U.S. SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

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

For the quarterly period ended March 31, 2019

OR

 ̈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:

Common Stock, $0.0001 par value per share

(Title of Class)



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   T  No  £



Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, 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 x   No  ̈



Indicate by check mark whether the registrant is a large accelerated filer, an accelerated file, non-accelerated filer, or a smaller reporting company.

|                                                   |                                                 
|-------------------------------------------------- | ------------------------------------------------
|Large accelerated filer £
Non-accelerated filer  £ | Accelerated filed  £
Smaller reporting company T



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



As of May 20,  2019, the Registrant had 20,277,448 shares of common stock issued and outstanding.

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ZZLL INFORMATION TECHNOLOGY, INC.

TABLE OF CONTENTS



PART I – FINANCIAL INFORMATIONItem 1.  Financial Statement (Unaudited)Unaudited Consolidated Balance Sheets as of March 31,  2019 and December 31, 20183Unaudited Consolidated Statements of Operations for the Three Months EndedMarch 31,  2019 and 20184Unaudited Consolidated Statements of Stockholders Deficit and Comprehensive Income As of March 31,  2019 and December 31, 20185Unaudited Consolidated Statements of Cash Flows for the Three Months Ended, March 31, 2019 and 20186Notes to Unaudited Consolidated Financial Statements7Item 2.  Managements Discussion and Analysis of Financial Condition and Results of Operations33Item 3. Quantitative and Qualitative Disclosures About Market Risk36Item 4. Controls and Procedures36PART II  OTHER INFORMATIONItem 1. Legal Proceedings37Item 1A. Risk Factors37Item 2. Sales of Equity Securities and Use of Proceeds37Item 3. Defaults upon Senior Securities37Item 4. Mine Safety Disclosures37Item 5. Other Information37Item 6. Exhibits37SIGNATURES38




Special Note Regarding Forward-Looking Statements

Information included in this Form 10-Q contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended (Securities Act), and Section 21E of the Securities Exchange Act of 1934, as amended (Exchange Act). This information may involve known and unknown risks, uncertainties and other factors which may cause the actual results, performance or achievements of ZZLL Information Technology, Inc. (the Company), to be materially different from future results, performance or achievements expressed or implied by any forward-looking statements. Forward-looking statements, which involve assumptions and describe future plans, strategies and expectations of the Company, are generally identifiable by use of the words may, will, should, expect, anticipate, estimate, believe, intend, or project or the negative of these words or other variations on these words or comparable terminology. These forward-looking statements are based on assumptions that may be incorrect, and there can be no assurance that these projections included in these forward-looking statements will come to pass. Actual results of the Company could differ materially from those expressed or implied by the forward-looking statements as a result of various factors. Except as required by applicable laws, the Company has no obligation to update publicly any forward-looking statements for any reason.  This Quarterly Report, and unless otherwise noted, the words "we," "our," "us," the "Company," "ZZLL" or Icon refers to ZZLL Information Technology, Inc.

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PART I - FINANCIAL INFORMATION

ITEM: 1 FINANCIAL STATEMENT

ZZLL INFORMATION TECHNOLOGY, INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

NotesMarch 31, 
    2019December 31,
    2018ASSETS(Unaudited)(Audited)Current assets:Cash and cash equivalents$45,508$10,793Amount due from NSML  Non-controlling interest5294,872294,872Other receivables5,2164,474Prepaid expenses6,066-Total current assets351,662310,139Non-current assets:Property, plant and equipment, net322366TOTAL ASSETS$351,984$310,505LIABILITIES AND STOCKHOLDERS EQUITYCurrent liabilities:Note payable$-$75,000Warrants liabilities9414,293555,883Amount due to related party8397,103321,504Other payables and accrued liabilities7285,178269,897Income tax payable1,3891,389Total current liabilities1,097,9631,223,673TOTAL LIABILITIES$1,097,963$1,223,673Stockholders equityPreferred stock, $0.0001 par value, 100,000,000 shares authorized; none issued and outstanding$-$-Common stock, $0.0001 par value, 300,000,000 shares authorized; 20,277,448 and 20,277,448 shares issued and outstanding, at March 31, 2019 and December 31, 2018 respectively2,0282,028Additional paid-in capital1,671,8471,671,847Accumulated other comprehensive (loss) income(270)804(Accumulated deficit)/ retained earnings(2,703,372)(2,872,550)TOTAL STOCKHOLDERS EQUITY(1,029,767)(1,197,871)Attributable to Non-Controlling Interest283,788284,703Attributable to The Group(745,979)(913,168)TOTAL LIABILITIES AND STOCKHOLDERS EQUITY$351,984$310,505




