EZGO ANNOUNCES FINANCIAL RESULTS FOR THE SIX MONTHS ENDED MARCH 31, 2025

CHANGZHOU, China, July 1, 2025 /PRNewswire/ -- 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, 2025.

Financial Highlights (all results compared to the prior fiscal year period unless otherwise noted)

• Gross margin from continuing operations increased to 10.2% in first half year of 2025, compared with 8.9% in first half year in 2024 and gross profit increased 10.3% to $671,468 in first half year of 2025.
• Net loss significantly decreased from $4.7 million in the first half year in 2024 to $1.3 million in the first half year of 2025.
• Cash and cash equivalents was approximately $3.4 million and $0.4 and million as of September 30, 2024 and March 31, 2025, respectively.

Management Commentary

While we are suffering recurring net loss, we successfully boosted our gross profit and narrowed our net losses from $4.7 million in the first half year of 2024 to $1.3 million in the first half year of 2025. During the six months ending on March 31, 2025, the revenue from sales of battery cells and packs slightly decreased mainly due to the tense competition in lead-acid battery market, and we are trying to promote other types of battery cells and packs sales, such as lithium battery and energy storage battery. We're leveraging maintenance service growth to compensate for lower electronic control system sales. Looking ahead, we are strategically shifting resources away from underperforming areas. After careful consideration, we decided to dispose of our e-bicycle business, which had been facing intense market competition and declining sales.

We're intensifying our focus on high-value services and lithium battery technology while optimizing our cost structure. Market competition remains intense, but our streamlined portfolio and efficiency gains position us to capitalize on recovery opportunities.

Financial Review for the Six Months Ended March 31, 2025

Net Revenues from continuing operations

Net revenues from continuing operations for the six months ended March 31, 2025 were approximately $6.6 million, a 3.5% decrease from approximately $6.8 million for the six months ended March 31, 2024. The decrease in revenues was mainly driven by the decrease in sales of cells and packs and sales of electronic control systems, and partially offset by the increase of maintenance service revenue.

The following table identifies revenue from continuing operations, as well as reportable segments for the six months ended March 31, 2024 and 2025:

The revenue from sales of battery cells and packs for six months ended March 31, 2025 was $5,518,183, compared to $5,847,751 for six months ended March 31, 2024, representing a slight decrease of 5.6%, which was mainly due to the decrease in sales volume of lead-acid battery due to intensified competition. Overall, the revenue generated from the sales of lithium battery packs was $4,851,428 for the six months ended March 31, 2025, which remains stable compared with the six months ended March 31, 2024. The revenue generated from the sales of the lead-acid battery packs was $373,750 for the six months ended March 31,2025 compared $931,801 for the six months ended March 31, 2024.

The revenue from sales of electronic control systems for six months ended March 31, 2025 was $636,356, decreased by 13.9% compared with the six months ended March 31, 2024, owing to the decreased sales volume due to the downward market environment and the lower price of Changzhou Higgs to maintain the market share.

The revenue from others segment mainly consists of maintenance service revenue. Driven by the customer base accumulated from the electronic control system sales business over the past two years and the growing market demand, the maintenance service revenue increased from $175,627 for six months ended March 31, 2024 to $360,350 for six months ended March 31, 2025, representing an increase of 105.2%.

Cost of Revenues

Cost of revenues consists primarily of purchase cost of battery packs, purchase of components of the electronic control system, depreciation, maintenance, and other overhead expenses.

Our cost of revenues decreased by $301,179, or 4.9%, to $5,893,899 for six months ended March 31,2025 from $6,195,078 for six months ended March 31, 2024, which was primarily due to the decreased sales of battery cells and packs. The change in cost of revenue directly corresponded with the change in revenue from the sales of battery cells and packs segment.

Gross Profit

Gross profit for the six months ended March 31, 2024 and 2025 was $608,884 and $671,468, or 8.9% and 10.2% of net revenues, respectively.

Gross profit margin for six months ended March 31, 2025 increased from 8.9% to 10.2%, primarily due to the higher margin of maintenance service. The increase in gross profit margin of maintenance service increased to 43.1% for the six months ended March 31, 2025 from 24.5% for the six months ended March 31, 2024, which was mainly due to the further amortization of fixed costs with increased revenues and the higher unit price of maintenance labor hours. The gross profit margin from sales of battery cells and packs increased slightly from 4.4% to 4.5% for six months ended March 31, 2025.

Selling and Marketing Expenses

Our selling and marketing expenses decreased by $31,451, or approximately 21.1%, to $117,772 for the six months ended March 31, 2025 from $149,223 for the six months ended March 31, 2024, which was attributable to a decrease of $15,745 in employee payroll expense driven by the decrease in sales department headcount. 

General and Administrative Expenses

Our general and administrative expenses decreased by $637,656, or approximately 34.7%, to $1,200,042 for the six months ended March 31, 2025 from $1,837,698 for the six months ended March 31, 2024. The decrease was primarily driven by the decrease in share-based compensation expense of $339,488 and the liquidated damages expense of $138,766 for the six months ended March 31, 2024.

Research and Development Expenses

Our research and development expenses decreased slightly by $5,863, or 1.5%, to $389,572 for the six months ended March 31, 2025 from $395,435 for the six months ended March 31, 2025, which remains relatively stable.

Other Expense/(income), Net

We recorded other expense, net of $1,395,560 and other income, net of $122,977 for the six months ended March 31, 2024 and 2025, respectively. The significant decrease in other expense, net is primarily attributable to the decrease in impairment loss of goodwill, which was approximately $1.4 million for the six months ended March 31, 2024, compared to nil for the six months ended March 31, 2025.

Income Tax (Benefits)/Expense, Net

We recorded income tax benefits of $79,488 and income tax expense of $21,334 for the six months ended March 31, 2024 and 2025, respectively. The reason was due to the shift from the recognition of deferred tax assets for the six months ended March 31, 2024 to the recognition of deferred tax liabilities for the six months ended March 31, 2025, owing to the decrease of interest income from related parties.

Loss from discontinued operations

Due to the declining performance of sales of e-bicycle business, we determined to dispose the variable interest entity, Jiangsu EZGO Electronic Technologies Co., Ltd. ("Jiangsu EZGO"), and its subsidiaries. On March 30, 2025, our Board of Directors approved this disposal of Jiangsu EZGO and its subsidiaries. The VIE and subsidiaries mainly operated in sales of E-bicycles business in PRC. The disposal of the sales of E-bicycles business represented a strategic shifts that had a major impact on our financial results, and met the held-for-sale criteria, which trigger discontinued operations accounting in accordance with ASC 205-20-45. Therefore, the historical financial results of the sales of E-bicycles business were classified as discontinued operation and the related assets and liabilities associated with the discontinued operations of the prior year were reclassified as assets/liabilities held for sale to provide comparable financial information.

Loss from discontinued operations was $1.5 million and $0.2 million for the six months ended 2024 and 2025, respectively. The decrease in loss from discontinued operations mainly resulted from the shift from gross loss for the six months ended 2024 to gross profit for the six months ended 2025, and the decrease in general and administrative expenses from discontinued operations:

Net revenue from discontinued operations mainly consists of the revenue generated from the sales of e-bicycles for the six months ended March 31, 2024 and 2025. Net revenue from discontinued operations decreased by 57.5% to $752,748 for six months ended March 31, 2025 from $1,771,339 for six months ended March 31, 2024, mainly due to the decline sales volume of the e-bicycles resulted from the fierce competition of the e-bicycle industry.

