The following discussion and analysis of our Company's financial condition and
results of operations should be read in conjunction with our unaudited condensed
consolidated financial statements and the related notes included elsewhere in
the report. This discussion contains forward-looking statements that involve
risks and uncertainties. Actual results and the timing of selected events could
differ materially from those anticipated in these forward-looking statements as
a result of various factors. See "Cautionary Note Concerning Forward-Looking
Statements" on page 2.



The description of our business included in this quarterly report is summary in
nature and only includes material developments that have occurred since the
latest full description. The full discussion of the history and general
development of our business is included in "Item 1. Description of Business"
section of the Company's Annual Report on Form 10-K filed with the SEC on April
15, 2022 (the "10-K"), which section is incorporated by reference.



Currency and exchange rate



Unless otherwise noted, all currency figures quoted as "U.S. dollars", "dollars"
or "US$" refer to the legal currency of the United States. References to "Hong
Kong Dollar" are to the Hong Kong Dollar, the legal currency of the Hong Kong
Special Administrative Region of the People's Republic of China. Throughout this
report, assets and liabilities of the Company's subsidiaries are translated into
U.S. dollars using the exchange rate on the balance sheet date. Revenue and
expenses are translated at average rates prevailing during the period. The gains
and losses resulting from translation of financial statements of foreign
subsidiaries are recorded as a separate component of accumulated other
comprehensive income within the statement of stockholders' equity.



Overview



We were incorporated under the laws of the State of Delaware on March 6, 2014,
under the name "Jovanovic-Steele, Inc." Our name was changed to Baja Custom
Designs, Inc. on October 26, 2017. On May 8, 2020, we acquired Luduson Holding
Company Limited, a limited liability company organized under the laws of British
Virgin Islands ("LHCL"). As a result of our acquisition of LHCL, we entered into
the business-to-business gaming technology industry.



We are a Delaware holding company that, through our wholly owned Hong Kong
operating subsidiaries, are a business-to-business gaming technology company. We
provide events marketing strategies with a combination of digital interactive
solutions and content production services in Hong Kong. In digital marketing
industry, we offer business-to-business digital marketing solutions on our
proprietary and secure network, which accommodates a wide range of devices and
theme-based gaming content, including multi-touch table, body motion sensing,
indoor positioning device and electronic circuit system, together with the
customized game content, as an integrated marketing solution. We are principally
engaged in developing and distributing digital entertainment - interactive game
software and providing system development consultancy, maintenance services to
our customers and providing interactive games installations in shopping mall
events, exhibitions and brand promotions.



We provide our business customers in the entertainment industry with a full line
of custom-made interactive gaming services. In this entertainment segment, we
offer a customized device box with a library of self-developed interactive game
contents, such as, sport-themed social games, motion-sensing action games, logic
and puzzle games, original IP characters education game for children, etc., to
meet with our business customers' operational use or business-to-business social
solutions.


Our goal is to provide innovative and effective interactive solution services to satisfy various marketing needs. We are committed to working at a high level of quality to meet the needs of different budgets. We provide services to a wide range of clients in different industry segments and regions.

Our main corporate and executive office is located at 17/F, 80 Gloucester RoadWanchai, hong kongphone number +852-2119 1031.








