Our Management's Discussion and Analysis contains forward-looking statements
relating to future events or our future financial performance. In some cases,
you can identify forward-looking statements by terminology such as "may",
"should", "intends", "expects", "plans", "anticipates", "believes", "estimates",
"predicts", "potential", or "continue" or the negative of these terms or other
comparable terminology. These statements are only predictions and involve known
and unknown risks, uncertainties and other factors which may cause our or our
industry's actual results, levels of activity or performance to be materially
different from any future results, levels of activity or performance expressed
implied by these forward-looking statements.
Although we believe that the expectations reflected in the forward-looking
statements are reasonable, we cannot guarantee future results, levels of
activity or performance. You should not place undue reliance on these
statements, which speak only as of the date of this Transition Report. These
cautionary statements should be considered with any written or oral
forward-looking statements that we may issue in the future. You should read this
Transition Report on Form 10-KT with the understanding that our actual future
results may be materially different from what we expect. All forward-looking
statements speak only as of the date on which they are made. We undertake no
obligation to update such statements to reflect events that occur or
circumstances that exist after the date on which they are made, except as
required by applicable law.
Management's discussion and analysis of our financial condition and results of
operations are based upon our consolidated financial statements which have been
prepared in accordance with accounting principles generally accepted in the
United States of America ("GAAP"). The following discussion and analysis he is
of the financial condition and results of operations of the Company is based
upon, and should be read in conjunction with, the audited consolidated financial
statements and related notes elsewhere in this Transition Report.
U.S. Dollars are denoted herein by "USD", "$" and "dollars".
Impact of COVID-19 Outbreak
The ongoing COVID-19 global and national health emergency has caused significant
disruption in the international and United States economies and financial
markets. In March 2020, the World Health Organization declared the COVID-19
outbreak a pandemic. The spread of COVID-19 has caused illness, quarantines,
cancellation of events and travel, business and school shutdowns, reduction in
business activity and financial transactions, labor shortages, supply chain
interruptions and overall economic and financial market instability. The
COVID-19 pandemic has the potential to significantly impact the Company's supply
chain and other service providers.
In addition, a severe prolonged economic downturn could result in a variety of
risks to the business, including weakened demand for products and services and a
decreased ability to raise additional capital when needed on acceptable terms,
if at all. As the situation continues to evolve, the Company will continue to
closely monitor market conditions and respond accordingly.
Overview and Recent Developments
The Company was organized in the State of Florida on January 26, 2012. We were
incorporated as E-Waste Corp. in the State of Florida on January 26, 2012, to
develop an e-waste recycling business. We were not able to raise sufficient
capital to execute our original business plan and we ceased that line of
business.
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Effective September 3, 2021, we changed our name from E-Waste Corp. to EZRaider
Co. On September 14, 2021, our wholly owned subsidiary, E-Waste Acquisition
Corp., a Delaware corporation, merged with and into EZRaider Global, Inc., a
Nevada corporation ("EZ Global"), with EZ Global surviving as our wholly owned
subsidiary in the merger (the "Merger"). At the effective time of the Merger,
all of the outstanding shares of capital stock of EZ Global, were converted into
28,550,000 shares of our common stock. As a result of the Merger, we
discontinued our prior activities and continued the existing business operations
of EZ Global, and its wholly owned subsidiary, EZ Raider, LLC, a Washington
limited liability company ("EZ LLC").
On November 15, 2021, our board of directors (the "Board") appointed George
Andrew Lear III as Chief Financial Officer of the Company. Prior to Mr. Lear's
appointment, Moshe Azarzar, had served as Chief Financial Officer on an interim
basis since September 14, 2021. In connection with his appointment as Chief
Financial Officer, Mr. Lear also replaced Mr. Azarzar as the Company's
"Principal Financial and Accounting Officer" for SEC reporting purposes. In
connection with Mr. Lear's appointment as the Company's Chief Financial Officer,
the Company entered into an Employment Agreement with Mr. Lear, effective as of
November 15, 2021. Said agreement has an initial term through January 31, 2022,
and currently the terms of the extension as described in the employment
agreement for Mr. Lear are in effect while also additional terms are being
discussed with the Company.
On November 18, 2021, the Board appointed Yoav Tilan as Chief Operating Officer
of the Company. In connection with Mr. Tilan's appointment as the Company's
Chief Operating Officer, the Company entered into an Employment Agreement with
Mr. Tilan, effective as of November 18, 2021, which has an initial term through
January 31, 2023, at which time the terms for an extension will be negotiated.
