U.S. SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended March 31, 2021

☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from ______________ to ______________

Commission File Number: 333-134991

ZZLL INFORMATION TECHNOLOGY, INC.

(Exact Name of Registrant as Specified in Its Charter)

Nevada		37-1847396
(State of Incorporation)		(IRS Employer Identification No.)

Unit 1504, 15/F., Carnival Commercial Building, 18 Java Road, North Point Hong Kong
(Address of Principal Executive Offices)		(Zip Code)

(+852) 3705 1571

(Registrant’s Telephone Number, Including Country Code)

Securities registered under Section 12(b) of the Exchange Act:

None

Securities registered under Section 12(g) of the Exchange Act:

Indicate by check mark whether the issuer (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports), and (2) been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer ☐	Accelerated filer ☐
Non-accelerated filer ☒	Smaller reporting company ☒
	Emerging growth company ☐

Securities registered pursuant to Section 12(b) of the Act:

Title of each class		Trading Symbol(s)		Name of each exchange on which registered
Common Stock, par value $0.0001 per share		ZZLL		None

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒

As of May 21, 2021, the Registrant had 20,277,448 shares of common stock issued and outstanding.

ZZLL INFORMATION TECHNOLOGY, INC.

TABLE OF CONTENTS

PART I – FINANCIAL INFORMATION

Item 1. Financial Statement (Unaudited)
Unaudited Condensed Consolidated Balance Sheets as of March 31, 2021 and December 31, 2020	1
Unaudited Condensed Consolidated Statements of Operations and Comprehensive Loss for the Three-Month Period Ended March 31, 2021 and 2020	2
Unaudited Condensed Consolidated Statements of Stockholders’ Deficit for the Three Months Ended March 31, 2021 and 2020	3
Unaudited Condensed Consolidated Statements of Cash Flows for the Three Months Ended March 21, 2021 and 2020	4
Notes to Unaudited Condensed Consolidated Financial Statements	5
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations	18
Item 3. Quantitative and Qualitative Disclosures About Market Risks	24
Item 4. Controls and Procedures	24

PART II – OTHER INFORMATION

Item 1. Legal Proceedings	26
Item 1A. Risk Factors	26
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds	27
Item 3. Default upon Senior Securities	27
Item 4. Mine Safety Disclosures	27
Item 5. Other Information	27
Item 6. Exhibits	27
SIGNATURES	28

ZZLL INFORMATION TECHNOLOGY, INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

(Amount in U.S. Dollars)

	Note		As of March 31, 2021			As of December 31, 2020

ASSETS
Current assets:
Cash and cash equivalents			$	156,454		$	932,102
Amounts due from related parties		6		356,294			779,768
Other receivables				47,123			34,982
Inventory				44,247			42,617
Deposit and prepaid expenses				5,338,416			7,752
Prepaid taxes				11,740			-
Total current assets				5,954,274			1,797,221

Long-term assets:
Property, plant and equipment, net				17,048			17,325
Operating leases right-of-use assets, net				261,128			291,550
Other assets				2,058			16,219
Total non-current assets				280,234			325,094
TOTAL ASSETS			$	6,234,508		$	2,122,315

LIABILITIES AND DEFICIT
Current liabilities:
Other payables			$	41,219		$	65,648
Accounts Payable				-			-
Amounts due to related parties		6		1,317,643			1,157,601
Accrued liabilities		4		201,815			201,815
Deferred income - current				4,740,569			823,337
Lease liabilities - current				103,614			105,419
Income taxes payable				11,909			4,219
Total current liabilities				6,416,769			2,358,039

Long-term liabilities:
Lease liabilities – non-current				171,050			197,224
Deferred income– long-term				646,797			682,730

TOTAL LIABILITIES			$	7,234,616		$	3,237,993

Stockholders’ deficit:
Preferred stock, $0.0001 par value, 10,000,000 shares authorized; 0 shares issued and outstanding, as of March 31, 2021 and March 31, 2020.							-
Common stock, $0.0001 par value, 300,000,000 shares authorized; 20,277,448 and 20,277,448 shares issued and outstanding, as of March 31, 2021 and March 31, 2020, respectively				2,028			2,028
Additional paid-in capital				1,671,847			1,671,847
Accumulated other comprehensive income				17,658			17,224
Accumulated deficit				(2,691,641	)		(2,806,777	)
TOTAL STOCKHOLDERS’ DEFICIT				(1,000,108	)		(1,115,678	)
TOTAL LIABILITIES AND STOCKHOLDERS’ DEFICIT			$	6,234,508		$	2,122,315

See accompanying notes to consolidated financial statements.

ZZLL INFORMATION TECHNOLOGY, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE (LOSS) INCOME

(Amounts in U.S. Dollars)

	Note		For the Quarter ended March 31, 2021			For the Quarter ended March 31, 2020

Net revenue			$	380,376		$	150,388
Cost of sales				(9,243	)		(20,242	)

Gross profit				371,133			130,146

Operating expenses

General and administrative expenses				(245,436	)		(86,818	)

Income/(loss) from operations				125,697			43,328

Non-operating income (expense)							-
Interest expenses				(3,174	)		(1,950	)
Interest income				2			4
Other income				325			87,067
Other expense				(7,714	)		-

Income (loss) before income taxes				115,136			128,449

Income taxes		5		-			-

Net income				115,136			128,449

Foreign currency translation adjustment				(434	)		1,640
Comprehensive income			$	114,702		$	130,089

Basic and diluted earnings per share of common stock			$	0.0057		$	0.0064

Weighted average number of shares of common stock outstanding
- Basic and diluted				20,277,448			20,277,448

See accompanying notes to consolidated financial statements.

ZZLL INFORMATION TECHNOLOGY, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF STOCKHOLDERS’DEFICIT

(Amounts in U.S. Dollars)

	Shares				paid-in		Comprehensive		development			stockholders’
	Outstanding*		Amount		capital		Income(loss)		stage			(deficit)/equity
			$		$		$		$			$
Balance Jan 1, 2020		20,277,448	$	2,028	$	1,671,847	$	4,397	$	(2,419,950	)	$	(741,678	)

Issuance of common stock		-		-		-		-		-			-
Currency translation adjustment		-		-		-		12,827		-			12,827
Net loss		-		-		-		-		(386,827	)		(386,827	)
Balance Dec 31, 2020		20,277,448		2,028		1,671,847		17,224		(2,806,777	)		(1,115,678	)

Balance Jan 1, 2021		20,277,448		2,028		1,671,847		17,224		(2,806,777	)		(1,115,678	)

Issuance of common stock		-		-		-		-		-			-
Currency translation adjustment		-		-		-		434		-			434
Net profit		-		-		-		-		115,136			115,136
Balance Mar 31, 2021		20,277,448		2,028		1,671,847		17,658		(2,691,641	)		(1,000,108	)

See accompanying notes to consolidated financial statements.

