Exhibit 99.1
EZGO ANNOUNCES FINANCIAL RESULTS
FOR THE SIX MONTHS ENDED MARCH 31, 2023
JIANGSU, CHINA, August 7, 2023 -- EZGO Technologies Ltd. (Nasdaq: EZGO) (“EZGO” or “we”, “our”, or the “Company”), a leading short-distance transportation solutions provider in China, today announced its unaudited financial results for the six months ended March 31, 2023.
Financial Highlights (all results compared to the prior year period unless otherwise noted)
| ● | Revenues were $5.2 million, a decrease of 14.4% | |
| ● | Units sold of e-bicycle reached 20,479, a decrease of 21.1% | |
| ● | Units sold of batteries and battery packs reached 8,964, a decrease of 24.2% | |
| ● | Gross margin was 3.5%, compared with 4.7% | |
| ● | Net loss was $5.0 million, compared with $2.7 million | |
| ● | The Company has cash and cash equivalents of approximately $2.3 million at March 31, 2023, compared to approximately $4.4 million at September 30, 2022 |
Management Commentary
For the six months ended March 31, 2023, mainland China experienced a transition from strict control of the COVID-19 pandemic to a full deregulation. Right after the full deregulation, most of the population was infected with the COVID-19 virus. Most industries nearly came to a halt in operations from late November 2022 to early January 2023, gradually returning to normal operations during China’s 2023 Spring Festival in late January 2023. During this period, the production and business activities in all departments of the Company were severely impacted, resulting in a decline in our semi-annual revenue compared to the same period last year and an increase in losses.
In addition to macroeconomic factors, increased competition in the e-bicycles industry, after business constraints were eased in China also led to a significant decline in sales of our products and gross profit in February and March 2023. Two of our major competitors also initiated a new round of price cuts resulting in even greater downward pressure on our product sales.
Based on management’s assessment of macroeconomics and industrial competition, along with our own resource endowment, management has adjusted our business strategies as follows: (i) we halted the production of low and middle-end products and focused on the design, development, and production of mid-to-high-speed electric motorcycles through joint ventures or partnerships; (ii) we further enhanced the development and market promotion of lithium battery products for low-speed vehicles (including e-bicycle, e-tricycle and low-speed four-wheeled scooters ); (iii) we have actively expanded overseas sales channels for our products, in the hope of alleviating our dependency on current domestic sales channels; and (iv) we also made equity investments in some of the high-quality suppliers in the electric motorcycles and lithium battery industry.
Financial Review for the Six Months Ended March 31, 2023
Net Revenues
Net revenues from continuing operations for the six months ended March 31, 2023 were approximately $5.2 million, a 14.4% decrease from approximately $6.0 million for the six months ended March 31, 2022. The decrease in revenues was mainly driven by the decrease in sales of e-bicycles, and partially offset by the increase of sales of battery and battery packs.
The following table identifies revenue from continuing operations and discontinued operations, as well as reportable segments for the six months ended March 31, 2023 and 2022:
| For the six months ended March 31, | Change | |||||||||||||||||||||
| Segment | 2023 | % | 2022 | % | Amount | % | ||||||||||||||||
| Sales of e-bicycles | E-bicycle sales segment | $ | 3,001,709 | 58.2 | $ | 4,055,330 | 67.2 | $ | (1,053,621 | ) | (26.0 | ) | ||||||||||
| Sales of batteries and battery packs | Battery cells and packs segment | 1,732,871 | 33.6 | 1,581,023 | 26.3 | 151,848 | 9.6 | |||||||||||||||
| Others | 427,118 | 8.3 | 393,825 | 6.5 | 33,293 | 8.5 | ||||||||||||||||
| Subtotal | Net revenue from continuing operations | 5,161,698 | 100.0 | 6,030,178 | 100.0 | (868,480 | ) | (14.4 | ) | |||||||||||||
| Rental of lithium batteries and e-bicycles | Rental segment | 120 | 0.0 | 261 | - | (141 | ) | (54.0 | ) | |||||||||||||
| Subtotal | Net revenue from discontinued operation | 120 | 0.0 | 261 | - | (141 | ) | (54.0 | ) | |||||||||||||
| Total | Net revenues | $ | 5,161,818 | 100.0 | $ | 6,030,439 | 100.0 | $ | (868,621 | ) | (14.4 | ) | ||||||||||
The e-bicycles sales segment engaged in online and offline sales of e-bicycles. The revenue of sales of e-bicycles decreased to approximately $1.1 million, or 26.0%, for the six months ended March 31, 2023 as compared to the same period in 2022, mainly due to the repeated outbreaks of COVID-19 in the fourth quarter of 2022 and adjustments made to selling policies.
Revenue generated from the battery cells and packs segment for the six months ended March 31, 2023 and 2022 was approximately $1.7 million and $1.6 million, respectively, a 9.6% increase derived from new customers and continuing relationships with long-term customers, as a mitigated measure to reduce the impact of COVID-19 and increased market competition on sales of e-bicycles.
Cost of Revenue
The cost of revenue s attributable the e-bicycles sales segment decreased by approximately $1.1 million, or approximately 27.0%, for the six months ended March 31, 2023 as compared to the same period in 2022, which was primarily due to a reduction in sales of e-bicycles as a result of the impact of the COVID-19 outbreak in the fourth quarter of 2022. This decrease directly corresponded with the decrease in revenue from sales of e-bicycles.
The cost of revenue attributable to the battery cells and packs segment increased by approximately $155,000, or approximately 10.3%, for the six months ended March 31, 2023 as compared to the same period in 2022, which was primarily due to the increased sales of battery cells and packs as a result of customer growth. The increase directly corresponded with the increase in revenue from the sales of batteries and battery packs segment.
Gross Profit
The gross profit attributable to the e-bicycles sales segment for the six months ended March 31, 2023 and 2022 was approximately $76,000 and $46,000, respectively, representing 2.5% and 1.7% of e-bicycles sales revenue. The increase of gross profit during the six months ended March 31, 2023 is primarily due to capacity reduction on e-bicycles sales as a result of a lower gross profit margin rate on sales by Tianjin Dilang Technologies Co., Ltd. and Tianjin Jiahao Bicycle Co., Ltd. (“Tianjin Jiahao”).
The gross profit attributable to the battery cells and packs segment for the six months ended March 31, 2023 and 2022 was approximately $67,000 and $71,000, respectively, representing 3.9% and 4.5% of battery cells and packs sales revenue. The increase of gross profit during the six months ended March 31, 2023 is primarily due to the increase in the sales price of battery cells and packs in 2023.
2
Selling and Marketing Expenses
Our selling and marketing expenses primarily consist of salaries and benefits expense, advertising expense, and freight expense. Our selling and marketing expenses decreased by approximately $281,000, or approximately 49.6%, to approximately $286,000 for the six months ended March 31, 2023 from approximately $567,000 for the six months ended March 31, 2022. Such decrease was attributable to a reduction in salaries and benefits expense and advertising expense, which was a result of a reduction in the amount of salespersons and a reduction in expenditures on exhibition promotion in direct relation to the Company's reduction of sales of e-bicycles.
General and Administrative Expenses
Our general and administrative expenses increased by approximately $268,000, or approximately 12.8%, to approximately $2.4 million for the six months ended March 31, 2023 from approximately $2.1 million for the six months ended March 31, 2022. The increase was primarily due to the addition of share-based compensation expenses as a result of the restricted shares granted to employees and external consultants in August 2022 and January 2023.
Other expense/(income), net
We recorded other expense, net of $2.6 million for the six months ended March 31, 2023 and other income of $352,000 for the six months ended March 31, 2023 and 2022, respectively. The significant increase in other expense, net is primarily attributable to the loss from disposal of Tianjin Jiahao on March 31, 2022, which was approximately $2.6 million.
Income Tax Expense/(Benefits)
Income tax benefits was approximately $15,000 for the six months ended March 31, 2023 and income tax expense was approximately $519,000 for the six months ended March 31, 2022. The change from income tax expense to income tax benefits is primarily due to the tax loss carrying forwards of the newly established wholly-owned subsidiaries in 2022 covered the change in valuation allowance accrued for deferred tax assets.
Net Loss
Net loss for the six months ended March 31, 2023 was approximately $5.0 million, compared to approximately $2.7 million for the same period in 2022, as a result of the explanations provided above.
About EZGO Technologies Ltd.
