| SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES | NOTE
4. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Basis
of presentation and consolidation The
consolidated financial statements of the Company have been prepared in accordance with the accounting principles generally accepted in
the United States of America (“U.S. GAAP”). The
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 interim results
of operations are not necessarily indicative of the operating results for the fiscal year or any future periods. 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
Shenzhen Ezekiel Technology
Co. Limited (3) PRC 100 HKD 10,000,000 (1) A wholly owned subsidiary of ZZLL. (2) A wholly owned subsidiary of Syndicore Asia Limited since October 8, 2019 (previously 55% owned). (3) A wholly owned subsidiary of Syndicore Asia Limited. 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 did not experience any bad debts during the six months ended June 30, 2021 and 2020. Inventories Inventories
consisting of lottery machines, are stated at the lower of cost or market value. The Company used the weighted average cost method of
accounting for inventory. Inventories on hand are evaluated on an on-going basis to determine if any items are obsolete, spoiled, or
in excess of future demand. The Company reviews its inventories for impairment and provides, if required, for an impairment charge that
is charged directly to cost of sales when it has been determined the product is obsolete or spoiled, and the Company will not be able
to sell it at a normal profit above its carrying cost. The Company’s primary inventories are multi-function lottery ticket machines.
The Company did not experience any inventory impairment during six month ended June 30, 2021. Property,
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. Customer
advances and deposits SAL
received prepayment of the full consideration of $1,000,000 under the Pretech Agreement in two installments in 2019 and 2020. The Company
is recognizing such prepayment in a straight line 7-year schedule. Of the full consideration of the Pretech Agreement, an aggregate amount
of $179,666 was recognized as revenue in 2019 and 2020 and $826,463 is outstanding and yet to be recognized. Ezekiel
received a series of prepayments in the aggregate amount of $4,078,044 from Qingdao Jiuzhou Xintong Industry and Trade
Co., Ltd. for the purchase of petroleum-based products. The Company recognized such prepayment as a current customer advance. The
Company recorded an aggregate of $4,221,566 as current customer advances and $609,838 as long-term customer advances as of June 30,
2021 HSAL
received prepayments from customers for eggs and other various products. The Company records these receipts as customer advances and
deposits until it has met all the criteria for recognition of revenue including the passing possession of the products to its customer,
at such point Company will reduce the customer and deposits balance and credit the Company’s revenue. Revenue
recognition The
Company adopted ASC Topic 606, Revenue from Contracts with Customers
1. Identify
the contract(s) with a customer;
2. Identify
the performance obligations in the contract;
3. Determine
the transaction price;
4. Allocate
the transaction price to the performance obligations in the contract; and
5. Recognize
revenue when (or as) the entity satisfies a performance obligation. In
applying ASC 606, the Company recognizes revenue when the Company has negotiated the terms of the transaction, set forth the sales price,
transferred of possession of the product to the customer, determined that the customer does not have the right to return the product,
determined that the customer is able to further sell or transfer the product onto others for economic benefit without any other obligation
to be fulfilled by the Company, and the Company is reasonably assured that funds have been or will be collected from the customer. Cost
of Sales Cost
of sales is mainly comprised of costs of multi-function lottery tickets machines, petroleum-based products, and various agriculture products. Selling
Expense Selling
expense is mainly comprised of advertising and promotion cost on the Company’s online application “ Bibishengjia General
and administrative 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”, 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
The
Company’s 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 per month (approximately US$1,031 per month). The Company
has successfully renewed its lease in the past and does not expect any difficulty in renewing it again. HSAL
leases 682.5 square meters of 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 22,523 per month (approximately $3,264 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. Ezekiel
leases 296.93 square meters of office space at Xin Li Kang Tower, Suite 22C, Nanshan District, Shenzhen, Guangdong Province, China at
a monthly charge of RMB 36,440 per month (approximately $5,281 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 4.5% 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: Supplemental
balance sheet information related to the operating lease for office was as follows:
The Six Months
June 30,
2021
Right-of-use assets $ 234,971
Lease payment liability-current 104,617
Lease payment liability-non-current 146,442
Total lease payment liability $ 251,059 The
remaining lease term and discount rate for the operating lease for office were as follows as of June 30, 2021:
Remaining lease term (years) 4
Discount rate 4.50% For
the quarter ended June 30, 2021, the lease expense was as follows:
Six Months Ended
Operating lease cost $ 61,138
Short-term lease cost
Total $ 61,138 Cash
payment for operating lease under ASC 842 in the year of 2020 was $94,134. For
the six months ended June 30, 2021, rental expenses based on ASC 840 were $61,138 . The
following is a schedule, by fiscal years, of the maturities of lease liabilities as of June 30, 2021:
2021 Remaining $ 56,859
2022 116,552
2023 and thereafter 92,048
Total lease payments 265,459
Less: imputed interest (14,400 )
Present value of lease liabilities $ 251,059 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$”). The functional currencies of the Company’s two business segments based in the PRC
is Chinese Renminbi (“RMB”) and Hong Kong dollars (“HKD”), respectively. Transactions in foreign currencies are
initially recorded at the functional currency rate ruling at the date of transaction. Any differences between the initially recorded
amount and the settlement amount are recorded as a gain or loss on foreign currency transaction in the consolidated statements of operations.
Monetary assets and liabilities denominated in foreign currency are translated at the functional currency rate of exchange ruling at
the balance sheet date. Any differences are taken to profit or loss as a gain or loss on foreign currency translation in the consolidated
statements of operations. In
accordance with ASC 830, Foreign Currency Matters, the Company translated the assets and liabilities into US$ 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 average rate used in translation of RMB to US$ is a ratio of US$1.00 = RMB 6.459589. The average rate
used in translation of HKD to US$ is a ratio of US$1.00 = HKD 7.765524. Below
is a table with foreign exchange rates used for translation:
As of June 30, Six month June 30, 2020
Period Average(average rate)
Chinese Renminbi (RMB) RMB 6.459589 RMB 7.08567
United States dollar ($) $ 1.00 $ 1.00
June 30, June 30, 2020
Period
End (Closing rate)
Chinese
Renminbi (RMB) RMB 6.457854 RMB 7.06564
United
States dollar ($) $ 1.00 $ 1.00
Period
Average (average rate) June 30, June 30, 2020
Hong
Kong dollar (HKD) HKD 7.765524 HKD 7.75191
United
States dollar ($) $ 1.00 $ 1.00
June 30, June 30, 2020
Period
End (Closing rate)
Hong
Kong dollar (HKD) HKD 7.765206 HKD 7.75074
United
States dollar ($) $ 1.00 $ 1.00 Stock-based
compensation The
Company does not provide any stock-based compensation. Basic
and diluted earnings (loss) per share Basic
and diluted earnings (loss) per common share has been computed by dividing net income (loss) by the weighted average number of common
shares outstanding. The
following table sets forth the computation of basic and diluted (loss) earnings per share:
Six Months Ended June
30, Six Months Ended June
30,
Numerator
Net income (loss) - $ 157,358 $ (85,738 )
Denominator
Weighted average common shares-basic 20,277,448 20,277,448
Earnings (loss) per common share-basic $ 0.01 $ (0.00 ) 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 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 six months ended June 30, 2021 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. 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. |
