September 30, 2021 and 2020, respectively.

The decrease approximately $0.4 million mainly due to factory

re-decoration which caused a capacity decrease.

We estimate the capacity will recover at late 2021.

generated from our logistics services business contributed approximately $2.4 million or 34.4% of our total revenue for the six months

ended September 30, 2021.

Revenue generated from our logistic business contributed approximately $2.8 million or 16.1% of our total revenue

for the six months ended September 30, 2020.

The decrease of $0.4 million was because YXPF, the new subsidiary was developing the business

in first quarter to replace the business of HPF, which was disposed of in September 2020.

generated from our property management and subleasing business contributed approximately $2.2 million or 30.6% of our total revenue for

the six months ended September 30, 2021.

This is a new business segment developed in current period.

was no revenue generated from our epidemic prevention supplies business for the six months ended September 30, 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.

Revenue generated from our epidemic prevention supplies business contributed

approximately $11.9 million, or 67.4% of our total revenue for the six months ended September 30, 2020.

Six months ended September 30,

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 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 42.1% of our total revenue for the nine months ended December

Revenue generated from our logistic business contributed approximately $3.7 million or 17.4% of our total revenue for the nine

months ended December 31, 2020.

The increase of $0.4 million was because YXPF, the new subsidiary was developing the business to replace

the business of HPF, which was disposed of in September 2020.

Revenue generated

from our property management and subleasing business contributed approximately $3.2 million or 32.6% of our total revenue for the nine

months ended December 31, 2021.

revenue generated from our epidemic prevention supplies business for the nine months ended December 31, 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 approximately

$11.9 million, or 56.5% of our total revenue for the nine months ended December 31, 2020.

Nine months ended December 31,

(decrease) in

2021 compared to 2020

2021 compared

dollars, except for percentages)

13 unchanged sentences

Net revenue for epidemic prevention supplies

(11,864,067 )

Merchandise/Finished goods/Raw materials

(14,680,253 )

Other and Overhead

Total cost of revenue for epidemic prevention supplies

(14,784,773 )

Gross loss for epidemic prevention supplies

Total cost of revenue

$ (13,835,531 )

$ (2,223,452 )

our garment manufacturing business, we purchase the majority of our raw materials directly from numerous local fabric and accessories

material costs for our garment manufacturing business were 69.5% of our total garment manufacturing business revenue in the six months

ended September 30, 2021, compared with 72.1% in the six months ended September 30, 2020.

The decreased in percentages was mainly due

to the purchase cost of the raw materials dropped.

costs for our garment manufacturing business were 21.5% of our total garment manufacturing business revenue in the six months ended September

30, 2021, compared with 19.4% in the six months ended September 30, 2020.

For our garment

manufacturing business, we purchase the majority of our raw materials directly from numerous local fabric and accessories suppliers.

costs for our garment manufacturing business were 69.1% of our total garment manufacturing business revenue in the nine months ended December

31, 2021, compared with 71.5% in the nine months ended December 31, 2020.

The decreased in percentages was mainly due to the purchase

cost of the raw materials dropped.

for our garment manufacturing business were 21.8% of our total garment manufacturing business revenue in the nine months ended December

31, 2021, compared with 19.9% in the nine months ended December 31, 2020.

The increase in percentages was mainly due to the rising wages

and other expenses for our garment manufacturing business accounted for 0.7% of our total garment business revenue for the six months

ended September 30, 2021, compared with 0.5% of total garment business revenue for the six months ended September 30, 2020.

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 18.8% and 33.6% of total cost of revenues for our service segment

for the six months ended September 30, 2021 and 2020, respectively.

The percentage decreased as we used our own logistics more than the

subcontractors under COVID-19 epidemic.

We have not experienced any disputes with our subcontractor and we believe we maintain good relationships

with our contract logistics services provider.

toll and other costs for our service business for the six months ended September 30, 2021 were approximately $0.8 million compared with

$0.9 million for the six months ended September 30, 2020.

Fuel, toll and other costs for our service business accounted for 34.7% of

our total service revenue for the six months ended September 30, 2021, compared with 31.1% for the six months ended September 30, 2020.

The increase in percentages was primarily attributable to decrease of use of subcontractors under the epidemic circumstance.

other expenses for our garment manufacturing business accounted for 8.2% of our total garment business revenue for the nine months ended

December 31, 2021, compared with 8.0% of total garment business revenue for the nine months ended December 31, 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 30.3% and 43.0% of total cost of revenues for our service segment for the nine

months ended December 31, 2021 and 2020, respectively.