Leveraging an Internet of Things (IoT) product and service platform and two e-bicycle brands, “Cenbird” and “Dilang,” EZGO has established a business model centered on the manufacturing and sale of e-bicycles and e-bicycle rentals, complemented by the e-bicycle charging pile business. For additional information, please visit EZGO’s website at www.ezgotech.com.cn. Investors can visit the “Investor Relations” section of EZGO’s website at www.ezgotech.com.cn/Investor.
Exchange Rate
This press release contains translations of certain Chinese Renminbi (“RMB”) amounts into U.S. dollars (“US$”) at specified rates solely for the convenience of the readers. Unless otherwise stated, all translations from RMB to US$ were made at the rate of RMB6.8676 to US$1.00 for the items in balance sheets and at the rate of RMB6.9761 to US$1.00 for the items in statements of operations and comprehensive loss, the exchange rate in effect as of March 31, 2023, as set forth in the H.10 Statistical release of the Board of Governors of the Federal Reserve System. The Company makes no representation that the RMB or US$ amounts referred could be converted into US$ or RMB, as the case may be, at any particular rate or at all.
3
Safe Harbor Statement
This press release contains forward-looking statements as defined by the Private Securities Litigation Reform Act of 1995. Forward-looking statements include statements concerning plans, objectives, goals, strategies, future events or performance, and underlying assumptions and other statements that are other than statements of historical facts. When the Company uses words such as “may,” “will,” “intend,” “should,” “believe,” “expect,” “anticipate,” “project,” “estimate” or similar expressions that do not relate solely to historical matters, it is making forward-looking statements. Forward-looking statements are not guarantees of future performance and involve risks and uncertainties that may cause the actual results to differ materially from the Company’s expectations discussed in the forward-looking statements. These statements are subject to uncertainties and risks including, but not limited to, the following: the Company’s goals and strategies; the Company’s future business development; product and service demand and acceptance; changes in technology; economic conditions; the growth of the short-distance transportation solutions market in China and the other international markets the Company plans to serve; reputation and brand; the impact of competition and pricing; government regulations; fluctuations in general economic and business conditions in China and the international markets the Company plans to serve and assumptions underlying or related to any of the foregoing and other risks contained in reports filed by the Company with the Securities and Exchange Commission (“SEC”). For these reasons, among others, investors are cautioned not to place undue reliance upon any forward-looking statements in this press release. Additional factors are discussed in the Company’s filings with the SEC, which are available for review at www.sec.gov. The Company undertakes no obligation to publicly revise these forward-looking statements to reflect events or circumstances that arise after the date hereof.
For more information, please contact:
At the Company:
Shawn Wen
Email: ir@ez-go.com.cn
Phone: (+86) 13502829216
4
EZGO TECHNOLOGIES LTD.
CONSOLIDATED BALANCE SHEETS
(In U.S. dollars except for number of shares)
| As of September 30, | As of March 31, | |||||||
| 2022 | 2023 | |||||||
| (unaudited) | ||||||||
| ASSETS | ||||||||
| Current assets | ||||||||
| Cash and cash equivalents | $ | $ | ||||||
| Restricted cash | ||||||||
| Short-term investments | ||||||||
| Accounts receivable, net | ||||||||
| Notes receivable | ||||||||
| Inventories | ||||||||
| Advances to suppliers | ||||||||
| Amount due from related parties, current | ||||||||
| Prepaid expenses and other current assets, net | ||||||||
| Total current assets | ||||||||
| Property and equipment, net | ||||||||
| Intangible assets, net | ||||||||
| Land use right, net | ||||||||
| Goodwill | ||||||||
| Deferred tax assets, net | ||||||||
| Long-term investments | ||||||||
| Other non-current assets | ||||||||
| Total non-current assets | ||||||||
| Total assets | $ | $ | ||||||
| LIABILITIES AND EQUITY | ||||||||
| Current liabilities | ||||||||
| Short-term borrowings | $ | $ | ||||||
| Accounts payable | ||||||||
| Advances from customers | ||||||||
| Income tax payable | ||||||||
| Amount due to related parties | ||||||||
| Accrued expenses and other payables | ||||||||
| Current liabilities of discontinued operation | ||||||||
| Total current liabilities | ||||||||
| Commitments and contingencies | ||||||||
| Equity | ||||||||
| Ordinary shares (par value of $ | ||||||||
| Subscription receivable | ( | ) | ( | ) | ||||
| Receivables from a shareholder | ( | ) | ||||||
| Additional paid-in capital | ||||||||
| Statutory reserve | ||||||||
| Accumulated deficit | ( | ) | ( | ) | ||||
| Accumulated other comprehensive loss | ( | ) | ( | ) | ||||
| Total EZGO Technologies Ltd.’s shareholders’ equity | ||||||||
| Non-controlling interests | ||||||||
| Total equity | ||||||||
| Total liabilities and equity | $ | $ | ||||||
The accompanying notes are an integral part of these consolidated financial statements.
5
EZGO TECHNOLOGIES LTD.
UNAUDITED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS
(In U.S. dollars except for number of shares)
| Six Months Ended March 31, | ||||||||
| 2022 | 2023 | |||||||
| Net revenues | $ | $ | ||||||
| Cost of revenues | ( | ) | ( | ) | ||||
| Gross profit | ||||||||
| Selling and marketing | ( | ) | ( | ) | ||||
| General and administrative | ( | ) | ( | ) | ||||
| Total operating expenses | ( | ) | ( | ) | ||||
| Loss from operations | ( | ) | ( | ) | ||||
| Interest income (expense), net | ( | ) | ||||||
| Other (expense) income, net | ( | ) | ||||||
| Loss from disposal of a subsidiary | ( | ) | ||||||
| Total other income/(expense), net | ( | ) | ||||||
| Loss from continuing operations before income tax expense | ( | ) | ( | ) | ||||
| Income tax (expense) benefit | ( | ) | ||||||
| Net loss from continuing operations | ( | ) | ( | ) | ||||
| (Loss) income from discontinued operations, net of tax | ( | ) | ||||||
| Net Loss | ( | ) | ( | ) | ||||
| Net loss from continuing operations | ( | ) | ( | ) | ||||
| Less: net loss attributable to non-controlling interests from continuing operations | ( | ) | ( | ) | ||||
| Net loss attributable to EZGO Technologies Ltd.’s shareholders from continuing operations | ( | ) | ( | ) | ||||
| (Loss) income from discontinued operation, net of tax | ( | ) | ||||||
| Net (loss) income attributable to EZGO Technologies Ltd.’s shareholders from discontinued operation | ( | ) | ||||||
| Net loss attributable to EZGO Technologies Ltd.’s shareholders | $ | ( | ) | $ | ( | ) | ||
| Net loss attributable to EZGO Technologies Ltd.’s shareholders from continuing operations per ordinary share: | ||||||||
| $ | ( | ) | $ | ( | ) | |||
| Net loss attributable to EZGO Technologies Ltd.’s shareholders from discontinued operation per ordinary share: | ||||||||
| ( | ) | |||||||
| Net loss attributable to EZGO Technologies Ltd.’s shareholders per ordinary share: | ||||||||
| ( | ) | ( | ) | |||||
| Weighted average shares outstanding: | ||||||||
| Loss from continuing operations before non-controlling interests | $ | ( | ) | $ | ( | ) | ||
| (Loss) income from discontinued operation, net of tax | ( | ) | ||||||
| Net loss | ( | ) | ( | ) | ||||
| Other comprehensive loss | ||||||||
| Foreign currency translation adjustment | ||||||||
| Comprehensive loss | ( | ) | ( | ) | ||||
| Less: Comprehensive loss attributable to non-controlling interests | ( | ) | ( | ) | ||||
| Comprehensive loss attributable to EZGO Technologies Ltd.’s shareholders | $ | ( | ) | $ | ( | ) | ||
The accompanying notes are an integral part of these unaudited consolidated financial statements.
6
EZGO TECHNOLOGIES LTD.
