EOS, INC. The following discussion and analysis of the results of operations and financial condition ofEOS Inc. and its subsidiary("EOS" or the "Company") as ofSeptember 30, 2022 for the nine months endedSeptember 30, 2022 and 2021 should be read in conjunction with our unaudited financial statements and the notes to those unaudited financial statements that are included elsewhere in this Quarterly Report on Form 10-Q. References in this Management's Discussion and Analysis of Financial Condition and Results of Operations to "us", "we", "our" and similar terms refer to EOS. This Quarterly Report contains forward-looking statements as that term is defined in the federal securities laws. The events described in forward-looking statements contained in this Quarterly Report may not occur. Generally, these statements relate to business plans or strategies, projected or anticipated benefits or other consequences of our plans or strategies, projected or anticipated benefits from acquisitions to be made by us, or projections involving anticipated revenues, earnings or other aspects of our operating results. The words "may," "will," "expect," "believe," "anticipate," "project," "plan," "intend," "estimate," and "continue," and their opposites and similar expressions, are intended to identify forward-looking statements. We caution you that these statements are not guarantees of future performance or events and are subject to a number of uncertainties, risks and other influences, many of which are beyond our control, which may influence the accuracy of the statements and the projections upon which the statements are based.
Our actual results, performance and achievements could differ materially from those expressed or implied in these forward-looking statements. Except as required by federal securities laws, we undertake no obligation to publicly update or revise any forward-looking statements, whether from new information, future events or otherwise.
Note on COVID- 19
The COVID-19 pandemic is a highly fluid situation and it is not currently possible for us to reasonably estimate the impact it may have on our financial and operating results. We will continue to evaluate the impact of the COVID-19 pandemic on our business as we learn more and the impact of COVID-19 on our industry becomes clearer. We are complying health guidelines regarding safety procedures, including, but are not limited to, social distancing, remote working, and teleconferencing. The extent of the future impact of the COVID-19 pandemic on our business is uncertain and difficult to predict. Adverse global economic and market conditions as a result of COVID-19 could also adversely affect our business. If the pandemic continues to cause significant negative impacts to economic conditions, our results of operations, financial condition and liquidity could be adversely impacted.
Overview
On or about
Results of Operation
The following presents the consolidated result of the Company for the three
months ended
Net sales Net sales were$300 ,005 for three months endedSeptember 30, 2022 , representing a decrease of$249,237 or 45%, as compared to$549,242 for the three months endedSeptember 30, 2021 . The decrease was primarily due to the impact of the epidemic, the sales revenue of water purifier machine decreased compared with the prior period. 3 Cost of sales
Cost of sales was
Gross profit
Gross profit was
Selling, general and administrative expenses
Selling, general and administrative expenses consist primarily of office rent,
salary and related costs for personnel and facilities, and professional service
fees. Selling, general and administrative expenses were
Income (loss) from operations
Loss from operations was
Other income (loss)
Other loss was$1,614 for the three months endedSeptember 30, 2022 , reflecting a decrease of$39,410 , or 96%, compared to other loss of$41,024 for the three monthsSeptember 30, 2021 . The decrease was mainly attributable to the
no investment disposal income in the current period
Net income (loss)
As a result of the above factors, our net loss was
Results of Operation
The following presents the consolidated result of the Company for the nine
months ended
Net sales Net sales were$432,190 for nine months endedSeptember 30, 2022 , representing a decrease of$453,830 , or 51%, as compared to$886,020 for the nine months endedSeptember 30, 2021 . The decrease was primarily due to the impact of the epidemic, the sales revenue of water purifier machine decreased compared with the prior period.
Cost of sales
Cost of sales was
Gross profit
Gross profit was
Selling, general and administrative expenses
Selling, general and administrative expenses consist primarily of office rent,
salary and related costs for personnel and facilities, and professional service
fees. Selling, general and administrative expenses were
Income (loss) from operations
Loss from operations was
Other income (loss)
Other income was
no investment disposal income in the current period.