The percentage decreased as we used our own logistics more than the subcontractors

under COVID-19 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, 2021 were approximately $1.4 million compared with $1.4 million

for the nine months ended December 31, 2020.

Fuel, toll and other costs for our service business accounted for 34.0% of our total service

revenue for the nine months ended December 31, 2021, compared with 37.3% for the nine months ended December 31, 2020.

Subcontracting

fees for our service business for the six months ended September 30, 2021 decreased 31.2% to approximately $1.0 million from $1.5 million

for the six months ended September 30, 2020.

Subcontracting fees accounted for 42.3% and 52.5% of our total service business revenue

in the six months ended September 30, 2021 and 2020, respectively.

This decrease in percentages was primarily because the Company used

less subcontractors under the epidemic circumstance.

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

epidemic prevention supplies business, we have trading and own production.

The cost of revenue included cost of merchandise and cost

of our own products.

fees for our service business for the nine months ended December 31, 2021 increased 18.6% to approximately $1.9 million from $1.6 million

for the nine months ended December 31, 2020.

Subcontracting fees accounted for 45.1% and 43.0% of our total service business revenue in

the nine months ended December 31, 2021 and 2020, respectively.

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

prevention supplies business, we have trading and own production.

The cost of revenue included cost of merchandise and cost of our own

The other cost of the quarter represented depreciation of machinery.

manufacturing business gross profit for the six months ended September 30, 2021 was approximately $0.2 million, nearly the same as for

the six months ended September 30, 2020.

Gross profit accounted for 8.4% of our total Garment manufacturing business revenue for the

six months ended September 30, 2021, compared with 8.0% for the six months ended September 30, 2020.

The gross margin was 0.4% higher

due to lower raw material cost in the months ended September 30, 2021.

profit in our logistics services business for the six months ended September 30, 2021 was approximately $0.6 million and gross margin

Gross profit in our logistics services business for the six months ended September 30, 2020 was approximately $0.5 million

and gross margin was 16.4%.

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.

profit in our property management and subleasing business for the six months ended September 30, 2021 was approximately $0.3 million,

or 13.5% of our total property management and subleasing business revenue.

Six months ended September 30,

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, 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.

The gross margin was 0.2% higher due to lower raw material cost in the months ended December

in our logistics services business for the nine months ended December 31, 2021 was approximately $0.9 million and 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,

2020 was 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 customers.

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 $0.02 million, or 7.5% of our total property management and subleasing business revenue.

Nine months ended December 31,

(decrease) in

2021 compared to 2020

2021 compared

dollars, except for percentages)

$ (2,223,451 )

Operating expenses:

1 unchanged sentence

General and administrative expenses

$ (1,015,393 )

$ (1,081,038 )

Income from operations

$ (3,304,489 )

General and administrative expenses

selling expenses in our Garment manufacturing business segment for the six months ended September 30, 2021 and 2020 was $0.0001 million

and approximately $0.002 million, respectively.

Our selling expenses in our logistics services segment was nil for the six months ended

September 30, 2021 and 2020, respectively.

Selling expenses in our property management and subleasing business was $0.09 million for

the six months ended September 30, 2021.

Selling expenses in our epidemic prevention supplies segment was nil and approximately $0.2

million for the six months ended September 30, 2021 and 2020, respectively.

Selling expenses consist primarily of advertisement, local

transportation, unloading charges and product inspection charges.

Total selling expenses for the six months ended September 30, 2021

decreased 42.0% to $0.09 million from $0.2 million for the six months ended September 30, 2020.

It was mainly due to decrease of marketing

expenses of epidemic prevention supplies business.

general and administrative expenses in our Garment manufacturing business segment for the six months ended September 30, 2021 and 2020

was both approximately $0.08 million.

Our general and administrative expenses in our logistics services segment, for the six months ended

September 30, 2021 and 2020 was both approximately $0.4 million.

The general and administrative expenses in our property management and

subleasing business was approximately $0.2 million for the six months ended September 30, 2021.

Our general and administrative expenses

in our epidemic prevention supplies segment was nil and approximately $0.02 million for the six months ended September 30, 2021 and 2020,

expenses in our Garment manufacturing business segment for the nine months ended December 31, 2021 and 2020 was $0.0003 million and approximately

$0.003 million, respectively.