ZZLL INFORMATION TECHNOLOGY, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

(Amounts in U.S. Dollars)

	For the quarter ended Mar 31, 2021			For the quarter ended Mar 31, 2020
Cash Flow from Operating Activities
Net Income	$	115,136		$	128,449
Adjustments to reconcile net income (loss) to net cash used in operating activities:
Depreciation and amortization		(666	)		12,224
Interest expense		-			1,950
Change in fair value of the warrants		-			(82,000	)
Interest income		-			(4	)
Changes in assets and liabilities:
Deposit and prepayments		(5,330,664	)		(10,845	)
Other receivables		(12,141	)		(496	)
Other payables and accrued liabilities		(24,428	)		452,085
Notes payable		-			-
Deferred revenue		3,881.299			(125,000	)
Inventory		(1,630	)
Income tax payable		(4,051	)		-
Cash provided by (used for) operating activities		(1,377,145	)		376,363
Cash Flow from Investing Activities
Interest received		-			4
Purchase of property, plant and equipment		45,526
Cash used in investing activities		45,526			4

Cash Flows from Financing Activities
Payment of lease liabilities – current		(1,805	)
Payment of lease liabilities – long term		(26,174	)		(10,420	)
Amounts due from related parties		423,474			(87,900	)
Amounts due to related parties		160,042			(137,567	)
Cash provided by financing activities		555,537			(235,887	)

Net increase (decrease) in cash		(776,082	)		140,480
Currency translation adjustment		434			1,640
Cash at Beginning of Period		932,102			873,192
Cash at End of Period	$	156,454		$	1,015,312

Supplemental Disclosures of Cash Flow Information:
Interest received		2			-
Interest paid		3,174			-
Income taxes		-			-

See accompanying notes to the consolidated financial statements.

ZZLL INFORMATION TECHNOLOGY, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 1. ORGANIZATION AND BASIS OF PRESENTATION

We were incorporated under the laws of the State of Nevada on September 9, 2005 under the name of JML Holdings, Inc. and we subsequently merged with Baoshinn International Express, Inc. and changed our name to Baoshinn Corporation on January 10, 2006. We changed our name to Green Standard Technologies, Inc. on June 17, 2015 andon May 19, 2016, we changed our name to ZZLL Information Technology, Inc. (the “Company”).

On April 23, 2013, we formed a wholly owned subsidiary, Syndicore Asia Limited (“SAL”) under the laws of Hong Kong. SAL has had limited operating activities since incorporation except for holding our ownership interest in Hunan Syndicore Asia Limited (“HSAL”), an e-Commerce company organized under the laws of the People’s Republic of China (the “PRC”).

On August 18, 2016, we entered into a joint venture agreement with Network Service Management Limited (“NSML”) to form Z-Line International E-Commerce Company Limited (“Z-Line”) under the laws of Hong Kong. We initially owned 55% and NSML owned 45% of the equity interests in Z-Line, which was formed to provide consumer-to-consumer, business-to-consumer and business-to-business-sales services via web portals. On October 8, 2019, we acquired the remaining 45% equity interest in Z-Line from NSML and Z Line became a wholly owned subsidiary of our company. Z-Line has had limited operating activities since incorporation.

On May 23, 2020, we formed a wholly owned subsidiary, Shenzhen Ezekiel Technology Co. Limited (“Ezekiel”) under the laws of the PRC.

We currently operate our business through our subsidiaries, SAL, HSAL and Ezekiel. SAL and HSAL’s businesses constitute our e-commerce business segment and Ezekiel’s business belongs to our trading business segment. The e-commerce segment operates a shopping search engine Bibishengjia that concurrently searches many shopping sites, primarily based in China and helps customers meet their one-stop online shopping needs. Bibishengjia also runs its own online shopping platforms - Bibi Mall and Lianlian Nongyuan Agricultural Products Store, and sources and resells agricultural and other goods on Bibishengjia. The trading segment sells petroleum based products and multi-function lottery machines.

NOTE 2. DESCRIPTION OF BUSINESS

HSAL’s e-Commerce business

HSAL is an e-Commerce company that developed an online application “Bibishengjia”. Bibishengjia is a shopping search engine that concurrently searches many shopping sites, primarily based in China, including major shopping sites such as Taobao.com, Tmall.com, JD.com and Pinduoduo.com, and helps customers meet their one-stop online shopping needs. The shopping sites included in the Bibishengjia search engine pay us commissions for directing customers to their sites. Additionally, if a seller on a shopping site offers a rebate to the shopping site for purchases made from such seller, the shopping site typically shares such rebates with the search engine that directed the customer to the shopping site. Besides directing traffic to shopping sites, Bibishengjia also runs its own online shopping platforms - Bibi Mall and Lianlian Nongyuan Agricultural Products Store, and sources and resells agricultural and other goods on Bibishengjia. Bibi Mall and Lianlian Nongyuan Agricultural Products Store do not take possession of the products and use third party delivery services to pick up the products sold from vendors and deliver the goods to customers directly. Bibishengjia was launched on August 18, 2019 and is currently available for download at the Apple APP Store and other major mobile download stores.

Ezekiel’s petroleum based products distribution business

In October 2020, Ezekiel entered into the business of distribution of petroleum based products, such as asphalt, heat conduction oil and machine (lubricating) oil. Ezekiel’s suppliers include large Chinese state-owned enterprises as well as reputable private Chinese companies. Ezekiel doesn’t take possession of the petroleum based products sold to third parties which are stored in the supplier’s designated warehouse and is not responsible for delivery to the customers.

Ezekiel’s multi-function lottery ticket machine business

In late 2020, Ezekiel started a new business where it purchases custom-made multi-function lottery ticket machines and re-sells them to third parties. The machines are designed and manufactured by third parties with third party technologies. Ezekiel doesn’t own any intellectual property rights relating to the machines. Besides dispensing lottery tickets for which the machine owner retains 7-8% of the ticket sales price, the machines also function as a cellphone charging station for about $0.45 per hour and a disinfectant wipes dispenser at cost. The machine has a LED screen which allows a customer to browse the Bibishengjia APP and make purchases there. Ezekiel has obtained licenses from several second and third-tier cities in the PRC where competition for lottery tickets sales and lottery tickets machines is manageable. The licenses allow Ezekiel’s machines to dispense lottery tickets in these cities. Besides selling the machines to third parties, Ezekiel also plans to install, as the owner and operator, machines at locations in cities where they already received licenses to sell lottery tickets.