On December 30, 2021, EZ Global entered into the Memorandum with D.S. Raider an
Israeli company that designs, manufactures and sells electric-powered, tactical
manned vehicles known as "EZRaider Vehicles." The Memorandum amended certain
terms of the Share Purchase Agreement EZ Global, D.S Raider, and the
shareholders of D.S Raider entered into on August 31, 2021 (as previously
amended on March 30, 2021 and August 31, 2021), pursuant to which, among other
things, EZ Global had the exclusive right to acquire 100% of the capital stock
of D.S Raider on or before December 31, 2021 for an aggregate purchase price of
$30,000,000, plus shares representing 21% of the Company's common equity. EZ
Global previously purchased approximately 6.7% of the issued and outstanding
capital stock of D.S Raider (295,947 Ordinary Shares), for an aggregate purchase
price of $3,850,000.
Pursuant to the Memorandum, in consideration of D.S Raider's agreement to extend
the Exclusivity Date to March 15, 2022, EZ Global agreed that, by December 31,
2021, it would secure $1,600,000 of purchase orders for EZRaider Vehicles for
the 2022 year (the "Purchase Orders") and will pay to pay DS Raider a down
payment of $800,000 (the "Down Payment"), representing 50% of the purchase price
for the Purchase Orders, no later than January 17, 2022. The $800,000 Down
Payment was paid to D.S Raider on January 13, 2022, and the Exclusivity Date was
extended to March 15, 2022 (which was subsequently further extended until March
31, 2022). The Share Purchase Agreement's Exclusivity Period for the D.S Raider
Acquisition has expired, and the Company is currently evaluating its options.
On December 31, 2021, the Company closed two private placement offerings: (a) a
private placement offering of up to $750,000 in shares of the Company's Common
Stock at a purchase price of $1.50 per share, in which the Company sold 143,335
shares of common stock to six accredited investors for the aggregate gross
proceeds to the Company of $215,001, and (b) a private placement offering of up
to $300,000 in principal amount of 6% unsecured promissory notes, in which the
Company received $125,000 in gross proceeds and sold and issued promissory notes
to three accredited investors in total principal amount of $125,000 and issued
total of 12,500 shares of common stock to these investors.
In January 2022, the Company closed an additional private placement offering in
which it sold an aggregate of 63,334 shares of the Company's Common Stock at a
purchase price of $1.50 per share to two accredited investors for an aggregate
gross proceeds of $95,001.
The Company is currently conducting an additional private placement offering of
up to $2,000,000 of shares of the Company's common stock at a purchase price of
$1.50 per share. As of the date of this Transition Report, the Company sold
6,667 shares of common stock to one accredited investor in this private
placement offering for aggregate gross proceeds of $10,000.
On March 15, 2022, the Company entered into amendments to certain unsecured 6%
promissory notes (the "Amendments") with three investors and issued additional
12,500 shares of common stock to these investors in consideration for the
extension of the maturity date of the promissory notes until July 8, 2022.
On March 15, 2022, EZ Global and Konrad Koss entered into Amendment No. 2 to the
6% unsecured promissory note in the principal amount of $200,000 (the "Second
Amendment"). Pursuant to the Second Amendment, the interest rate on the
principal amount was increased from 6% to 7.5% per annum, and the maturity date
was extended until September 16, 2022.
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On March 15, 2022, EZ Global and Konrad Koss entered into Amendment No. 1 to the
6% unsecured promissory note in the principal amount of $50,000 (the
"Amendment"). Pursuant to the Amendment, the interest rate on the principal
amount was increased from 6% to 7.5%, and the maturity date was extended until
September 16, 2022.
Change in Fiscal Year-End
On February 14, 2022, the Board of Directors of the Company approved the change
in our fiscal year end from February 28/29 to December 31. As a result of this
change, we are filing this Transition Report on Form 10-KT for the ten-month
transition period from March 1, 2021 to December 31, 2021. References to any of
our previous fiscal years mean the fiscal years ending on February 28/29.
Results of Operations
Ten-Month Period Ended December 31, 2021 Compared to Ten-Month Period Ended
December 31, 2020
Revenues from operations were $347,127 for the ten months ended December 31,
2021, as compared to $572,416 for the ten months ended December 31, 2020. This
decrease was primarily due to a decrease in customers due to supply chain issues
related to the COVID-19 pandemic.
Cost of Revenue
Cost of revenues was $361,752 for the ten months ended December 31, 2021, as
compared to $359,262 for the ten months ended December 31, 2020. Gross loss was
$14,625 for the ten months ended December 31, 2021, and gross profit $213,154
for the ten months ended December 31, 2020, respectively. Gross profit margin
decreased to (4.21%) from 37.24% for the ten months ended December 31, 2021 and
2020, respectively. The decrease was primarily due to lower margins associated
with the mix of products sold, namely higher margin accessories and machines.