Net loss
As a result of the above factors, our net loss was
4
Liquidity and Capital Resources
Cash and cash equivalents were$17 ,575 atSeptember 30, 2022 and$24,141 atDecember 31, 2021 . Our total current assets were$1,637,766 atSeptember 30, 2022 , as compared to$2,037,901 atDecember 31, 2021 . Our total current liabilities were$1,102 ,062 atSeptember 30, 2022 , as compared to$792,118 atDecember 31, 2021 .
We had a working capital of
Net cash used in operating activities was
Net cash used in investing activities was
Net cash provided by financing activities was
As a result of the above factors, net decrease in cash and cash equivalents were
Critical Accounting Policies
Principles of Consolidation
The accompanying unaudited consolidated financial statements, including the
accounts of
The functional currency of the subsidiaries in
5 Use of Estimates
The preparation of financial statements in conformity with generally accepted
accounting principles in
Cash and Cash Equivalents
Cash and cash equivalents include cash and all highly liquid instruments with original maturities of three months or less.
Accounts Receivable
Accounts receivable are stated at carrying value less estimates made for doubtful receivables. An allowance for impairment of trade receivables is established if the collection of a receivable becomes doubtful. Such receivable becomes doubtful 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. Significant financial difficulties of the debtor, probability that the debtor will enter into bankruptcy or financial reorganization, and default or delinquency in payments are considered indicators that the receivable is impaired. The amount of the allowance is the difference between the asset's carrying amount and the present value of estimated future cash flows, discounted at the original effective interest rate. An impairment loss is recognized in the statement of income, as are subsequent recoveries of previous impairments.
Inventory
Inventory is stated at the lower of cost and net realizable value. Net realizable value (NRV) is defined as estimated selling prices less costs of completion, disposal, and transportation. Inventory consists mainly of finished goods held for resale. Cost is determined on a weighted average cost method. The Company periodically reviews the age and turnover of its inventory to determine whether any inventory has become obsolete or has declined in value, and incurs a charge to operations for known and anticipated inventory obsolescence.
Property and Equipment
Property and equipment is carried at cost net of accumulated depreciation. Repairs and maintenance are expensed as incurred. Expenditures that improve the functionality of the related asset or extend the useful life are capitalized. When property and equipment is retired or otherwise disposed of, the related gain or loss is included in operating income. Leasehold improvements are depreciated on the straight-line method over the shorter of the remaining lease term or estimated useful life of the asset. Depreciation is calculated on the straight-line method, including property and equipment under capital leases, generally is five years. Depreciation expense is$898 and$1,677 for the nine months ended S eptem ber 30, 2022 and 2021, respectively. 6 Revenue Recognition Pursuant to ASC 606, the Company recognizes revenue when its customer obtains control of promised goods or services, in an amount that reflects the consideration that the Company expects to receive in exchange for those goods or services. To determine revenue recognition for arrangements that the Company determines is within the scope of ASC 606, the Company performs the following five steps: (i) identify the contract(s) with a customer; (ii) identify the performance obligations in the contract; (iii) determine the transaction price; (iv) allocate the transaction price to the performance obligations in the contract; and (v) recognize revenue when (or as) the Company satisfies a performance obligation. The Company only applies the five-step model to contracts when it is probable that the Company will collect the consideration the Company is entitled to in exchange for the goods or services the Company transfers to the customers. At inception of the contract, once the contract is determined to be within the scope of ASC 606, the Company assesses the goods or services promised within each contract, determines those that are performance obligations, and assesses whether each promised good or service is distinct. The Company then recognizes as revenue the amount of the transaction price that is allocated to the respective performance obligation when (or as) the performance obligation is satisfied.
Merchandise sales: The Company recognizes sales revenues from merchandise sales when customers obtain control of the Company's products, which typically occurs upon delivery to customer. Merchandise sales revenues are recorded at the sales price, or "transaction price".
Software sales: The Company does not develop the software products on its own. When the Company receives a purchase order from the customer, the Company would engage with the third-party software company to customize and develop the software products. The Company recognizes software revenues upon completion of the installation and testing, and transfer the control of the software products to the customer. Software revenues are recorded at the fixed sales price, or "transaction price", pursuant to the sales contracts. The Company may also charge the customer maintenance service fees on a straight-line basis over the service period pursuant to the sales contract. The Company concluded that the performance obligation for the maintenance service is distinct. Therefore, such maintenance service revenue can be separated from other elements in the arrangement.
