ADDENTAX GROUP CORP AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

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

AS OF DECEMBER 31, 2018 (UNAUDITED) AND MARCH 31, 2018 (AUDITED)

See accompany notes to the condensed consolidated financial statements.

ADDENTAX GROUP CORP. AND SUBSIDIARIES

Condensed Consolidated Balance SheetsCONDENSED CONSOLIDATED STATEMENTS OF LOSS AND COMPREHENSIVE LOSS

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

FOR THE THREE AND NINE MONTHS ENDED DECEMBER 31, 2018 AND 2017 (UNAUDITED)

The accompanyingSee accompany notes are an integral part of these unauditedto the condensed consolidated financial statements.

ADDENTAX GROUP CORP. AND SUBSIDIARIES

Condensed Consolidated Statements of Operations and Comprehensive LossCONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

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

FOR THE NINE MONTHS ENDED DECEMBER 31, 2018 AND 2017 (UNAUDITED)

The accompanying

See accompany notes are an integral part of these unauditedto the condensed consolidated financial statements.

ADDENTAX GROUP CORP. AND SUBSIDIARIES

Condensed Consolidated Statements of Cash FlowsNOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)FOR THE THREE AND NINE MONTHS ENDED DECEMBER 31, 2018 AND 2017

The accompanying notes are an integral part of these unaudited condensed financial statements

ADDENTAX GROUP CORP.

Notes to the Condensed Consolidated Financial Statements

September 30, 2017

(Unaudited)

NOTE 1 - ORGANIZATION AND NATURE OF BUSINESS

Addentax Group Corp. (“the Company”, “we”, “us” or “our”ATXG”) was incorporated in Nevada on October 28, 2014, and before the Companytransaction described below, ATXG was engaged in the field of producing images on multiple surfaces using heat transfer technology.

During the reporting period, the Company was mainly engaged in textile and garment manufacturing and providing logistics services to its customers. The Company also provides business consultancy to their customers in assisting them to identify weaknesses in their operation in order to optimize their efficiency. The Company also assists their customers in improving their supply chain management which involves the movement and storage of raw materials, of work in progress inventory, and of finished goods from point of origin to point of consumption.

Share Exchange and Reorganization

AsOn December 28, 2016, ATXG acquired 250,000,000 shares of the Effective Dateissued and pursuant to a Securities Purchase Agreement dated September 25, 2017, the Company andoutstanding stock of Yingxi Industrial Chain Group Co., Ltd.(“Yingxi”), have determined that all conditions necessary to close. The 250,000,000 shares of Yingxi were acquired from the Share Exchange Agreement have been satisfiedmembers of Yingxi in a share exchange transaction in return for the issuance of 500,000,000 shares of common stock of ATXG. The 250,000,000 shares of Yingxi constitute 100% of its issued and thereforeoutstanding stock, and as a result of the date hereof, the Share Exchange Agreement was closed and as suchtransaction, Yingxi has becomebecame a wholly-owned subsidiary of ATXG. Following the Company. As perconsummation of the Share Exchange Agreement,reverse acquisition effective on September 25, 2017, and giving effect to the Company acquired 250,000,000 sharessecurities exchanged in the offering, the members of Yingxi representing 100%beneficially owned approximately ninety-nine (99%) of the issued and outstanding equitycommon stock of Yingxi, from the Yingxi shareholders and in exchange the Company issued to Yingxi an aggregate of 500,000,000 shares of common stock.

Recapitalization

ATXG. For financial accounting purposes, this transactionthe Company was treated as an acquiree and Yingxi as an acquirer, as a reverse acquisition by Yingxi,result, the business and resultedfinancial information contained in a recapitalization with Yingxi beingthis report is that of the accounting acquirer and Addentax Group Corp. as the acquired company. The consummation of this reverse acquisition resulted in a change of control. Accordingly, the historical financial statements prior to the acquisition are thoseconsummation date and that of the accounting acquirer,combined entity after that date.

Yingxi was incorporated in the Republic of Seychelles on August 4, 2016. ATXG, together with Yingxi and have been prepared to give retroactive effect toits subsidiaries (the “Company”) operates primarily in the reverse acquisition completed on September 25, 2017,People’s Republic of China (“PRC” or “China”) and representis engaged in the operationsbusiness of Yingxi. The consolidated financial statements aftergarments manufacturing and providing logistic services.

On December 15, 2016, Yingxi entered into an equity transfer agreement with the acquisition date, September 25, 2017 include the balance sheets of both companies at historical cost, the historical resultsshareholder of Yingxi andIndustrial Chain Investment Co., Ltd (“Yingxi HK”) under which Yingxi agreed to pay total consideration of RMB21,008,886 (approximately $3,048,936) in cash in exchange for a 100% ownership interest in Yingxi HK. Yingxi HK was incorporated in Hong Kong in 2016. Yingxi HK is a holding company with no assets other than a 100% equity interest in the results of the Company from the acquisition date. All share and per share informationfollowing subsidiaries:

The accompanying consolidated financial statements of the Company and footnotes hasits subsidiaries are prepared pursuant to the rules and regulations of the U.S. Securities and Exchanges Commission (“SEC”) and in conformity with generally accepted accounting principles in the U.S. (“US GAAP”). All material inter-company accounts and transactions have been retroactively restated to reflect the recapitalization.

NOTE 2 - GOING CONCERNeliminated in consolidation.

The accompanying unaudited interimconsolidated financial statements have been prepared assumingare presented on the basis that the Company will continue asis a going concern. The going concern whichassumption contemplates the realization of assets and the liquidationsatisfaction of liabilities in the normal course of business. For

The Company incurred net loss of $544,977, $61,139, $569,586 and $41,182, during the 6three months and nine months ended September 30,December 31, 2018 and 2017, respectively. As of December 31, 2018 and March 31, 2018, the Company has sufferedhad net current liability of $1,550,898 and $1,104,934, respectively, and a loss from operationsdeficit on total equity of $119,669. The Company intends to fund operations through equity financing arrangements, which may be insufficient to fund its capital expenditures, working capital$1,550,898 and other cash requirements for the year ended March 31, 2018.