UNAUDITED CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY
SIX MONTHS ENDED MARCH 31, 2022 AND 2023
(In U.S. dollars except for number of shares)
| Ordinary Shares | Subscription | Receivables due from | Additional paid-in | Statutory | Accumulated earnings/ | Accumulated Other Comprehensive | Total EZGO’s shareholders' | Non-controlling | Total | |||||||||||||||||||||||||||||||||||
| Shares | Amount | receivable | shareholder | capital | reserve | (deficits) | Income (Loss) | equity | interest | equity | ||||||||||||||||||||||||||||||||||
| Balance as of September 30, 2021 | $ | $ | ( | ) | $ | ( | ) | $ | $ | $ | ( | ) | $ | $ | $ | $ | ||||||||||||||||||||||||||||
| Net loss | - | ( | ) | ( | ) | ( | ) | ( | ) | |||||||||||||||||||||||||||||||||||
| Receivable from a shareholder | - | - | ||||||||||||||||||||||||||||||||||||||||||
| Appropriation to statutory reserve | - | ( | ) | |||||||||||||||||||||||||||||||||||||||||
| Foreign currency translation adjustment | - | ( | ) | |||||||||||||||||||||||||||||||||||||||||
| Balance as of March 31, 2022 | $ | $ | ( | ) | $ | ( | ) | $ | $ | $ | ( | ) | $ | $ | $ | $ | ||||||||||||||||||||||||||||
| Ordinary Shares | Subscription | Receivables due from | Additional paid-in | Statutory | Accumulated earnings/ | Accumulated Other Comprehensive | Total EZGO's shareholders' | Non-controlling | Total | |||||||||||||||||||||||||||||||||||
| Shares | Amount | receivable | shareholder | capital | reserve | (deficits) | Income (Loss) | equity | interest | equity | ||||||||||||||||||||||||||||||||||
| Balance as of September 30, 2022 | $ | $ | ( | ) | $ | ( | ) | $ | $ | $ | ( | ) | $ | ( | ) | $ | $ | $ | ||||||||||||||||||||||||||
| Equity issuance | ||||||||||||||||||||||||||||||||||||||||||||
| Issuance of ordinary shares for Acquisition of Changzhou Sixun | ||||||||||||||||||||||||||||||||||||||||||||
| Share-based compensation - vesting of restricted shares award to employees | ||||||||||||||||||||||||||||||||||||||||||||
| Share-based compensation - vesting of restricted shares award to non-employees | - | |||||||||||||||||||||||||||||||||||||||||||
| Exercise of warrant | ( | ) | ||||||||||||||||||||||||||||||||||||||||||
| Addition of non-controlling interest from Acquisition of Changzhou Sixun | - | |||||||||||||||||||||||||||||||||||||||||||
| Net loss | - | ( | ) | ( | ) | ( | ) | ( | ) | |||||||||||||||||||||||||||||||||||
| Receivable from a shareholder | - | - | ||||||||||||||||||||||||||||||||||||||||||
| Appropriation to statutory reserve | - | ( | ) | |||||||||||||||||||||||||||||||||||||||||
| Foreign currency translation adjustment | - | ( | ) | |||||||||||||||||||||||||||||||||||||||||
| Balance as of March 31, 2023 | $ | $ | ( | ) | $ | $ | $ | $ | ( | ) | $ | ( | ) | $ | $ | $ | ||||||||||||||||||||||||||||
The accompanying notes are an integral part of these unaudited consolidated financial statements.
7
EZGO TECHNOLOGIES LTD.
UNAUDITED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In U.S. dollars except for number of shares)
| Six Months Ended March 31, | ||||||||
| 2022 | 2023 | |||||||
| CASH FLOWS FROM OPERATING ACTIVITIES: | ||||||||
| Net loss | $ | ( | ) | $ | ( | ) | ||
| Adjustments to reconcile net income to net cash (used in) provided by operating activities: | ||||||||
| Provision for accounts receivable | ||||||||
| Inventories write down | ( | ) | ||||||
| Depreciation and amortization | ||||||||
| Share-based compensation | ||||||||
| Loss from disposal of a subsidiary | ||||||||
| Loss from long-term investment | ||||||||
| Loss from disposal of property and equipment | ||||||||
| Deferred tax expenses (benefits) | ( | ) | ||||||
| Changes in operating assets and liabilities: | ||||||||
| Accounts receivable | ||||||||
| Notes receivable | ( | ) | ||||||
| Advance to suppliers | ( | ) | ( | ) | ||||
| Inventories | ( | ) | ( | ) | ||||
| Amount due from related parties | ( | ) | ( | ) | ||||
| Prepaid expenses and other current assets | ( | ) | ( | ) | ||||
| Accounts payable | ( | ) | ( | ) | ||||
| Advance from customers | ||||||||
| Income tax payable | ( | ) | ||||||
| Accrued expenses and other payables | ||||||||
| Net cash used in operating activities | ( | ) | ( | ) | ||||
| CASH FLOWS FROM INVESTING ACTIVITIES: | ||||||||
| Purchase of property and equipment | ( | ) | ( | ) | ||||
| Purchase of land use right | ( | ) | ||||||
| Maturities of short-term investment | ||||||||
| Purchase of long-term investments | ( | ) | ( | ) | ||||
| Prepayment for intent long-term investment | ( | ) | ||||||
| Proceed from disposal of property and equipment | ||||||||
| Loan to related parties | ( | ) | ( | ) | ||||
| Collection of loan to related parties | ||||||||
| Net cash inflow from disposal of a subsidiary | ||||||||
| Net cash outflow due to acquisition of Changzhou Sixun | ( | ) | ||||||
| Net cash provided by (used in) investing activities | ( | ) | ||||||
| CASH FLOWS FROM FINANCING ACTIVITIES: | ||||||||
| Proceeds from short-term borrowings | ||||||||
| Repayments of short-term borrowings | ( | ) | ||||||
| Loan from related parties | ||||||||
| Repayment of loan from related parties | ( | ) | ( | ) | ||||
| Collection of receivable from a shareholder | ||||||||
| Cash receipts from equity issuance, net of issuance cost | ||||||||
| Net cash provided by financing activities | ||||||||
| Effect of exchange rate changes | ||||||||
| Net decrease in cash, cash equivalents and restricted cash | ( | ) | ( | ) | ||||
| Cash, cash equivalents and restricted cash, at beginning of the period | ||||||||
| Cash, cash equivalents and restricted cash, at end of the period | $ | $ | ||||||
| Reconciliation of cash, cash equivalents, and restricted cash to the Consolidated Balance Sheets | ||||||||
| Cash and cash equivalents | $ | $ | ||||||
| Restricted cash | ||||||||
| Total cash, cash equivalents, and restricted cash | $ | $ | ||||||
| SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION: | ||||||||
| Income tax paid | $ | $ | ||||||
| Interests paid | $ | $ | ||||||
| SUPPLEMENTAL SCHEDULE OF NON-CASH INVESTING ACTIVITIES | ||||||||
| Shares issued for the acquisition of Changzhou Sixun | $ | $ | ||||||
| Increase of non-controlling interests derived from acquisition of Changzhou Sixun | $ | $ | ||||||
The accompanying notes are an integral part of these unaudited consolidated financial statements.
8
EZGO TECHNOLOGIES LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
2022 AND 2023
(In U.S. dollars except for number of shares)
| 1. | ORGANIZATION AND PRINCIPAL ACTIVITIES |
EZGO Technologies Ltd. (“EZGO” or
the “Company”) is a holding company incorporated under the laws of the British Virgin Islands (“BVI”) on January
24, 2019. The Company commenced operations through its variable interest entity (“VIE”) and VIE’s subsidiaries in the
People’s Republic of China (“PRC”). The Company is mainly engaged in sales of battery packs, battery cells, as well
as electric bicycles (“e-bicycle”) and battery cell trading, in PRC.