Our selling expenses in our logistics services segment was nil for the nine months ended December 31, 2021

and 2020, respectively.

Selling expenses in our property management and subleasing business was $0.1 million for the nine months ended

December 31, 2021.

Selling expenses in our epidemic prevention supplies segment was nil and approximately $0.4 million for the nine months

ended December 31, 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, 2021 decreased 64.1% to $0.1 million from

$0.4 million for the nine months ended December 31, 2020.

It was mainly due to decrease of marketing expenses of epidemic prevention supplies

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 $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 $0.6 million.

The general and administrative expenses in our property

management and subleasing business was approximately $0.3 million and $0.001 million for the nine months ended December 31, 2021 and 2020,

respectively.

Our general and administrative expenses in our corporate office for the six months ended September 30, 2021 and 2020 was

approximately $0.2 million and $0.4 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.

general and administrative expenses for the six months ended September 30, 2021 was nearly the same as that for the six months ended

September 30, 2020.

Our general and administrative expenses in our epidemic prevention supplies segment was nil and approximately $0.02 million

for the nine months ended December 31, 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 $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 was approximately $1.4 million and $1.5 million, respectively.

(loss) from operations

from operations for the six months ended September 30, 2021 was approximately $0.04 million and loss from operations for the six months

ended September 30, 2020 was approximately $3.3 million.

Income from operations of approximately $0.1 million was attributed from our

garment manufacturing segment for both the six months ended September 30, 2021 and 2020.

operations for the nine months ended December 31, 2021 was approximately $0.01 million and loss from operations for the nine months ended

December 31, 2020 was approximately $3.6 million.

Income from operations of approximately $0.1 million and $0.2 million was attributed

from our garment manufacturing segment for the nine months ended December 31, 2021 and 2020, respectively.

Income from operations of approximately

million and $0.04 million was attributed from our logistics services segment for the six months ended September 30, 2021 and 2020, respectively.

Loss from operations of approximately $0.03 million was attributed from our newly developed property management and subleasing business.

Income (loss) from operations of nil and approximately ($3.1) million was attributed from our epidemic prevention supplies segment for

the six months ended September 30, 2021 and 2020, respectively.

We incurred a loss from operations in corporate office of approximately

$0.2 million and $0.4 million for the six months ended September 30, 2021 and 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.

tax expense for the six months ended September 30, 2021 and 2020 was approximately $0.015 million and $0.007 million, respectively, 111.6%%

increase compared to 2020.

$0.2 million and $0.1 million was attributed from our logistics services segment for the nine months ended December 31, 2021 and 2020,

respectively.

Income from operations of approximately $0.05 million and $0.006 million was attributed from our property management and

subleasing business for the nine months ended December 31, 2021 and 2020, respectively.

Income (loss) from operations of nil and approximately

($3.3) million was attributed from our epidemic prevention supplies segment for the nine months ended December 31, 2021 and 2020, respectively.

We incurred a loss from operations in corporate office of approximately $0.3 million and $0.6 million for the nine months ended December

31, 2021 and 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 expense

for the nine months ended December 10, 2021 and 2020 was approximately $0.018 million and $0.023 million, respectively, 22.9% decrease

compared to 2020.

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

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.

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 six months ended September 30, 2021 and 2020.

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 six months ended September 30, 2021 and 2020.

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.

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 nine months ended December 31, 2021 and 2020.

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 nine months ended December 31, 2021 and 2020.

is governed by the Income Tax Laws of the PRC.

All Yingxi’s operating companies are subject to progressive EIT rates from 5% to

The preferential tax rates will be expired at end of year 2022 and the EIT rate will be 25% from year 2023.

Company’s parent entity, Addentax Group Corp.

The Company’s

parent entity, Addentax Group Corp.

is a U.S entity and is subject to the United States federal income tax.

for income taxes in the United States has been made as Addentax Group Corp.

had no United States taxable income for the six months ended

September 30, 2021 and 2020.

Income (Loss)

incurred a net income of approximately $0.1 million and a net loss of $3.3 million for the six months ended September 30, 2021 and 2020,

respectively.