Operating Expenses
Operating expenses increased 416% to approximately $1,823,278 for the ten months
ended December 31, 2021, as compared to $339,916 for the ten months ended
December 31, 2020. This increase was primarily due to an increase in
professional fees, advertising expenses, bad debt, and general administrative
expenses attributable to fees required in connection with the Merger with EZ
Global.
Other Expenses
The Company's other expenses increased to $360,619 for the ten months ended
December 31, 2021, as compared to other expenses of $24,360 during the ten
months ended December 31, 2020. The primary reason for this increase was due to
interest expense on the loans on the outstanding debt and loss on debt
settlement.
Due to the described factors above, we had a net loss of $2,198,522 and $151,122
for the ten months ended December 31, 2021 and 2020, respectively.
Years Ended February 28, 2021 Compared to February 29, 2020.
Revenues from operations were $661,370 for the year ended February 28, 2021, as
compared to $317,666 for the year ended February 29, 2020. This increase was
primarily due to word of mouth and exposure of the EZ Raider in public use and
the emphasis of outdoor recreation during the early days of the pandemic.
Cost of Revenue
Cost of revenues was $375,245 for the year ended February 28, 2021, as compared
to $230,792 for the year ended February 29, 2020. Gross profits were $286,125
and $86,874 for the years ended February 28, 2021 and February 29, 2020,
respectively. Gross profit margin increased to 43.26% from 27.35% for the years
ended February 28, 2021 and February 29, 2020, respectively. The increase was
primarily due to higher margins associated with the mix of products sold, namely
higher margin accessories and machines.
Operating Expenses
Operating expenses increased 4% to approximately $445,548 for the year ended
February 28, 2021, as compared to $426,401 for the year ended February 29, 2020.
This increase was primarily due to an increase in professional fees, advertising
expenses and general administrative expenses.
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Other Expenses
The Company's other expenses increased to $37,246 for the year ended February
28, 2021, as compared to other expenses of $0 during the year ended February 29,
2020. The primary reason for this increase was due to interest expense on the
loans on the outstanding debt.
Due to the described factors above, we had a net loss of $196,669 and $339,527
for the years ended February 28, 2021 and February 29, 2020, respectively.
Liquidity and Capital Resources
As of December 31, 2021, we have $837,946 in current assets and $2,704,641 in
current liabilities. We had $365,800 cash on hand and our working capital
deficit was $1,866,695.
Cash Flows:
Ten Months Ended,
December 31, 2021 December 31, 2020
Cash Flows used in Operating Activities $ (257,406 ) (124,597 )
Cash Flows used in Investing Activities (3,349,642 ) -
Cash Flows Provided by Financing
Activities 3,932,250 55,932
Net increase (decrease) in cash $ 325,202 (68,665 )
Liquidity and Capital Resources
For the ten months ended December 31, 2021, net cash used in operations of
$257,406 was the result of a net loss of $2,198,522, depreciation expense of
$22,312, stock issued for services of $288,834, stock issued as debt issuance
cost of $18,750, loss on debt conversion of $256,568, bad debt expense of
$69,591, an increase in accounts receivable of $45,738, an increase in prepaid
expense of $74,100 an increase in inventory of $285,033. These were offset by an
increase of accounts payable of $720,657, and an increase in accounts payable -
related party of $11,000, an increase in accrued interest payable of $67,086,
and an increase in deferred revenue of $891,189.
For the ten months ended December 31, 2020, net cash used in operations of
$124,597 was the result of a net loss of $151,122, depreciation expense of
$31,169, an increase in accounts receivable of $7,445, and a decrease in
inventory of $89,744. These were offset by an increase of accounts payable of
$108,020 and a decrease in deferred revenue of $21,075.
Net cash used in investing activities was $3,349,642 for the ten months ended
December 31, 2021, which was attributable to an investment in D.S. Raider of
$3,350,000 and cash acquired in connection with the recapitalization of $358, as
compared to net cash used in investing activities, which was $0 for the ten
months ended December 31, 2020.
Net cash provided by financing activities was $3,932,250 for the ten months
ended December 31, 2021, which was a repayment and advances from related party
of $453,736, repayment of note payable of $167,163 and these were offset by
proceeds from convertible notes of $320,000, common stock issued for cash of
$4,390,001, partially offset by recapitalization of $491,178.