$1,104,934, respectively.

The ability of the Company to emerge from an early stagecontinue as a going concern is dependent upon among other things,the Company’s profit generating operations in the future and/or obtaining additionalthe 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 developmentcapital contributions from the CEO. In the event that the Company requires additional funding to finance the growth of its business plan. In responsethe Company’s current and expected future operations as well as to these problems, management intendsachieve our strategic objectives, the CEO has indicated the intent and ability to raiseprovide additional funds through public or private placement offerings.equity financing.

These factors, among others,conditions raise substantial doubt about the Company’s ability to continue as a going concern. The accompanying unaudited interimCompany’s continuation as a going concern is dependent on the Company’s ability to meet obligations as they become due and to obtain additional equity or alternative financing required to fund operations until sufficient sources of recurring revenues can be generated. There can be no assurance that the Company will be successful in its plans described above or in attracting equity or alternative financing on acceptable terms, or if at all. The consolidated financial statements do not include any adjustments that might result from the outcome of this uncertainty.

NOTE 3 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

BasisThe Company’s operations are conducted in the PRC. Accordingly, the Company’s business, financial condition and results of Presentationoperations may be influenced by the political, economic and legal environment in the PRC, and by the general state of the PRC economy.

The accompanying unaudited consolidated financial statements have been prepared in accordance with generally accepted accounting principlesCompany’s operations in the United StatesPRC 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 America for interim financial information and with the instructions to Regulation S-X.taxation.

In the opinion of management, all adjustments consisting of normal recurring entries necessary for a fair statement of the periods presented for: (a) the financial position; (b) the result of operations; and (c) cash flows, have been made in order to make the consolidated financial statements presented not misleading. The results of operations for such interim periods are not necessarily indicative of operations for a full year.

Basis of Consolidation

These consolidated financial statements include the accounts of Yingxi Industrial Chain Group Co., Ltd and its wholly-owned subsidiaries. All material intercompany balances and transactions have been eliminated in consolidation.

Principal of subsidiaries

The detailsCompany’s reporting currency is the U.S. dollar. The functional currency of the principal subsidiariesparent company is the U.S. dollar and the functional currency of the CompanyCompany’s operating subsidiaries is the Chinese Renminbi (“RMB”). For the subsidiaries whose functional currencies are set out as follows:the RMB, all assets and liabilities are translated at exchange rates at the balance sheet date and revenue and expenses are translated at the average yearly exchange rates and equity is translated at historical exchange rates. Any translation adjustments resulting are not included in determining net income but are included in foreign exchange adjustment to other comprehensive income, a component of equity.

Use of Estimates

The preparation of the consolidated financial statements is in conformity with theUS GAAP that requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities. It also requires theliabilities and disclosure of contingent assets and liabilities at the date of the consolidated financial statements and the reported amountamounts of revenues and expenses during the reporting period. Actualperiods. 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.

Foreign Currency Translation

The Company’s reporting currency is the U.S. Dollars (“USD”). The functional currency of the Company and its subsidiaries is Chinese Yuan Renminbi (“RMB”). All transactions initiated in RMB are translated into USD in accordance with ASC 830,“Foreign Currency Matters,”as follows:

Adjustments arising from such translations are includedAccounting Standards Codification (“ASC”) 820 “Fair Value Measurements and Disclosures”, which defines fair value, establishes a framework for measuring fair value and expands disclosures about fair value measurements. The statement clarifies that the exchange price is the price in accumulated other comprehensive incomean orderly transaction between market participants to sell the asset or transfer the liability in shareholders’ equity.the market in which the reporting entity would transact for the asset or liability, that is, the principal or most advantageous market for the asset or liability. It also emphasizes that fair value is a market-based measurement, not an entity-specific measurement, and that market participant assumptions include assumptions about risk and effect of a restriction on the sale or use of an asset.

Level 1: Unadjusted quoted prices in active markets that are accessible at the measurement date for identical, unrestricted assets or liabilities;

Accounts ReceivableLevel 2: Quoted prices in markets that are not active, or inputs that are observable, either directly or indirectly, for substantially the full term of the asset or liability; and

Level 3: Prices or valuation techniques that require inputs that are both significant to the fair value measurement and unobservable (supported by little or no market activity).

At December 31, 2018, the Company has no financial assets or liabilities subject to recurring fair value measurements.

The Company’s financial instruments include cash, accounts receivable, consistsadvances to suppliers, other receivables, accounts payable, other payables, taxes payables and related party receivables or payables. Management estimates that the carrying amounts of trade receivablesfinancial instruments approximate their fair values due to their short-term nature. The fair value of amounts with related parties is not practicable to estimate due to the related party nature of the underlying transactions.

The Company considers all highly liquid investments purchased with original maturities of three months or less to be cash equivalents. The Company had no cash equivalents at December 31, 2018 and March 31, 2018.

Financial instruments that potentially subject the Company to concentrations of credit risk consist primarily of accounts receivable. The Company extends credit to its customers in the normal course of business and generally does not require collateral. The Company’s credit terms are dependent upon the segment, and the customer. The Company assesses the probability of collection from customers. Theeach customer at the outset of the arrangement based on a number of factors, including the customer’s payment history and its current creditworthiness. If in management’s judgment collection is not probable, the Company does not record revenue until the uncertainty is removed.

Management performs ongoing credit evaluations, and the Company maintains an allowance for potential credit losses based upon its loss history and its aging analysis. The allowance for doubtful accounts is the Company’s best estimate of the amount of credit losses in existing accounts receivable. Management reviews the allowance for doubtful accounts each reporting period based on a detailed analysis of trade receivables. In the Company’s assessmentanalysis, management primarily considers the age of collectabilitythe customer’s receivable, and also considers the creditworthiness of the customer, receivable. The Company analyzes pastthe economic conditions of the customer’s industry, general economic conditions and trends, and the business relationship and history with a customer, customer credit, collection history, and financial condition when evaluatingits customers, among other factors. If any of these factors change, the Company may also change its original estimates, which could impact the level of the Company’s future allowance for doubtful accounts. If judgments regarding the collectability of customer accounts. Uncollectible accountsreceivables are charged offincorrect, adjustments to the allowance when it is deemed probable that the receivable will notmay be recovered.

