EZAGOO LIMITED The following discussion should be read in conjunction with our financial
statements, including the notes thereto, appearing elsewhere in this Annual
Report. The following discussion contains forward-looking statements that
reflect our plans, estimates and beliefs. Our actual results could differ
materially from those discussed in the forward- looking statements. Factors that
could cause or contribute to such differences include, but are not limited to
those discussed below and elsewhere in this Report. Our audited financial
statements are stated in
Company Overview
During the year 2021, the Company conducted its business in generally two revenue stream: the traditional urban bus advertisement and the mobile short video advertisement.
Results of Operations
For the year ended
Revenue
The Company generated revenue of
Costs and Expenses
Our cost structure has two components: cost of revenues and operating expenses
of
Cost of revenues
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
2021 and 2020, respectively, which are outsourcing to the related party.
? Bus rental fee and related costs of
properties.
? Salaries and related costs of
31, 2021 and 2020, respectively, which are the compensation expenses for
technical employees responsible for R&D and depreciation of computer related to
our existing Xindian platform.
26 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
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
a. Compensation expenses for employees in financial, human resources, and other
administrative support functions;
b. Professional services fees, including audit, consulting, outside legal
service.
c. Office expenses, including rent and rate, insurance.
Net Income (Loss)
The net income for the year was
Liquidity and Capital Resources
As of
Cash Flow from Operating Activities
Net cash used in operating activities for the year ended
Cash Flow from Investing Activities
Net cash used in investing activities for the year ended
Cash Flow from Financing Activities
Net cash generated from financing activities for the year ended
The revenues, if any, generated from our current business operations alone may not be sufficient to fund our operations or planned growth. We will likely require additional capital to continue to operate our business, and to further expand our business. Sources of additional capital through various financing transactions or arrangements with third parties may include equity or debt financing, bank loans or revolving credit facilities. We may not be successful in locating suitable financing transactions in the time period required or at all, and we may not obtain the capital we require by other means. Our inability to raise additional funds when required may have a negative impact on our operations, business development and financial results.
Critical accounting estimates Use of estimates
In preparing these consolidated financial statements, management makes estimates and assumptions that affect the reported amounts of assets and liabilities in the balance sheets and revenues and expenses during the periods reported. Actual results may differ from these estimates.
27 Reclassification
Certain prior year amounts have been reclassified for consistency with the current year presentation. These reclassifications had no effect on the reported results of operations.
Foreign currencies translation and re-measurement
Transactions denominated in currencies other than the functional currency are translated into the functional currency at the exchange rates prevailing at the dates of the transaction. Monetary assets and liabilities denominated in currencies other than the functional currency are translated into the functional currency using the applicable exchange rates at the balance sheet dates. The resulting exchange differences are recorded in the statements of operations and comprehensive income.
The reporting currency of the Company is United States Dollars ("US$") and the
accompanying financial statements have been expressed in US$. In addition, the
Company's subsidiary in
In general, for consolidation purposes, assets and liabilities of its subsidiaries whose functional currency is not US$ are translated into US$, in accordance with ASC Topic 830-30, "Translation of Financial Statement", using the exchange rate on the balance sheet date. Revenues and expenses are translated at average rates prevailing during the period. The gains and losses resulting from translation of financial statements of foreign subsidiary are recorded as a separate component of accumulated other comprehensive income (loss) within the statements of stockholders' deficit.
Translation of amounts from RMB into
As of and for the
year ended
December 31,
2021 2020
Period-end RMB: US$1 exchange rate 6.36 6.53
Period-average RMB:
7.75 7.75
Period-average HK$:
Cash and cash equivalents
The Company considers all highly liquid instruments with a maturity of three months or less at the time of issuance to be cash equivalents.
Lease
The Company accounts for its leases in accordance with ASC 842 Leases. The Company leases office space. The Company concludes on whether an arrangement is a lease at inception. This determination as to whether an arrangement contains a lease is based on an assessment as to whether a contract conveys the right to the Company to control the use of identified property, plant or equipment for period of time in exchange for consideration. Leases with an initial term of 12 months or less are not recorded on the balance sheet. The Company recognizes these lease expenses on a straight-line basis over the lease term.
The Company has assessed its contracts and concluded that its leases consist of only operating leases. Operating leases are included in operating lease right-of-use (ROU) assets, current portion of operating lease liabilities, and operating lease liabilities in the Company's consolidated balance sheets.
ROU assets represent the Company's right to use an underlying asset for the lease term and lease liabilities represent the Company's 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 Company's leases do not provide an implicit rate, the Company determines an incremental borrowing rate based on the information available at commencement date in determining the present value of lease payments. The Company's incremental borrowing rate is a hypothetical rate based on its understanding of what its credit rating would be. 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.
28 Revenue recognition
The Company assesses and follows the guidance of ASC 606, revenue from contracts with customers is recognized using the following five steps:
1. Identify the contract(s) with a customer;
a. The parties to the contract have approved the contract (in writing, orally,
or in accordance with other customary business practices) and are committed
to perform their respective obligations.
b. The entity can identify each party's rights regarding the services to be
transferred.
c. The entity can identify the payment terms for the services to be
transferred.
d. The contract has commercial substance (that is, the risk, timing, or amount
of the entity's future cash flows is expected to change as a result of the
contract).
e. It is probable that the entity will collect substantially all of the
consideration to which it will be entitled in exchange for the services
that will be transferred to the customer.