See accompanying notes to unaudited consolidated financial statements



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ZZLL INFORMATION TECHNOLOGY, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS



(Unaudited)Apr. 15, 2011NotesThree Months Ended March 31,(Inception)
    Through20192018Mar. 31, 2019Net Revenue$28,907)$268$125,279Cost of sales(18,781)(2,003)(56,454)Gross profit /(loss)10,126(1,735)68,825Operating expensesSelling, General and administrative expenses69,37954,2992,438,180(Loss) /Income  from operations(59,253)(56,034)(2,369,355)Non-operating income /(expense):Other income227,516137,520369,265Interest income---Interest expenses--(214)Total non-operating income /(expense)227,516137,520369,051Income /(Loss) before income taxes168,26381,486(2,000,304)Income taxes6--1,389Net income /(loss)168,26381,486(2,001,693)Non-controlling interest9151,00436,725Net income /(loss) attributable to the Company169,17882,490(1,964,968)Comprehensive income statement:Net income /(loss)169,17882,490(1,964,968)Foreign currency translation adjustment(1,074)(827)(270)Comprehensive Income /(Loss)$168,104$81,663$(1,965,238)Basic and diluted earnings /(loss) per share of common stock0.83 cents0.42 cents(48.81 cents)Weighted average number of common shares outstanding  basic and diluted20,277,44819,624,1154,025,778




The accompanying notes are an integral part of the financial statements

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ZZLL INFORMATION TECHNOLOGY, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF STOCKHOLDERS EQUITY AND

ACCUMULATED OTHER COMPREHENSIVE INCOME (UNAUDITED)

|                         |               |   |            |   |           |   |                |   |             |   |                 
|------------------------ | ------------- | - | ---------- | - | --------- | - | -------------- | - | ----------- | - | ----------------
|                         |               |   |            |   |          
|                         |               |   |            |   |           |   | Accumulated    |   | Accumulated |   |                 
|                         | Common stock  |   | Additional |   | Other     |   | deficit during |   | Total      
|                         | Shares        |   | Amount     |   | paid-in   |   | Comprehensive  |   | development |   | stockholders'   
|                         | Outstanding * |   |            |   | capital   |   | Income         |   | stage       |   | equity/(deficit)
|                         |               |   |            |   |           |   |                |   |             |   |                 
|Balance,
Jan 1, 2018     | 19,252,448    | $ | 1,925      | $ | 1,630,950 | $ | (388)          | $ | (2,751,744) | $ | (1,119,257)     
|                         |               |   |            |   |           |   |                |   |             |   |                 
|Issuance of common stock | 1,025,000     |   | 103        |   | 40,897    |   | -              |   | -           |   | 41,000          
|Exchange reserve         | -             |   | -          |   | -         |   | (837)          |   | -           |   | (837)           
|Net loss                 | -             |   | -          |   | -         |   | -              |   | 82,490      |   | 82,490          
|Balance,
Mar 31, 2018    | 20,277,448    | $ | 2,028      | $ | 1,671,847 | $ | (1,215)        | $ | (2,669,254) | $ | (996,594)       
|                         |               |   |            |   |           |   |                |   |             |   |                 
|Balance,     Jan 1, 2019 | 20,277,448    | $ | 2,028      | $ | 1,671,847 | $ | 804            | $ | (2,872,550) | $ | (1,197,871)     
|                         |               |   |            |   |           |   |                |   |             |   |                 
|Issuance of common stock | -             |   | -          |   | -         |   | -              |   | -           |   | -               
|Exchange reserve         | -             |   | -          |   | -         |   | (1,074)        |   | -           |   | (1,074)         
|Net loss                 | -             |   | -          |   | -         |   | -              |   | 169,178     |   | 169,178         
|Balance,
Mar 31, 2019    | 20,277,448    | $ | 2,028      | $ | 1,671,847 | $ | (270)          | $ | (2,703,372) | $ | (1,029,767)     
|                         |               |   |            |   |           |   |                |   |             |   |                 