For the concentration risk disclosure, please refer to Note 10.required, which would reduce profitability.

Financial InstrumentsAccounts receivable are recognized and carried at the original invoice amount less an allowance for any uncollectible amounts. An estimate for doubtful accounts receivable is made when collection of the full amount is no longer probable. Bad debts are written off as incurred. No allowance for doubtful accounts was made for the three and nine months ended December 31, 2018 and 2017.

The following customers had an accounts receivable balance greater than 10% of total accounts receivable at December 31, 2018 and March 31, 2018.

The Company’s consolidated financial instruments consist primarily of cash, accounts receivable, prepaid expenses, inventory and other assets, accounts payable and accrued expenses and other payables. The carrying amounts of such financial instruments approximate their respective estimated fair value due to their short-term maturities.

Concentrations of Credit Risks

The Company’s exposure to concentrationsManufacturing segment inventories consist of credit risk primarily related to its cashraw materials, work in progress and cash equivalents. The Company places its cashfinished goods and cash equivalents with financial institutions of high credit worthiness. The Company’s management assess the financial strength and credit worthiness of any parties to which it extends funds, and as such, it believes that any associated credit risk exposures are limited.

Inventory

Inventory is stated at the lower of cost, (weighted average)determined on a weighted average basis, or net realizable value. The Company’s inventoryNet realizable value is constantly monitoredthe estimated selling price in the ordinary course of business less the estimated cost of completion and the estimated costs necessary to make the sale. When inventories are sold, their carrying amount is charged to expense in the period in which the revenue is recognized. Write-downs for obsolescence. This is based ondeclines in net realizable value or for losses of inventories are recognized as an expense in the management’s estimatesperiod the impairment or loss occurs. No allowance for obsolete finished goods was made for the three and they have taken into considerations factors such as turnover, technical obsolescence, right of return status to suppliersnine months ended December 31, 2018 and price protection offered by suppliers. These estimates are necessarily subject to a degree of measurement uncertainty. Reserves for slow-moving and obsolete inventory at September 30, 2017, were $0 and at March 31, 2017were $0.

Related Partiesrespectively.

TheDuring the three and nine months ended December 31, 2018 and 2017, approximately 76%, 51%, 62% and 57% of total inventory purchases were from the Company’s five largest suppliers, respectively. Management believes that should the Company follows ASC 850,“Related Party Disclosures,”forlose any one of its major suppliers, other suppliers are available that could provide similar products to the identification of related parties and disclosure of related party transactions see Note 9.Company on comparable terms.

Property and Equipment

PropertyPlant and equipment are carried at cost less accumulated depreciation. Cost includes all direct costs necessary to acquire and prepare assets for use.

The costsDepreciation is provided over the assets’ estimated useful lives, using the straight-line method. Estimated useful lives of repairs and maintenance are expensed when incurred, while expenditures for refurbishments and improvements that significantly add to the productive capacity or extend the useful life of an asset are capitalized. When assets are retired or sold, the asset’s cost and related accumulated depreciation are eliminated with any remaining gain or loss recognized in net earnings.

Depreciation of plant and equipment is recorded on the straight-line method over estimated useful lives, generallyare as follows:

ImpairmentThe cost and related accumulated depreciation of long-lived assets sold or otherwise retired are eliminated from the accounts and any gain or loss is included in the statement of income. The cost of maintenance and repairs is charged to the statement of income as incurred, whereas significant renewals and betterments are capitalized.

Goodwill represents the excess of the purchase price over the net fair value of the identifiable tangible and intangible assets acquired and the fair value of liabilities assumed in acquisitions. ASC350-30-50 “Goodwill and Other Intangible Assets”, requires the testing of goodwill and indefinite-lived intangible assets for impairment at least annually. The Company tests goodwill for impairment in the fourth quarter of each year.

We evaluate carryingUnder applicable accounting guidance, the goodwill impairment analysis is a two-step test. The first step of the goodwill impairment test involves comparing the fair value of long-livedeach reporting unit with its carrying amount including goodwill. If the fair value of a reporting unit exceeds its carrying amount, goodwill of the reporting unit is considered not impaired; however, if the carrying amount of the reporting unit exceeds its fair value, the second step must be performed to measure potential impairment.

The second step involves calculating an implied fair value of goodwill for each reporting unit for which the first step indicated possible impairment. If the implied fair value of goodwill exceeds the goodwill assigned to the reporting unit, there is no impairment. If the goodwill assigned to a reporting unit exceeds the implied fair value of goodwill, an impairment charge is recorded for the excess.

The Company tested goodwill for impairment as of March 31, 2018 and it was determined that the recoverable amount of one of the Company’s reporting units was lower than the carrying amount of the goodwill recorded. Therefore it was concluded that the carrying amount of goodwill of $454,659 was impaired.

Long-lived assets held and used by the Company are reviewed for impairment whenever events or changes in circumstances would indicate that itthe carrying amount of assets may not be recoverable. It is more likely than not their carrying values may exceed their realizable values,reasonably possible that these assets could become impaired as a result of technology or other industry changes. Determination of recoverability of assets to be held and records impairment charges when considered necessary.

When circumstances indicate that impairment may have occurred, the Company tests such assets for recoverabilityused is by comparing the estimatedcarrying amount of an asset to future net undiscounted future cash flows expected to result frombe generated by the use ofassets. If such assets and their eventual dispositionare considered to their carrying amount. In estimating these future cash flows, assets and liabilities are grouped at a lowest level forbe impaired, the impairment to be recognized is measured by the amount by which there are identifiable cash flows that are largely independent of the cash flows generated by other such groups. If the undiscounted future cash flows are less than the carrying amount of the asset, an impairment loss, measured asassets exceeds the excessfair value of the assets. Assets to be disposed of are reported at the lower of the carrying amount or fair value less costs to sell.

There was no impairment of long-lived assets as of December 31, 2018 and March 31, 2018.