Trade discount and allowances: The Company generally does not provide invoice discounts on product sales to its customers for prompt payment.
Product returns: The Company generally does not provide customers with the right to return a product for a full or partial refund, a credit, or an exchange for another product.
To date, product allowance and returns have been minimal and, based on its experience, the Company believes that returns of its products will continue to be minimal.
7
The following tables provide details of revenue by major products and by geography.
Revenue by Major Products For the nine months endedSeptember 30, 2022 : Water purifier machine$ 11,873 Automobile carbon reduction machine 21,665 Nutrition supplement 110,355 Software 285,920 Other materials 2,377 Total$ 432,190 For the nine months endedSeptember 30, 2021 : Water purifier machine$ 886,020 Automobile carbon reduction machine - Nutrition supplement - Software - Total$ 886,020 Revenue by Geography For the nine months endedSeptember 30, 2022 :Asia Pacific $ 432,190 Total$ 432,190 For the nine months endedSeptember 30, 2021 :Asia Pacific $ 886,020 Total$ 886,020 8 Advertising Costs
Advertising costs are expensed at the time such advertising commences.
Advertising expenses were
Post-retirement and Post-employment Benefits
The Company's subsidiaries in
Fair Value Measurements
FASB ASC 820, "Fair Value Measurements" defines fair value for certain financial and nonfinancial assets and liabilities that are recorded at fair value, establishes a framework for measuring fair value and expands disclosures about fair value measurements. It requires that an entity measure its financial instruments to base fair value on exit price, maximize the use of observable units and minimize the use of unobservable inputs to determine the exit price. It establishes a hierarchy which prioritizes the inputs to valuation techniques used to measure fair value. This hierarchy increases the consistency and comparability of fair value measurements and related disclosures by maximizing the use of observable inputs and minimizing the use of unobservable inputs by requiring that observable inputs be used when available. Observable inputs are inputs that reflect the assumptions market participants would use in pricing the assets or liabilities based on market data obtained from sources independent of the Company. Unobservable inputs are inputs that reflect the Company's own assumptions about the assumptions market participants would use in pricing the asset or liability developed based on the best information available in the circumstances. The hierarchy prioritizes the inputs into three broad levels based on the reliability of the inputs as follows:
9
¨ Level 1 - Inputs are quoted prices in active markets for identical assets or
liabilities that the Company has the ability to access at the measurement date. Valuation of these instruments does not require a high degree of judgment as the valuations are based on quoted prices in active markets that are readily and regularly available.
¨ Level 2 - Inputs other than quoted prices in active markets that are either
directly or indirectly observable as of the measurement date, such as quoted prices for similar assets or liabilities; quoted prices in markets that are not active; or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities.
¨ Level 3 - Valuations based on inputs that are unobservable and not corroborated
by market data. The fair value for such assets and liabilities is generally determined using pricing models, discounted cash flow methodologies, or similar techniques that incorporate the assumptions a market participant would use in pricing the asset or liability.
The carrying values of certain assets and liabilities of the Company, such as cash and cash equivalents, accounts receivable, inventory, advance to suppliers, prepaid expenses, accounts payable, accrued expenses, and due to shareholders, approximate fair value because of to their relatively short maturities.
Income Taxes
The Company accounts for income taxes in accordance with ASC 740, Income Taxes, which requires that the Company recognize deferred tax liabilities and assets based on the differences between the financial statement carrying amounts and the tax basis of assets and liabilities, using enacted tax rates in effect in the years the differences are expected to reverse. Deferred income tax benefit (expense) results from the change in net deferred tax assets or deferred tax liabilities. A valuation allowance is recorded when, in the opinion of management, it is more likely than not that some or all of any deferred tax assets will not be realized.