Cost of revenues from discontinued operations mainly consists of the purchase cost of e-bicycles and the depreciation cost for charging piles rental business. Cost of revenues from discontinued operations decreased by 61.1% to $736,438 for six months ended March 31, 2025 from $1,892,416 for six months ended March 31, 2024. The decrease in the cost of sales of e-bicycles was in line with the decrease in its revenues. The cost of charging piles rental business, which generated minimal revenue, dropped significantly, driven by the decrease in depreciation cost from the charging piles disposed in June 2024. Consequently, the gross profit from discontinued operations shifted from a gross loss of $121,077 for the six months ended March 31, 2024 to a gross profit of $16,310 for the six months ended March 31, 2025.

General and administrative expenses from discontinued operations mainly decreased by 90.9% to $111,527 for six months ended March 31, 2025 from $1,227,262 for the six months ended March 31, 2024, which was primarily due to the decrease in credit losses for accounts receivable and advances to suppliers. For the six months ended March 31, 2025, the credit losses for accounts receivable and advances to suppliers for discontinued operations amounted to $1,590 and nil, respectively, compared to $946,578 and $209,046 for the six months ended March 31, 2024, respectively. 

Net Loss from continuing and discontinued operations

Net loss from continuing and discontinued operations for the six months ended March 31, 2025 was approximately $1.3 million, compared to approximately $4.7 million for the same period in 2024, as a result of the explanations discussed above.

Segment Information

We operate in three segments for the six months ended March 31, 2024 and 2025: (i) sales of battery cells and packs, (ii) sales of electronic control system and (iii) others, which mainly included the sales of second-hand machinery, the provision of maintenance services and photovoltaic engineering contracting. The sales of battery cells and packs segment engaged in selling battery packs. The electronic control system and intelligent robot segment engage in selling electronic control systems and intelligent robots. To explore and expand potential customers, we started to provide comprehensive machine maintenance services during 2023, and started to provide second-hand machinery sales during 2024. The revenue from comprehensive machine maintenance service and second-hand machinery sales for six months ended March 31, 2025 was included in others segment for segment reporting.

The following tables present a summary of each reportable segment's revenue and income from continuing operations—excluding the e-bicycle sales segment, which is disclosed as a discontinued operation for the six months ended March 31, 2024, and 2025:

 

 

 

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

 

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

 

 

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

 

 

 

 

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

 

 

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

 

EZGO TECHNOLOGIES LTD. 

NOTES TO UNAUDITED INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(In U.S. dollars except for number of shares)

1. ORGANIZATION AND PRINCIPAL ACTIVITIES

EZGO Technologies Ltd. ("EZGO"), is a holding company incorporated under the laws of the British Virgin Islands ("BVI") on January 24, 2019. EZGO, its subsidiaries, VIE and VIE's subsidiaries (collectively referred to as the "Company") mainly sells battery cells and packs, electronic control systems and second-hand machinery, and provides maintenance services in the People's Republic of China ("PRC"). The unaudited interim condensed consolidated financial statements ("CFS") reflect the activities of EZGO and each of the following entities as of March 31, 2025:

 

 

EZGO TECHNOLOGIES LTD. 

NOTES TO UNAUDITED INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS 

(In U.S. dollars except for number of shares)

1. ORGANIZATION AND PRINCIPAL ACTIVITIES (CONTINUED)

The VIE contractual arrangements

Current PRC laws and regulations impose restrictions or prohibitions on foreign ownership of companies that engage in value-added telecommunication services, and certain other businesses. Changzhou EZGO is considered a foreign-invested enterprise. To comply with PRC laws and regulations, EZGO conducts part of its business in PRC through Jiangsu EZGO and its subsidiaries, based on a series of contractual arrangements. These contractual arrangements expire on November 8, 2039. The following is a summary of the contractual arrangements that provide EZGO with effective control of its VIE and VIE's subsidiaries and enable it to receive substantially all the economic benefits from their operations.

Each VIE Agreements is described below:

Proxy Agreement 

Pursuant to the Proxy Agreement, dated November 8, 2019, among WFOE, Jiangsu EZGO and each equity holder of Jiangsu EZGO, each equity holder irrevocably authorizes WFOE to exercise his or her rights as an equity holder of Jiangsu EZGO, including the right to attend equity holders' meetings, to exercise voting rights and to transfer all or a part of his or her equity interests therein pursuant to the Exclusive Call Option Agreement. During the term of Proxy Agreement, Jiangsu EZGO and all its equity holders may not terminate the agreements except when this agreement or applicable PRC laws provide otherwise.

Exclusive Call Option Agreement

Pursuant to the Exclusive Call Option Agreement, dated November 8, 2019, among WFOE, Jiangsu EZGO and the equity holders of Jiangsu EZGO, each equity holder of Jiangsu EZGO irrevocably granted WFOE an exclusive option to purchase, or to designate other persons to purchase, to the extent permitted by applicable PRC laws, rules, and regulations, all of the equity interest and assets in Jiangsu EZGO from each equity holder. The equity holders of Jiangsu EZGO agree that, without the prior written consent of WFOE, they will not dispose of their equity interests in Jiangsu EZGO or create or allow any encumbrance on their equity interests. The purchase price for the equity interest is to be the minimum permitted by applicable PRC laws, rules and regulations, or the amount that the equity holders actually pay to Jiangsu EZGO for the equity, whichever is lower. The purchase price for the assets is to be the minimum permitted by applicable PRC laws, rules and regulations, or the net book value of the assets, whichever is lower. The Exclusive Call Option Agreement expires when all the equity interest or all the assets are transferred pursuant to the agreement.

Exclusive Management Consulting and Technical Service Agreement ("EMCTSA")

Pursuant to the EMCTSA, dated November 8, 2019, between WFOE and Jiangsu EZGO, Jiangsu EZGO agrees to engage WFOE as its exclusive provider of management consulting, technical support, intellectual property license and relevant services, including all services within Jiangsu EZGO's business scope and decided by WFOE from time to time as necessary. Jiangsu EZGO shall pay WFOE service fees within three months after each fiscal year end. The service fees should be 95% (or a percentage adjusted by WFOE in its sole discretion) of the net profit after the deficit of the prior fiscal year is covered and the statutory reserve is appropriated. WFOE exclusively owns any intellectual property arising from the performance of the EMCTSA. The EMCTSA is effective for 20 years unless earlier terminated as set forth in the agreement or other written agreements entered into by the parties thereto. The EMCTSA shall be extended automatically by the expiry thereof, until WFOE's business term or Jiangsu EZGO's business term expires, unless otherwise notified by WFOE in writing. During the term of the EMCTSA, Jiangsu EZGO may not terminate the agreements except in the case of WFOE's gross negligence or fraud, or this agreement or laws provide otherwise. WFOE may terminate this agreement by 30-day written notice to Jiangsu EZGO at any time.

 

EZGO TECHNOLOGIES LTD. 