| Name | Date of incorporation / acquisition |
Place of incorporation |
Percentage of effective ownership |
Principal | ||||
| Wholly owned subsidiaries | ||||||||
| China EZGO Group Ltd. (formerly known as Hong Kong JKC Group Co., Ltd., “EZGO HK”) | ||||||||
| Changzhou Langyi Electronic Technologies Co., Ltd. | ||||||||
| Jiangsu Langyi Import and Export Trade Co., Ltd. (“Langyi Trading”) | ||||||||
| Changzhou EZGO Enterprise Management Co., Ltd. (formerly known as Changzhou Jiekai Enterprise Management Co., Ltd., a wholly foreign-owned enterprise, “WFOE” or “Changzhou EZGO”) | ||||||||
| Jiangsu EZGO Energy Supply Chain Technology Co., Ltd. (“Jiangsu Supply Chain”) | ||||||||
| Jiangsu EZGO New Energy Technologies Co., Ltd. (“Jiangsu New Energy”) | ||||||||
| Sichuan EZGO Energy Technologies Co., Ltd. (“Sichuan EZGO”) | ||||||||
| Tianjin EZGO Electric Technologies Co., Ltd. (“Tianjin EZGO”) | ||||||||
| Changzhou Youdi Electric Bicycle Co., Ltd. (“Changzhou Youdi”) | ||||||||
| Changzhou Sixun Technology Co., Ltd. (“Changzhou Sixun”) | ||||||||
| Changzhou Higgs Intelligent Technology Co., Ltd. (“Changzhou Higgs”) | ||||||||
| Changzhou Zhuyun Technology Co., Ltd. (“Changzhou Zhuyun”) | ||||||||
| VIE and subsidiaries of VIE | ||||||||
| Jiangsu EZGO Electronic Technologies Co., Ltd. (formerly known as Jiangsu Baozhe Electric Technologies, Co., Ltd.,“Jiangsu EZGO”) | ||||||||
| Changzhou Hengmao Power Battery Technology Co., Ltd. (“Hengmao”) | ||||||||
| Changzhou Yizhiying IoT Technologies Co., Ltd. (“Yizhiying”) | ||||||||
| Jiangsu Cenbird E-Motorcycle Technologies Co., Ltd. (“Cenbird E-Motorcycle”) | ||||||||
| Tianjin Dilang Technologies Co., Ltd. (“Dilang”) |
9
EZGO TECHNOLOGIES LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
2022 AND 2023
(In U.S. dollars except for number of shares)
| 2. | SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES |
| (a) | Basis of presentation |
The accompanying consolidated financial statements (“CFS”) were prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”) and pursuant to the rules and regulations of the Securities and Exchange Commission (the “SEC”) and have been consistently applied. The CFS includes the financial statements of the Company, its subsidiaries, the VIE and the VIE’s subsidiary. All inter-company balances and transactions were eliminated upon consolidation. Certain information or footnote disclosures normally included in financial statements prepared in accordance with GAAP have been condensed or omitted, pursuant to the rules and regulations of the SEC for interim financial reporting. Accordingly, they do not include all the information and footnotes necessary for a comprehensive presentation of financial position, results of operations, or cash flows. In the opinion of management, the accompanying CFS include all adjustments, consisting of a normal recurring nature, which are necessary for a fair presentation of the financial position, operating results, and cash flows for the periods presented.
| (b) | Accounts receivable, net |
Accounts receivable, net are stated at the original
amount less an allowance for doubtful receivables, if any, based on a review of all outstanding amounts at period end. An allowance is
also made when there is objective evidence that the Company will not be able to collect all amounts due according to the original terms
of the receivables. The Company analyses the aging of the customer accounts, coverage of credit insurance, customer concentrations, customer
credit-worthiness, historical and current economic trends and changes in its customer payment patterns when evaluating the adequacy of
the allowance for doubtful accounts. For the six months ended March 31, 2022 and 2023, the Company recorded bad debt expense of $
| (c) | Intangible assets, net |
The Company performs valuation of the intangible
assets arising from business combinations to determine the relative fair value (“FV”) to be assigned to each asset acquired.
The acquired intangible assets are recognized and measured at FV.
| Category | Estimated useful life | ||
| Patents | |||
| Software copyright |
10
EZGO TECHNOLOGIES LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
2022 AND 2023
(In U.S. dollars except for number of shares)
| 2. | SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued) |
| (d) | Goodwill |
Goodwill is the excess of the purchase price over FV of the identifiable assets and liabilities acquired in a business combination.
Goodwill is not depreciated or amortized but is tested for impairment on an annual basis as of September 30 of each balance sheet date and in between annual tests when an event occurs or circumstances change that could indicate that the asset might be impaired. The Company first has the option to assess qualitative factors to determine whether it is more likely than not that the FV of a reporting unit is less than its carrying amount.
If the Company decides, as a result of its qualitative assessment, that it is more likely than not that the FV of a reporting unit is less than its carrying amount, the quantitative impairment test is mandatory. Otherwise, no further testing is required. The quantitative impairment test consists of a comparison of the FV of each reporting unit with its carrying amount, including goodwill. A goodwill impairment charge will be recorded for the amount by which a reporting unit’s carrying value exceeds its FV, but not to exceed the carrying amount of goodwill. Application of a goodwill impairment test requires significant management judgment, including the identification of reporting units and determining the FV of each reporting unit. The judgment in estimating the FV of reporting units includes estimating future cash flows, determining appropriate discount rates and making other assumptions. Changes in these estimates and assumptions could materially affect the determination of FV for each reporting unit.
| (e) | Long-term investments |
Long-term investments are the Company’s equity investments in privately held companies accounted for equity method, and equity investments without readily determinable fair values.
(1) Equity investments accounted for using the equity method
The Company applies the equity method of accounting to equity investments, in ordinary shares or in-substance ordinary shares, over which it has significant influence but does not own a majority equity interest or otherwise control. Under the equity method, the Company initially records its investment at cost. The Company subsequently adjusts the carrying amount of the investment to recognize the Company’s proportionate share of each equity investee’s net income or loss into consolidated statements of operations and comprehensive loss after the date of acquisition.
(2) Equity investment without readily determinable fair values
Equity investment without readily determinable FVs refers to the investment over which the Company does not have the ability to exercise significant influence through the investments in ordinary shares or in substance ordinary shares, are accounted for under the measurement alternative upon the adoption of ASU2016-01 (the “Measurement Alternative”). Under the Measurement Alternative, the carrying value is measured at purchase cost, less any impairment, plus or minus changes resulting from observable price changes in orderly transactions for identical or similar investments of the same issuer. All gains and losses on these investments, realized and unrealized, are recognized in the consolidated statements of operations and comprehensive loss. The Company makes an assessment of whether an investment is impaired based on performance and financial position of the investee, as well as other evidence of market value at each reporting date. Such assessment includes, but is not limited to, reviewing the investee’s cash position, recent financing, as well as the financial and business performance. The Company recognizes an impairment loss equal to the difference between the carrying value and FV in the consolidated statements of operations and comprehensive loss if any.
11
EZGO TECHNOLOGIES LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
2022 AND 2023
(In U.S. dollars except for number of shares)
| 2. | SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued) |
| (f) | Revenue recognition |
The Company follows ASU 2014-09, Revenue from Contracts with Customers (“ASC Topic 606”), to account for the revenue from sales of self-manufactured battery cell, battery pack and e-bicycles and battery cell trading. The Company applied ASC Topic 840, Leases, for the revenue from rentals of lithium batteries and e-bicycles.
The core principle of ASC Topic 606 is that a company should recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the company expects to be entitled in exchange for those goods or services. The following five steps are applied to achieve that core principle:
Step 1: Identify the contract with the customers
Step 2: Identify the performance obligations in the contract
Step 3: Determine the transaction price
Step 4: Allocate the transaction price to the performance obligations in the contract
Step 5: Recognize revenue when the company satisfies a performance obligation
Revenue recognition policies are discussed as follows:
Revenue from sales of self-manufactured battery cell, battery pack and e-bicycles
The Company sells products to different customers, primarily including sale of self-manufactured battery cells (see Note 16 Discontinued Operation), self-assembled battery packs and sale of e-bicycles. The Company presents the revenue generated from its sales of products on a gross basis as the Company is a principal. The revenue is recognized at a point in time when the Company satisfies the performance obligation by transferring promised product to a customer upon acceptance by customers.
Contract liabilities primarily
consist of advances from customers, which comprises unamortized lithium batteries. As of September 30, 2022 (audited) and March 31, 2023,
the Company recognized advances from customers of $
The revenues from sales of self-manufactured
battery cells and lithium batteries and e-bicycles services via sublease and its own application named Yidianxing are revenues from the
Company’s discontinued operation, and are reported separately in the Consolidated Statements of Income for the six months ended
March 31, 2022 and 2023 (see Note 16 Discontinued Operation).
| 2022 | 2023 | |||||||
| Revenues from continuing operations: | ||||||||
| Sales of e-bicycles | $ | $ | ||||||
| Sales of batteries and battery packs | ||||||||
| Others | ||||||||
| Net revenues | $ | $ | ||||||
12
EZGO TECHNOLOGIES LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
2022 AND 2023
(In U.S. dollars except for number of shares)
| 2. | SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued) |
| (f) | Revenue recognition (continued) |
Timing of revenue recognition may differ from the timing of invoicing to customers. Accounts receivable represent revenue recognized for the amounts invoiced and/or prior to invoicing when the Company has satisfied its performance obligation and has unconditional right to the payment. The Company had no contract assets as of September 30, 2022 (audited) or March 31, 2023.
The Company applies a practical expedient to expense costs as incurred for costs to obtain a contract with a customer when the amortization period would have been one year or less. The Company has no material incremental costs of obtaining contracts with customers that the Company expects the benefit of those costs to be longer than one year.
| (g) | Share-based compensation |
The Company applies ASC 718, Compensation—Stock Compensation (“ASC 718”), to account for its share-based payments. In accordance with ASC 718, the Company determines whether an award should be classified and accounted for as a liability award or equity award. All the Company’s grants of share-based awards were classified as equity awards and are recognized in the financial statements based on their grant date fair values.
