| SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES | NOTE
3 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Basis
of presentation and consolidation The accompanying unaudited consolidated financial
statements of the Company have been prepared in accordance with generally accepted accounting principles in the United States
(“GAAP”) for interim financial reporting, and in accordance with instructions for Form 10-Q and Article 10 of Regulation
S-X. Accordingly, they do not include all of the information and footnotes required by generally accepted accounting principles
for complete financial statements. In the opinion of management, the unaudited consolidated financial statements contained in
this report reflect all adjustments that are normal and recurring in nature and considered necessary for a fair presentation of
the financial position and the results of operations for the interim periods presented. The year-end balance sheet data was derived
from audited financial statements but does not include all disclosures required by GAAP. The results of operations for the interim
period are not necessarily indicative of the results expected for the full year. These unaudited consolidated financial statements,
footnote disclosures and other information should be read in conjunction with the financial statements and the notes thereto included
in the Company’s Annual Report on Form 10-K for the year ended December 31, 2019. The
unaudited consolidated financial statements are presented in US Dollars and include the accounts of the Company and its subsidiaries.
All significant inter-company accounts and transactions have been eliminated in consolidation. The results of subsidiaries acquired
or disposed of during the years are included in the consolidated statements of operations from the effective date of acquisition
or up to the effective date of disposal. The Company has limited operations and is considered to be in the development stage under
ASC 915-15. The
following table depicts the identity of the Company’s subsidiaries:
Name of Subsidiary Place of Attributable Registered
Syndicore Asia Limited (1) Hong Kong 100 HKD 1
Z-Line International E-Commerce Limited (2) Hong Kong 100 HKD 8,000,000
Hunan Syndicore Asia Limited (3) PRC 100 HKD 10,000,000
Ezekiel Technology Inc. (4) PRC 100 HKD 10,000,000
(1) Wholly
owned subsidiary of ZZLL
(2) A
wholly owned subsidiary of Syndicore Asia Limited since October 8, 2019 (previously 55% owned).
(3) Wholly
owned subsidiary of Syndicore Asia Limited
(4) Wholly owned subsidiary of ZZLL that was formed in May 2020
(inactive at present). Use
of estimates In preparing financial statements in conformity
with accounting principles generally accepted in the United States management makes estimates and assumptions that affect the
reported amounts of assets and liabilities and disclosures of contingent assets and liabilities at the dates of the financial
statements, as well as the reported amounts of revenues and expenses during the reporting year. These accounts and estimates
include, but are not limited to, the valuation of accounts receivable, deferred income taxes and the estimation on useful lives
of plant and equipment. Actual results could differ from those estimates. Concentrations
of credit risk Financial instruments that potentially subject
the Company to significant concentrations of credit risk consist principally of accounts receivable. In respect of accounts receivable,
the Company extends credit based on an evaluation of the customer’s financial condition, generally without requiring collateral
or other security. In order to minimize the credit risk, the management of the Company has delegated a team responsibility for
determination of credit limits, credit approvals and other monitoring procedures to ensure that follow-up action is taken to recover
overdue debts. Further, the Company reviews the recoverable amount of each individual trade debt at each balance sheet date to
ensure that adequate impairment losses are made for irrecoverable amounts. In this regard, the directors of the Company consider
that the Company’s credit risk is significantly reduced. Cash
and cash equivalents Cash and cash equivalents include all cash,
deposits in banks and other highly liquid investments with initial maturities of three months or less. The Company currently maintains
bank accounts in HK and the PRC only. Accounts
receivable Accounts receivable are stated at original
amount less allowance made for doubtful receivables, if any, based on a review of all outstanding amounts at the year end. An
allowance is also made when there is objective evidence that the Company will not be able to collect all amounts due according
to original terms of receivables. Bad debts are written off when identified. The Company extends unsecured credit to customers
in the normal course of business and believes all accounts receivable in excess of the allowances for doubtful receivables to
be fully collectible. The Company does not accrue interest on trade accounts receivable. Pursuant to the Company’s credit
policy exposure to credit risk is monitored on an on-going-basis where management performs credit evaluations on all customers
that are sold services or products on account. The Company had not experienced any bad debts during the six-month periods ended
June 30, 2020 and 2019, respectively. Plant
and equipment Plant
and equipment are stated at cost less accumulated depreciation. Cost represents the purchase price of the asset and other costs
incurred to bring the asset into its existing use. Maintenance, repairs and betterments, including replacement of minor items,
are charged to expense; major additions to physical properties are capitalized. Depreciation
of plant and equipment is provided using the straight-line method over their estimated useful lives at the following annual rates:
Furniture and fixtures 20% - 50 %
Office equipment 20 % Plant
and equipment are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an
asset may not be recoverable. Recoverability of assets to be held and used is measured by a comparison of the carrying amount