The accompanying notes are an integral part of the financial statements



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ZZLL INFORMATION TECHNOLOGY, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS



(Unaudited)(Unaudited)Three Months Ended
    March 31,Apr 15, 2011 (inception)
    Through20192018Mar 31, 2019Cash flows used in operating activities:Net (loss) /income$169,178$82,490$(1,964,968)Adjustments to reconcile net income /(loss) to net cash used in operating activities:Depreciation and Amortization4437284Re-organization (reverse merger and spin-off)--(9,195)Stock based compensation--85,000Non-controlling interest(915)(1,004)(36,725)Warrant liabilities(141,590)(137,512)414,293Changes in assets and liabilities:Prepayment(6,066)-(6,066)Other receivables(742)(116)(5,216)Other payables and accrued liabilities15,28112,201367,178Notes payable(75,000)--Income tax payable--1,389Net cash provided by (used for) operating activities(39,810)(43,904)(1,154,026)Cash flows used for investing activities:Disposal of subsidiary OODI--22,942Purchase of Property, Plant and Equipment--(606)Net cash used for investing activities--22,336Cash flows provided by (used for) financing activities:Proceed from Issuance of common stock-41,000836,724Amount due from NSML--25,641Amounts due to / from related parties75,5996,848315,103Net cash provided by (used for) financing activities75,59947,8481,177,468Net increase /(decrease) in cash35,7893,94445,778Effect of foreign currency translation(1,074)(827)(270)Cash  beginning of period10,7918,430-Cash  end of period$45,508$21,547$45,508Supplemental disclosures of cash flow information:Interest paid$-$-$-Income taxes$-$-$-




See accompanying notes to unaudited consolidated financial statements

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ZZLL INFORMATION TECHNOLOGY, INC. AND SUBSIDIARIES

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS



NOTE 1.-ORGANIZATION AND BASIS OF PRESENTATION



ZZLL Information Technology, Inc. (The Company) was incorporated under the laws of the State of Nevada on September 9, 2005, under the name of JML Holdings, Inc.  The Company merged with Baoshinn International Express, Inc. (BSIE) on March 31, 2006, by acquiring all of the issued and outstanding common stock of BSIE in a share exchange transaction. We issued 16,500,000 shares of our common stock in exchange for 100% of the issued and outstanding shares of BSIE common stock.  The transaction was accounted for as a recapitalization of BSIE whereby BSIE is deemed to be the accounting acquirer and is deemed to have adopted our capital structure.

On June 17, 2015, Baoshinn Corporation had been amended to the name Green Standard Technologies, Inc..

On May 27, 2016, the Company changed its name with the State of Nevada from Green Standard Technologies, Inc. to ZZLL Information Technology, Inc.

On May 27, 2016, ZZLL Information Limited acquired 4,992,500 common shares of the Company through a private Common Stock Purchase Agreement for investment purposes in the ordinary course of business. The aggregate number and percentage of common shares of the Issuer beneficially owned by Mr. Wei Liang is 4,992,500 common shares, or approximately 26.662% of the 18,725,003 issued common shares.

On June 14, 2016, Wei Liang (Mr. Liang) was appointed to serve as a member of the Board of Directors of ZZLL Information Technology, Inc.

On June 24, 2016, ZZLL Technology Limited acquired 4,895,000 common shares of the Company through a private Common Stock Purchase Agreement for investment purposes in the ordinary course of business. The aggregate number and percentage of common shares of the Issuer beneficially owned by Mr. Wei Zhu is 4,895,000 common shares, or approximately 26.142% of the 18,725,003 issued common shares.