The Company elects to recognize compensation expense using the straight-line method for all awards granted with graded vesting based on service conditions. The Company has also elected to account for forfeitures as they occur. Previously recognized compensation cost for the awards is reversed in the period that the award is forfeited.
| (h) | Recent Accounting Standards |
The Company is an “emerging growth company” (“EGC”) as defined in the Jumpstart Our Business Startups Act of 2012 (the “JOBS Act”). Under the JOBS Act, EGC can delay adopting new or revised accounting standards issued subsequent to the enactment of the JOBS Act until such time as those standards apply to private companies.
In February 2016, the Financial Accounting Standards
Board (the “FASB”) issued ASU No. 2016-02, Leases (Topic 842). The guidance supersedes existing guidance on accounting for
leases with the main difference being that operating leases are to be recorded in the statement of financial position as right-of-use
assets and lease liabilities, initially measured at the present value of the lease payments. For operating leases with a term of 12 months
or less, a lessee is permitted to make an accounting policy election not to recognize lease assets and liabilities. In July 2018, ASU
2016-02 was updated with ASU 2018-11, Targeted Improvements to ASC Topic 842, which provides entities with relief from the costs of implementing
certain aspects of the new leasing standard. Specifically, under the amendments in ASU 2018-11, (1) entities may elect not to recast the
comparative periods presented when transitioning to ASC 842 and (2) lessors may elect not to separate lease and non-lease components when
certain conditions are met. In November 2019, ASU 2019-10, Codification Improvements to ASC 842 modified the effective dates of all other
entities. In June 2020, ASU 2020-05 defers the effective date for one year for entities in the “all other” category. For all
other entities, the amendments in ASU 2020-05 are effective for fiscal years beginning after December 15, 2021, and interim periods within
fiscal years beginning after December 15, 2022. Early application of the guidance continues to be permitted. Based on the portfolio of
leases as of March 31, 2023, a right-of-use asset of $
In June 2016, the FASB issued ASU No. 2016-13, “Financial Instruments – Credit Losses,” which requires the measurement of all expected credit losses for financial assets held at the reporting date based on historical experience, current conditions, and reasonable and supportable forecasts. Subsequently, the FASB issued ASU No. 2018-19, Codification Improvements to Topic 326, to clarify that receivables arising from operating leases are within the scope of lease accounting standards. Further, the FASB issued ASU No. 2019-04, ASU 2019-05, ASU 2019-10, ASU 2019-11 and ASU 2020-02 to provide additional guidance on the credit losses standard. For all other entities, the amendments for ASU 2016-13 are effective for fiscal years beginning after December 15, 2022, including interim periods within those fiscal years, with early adoption permitted. Adoption of the ASUs is on a modified retrospective basis. The Company will adopt ASU 2016-13 on October 1, 2023. The Company is in the process of evaluating the effect of the adoption of this ASU on its CFS.
Other accounting standards that have been issued by FASB that do not require adoption until a future date are not expected to have a material impact on the consolidated financial statements upon adoption. The Company does not discuss recent standards that are not anticipated to have an impact on or are unrelated to its unaudited consolidated financial statements.
13
EZGO TECHNOLOGIES LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
2022 AND 2023
(In U.S. dollars except for number of shares)
| 3. | ACQUISITION |
Acquisition of Changzhou Sixun
On January 25, 2023, the Company completed the
acquisition of Changzhou Sixun through an equity transfer agreement with certain “non-U.S. persons” (the “Sellers”)
as defined in Regulation S of the Securities Act of 1933, as amended (the “Securities Act”), for the transfer of
The Company engaged an independent valuation firm to assist management in valuing assets acquired, liabilities assumed and intangible assets identified as of the acquisition day.
The transaction constitutes
a business combination for accounting purposes and is accounted for using the acquisition method under ASC 805. The Company is deemed
to be the accounting acquirer. The identifiable intangible assets acquired upon acquisition was patents and software copyright, which
has an estimated useful life of
| Amount | ||||
| Cash and cash equivalents | $ | |||
| Accounts receivable | ||||
| Notes receivable | ||||
| Advance to suppliers | ||||
| Prepaid expenses and other current assets, net | ||||
| Inventories, net | ||||
| Fixed assets | ||||
| Intangible assets - patents | ||||
| Intangible assets – software copyright | ||||
| Total assets (a) | ||||
| Advances from customers | ||||
| Accounts payable | ||||
| Accrued expenses and other payables | ||||
| Total liabilities (b) | ||||
| Total net identifiable asset acquired (c=a-b) | ||||
| Non-controlling interest on Changzhou Higgs (d) | ||||
| Total consideration (e) | ||||
| Goodwill (e+d-c) | ||||
Prior to the acquisition, Changzhou Sixun did not prepare its financial statements in accordance with U.S. GAAP. The Company determined that the cost of reconstructing the financial statement of Changzhou Sixun for the periods prior to the acquisition outweighed the benefits. Based on an assessment of the financial performance and a comparison of Changzhou Sixun’s and the Company’s financial performance for the fiscal year prior to the acquisition, the Company did not consider Changzhou Sixun to be material to the Company based on the significance testing. Thus, the Company’s management believes that the presentation of pro forma financial information with respect to the results of operations of the Company for the business combination is impractical.
14
EZGO TECHNOLOGIES LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
2022 AND 2023
(In U.S. dollars except for number of shares)
| 4. | ACCOUNTS RECEIVABLE, NET |
| 2022 | 2023 | |||||||
| (audited) | ||||||||
| Accounts receivable | $ | $ | ||||||
| Less: allowance for doubtful accounts | ( | ) | ( | ) | ||||
| Accounts receivable, net | $ | $ | ||||||
| 2022 | 2023 | |||||||
| Balance at beginning of the period | $ | $ | ||||||
| Current period addition | ||||||||
| Write-off | ( | ) | ||||||
| Foreign currency translation adjustment | ( | ) | ||||||
| Balance at the end of the period | $ | $ | ||||||
For the six months ended March 31, 2022 and 2023,
$
| 5. | INVESTMENTS |
| 2022 | 2023 | |||||||
| (audited) | ||||||||
| Short-term investments: | ||||||||
| Convertible debt instrument (1) | $ | $ | ||||||
| Total short-term investments | ||||||||
| Long-term investments: | ||||||||
| Investments accounted for using the equity method (2) | ||||||||
| Investments without readily determinable fair values (3) | ||||||||
| Total investments | $ | $ | ||||||
15
EZGO TECHNOLOGIES LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
2022 AND 2023
(In U.S. dollars except for number of shares)
| 5. | INVESTMENTS (continued) |
| 2022 | 2023 | |||||||
| Beginning balance | $ | $ | ||||||
| Addition of investments accounted for using the equity method | ||||||||
| Addition of investments without readily determinable fair values | ||||||||
| Proportionate share of the equity investee’s net loss | ( | ) | ( | ) | ||||
| Foreign currency translation adjustment | ( | ) | ||||||
| Ending balance | $ | $ | ||||||
| (1) |
| (2) |
| (3) |
16
EZGO TECHNOLOGIES LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
2022 AND 2023
(In U.S. dollars except for number of shares)
| 6. | INVENTORIES, NET |
| 2022 | 2023 | |||||||
| (audited) | ||||||||
| Finished goods (1) | $ | $ | ||||||
| Raw materials (2) | ||||||||
| Others | ||||||||
| Reserve for inventories | ( | ) | ( | ) | ||||
| Inventories, net | $ | $ | ||||||
| (1) |
| (2) |
| 2022 | 2023 | |||||||
| Beginning balance | $ | $ | ||||||
| Current period addition | ||||||||
| Charge off | ( | ) | ( | ) | ||||
| Foreign currency translation adjustment | ( | ) | ||||||
| Ending balance | $ | $ | ||||||
For the six months ended March 31, 2022 and 2023,
$
| 7. | ADVANCES TO SUPPLIERS, NET |
| 2022 | 2023 | |||||||
| (audited) | ||||||||
| Prepayment for purchase of battery packs (1) | $ | $ | ||||||
| Prepayment for purchase of e-bicycles materials (2) | ||||||||
| Others | ||||||||
| Less: allowance for doubtful accounts | ( | ) | ( | ) | ||||
| Advances to suppliers, net | $ | $ | ||||||
| (1) |
| (2) |
17
EZGO TECHNOLOGIES LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
2022 AND 2023
(In U.S. dollars except for number of shares)
| 8. | PREPAID EXPENSES AND OTHER CURRENT ASSETS |
| 2022 | 2023 | |||||||
| (audited) | ||||||||
| Short-term receivables due to disposal of Tianjin Jiahao | $ | $ | ||||||
| VAT prepayment | ||||||||
| Security deposits | ||||||||
| Prepaid professional service fee | ||||||||
| Prepaid rental fee | ||||||||
| Prepaid exhibition fee | ||||||||
| Other | ||||||||
| Prepaid expenses and other current assets | $ | $ | ||||||
| 9. | PROPERY, PLANT AND EQUIPMENT, NET |
| 2022 | 2023 | |||||||
| (audited) | ||||||||
| Building (1) | $ | $ | ||||||
| Equipment for rental business | ||||||||
| Production line for e-bicycles | ||||||||
| Leasehold improvements | ||||||||
| Furniture, fixtures and office equipment | ||||||||
| Vehicles | ||||||||
| Construction in progress | ||||||||
| Accumulated depreciation | ( | ) | ( | ) | ||||
| Property, plant and equipment, net | $ | $ | ||||||
| (1) |
For the six months ended March 31, 2022 and 2023,
depreciation expense was $
For the six months ended March 31, 2022 and 2023,
the Company received $
18
EZGO TECHNOLOGIES LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
2022 AND 2023
(In U.S. dollars except for number of shares)
| 10. | INTANGIBLE ASSETS, NET |
| 2022 | 2023 | |||||||
| (audited) | ||||||||
| Patents | $ | $ | ||||||
| Software copyright | ||||||||
| Accumulated amortization | ( | ) | ||||||
| Intangible assets, net | $ | $ | ||||||
For the six months ended March 31, 2022 and 2023,
amortization of intangible assets was and $
Intangible assets including patents and software copyright which were considered as important underlying assets in the business acquisition of Changzhou Sixun (see Note 2) were identified and recognized based on a formal valuation report issued by the independent third-party valuation specialist.