NOTES TO UNAUDITED INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS 

(In U.S. dollars except for number of shares)

1. ORGANIZATION AND PRINCIPAL ACTIVITIES (CONTINUED)

Equity Pledge Agreement

Pursuant to the Equity Pledge Agreement, dated November 8, 2019, among WFOE, Jiangsu EZGO and the equity holders of Jiangsu EZGO, the equity holders of Jiangsu EZGO pledged the 100% equity interests in Jiangsu EZGO to WFOE to guarantee performance of all of his or her obligations under the Proxy Agreement, Exclusive Call Option Agreement and EMCTSA. If any event of default as provided for therein occurs, WFOE, as the pledgee, will be entitled to dispose of the pledged equity interests according to applicable PRC laws. On November 28, 2019, WFOE, Jiangsu EZGO and all its equity holders have completed the registration of the equity pledge with the relevant office of SAMR in accordance with the PRC Property Rights Law.

Loan Agreement

Pursuant to the Loan Agreement, dated November 8, 2019, WFOE agrees to provide Jiangsu EZGO with loans of different amounts with interest of 24% according to Jiangsu EZGO's needs from time to time. The term of each loan is 20 years, which can be extended with the written consent of both parties. During the term of the loan or the extended term of the loan, Jiangsu EZGO shall not repay in advance without the written consent of WFOE while in case of certain circumstances, Jiangsu EZGO must repay the loan in advance upon WFOE's written request.

Spousal Consent Letter

The spouses of individual equity holders of Jiangsu EZGO each signed Spousal Consent Letters. Under the Spousal Consent Letter, the signing spouse unconditionally and irrevocably agreed to the execution by his or her spouse of the above-mentioned Equity Pledge Agreement, Exclusive Call Option Agreement and Proxy Agreement, and that his or her spouse may perform, amend or terminate such agreements without his or her consent. In addition, in the event that the spouse obtains any equity interest in Jiangsu EZGO held by his or her spouse for any reason, he or she agrees to be bound by and sign any legal documents substantially similar to the contractual arrangements entered into by his or her spouse, as may be amended from time to time.

Due to the declining performance of sales of e-bicycle business, the Company determined to dispose the variable interest entity, Jiangsu EZGO Electronic Technologies Co., Ltd., and its subsidiaries with no plan to acquire a new variable interest entity. The historical financial results of the sales of e-bicycles business were classified as discontinued operation and the related assets and liabilities associated with the discontinued operations of the prior year were reclassified as assets/liabilities held for sale to provide comparable financial information. The financial information of the VIE and its subsidiaries were disclosed in Note 12.

 

EZGO TECHNOLOGIES LTD. 

NOTES TO UNAUDITED INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(In U.S. dollars except for number of shares)

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

(a) Basis of presentation

The accompanying CFS are prepared in accordance with accounting principles generally accepted in the United States of America ("U.S. GAAP"). The CFS includes the financial statements of EZGO, its subsidiaries, its VIE and its VIE's subsidiaries for which EZGO is the primary beneficiary.

The accompanying unaudited interim condensed consolidated financial statements are 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 accompanying unaudited interim condensed consolidated financial statements of the Company include all normal and recurring adjustments that management of the Company considers necessary for a fair presentation of its financial position and operating results. The results of operations for the six months ended March 31, 2025 are not necessarily indicative of results to be expected for any other interim period or for the full year ended September 30, 2025. Accordingly, these statements should be read in conjunction with the Company's audited financial statements and notes thereto as of and for the years ended March 31, 2023 and 2024.

Liquidity 

The Company's liquidity is based on its ability to enhance its operating cash flow position, obtain capital financing from equity interest investors, initial public offering, and borrow funds to fund its general operations and capital expenditure. The Company's ability to continue as a going concern is dependent on management's ability to execute its business plan successfully, which includes increasing market acceptance of our products to boost its sales volume to achieve economies of scale while applying more effective marketing strategies and cost control measures to better manage operating cash flow position and obtaining funds from outside sources of financing to generate positive financing cash flows.

The going concern assumption contemplates the realization of assets and the settlement of liabilities in the normal course of business. As of the reporting date, the Company has taken steps to strengthen its liquidity position. On June 30, 2025, the Company entered into a funding support agreement with Mr. Shuang Wu, under which a line of credit of up to RMB45,000,000 ($6,201,166) is available through July 1, 2026. In addition, management is implementing measures to improve operating efficiency and reduce discretionary spending, including optimizing general and administrative expenses, accelerating the collection of receivables, and reducing reliance on advance payments. The Company would also further consider financing from bank credit or shareholder capital injection to enhance capital turnover and liquidity position if necessary.

Based on the Company's current working capital, access to undrawn credit facilities, and financial support from related parties, the Company estimates that it will have sufficient liquidity to meet its obligations and operating requirements for at least the twelve months and accordingly these financial statements have been prepared on a going concern basis.

(b) Consolidation

The CFS include the financial statements of EZGO, its subsidiaries, VIE and VIE's subsidiaries for which EZGO is the primary beneficiary. Consolidation of subsidiaries begins from the date the Company obtains control of the subsidiaries and ceases when the Company loses control of the subsidiaries. All inter-company transactions, balances and unrealized gains or losses on transitions among the Company and its subsidiaries were eliminated in consolidation.

A non-controlling interest in a subsidiary of the Company is the portion of the equity (net assets) in the subsidiary not directly or indirectly attributable to the Company. Non-controlling interests are presented as a separate component of equity on the Unaudited Interim Condensed Consolidated Balance Sheets and net loss and other comprehensive loss attributable to non-controlling shareholders is presented as a separate component on the Unaudited Interim Condensed Consolidated Statements of Operations and Comprehensive Loss.

(c) Reverse Share Split 

Effective on March 22, 2024, the Company effected a Reverse Share Split of all of the Company's ordinary shares at a ratio of 1-for-40 so that every forty (40) shares are combined into one (1) share (with the fractional shares rounding off to the nearest whole share). The par values and the authorized shares of the ordinary shares were adjusted as a result of the Reverse Share Split. All numbers of shares and per share data presented in the CFS and related notes have been retroactively restated to reflect the reverse share split stated above, refer to Note 15. The Company issued one full post-Reverse Share Split ordinary share to any shareholder who would have been entitled to receive a fractional share as a result of the process.

(d) Discontinued operation

A discontinued operation may include a component of an entity or a group of components of an entity, or a business or non-profit activity. A disposal of a component of an entity or a group of components of an entity is reported in discontinued operation if the disposal results from strategic shift that has (or will have) a major effect on an entity's operations and financial results when any of the following occurs: (1) the component of an entity or group of components of an entity meets the criteria to be classified as held for sale; (2) the component of an entity or group of components of an entity is disposed of by sale; (3) the component of an entity or group of components of an entity is disposed of other than by sale (for example, by abandonment or in a distribution to owners in a spinoff). For any component classified as held for sale or disposed of by sale or other than by sale that qualify for presentation as a discontinued operation in the period, the Company has reported the assets and liabilities of the discontinued operation as assets of discontinued operation, and liabilities of discontinued operation in the Unaudited Interim Condensed Consolidated Balance Sheets. The results of discontinued operation were reflected separately in the Unaudited Interim Condensed Consolidated Statements of Operations as a single line item for all periods presented in accordance with U.S. GAAP. Cash flows from discontinued operation of the three categories were separately presented in the Unaudited Interim Condensed Consolidated Statements of Cash Flows for all periods presented in accordance with U.S. GAAP.