On August 18, 2016, the Company through SAL entered into a Joint Venture Agreement (JVA) with Network Service Management Limited, a Hong Kong company (NSML) in the formation of Z-Line International E-Commerce Company Limited (Z-Line), a Hong Kong based e-Commerce company. The Company through SAL owned 55% of Z-Line that provides consumer-to-consumer, business-to-consumer and business-to-business-sales services via web portals.

On August 25, 2016 and September 20, 2016, the Company issued 6,696,500 common shares and 32,000,000 common shares to the officer respectively. The issuance with an aggregate of 38,696,500 common shares in lieu of $193,483 compensation to the officer under an option resolved in 2013 to pay the officer by common stock in lieu of cash at a rate of $0.005 per share.

On November 10 and December 1, 2016, the Company further issued 1,000,000 common shares and 15,400,000 common shares to the officer respectively. The issuance with an aggregate of 16,400,000 common shares in lieu of $82,000 compensation to the officer under an option resolved in 2013 to pay the officer by common stock in lieu of cash at a rate of $0.005 per share.

Effective on October 5, 2017, the Company executed a reverse stock split pursuant to which fifty (50) shares of the Companys Common Stock, par value $.0001 per share, issued and outstanding, was reclassified as and changed, into one (1) share of the Companys outstanding Common Stock.

On October 13, 2017, the Company issued 15,753,500 common shares to the officer. The issuance of 15,753,500 common shares was in lieu of $78,768 in compensation due to the officer under an option granted in 2013 to pay the officer by common stock in lieu of cash at a rate of $0.005 per share.

On December 12, 2017, the Company issued 2,022,500 shares of units consisting of its common stock and a warrant (the Units).  The units were issued to five shareholders at a rate of $0.04 per Unit. The warrant exercise price is $0.05 for one common share valid for a two years period after the subscription date. The total consideration for the issuance was $80,900.

On January 31, 2018, the Company issued 475,000 units consisting of its common stock and a warrant (the Units) to two shareholders at a rate of $0.04 per Unit. The warrant exercise price is $0.05 for one common share and it is valid for a two years period after the subscription date. The total consideration for the issuance was $19,000.

On March 23, 2018, the Company issued 550,000 units consisting of shares of its common stock and a warrant (the Units) to three shareholders at a rate of $0.04 per Unit. The warrant exercise price is $0.05 for one common share and it is valid for a two years period after the subscription date. The total consideration for the issuance was $22,000.





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ZZLL INFORMATION TECHNOLOGY, INC. AND SUBSIDIARIES

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS



NOTE 2.-DESCRIPTION OF BUSINESS



Syndicore Asia Limited  Video Syndication and E-Commerce Company

Syndicore Asia Limited (SAL) is a wholly owned subsidiary of the Company formed under the laws of Hong Kong.   SAL is an online media company that syndicates video in a cloud-based, multimedia conduit serving a growing global community of content creators, news outlets and leading brands. SAL will be a provider of syndicated video media to news organizations in the Asia Pacific region. In addition, SAL plans to aggregate content from the Asia Pacific region and provide it to news organizations around the world.

On December 15, 2013, SAL entered into a Distribution Agreement (the Distribution Agreement) with SendtoNews Video, Inc., a British Columbia company (STN). Under the terms of the Distribution Agreement, SAL was granted an exclusive license to use, modify, edit, reproduce, distribute, feed, store, communicate, display, and transmit STNs content in the Asia Pacific Territory (the Content). STN is the content provider for various worldwide sporting events. STN would also provide on-going assistance to SAL with regard to technical, administrative, and service-orientated issues relating to the delivery, utilization, transmission, storage and maintenance of the Content.

On January 20, 2014, SAL entered into a revised Distribution Agreement whereby STN has agreed to provide SAL transferrable rights for the use, reproduction, storage, display, and transmission of certain content subject to pre-approval in writing from STN. In addition, the revised Distribution Agreement includes changes to the revenue sharing terms, and adds a share of advertising revenue directly resulting from aggregated content by SAL within the territory.

