Company: ZDAN
Filing Date: 2025-06-30
Form Type: F-1
Source: 0001683168-25-004840
Chunk: 299

Company: Zerolimit Technology Holding Co. Ltd.
Filing Date: 2025-06-30
Form: F-1
Chunk 299
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Revenue recognition

The Company adopted ASC Topic 606, Revenue from
Contracts with Customers, effective as of January 1, 2019. Accordingly, the consolidated financial statements for the years ended September
30, 2024 and 2023 are presented under ASC 606. No practical expedients were used when adoption ASC 606 The core principle of the guidance
is that an entity should recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects
the consideration to which the entity expects to be entitled in exchange for those goods or services. Revenue is the transaction price
the Company expects to be entitled to in exchange for the promised services in a contract in the ordinary course of the Company’s
activities and is recorded net of value-added tax (“VAT”). To achieve that core principle, the Company applies the following
steps:

Step 1: Identify the contract (s) with a customer

Step 2: Identify the performance obligations in the contract

Step 3: Determine the transaction price

Step 4: Allocate the transaction price to the performance
obligations in the contract

Step 5: Recognize revenue when (or as)
the entity satisfies a performance obligation

The Company generates revenues from software
licensing and providing related services through its distribution network. The distributors are considered as customers.

The Company typically enter into purchase agreements
with its distributors, which specify the cooperation scope, payment terms, rights and obligations of both parties, restrictive covenants,
delivery terms, refunds or replacements, breach and termination, and dispute resolutions. The distributors make payment to the Company
in accordance with the agreed-upon terms. After the payment has been received from the distributors, software products are delivered
in accordance with the contractual obligations in the purchase agreements to the distributors through an activation code.

Additionally, after delivery of the software
product, the Company works together with distributors to provide after-sales support and maintenance services. Revenue recognition policies
for each type of revenue stream are as follow:

Software Perpetual License

The Company derives its software perpetual license
revenue by selling software perpetual license and providing related services based on customers’ order. There are two performance
obligations. Software license and related pre-installation debugging service is considered one performance obligation. Usually the physical
possession of the software is transferred to the Customers immediately upon the delivery of software and the activation code. The activation
codes are matched to debugged software only, so the debugging is not separable from the fulfillment