 

EZGO TECHNOLOGIES LTD.

NOTES TO UNAUDITED INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(In U.S. dollars except for number of shares)

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

(e) Short-term investments

Short-term investments include fixed deposit receipt, which is classified based on the nature and characteristics. Fixed deposit receipt is measured at amortized cost, which is classified as held-to-maturity debt investments in accordance with ASC topic 310 ("ASC 310"), Receivables.

(f) Credit losses

In accordance with Accounting Standards Update ("ASU") 2016-13 "Financial Instruments – Credit Losses" (Topic 326), the Company estimates and records an expected lifetime credit loss by using an aging schedule method in combination with current situation adjustment, which replaces the previous incurred loss impairment model. The expected credit loss impairment model requires the entity to recognize its estimate of expected credit losses for affected financial assets using an allowance for credit losses and requires consideration of a broader range of reasonable and supportable information to inform credit loss estimates.

The Company's accounts receivable, notes receivable, amounts due from related parties and certain receivables which are included in prepaid expenses and other current assets line items in the balance sheet are within the scope of ASC Topic 326. The Company uses an aging schedule method in combination with current situation adjustment, to determine the loss rate of receivable balances and evaluate the expected credit losses on an individual basis. When establishing the loss rate, the Company makes the assessment based on various factors, including aging of receivable balances, historical experience, creditworthiness of debtor, current economic conditions, reasonable and supportable forecasts of future economic, and other factors that may affect the Company's ability to collect from the debtors. The Company also applies current situation adjustment to provide specific provisions for allowance when facts and circumstances indicate that the receivable is unlikely to be collected.

(g) Accounts receivable, net

Accounts receivable, net are stated at the original amount less allowances for credit losses. Accounts receivable are recognized in the period when the Company has provided services to its customers and when its right to consideration is unconditional. For the six months ended March 31, 2024 and 2025, the Company recorded allowance for credit losses of $78,788 and $30,926 from continuing operations and $946,578 and $1,590 from discontinued operation, respectively.

(h) Goodwill, net

Goodwill is the excess of the purchase price over fair value ("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 year and in between annual tests when an event occurs or circumstances change that could indicate 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 it's 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. The Company recognized $1,362,044 and nil impairment loss of goodwill from the acquisition of Changzhou Sixun for the six months ended March 31, 2024 and 2025, which was recognized in the Unaudited Interim Condensed Consolidated Statements of Operations. As of September 30, 2024 and March 31,2025, the carrying amount of goodwill was $1,780,569 and $1,721,901, respectively.

 

EZGO TECHNOLOGIES LTD. 

NOTES TO UNAUDITED INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS 

(In U.S. dollars except for number of shares)

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

(i) Long term investments, net

Long-term investments are the Company's equity investments in privately held companies accounted for equity method, and equity investments without readily determinable FVs.

(1) Equity investments accounted for using the equity method

Equity investments are comprised of investments in privately held companies. The Company uses the equity method to account for an equity investment over which it has the ability to exert significant influence but does not otherwise have control. The Company records equity method investments at the cost of acquisition, plus the Company's share in undistributed earnings and losses since acquisition. For equity investments over which the Company does not have significant influence or control, the cost method of accounting is used.

The Company has historically provided financial support to certain equity investees in the form of loans. If the Company's share of the undistributed losses exceeds the carving amount of an investment accounted for by the equity method, the Company continues to report losses up to the investment carrying amount, including any loans balance due from the equity investees.

The Company asses its equity investment and loans to equity investees for impairment on a periodic basis by considering factors including, but not limited to, current economic and market conditions, the operating performance of the investees including current earnings trends, the technological feasibility of the investee's products and technologies, the general market conditions in the investee's industry or geographic area, factors related to the investee's ability to remain in business, such as the investee's liquidity, debt ratios, cash bur rate, and other company-specific information including recent financing rounds. If it has been determined that the equity investment is less than its related FV and that is decline is other-than-temporary, the carrying value of the investment and loan to equity investee is adjusted downward to reflect these declines in value.

(2) Equity investment without readily determinable FVs

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 common stock or in substance common stock, are accounted for under the measurement alternative upon the adoption of ASU 2016-01 (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. 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 unaudited interim condensed consolidated statements of operations.

 

EZGO TECHNOLOGIES LTD. 

NOTES TO UNAUDITED INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS 

(In U.S. dollars except for number of shares)

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

(j) Revenue recognition

The Company recognizes revenues in accordance with ASC 606, "Revenue from Contracts with Customers" ("ASC 606"). The Company's revenues are mainly generated from 1) sales of products, 2) maintenance services and 3) other services.

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 products

The Company sells products to different customers, primarily battery cells and packs, e-bicycles (see Note 12 Discontinued Operation), electronic control systems and second-hand machinery. The Company identifies one performance obligation in providing the products for a fixed consideration as stated in the sales contract. The Company presents the revenue generated from its sales of products on a gross basis as the Company acts as the principal. The revenue is recognized when the Company satisfies the performance obligation by transferring the promised product to the customers upon acceptance by customers.

The Company generally provides different warrant periods for different products: a six-month warranty period for battery packs, and a one-year warranty period for electronic control systems. The customers are required to perform product quality check upon acceptance of delivery and the warranty covers only production defects. Customers do not have the option to purchase a warranty separately, nor does a warranty provide services other than a warranty. Therefore, warranty costs are considered as accrued performance costs rather than performance obligations. As of September 30, 2024 and March 31, 2025, there is no warranty claim by customer and the Company did not accounted provision for warranty cost related to product quality issues in the unaudited condensed consolidated balance sheet as the Company believes that the likelihood of warranty claims is remote or immaterial, based on historical experience, the nature of the products, and other relevant factors.

Revenue from maintenance services

The Company provides comprehensive machine maintenance services, usually through a separate contract specified for the provision of maintenance services. In accordance with the detailed requirements in the contract, the Company implements a targeted maintenance strategy for machines in need of repair. The Company identifies one performance obligation in providing maintenance service for a fixed consideration as stated in the sales contract. The Company presents the revenue generated from its sales of products on a gross basis as the Company acts as the principal. The revenue is recognized when the Company satisfies the performance obligation by completion of maintenance service upon acceptance by customers.

Revenue from other services

The Company also provides other services, mainly including photovoltaic engineering contracting. The Company identifies one performance obligation in the provision of services in the contract, and recognizes revenue when the Company satisfies the performance obligation upon acceptance by customers. For photovoltaic engineering contracting, the Company does not directly engage in the construction but rather serves as an intermediatory to connect the party awarding the contract with suitable contractors. Therefore, the Company presents the revenue from photovoltaic engineering contracting on a net basis as the Company acts as an agent.

 

EZGO TECHNOLOGIES LTD.

NOTES TO UNAUDITED INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(In U.S. dollars except for number of shares)

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

(j) Revenue recognition (continued)

The following table identifies the disaggregation of the Company's revenues from continuing operations for the six months ended March 31, 2024 and 2025, respectively:

Contract balance

Contract liabilities primarily consist of advances from customers.

Advances from customers amounted to $143,723 and $103,596 as of September 30, 2024 and March 31, 2025, respectively. Revenue included in the beginning balance of advances from customers and recognized during the six months ended March 31, 2024 and 2025 amounted to $209,083 and $57,737 respectively.