The cost of each machine is approximately $950 and we sell these machines to third parties for about $1375. We currently generate revenue from sales of our machines to third parties. If and when we are able to install machines, as the owner and operator, we will generate revenue from the fees Ezekiel retains on all lottery ticket sales made by the machines, and fees collected from the cellphone charging station.

NOTE 3. GOING CONCERN

The accompanying consolidated financial statements have been prepared assuming that the Company will continue as a going concern, which contemplates the realization of assets and the discharge of liabilities in the normal course of business for the foreseeable future. The Company, which had an accumulated deficit of $2,691,641 and a working capital deficit of $462,495 as of March 31, 2021, incurred losses from inception until March 31, 2021. The recoverability of a major portion of the recorded asset amounts and realization of the portion of current liabilities into revenue shown in the accompanying balance sheets are dependent upon continued operations of the Company, which in turn are dependent upon the Company’s ability to raise additional financing and to succeed in its future operations. The Company will need additional cash resources to operate during the upcoming 12 months, and the continuation of the Company may be dependent upon the continuing financial support of investors, directors and/or shareholders of the Company. However, there is no assurance that efforts to raise equity or debt will be successful in raising sufficient funds to assure the eventual profitability of the Company. These conditions raise substantial doubt about the Company’s ability to continue as a going concern. These accompanying financial statements do not include any adjustments relating to the recoverability and classification of recorded asset amounts or amounts and classification of liabilities that might be necessary should the Company be unable to continue as a going concern.

Management plans to support the Company in operation and to maintain its business strategy to raise funds through public and private offerings and to rely on officers and directors to perform essential functions with minimal compensation. If we do not raise all of the money we need from such offerings, we will have to find alternative sources including, loans from our officers, directors or others. Management has actively taken steps to revise its operating and financial requirements, which they believe will allow the Company to continue its operations for the next 12 months.

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 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 Incorporation	Attributable Equity Interest %		Registered Capital
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 quarters ended March 31, 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 impairment on inventory during the quarter ended March 31, 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 a prepayment in connection with a 7-year agreement with Pretech. The Company is recognizing the prepayment in a straight line 7-year schedule until the agreement terms are fully delivered. This prepayment has been recorded as a customer deposit.

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.

Ezekiel received a prepayment in the amount of $ 4,599,046 from Qingdao Jiuzhou Xintong Industry and Trade Co., Ltd. for the purchase of petroleum based products. This prepayment has been recorded as a customer deposit.

Revenue recognition

The Company adopted ASC Topic 606, Revenue from Contracts with Customers, and all subsequent ASUs that modified ASC 606 on April 1, 2017 using the full retrospective method which requires the Company to present the financial statements for all periods as if Topic 606 had been applied to all prior periods. Revenue from contracts with customers is recognized using the following five steps:

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.

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. Ezekiel received a prepayment in the amount of $4,599,046 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 $4,740,569 as current customer advances and $646,797 as long-term customer advances as of March 31, 2021. 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.

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 expense is mainly comprised of rent, salary, business registration fees, telephone and utilities costs, and office miscellaneous expenses.

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 Quarters Ended
	March 31,		December 31,
	2021		2020
Right-of-use assets	$	261,128	$	291,550
Lease payment liability-current		103,614		105,419
Lease payment liability-non current		171,050		197,224
Total lease payment liability	$	274,664	$	302,643

The remaining lease term and discount rate for the operating lease for office were as follows as of March 31, 2021:

Remaining lease term (years)			4
Discount rate			4.50	%

For the quarter ended March 31, 2021, the lease expense was as follows:

	For the Year Quarter March 31, 2021
Operating lease cost	$	30,078
Short-term lease cost
Total	$	30,078

Cash payment for operating lease under ASC 842 in the year of 2020 was $94,134.

For the Quarter ended March 31, 2021, rental expenses based on ASC 840 were $30,078.

The following is a schedule, by fiscal years, of the maturities of lease liabilities as of March 31, 2021:

2021 Remaining	$	86,292
2022		114,847
2023 and thereafter		90,703
Total lease payments		291,842
Less: imputed interest		(17,178	)
Present value of lease liabilities	$	274,664

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$1.00 = RMB 6.481987. The average rate used in translation of HKD to US$ is a ratio of US$1.00 = HKD 7.756896.

Below is a table with foreign exchange rates used for translation:

	March 31, 2021		December 31, 2020
Average Yearly (average rate)
Chinese Renminbi (RMB)	RMB	6.481987	RMB	6.90013

United States dollar ($)	$	1.00	$	1.00

	March 31, 2021		December 31, 2020
Year Ended (Closing rate)
Chinese Renminbi (RMB)	RMB	6.553629	RMB	6.52765

United States dollar ($)	$	1.00	$	1.00

	March 31, 2021		December 31, 2020
Average yearly (average rate)
Hong Kong dollar (HKD)	HKD	7.756896	HKD	7.75576

United States dollar ($)	$	1.00	$	1.00

	March 31, 2021		December 31, 2020
Year Ended (Closing rate)
Hong Kong dollar (HKD)	HKD	7.774219	HKD	7.75249

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:

	As of March 31, 2021		As of March 31, 2020
Numerator
Net income (loss) -	$	115,136	$	128,449

Denominator
Weighted average common shares-basic		20,277,448		20,277,448
Earnings (loss) per common share-basic	$	0.01	$	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 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 quarter ended March 31, 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.

NOTE 5. INCOME TAXES

The Company and its subsidiaries file separate income tax returns. The Company was incorporated in Delaware and is subject to United States federal and state income taxes. The Company did not generate taxable income in the United States for the quarter ended March 31, 2021 and 2019.

Two subsidiaries were incorporated in Hong Kong and are subject to Hong Kong Profits Tax at 16.5% for the quarter ended March 31, 2021 and 2019. Provision for Hong Kong profits tax has not been made for the periods presented as the subsidiaries had no assessable profits during the periods. One subsidiary is incorporated in the PRC and is subject to PRC Income Tax at 25% for the quarter ended March 31, 2021 and 2019. Provision for PRC Income Tax has not been made for the year presented as the subsidiary had no assessable profits during the year.

Deferred taxes are determined based on the temporary differences between the financial statement and income tax bases of assets and liabilities as measured by the enacted tax rates which will be in effect when these differences reverse. For the quarter ended March 31, 2021 and 2019, the Company has tax loss carrying-forwards, which does not recognize deferred tax assets as it is not probable that future taxable profits against which the losses can be utilized will be available in the relevant tax jurisdiction and entity.

