EZAGOO LIMITED The information contained in this quarter report on Form 10-Q is intended to update the information contained in our Annual Report on Form 10-K for the year endedDecember 31, 2021 and presumes that readers have access to, and will have read, the "Management's Discussion and Analysis of Financial Condition and Results of Operations" and other information contained in such Form 10-K. The following discussion and analysis also should be read together with our consolidated financial statements and the notes to the consolidated financial statements included elsewhere in this Form 10-Q. The following discussion contains certain statements that may be deemed "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995. Such statements appear in a number of places in this Report, including, without limitation, "Management's Discussion and Analysis of Financial Condition and Results of Operations." These statements are not guarantees of future performance and involve risks, uncertainties and requirements that are difficult to predict or are beyond our control. Forward-looking statements speak only as of the date of this quarterly report. You should not put undue reliance on any forward-looking statements. We strongly encourage investors to carefully read the factors described in our Form S-1 Amendment No.5, datedMay 3, 2019 in the section entitled "Risk Factors" for a description of certain risks that could, among other things, cause actual results to differ from these forward-looking statements. We assume no responsibility to update the forward-looking statements contained in this transition report on Form10-Q. The following should also be read in conjunction with the unaudited Condensed Consolidated Financial Statements and notes thereto that appear elsewhere in this report. Company OverviewEzagoo Limited ("the Company" or "EZAGOO"), was incorporated in theState of Nevada onMay 9, 2018 . As ofJanuary 1, 2022 , the Company's revenue will mainly be generated revenue from Xindian application platform. According to the announcement ofthat was issued by the Changsha government onNovember 17, 2020 , "In order to accelerate the development of theChangsha City, the local government decided to set up theChangsha Public Transportation Group Ltd , which is holdsBaojun Bus Co. ,Zhongwang Bus Co. , andTongchang Bus Co. " These mentioned Bus companies are used to be our vendors, our contracts withZhongwang Bus Co. , andTongchang Bus Co. , were expired onFebruary 9, 2021 , andApril 1, 2020 , respectively, and we were not renewed as they were the first batch of bus companies to be merged by theChangsha government. The contract withBaojun Bus Co. , was expired onDecember 31, 2020 but we continued the bus rent on a monthly basis untilDecember 28, 2021 . TheChangsha government completed the merge and acquisition at the end of 2021, which makes it very difficult for us to continue to operate in this area. During the periods endedSeptember 30, 2022 , the Company conducted its business in generally two revenue streams: the advertisement income of mobile short video, and the commission income from e-commerce business & other value-added services that started fromJune 1, 2022 . Results of Operation
For the three and nine months ended
Revenue
Three months ended Nine months ended
September 30, September 30,
2022 2021 2022 2021
(Unaudited) (Unaudited) (Unaudited) (Unaudited)
REVENUES $ $ $ $
Advertisement income of mobile
short video - 386,634 240,283 1,279,170
Commission income
-Commission income of e-commerce
business - - 9 -
-Commission income of other
value-added services 423 -
609 -
$ 423 $ 386,634 $ 240,901 $ 1,279,170 For three months endedSeptember 30, 2022 and 2021, we realized revenue in amount of$423 and$386,634 , respectively. The decrease in advertisement income is the Company suffered from the Covid-19, and we met the bottleneck when we transformed the traditional bus advertising to their Xindian platform sinceJanuary 1, 2022 . We're planning to expand our brand to attract more potential users and customers, and we have generated commission income of e-commerce business (Xin-Beauty) and other value-added services (Customers or Users could sell products in Xindian, like Amazon), that are starting fromApril 1, 2022 . For nine months endedSeptember 30, 2022 and 2021, we realized revenue in amount of$240,901 and$1,279,170 , respectively. The decrease in revenue is the Company's business development is focus on the advertisement income and other income from Xindian, and no traditional advertisement on urban-bus sinceJanuary 1, 2022 . We're planning to expand our brand to attract more potential users and customers, and we have generated commission income of e-commerce business (Xin-Beauty) and other value-added services (Customers or Users could sell products in Xindian, likeAmazone ), that are starting fromApril 1, 2022 . 2 Costs and Expenses
Cost of revenues is comprised of short video produce costs, bus rental fee and related costs, salaries and related costs.
? Short video produce costs of
30, 2022 and 2021, respectively, which are outsourcing to the related party.
Short video produce costs of
related party.
? Bus rental fee and related costs of
Bus rental fee and related costs of
? Salaries and related costs of
30, 2022 and 2021 respectively, which are the compensation expenses for
technical employees responsible for R&D and depreciation of computer related
to our existing Xindian platform.
Salaries and related costs of
for technical employees responsible for R&D and depreciation of computer
related to our existing Xindian platform.
Operating Expenses
Operating expenses are generally included during our normal course of business, which we categorize as either sales and marketing expenses and general & administrative expenses.
? The main components of our sales and marketing expenses of
for three months ended September 30, 2022 and 2021 respectively, and of
$103,957 and $98,101 for the nine months ended September 30, 2022
respectively, are:
a. Compensation expenses for employees engaged in sales and marketing, sales
support, and certain customer service functions;
b. Spending related to our advertising and promotional activities in support of
our services and Xindian platform.
? The main components of our general and administrative expenses of
of $812,599 and $672,419 for the nine months ended September 30, 2022
respectively, are:
a. Compensation expenses for employees in financial, human resources, and other
administrative support functions;
b. Professional services fees, including audit, consulting.
c. Office expenses, including rent and rate, insurance.