2. Identify the performance obligations in the contract;
a. According to the contract, the Company and Customer has to maintain the
performance obligation, respectively.
b. The customer shall pay for the advertising services after signing of the
contract and provide appropriate advertisement materials to the Company,
the Company shall ensure the advertisement of the Customer is published
according to the contract terms.
3. Determine the transaction price;
a. For the advertising contract, the transaction price is explicitly stated in
fixed amount in the contract. There is no variable consideration, such as
discounts, rebates, consideration payable to customer or noncash
consideration. There was no price concession, and the Company did not
expect any price concession for the service performed during the years
ended December 31, 2021 and 2020.
b. The contract does not contain any elements that would cause consideration
under the arrangement to be variable (Examples include discounts, rebates,
refunds, credits, incentives, tiered pricing, price guarantees, right of
return, etc.).
c. There are no factors that exist whereby it is not probable that a
significant reversal or revenues will not occur in the contract.
4. Allocate the transaction price to the performance obligations in the contract;
and
a. There were no multiple performance obligations to which the transaction
price must be allocated, and each contract only has one performance
obligation. The standalone selling price is explicated stated in the
contract.
5. Recognize revenue when (or as) the entity satisfies a performance obligation.
a. Per ASC 606, an entity shall recognize revenue when (or as) the entity
satisfies a performance obligation by transferring a promised good or
service (that is, an asset) to a customer. An asset is transferred when (or
as) the customer obtains control of that asset.
b. Revenue is recognized when the advertising service is performed. According
to the sample advertising contract, upon obtaining the signed contract from
the Customer, the service period would be started. Therefore, the revenue
is recognized when the service completely provided at that point in time.
Under Topic 606, revenues are recognized when the promised services have been confirmed and transferred to the consumers in amounts that reflect the consideration the customer expects to be entitled to in exchange for those services. The Company presents value added taxes ("VAT") as reductions of revenues. The Company recognizes revenues net of value added taxes ("VAT") and relevant charges.
The Company's revenue mainly from providing advertising services on urban bus in
29 Cost of revenues
Cost of revenue includes bus media terminal rental fees, bus monitors maintenance fees, bus screen installation fees, internet data fees, cloud fees for storage use and the operating salaries for the staffs who running the Xindian application.
Income taxes
The Company followed the liability method of accounting for income taxes in accordance with ASC 740, Income Taxes, or ASC 740. Under this method, deferred tax assets and liabilities are determined based on the difference between the financial reporting and tax bases of assets and liabilities using enacted tax rates that will be in effect in the period in which the differences are expected to reverse. The Company recorded a valuation allowance to offset deferred tax assets if based on the weight of available evidence, it is more-likely-than-not that some portion, or all, of the deferred tax assets will not be realized. The effect on deferred taxes of a change in tax rate is recognized in tax expense in the period that includes the enactment date of the change in tax rate.
The Company accounted for uncertainties in income taxes in accordance with ASC 740. Interest and penalties related to unrecognizable tax benefit recognized in accordance with ASC 740 are classified in the consolidated statements of comprehensive loss as income tax expense.
Earnings per share
The Company computes earnings per share ("EPS") in accordance with ASC Topic 260, "Earnings per share". Basic EPS is measured as the income or loss available to common shareholders divided by the weighted average common shares outstanding for the period. Diluted EPS is similar to basic EPS but presents the dilutive effect on a per share basis of potential common shares (e.g., convertible securities, options, and warrants) as if they had been converted at the beginning of the periods presented, or issuance date, if later. Any potential common shares in 2021 and 2020 that have an anti-dilutive effect (i.e. those that increase income per share or decrease loss per share) are excluded from the calculation of diluted EPS.
Related party transaction
A related party is generally defined as (i) any person that holds 10% or more of the Company's securities and their 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, or (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.
Transactions involving related parties cannot be presumed to be carried out on an arm's-length basis, as the requisite conditions of competitive, free market dealings may not exist. Representations about transactions with related parties, if made, shall not imply that the related party transactions were consummated on terms equivalent to those that prevail in arm's-length transactions unless such representations can be substantiated.
Recent accounting pronouncements
In
In
The Company has reviewed all recently issued, but not yet effective, accounting pronouncements and does not believe the future adoption of any such pronouncements may be expected to cause a material impact on its financial condition or the results of its operations.
30 Risks and uncertainties
Substantially all the Company's services are conducted in
Going Concern
The accompanying financial statements have been prepared using the going concern basis of accounting, which contemplates the realization of assets and the satisfaction of liabilities in the normal course of business.
As of
These and other factors raise substantial doubt about the Company's ability to continue as a going concern. These financial statements do not include any adjustments to reflect the possible future effects on the recoverability and classification of assets or the amounts and classification of liabilities that may result in the Company not being able to continue as a going concern.
Off-Balance Sheet Arrangements
As of
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