| Year Ended September 30, | Amount | |||||
| Remaining in fiscal year 2023 | $ | |||||
| 2024 | ||||||
| 2025 | ||||||
| 2026 | ||||||
| 2027 | ||||||
| 2028 and thereafter | ||||||
| Total | $ | |||||
19
EZGO TECHNOLOGIES LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
2022 AND 2023
(In U.S. dollars except for number of shares)
| 11. | LAND USE RIGHT, NET |
As of September 30, 2022 and March 31, 2023, land use right, net consisted of the following:
| 2022 | 2023 | |||||||
| (unaudited) | ||||||||
| Land use right | $ | $ | ||||||
| Accumulated amortization | ( | ) | ( | ) | ||||
| Land use right, net | $ | $ | ||||||
For the six months ended March 31, 2022 and 2023,
the Company recognized amortization expense of $
| (1) | Land use right of Tianjia Jiahao |
As mentioned previously in Note 9, the land use
right of Tianjin Jiahao was also disposed at the carrying amount of $
| (2) | Land use right of Jiangsu New Energy |
In January 2023, Jiangsu New Energy acquired land
use rights of $
20
EZGO TECHNOLOGIES LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
2022 AND 2023
(In U.S. dollars except for number of shares)
| 12. | OTHER NON-CURRENT ASSETS |
| 2022 | 2023 | |||||||
| (audited) | ||||||||
| Prepayment for intent equity investment | $ | $ | ||||||
| Long-term receivables due to disposal of Tianjin Jiahao | ||||||||
| Prepaid expenses for land use right (1) | ||||||||
| Prepaid construction fee (2) | ||||||||
| Total of other non-current assets | $ | $ | ||||||
| (1) |
| (2) |
| 13. | ACCRUED EXPENSES AND OTHER PAYABLES |
| 2022 | 2023 | |||||||
| (audited) | ||||||||
| Other taxes payable (1) | $ | $ | ||||||
| Payroll payable | ||||||||
| Loan from third-parties | ||||||||
| Others | ||||||||
| Total of accrued expenses and other payables | $ | $ | ||||||
| (1) |
| 14. | SHORT-TERM BORROWINGS |
| 2022 | 2023 | |||||||
| Short-term borrowings | $ | $ | ||||||
On August 12, 2022, Yizhiying entered into a non-revolving
loan facility of RMB
On December 15, 2022, Changzhou EZGO entered into
a revolving loan facility of RMB
On March 24, 2023, Changzhou EZGO entered into
a non-revolving loan facility of RMB
For the six months ended March 31, 2022 and 2023,
the Company recorded interest expense of $
21
EZGO TECHNOLOGIES LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
2022 AND 2023
(In U.S. dollars except for number of shares)
| 15. | RELATED PARTY TRANSACTIONS AND BALANCES |
The following is a list of related parties which the Company had transactions with during the six months ended March 31, 2022 and 2023:
| Name | Relationship | ||
| (a) | Huiyan Xie | ||
| (b) | Shuang Wu | ||
| (c) | Yan Fang | ||
| (d) | Jianhui Ye | ||
| (e) | Feng Xiao | ||
| (f) | Changzhou Cenbird Electric Bicycle Manufacturing Co., Ltd. | ||
| (g) | Jiangsu Xinzhongtian Suye Co., Ltd. | ||
| (h) | Shenzhen Star Asset Management Co., Ltd. | ||
| (i) | Beijing Weiqi Technology Co., Ltd. | ||
| (j) | Shenzhen Star Cycling Network Technology Co., Ltd. | ||
| (k) | Nanjing Mingfeng Technology Co.,Ltd. | ||
| (l) | Shandong Xingneng'an New Energy Technology Co., Ltd. | ||
| (m) | Jiangsu Youdi Technology Co., Ltd. | ||
22
EZGO TECHNOLOGIES LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
2022 AND 2023
(In U.S. dollars except for number of shares)
| 15. | RELATED PARTY TRANSACTIONS AND BALANCES (continued) |
Amount due from related parties
As of September 30, 2022 and March 31, 2023, amount due from related parties consisted of the following:
| 2022 | 2023 | |||||||
| (audited) | ||||||||
| Shandong Xingneng'an New Energy Technology Co., Ltd. (l)(1)&(2) | $ | $ | ||||||
| Changzhou Cenbird Electric Bicycle Manufacturing Co., Ltd. (f)(1) | ||||||||
| Shenzhen Star Cycling Network Technology Co., Ltd. (j)(1)&(2) | ||||||||
| Jiangsu Youdi Technology Co., Ltd. (m)(1)&(2) | ||||||||
| Jiangsu Xinzhongtian Suye Co., Ltd. (g)(1) | ||||||||
| Beijing Weiqi Technology Co., Ltd. (i)(4) | ||||||||
| Jianhui Ye (d)(3) | ||||||||
| Shuang Wu (b)(3) | ||||||||
| Amount due from related parties | $ | $ | ||||||
| (1) |
| (2) |
| (3) |
| (4) |
Amount due to related parties
As of September 30, 2022 and March 31, 2023, amount due to related parties consisted of the following:
| 2022 | 2023 | |||||||
| (audited) | ||||||||
| Huiyan Xie (a)(1) | $ | $ | ||||||
| Shuang Wu (b)(1) | ||||||||
| Feng Xiao (e)(1) | ||||||||
| Nanjing Mingfeng Technology Co., Ltd. (k)(2) | ||||||||
| Yan Fang (c)(1) | ||||||||
| Shenzhen Star Asset Management Co., Ltd. (h)(2) | ||||||||
| Amount due to related parties | $ | $ | ||||||
| (1) |
| (2) |
23
EZGO TECHNOLOGIES LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
2022 AND 2023
(In U.S. dollars except for number of shares)
| 15. | RELATED PARTY TRANSACTIONS AND BALANCES (continued) |
Related parties transactions
For the six months ended March 31, 2022 and 2023, the Company had the following related party transactions:
| Related parties | Nature | 2022 | 2023 | |||||||
| Shandong Xingneng’an New Energy Technology Co., Ltd (l) | $ | ( | ) | $ | ||||||
| Shandong Xingneng’an New Energy Technology Co., Ltd (l) | ||||||||||
| Shandong Xingneng’an New Energy Technology Co., Ltd (l) | ( | ) | ||||||||
| Shandong Xingneng’an New Energy Technology Co., Ltd (l) | ||||||||||
| Changzhou Cenbird Electric Bicycle Manufacturing Co., Ltd. (f) | ( | ) | ||||||||
| Jiangsu Xinzhongtian Suye Co., Ltd. (g) | ( | ) | ||||||||
| Shenzhen Star Cycling Network Technology Co., Ltd.(j) | ||||||||||
| Shenzhen Star Cycling Network Technology Co., Ltd.(j) | ( | ) | ||||||||
| Nanjing Mingfeng Technology Co., Ltd.(k) | ||||||||||
| Nanjing Mingfeng Technology Co., Ltd.(k) | ( | ) | ||||||||
| Shuang Wu (b) | ( | ) | ||||||||
| Shuang Wu (b) | ||||||||||
| Yan Fang (c) | ( | ) | ||||||||
| Yan Fang (c) | ||||||||||
| Huiyan Xie (a) | ( | ) | ||||||||
| Huiyan Xie (a) | ||||||||||
24
EZGO TECHNOLOGIES LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
2022 AND 2023
(In U.S. dollars except for number of shares)
| 16. | DISCONTINUED OPERATION |
In November 2018, the Company entered into an agreement with a third-party company to dispose its battery cell production line. The production line was disposed in December 2018. After the disposal, the Company is no longer engaged in the manufacturing of battery cells. The disposal of the production line was treated as a discontinued operation for all fiscal years presented.