Net Income (Loss)
The net loss was $308,263 for three months ended September 30, 2022 , as compared
to net loss of $50,867 for three months ended September 30, 2021 . The decrease
of net income mainly derived from the decrease in the advertisement income and
increase in administrative expenses.
The net loss was $877,651 for nine months ended September 30, 2022 , as compared
to net income of $49,674 for nine months ended September 30, 2021 . The decrease
of net income mainly derived from the decrease in the advertisement income and
increase in administrative expenses.
Liquidity and Capital Resources
As ofSeptember 30, 2022 , we had working capital deficit of$2,049,399 as compared to working capital deficit of$1,481,472 as ofDecember 31, 2021 . The increase in working capital deficit was reflected in the advanced from related parties and the deferred income for operating use. The Company's net loss of$877,651 and net income of$49,674 for nine months endedSeptember 30, 2022
and 2021, respectively.
Cash Flow from Operating Activities
For nine months endedSeptember 30, 2022 , net cash used in operating activities was$617,620 , compared to net cash used in operating activities of$817,268 for nine months endedSeptember 30, 2021 , reflecting a decrease of 199,647. The cash used in operating activities was mainly due to increasing in the repayment from related party and the decreasing in deferred revenue.
Cash Flow from Investing Activities
For nine months ended
Cash Flow from Financing Activities
For nine months endedSeptember 30, 2022 , net cash provided by financing activities was$479,709 , as compared to net cash used in financial activities of$581,763 , reflecting a decrease of$102,054 . The net cash provided by financing activities for nine months endedSeptember 30, 2022 was the loan advanced from related parties. 3 Credit Facilities
We do not have any credit facilities or other access to bank credit.
Contractual Obligations, Commitments and Contingencies
We currently have three lease agreement in place with respect to office premises
in
Off-balance Sheet Arrangements
As ofSeptember 30, 2022 , we have no significant off-balance sheet arrangements that have or are reasonably likely to have a current or future effect on our financial condition, changes in our financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources that are material to our stockholders. Additional Information
VIE STRUCTURE AND ARRANGEMENTS
Foreign ownership in companies providing media advertising services is subject to certain restrictions under PRC laws and regulations. To comply with the PRC laws and regulations, we, through our wholly-owned subsidiary,Changsha Ezagoo Technology Limited (CETL), entered into a set of contractual arrangements withBeijing Ezagoo Zhicheng Internet Technology Limited (BEZL) and includes its branch company, namedChangsha Branch ofBeijing Ezagoo Industrial Development Group Holding Limited (BELCB), and its shareholders. The contractual arrangements between CETL, BEZL and shareholders of BEZL allow us to:
1. exercise effective control over BEZL and BELCB whereby having the power to
direct BEZL and BELCB's activities that most significantly drive the economic
results of BEZL and BELCB;
2. receive substantially all of the economic benefits and residual returns, and
absorb substantially all the risks and expected losses from BEZL and BELCB as
if it was their sole shareholder; and
3. have an exclusive option to purchase all of the equity interests in BEZL and
BELCB. Our consolidated financial statements include the financial statements of our company, our subsidiaries and our consolidated VIE for which we are the primary beneficiary. All transactions and balances among our company, our subsidiaries and our consolidated VIE have been eliminated upon consolidation. A subsidiary is an entity in which we, directly or indirectly, control more than one half of the voting powers; or has the power to appoint or remove the majority of the members of the board of directors; or to cast a majority of votes at the meeting of directors; or has the power to govern the financial and operating policies of the investee under a statute or agreement among the shareholders or equity holders. A consolidated VIE is an entity in which we, or our subsidiaries, through contractual agreements, bears the risks of, and enjoys the rewards normally associated with ownership of the entity. In determining whether we or our subsidiaries are the primary beneficiary, we considered whether it has the power to direct activities that are significant to the consolidated VIE's economic performance, and also our obligation to absorb losses of the consolidated VIE that could potentially be significant to the consolidated VIE or the right to receive benefits from the consolidated VIE that could potentially be significant to the consolidated VIE. We hold all the variable interests of the consolidated VIE and its subsidiaries, and has been determined to be the primary beneficiary of the consolidated VIE.
In accordance with the contractual agreements among between CETL, BEZL, BELCB and shareholders of BEZL and BELCB allow us to:
1. exercise effective control over BEZL and BELCB whereby having the power to
direct BEZL and BELCB's activities that most significantly drive the economic
results of BEZL;
2. receive substantially all of the economic benefits and residual returns, and
absorb substantially all the risks and expected losses from BEZL and BELCB as
if it was their sole shareholder;
3. and have an exclusive option to purchase all of the equity interests in BEZL
and BELCB. We believe that the contractual arrangements among CETL, BEZL, BELCB and the shareholders of BEZL are in compliance with PRC law and are legally enforceable. However, uncertainties in the PRC legal system could limit our ability to enforce these contractual arrangements and if the shareholders of our consolidated VIE were to reduce their interest in us, their interests may diverge from ours and that may potentially increase the risk that they would seek to act contrary to the contractual terms. Our ability to control the consolidated VIE also depends on the voting rights proxy agreement and our company, through CETL, has to vote on all matters requiring shareholder approval in the consolidated VIE. As noted above, we believe this voting rights proxy agreement is legally enforceable but may not be as effective as direct equity ownership.
On
The Company's mailing address is B127, 2/F, Block B,
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