Item 7. Management’s Discussion and Analysis
Item 7. Management’s Discussion and
Analysis of Financial Condition and Results of Operations
The following discussion
and analysis of our results of operations and financial condition should be read together with our consolidated financial statements
and the notes thereto and other financial information, which are included elsewhere in this Report. Our financial statements have been
prepared in accordance with U.S. GAAP. In addition, our financial statements and the financial information included in this Report reflect
our organizational transactions and have been prepared as if our current corporate structure had been in place throughout the relevant
periods.
Overview
We were incorporated in the
State of Delaware on January 7, 2019. We are a travel service provider. We currently provide car services to individual and group travelers.
We currently offer carpooling, airport pick-up and drop-off, and personal driver services for travelers between Guangdong Province and
Hong Kong. We collaborate with car fleet companies and charge a service fee by matching the traveler and the driver. Redefining the user
experience, we aim to provide our users with comprehensive and convenient service offerings and become a one-stop travel booking resource
for travelers. While network scale is important, we recognize that transportation happens locally. We currently operate in two markets
– Guangdong Province and Hong Kong and plan to expand our offering in more oversea markets.
Transfers of Cash to and from Our Subsidiaries
Pony Group Inc is a holding
company incorporated in Delaware with no material operations of its own, and we conduct our business through our indirectly wholly-owned
subsidiaries, Pony HK, in Hong Kong and Universe Travel, in Shenzhen. We currently do not rely on dividends and other distributions on
equity to be paid by our Hong Kong or Shenzhen subsidiaries to fund our cash and financing requirements, including the funds necessary
to pay dividends and other cash distributions to our stockholders, to service any debt we may incur and to pay our operating expenses.
Currently, substantially all of our operations are in Hong Kong from Pony HK and in Shenzhen from Universe Travel. Pony HK is the parent
of a wholly-owned subsidiary, Universe Travel Culture & Technology Ltd., that is incorporated in the PRC. We do not intend to set
up any subsidiary or enter into any contractual arrangements to establish a VIE structure with any entity in China. Hong Kong is a special
administrative region of the PRC and the basic policies of the PRC regarding Hong Kong are reflected in the Basic Law of the Hong Kong
Special Administrative Region of the People’s Republic of China (the “Basic Law”), providing Hong Kong with a high
degree of autonomy and executive, legislative and independent judicial powers, including that of final adjudication under the principle
of “one country, two systems”. The laws and regulations of the PRC do not currently have any material impact on any future
transfer of cash either from us to Pony HK or from Pony HK to us and the investors in the U.S. In addition, there are no restrictions
or limitations under the laws of Hong Kong imposed on the conversion of Hong Kong dollar or the Chinese Yuan into foreign currencies
and the remittance of currencies out of Hong Kong or across borders and to U.S investors.
We are permitted under the
Delaware law to provide funding to our subsidiaries, including Pony HK and Universe Travel, through loans or capital contributions without
restrictions on the amount of the funds. There are no significant restrictions or limitations on our ability to distribute earnings from
our businesses, including our subsidiaries, to the U.S. investors. Specifically, under PRC laws and regulations, Universe Travel is a
wholly foreign-owned enterprise in China. As such, Universe Travel may pay dividends only out of its accumulated after-tax profits as
determined in accordance with PRC accounting standards and regulations. In addition, a wholly foreign-owned enterprise is required to
set aside at least 10% of its accumulated after-tax profits each year, if any, to fund certain statutory reserve funds until the aggregate
amount of such funds reaches 50% of its registered capital. At its discretion, a wholly foreign-owned enterprise may allocate a portion
of its after-tax profits based on PRC accounting standards to staff welfare and bonus funds. These reserve funds and staff welfare and
bonus funds are not distributable as cash dividends.