Due to the impact of COVID-19, the revenue of rental business decreased after December 2019, which led to the termination of the cooperation with its sublease agents from January 2020 to July 2020. Therefore, management decided to dispose majority of its rental assets, mainly batteries and E-bicycle, before September 30, 2021. The disposal of the Company’s rental business was also treated as a discontinued operation for all fiscal years presented.
| 2022 | 2023 | |||||||
| Liabilities of discontinued operation | ||||||||
| Accounts payable | $ | $ | ||||||
| Other payables | ||||||||
| Income tax payable | ||||||||
| Total current liabilities | ||||||||
| Total liabilities | $ | $ | ||||||
| Six Months Ended March 31, | ||||||||
| 2022 | 2023 | |||||||
| Net revenues | $ | $ | ||||||
| Cost of revenues | ( | ) | ||||||
| (Loss)/Income from discontinued operation before income tax | ( | ) | ||||||
| Income tax expense | ||||||||
| (Loss)/Income from discontinued operation, net of income tax | $ | ( | ) | $ | ||||
25
EZGO TECHNOLOGIES LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
2022 AND 2023
(In U.S. dollars except for number of shares)
| 17. | INCOME TAXES |
BVI
The Company is incorporated in the BVI. Under the current laws of the BVI, the Company is not subject to income or capital gains taxes. In addition, dividend payments are not subject to withholdings tax in the BVI.
Hong Kong
On March 21, 2018, the Hong Kong Legislative Council
passed The Inland Revenue (Amendment) (No. 7) Bill 2017 (the “Bill”) which introduces the two-tiered profits tax rates regime.
The Bill was signed into law on March 28, 2018 and was announced on the following day.
PRC
The Company’s PRC subsidiaries, VIE and
VIE’s subsidiaries are subject to the PRC Enterprise Income Tax Law (“EIT Law”) and are taxed at the statutory income
tax rate of
| Six Months Ended March 31, | ||||||||
| 2022 | 2023 | |||||||
| Current | $ | $ | ||||||
| Deferred | ( | ) | ||||||
| Total income tax expense (benefit) | $ | $ | ( | ) | ||||
The reconciliations of the statutory income tax rate and the Company’s effective income tax rate are as follows:
| Six Months Ended March 31, | ||||||||
| 2022 | 2023 | |||||||
| Net loss before provision for income taxes | $ | ( | ) | $ | ( | ) | ||
| PRC statutory tax rate | % | % | ||||||
| Income tax at statutory tax rate | ( | ) | ( | ) | ||||
| Non-taxable income and non-deductible expenses | ||||||||
| Effect of income tax rate differences in jurisdictions other than the PRC | ||||||||
| Effect on valuation allowance | ||||||||
| Income tax expense (benefit) | $ | $ | ( | ) | ||||
| Effective tax rate | - | % | % | |||||
26
EZGO TECHNOLOGIES LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
2022 AND 2023
(In U.S. dollars except for number of shares)
| 17. | INCOME TAXES (continued) |
The current PRC EIT Law imposes a
As of September 30, 2022 (audited) and March 31, 2023, the Company had not recorded any withholding tax on the retained earnings of its foreign invested enterprises in the PRC, since the Company intended to reinvest its earnings to further expand its business in mainland China, and its foreign invested enterprises did not intend to declare dividends to their immediate foreign holding companies.
For the six months ended March 31, 2022 and 2023,
the effect of income tax rate differences in jurisdictions other than the PRC mainly resulted from the loss in EZGO, which is incorporated
in BVI and is not subject to income or capital gains taxes. The effective tax rates are -
Accounting for uncertainty tax position
The Company did not identify significant unrecognized tax benefits for the six months ended March 31, 2022 and 2023. The Company did not incur any interest or penalties related to potential underpaid income tax expenses. In general, the PRC tax authority has up to five years to conduct examinations of the Company’s tax filings. Accordingly, the tax years from 2017 to 2022 of the Company’s PRC subsidiaries and VIE and subsidiaries of the VIE remain open to examination by the taxing jurisdictions. The Company does not expect that its assessment regarding unrecognized tax positions will materially change over the next 12 months.
27
EZGO TECHNOLOGIES LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
2022 AND 2023
(In U.S. dollars except for number of shares)
| 18. | SHARE-BASED COMPENSATION |
EZGO Technologies Ltd. Incentive Plan (the "EZGO 2022 Plan")
On August 6, 2022, the board of directors of EZGO
approved the EZGO 2022 Plan. On August 8, 2022,
On January 13 and March 1, 2023,
The estimated FV of restricted shares granted was the closing price on the grant date of the Company's ordinary shares traded in the Nasdaq Stock Market.
| Number of nonvested restricted shares | Weighted average fair value per ordinary share on the grant dates | |||||||
| Outstanding as of September 30, 2021 | $ | |||||||
| Granted | ||||||||
| Vested | ( | ) | ||||||
| Forfeited | ||||||||
| Unvested as of September 30, 2022 | ||||||||
| Granted | ||||||||
| Vested | ( | ) | ||||||
| Forfeited | ||||||||
| Unvested as of March 31, 2023 | $ | |||||||
As of March 31, 2023, there was approximately
$
Total share-based compensation expense of share-based
awards granted to management and external consultants for the six months ended March 31, 2023 was $
28
EZGO TECHNOLOGIES LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
2022 AND 2023
(In U.S. dollars except for number of shares)
| 19. | EQUITY |
| (a) | Ordinary shares |
The Company was established under the
laws of the BVI on January 24, 2019. The authorized number of ordinary shares was
On September 8, 2020, the Company effected
a one thousand-for-one subdivision of shares to shareholders, which increased the total number of authorized and issued ordinary shares
from
On January 28, 2021, the Company closed
its initial public offering and issued
On June 1, 2021, the Company closed
its registered direct public offering of
On
July 21, 2022, the Company entered into a securities purchase agreement with certain “non-U.S. Persons” as defined in Regulation
S of the Securities Act, pursuant to which the Company sold
On August 8, 2022, the Company issued
On January 25, 2023,
On March 9, 2023, the Company entered
into a securities purchase agreement with certain investors in connection with the offer and sale of
On March 16 and March 20, 2023,
| (b) | Statutory reserve and restricted net assets |
The Company’s
PRC subsidiaries, VIE and VIE’s subsidiaries are required to reserve
29
EZGO TECHNOLOGIES LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
2022 AND 2023
(In U.S. dollars except for number of shares)
| 19. | EQUITY (continued) |
Relevant
PRC statutory laws and regulations permit the payment of dividends by the Company’s PRC subsidiaries and VIE and VIE’s subsidiaries
only out of their retained earnings, if any, as determined in accordance with PRC accounting standards and regulations. Furthermore, registered
share capital and capital reserve accounts are also restricted from distribution. As a result of these PRC laws and regulations, the Company’s
PRC subsidiaries and VIE and VIE’s subsidiaries are restricted in their ability to transfer a portion of their net assets to the
Company either in the form of dividends, loans or advances. The Company’s restricted net assets, comprising of the registered paid
in capital and statutory reserve of Company’s PRC subsidiaries and VIE and VIE’s subsidiaries, were $
| (c) | Receivables from a shareholder |
Receivables
from a shareholder as of September 30, 2022 and March 31, 2023, including the loans to Mr. Henglong Chen, the former Chairman of Board
of Directors of the Company, were $
| (d) | Warrant |
In January
2021, warrant shares were granted to an underwriter to purchase
In June
2021, warrant shares were granted to certain investors in the Company’s public offering to purchase
On March
16 and March 20, 2023,
As of March
31, 2023, there were
| Ordinary Shares Number Outstanding | Weighted Average Exercise Price | Contractual Life in Years | Intrinsic Value | |||||||||||||
| Warrants Outstanding as of September 30, 2022 | $ | | $ | |||||||||||||
| Warrants Exercisable as of September 30, 2022 | $ | | $ | |||||||||||||
| Warrants Granted | ||||||||||||||||
| Warrants Exercises | ( | ) | ||||||||||||||
| Warrants Expired | ||||||||||||||||
| Warrants Outstanding as of March 31, 2023 | $ | | $ | |||||||||||||
| Warrants Exercisable as of March 31, 2023 | $ | $ | ||||||||||||||
| (e) | Non-controlling interests |
As of March
31, 2023, the Company’s non-controlling interests were
30
EZGO TECHNOLOGIES LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
2022 AND 2023
(In U.S. dollars except for number of shares)
| 20. | COMMITMENTS AND CONTINGENCIES |
Legal Proceedings
From time to time, the Company may be subject to legal proceedings, investigations and claims incidental to the conduct of our business. The Company currently have two contract disputes with its suppliers, Jiangsu Anruida New Material Company Limited (“Anruida”) and Zhuhai Titans New Power Electric Co., Ltd. (“Titans”).