NOTE 6. OTHER PAYABLES AND ACCRUED LIABILITIES

The other payables and accrued liabilities were comprised of the following:

	As of March 31, 2021		As of December 31, 2020
Accrued liabilities	$	201,815	$	201,815
Other payables		41,219		65,648
	$	243,034	$	267,463

NOTE 7. AMOUNT DUE FROM/TO RELATED PARTIES

A related party is generally defined as (i) any person and their immediate families that holds 10% or more of the Company’s securities, (ii) the Company’s management, (iii) someone that directly or indirectly controls, is controlled by or is under common control with the Company or (iv) anyone who can significantly influence the financial and operating decisions of the Company. A transaction is considered to be a related party transaction when there is a transfer of resources or obligations between related parties.

As of March 31, 2021, the Company had lent $356,294 in the normal course of business to businesses owned by related parties for their operating expenses as shown in the table below.

As of March 31, 2021, the Company had received net advances of $1,317,643 from certain major shareholders and related parties for use in its operations as shown in the table below. These advances bear no interest, are not collateralized and do not have specified repayment terms.

Amounts due from related parties are as follows:

	March 31, 2021		December 31, 2020
Amount due from related parties:
Hunan Zhong Zong Hong Fu Culture Industry Company Limited ^(b)(d)	$		$	90,093
Hunan Zhong Zong Lianlian Information Technology Limited Company ^(b)(e)		356,282		689,675
Changsha Gengtong Property Management Co., Ltd. ^(b)				-
Shen Tian		12
	$	356,294	$	779,768
Amount due to related parties:
Sean Webster	$		$	-
Wei Zhu ^(a)		232,949		233,603
Hunan Longitudinal Uned Information Technology Co., Ltd. ^(b)				-
Shenzhen Zong Wang Internet Information Limited Company ^(b)				18,843
Zhong He Lian Chuang ^(b)				15,319
Shen Tian ^(c)		642,607		496,814
Loan from Harry Cheung		40,776
Various other shareholders and directors		401,311		393,022
	$	1,317,643	$	1,157,601

(a)

Major shareholder of the Company.

(b)	Under common control.

(c)	Ezekiel’s general manager.

(d)

Hunan Zhong Zong Hong Fu Culture Industry Company Limited (“Hong Fu”): 100% of the equity interests of Hong Fu are owned by Wei Liang and Wei Zhu, the two majority shareholders of the Company. Hong Fu provides services to the cultural and entertainment industries and related marketing services to other industries. Hong Fu has been servicing the Company by making available more than a dozen of online live promoters/influencers trained by Hong Fu to HSAL on a continuous basis in the Bibishengjia APP. The Company lent RMB 600,000 (approximately $88,203) to Hong Fu when Hong Fu needed funds to improve its recruitment and training of online live promoters/influencers. This loan is from July 1, 2019 to June 30, 2021, free of interests.

(e)

Hunan Zhong Zong Lianlian Information Technology Limited Company (“Lianlian”): 100% of the equity interests of Lianlian are owned by Wei Liang and Wei Zhu, the two majority shareholders of the Company. Lianlian is engaged in technology and online-to-offline marketing services. Lianlian served the Company by utilizing its local connections and local marketing resources to help the Company secure a partnerships in March 2020 with the government of Hunan province to help to market local products on the Bibishengjia APP that are otherwise hard to sell due to transportation and other logistics limitations, and an opportunity to promote the Bibishengjia APP in local TV programs and host community gatherings to share shopping experience in Hunan province. The Company lent RMB 4,500,000 (approximately $ 689,675) to Lianlian when Lianlian needed additional funds to cover operating costs and office renovation costs. This loan is from January 1, 2020 to December 31, 2021, bearing no interests. The Company lent $13,018 to Lianlian in 2019 to help cover Lianlian’s operating costs, free of interests and due on demand.

NOTE 8. STOCK OPTIONS

During the quarters ended March 31, 2021 and 2020, the Company did not issue any stock options and there were no stock options issued or outstanding.

NOTE 9. FAIR VALUE MEASUREMENTS

FASB Accounting Standards Codification Topic 820, Fair Value Measurements and Disclosures provides a single definition of fair value, a hierarchy for measuring fair value and expanded disclosures about fair value adjustments. Various inputs are used in determining the fair value of assets and liabilities. Inputs may be based on independent market data (“observable inputs”) or they may be internally developed (“unobservable inputs”). These inputs are categorized into a disclosure hierarchy consisting of three broad levels for financial reporting purposes. The level of a value determined for an asset or liability within the fair value hierarchy is based on the lowest level of any input that is significant to the fair value measurement in its entirety. The three levels of the fair value hierarchy are as follows:

Level 1 –

Unadjusted quoted prices in active markets for identical assets or liabilities;

Level 2 –

Inputs other than quoted prices included within Level 1 that are observable for the asset or liability either directly or indirectly, including quoted prices for similar assets or liabilities in active markets, quoted prices for identical or similar assets or liabilities in markets that are not considered to be active, inputs other than quoted prices that are observable for the asset or liability and inputs that are derived principally from or corroborated by observable market data by correlation or other means; and

Level 3 –

Inputs that are unobservable for the asset or liability, including the Trust’s assumptions used in determining the fair value of investments

There were no transfers between Level 1 and other Levels during the years ended December 31, 2020 and 2019.

NOTE 10 SEGMENT INFORMATION

FASB Accounting Standard Codification Topic 280 (ASC 280) “Segment Reporting” establishes standards for reporting information about operating segments in financial statements. Operating segments are defined as components of an enterprise about which separate financial information is available that is evaluated regularly by the chief operating decision maker, or decision making Company, in deciding how to allocate resources and in assessing performance.

General Information of Reportable Segments:

Since the fourth quarter of 2020, the Company has been operating in two reportable segments: e-commerce and trading. The e-commerce segment operates a shopping search engine Bibishengjia that concurrently searches many shopping sites, primarily based in China and helps customers meet their one-stop online shopping needs. Bibishengjia also runs its own online shopping platforms - Bibi Mall and Lianlian Nongyuan Agricultural Products Store, and sources and resells agricultural and other goods on Bibishengjia. The trading segment sells petroleum based products and multi-function lottery machines. To date, there were no inter-segment revenues between our two segments. The segments’ accounting policies are the same as those described in the summary of significant accounting policies. The Company’s chief operating decision maker (“CODM”), who is the CEO of the Company, evaluates performance of each of the segments based on profit or loss from continuing operations net of income tax.

The Company’s reportable business segments are strategic business units that offer different products. Each segment is managed independently because they require different operations and markets to distinct classes of customers.