Concentration of Credit Risk
Cash and cash equivalents : The Company's financial instruments that are exposed to concentrations of credit risk consist primarily of cash and cash equivalents. The Company places its cash and temporary cash investments in high quality credit institutions inTaiwan , but these investments may be in excess of the insurance limits ofTaiwan Central Deposit Insurance Corporation (the "TCDIC"). The Company does not enter into financial instruments for hedging, trading or speculative purposes. Concentration of credit risk with respect to trade and notes receivables is limited due to the wide variety of customers and markets in which the Company transacts business, as well as their dispersion across many geographical areas. As ofSeptember 30, 2022 , the Company had approximately$0 in excess of TCDIC insured limits. The Company has not experienced any losses in such accounts.
Customers
: The Company performs ongoing credit evaluations of its customers' financial condition and generally requires no collateral.
For the nine months endedSeptember 30, 2022 , three customers accounted for more than 10% of the Company's total revenues, representing approximately 95% of its total revenues, and 97% of accounts receivable in aggregate atSeptember 30, 2022 . Net sales Accounts for the nine receivable months ended balance as of September 30, September 30, Customer 2022 2022 A$ 69,268 $ 295,699 B$ 271,332 $ 36,373 C$ 71,867 $ 54,403 10 For the nine months endedSeptember 30, 2021 , one customer accounted for more than 10% of the Company's total revenues, representing approximately 100% of its total revenues, and 100% of accounts receivable in aggregate atSeptember 30, 2021 . Net sales for the nine Accounts receivable months ended balance as of September 30, September 30, Customer 2021 2021 A$ 886,020 $ 243,933 Suppliers
: The Company's inventory is purchased from various suppliers.
For the nine months ended
Net purchase Accounts
for the nine payable
months ended balance
as of
September 30, September 30,
Supplier 2022 2022
A $ - $ -
B $ 106,185 $ -
C $ - $ -
D $ 162,845 $ 1,636
For the nine months ended
Net purchase Accounts
for the nine payable
months ended balance
as of
September 30, September 30,
Supplier 2021 2021
A $ - $ -
B $ - $ -
C $ - $ -
D $ 12,930 $ -
E $ 71,712 $ -
F $ 13,189 $ -
Foreign-currency Transactions
Foreign-currency transactions are recorded in New Taiwan dollars ("NTD") and Renminbi ("RMB") at the rates of exchange in effect when the transactions occur. Gains or losses resulting from the application of different foreign exchange rates when cash in foreign currency is converted into New Taiwan dollars and Renminbi, or when foreign-currency receivables or payables are settled, are credited or charged to income in the year of conversion or settlement. On the balance sheet dates, the balances of foreign-currency assets and liabilities are restated at the prevailing exchange rates and the resulting differences are charged to current income except for those foreign currencies denominated investments in shares of stock where such differences are accounted for as translation adjustments under stockholders' equity.
11 Translation Adjustment
The accounts of the Company's subsidiaries were maintained, and their financial
statements were expressed in New
Comprehensive Income (loss)
Comprehensive income (loss) includes accumulated foreign currency translation gains and losses. The Company has reported the components of comprehensive income (loss) on its consolidated statements of operations and other comprehensive income (loss).
Recent Accounting Pronouncements
InJune 2016 , the FASB issued ASU 2016-13, "Financial Instruments - Credit Losses (Topic 326) - Measurement of Credit Losses on Financial Instruments." This pronouncement, along with subsequent ASUs issued to clarify provisions of ASU 2016-13, changes the impairment model for most financial assets and will require the use of an "expected loss" model for instruments measured at amortized cost. Under this model, entities will be required to estimate the lifetime expected credit loss on such instruments and record an allowance to offset the amortized cost basis of the financial asset, resulting in a net presentation of the amount expected to be collected on the financial asset. In developing the estimate for lifetime expected credit loss, entities must incorporate historical experience, current conditions, and reasonable and supportable forecasts. This pronouncement is effective for fiscal years, and for interim periods within those fiscal years, beginning afterDecember 15, 2019 . OnNovember 19, 2019 , the FASB issued ASU No. 2019-10, Financial Instruments-Credit Losses (Topic 326), finalized various effective date delays for private companies, not-for-profit organizations, and certain smaller reporting companies applying the credit losses (CECL), the revised effective date isJanuary 2023 .
© Edgar Online, source