  21





We are not a Chinese operating company but a Delaware holding company with
operations conducted through our wholly owned subsidiaries based in Hong Kong.
Our holding company structure presents unique risks as our investors may never
directly hold equity interests in our Hong Kong subsidiaries and will be
dependent upon contributions from our subsidiaries to finance our cash flow
needs. Our Hong Kong subsidiaries are currently not required to obtain
permission from the Chinese authorities including the China Securities
Regulatory Commission, or CSRC, or Cybersecurity Administration Committee, or
CAC, to operate or to issue securities to foreign investors. The business of our
subsidiaries until now are not subject to cybersecurity review with the
Cyberspace Administration of China, or CAC, given that: (i) data processed in
our business does not have a bearing on national security and thus may not be
classified as core or important data by the authorities; (ii) we do not possess
a large amount of personal information in our business operations. In addition,
we are not subject to merger control review by China's anti-monopoly enforcement
agency due to the level of our revenues which provided from us and audited by
our auditor and the fact that we currently do not expect to propose or implement
any acquisition of control of, or decisive influence over, any company with
revenues within China of more than RMB400 million. Currently, these statements
and regulatory actions have had no impact on our daily business operations, the
ability to accept foreign investments and list our securities on an U.S. or
other foreign exchange. However, since these statements and regulatory actions
are new, it is highly uncertain how soon legislative or administrative
regulation making bodies will respond and what existing or new laws or
regulations or detailed implementations and interpretations will be modified or
promulgated, if any, and the potential impact such modified or new laws and
regulations will have on our daily business operation, the ability to accept
foreign investments and list our securities on an U.S. or other foreign
exchange.



Further, in light of the recent statements and regulatory actions by the PRC
government, such as those related to Hong Kong's national security, the
promulgation of regulations prohibiting foreign ownership of Chinese companies
operating in certain industries, which are constantly evolving, and
anti-monopoly concerns, we may be subject to the risks of uncertainty of any
future actions of the PRC government in this regard, including the risk that we
inadvertently conclude that such approvals are not required, that applicable
laws, regulations or interpretations change such that we are required to obtain
approvals in the future, which may result in a material change in our
operations, including our ability to continue our existing holding company
structure, carry on our current business, accept foreign investments, and offer
or continue to offer securities to our investors, and the resulting adverse
change in value to our common stock. We may also be subject to penalties and
sanctions imposed by the PRC regulatory agencies, including the Chinese
Securities Regulatory Commission, if we fail to comply with such rules and
regulations, which could adversely affect the ability of the Company's
securities to continue to trade on the Over-the-Counter Bulletin Board, which
may cause the value of our securities to significantly decline or become
worthless. For a detailed description of the risks facing the Company and the
offering associated with our operations in Hong Kong, please refer to "Risk
Factors - Risk Factors Relating to Doing Business in Hong Kong." set forth
in
the 10-K.


Impact of COVID-19 on our business



The outbreak of COVID-19 that started in late January 2020 in the PRC has
negatively affected our business. In March 2020, the World Health Organization
declared COVID-19 as a pandemic and has resulted in quarantines, travel
restrictions, and the temporary closure of stores and business facilities in
Hong Kong, China and the U.S. in the subsequent months. Given the rapidly
expanding nature of the COVID-19 pandemic, and because substantially all of the
Company's business operations and its workforce are concentrated in Hong Kong,
the Company's business, results of operations, and financial condition for
calendar year 2021 have been adversely affected.



Management believes that COVID-19 could continue to have a material impact on
its financial results for the first half of calendar year 2022 and could cause
the potential impairment of certain assets. To mitigate the overall financial
impact of COVID-19 on the Company's business, management is continuing to work
closely with its service centers to enhance their marketing and promotion
activities to generate revenue.



We believe that the Company can generate sufficient cash flow over the next 12
months to implement the revised business plan. We believe that we will need
approximately $1.5 million to implement our revised business plan for the 12
months thereafter.







  22






Results of Operations.


Comparison of the three months ended March 31, 2022 and 2021

The following table presents certain operational data for the three months ended March 31, 2022 and 2021:


                                       Three Months Ended March 31,
                                         2022                 2021
Revenues                            $        1,281       $      193,376
Cost of revenue                                  -              (34,371 )
Gross profit                                 1,281              159,005
Total operating expenses                   (90,733 )            (38,853 )
(Loss) Income before Income Taxes          (89,452 )            120,152
Income tax expense                               -              (12,840 )
Net (loss) income                          (89,452 )            107,312



Revenue. We generated revenues of $1,281 and $193,376 for the three months ended
March 31, 2022 and 2021. The significant decrease is due to the decrease in
business volume in digital advertising income from our online entertainment
portal from the unexpected Omicron outbreak, starting from December 2021 up to
March 2022, globally and in Hong Kong and China.