Information about Reported Segment Profit or Loss and Segment Assets

For Quarter ended March 31, 2021	E-Commerce			Trading			All Other			Total
Revenue	$	380,376		$	-		$	-		$	380,376
Cost of revenues	$	(9,184	)	$	(59	)	$	-		$	(9,243	)
Gross Profit (Loss)	$	371,192		$	(59	)	$	-		$	371,133
Selling and Marketing	$	57,505		$	-		$	-		$	57,505
General and administrative	$	68,693		$	104,293		$	14,945		$	187,931
Operating Income (Loss)	$	244,994		$	(104,352	)	$	(14,945	)	$	125,697

For Quarter ended March 31, 2020	E-Commerce			Total
Revenue	$	150,388		$	150,388
Cost of revenues	$	(20,242	)	$	(20,242	)
Gross Profit (Loss)	$	130,146		$	130,146
Operating Income (Loss)	$	43,328		$	43,328

Reconciliations of Reportable Segment Revenues, Profit or Loss, and Assets, to the Consolidated Totals as of the quarter ended March 31, 2021.

	Quarter Ended
	March 31,
Revenue	2021
Total revenues from reportable segments	$	380,376
Elimination of inter segments revenues	$	-
Total consolidated revenues	$	380,376

Profit or Loss
Total income (loss) from reportable segments	$	371,133
Elimination of inter segments profit or loss
Unallocated amount:
Other corporation expense	$	(255,997	)
Total consolidated net loss	$	115,136

Assets
Total assets from reportable segments	$	6,231,245
Unallocated amount:
Other unallocated assets – Holding Company	$	3,263
Other unallocated assets –
Other unallocated assets –
Other unallocated assets –
Total consolidated assets	$	6,234,508

NOTE 11 CONCENTRATION AND RISK

Credit risk

Financial instruments that potentially subject the Company to significant concentrations of credit risk consist primarily of cash and cash equivalents, accounts receivable, and other receivables. The Company maintains certain bank accounts in the PRC and in Hong Kong. As of March 31,2021 and December 31, 2020 and 2019, $156,454 and $932,102, respectively, were deposited in major financial institutions located in Mainland China, and Hong Kong Special Administration. Management believes that these financial institutions are of high credit quality and continually monitor the credit worthiness of these financial institutions.

Currency convertibility risk

A significant part of the Company’s businesses is transacted in RMB, which is not freely convertible into foreign currencies. All foreign exchange transactions take place either through the People’s Bank of China or other banks authorized to buy and sell foreign currencies at the exchange rates quoted by the People’s Bank of China. Approval of foreign currency payments by the People’s Bank of China or other regulatory institutions requires submitting a payment application form together with suppliers’ invoices and signed contracts. These exchange control measures imposed by the PRC government authorities may restrict the ability of the Company’s PRC subsidiary to transfer its net assets, to the Company through loans, advances or cash dividends.

Major customers

The Company engages in e-commerce and sales businesses in the PRC. All revenues were generated from customers located in the PRC. The customer who accounted for 10% or more of total revenues for the quarter ended March 31, 2021 and its outstanding accounts receivable balances as at year-end dates, are presented as follows:

		For the Quarter Ended March 31, 2021
Customer	Segment	Sales		Percentage of total Sales
Customer A	E-Commerce	$	343,920		90.42	%

For the quarter ended March 31, 2020, there were no customers who accounted for 10% or more of the Company’s sales.

Major vendors

For the quarter ended March 31, 2021, the vendor who accounted for 10% or more of the Company’s purchases and its outstanding accounts payable balances as at year-end dates, are presented as follows:

		For the Quarter Ended March 31, 2021
Supplier	Segment	Purchases		Percentage of total Purchases
Supplier A	E-Commerce	$	3,319		35.91	%
Supplier B	E-Commerce	$	5,865		62.50	%

For the quarter ended March 31, 2020, there were no vendors who accounted for 10% or more of the Company’s purchases.

NOTE 12. SUBSEQUENT EVENTS

The Company’s management has performed subsequent events procedures through the date the consolidated financial statements are issued. There were no subsequent events requiring adjustment or disclosure in the consolidated financial statements.

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

The discussion and analysis which follows in this Annual Report may contain trend analysis and other forward-looking statements within the meaning of Section 21E of the Securities Exchange Act of 1934 which reflect our current views with respect to future events and financial results. These include statements regarding our future financial results, projected growth and forecasts, and similar matters which are not historical facts. We remind stockholders that forward-looking statements are merely predictions and therefore are inherently subject to uncertainties and other factors which could cause the actual future events or results to differ materially from those described in the forward-looking statements. These uncertainties and other factors include, among other things, the impact of the spread of the COVID-19 pandemic, business conditions affecting our business and general economic conditions; our ability to generate sufficient revenues to reach profitable operations; and our need to obtain additional financing. The forward-looking statements contained in this Annual Report and made elsewhere by or on our behalf should be considered in light of these factors.

We currently operate our business through our subsidiaries, HSAL, SAL and Ezekiel.

HSAL’s e-Commerce business

HSAL is an e-Commerce company operating through its self-developed online application “Bibishengjia”. Bibishengjia is a shopping search engine that concurrently searches many shopping sites, preliminarily based in China, including major shopping sites such as Taobao.com, Tmall.com, JD.com and Pinduoduo.com, and helps customers meet their one-stop online shopping needs. Bibishengjia also runs its own online shopping platforms - Bibi Mall and Lianlian Nongyuan Agricultural Products Store. Bibishengjia was launched on August 18, 2019 and is currently available for download at the Apple APP Store and other major mobile download stores.

On September 26, 2019, we, through SAL, entered into an agreement (the “Pretech Agreement”) with Pretech International Co., Limited (“Pretech”), a company incorporated under the laws of Hong Kong (“HK”). Pretech is a software, hardware and digital company that also specializes in the development and manufacture of consumer electronics. Under the terms of the Pretch Agreement, Pretech agreed to act as SAL’s sales agent to promote and bring more customers to Bibishengjia and also make sales of its own products through the use of Bibishengjia. Pretech paid $1 million for the use of Bibishengjia, and the Company agreed to pay Pretech 5% of all sales made in the PRC and HK through Bibishengjia. The term of the Pretech Agreement is for 24 months from the date the Pretech Agreement was entered into and is extendable for another 24 months, unless a party decides to cancel at the end of the initial 24-month period. Pretech’s use of Bibishengjia is accomplished by a section on the Bibishengjia APP created specifically for Pretech. When users browse the Bibishengjia APP, they are able to click on the Pretech hyperlink and be directed to Pretech’s own site where they can make purchases of Pretech’s products. Additional features and functions may be added to the APP according to the Pretech’s needs, markets conditions and additional requirements upon separate agreement between the parties, either in conjunction with the needs of SAL and HSAL or specifically for Pretech. On October 26, 2020, the Pretch Agreement was amended and restated whereby Pretech was given the right to use Bibishengjia directly for 7 years. Under the Pretech Agreement, the Bibishengjia APP, its contents and all related intellectual property rights including rights related to the Pretech hyperlink, are the sole property of SAL, including any additional developments or modifications made in the APP, in perpetuity.