of an asset to estimated undiscounted future cash flows expected to be generated by the asset. If the carrying amount of an asset
exceeds its estimated future cash flows, an impairment charge is recognized by the amount by which the carrying amount of the
asset exceeds the fair value of the asset. Assets to be disposed of are separately presented in the balance sheet and reported
at the lower of the carrying amount or fair value less costs to sell and are no longer depreciated. Income
Taxes Income
taxes are accounted for under the asset and liability method. Deferred tax assets and liabilities are recognized for the future
tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities
and their respective tax bases and operating loss and tax credit carry forwards. Deferred tax assets and liabilities are measured
using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to
be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in
the period that includes the enactment date. Comprehensive
income(loss) The
Company has adopted FASB Accounting Standard Codification Topic 220 (“ASC 220”) “Comprehensive income”
(formerly known as SFAS No. 130, “Reporting Comprehensive Income”), which establishes standards for reporting and
display of comprehensive income, its components and accumulated balances. Accumulated other comprehensive income (loss) represents
the accumulated balance of foreign currency translation adjustments of the Company. Leases Our executive offices are located in the Carnival
Commercial Building, 18 Java Road, North Point Hong Kong. Our current lease is from August 28, 2019 to August 27, 2021 at a monthly
charge of HK$8,000 (approximately $1,040) per month. We have successfully renewed our lease in the past and do not expect any
difficulty in renewing it again. Our subsidiary, Hunan Syndicore Asia Limited,
leases 682.5 square meters office space at Tower E1, Li Gu Yu Yuan, No. 27 Wen Xuan Road, Chang Sha, Hunan Province, China at
a monthly charge of RMB 22,522.83 (approximately $3,217.55) per month. The term of the lease is from May 15, 2019 to May 14,
2024. The lease may be renewed upon three months prior written notice. Our recently formed subsidiary, Ezekiel Technology Inc., leases
296.93 square meters office space at Xin Li Kang Tower, Nanshan District, Shenzhen, Guangdong Province, China at a monthly charge
of RMB 36,440.55 (approximately $5,205) per month. The term of the lease is from April 1, 2020 to April 9, 2023. The lease may
be renewed upon six months prior written notice. Under
Topic 842, operating lease expense is generally recognized evenly over the term of the lease. The Company has operating leases
primarily consisting of facilities with remaining lease terms of approximately two to four years. The Company does not have the
option to terminate the leases early. Leases
with an initial term of twelve months or less are not recorded on the balance sheet. For lease agreements entered into or reassessed
after the adoption of Topic 842, the Company has combined the lease and non-lease components in determining the lease liabilities
and ROU assets. The
Company’s lease agreements generally do not provide an implicit borrowing rate; therefore, an internal incremental borrowing
rate is determined based on information available at lease commencement date for purposes of determining the present value of
lease payments. The Company used the incremental borrowing rate on December 29, 2018 of 5.5% for all leases that commenced prior
to that date. ROU
lease assets and lease liabilities for our operating leases were recorded in the balance sheet as follows:
As of
June
30,
Operating Leases:
Operating leases right-of-use assets, net $ 150,597
Operating leases liabilities (current) 21,908
Operating leases liabilities (non-current) 138,749
Total lease liabilities $ 160,657
Weighted average remaining lease term (in years) 3
Weighted average discount rate 4.50 % Future
lease payments included in the measurement of lease liabilities on the balance sheet as of June 30, 2020, for the following five
fiscal years and thereafter are as follows:
Years: Amount
2020 (remaining) $ 25,264
2021 46,480
2022 41,217
2023 43,278
2024 18,398
Total future minimum lease payments $ 174,637 Foreign
currency translation For
financial reporting purposes, the financial statements of the Company which are prepared using the functional currency have been
translated into United States Dollars (“US$”). The functional currencies of the Company’s subsidiary operating
business unit based in Hong Kong and PRC are the Hong Kong Dollar (“HK$”) and Chinese Renminbi (“RMB”)
respectively. Transactions in foreign currencies are initially recorded at the functional currency rate ruling at the date of
transaction. Any differences between the initially recorded amount and the settlement amount are recorded as a gain or loss on
foreign currency transaction in the consolidated statements of operations. Monetary assets and liabilities denominated in foreign
currency are translated at the functional currency rate of exchange ruling at the balance sheet date. Any differences are taken
to profit or loss as a gain or loss on foreign currency translation in the consolidated statements of operations. In
accordance with ASC 830, Foreign Currency Matters, the Company translated the assets and liabilities into US $ using the rate
of exchange prevailing at the applicable balance sheet date and the consolidated statements of operations and cash flows are translated
at an average rate during the reporting period. Adjustments resulting from the translation are recorded in shareholders’
equity as part of accumulated other comprehensive income. The rate used in translation of Hong Kong dollars to US$ is a ratio
of US$1.00=HK$7.80, a fixed exchange rate maintained between Hong Kong and United States derived from the Hong Kong Monetary Authority
pegging HK$ and US$ monetary policy. Below
is a table with foreign exchange rates used for translation:
June 30, June 30,
For the six months ended (Average Rate)
Chinese Renminbi (RMB) RMB7.08567 RMB6.78600
United States dollar ($) $ 1.00 $ 1.00
June 30, June 30,
As of (Closing Rate)
Chinese Renminbi (RMB) RMB7.06564 RMB6.86670