In the three months ended March 31, 2022 and 2021, the following customers represented 10% or more of our total net revenue:


                                 Three Months ended
                                   March 31, 2022              March 31, 2022
                                             Percentage           Accounts
                            Revenues         of revenues         receivable

Ease Audio Group Limited   $    1,281                100%     $          1,281

                           $    1,281                100%     $          1,281




                                            Three months ended March 31, 2021                  March 31, 2021
                                                                   Percentage                     Accounts
Customer                                     Revenues             of revenues                    receivable
Ease Audio Group Limited                  $      116,026                    60%               $      2,132,021
Yu Lin Nuo Ya Interactive Entertainment
Company Limited                                   38,675                    20%                      1,398,494
Shenzhen Jiu Sheng Optoelectronic Comm
Tech Co., Ltd                                     38,675                    20%                      1,124,229

                                 Total:   $      193,376                   100%       Total:  $      4,654,744










  23





All of our major customers are located in hong kong and the PRC

Cost of Revenue. Cost of revenue for the three months ended March 31, 2022, was
$0, and as a percentage of net revenue, approximately 0%. Cost of revenue for
the three months ended March 31, 2021, was $34,371, and as a percentage of net
revenue, approximately 17.8%. Cost of revenue increased primarily as a result of
the decrease in our business volume .



Gross Profit. We achieved a gross profit of $1,281 and $159,005 for the three
months ended March 31, 2022 and 2021, respectively. The increase in gross profit
is primarily attributable to the increase in our business volume.



General and Administrative Expenses ("G&A"). We incurred G&A expenses of $90,733
and $38,853 for the three months ended March 31, 2022, and 2021, respectively.
The increase in G&A is due to the addition of legal, accounting and review
fees.



income tax expense. Our income tax expense for the quarters ended March 31, 2022 and 2021 was $0 and $12,840respectively.



Net (Loss) Income. During the three months ended March 31, 2022, we incurred a
net loss of $89,452, as compared to a net income of $107,312 for the same period
ended March 31, 2021. The decrease in net income is primarily attributable to
the decrease in our business volume amid the unexpected omicron outbreak in
the
first quarter of 2022.


Cash and capital resources

From March 31, 2022we had cash and cash equivalents of $19,044accounts receivable from $8,576installments, installments and other receivables from $824,462.

We believe that our current liquidity and the other sources of liquidity described below are sufficient to support general operations for at least the next 12 months.


                                                          Three Months Ended March 31,
                                                            2022                 2021

Net cash provided by (used in) operating activities $83,112

  $      (9,959 )
Net cash provided by (used in) investing activities    $             -       $           -
Net cash used in financing activities                  $       (59,941 )   
 $      (9,674 )



Net cash provided by (used in) operating activities.



For the three months ended March 31, 2022, net cash provided by operating
activities was $83,112, which consisted primarily of a net loss of $89,452, a
decrease in deposits, prepayments and other receivables of $3,509, a decrease in
accounts receivables of $120,574, an increase in accrued expenses and other
payables of $9,241, and depreciation of plant and equipment of $39,240.



For the three months ended March 31, 2021, net cash used in operating activities
was $9,959, which consisted primarily of a net income of $107,312, an increase
in income tax payable of $10,733, offset by an increase in accounts receivables
of $160,401, an decrease in accrued expenses and other payables of $7,346, and
depreciation of plant and equipment of $39,743.









  24







Net cash provided by (used in) investing activities.

For the three months ended March 31, 2022there is no net cash from investing activities.

For the three months ended March 31, 2021there is no net cash from investing activities.

Net cash used In fundraising activities.

For the three months ended March 31, 2022the net cash allocated to financing activities was $59,941 consisting mainly of a reimbursement to an administrator.