In addition to our own marketing and promotional efforts and Pretech’s sales support, in the third quarter of 2020, we started to promote the Bibishengjia APP through “Momo” by using live streaming. We believe the mobile streaming media will accelerate our growth in the future.

Ezekiel’s petroleum based products distribution business

In October 2020, Ezekiel entered into the business of distribution of petroleum based products, such as asphalt, heat conduction oil and machine (lubricating) oil. Ezekiel’s suppliers include large Chinese state-owned enterprises as well as reputable private Chinese companies. Ezekiel doesn’t take possession of the petroleum based products which are stored in the supplier’s designated warehouse and is not responsible for delivery to the customers.

Ezekiel’s multi-function lottery tickets machine business

In late 2020, Ezekiel started a new business where it purchases custom-made multi-function lottery ticket machines and re-sells them to third parties. The machines are designed and manufactured by third parties with third party technologies. Ezekiel doesn’t own any intellectual property rights relating to the machines. Besides dispensing lottery tickets for which the machine owner retains 7-8% of the ticket sales price, the machines also function as a cellphone charging station for about $0.45 per hour and a disinfectant wipes dispenser at cost. The machine has a LED screen which allows a customer to browse the Bibishengjia APP and make purchases there. Ezekiel has obtained licenses from several second and third-tier cities in the PRC where competition for lottery tickets sales and lottery tickets machines is manageable. The licenses allow its machines to dispense lottery tickets in these cities. Besides selling the machines to third parties, Ezekiel also plans to install, as the owner and operator, machines at locations in cities where they already received licenses to sell lottery tickets.

Going Concern Uncertainties

The Company, which had an accumulated deficit of $2,691,641 and a working capital deficit of $462,495 as of March 31, 2021, has incurred operating losses since inception. The recoverability of a major portion of the recorded asset amounts and realization of the portion of current liabilities into revenue shown in the accompanying balance sheets are dependent upon continued operations of the Company, which in turn are dependent upon the Company’s ability to raise additional financing and to succeed in its future operations. The Company will need additional cash resources to operate during the upcoming 12 months, and the continuation of the Company may be dependent upon the continuing financial support of investors, directors and/or shareholders of the Company. However, there is no assurance that efforts to raise equity or debt will be successful in raising sufficient funds to assure the eventual profitability of the Company. These conditions raise substantial doubt about the Company’s ability to continue as a going concern. These accompanying financial statements do not include any adjustments relating to the recoverability and classification of recorded asset amounts or amounts and classification of liabilities that might be necessary should the Company be unable to continue as a going concern.

Critical Accounting Policies

Our financial statements have been prepared in accordance with accounting principles generally accepted in the United States. The preparation of these financial statements requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. The policies discussed below are considered by management to be critical to an understanding of our financial statements because their application places the most significant demands on management’s judgment, with financial reporting results relying on estimation about the effect of matters that are inherently uncertain. Specific risks for these critical accounting policies are described in the following paragraphs. For all of these policies, management cautions that future events rarely develop exactly as forecast, and the best estimates routinely require adjustment.

Revenue Recognition.

We adopted Accounting Standard Codification (“ASC”) Topic 606, Revenues from Contract with Customers (“ASC 606”) for all periods presented. Under ASC 606, revenue is recognized when control of the promised goods and services is transferred to the Company’s customers, in an amount that reflects the consideration that we expect to be entitled to in exchange for those goods and services, net of value-added tax. We determine revenue recognition through the following steps:

●

Identify the contract with a customer;

●

Identify the performance obligations in the contract;

●

Determine the transaction price;

●

Allocate the transaction price to the performance obligations in the contract; and

●

Recognize revenue when (or as) the entity satisfies a performance obligation.

The transaction price is allocated to each performance obligation on a relative standalone selling price basis. The transaction price allocated to each performance obligation is recognized when that performance obligation is satisfied by the control of the promised goods and services is transferred to the customers, which at a point in time or over time as appropriate.

Our revenues are net of value added tax (“VAT”) collected on behalf of PRC tax authorities in respect to the sales of merchandise. VAT collected from customers, net of VAT paid for purchases, is recorded as a liability in the accompanying consolidated balance sheets until it is paid to the relevant PRC tax authorities

Ezekiel’s petroleum-based product distribution business generates revenue from its sales. Ezekiel’s multi-function lottery ticket machine business generates revenue from the sale of machines to third parties and from its retention of a percentage of all lottery ticket sales made by the machines.

Cost of sales. Cost of sales includes the cost of direct labor, merchandise and materials.

Selling expenses. Selling expenses include advertising, depreciation and amortization, and certain expenses associated with operating the Company’s corporate headquarters.

General and administrative expenses. General and administrative expenses include rent, salaries, business registration fees, telephone and utilities costs, and office miscellaneous expenses.

Accounts Receivable. We don’t have any accounts receivable in this period. For our e-commence segment, our customers are required to pay while placing their orders per our policy, and therefore we don’t record any accounts receivable. The payment under the Pretech Agreement was paid in full upon signing. Lump sum payments are required to be made for our petroleum based products and our multi-function lottery machines per our sales policy, and therefore we don’t incur any material accounts receivable.

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.

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.

Recent accounting pronouncements

Our company considers the applicability and impact of all Accounting Standard Updates (“ASUs”). ASUs not discussed below were assessed and determined to be either not applicable or are expected to have minimal impact on our balance sheets or statements of operations.

In June 2016, the FASB issued ASU 2016-13, Financial Instruments - Credit Losses (Topic 326) Measurement of Credit Losses on Financial Instruments. The amendments in this Update require a new topic to be added (Topic 326) to the Accounting Standards Codification (“ASC”) and removes the thresholds that entities apply to measure credit losses on financial instruments measured at amortized cost, such as loans, trade receivables, reinsurance recoverables, and off-balance-sheet credit exposures, and held-to-maturity securities. Under current U.S. GAAP, entities generally recognize credit losses when it is probable that the loss has been incurred. The guidance under ASU 2016-13 will remove all current recognition thresholds and will require entities under the new current expected credit loss (“CECL”) model to recognize an allowance for credit losses for the difference between the amortized cost basis of a financial instrument and the amount of amortized cost that an entity expects to collect over the instrument’s contractual life. The new CECL model is based upon expected losses rather than incurred losses. The ASU is effective for fiscal years beginning after December 15, 2022, including interim periods within those fiscal years. We are currently evaluating the effect that this new guidance will have on our financial statements and related disclosures.