Timing of revenue recognition may differ from the timing of invoicing to customers. Accounts receivable is revenue recognized for amounts invoiced and/or prior to invoicing when the Company has satisfied its performance obligation and has unconditional right to the payment. The Company has no contract assets as of September 30, 2024 and March 31, 2025.

The Company applied 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 and the Company expects the benefit of those costs to be longer than one year.

(k) Share-based compensation

The Company applies ASC 718, Compensation—Stock Compensation ("ASC 718"), to account for all of 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 FVs.

The Company elected to recognize compensation expense using the straight-line method for all awards granted with graded vesting based on service conditions. The Company 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.

(l) Warrants

The Company accounts for the warrants issued in connection with equity-linked instruments under authoritative guidance on accounting from ASC 480, Distinguishing Liabilities from Equity and ASC 815, Derivatives and Hedging. The Company classifies warrants in its unaudited interim condensed consolidated balance sheet as an equity based on the nature and characteristics of each warrant issued. Accordingly, the Company evaluated and classified the warrant instrument under equity treatment at its assigned value.

 

EZGO TECHNOLOGIES LTD.

NOTES TO UNAUDITED INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(In U.S. dollars except for number of shares)

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

(m) 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 November 2023, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update ("ASU") 2023-07, Segment Reporting (Topic 280)- Improvements to Reportable Segment Disclosures ("ASU 2023-07"), which provides guidance on the enhanced disclosure of significant segment expenses that are regularly provided to the CODM and included within each reported measure of segment profit or loss, on an annual and interim basis. The guidance is effective for fiscal years beginning after December 15, 2023, and interim periods within fiscal years beginning after December 15, 2024. Adoption of this guidance should be applied retrospectively to all prior periods presented. Early adoption is permitted. The Company, an emerging growth company, does not expect to adopt this guidance early and does not expect the adoption of this ASU to have a material impact on its future consolidated financial statements.

In December 2023, the FASB issued ASU 2023-09, "Income Taxes (Topic 740): Improvements to Income Tax Disclosures", which requires disaggregated information about a reporting entity's effective tax rate reconciliation, as well as information related to income taxes paid to enhance the transparency and decision usefulness of income tax disclosures. The guidance is effective for annual periods beginning after December 15, 2024 on a prospective basis. Early adoption is permitted. The Company does not expect to adopt this guidance early and does not expect the adoption of this ASU to have a material impact on its future consolidated financial statements.

In March 2024, the FASB issued ASU No. 2024-02, Codification Improvements-Amendments to Remove References to the Concepts Statements ("ASU 2024-02"). The amendments in this Update affect a variety of Topics in the Codification. The amendments apply to all reporting entities within the scope of the affected accounting guidance. This update contains amendments to the Codification that remove references to various Concepts Statements. In most instances, the references are extraneous and not required to understand or apply the guidance. In other instances, the references were used in prior statements to provide guidance in certain topical areas. ASU 2024-02 is effective for public business entities for fiscal years beginning after December 15, 2024. For all other entities, the amendments are effective for fiscal years beginning after December 15, 2025. Early adoption is permitted for both interim and annual financial statements that have not yet been issued or made available for issuance. The Company does not expect to adopt this guidance early and does not expect the adoption of this ASU to have a material impact on its future consolidated financial statements.

In November 2024, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update ("ASU") 2024-03, Income Statement — Reporting Comprehensive Income — Expense Disaggregation Disclosures (Subtopic 220-40): Disaggregation of Income Statement Expenses ("ASU 2024-03") which requires detailed disclosures in the notes to financial statements disaggregating specific expense categories and certain other disclosures to provide enhanced transparency into the nature and function of expenses. The FASB further clarified the effective date in January 2025 with the issuance of ASU 2025-01, Income Statement — Reporting Comprehensive Income — Expense Disaggregation Disclosures (Subtopic 220-40): Clarifying the Effective Date ("ASU 2025-01"). ASU 2024-03 is effective for annual periods beginning after December 15, 2026, and interim periods within annual reporting periods beginning after December 15, 2027, with early adoption permitted. The requirements should be applied on a prospective basis while retrospective application is permitted. The Group does not expect to adopt this guidance early and does not expect the adoption of this ASU to have a material impact on its future consolidated financial statements.

In March 2025, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update 2025-02 "Liabilities (405): Amendments to SEC Paragraphs Pursuant to SEC Staff Accounting Bulletin No. 122" ("ASU 2025-02"), which amends the Accounting Standards Codification to remove the text of SEC Staff Accounting Bulletin ("SAB") 121 "Accounting for Obligations to Safeguard Crypto- Assets an Entity Holds for its Platform Users" as it has been rescinded by the issuance of SAB 122. ASU 2025-02 is effective immediately and is not expected to have an impact on the Group's financial statements.

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 CFS upon adoption. The Company does not discuss recent standards that are not anticipated to have an impact on or are unrelated to its CFS.

 

EZGO TECHNOLOGIES LTD.

NOTES TO UNAUDITED INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(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, for the transfer of 100% of the equity interests in and all assets in Changzhou Sixun Technology Co., Ltd. ("Changzhou Sixun") to Jiangsu New Energy, for RMB59,400,000 ($8,185,539). In this acquisition, Changzhou Sixun was set as a target company to hold 60% of the equity of Changzhou Higgs Intelligent Technologies Co., Ltd. ("Changzhou Higgs").

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 Company completed the valuations necessary to assess the FV of the acquired assets and liabilities with the assistance from an independent valuation firm, resulting from which the amounts of goodwill were determined and recognized as of the acquisition dates.

Goodwill arising from the acquisition of Changzhou Sixun

For six months ended March 31, 2024 and 2025, the Company recognized $1,362,044 and nil impairment loss of goodwill related to the acquisition of Changzhou Sixun, respectively. As of September 30, 2024 and March 31, 2025, the carrying amount of goodwill was $1,780,569 and $1,721,901, respectively. 

 

EZGO TECHNOLOGIES LTD.

NOTES TO UNAUDITED INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(In U.S. dollars except for number of shares)

4. ACCOUNTS RECEIVABLE, NET

As of September 30, 2024 and March 31, 2025, accounts receivable and allowance for credit losses consisted of the following:

Accounts receivable are considered overdue after 180 days, the general credit term the Company offers to customers. As of September 30, 2024 and March 31, 2025, the overdue accounts receivable, net of allowance for credit losses, ageing between 180 days and one year were $128,571 and $887,883, respectively.

The movement is the allowance for credit losses for the six months ended March 31, 2024 and 2025:

For the six months ended March 31, 2024 and 2025, the Company recorded credit losses of $78,788 and $30,926 from continuing operations and $946,578 and $1,590 from discontinued operation.

 

EZGO TECHNOLOGIES LTD.

NOTES TO UNAUDITED INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(In U.S. dollars except for number of shares)

5. INVESTMENTS

As of September 30, 2024 and March 31, 2025, investments consisted of the following:

 

The movement of the carrying amount of long-term investment was as follows for the six months ended March 31, 2024 and 2025:

For the six months ended March 31, 2025, equity method investments held by the Company individually have not met the significance criteria as defined under Rule 10-01(b)(1) of Regulation S-X.