In addition, Pony HK is permitted
under the laws of Hong Kong to provide funding to Pony Group Inc, the holding company incorporated in Hong Kong, and to Pony HK’s
subsidiary, Universe Travel, a company incorporated in the PRC, through dividend or other distribution without restrictions on the amount
of the funds. Further, Pony HK and Universe Travel currently intend to retain all available funds and future earnings, if any, for the
operation and expansion of its business and does not anticipate declaring or paying any dividends in the foreseeable future As of the
date of this Report, there has been no dividends, distributions or cash transfer between our holding company and our subsidiaries nor
do we expect such dividends, distributions or cash transfers to occur in the foreseeable future among our holding company and its subsidiaries.
Accordingly, we currently do not have, nor we anticipate to have in the future, cash management policies that dictate how funds are transferred
between our holding company and its subsidiaries.
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Moreover, there are no restrictions
on foreign exchange or our ability to transfer cash between entities within our group, across borders, or to U.S. investors. However,
the PRC government has significant authority to intervene or influence the China operations of an offshore holding company at any time,
and such oversight may also extend to our Hong Kong operating company. We cannot assure you that the PRC government will not prevent
us from transferring the cash we maintain in Hong Kong outside of Hong Kong, or restrict our ability to deploy our cash into business
or to pay dividends. We could also be subject to limitations on the transfer or the use of our cash if we expand our business operations
into China or conduct our operations in some other ways such that we become subject to PRC laws that regulate these activities. In addition,
if Pony HK or Universe Travel incur debt on its own behalf in the future, the instruments governing the debt may restrict its ability
to pay dividends or make other distributions to us. To the extent cash and/or assets in the business is in Pony HK or Universe Travel,
the cash and/or assets may not be available to fund operations or for other use outside of the PRC or Hong Kong due to interventions
in or the imposition of restrictions and limitations on our ability or on our subsidiaries by the PRC government to transfer such cash
and/or assets. As such, any limitation on our ability to transfer or use our cash could materially and adversely limit our ability to
grow, make investments or acquisitions that could be beneficial to our business, pay dividends, or otherwise fund and conduct our business.
We have never paid or declared
any cash dividends on our common stock and do not anticipate paying cash dividends in the foreseeable future. The declaration of dividends
on any class of shares is within the discretion of our board of directors, subject to Delaware law, out of legally available funds, and
will depend on the assessment of, among other factors, earnings, capital requirements and our operating and financial condition. None
of our subsidiaries has made any dividends or distributions to us. Under the current practice of the Inland Revenue Department of Hong
Kong, no tax is payable in Hong Kong in respect of dividends paid by us. See “ Item 1A. Risk Factors - Risks Related to Our Business
and Industry - We are not likely to pay cash dividends in the foreseeable future. .”
Plan of Operations
In January 2019, we started
our Research and Development (“R&D”) project mobile Lets Go App (“App”) designed to have multi-language interface
to attract users from the world, focusing on providing one-stop travel services to foreigners traveling in China, for both leisure and
business.
In April 2019, we rolled
out basic version which supports carpooling, car rental, Airport Pick-up and/or Drop-off, etc., available for download at Apple App store;
the basic version has an interface in Chinese language only. In May 2019, we rolled out second version which has an enhanced interface
in both Chinese and English language which supports payment through PayPal.
We intend to attract users
from outside of China to use our App and expand our offerings on the App to serve as a one-stop shop to book tickets, reserve hotels,
rent a car and hire an English speaking driver.
Our goal is to grow to an
international player in the travel service market. To accomplish such goal, we will cooperate with other businesses which have capital,
marketing and technology resources or products. We expect to recruit more workforce and talents, and develop new technologies and products.
Results of Operations
For the Year Ended
December 31, 2025 Compared to December 31, 2024
Revenue
For the years ended December
31, 2025 and 2024, revenues were $141,393 and $97,394, respectively, with an increase of $43,999 over the same period in 2024. The increase
in revenue was attributable to a new client introduced to Pony HK, Benfu Development., Ltd, where $55,159 in car services
revenue was attributable to such client during the year ended December 31, 2025. As a result, the Company’s revenue increased compared
with the same period last year.