Recent Developments

The COVID-19 outbreak has resulted in travel restrictions, closed international borders, enhanced health screenings at ports of entry and elsewhere, disruption of and delays in healthcare service preparation and delivery, prolonged quarantines, cancellations, supply chain disruptions, and lower consumer demand, layoffs, defaults and other significant economic impacts, as well as general concern and uncertainty. The current severity of the pandemic and the uncertainty regarding the length of its effects could have negative consequences for our company.

Most of our administrative functions are being performed remotely. A small crew maintains each of our three offices for those functions that cannot be handled remotely. Our ability to collect money, pay bills, handle customer and consumer communications, schedule production, and order ingredients necessary for our production has not been impacted.

To date, the pandemic has had minimal impact on our sales. We experienced a slight decline in sales at the beginning of the imposition of restrictions to mitigate the spread of COVID-19. To date we have not experienced a significant change in the timeliness of payments of our invoices and our cash position, remains stable with approximately $156,454 of cash and cash equivalents as of March 31, 2021.

Segment Reporting

Since the fourth quarter of 2020 we have been engaged in two business segments, the e-commerce business, consisting of HSAL and SAL’s e-commerce operation, and sales business covering Ezekiel’s sales of petroleum based products and multi-function lottery machines. In 2019 we operated in one segment, our e-Commerce segment.

Result of Operations

Three Months Ended March 31, 2021 Compared with the Three Months Ended March 31, 2021

The following table sets forth a summary of our consolidated statements of operations for the periods indicated.

	Three Months Ended						Variance
	March 31, 2021			March 31, 2020			Amount			%

Net sales	$	380,376		$	150,388			229,988			153	%

Cost of revenues		(9,243	)		(20,242	)		10,999			(54	)%

Gross profit		371,133			130,146			240,987			185	%

General and administrative and other operating expenses		(245,436	)		(86,818	)		(158,618	)		183	%

Income from operations		125,697			43,328			82,369			190	%

Other non-operating income		325			87,067			(86,742	)		(100	)%

Other expenses		(7,714	)		-			(7,714	)		N/A	%

Interest income		2			4			(2	)		(50	)%

Interest expenses		(3,174	)		(1,950	)		(1,224	)		63	%

Income before income taxes		115,136			128,449			(13,313	)		(10	)%

Income taxes		-			-

Net income		115,136			128,449			(13,313	)		(10	)%

Net revenue for the three months ended March 31, 2021 was $380,376, an increase of $229,988, or 153%, from net revenue of $150,388 for the three months ended March 31, 2020. The increase is attributable to HSAL’s e-commerce business. Bibiishengjia’s platform generated revenues of $380,376 in the three months ended March 31, 2021 compared to revenues of $150,388 in the three months ended March 31, 2020. Ezekial had no sales in this period although it received a customer deposit of $4,599,046 for petroleum based products, which will be recorded as revenues upon completion of the sale. Ezekial did not record any sales of multi-function lottery machines in the 2021 period.

Our cost of revenues decreased to $9,243 for the three months ended March 31, 2021, a decrease of $10,999, or 54%, from $20,242 for the three months ended March 31, 2020. Such decrease was attributable to the decrease of cost of revenues of the Bibiishengjia’s platform.

Our gross profit increased by $240,987 or 185%, to $371,133 in the quarter ended March 31, 2021 from $130,146 in the quarter ended March 31, 2020. Such increase was attributable to the increase of sales attributable to the Bibiishengjia’s platform.

Selling, general and administrative expenses increased by $158,618, or183%, to $245,436 in the quarter ended March 31, 2021, from $86,818 in the quarter ended March 31, 2020. The increase is mainly attributable to increased rent expenses and increased employee salaries.

Our income from operations was $125,697 for the quarter ended March 31, 2021 compared to income from operations of $43,328 for the quarter ended March 31, 2020.

We had non-operating income of $325 in the quarter ended March 31, 2021 compared to non-operating income of $87,067 in the quarter ended March 31, 2020. In 2020. we recorded $82,000 of non-operating income related to the reversal of a warrant issuance expense incurred in 2018.

Liquidity and Capital Resources

As of March 31, 2021, we had $156,454 in cash and cash equivalents and a working capital deficit of $462,495 compared with $932,102 in cash and cash equivalents and a working capital deficit of $560,819 on December 31, 2020. Our accumulated deficit on March 31, 2021 was $2,691,641.

To date the Company has funded its operations by advances from related parties which are interest free, unsecured, and have no fixed repayment terms and in 2020 from cash provided from operations including the prepayment made under the Pretech Agreement. As of March 31, 2021, and December 31, 2020, the Company had received net advances of $1,317,643 and $1,157,601 from shareholders and related parties for operating expenses. These advances bear no interest, no collateral and have no repayment term.

Management has continued to support the Company’s operations and the Company has relied on its officers and directors to perform essential functions with minimal compensation. If the Company is unable to raise the funds it requires from third parties it will have to find alternative sources, such as loans from our officers and directors.

As of March 31, 2021, the Company reported related party receivables in the aggregate amount of $356,282, due entirely from Hunan Zhong Zong Lianlian Information Technology Limited Company (“Lianlian”). 100% of equity interests of Hong Fu and Lianlian are owned by Wei Liang and Wei Zhu, the two majority shareholders of the Company. The amount due from Hong Fu, which is a loan in the principal amount of RMB 600,000 (approximately $88,203) for a two-year term beginning on July 1, 2019 and free of interest. The amount due from Lianlian in 2020, which is a loan with the principal amount of RMB 4,500,000 (approximately $ 689,675) for a two-year term beginning on January 1, 2020 and free of interest. The $13,018 due from Lianlian in 2019, is free of interests and due on demand. All of these loans were made in the ordinary course of business.

Management has actively taken steps to monitor its operating and financial requirements and believes that its current and available capital resources will allow the Company to continue its operations throughout this fiscal year.

The following table summarizes our cash flows for the periods presented:

	Three Months Ended March 31, 2021			Three Months Ended March 31, 2020
Net cash provided by (used for) operating activities		(1,377,145	)	$	376,363
Net cash provided by (used for) investing activities		45,526			4
Net cash provided by (used for) financing activities		555,537			(235,887	)
Net increase (decrease) in cash and cash equivalents		(776,082	)	$	140,480

Net cash used for operating activities during the quarter ended March 31, 2021, was $1,377,145 compared to net cash provided by operation of $376,363 in 2020. During the 2021 period Ezekial received a prepayment of $4,599,046 from customer with respect to a petroleum based product sale and subsequently made a prepayment of $5,338,416 to the supplier, Yanchang Petroleum (Zhejiang Free Trade Zone) Co., Ltd,. The difference between customer prepayment and the prepayment to supplier accounted for the majority of the net cash used for operating activities.