For the three months ended March 31, 2021the net cash allocated to financing activities was $9,674 consisting mainly of a reimbursement to an administrator.

Off-balance sheet arrangements

We have no off-balance sheet collateral, interest rate swap transactions or outstanding foreign exchange contracts. We do not engage in trading activities involving non-exchange traded contracts.

Critical accounting policies and estimates.



The preparation of financial statements in conformity with accounting principles
generally accepted in the United States requires our management to make
assumptions, estimates and judgments that affect the amounts reported, including
the notes thereto, and related disclosures of commitments and contingencies, if
any. We have identified certain accounting policies that are significant to the
preparation of our financial statements. These accounting policies are important
for an understanding of our financial condition and results of operations.
Critical accounting policies are those that are most important to the
presentation of our financial condition and results of operations and require
management's subjective or complex judgment, often as a result of the need to
make estimates about the effect of matters that are inherently uncertain and may
change in subsequent periods. Certain accounting estimates are particularly
sensitive because of their significance to financial statements and because of
the possibility that future events affecting the estimate may differ
significantly from management's current judgments. We believe the following
accounting policies are critical in the preparation of our financial statements.



-  Basis of presentation


These accompanying consolidated financial statements have been prepared in accordance with generally accepted accounting principles in The United States of America (“US GAAP”).

– Use of estimates and assumptions



In preparing these consolidated financial statements, management makes estimates
and assumptions that affect the reported amounts of assets and liabilities in
the balance sheet and revenues and expenses during the period reported. Actual
results may differ from these estimates.



-  Basis of consolidation



The consolidated financial statements include the accounts of the Company and
its subsidiaries. All significant inter-company balances and transactions within
the Company have been eliminated upon consolidation.









  25






-  Accounts receivable



Accounts receivable are recorded at the invoiced amount and do not bear
interest, which are due within contractual payment terms, generally 30 to 90
days from completion of service. Credit is extended based on evaluation of a
customer's financial condition, the customer credit-worthiness and their payment
history. Accounts receivable outstanding longer than the contractual payment
terms are considered past due. Past due balances over 90 days and over a
specified amount are reviewed individually for collectability. At the end of
fiscal year, the Company specifically evaluates individual customer's financial
condition, credit history, and the current economic conditions to monitor the
progress of the collection of accounts receivables. The Company will consider
the allowance for doubtful accounts for any estimated losses resulting from the
inability of its customers to make required payments. For the receivables that
are past due or not being paid according to payment terms, the appropriate
actions are taken to exhaust all means of collection, including seeking legal
resolution in a court of law. Account balances are charged off against the
allowance after all means of collection have been exhausted and the potential
for recovery is considered remote. The Company does not have any
off-balance-sheet credit exposure related to its customers.



-  Revenue recognition


The Company adopted Accounting Standards Codification ("ASC") 606 - Revenue from
Contracts with Customers" ("ASC 606"). Under ASC 606, a performance obligation
is a promise within a contract to transfer a distinct good or service, or a
series of distinct goods and services, to a customer. Revenue is recognized when
performance obligations are satisfied and the customer obtains control of
promised goods or services. The amount of revenue recognized reflects the
consideration to which the Company expects to be entitled to receive in exchange
for goods or services. Under the standard, a contract's transaction price is
allocated to each distinct performance obligation. To determine revenue
recognition for arrangements that the Company determines are within the scope of
ASC 606, the Company performs the following five steps:



         ·    identify the contract with a customer;
         ·    identify the performance obligations in the contract;
         ·    determine the transaction price;
         ·    allocate the transaction price to performance obligations in the
              contract; and

· Recognize revenue as the performance obligation is satisfied.



-  Foreign currencies translation



Transactions denominated in currencies other than the functional currency are
translated into the functional currency at the exchange rates prevailing at the
dates of the transaction. Monetary assets and liabilities denominated in
currencies other than the functional currency are translated into the functional
currency using the applicable exchange rates at the balance sheet dates. The
resulting exchange differences are recorded in the consolidated statement of
operations.