Revenue is generated through sale of goods and delivery services. Revenue is recognized when a customer obtains control of promised goods or services and is recognized in an amount that reflects the consideration that the Company expects to receive in exchange for those goods or services. In addition, the standard requires disclosure of the asset over its estimated fair value, is recognized. Fair values are determined based on discountednature, amount, timing, and uncertainty of revenue and cash flows quoted market values or external appraisals as applicable.

Revenue Recognition

arising from contracts with customers. The amount of revenue that is recorded reflects the consideration that the Company expects to receive in exchange for those goods and services. The Company recognizes revenue only when all ofapplies the following criteria have been met:five-step model in order to determine this amount:

Deferred RevenueThe Company only applies the five-step model to contracts when it is probable that the Company will collect the consideration it is entitled to in exchange for the goods or services it transfers to the customer. Once a contract is determined to be within the scope of ASC 606 at contract inception, the Company reviews the contract to determine which performance obligations the Company must deliver and which of these performance obligations are distinct. The Company recognizes as revenues the amount of the transaction price that is allocated to the respective performance obligation when the performance obligation is satisfied or as it is satisfied. Generally, the Company’s performance obligations are transferred to customers at a point in time, typically upon delivery.

DeferredFor all reporting periods, the Company has not disclosed the value of unsatisfied performance obligations for all product and service revenue are services billedcontracts with an original expected length of one year or less, which is an optional exemption that is permitted under the adopted rules.

The Company reports earnings per share in accordance with ASC 260 “Earnings Per Share”, which requires presentation of basic and diluted earnings per share in conjunction with the disclosure of the methodology used in computing such earnings per share. Basic earnings per share excludes dilution and is computed by dividing income available to customerscommon stockholders by the weighted average common shares outstanding during the period. Diluted earnings per share takes into account the potential dilution that could occur if securities or other contracts to issue common stock were exercised and converted into common stock. Further, if the number of common shares outstanding increases as a result of a stock dividend or stock split or decreases as a result of a reverse stock split, the computations of a basic and diluted earnings per share shall be adjusted retroactively for whichall periods presented to reflect that change in capital structure.

The Company’s basic earnings per share is computed by dividing the servicesnet income available to holders by the weighted average number of the Company’s common stock shares outstanding. Diluted earnings per share reflects the amount of net income available to each common stock share outstanding during the period plus the number of additional shares that would have not been fully performed. Asoutstanding if potentially dilutive securities had been issued. The Company had no potentially dilutive common stock shares outstanding as of September 30, 2017December 31, 2018 and March 31, 2017, deferred revenue were $492,553 and $290,099, respectively.2018.

Income Taxes

The Company accounts for income taxes using the asset and liability method in accordance withprescribed by ASC 740“Accounting for Income Taxes.” The asset and liability “Income Taxes”. Under this method, provides that deferred tax assets and liabilities are recognized fordetermined based on the expected future tax consequences of temporary differencesdifference between the financial reporting and tax bases of assets and liabilities and for operating loss and tax credit carry forwards. Deferred tax assets and liabilities are measured using the currently enacted tax rates and laws that will be in effect whenin the years in which the differences are expected to reverse. The Company records a valuation allowance to reduceoffset deferred tax assets toif based on the amountweight of available evidence, it is more-likely-than-not that is believed more likely thansome portion, or all, of the deferred tax assets will not to be realized.

Uncertain Tax Positions The effect on deferred taxes of a change in tax rates is recognized as income or loss in the period that includes the enactment date.

The Company follows guidance issued by the FASB regarding accounting for uncertainty in income taxes. This guidance clarifies the accounting for income taxes by prescribing the minimum recognition threshold an incomedoes not have any material unrecognized tax position is required to meet before being recognized in the financial statements and applies to all income tax positions. Each income tax position is assessed using a two-step process. A determination is first made as to whether it is more likely than not that the income tax position will be sustained, based upon technical merits, upon examination by the taxing authorities. If the income tax position is expected to meet the more likely than not criteria, the benefit recorded in the financial statements equals the largest amount that is greater than 50% likely to be realized upon its ultimate settlement.benefits.

The Company recordsis governed by the Income Tax Laws of the PRC. The PRC federal statutory tax rate is 25%. The Company files income tax relatedreturns with the relevant government authorities in the PRC. The Company does not believe there will be any material changes in its unrecognized tax positions over the next 12 months.

The Company’s policy is to recognize interest and penalties accrued on any unrecognized tax benefits as a component of the provision for income tax expense. AsThe Company does not have any accrued interest or penalties associated with any unrecognized tax benefits, nor was any interest expense recognized during the three and nine months ended December 31, 2018 and 2017. The Company’s effective tax rate differs from the PRC federal statutory rate primarily due to non-deductible expenses, temporary differences and preferential tax treatment.

New U.S. federal tax legislation, commonly referred to as the Tax Cuts and Jobs Act (the “U.S. Tax Reform”), was signed into law on December 22, 2017. The U.S. Tax Reform modified the U.S. Internal Revenue Code by, among other things, reducing the statutory U.S. federal corporate income tax rate from 35% to 21% for taxable years beginning after December 31, 2017; limiting and/or eliminating many business deductions; migrating the U.S. to a territorial tax system with a one-time transaction tax on a mandatory deemed repatriation of September 30, 2017previously deferred foreign earnings of certain foreign subsidiaries; subject to certain limitations, generally eliminating U.S. corporate income tax on dividends from foreign subsidiaries; and Marchproviding for new taxes on certain foreign earnings. Taxpayers may elect to pay the one-time transition tax over eight years, or in a single lump-sum payment. The Company measured the current and deferred taxes based on the provisions of the Tax legislation. After the Company’s measurement, no deferred tax benefit nor expense relating to the U.S. Tax Reform was needed for the three and nine months ended December 31, 2017,2018.

A related party is generally defined as:

(i) any person that holds the Company’s securities including such person’s immediate families,

(ii) the Company’s management,

(iii) someone that directly or indirectly controls, is controlled by or is under common control with the Company, determined there were no uncertain tax provisions.or

Earnings (Loss) Per Share(iv) anyone who can significantly influence the financial and operating decisions of the Company.

A transaction is considered to be a related party transaction when there is a transfer of resources or obligations between related parties.