Net cash used for investing activities during the quarter ended March 31, 2021, was $45,526 compared to net cash provided by investing activities of $4 in 2020. The cash used for investing activities relate to the purchase of fixed assets, consisting of right of use asset (rent), furniture and lottery machines in 2021.

Net cash provided by financing activities was $555,537 for the quarter ended March 31, 2021 compared to net cash used for financing activities of $235,887 in 2020. This change was primarily due to advances of $423,474 from related parties.

We believe our existing cash and cash equivalents on hand at March 31, 2021 and the cash flows expected from operations, will be sufficient to support our operating and capital requirements during the next twelve months.

Inflation and Seasonality

We do not believe that our operating results have been materially affected by inflation during the preceding two years. There can be no assurance, however, that our operating results will not be affected by inflation in the future. Our business is subject to minimal seasonal variations.

Off-Balance Sheet Arrangements

The Company did not have any off-balance sheet arrangements as of March 31, 2021 and 2020.

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Pursuant to Item 305(e) of Regulation S-K (§ 229.305(e)), the Company is not required to provide the information required by this Item as it is a “smaller reporting company,” as defined by Rule 229.10(f)(1).

Item 4. Controls and Procedures

Evaluation of Disclosure Controls and Procedures

As of March 31, 2021, our management, with the participation of our Chief Executive Officer and Chief Financial Officer, evaluated the effectiveness of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e)) under the Securities Exchange Act of 1934 (the “Exchange Act”)as of the end of the period covered by this Annual Report on Form 10-K. Based on our evaluation, our Chief Executive Officer and Chief Financial Officer, determined that our internal controls over disclosure controls and procedures were not effective and were inadequate to insure that the information required to be disclosed by the Company in reports it files or submits under the Exchange Act were recorded, processed, summarized and reported within the time period specified in the commission rules and forms.

Disclosure Controls and Internal Controls.

As provided in Rule 13a-14 under the Exchange Act, Disclosure Controls are defined as meaning controls and procedures that are designed with the objective of insuring that information required to be disclosed in our reports filed under the Exchange Act, is recorded, processed, designed and reported within the time periods specified by the SEC’s rules and forms. Disclosure Controls include, within the definition under the Exchange Act, and without limitation, controls and procedures to insure that information required to be disclosed by us in our reports is accumulated and communicated to our management, including our chief executive officer and principal financial officer, as appropriate to allow timely decisions regarding disclosure. Internal Controls are procedures which are designed with the objective of providing reasonable assurance that (1) our transactions are properly authorized; (2) our assets are safeguarded against unauthorized or improper use; and (3) our transactions are properly recorded and reported, all to permit the preparation of our financial statements in conformity with generally accepted accounting principles.

Management’s Annual Report on Internal Control over Financial Reporting

Our management is responsible for establishing and maintaining adequate internal control over financial reporting. Under the supervision of our Chief Executive Officer and Chief Financial Officer, we conducted an evaluation of the effectiveness of our internal control over financial reporting as of March 31, 2021 using the May 2013 updated criteria established in “Internal Control—Integrated Framework” issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). A material weakness is a deficiency, or combination of deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of our annual or interim financial statements will not be prevented or detected on a timely basis. In our assessment of the effectiveness of internal control over financial reporting as of March 31, 2021, we identified material weakness as follows: (1) lack of adequate segregation of duties and necessary corporate accounting resources in our financial reporting process and accounting function, and (2) lack of control procedures that include multiple levels of review. To date, we have been unable to remediate these weaknesses. The remediation initiatives planned by the Company include hiring more personnel with public company experience and engaging an outside consultant with considerable public company reporting experience and breadth of knowledge of US GAAP to provide more training in connection with the preparation and review of our financial statements.

Changes in Internal Control over Financial Reporting

There have been no changes in our internal control over financial reporting during the period covered by this report on Form 10-K that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

PART II – OTHER INFORMATION

ITEM 1: LEGAL PROCEEDINGS

The Company is currently not a party to any material pending legal proceedings.

ITEM 1A: RISK FACTORS

There are doubts about our company’s ability to continue as a going concern.

Our company’s independent auditors have raised doubts about our ability to continue as a going concern. There can be no assurance that sufficient funds will be generated from our operation or that sufficient funds will be available from external sources, such as securities, debt or equity financing or other potential sources, for us to continue in business.

We are in the early stages of development of our business and have limited operating history on which you can base an investment decision.

We were formed in 2005, but recently refocused our business to e-commerce and trading. As a result, we may encounter many expenses, delays, problems, and difficulties that we have not anticipated and for which we have not planned. There can be no assurance that at this time we will successfully develop or acquire a significant customer base, operate profitably, or that we will have adequate working capital to fund our operations or meet our obligations as they become due.

Investors should evaluate an investment in our company in light of the problems and uncertainties frequently encountered by companies attempting to develop new markets. Despite best efforts, we may never overcome these obstacles to achieve financial success. Our business is speculative and dependent upon the implementation of our business plan, as well as our ability to successfully acquire businesses on terms that will be commercially viable for us. There can be no assurance that our efforts will be successful or result in revenue or profit. There is no assurance that we will earn significant revenues or that our investors will not lose their entire investment.

ITEM 2: UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS.

None

ITEM 3: DEFAULTS UPON SENIOR SECURITIES.

None

ITEM 4: MINE SAFETY DISCLOSURES

Not applicable

ITEM 5: OTHER INFORMATION

None

ITEM 6: EXHIBITS

Exhibits No.
31.1		Certification of Chief Executive Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
31.2		Certification of Chief Financial Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
32.1		Certification of Chief Executive Officer and Chief Financial Officer Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
101.INS		XBRL Instance Document
101.SCH		XBRL Taxonomy Extension Schema Document
101.CAL		XBRL Taxonomy Extension Calculation Linkbase Document
101.DEF		XBRL Taxonomy Extension Definition Linkbase Document
101.LAB		XBRL Taxonomy Extension Label Linkbase Document
101.PRE		XBRL Taxonomy Extension Presentation Linkbase Document

SIGNATURE

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

	ZZLL Information Technology Inc.

Dated: May 24, 2021	By:	/s/ Yanfei Tang
		Yanfei Tang
		Chief Executive Officer and Chief Financial Officer

ZZLL INFORMATION TECHNOLOGY, INC 10-Q