 

EZGO TECHNOLOGIES LTD.

NOTES TO UNAUDITED INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(In U.S. dollars except for number of shares)

6. INVENTORIES, NET

As of September 30, 2024 and March 31, 2025, inventories and reserve of inventories consisted of the following:

 

The movement of provision for inventories was as follows for the six months ended March 31, 2024 and 2025:

For the six months ended March 31, 2024 and 2025, provisions for inventories of $99,138 and $30,507 were recorded respectively. $56,917 and $21,405 were charged against the provision balance due to subsequent sales of the inventories which were written down in the previous period for the six months ended March 31, 2024 and 2025, respectively.

 

EZGO TECHNOLOGIES LTD.

NOTES TO UNAUDITED INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(In U.S. dollars except for number of shares)

7. ADVANCES TO SUPPLIERS

As of September 30, 2024 and March 31, 2025, advances to suppliers consisted of the following:

8. PROPERY, PLANT AND EQUIPMENT, NET

As of September 30, 2024 and March 31, 2025, property, plant and equipment, net consisted of the following:

 

For the six months ended March 31, 2024 and 2025, depreciation expenses were $12,900 and $15,292, respectively.

9. OTHER NON-CURRENT ASSETS

As of September 30, 2024 and March 31, 2025, other non-current assets consisted of the following:

 

 

EZGO TECHNOLOGIES LTD.

NOTES TO UNAUDITED INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(In U.S. dollars except for number of shares)

10. BORROWINGS

As of September 30, 2024 and March 31, 2025, the bank borrowings were for working capital and capital expenditures. Borrowings consisted of the following:

 

 

 

EZGO TECHNOLOGIES LTD.

NOTES TO UNAUDITED INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(In U.S. dollars except for number of shares)

10. BORROWINGS (CONTINUED)

 

For the six months ended March 31, 2024 and 2025, the Company recorded interest expenses of $30,121 and $73,001, respectively. For the six months ended March 31, 2024 and 2025, $142,079 and $179,787 of interest expense from the long-term borrowings from Bank of Jiangnan was capitalized in the construction of Changzhou manufacturing plant respectively. of interest expense from the long-term borrowings from Bank of Jiangnan was capitalized in the construction of Changzhou manufacturing plant respectively.

 

EZGO TECHNOLOGIES LTD.

NOTES TO UNAUDITED INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(In U.S. dollars except for number of shares)

11. RELATED PARTY TRANSACTIONS AND BALANCES

The following is a list of related parties which the Company has transactions with during the six months ended March 31, 2024 and 2025:

Amounts due from related parties

As of September 30, 2024 and March 31, 2025, amounts due from related parties consisted of the following:

 

 

EZGO TECHNOLOGIES LTD.

NOTES TO UNAUDITED INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(In U.S. dollars except for number of shares)

11. RELATED PARTY TRANSACTIONS AND BALANCES (CONTINUED)

Amounts due to related parties

As of September 30, 2024 and March 31, 2025, amounts due to related parties consisted of the following:

 

 

EZGO TECHNOLOGIES LTD.

NOTES TO UNAUDITED INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(In U.S. dollars except for number of shares)

11. RELATED PARTY TRANSACTIONS AND BALANCES (CONTINUED)

Related party transactions

For the six months ended March 31, 2024 and 2025, the Company had the following material related party transactions:

 

EZGO TECHNOLOGIES LTD.

NOTES TO UNAUDITED INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(In U.S. dollars except for number of shares)

12. DISCONTINUED OPERATIONS 

Due to the declining performance of sales of e-bicycle business, the Company determined to dispose the variable interest entity, Jiangsu EZGO Electronic Technologies Co., Ltd. ("Jiangsu EZGO"), and its subsidiaries. On March 30, 2025, the Company's Board of Directors approved this disposal of Jiangsu EZGO and its subsidiaries. The disposal is expected to be executed through a sale transaction and is anticipated to be completed within 12 months from the date of approval by the Board of Directors. The VIE and subsidiaries mainly operated in sales of e-bicycles business in PRC. The disposal of the sales of e-bicycles business represented strategic shifts of the Company that had a major impact on the Company's financial results, and met the held-for-sale criteria, which trigger discontinued operations accounting in accordance with ASC 205-20-45. Therefore, the historical financial results of the sales of e-bicycles business were classified as discontinued operation and the related assets and liabilities associated with the discontinued operations of the prior year were reclassified as assets/liabilities held for sale to provide comparable financial information.

The following tables set forth the assets, liabilities, results of operations and cash flows of the discontinued operations, which were included in the Company's unaudited condensed consolidated financial statements. 

 

EZGO TECHNOLOGIES LTD.

NOTES TO UNAUDITED INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(In U.S. dollars except for number of shares)

12. DISCONTINUED OPERATIONS (CONTINUED)

 

EZGO TECHNOLOGIES LTD.

NOTES TO UNAUDITED INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(In U.S. dollars except for number of shares)

13. 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 HK 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. Under the two-tiered profits tax rates regime, the first 2 million Hong Kong Dollar ("HKD") of profits of the qualifying group entity is taxed at 8.25%, and profits above HKD 2 million are taxed at 16.5%. The Company's HK subsidiaries did not have assessable profits derived in Hong Kong for the six months ended March 31, 2024 and 2025. Therefore, no HK profit tax was provided for the six months ended March 31, 2024 and 2025.

PRC

Under the PRC Enterprise Income Tax Law (the "EIT Law"), the standard enterprise income tax rate for domestic enterprises and foreign invested enterprises is 25%. The EIT Law also provides that an enterprise established under the laws of a foreign country or region but whose "de facto management body" is located in the PRC be treated as a resident enterprise for PRC tax purposes and consequently be subject to the PRC income tax at the rate of 25% on its global income. The Implementing Rules of the EIT Law merely define the location of the "de facto management body "as" the place where the exercising, in substance, of the overall management and control of the production and business operation, personnel, accounting, property, of a non-PRC company is located." Based on a review of surrounding facts and circumstances, the Company does not believe that it is likely that its operations outside of the PRC should be considered as a resident enterprise for PRC tax purposes for six months ended March 31, 2024 and 2025.

In accordance with the implementation rules of EIT Laws, a qualified "High and New Technology Enterprise" ("HNTE") is eligible for a preferential tax rate of 15%. The HNTE certificate is effective for a period of three years. An entity could re-apply for the HNTE certificate when the prior certificate expires. Changzhou Higgs obtained its HNTE status in October 2022 and will enjoy the preferential tax rate for three years through June 2025.

According to Caishui [2021] No.13, announcement of the Ministry of Finance and the State Taxation Administration, which became effective from January 1, 2021, an enterprise engaged in manufacturing business and whose main operating revenue accounts for more than 50% of the total revenue, is entitled to claim an additional tax deduction amounting to 100% of the qualified R&D expenses incurred in determining its tax assessable profits for that year.

For qualified small and low-profit enterprises, from January 1, 2022 to December 31, 2022, 12.5% of the first RMB1 million of the assessable profit before tax is subject to preferential tax rate of 20% and the 25% of the assessable profit before tax exceeding RMB1 million but not exceeding RMB3 million is subject to preferential tax rate of 20%. From January 1, 2023 to December 31, 2027, 25% of the first RMB3 million of the assessable profit before tax is subject to the tax rate of 20%.