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Cost of Revenue
Cost of Revenue for the years
ended December 31, 2025 and 2024 were $94,034 and $55,473, respectively, with an increase of $38,561 over the same period in 2024. The
increase was mainly due to the increase of revenue, thus the cost of revenue also increased accordingly.
Gross Profit
Gross profits were $47,359
and $41,921 for the years ended December 31, 2025 and 2024, respectively, an increase of $5,438 over the same period in 2024. The gross
profit ratios were 33.0% and 43.0% for the years ended December 31, 2025 and 2024, respectively. The decrease of gross profit margin
for the year ended December 31, 2025 compared to the same period of 2024 was due to the fact that we offered greater competitive pricing
to obtain new clients for our car services which resulted in a decrease in gross margins for the year ended December 31, 2025.
Operating Expenses
Operating expenses for the
years ended December 31, 2025 and 2024 were $293,018 and $204,957, respectively, with an increase of $88,061 or 43.0% from the same period
in 2024. The increase of operating expenses was mainly due to increase of service fees accrued, not paid yet for other consulting services as compared
to the prior period.
Other Income (Expenses)
Other income consists of
interest income and exchange gain (loss). For the year ended December 31, 2025 and 2024, the net other expenses were $769 and $1,038.
The change of other income (expenses) mainly due to the change of exchange rate.
Net Loss
Net Losses for the years
ended December 31, 2025 and 2024 were $246,429 and $164,074, respectively, due to the reasons described above.
Liquidity and Capital Resources
We suffered recurring losses
from operations and have an accumulated deficit of $1,134,923 as of December 31, 2025. We had a cash balance of $9,675 and working capital
deficit of $957,971 as of December 31, 2025. The Company has incurred losses of $246,429 and $164,074 for the years ended December 31
2025 and 2024, respectively. The Company has not continually generated significant gross margins. Unless our operations generate a significant
increase in gross margins and cash flows from operating activities, our continued operations will depend on whether we are able to raise
additional funds through various sources, such as equity and debt financing, other collaborative agreements and/or strategic alliances.
Our management is actively engaged in seeking additional capital to fund our operations in the short to medium term. Such additional
funds may not become available on acceptable terms and there can be no assurance that any additional funding that we do obtain will be
sufficient to meet our needs in the long term.
Net cash used in operating
activities for the year ended December 31, 2025 amounted to $101,270, compared to $148,977 net cash used in operating activities for
the year ended December 31, 2024. Net cash used in operating activities mostly consist of net loss. The net loss for year ended December
31, 2025 and 2024 were $246,429 and $164,074, respectively.
Net cash provided by financing
activities for the year ended December 31, 2025 amounted to $130,587, compared to $136,523 for the same period in 2024. The net cash
provided by financing activities were from shareholders who covered cost and other expenses on behalf of the Company.
Going Concern
The accompanying consolidated
financial statements have been prepared assuming the Company will continue as a going concern; however, the above condition raises substantial
doubt about the Company’s ability to do so. The financial statements do not include any adjustments to reflect the possible future
effects on the recoverability and classification of assets or the amounts and classification of liabilities that may result should the
Company be unable to continue as a going concern.
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In order to continue
as a going concern, the Company will need, among other things, additional capital resources. Management’s plans to obtain such
resources for the Company include (1) obtaining capital from the sale of its equity securities, (2) sales of the Company’s services,
(3) short-term and long-term borrowings from banks, and (4) short-term borrowings from stockholders or other related parties (ies) when
needed. However, management cannot provide any assurance that the Company will be successful in accomplishing any of its plans. The ability
of the Company to continue as a going concern is dependent upon its ability to successfully accomplish the plans described in the preceding
paragraph and eventually to secure other sources of financing and attain profitable operations.
Off-Balance Sheet Arrangements
As of December 31, 2025,
we did not have any off-balance sheet arrangements as defined in Item 303(a)(4)(ii) of Regulation S-K.
Item 7A. Quantitative and Qualitative Disclosures About Market
Risk
Not applicable.
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