United States dollar ($) $ 1.00 $ 1.00
June 30, June 30,
For the six months ended (Average Rate)
Hong Kong (HKD) HKD7.75191 HKD7.80000
United States dollar ($) $ 1.00 $ 1.00
June 30, June 30,
As of (Closing Rate)
Hong Kong (HKD) HKD7.75074 HKD7.80000
United States dollar ($) $ 1.00 $ 1.00 Stock-Based
Compensation The
Company does not provide any stock-based compensation. Basic
and diluted earnings per share Basic
earnings (loss) per common share has been computed by dividing net income (loss) by the weighted average number of common shares
outstanding. Diluted earnings (loss) per common share for the periods ended June 30, 2020 and June 30, 2019 have been computed
by dividing net income (loss) by the weighted average number of common shares outstanding and common stock equivalents, which
include options and convertible notes outstanding during the same period. The
following table sets forth the computation of basic and diluted (loss) earnings per share:
Three Months Three Months Six
Months Six
Months
Numerator
Net income (loss) - basic and diluted $ 209 $ (62 ) $ 259 $ (39 )
Denominator
Weighted average common shares- basic and diluted 5,154 5,154 5,154 5,154
Earnings (loss) per common share-basic and diluted $ 0.04 $ (0.01 ) $ 0.05 $ (0.01 ) Commitments
and contingencies Liabilities
for loss contingencies arising from claims, assessments, litigation, fines and other sources are recorded when it is probable
that a liability has been incurred and the amount of the assessment can be reasonably estimated. Recently
issued accounting pronouncements not yet adopted On
January 1, 2020, the Company adopted Accounting Standards Update (“ASU”) No. 2016-13, “Financial Instruments
– Credit Losses on Financial Instruments,” which requires that expected credit losses relating to financial assets
be measured on an amortized cost basis and available-for-sale debt securities be recorded through an allowance for credit losses.
ASU 2016-13 limits the amount of credit losses to be recognized for available-for-sale debt securities to the amount by which
carrying value exceeds fair value and also requires the reversal of previously recognized credit losses if fair value increases.
Also, for available-for-sale debt securities with unrealized losses, the standard eliminates the concept of other-than-temporary
impairments and requires allowances to be recorded instead of reducing the amortized cost of the investment. The adoption by the
Company of the new guidance did not have a material impact on the Company’s consolidated financial statements. Our
condensed consolidated financial statements for the six months ended June 30, 2020 are presented under the new standard, while
comparative periods presented are not adjusted and continue to be reported in accordance with the Company’s historical accounting
policy. In
February 2016, the Financial Accounting Standard Board (“FASB”) issued ASU No. 2016-02, Leases (Topic 842). The standard
requires lessees to recognize almost all leases on the balance sheet as a right-of-use asset and a lease liability and requires
leases to be classified as either an operating or a finance type lease. The standard excludes leases of intangible assets or inventory.
In July 2018, the FASB issued amendments in ASU 2018-11, which provide another transition method in addition to the existing transition
method, by allowing entities to initially apply the new leases standard at the adoption date and recognize a cumulative-effect
adjustment to the opening balance of retained earnings in the period of adoption, and to not apply the new guidance in the comparative
periods they present in the financial statements. We adopted the standard as of January 1, 2019, using a modified retrospective
transition approach and elected to use the effective date as the date of initial application. As a result of the adoption of Topic
842 on January 1, 2019, we recorded operating lease right of use (“ROU”) assets of $3.26 million and operating lease
liabilities of $3.25 million. The ROU assets include adjustments for prepayments and accrued lease payments. The adoption did
not impact the Company’s beginning retained earnings, or its prior year consolidated statements of income and statements
of cash flows. In
June 2016, the FASB issued ASU 2016-13, Financial Instruments – Credit Losses (Topic 326), amending existing guidance on
the accounting for credit losses on financial instruments within its scope. The guidance introduces an expected loss model for
estimating credit losses, replacing the incurred loss model. The new guidance also changes the impairment model for available-for-sale
debt securities, requiring the use of an allowance to record estimated credit losses (and subsequent recoveries). The new guidance
is effective for the Company beginning after December 15, 2020. The Company is currently evaluating the impact of the adoption
of this guidance on its condensed consolidated financial statements. In
August 2018, the FASB issued ASU 2018-13, Fair Value Measurement (Topic 820): Disclosure Framework. The purpose of the update
is to improve the effectiveness of the fair value measurement disclosures that allow for clear communication of information that
is most important to the users of financial statements. There were certain required disclosures that have been removed or modified.
In addition, the update added the following disclosures: (i) changes in unrealized gains and losses for the period included in
other comprehensive income (loss) for recurring Level 3 fair value measurements held at the end of the reporting period and (ii)
the range and weighted average of significant unobservable inputs used to develop Level 3 fair value measurements. The standard
will become effective for the Company for its periods beginning after December 15, 2019; early adoption is permitted. The Company
is currently evaluating the impact of ASU 2018-13 on its condensed consolidated financial statements. Other pronouncements issued by the FASB or
other authoritative accounting standards with future effective dates are either not applicable or not significant to the condensed
consolidated financial statements of the Company. |