“In August 2018, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No. 2018-13, Fair Value Measurement (Topic 820) Disclosure Framework – Change to the Disclosure Requirements for Fair Value Measurement. The amendments in this Update modify the disclosure requirements of fair value measurements in Topic 820, Fair Value Measurement, based on the concepts in the Concepts Statement, including the consideration of costs and benefits. This standard will be effective for the Company on September 1, 2020. The Company is currently evaluating the impact the adoption of this ASU will have on its financial statements.

In February 2018, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No. 2018-02, Income Statement - Reporting Comprehensive Income (Topic 220) Reclassification of Certain Tax Effects from Accumulated Other Comprehensive Income. The amendments allow a reclassification from accumulated other comprehensive income to retained earnings for stranded tax effects resulting from the Tax Cuts and Jobs Act. This standard has adopted ASC 260,“Earnings Per Share,” (“EPS”) which requires presentationbeen effective for the Company on September 1, 2018. The adoption of basic and diluted EPS on the face of the income statement for all entities with complex capital structures, and requires a reconciliation of the numerator and denominator of the basic EPS computation to the numerator and denominator of the diluted EPS computation. In the accompanying consolidated statements of operations and comprehensive loss, basic loss per share is computed by dividing net loss by the weighted average number of shares of common stock outstanding during the period.

The Company had no potentially dilutive securities, such as convertible debt, options or warrants, issued and outstanding during the six months ended September 30, 2017 and 2016.

Recent Accounting Pronouncements

The Company has reviewed all other recently issued, but not yet effective, accounting pronouncements andthis standard does not believe the future adoption of any such pronouncements may be expected to causehave a material impact on ourthe Company’s consolidated financial position, results of operations or cash flows.

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 September 1, 2020. The Company is currently evaluating the impact the adoption of this ASU will have on its consolidated financial statements.

In September 2017,May 2014, the FASB has issued Accounting Standards Update (ASU) No. 2017-13,“Revenue RecognitionASU 2014-09, “Revenue from Contracts with Customers (Topic 605), 606).” (“ASU 2014-09”). The core principle of the guidance is that an entity should recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. ASU 2014-09 supersedes most existing revenue recognition guidance in US GAAP. In August 2015, the FASB issued ASU 2015-14,Revenue from Contracts with Customers (Topic 606): Deferral of Effective Date (“ASU 2015-14”), Leases (Topic 840), and Leases (Topic 842): Amendments to SEC Paragraphs Pursuant to the Staff Announcement at the July 20, 2017 EITF Meeting and Rescission of Prior SEC Staff Announcements and Observer Comments.”The amendments in ASU No. 2017-13 amends the early adoption date option for certain companies related to the adoption of ASU No. 2014-09 and ASU No. 2016-02. Both of the below entities may still adopt using the public company adoption guidance in the related ASUs, as amended. The effective date is the same aswhich deferred the effective date and transition requirementsof ASU 2014-09 to January 1, 2018 for the amendments forCompany. Early adoption was permitted. The Company adopted ASU 2014-09 utilizing the modified retrospective method. The Company evaluated the impact of adopting the new standard and ASU 2016-02.concluded that there was no material impact on the Company’s revenue recognition policy.

In May 2014,February 2016, the FASB issued an accounting standards updateASU 2016-02,“Lease (Topic 842)”, which amends recognition of lease assets and introducedlease liabilities by lessees for those leases classified as operating leases. Under the new guidance, lessees will be required to recognize a 5-step approach which modifieslease liability and a right-of-use asset for all leases (with the requirements for identifying, allocating, and recognizing revenue related toexception of short-term leases) at the achievement of performance conditions under contracts with customers.commencement date. This update also requires additional disclosure related to the nature, amount, timing, and uncertainty of revenue that is recognized under contracts with customers. This guidance is effectivestandard will take effect for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2017 and is required to be applied retrospectively to all revenue arrangements.2018. The adoption of this guidance isstandard does not expected tohave a material impact on the Company’s consolidated financial position, results of operations or cash flows.

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.

In

On December 10, 2016, the FASB has issued Accounting Standards Update (ASU) No. 2016-20, “Technical Corrections and ImprovementsCompany entered into an equity transfer agreement relating to Topic 606, Revenue from Contracts with Customers.” The amendments affect narrow aspectsthe acquisition of 100% of the guidance issued in ASU 2014-09 including Loan Guarantee Fees, Contract Costs, Provisions for Lossesequity of Yingxi Industrial Chain Investment Co., Ltd (“Yingxi HK”) and subsidiaries. The acquisition was financed with proceeds from the Company’s borrowings from a third party. The acquisition was closed on Construction-Type and Production-Type Contracts, DisclosureDecember 15, 2016. The results of Remaining Performance Obligations, Disclosureoperations of Prior Period Performance Obligations, Contract Modifications, Contract Asset vs. Receivable, Refund Liability, Advertising Costs, Fixed Odds Wagering ContractsYingxi HK are included in the Casino Industry, and Costs Capitalized for Advisors to Private Funds and Public Funds. The effective date and transition requirements for the amendments are the same as the effective date and transition requirements for FASB Accounting Standards Codification Topic 606. Public entities should apply Topic 606 (and related amendments) for annual reporting periodsCompany’s consolidated financial statements beginning afteron December 15, 2017, including interim reporting periods therein.

NOTE 4 – INVENTORY2016.

InventoryThe following represents the purchase price allocation at September 30, 2017the dates of the acquisition:

The receivables and allowance balances at December 31, 2018 and March 31, 2017consist of the following:2018 are as follows:

NOTE 5 – NOTES RECEIVABLENo allowance for doubtful accounts was made for the three and nine months ended December 31, 2018 and 2017.

Other receivables primarily represent rental deposit; refundable security deposits to customers for quality assurance on the provision of logistic service; and unsecured and non-interest bearing short-term advances that the Company makes from time-to-time to employees and third-party entities. These advances are unsecured and due on demand.