The reporting currency of the Company is United States Dollar ("US$") and the
accompanying consolidated financial statements have been expressed in US$. In
addition, the Company's operating subsidiaries in Hong Kong and Seychelles
maintain their books and record in its local currency, Hong Kong Dollars
("HKD"), which is a functional currency as being the primary currency of the
economic environment in which their operations are conducted. In general, for
consolidation purposes, assets and liabilities of its subsidiaries whose
functional currency is not US$ are translated into US$, in accordance with ASC
Topic 830-30, "Translation of Financial Statement", using the exchange rate on
the balance sheet date. Revenues and expenses are translated at average rates
prevailing during the year. The gains and losses resulting from translation of
financial statements of foreign subsidiaries are recorded as a separate
component of accumulated other comprehensive income within the statements of
changes in stockholder's equity.









  26





– Debt issued with common shares



Debt issued with common stock is accounted for under the guidelines established
by ASC 470-20 - Accounting for Debt With Conversion or Other Options. The
Company recorded the relative fair value of common stock and warrants related to
the issuance of debt as a debt discount or premium. The discount or premium is
subsequently amortized to interest expense over the expected term of the debt.



-  Leases



The Company adopts the FASB Accounting Standards Update ("ASU") 2016-02 "Leases
(Topic 842)." for all periods presented.  This standard requires lessees to
recognize lease assets ("right of use") and related lease obligations ("lease
liabilities") on the balance sheet for leases with terms in excess of 12 months.



The Company determines whether an agreement is a lease at inception. Operating leases are included in right-of-use operating lease assets and operating lease liabilities on the Consolidated Balance Sheets. Finance leases are included in ROU finance lease assets and finance lease liabilities in the Consolidated Balance Sheets.

ROU assets represent the Company's right to use an underlying asset for the
lease term and lease liabilities represent the Company's obligation to make
lease payments arising from the lease. Operating lease and finance lease ROU
assets and liabilities are recognized at January 1, 2019 based on the present
value of lease payments over the lease term discounted using the rate implicit
in the lease. In cases where the implicit rate is not readily determinable, the
Company uses its incremental borrowing rate based on the information available
at commencement date in determining the present value of lease payments. Lease
expense for lease payments is recognized on a straight-line basis over the
lease
term.


– Recent accounting statements



In May 2021, the FASB issued ASU 2021-04, Earnings Per Share (Topic 260),
Debt-Modifications and Extinguishments (Subtopic 470-50), Compensation-Stock
Compensation (Topic 718), and Derivatives and Hedging-Contracts in Entity's Own
Equity (Subtopic 815-40), ("ASU 2021-04"). This ASU reduces diversity in an
issuer's accounting for modifications or exchanges of freestanding
equity-classified written call options (for example, warrants) that remain
equity classified after modification or exchange. This ASU provides guidance for
a modification or an exchange of a freestanding equity-classified written call
option that is not within the scope of another Topic. It specifically addresses:
(1) how an entity should treat a modification of the terms or conditions or an
exchange of a freestanding equity-classified written call option that remains
equity classified after modification or exchange; (2) how an entity should
measure the effect of a modification or an exchange of a freestanding
equity-classified written call option that remains equity classified after
modification or exchange; and (3) how an entity should recognize the effect of a
modification or an exchange of a freestanding equity-classified written call
option that remains equity classified after modification or exchange. This ASU
will be effective for all entities for fiscal years beginning after December 15,
2021. An entity should apply the amendments prospectively to modifications or
exchanges occurring on or after the effective date of the amendments. Early
adoption is permitted, including adoption in an interim period. The adoption of
ASU 2021-04 on January 1, 2022 did not have a material impact on the Company's
financial statements or disclosures.



The Company has reviewed all recently issued but not yet effective accounting pronouncements and does not believe that the future adoption of such pronouncements could have a material impact on its financial condition or results of operations.










  27

© Edgar Online, source Previews