SAL will strive to become a leading digital content provider for the Asia Pacific region, capitalizing on an explosively growing market with local, regional and national content that was previously unavailable in the area. This is a new and exciting market, and offers exciting opportunities for expansion and growth. There is no assurance, however, that SAL will be successful in its efforts.

On the other side of the distribution chain, we plan to create SALs own proprietary news partnerships to provide guaranteed content distribution in return for a corresponding share of advertising revenues to a news industry looking to supplement their rapidly declining traditional ad revenue with viable digital-age revenue.

  Digital ad spending is on the rise. It is forecasted to expand from $117.60 billion USD in 2013 to $173.12 billion USD in 2017. (Go-Globe.com)

  The increase in worldwide digital ad spending is led by the Asia-Pacific region and specifically China.

  China is estimated to reach 33% of the worlds total ad spending by 2017. (Infographic)

  Branded video content reaches nearly half (46%) of all internet users. More than half of these people (54%) go on to click though to the brands website (Econsultancy)

  80% of internet users recall watching a video ad on a website they visited in the past 30 days; 46% took some action after viewing the ad (Online Publishers Association)

  Video promotion is over 6 times more effective than print and online (b2bmarketing.net)

  Dr. James McQuivey of Forrester Research says a minute of video is worth 1.8 million words

  90% of information transmitted to the brain is visual, and visuals are processed 60,000X faster in the brain than text (3M Corporation & Zabisco)

Management believes that SALs customers will be willing to pay a premium CPM because:

  The ability to sponsor exclusive, highly sought-after short form video content

  Deep, creative advertising opportunities  other than rudimentary logo/banner overlays and pre-roll

  Premium positioning

  Unprecedented transparency and near real-time performance metrics to evaluate their investment

  Securing sponsorships with related enterprises

  Stronger control over distribution to help target intended audience.

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ZZLL INFORMATION TECHNOLOGY, INC. AND SUBSIDIARIES

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS



NOTE 2.-DESCRIPTION OF BUSINESS (CONTINUED)

  Other segments of the market are also benefiting.  The high and rapidly increasing popularity of social media platforms such as Facebook, YouTube, and Twitter are expected to revolutionize the marketing strategies employed in areas such as the pharmaceuticals industry. There, in addition to marketing, an increasing number of pharma players have also begun leveraging these platforms to enhance consumer relationships and improve brand management, based on the market intelligence generated by monitoring and analyzing user-generated content. The ability to incorporate consumer feedback to develop new products is also expected to initiate a strategic shift in the operational model of pharma companies. Social media involvements are expected to increase product sales, especially those of OTC drugs, in the long term. Novartis for instance has already begun using YouTube and Facebook to enhance the sales for its OTC drugs such as Comtrex, Orofar and Bufferin. Johnson &Johnson, one of the first pharma giants to enter the social media space, has used online platforms for crisis management  when the company recalled its products (Tylenol and Benadryl tablets) it used social websites to apologize to consumers for irregularities in its manufacturing plant found during FDA inspection.

SALs exclusive distribution agreement with SendtoNews Video Incorporated (STN) for the Asia Pacific region includes major markets such as Japan, China and India. SAL now has distribution rights of online content for some of the worlds leading sports organizations with the same highlights, player interviews and other fan-interest content. SAL, being the exclusive provider in the Asia Pacific region for highly sought after content, offers deep market exposure with unprecedented efficiency and metrics-driven transparency. On the other side of the distribution chain, we will create SALs own proprietary news partnerships to provide guaranteed content distribution in return for a corresponding share of advertising revenues to a News industry looking to supplement their rapidly declining traditional ad revenue with viable digital-age revenue.

SAL is also in the startup phase and is in the process of entering into arrangements and agreements to implement the current business plan.  Syndicore Asia Limited is devoting its resources to establishing the new business, and its planned operations have not yet fully commenced.