On October
21, 2019, Anruida commenced an action against Hengmao Power Battery in Changzhou Wujin District Intermediate People’s Court alleging
that Hengmao Power Battery defaulted on the contract payment of RMB
On January
6, 2020, Titans commenced an action against Hengmao Power Battery in Changzhou Wujin District Intermediate People’s Court alleging
that Hengmao Power Battery defaulted on the payment of RMB
Other than disclosed above, the Company is not a party to, nor is it aware of, any legal proceedings, investigations or claims which, in the opinion of its management, are likely to have a material adverse effect on its business, financial condition or results of operations.
Operating Leases
The Company
leases its offices under non-cancellable operating lease agreements. Rent and related utilities expense under all operating leases, included
in operating expenses in the unaudited consolidated statements of operations, amounted to $
| Years Ended March 31, | Amount | |||
| 2024 | $ | |||
| 2025 | ||||
| 2026 | ||||
| 2027 | ||||
| Total | $ | |||
31
EZGO TECHNOLOGIES LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
2022 AND 2023
(In U.S. dollars except for number of shares)
| 21. | SEGMENT REPORTING |
The Company determined that it operates in two segments: (1) battery cells and packs segment, and (2) e-bicycle sales segment. The battery cells and packs segment engages in selling battery packs and trading battery cells. The e-bicycle sales segment sells e-bicycles on various ecommerce platforms to individual customers.
The Company’s chief operating decision maker (“CODM”), which is its chief executive officer, measures the performance of each segment based on metrics of revenue and profit before taxes from operations and uses these results to evaluate the performance of, and to allocate resources to each of the segments. As most of the Company’s long-lived assets are located in the PRC and most of the Company’s revenues are derived from the PRC, no geographical information is presented. The Company does not allocate assets to its segments as the CODM does not evaluate the performance of segments using asset information.
| For the Six Months Ended March 31, 2022 | ||||||||||||||||||||
| Battery cells and packs segment | E-bicycle sales segment | Subtotal from operating segments | Other | Consolidated | ||||||||||||||||
| Revenues from external customers | $ | $ | $ | $ | $ | |||||||||||||||
| Depreciation and amortization | ||||||||||||||||||||
| Segment loss before tax | ( | ) | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||||
| Segment gross profit margin | % | % | % | % | % | |||||||||||||||
| For the Six Months Ended March 31, 2023 | ||||||||||||||||||||
| Battery cells and packs segment | E-bicycle sales segment | Subtotal from operating segments | Other | Consolidated | ||||||||||||||||
| Revenues from external customers | $ | $ | $ | $ | $ | |||||||||||||||
| Depreciation and amortization | ||||||||||||||||||||
| Segment loss before tax | ( | ) | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||||
| Segment gross profit margin | % | % | % | % | % | |||||||||||||||
32
EZGO TECHNOLOGIES LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
2022 AND 2023
(In U.S. dollars except for number of shares)
| 21. | SEGMENT REPORTING (continued) |
| Six Months Ended March 31, | ||||||||
| 2022 | 2023 | |||||||
| Net revenues | ||||||||
| Total revenue from reportable segments | $ | $ | ||||||
| Other revenues | ||||||||
| Consolidated net revenues | $ | $ | ||||||
| Income or loss | ||||||||
| Total operating loss for reportable segments | $ | ( | ) | $ | ( | ) | ||
| Other income for reportable segments | ||||||||
| Total income for reportable segments | ( | ) | ( | ) | ||||
| Unallocated amounts: | ||||||||
| Other corporate expense | ( | ) | ( | ) | ||||
| Consolidated loss from continuing operations before income taxes | $ | ( | ) | $ | ( | ) | ||
| 22. | CONCENTRATIONS |
Concentrations of credit risk
As of September
30, 2022 and March 31, 2023, cash, cash equivalents and restricted cash balances in the PRC were $
Concentrations of customers
| As of September 30, 2022 | As of March 31, 2023 | |||||||||||||||
| Customers | Amount | % of Total | Amount | % of Total | ||||||||||||
| (audited) | ||||||||||||||||
| A | $ | % | $ | % | ||||||||||||
| B | % | |||||||||||||||
| C | % | |||||||||||||||
| D | % | |||||||||||||||
| E | % | |||||||||||||||
| Total | $ | % | $ | % | ||||||||||||
| * |
33
EZGO TECHNOLOGIES LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
2022 AND 2023
(In U.S. dollars except for number of shares)
| 22. | CONCENTRATIONS (continued) |
| 2022 | 2023 | |||||||||||||||
| Customers | Amount | % of Total | Amount | % of Total | ||||||||||||
| (audited) | ||||||||||||||||
| F | $ | $ | % | |||||||||||||
| Total | $ | $ | % | |||||||||||||
| * |
| 2022 | 2023 | |||||||||||||||
| Customers | Amount | % of Total | Amount | % of Total | ||||||||||||
| G | $ | $ | % | |||||||||||||
| H | % | |||||||||||||||
| I | % | |||||||||||||||
| E | % | |||||||||||||||
| Total | $ | % | $ | % | ||||||||||||
| * |
Concentrations of suppliers
| 2022 | 2023 | |||||||||||||||
| Suppliers | Amount | % of Total | Amount | % of Total | ||||||||||||
| (audited) | ||||||||||||||||
| A | $ | % | $ | % | ||||||||||||
| B | % | |||||||||||||||
| C | % | |||||||||||||||
| D | % | |||||||||||||||
| E | % | |||||||||||||||
| F | % | |||||||||||||||
| Total | $ | % | $ | % | ||||||||||||
| * |
34
EZGO TECHNOLOGIES LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
2022 AND 2023
(In U.S. dollars except for number of shares)
| 22. | CONCENTRATIONS (continued) |
| 2022 | 2023 | |||||||||||||||
| Suppliers | Amount | % of Total | Amount | % of Total | ||||||||||||
| (audited) | ||||||||||||||||
| G | $ | $ | % | |||||||||||||
| H | % | |||||||||||||||
| I | % | |||||||||||||||
| Total | $ | $ | % | |||||||||||||
| * |
| 2022 | 2023 | |||||||||||||||
| Suppliers | Amount | % of Total | Amount | % of Total | ||||||||||||
| J | $ | $ | % | |||||||||||||
| K | % | |||||||||||||||
| G | % | |||||||||||||||
| C | % | |||||||||||||||
| L | % | |||||||||||||||
| Total | $ | % | $ | % | ||||||||||||
| * |
| 23. | SUBSEQUENT EVENTS |
On April
3, 2023, Yizhiying, a wholly-owned subsidiary of Jiangsu EZGO, the variable interest entity of the Company, entered into an equity transfer
agreement with Tianjin Mizhiyan New Energy Technologies Co., Ltd. (“Mizhiyan”) and Tianjin Dilang for the transfer of
On June 5, 2023, the Company entered into a securities
purchase agreement with certain purchasers, in connection with the offer and sale of
On June 25, 2023, Jiangsu New Energy pledged the
land use right to obtain a line of credit from Jiangnan Rural Commerce Bank of RMB
35