The components of the income tax benefit from continuing operations are:

 

EZGO TECHNOLOGIES LTD.

NOTES TO UNAUDITED INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(In U.S. dollars except for number of shares)

13. INCOME TAXES (CONTINUED)

The reconciliations of the statutory income tax rate and the Company's effective income tax rate are as follows:

The current PRC EIT Law imposes a 10% withholding income tax for dividends distributed by foreign invested enterprises to their immediate holding companies outside the PRC. A lower withholding tax rate will be applied if there is a tax treaty arrangement between the PRC and the jurisdiction of the foreign holding company. Distributions to holding companies in HK that satisfy certain requirements specified by the PRC tax authorities, for example, will be subject to a 5% withholding tax rate.

As of September 30, 2024 and March 31, 2025, the Company had not recorded any withholding tax on the retained earnings of its foreign invested enterprises in the PRC, since the Company intends to reinvest its earnings to further expand its business in PRC, and its foreign invested enterprises do not intend to declare dividends to their immediate foreign holding companies.

For the six months ended March 31, 2024 and 2025, 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 3% and -2% for the six months ended March 31, 2024 and 2025 respectively.

The tax effect of temporary difference under ASC Topic 740 "Accounting for Income Taxes" that gives rise to deferred tax asset and liability as of September 30, 2024 and March 31, 2025 was as follows:

 

EZGO TECHNOLOGIES LTD.

NOTES TO UNAUDITED INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(In U.S. dollars except for number of shares)

 

13. INCOME TAXES (CONTINUED)

For the six months ended March 31, 2024 and 2025, the Company accrued valuation allowance for deferred tax assets of nil and nil, respectively, for which the Company concluded it is more likely than not that these net operating losses would not be utilized in the future. This assessment considers, among other matters, the nature, frequency and severity of recent losses, forecasts of future profitability, the duration of statutory carry forward periods, the Company's experience with tax attributes expiring unused and tax planning alternatives. Valuation allowances have been established for deferred tax assets based on a more-likely-than-not threshold.

Accounting for uncertainty tax position

The Company did not identify significant unrecognized tax benefits for the six months ended March 31 2024 and 2025. The Company did not incur any interest and 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 2019 to 2024 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.

14. 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. As of September 30, 2024, there was no unvested share under the EZGO 2022 plan. Please refer to the Note 19: Share-based Compensation in the Company's Annual Report on Form 20-F for the year ended September 30, 2024.

EZGO Technologies Ltd. 2025 Equity Incentive Plan (the "EZGO 2025 Plan")

On February 18, 2025, the Board of Directors of EZGO approved the EZGO 2025 Plan. On February 18, 2025, 500,000 restricted shares with 12-month service condition were granted to management under the EZGO 2025 plan, which shall vest after first anniversary of date of grant.

The estimated FV of restricted shares granted was the closing price of the Company's ordinary shares traded in the Stock Exchange on grant date.

A summary of activities of the restricted shares for the six months ended March 31, 2025 is as follow:

As of March 31, 2025, there was unrecognized share-based compensation expenses of $233,750 in relation to the restricted shares granted which is expected to be recognized over a weighted average period of 0.89 years. Share-based compensation expenses of $360,737 and $21,250 were recognized in relation to the restricted shares for the six months ended March 31, 2024 and 2025, which were all allocated to general and administrative expenses.

 

EZGO TECHNOLOGIES LTD.

NOTES TO UNAUDITED INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(In U.S. dollars except for number of shares)

 

15. EQUITY

(a) Ordinary shares

The Company was established under the laws of the BVI on January 24, 2019.

On April 12, 2024, the Company effected a reverse share split (the "Reverse Share Split") of the Company's ordinary shares at a ratio of 1-for-40 so that every forty shares are combined into one share (with the fractional shares rounding off to the nearest whole share). All numbers of shares and per share data presented in the unaudited interim condensed consolidated financial statements and related notes have been retroactively restated to reflect the reverse share split stated above.

(b) Statutory reserve and restricted net assets

The Company's PRC subsidiaries are required to reserve 10% of their net profit after income tax, as determined in accordance with the PRC accounting rules and regulations. Appropriation to the statutory reserve by the Company is based on profit arrived at under PRC accounting standards for business enterprises for each year. The profit arrived at must be set off against any accumulated losses sustained by the Company in prior years, before allocation is made to the statutory reserve. Appropriation to the statutory reserve must be made before distribution of dividends to shareholders. The appropriation is required until the statutory reserve reaches 50% of the registered capital. This statutory reserve is not distributable in the form of cash dividends.

Relevant PRC statutory laws and regulations permit the payment of dividends by the Company's PRC 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 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, were $28,659,554 and $33,418,613 as of September 30, 2024 and March 31, 2025, respectively.

(c) Warrants

In September 2023, 8,498,125 common warrants were granted to investors in the Company's public offering with each common warrant to purchase four exchange warrants, by which the investors can purchase up to 33,992,500 ordinary shares at $1.13 per share. In the same month, the investors exercised 26,093,088 exchange warrants via cashless option to receive 26,093,088 ordinary shares for free. In April 2024, the investors exercised 197,941 exchange warrants via cashless option to receive 134,000 ordinary shares.

On April 29, 2024, the Company was named as defendant in a lawsuit in the Supreme Court for the State of New York by Empery Asset Master, Ltd., Empery Tax Efficient, LP, and Empery Tax Efficient III, LP (collectively, the "Plaintiffs"), relating to certain purported notices of exercise and the number of warrant shares issuable under certain exchange warrants (the "Exchange Warrants") issued to the Plaintiffs in September 2023. On October 29, 2024, the Company entered into a Settlement Agreement and Release (the "Settlement Agreement") and certain Side Letter Agreements (the "Side Letter Agreements") with the Plaintiffs, which resolved and settled the above referenced lawsuit between the Company and Plaintiffs. Pursuant to the Settlement Agreement and the Side Letter Agreements, the Plaintiffs and the Company agree and acknowledge that the Warrant Shares shall be reduced to 3,000,000 Warrant Shares. As of March 31, 2025, the Plaintiffs exercised 3,000,000 exchange warrants via cashless option to receive 3,000,000 ordinary shares.

 

EZGO TECHNOLOGIES LTD.

NOTES TO UNAUDITED INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(In U.S. dollars except for number of shares)

15. EQUITY (CONTINUED)

As of March 31, 2025, there were no Exchange Warrant granted to investors left unexercised.

Following table summarizes the movement of warrant activities during the six months ended March 31, 2024 and 2025, respectively:

 

(c) Warrants

 

(d) Non-controlling interests

As of March 31, 2025, the Company's non-controlling interests included a 19.13% equity interest of Hengmao, 49% equity interest of Cenbird E-Motorcycle, which was acquired on September 10, 2019, and 40% equity interest of Changzhou Higgs, which was acquired on January 25, 2023.

 

EZGO TECHNOLOGIES LTD.

NOTES TO UNAUDITED INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(In U.S. dollars except for number of shares)

16. COMMITMENTS AND CONTINGENCIES

Commitments

On May 25, 2023, the Company entered into a construction contract of RMB64 million (approximately $9 million) for a factory under construction for the production of lithium batteries. As of March 31, 2025, the Company had paid approximately RMB64 million (approximately $9 million).