Our basic and diluted earnings per share were $0.00 and ($0.13) for the six months ended September 30, 2021 and 2020, respectively.

of cash flows

cash flows information for the three months ended September 30, 2021 and 2020 is as follow:

Three months ended September 30,

Net cash used in operating activities

$ (3,062,555 )

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.

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 diluted earnings per share were $0.00 and ($0.14) for the nine months ended December 31, 2021 and 2020, respectively.

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

Nine months ended December 31,

Net cash provided by (used in) operating activities

Net cash used in investing activities

Net cash provided by financing activities

$ (1,138,547 )

cash used in operating activities in the six months ended September 30, 2021 was approximately $2.9 million less than that of the six

months ended September 30, 2020.

It was mainly because the net income of the six months ended September 30, 2021 was approximately $0.1

million while the net loss of the six months ended September 30, 2020 was approximately $3.3 million.

The movement of operating assets

and liabilities of the six months ended September 30, 2021 resulted in negative cash flow of approximately $0.03 million, while the movement

of operating assets and liabilities of the three months ended September 30, 2020 resulted in positive cash inflow of approximately $0.1

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.

cash used in investing activities for the six months ended September 30, 2021 was approximately $0.3 million less than that of the three

months ended September 30, 2020.

It was mainly because the purchase of plant and equipment and other assets in the six months ended September

30, 2021 was approximately $0.3 million less than the purchase of plant and equipment in the six months ended September 30, 2020.

cash provided by financing activities for the six months ended September 30, 2021 was approximately $3.0 million more than the six months

ended September 30, 2020.

It was mainly because there was proceeds of $3.7 million from issue of ordinary shares in the six months ended

September 30, 2020;

the net repayment of related party borrowings in current period was approximately $0.6 million more than that of

the six months ended September 30, 2020;

and there was repayment of bank borrowing of $0.1 million in the six months ended September

Net cash (used in) provided by financing activities

Net cash used

in operating activities 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 approximately $3.6 million for the nine months ended December 31, 2020.

The movement of operating assets and liabilities

of 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 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 and 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 approximately $0.7 million due to disposal of two subsidiaries in the nine months ended December 31, 2020.

financing activities for the nine months ended December 31, 2021 was approximately $6.2 million less than the nine months ended December

It was mainly because there was proceeds of $3.7 million from issue of ordinary shares in the nine months ended December 31,

the net repayment of related party borrowings in current period was approximately $2.6 million more than that of the nine months

ended December 31, 2020;

and there was repayment of bank borrowing of $0.1 million in the nine months ended December 31, 2020.

Condition, Liquidity and Capital Resources

of September 30, 2021, we had cash on hand of approximately $0.7 million, total current assets of approximately $5.3 million and current

liabilities of approximately $9.9 million.

We presently finance our operations by using the cash flows borrowed from related

parties and third parties.

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.

As of December

31, 2021, we had cash on hand of approximately $0.5 million, total current assets of approximately $4.8 million and current liabilities

of approximately $9.5 million.

We presently finance our operations by using the cash flows borrowed from related parties and third parties.

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.

growth and development of our business will require a significant amount of additional working capital.

1 unchanged sentence

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.

currently do not have adequate cash to meet our short or long-term objectives.

In the event additional capital is raised, it may have

13 unchanged sentences

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.

Currency Translation Risk

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.

that our business model will be successful or that we can sustain revenue growth, achieve or sustain profitability, or continue as a going

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.

years, RMB continued to appreciate against the U.S.

As of September 30, 2021, the market foreign exchange rate was RMB 6.45 to

In the past years, RMB

continued to appreciate against the U.S.

As of December 31, 2021, the market foreign exchange rate was RMB 6.355 to one U.S.

Our financial statements are translated into U.S.

dollars using the closing rate method.

The balance sheet items are

translated into U.S.

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

The foreign currency translation loss for the six months ended September 30, 2021 and 2020 was approximately $0.03 million and

$0.09 million respectively.

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.

currency translation loss for the nine months ended December 31, 2021 and 2020 was approximately $0.06 million and $0.2 million respectively.

Sheet Arrangements

have no off-balance sheet arrangements (as that term is defined in Item 303(a)(4)(ii) of Regulation S-K) as of September 30, 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.

Quantitative and Qualitative Disclosures About Market Risk

applicable to smaller reporting companies.

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, 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.

and Qualitative Disclosures About Market Risk

Not applicable

to smaller reporting companies.

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 2. Management’s Discussion and Analysis