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

Note receivable at September 30, 2017The Company had the following related party balances as of December 31, 2018 and March 31, 2017amounted to $1,613,812 and $1,057,437, respectively.218

Our consolidated unaudited financial statements are stated in United States Dollars (US$) and are prepared in accordance with United States Generally Accepted Accounting Principles. The following discussion should be read in conjunction with ourthe attached consolidated unaudited financial statements and thenotes thereto, and our consolidated audited financial statements and related notes that appear elsewherefor our fiscal year ended March 31, 2018 found in this quarterly report. Theour Annual Report on Form 10-K (as amended). In addition to historical information, the following discussion contains forward-looking statements that reflect our plans, estimatesinvolve risks, uncertainties and beliefs.assumptions. Where possible, we have tried to identify these forward-looking statements by using words such as “anticipate,” “believe,” “intends,” or similar expressions. Our actual results could differ materially from those discussed inanticipated by the forward-looking statements. Factors that could cause or contributestatements due to such differences include,important factors and risks including, but are not limited to, those discussed belowset forth in our Annual Report on Form 10-K (as amended), and elsewhereamendments thereto.

This Report contains statements that we believe are, or may be considered to be, “forward-looking statements”. All statements other than statements of historical fact included in this quarterly report.Report regarding the prospects of our industry or our prospects, plans, financial position or business strategy, may constitute forward-looking statements. In addition, forward-looking statements generally can be identified by the use of forward-looking words such as “may,” “will,” “expect,” “intend,” “estimate,” “foresee,” “project,” “anticipate,” “believe,” “plans,” “forecasts,” “continue” or “could” or the negatives of these terms or variations of them or similar terms. Furthermore, such forward-looking statements may be included in various filings that we make with the Securities and Exchange Commission or press releases or oral statements made by or with the approval of one of our authorized executive officers. Although we believe that the expectations reflected in these forward-looking statements are reasonable, we cannot assure you that these expectations will prove to be correct. These forward-looking statements are subject to certain known and unknown risks and uncertainties, as well as assumptions that could cause actual results to differ materially from those reflected in these forward-looking statements. Readers are cautioned not to place undue reliance on any forward-looking statements contained herein, which reflect management’s opinions only as of the date hereof. Except as required by law, we undertake no obligation to revise or publicly release the results of any revision to any forward-looking statements. You are advised, however, to consult any additional disclosures we make in our reports to the SEC. All subsequent written and oral forward-looking statements attributable to us or persons acting on our behalf are expressly qualified in their entirety by the cautionary statements contained in this Report.

You should read the matters described in “Risk Factors” and the other cautionary statements made in this Report, and incorporated by reference herein, as being applicable to all related forward-looking statements wherever they appear in this Report. We cannot assure you that the forward-looking statements in this Report will prove to be accurate and therefore prospective investors are encouraged not to place undue reliance on forward-looking statements.

Critical Accounting Policies and Estimates

The discussion and analysis of the Company’s financial condition and results of operations are based upon its consolidated unaudited financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States of America. The preparation of these unaudited financial statements requires management to make estimates and judgments that affect the reported amounts of assets, liabilities, revenues and expenses, and related disclosure of contingent liabilities. On an on-going basis, management evaluates past judgments and estimates, including those related to bad debts, accrued liabilities, convertible promissory notes and contingencies. Management bases its estimates on historical experience and on various other assumptions that are believed to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions or conditions. The accounting policies and related risks described in the Company’s annual report on Form 10-K/A as filed with the Securities and Exchange Commission on September 21, 2018 (as amended) are those that depend most heavily on these judgments and estimates. As of December 31, 2018, there had been no material changes to any of the critical accounting policies contained therein.

Definitions:

Unless the context requires otherwise, specified in this quarterly report, all dollar amounts are expressed in United States dollars and all references to “common stock”the “Company,” “we,” “us,” “our,” “Addentax” and “Addentax Group Corp.” refer specifically to shares of our common stock.

As used in this quarterly report, the terms “we”, “us”, “our company”, mean Addentax Group Corp. and its consolidated subsidiaries including Dongguan Heng Sheng Wei Garments Co., a Nevada corporationLtd, which is wholly-owned; Shantou Chenghai Dai Tou Garments Co., Ltd, which is wholly-owned; Shenzhen Xin Kuai Jie Transportation Co., Ltd, which is wholly-owned; Shenzhen Hua Peng Fa Logistic Co., Ltd, which is wholly-owned; and our wholly-owned subsidiary Yingxiingxi Industrial Chain Group Co., Ltd., a Republicwhich is wholly-owned.

In addition, unless the context otherwise requires and for the purposes of Seychelles corporation, unlessthis report only:

This information should be read in conjunction with the interim unaudited financial statements and the notes thereto included in this Quarterly Report on Form 10-Q, and the unaudited financial statements and notes thereto and Part II, Item 7, Management’s Discussion and Analysis of Financial Condition and Results of Operations contained in our Annual Report on Form 10-K/A for the year ended March 31, 2018 (as amended).

Certain capitalized terms used below and otherwise indicated.defined below, have the meanings given to such terms in the footnotes to our consolidated financial statements included above under “Part I - Financial Information” - “Item 1. Financial Statements”.

Corporate OverviewHistory

Addentax Group Corp., was incorporated in the State of Nevada on October 28, 2014 and established a fiscal year-end of March 31.2014. We are in the development stage and were originally incorporated to produce images on multiple surfaces, such as glass, leather, plastic, ceramic, textile, and others using a 3D sublimation vacuum heat transfer machine. Our business office is located at Floor 13th, Building 1, Block B, Zhihui Square, Nanshan District, Shenzhen City, China 518000. Our telephone number is +(86) 755 86961 405.We no longer pursue opportunities related to 3D printing positioning.

We have a fiscal year-end of March 31.

On July 12, 2016, we filed an amendment to our articles of incorporation, which amendment was effectuated by our transfer agent on July 20, 2016. The certificate of amendment was filed in order to undertake a two for one forward stock split and increase our authorized shares of common stock, par value $0.001 per share, to 150,000,000 shares, which forward stock split has been retroactively reflected throughout this Report.