Net cash provided by financing activities was $55,932 for the ten months ended
December 31, 2020, reflecting the repayment of advances from related party of
$170,706, offset by proceeds from notes payable of $213,423 and proceeds from
PPP loan of $13,215.
Liquidity, Going Concern and Management's Plans
The consolidated financial statements included in this Transition Report have
been prepared on a going concern basis, which contemplates the realization of
assets and the settlement of liabilities and commitments in the normal course of
business.
As reflected in the accompanying consolidated financial statements, for the ten
months ended December 31, 2021, the Company had:
? Net loss of $2,198,522; and
? Net cash used in operations was $257,406.
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Additionally, at December 31, 2021, the Company had:
? Accumulated deficit of $2,794,792;
? Stockholders' equity of $2,064,724; and
? Working capital deficit of $1,866,695
We manage liquidity risk by reviewing, on an ongoing basis, our sources of
liquidity and capital requirements. The Company had cash on hand of $365,800 on
December 31, 2021.
In the long-term, the Company expects business operations to generate sufficient
revenues and positive cash flows from operations to meet its current
obligations. However, in the short-term, the Company needs to raise debt or
equity-based capital at favorable terms, though such terms are not certain.
Currently, the Company expects to incur losses from operations and have negative
cash flows from operating activities for the near-term.
Our management believes that our current cash position, along with our revenue
growth and the financing from potential institutional investors will be
sufficient to fund our operations for at least the next three (3) months. If the
Company does not obtain additional capital, the Company will be required to
reduce the scope of its business development activities or cease operations. The
Company continues to explore obtaining additional capital financing and the
Company is closely monitoring its cash balances, cash needs, and expense levels.
These factors create substantial doubt about the Company's ability to continue
as a going concern within the twelve (12) month period subsequent to the date
that these consolidated financial statements are issued. The consolidated
financial statements do not include any adjustments that might be necessary if
the Company is unable to continue as a going concern. Accordingly, the
consolidated financial statements have been prepared on a basis that assumes the
Company will continue as a going concern and which contemplates the realization
of assets and satisfaction of liabilities and commitments in the ordinary course
of business.
Management's strategic plans include the following:
? Pursuing additional capital raising opportunities;
? Investing in the development and growth of EZ Global's electric vehicles
business;
? Identifying and pursuing additional acquisitions, in addition to the proposed
acquisition of D.S Raider; and
? Identifying unique market opportunities that represent potential positive
short-term cash flow.
Critical Accounting Policies and Estimates
We prepare our condensed consolidated financial statements in accordance with
accounting principles generally accepted in the United States of America, and
make estimates and assumptions that affect our reported amounts of assets,
liabilities, revenue and expenses, and the related disclosures of contingent
liabilities. We base our estimates on historical experience and other
assumptions that we believe are reasonable in the circumstances. Actual results
may differ from these estimates. The following critical accounting policies
affect our more significant estimates and assumptions used in preparing our
consolidated financial statements.
Accounts Receivable
Accounts receivable are stated at the amount management expects to collect from
outstanding customer balances. Credit is extended to customers based on an
evaluation of their financial condition and other factors. Interest is not
accrued on overdue accounts receivable. The Company does not require collateral.
Management periodically assesses the Company's accounts receivable and, if
necessary, establish an allowance for estimated uncollectible amounts. The
Company provides an allowance for doubtful accounts based upon a review of the
outstanding accounts receivable, historical collection information and existing
economic conditions. Accounts determined to be uncollectible are charged to
operations when that determination is made.
When a client is invoiced, the amount is recorded as an asset in Accounts
Receivable and as Deferred Revenue in Current Liabilities. When payment is
received the amount is moved to Cash on the balance sheet.
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The Company provided $69,591 and $0 allowances for doubtful accounts as of
December 31, 2021 and February 28, 2021, respectively.
Inventory
Inventory consists of components held for assembly and finished goods held for
resale. Inventory is valued at a lower cost or net realizable value on a
first-in, first-out basis. The Company's policy is to record a reserve for
technological obsolescence or slow-moving inventory items. The Company only
carries finished goods to be shipped to customers. All existing inventory is
considered current and usable.
Equity securities without a readily determinable fair value
Certain equity securities are carried at cost as these securities did not have a
readily determinable fair value. There were no observable price changes in
orderly transactions for the identical or a similar investment of the same
issuer as of December 31, 2021 and 2020.
Recent Accounting Pronouncements
The recent accounting standards that have been issued or proposed by Financial
Accounting Standard Board (FASB) or other standard-setting bodies that do not
require adoption until a future date are not expected to have a material impact
on the financial statement upon adoption.
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EZRAIDER CO. 