In May 2023, the Company entered into procurement agreements for production equipment, scheduled to be installed and operational following the completion of the ongoing construction project. As stipulated in the contracts, is obligated to make an upfront payment of 60% of the total purchase price, the residual amount approximately $5 million to be settled upon the delivery and inspection of the production equipment. As of March 31, 2025, the Company had paid approximately $7 million.

Legal Proceedings

From time to time, the Company may be subject to legal proceedings, investigations and claims incidental to the conduct of business. The Company currently have two contract disputes with our 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 RMB958,805 ($132,127) and seeking the payment of the contractual payment and interest on the contractual payment. The appellate court rendered its judgment on January 28, 2021, pursuant to which Hengmao Power Battery shall repay RMB958,805 ($132,127) and accrued interest. The Company accrued payable of default contractual payment and interest as of March 31, 2025.

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 RMB1,072,560 ($147,803) and seeking the payment of the contractual payment. However, the Company plans to defend the case. The appellate court rendered its judgment on January 27, 2021, pursuant to which Hengmao Power Battery shall repay RMB1,072,560 ($147,803), accrued interest and attorney's fees. The Company accrued payable of default contractual payment and interest as of March 31, 2025.

Other than disclosed above, the Company are not a party to, nor are we aware of, any legal proceedings, investigations or claims which, in the opinion of our management, are likely to have a material adverse effect on our business, financial condition or results of operations.

 

EZGO TECHNOLOGIES LTD.

NOTES TO UNAUDITED INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(In U.S. dollars except for number of shares)

17. SEGMENT REPORTING

ASC Topic 280, "Segment Reporting," establishes standards for companies to report in their financial statement information about operating segments, products, services, geographic areas, and major customers. Operating segments are defined as components of an enterprise that engage in business activities from which it may recognize revenues and incur expenses, and for which separate financial information is available that is regularly evaluated by the Company's chief operating decision maker, or group, in deciding how to allocate resources and assess performance.

The Company's chief operating decision maker ("CODM") has been identified as the Chief Financial Officer. The Company's CODM, 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.

Historically, the Company determined it operates in three segments: (1) sales of battery cells and packs, (2) sales of electronic control system and (3) others, which mainly included the sales of second-hand machinery, the provision of maintenance services and photovoltaic engineering contracting.

The following tables present a summary of each reportable segment's revenue and income from continuing operations—excluding the e-bicycle sales segment, which is disclosed as a discontinued operation for the six months ended March 31, 2024, and 2025:

 

EZGO TECHNOLOGIES LTD.

NOTES TO UNAUDITED INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(In U.S. dollars except for number of shares)

17. SEGMENT REPORTING (CONTINUED)

The following table presents the reconciliation from reportable segment income to the consolidated income from continuing operations before income taxes for the six months ended March 31, 2024 and 2025:

 

EZGO TECHNOLOGIES LTD.

NOTES TO UNAUDITED INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(In U.S. dollars except for number of shares)

18. CONCENTRATIONS

Concentrations of credit risk

As of September 30, 2024 and March 31, 2025 cash, cash equivalents and restricted cash balances in the PRC was $4,404,100 and $372,562 respectively, which were primarily deposited in financial institutions located in PRC, and each bank account is insured by the government authority with the maximum limit of RMB500,000 ($68,902). To limit exposure to credit risk relating to deposits, the Company primarily place cash and cash equivalent deposits with large financial institutions in PRC which management believes are of high credit quality and management also continually monitors the financial institutions' credit worthiness.

Concentrations of customers

The following table sets forth information as to each customer that accounted for 10% or more of total accounts receivable as of September 30, 2024 and March 31, 2025.

 

The following table sets forth information as to each customer that accounted for 10% or more of total advances from customers as of September 30, 2024 and March 31, 2025.

 

EZGO TECHNOLOGIES LTD.

NOTES TO UNAUDITED INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(In U.S. dollars except for number of shares)

18. CONCENTRATIONS (CONTINUED)

The following table sets forth information as to each customer that accounted for 10% or more of total revenues for the six months ended March 31, 2024 and 2025.

Concentrations of suppliers

The following table sets forth information as to each supplier that accounted for 10% or more of total accounts payable as of September 30, 2024 and March 31, 2025.

 

EZGO TECHNOLOGIES LTD.

NOTES TO UNAUDITED INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(In U.S. dollars except for number of shares)

18. CONCENTRATIONS (CONTINUED)

The following table sets forth information as to each third party that accounted for 10% or more of total advances to suppliers as of September 30, 2024 and March 31, 2025.

The following table sets forth information as to each supplier that accounted for 10% or more of total purchases for the six months ended March 31, 2024 and 2025.

 

EZGO TECHNOLOGIES LTD.

NOTES TO UNAUDITED INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(In U.S. dollars except for number of shares)

19. SUBSEQUENT EVENTS 

On December 30, 2024, the Company received notification from the Nasdaq Stock Market LLC ("Nasdaq") notifying the Company that the minimum closing bid price per share for its ordinary shares, par value US$0.04 per share ("Ordinary Shares") was below $1.00 for a period of 30 consecutive business days and that the Company did not meet the minimum bid price requirement set forth in Nasdaq Listing Rule 5550(a)(2). The Company has a compliance period of one hundred eighty (180) calendar days, or until June 30, 2025 (the "Compliance Period"), to regain compliance with Nasdaq's minimum bid price requirement. On June 10, 2025, the Company requested an extension of an additional 180 days.

On March 14, 2025, Changzhou EZGO and Jiangsu Yiwo Investment Co., Ltd. ("Jiangsu Yiwo") entered into an Equity Investment Agreement, pursuant to which Jiangsu Yiwo was approved to make a capital contribution of $3,000,000 to Changzhou EZGO. With the completion of the contribution on April 7, 2025, Jiangsu Yiwo held a 4.762% ownership interest in Changzhou EZGO 's total issued share capital.

The Company performed an evaluation of subsequent events through July 1, 2025, which was the date of the issuance of the unaudited interim condensed consolidated financial statements , and determined there were no other events that would have required adjustment or disclosure in the unaudited interim condensed consolidated financial statements.

About EZGO Technologies Ltd.

EZGO's vision is to build a leading short-distance transportation solution provider and intelligent manufacturer in China. Leveraging an Internet of Things (IoT) management platform, EZGO has established a business model centered on the sale of battery packs and electronic control system. EZGO also conducts the design and manufacturing of electronic control system to deliver tailored products in accordance with customer requirements. 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 document 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 RMB7.2567 to US$1.00 for the items in balance sheets, the exchange rate in effect as of March 31, 2025, as set forth in the H.10 Statistical release of the Board of Governors of the Federal Reserve System. All translations from RMB to US$ were made at the rate of RMB7.2308 to US$1.00 for the items in statements of operations and comprehensive loss, which is the average exchange rate for the six months ended March 31, 2025, according to the H.10 Statistical release of the Board of Governors of the Federal Reserve System. The Company makes no representation that the RMB or US$ amounts referred could be converted into US$ or RMB, as the case may be, at any particular rate or at all.

Safe Harbor Statement

This document 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 document. 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.

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SOURCE EZGO Technologies Ltd.