Current Business

Effective December 28, 2016, the Company executed a Sale & Purchase Agreement (“Agreement”S&P”) for the acquisition of 100% of the shares and assets of Yingxi Industrial Chain Group Co., Ltd., (YICG”) a company incorporated under the laws of the Republic of Seychelles. The Company agreed to issue five hundred million (500,000,000) shares to Yingxi Industrial Chain Group Co., Ltd. (“YICG”) is currently a garment manufacturer. Intending to acquirediversify its service portfolio, the sharesCompany plans to develop another branch of business: international supply chain management consulting service, which will focus exclusively on the textile & garments industry. The Company plans to assist clients to open textile and assets for a cost of US$0.30 per share or a total cost of US$150,000,000.garment sales outlets throughout China. The closing ofCompany will also provide assistance services in plan implementation. Pursuant to the Agreement occurredS&P, which closed on September 25, 2017.

As a result2017, the Company issued five hundred million (500,000,000) restricted common shares of the closing,Company to the Company has terminated its previous business plan, and is now pursuing the historical businessowners of Yingxi Industrial Chain Group Co., Ltd., an international industry chain in consideration for the acquisition of YICG.

After the Share Exchange, YICG’s business became our business. We are a garment manufacturer and logistic service provider specializingbased in China. Our common stock is listed on the OTCQB under the symbol of “ATXG”. We classify our businesses into two segments: Garment manufacturing and logistics services.

Our garment manufacturing business consists of sales made principally to wholesalers located in the People’s Republic of China (“PRC”). We have our own manufacturing facilities, with sufficient production capacity and skilled workers on production lines to ensure that we meet our high quality control standards and timely meet the delivery requirements for our customers. We conduct our garment manufacturing operations through two wholly-owned subsidiaries, namely Dongguan Heng Sheng Wei Garments Co., Ltd (“HSW”) and Shantou Chenghai Dai Tou Garments Co., Ltd (“DT”), which are located in the Guangdong province, China.

Our logistic business consists of delivery and courier services covering approximately 20 provinces in China. Although we have our own motor vehicles and drivers, we currently outsource some of the business to our contractors. We believe outsourcing allows us to maximize our capacity and maintain flexibility while reducing capital expenditures and the costs of keeping drivers during slow seasons. We conduct our logistic operations through two wholly-owned subsidiaries, namely Shenzhen Xin Kuai Jie Transportation Co., Ltd (“XKJ”) and Shenzhen Hua Peng Fa Logistic Co., Ltd (“HPF”), which are located in the Guangdong province, China.

Business Objectives

Garment Manufacturing Business

We believe the strength of our garment manufacturing business is mainly due to our consistent emphasis on exceptional quality and timely delivery. The primary business objective for our garment manufacturing segment is to expand our customer base and improve our profit. In the future, we plan to develop our growth opportunities and continued investment initiatives to provide value-added consulting services to the apparel supply-chain companies and retailers in China.

Logistic Business

The business objective and future plan for our logistic service segment is to establish an efficient logistic system and to build a nationwide delivery and courier network in China. As of December 31, 2018, we provide logistic service to over 23 cities in approximately 20 provinces. We expect to develop additional 20 logistic point in existing serving cities in the fourth quarter of 2018 and improve company’s profit in 2019 fiscal year.

Seasonality of Business

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

Garment manufacturing business

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

Logistic business

For logistic service, we generally receive payments from the customers between 30 to 90 days following the date of the register of our receipt of packages.

Future Business

In addition to our garment manufacturing business, we also want to kick start our supply chain management consulting service. Our supply chain management consulting service is still under development with no active clients. However, due to the uniqueness of our business model, we have attracted over 30 potential clients strongly interested in our proposed service. All of those potential clients are located in China. We plan to put our proposed service into operation in the second or third quarter of calendar 2018.

To help ensure the quality of our business, we conduct strict rules for our potential clients.

Client Qualifications: To sign a servicing contract with the Company, a potential client must:

Medium and small-sized enterprises all over the world can search for our service, but our current focus is on helping clients in China.

Many medium-small sized enterprises in China experience the problem of business maintenance or expansion in the textile and garments industry where increasing operational costs cause decreasing profit. Most seek to employ new business models that can increase a company’s competitive advantage and increase sales. We have found that due to the limitation of resources and information, management of these enterprises find it hard to design a suitable plan for their company’s sustainable development.

To assist these enterprises, we set up a research team to carry out extensive investigation and integrate necessary industry information and resources which can help us to work out the best plan for our clients.

The research will include:

We developed a multi-task Industrial Chain Service System which we call “Adden Chain” not only for providing business solutions to clients, but also assisting the clients to fully realize their business plan and potential.

Our company’s service can be divided into three parts:

Consulting & garments industry.Plan Design

There are four main services within this part:

Promotion Service

We will design a “Promotion Plan” for our clients depending on their requirements to improve their marketing plans.

Operation Assistance Service

We can help clients to sort out all the individual parts (i.e., Raw Materials Supply, Manufacturing, Product Design and Marketing) within the whole operation chain, and assist them to fix weaknesses. We can also help clients to reallocate the resources they own and improve their operational efficiency.

Logistics and International Trading Service

We develop and apply our “YX logistics system” to improve our client’s transportation efficiency. Our YX logistics system mainly provides three services to our clients: transportation service; storage & distribution service; and bulk purchasing service.

We also work with qualified international trading companies to help expand our clients’ global market share. Currently we build trading routes to various areas like America, Australia, and Africa which can help clients lower international trading costs.

Financial Services

We will offer financial services to selected clients. These services include long term & short term loans which we provide to clients, financing services, and inventory pledge services. Also, we plan to build a third party payment center which can improve clients’ capital turnover. Clients will be able to employ the third party payment center to process transactions and accept the payment terms and payment period we set. As the third party guarantor, we could help our clients to pay or receive payments on time.

Plan implementation Assistance:

We have never declared bankruptcy, been in receivership, or involved in any kind of legal proceeding.already built strategic cooperative relationships with over 40 textile and garments industry related entities. We are available to assist our clients to deal with various issues and problems.

Additional Services

Team Establishment:

We will assist clients to establish an organizational structure and a management team best suited for their business plan.

Headhunting Services:

We work with headhunting companies, i.e., companies that provide employment or recruiting services to find the most qualified managers and professionals to meet the specific needs of our clients.

Follow-up Service:

We provide clients with continuous consultancy and follow-up services throughout the entire startup and service period.

Markets

Currently, our market focuses on small and medium-sized enterprises in China who have business expansion plans.

Sufficiency of Cash Flows

Because current cash balances and our projected cash generated from operations are not sufficient to meet our cash needs for working capital and capital expenditures, management intends to seek additional equity or obtain additional credit facilities. However, we may be unable to raise additional capital upon terms acceptable to us. The sale of additional equity will result in additional dilution to our shareholders. A portion of our cash may be used to acquire or invest in complementary businesses or products or to obtain the right to use complementary technologies. From time to time, in the ordinary course of business, we evaluate potential acquisitions of such businesses, products or technologies.

Summary of Critical Accounting Policies

We have identified critical accounting policies that, as a result of judgments, uncertainties, uniqueness and complexities of the underlying accounting standards and operation involved could result in material changes to our financial position or results of operations under different conditions or using different assumptions.

Estimates and Assumptions

We regularly evaluate the accounting estimates that we use to prepare our financial statements. In general, management’s estimates are based on historical experience, on information from third party professionals, and on various other assumptions that are believed to be reasonable under the facts and circumstances. Actual results could differ from those estimates made by management.

Revenue Recognition

Revenue is generated through sale of goods and delivery services. Revenue is recognized when a customer obtains control of promised goods or services and is recognized in an amount that reflects the consideration that the Company expects to receive in exchange for those goods or services. In addition, the standard requires disclosure of the nature, amount, timing, and uncertainty of revenue and cash flows arising from contracts with customers. The amount of revenue that is recorded reflects the consideration that the Company expects to receive in exchange for those goods and services. The Company applies the following five-step model in order to determine this amount:

The Company only applies the five-step model to contracts when it is probable that the Company will collect the consideration it is entitled to in exchange for the goods or services it transfers to the customer. Once a contract is determined to be within the scope of ASC 606 at contract inception, the Company reviews the contract to determine which performance obligations the Company must deliver and which of these performance obligations are distinct. The Company recognizes as revenues the amount of the transaction price that is allocated to the respective performance obligation when the performance obligation is satisfied or as it is satisfied. Generally, the Company’s performance obligations are transferred to customers at a point in time, typically upon delivery.

For all reporting periods, the Company has not disclosed the value of unsatisfied performance obligations for all product and service revenue contracts with an original expected length of one year or less, which is an optional exemption that is permitted under the adopted rules.

Concentrations of Credit Risk

Cash held in banks: We maintain cash balances at the financial institutions in China. We have not experienced any losses in such accounts.

Accounts Receivable: Customer accounts typically are collected within a short period of time, and based on its assessment of current conditions and its experience collecting such receivables, management believes it has no significant risk related to its concentration within its accounts receivable.

Recently issued and adopted accounting pronouncements

“In August 2018, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No. 2018-13, Fair Value Measurement (Topic 820) Disclosure Framework – Change to the Disclosure Requirements for Fair Value Measurement. The amendments in this Update modify the disclosure requirements of fair value measurements in Topic 820, Fair Value Measurement, based on the concepts in the Concepts Statement, including the consideration of costs and benefits. This standard will be effective for the Company on September 1, 2020. The Company is currently evaluating the impact the adoption of this ASU will have on its financial statements.

In February 2018, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No. 2018-02, Income Statement - Reporting Comprehensive Income (Topic 220) Reclassification of Certain Tax Effects from Accumulated Other Comprehensive Income. The amendments allow a reclassification from accumulated other comprehensive income to retained earnings for stranded tax effects resulting from the Tax Cuts and Jobs Act. This standard has been effective for the Company on September 1, 2018. The adoption of this standard does not have a material impact on the Company’s consolidated financial position, results of operations or cash flows.

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 September 1, 2020. The Company is currently evaluating the impact the adoption of this ASU will have on its consolidated financial statements.

In May 2014, the FASB issued ASU 2014-09, “Revenue from Contracts with Customers (Topic 606).” (“ASU 2014-09”). The core principle of the guidance is that an entity should recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. ASU 2014-09 supersedes most existing revenue recognition guidance in US GAAP. In August 2015, the FASB issued ASU 2015-14,Revenue from Contracts with Customers (Topic 606): Deferral of Effective Date (“ASU 2015-14”), which deferred the effective date of ASU 2014-09 to January 1, 2018 for the Company. Early adoption was permitted. The Company adopted ASU 2014-09 utilizing the modified retrospective method. The Company evaluated the impact of adopting the new standard and concluded that there was no material impact on the Company’s revenue recognition policy.

In February 2016, the FASB issued ASU 2016-02,“Lease (Topic 842)”, which amends recognition of lease assets and lease liabilities by lessees for those leases classified as operating leases. Under the new guidance, lessees will be required to recognize a lease liability and a right-of-use asset for all leases (with the exception of short-term leases) at the commencement date. This standard will take effect for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2018. The adoption of this standard does not have a material impact on the Company’s consolidated financial position, results of operations or cash flows.

The Company reviews new accounting standards as issued. Management has not identified any other new standards that it believes will have a significant impact on the Company’s consolidated financial statements.

Results of Operations

For the three months ended September 30, 2017 compared to 2016

Revenue

Net revenues totaled $3,729,840 for the three months ended September 30,December 31, 2018 and 2017 an increase of $1,296,281 compared to 2016. The increase was primarily a result of regular increase of business.

CostThe following tables summarize our results of revenue

Cost of revenue totaled $3,366,742operations for the three months ended September 30, 2017, an increase of $1,318,883 compared to 2016. Our cost of revenues consisted mainly of the labor cost, raw material cost, manufacturing cost, transportation costDecember 31, 2018 and operation tax.2017. The increase was primarily a result of an increase in transportation fee caused by increasing toll chargetable and the third-party cost from new business.discussion below should be read in conjunction with our condensed consolidated financial statements and the notes thereto appearing elsewhere in this report.

Gross profit