Green Standard Technologies Enterprises, Inc. (F/K/A Green Standard Technologies, Inc.)

On August 1, 2014, the Company formed Green Standard Technologies, Inc. (GSTE) as a wholly owned subsidiary incorporated under the law of the state of Nevada. The Companys second line of business is carried out by this subsidiary.

GSTE is in the medical and recreation marijuana industry, and the establishment of a website will be used to further their business by providing visions with medical and recreational marijuana resource.

During the year 2017, GSTE was inactive, no longer had a useful purpose, and provided no revenue to the Company. On Dec 29, 2017, for the best interest of the Company, the Board decided to eliminate all costs in connection with GSTE, agreed not to continue GSTE and closed down with immediate effect.

Z-Line International E-Commerce Company Limited  E-Commerce Company

Z-Line International E-Commerce Company Limited (Z-Line) is a 55% owned subsidiary of the Company formed under the laws of Hong Kong and incorporated on August 17, 2016.  Z-Line is a Hong Kong based e-Commerce company that provides consumer-to-consumer, business-to-consumer, and business-to-business-sales services via web portals.

Z-Line currently operates through the web portal www.zzll.win and has begun additional development, which will occur as the site evolves to increase its functionality, sales, service, support and product offerings. Z-line Mall currently carries daily necessities, cosmetic products and skin care products.



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ZZLL INFORMATION TECHNOLOGY, INC. AND SUBSIDIARIES

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS



NOTE 2.-DESCRIPTION OF BUSINESS (CONTINUED)

Hunan Syndicore Asia Limited  E-Commerce Company

On June 28, 2017, Hunan Syndicore Asia Limited (HSAL), a 100% owned subsidiary of Syndicore Asia Limited incorporated under the laws of PRC.  HSAL is a Wholly Foreign-Owned Enterprise (WFOE) in China, established in the National High-Tech Industrial Development Zone of Changsha, Hunan.  HSAL is a PRC based e-Commerce company that will endeavor to develop its in E-Commerce, video content and video streaming capabilities. Additionally, HSAL has now launched Hua Wen Mall (HWM) - its first online member retail website at hwt.zzll.win. HWM is a platform that allows businesses to sell their products and services to HWMs members through this business-to-business and business-to-consumer portal. All payments and processing will go through HWM, for which they will receive a transaction fee. The Mall will develop its own branded products, and is especially moving towards products which have smart functionality allowing the Company to capture a greater segment of the market with data and information analytics as social media becomes increasingly influential in the Chinese market.

Hua Wen Mall will also cooperate with ZZLLs existing Hong Kong platform, Z-Line Mall (www.zzll.win) to share members, customers and products.



NOTE 3.-GOING CONCERN

The financial statements at March 31, 2019, at Dec 31, 2018, and for the period from April 15, 2011 (date of inception), to March 31, 2019, have been prepared in accordance with generally accepted principles in the United States applicable to a going concern basis, which contemplates the realization of assets and settlement of liabilities and commitments in the normal course of business.  The Company incurred an accumulated deficits of $2,703,372 as of March 31, 2019 ($2,872,550 as of Dec 31, 2018), generated a net income of $169,178 for the three months period ended March 31, 2019 ($82,490 for comparable period ended March 31, 2018). As of March 31, 2019, the Company has its current liabilities exceed its current assets resulting in negative working capital of $746,301 ($913,534 as of Dec 31, 2018). In view of the matters described above, 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 may 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 equity or debt offerings will be successful in raising sufficient funds to assure the eventual profitability of the Company. 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 is 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 a public offering, we will have to find alternative sources, such as a private placement of securities, or loans from our officers, directors or others.

Moreover, management has actively taken steps to revise its operating and financial requirements, which believes that will allow the Company to continue its operations throughout this fiscal year.

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ZZLL INFORMATION TECHNOLOGY, INC. AND SUBSIDIARIES

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS



NOTE 4.-SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Basis of presentation and consolidation

The accompanying unaudited consolidated financial statements of the Group have been prepared in accordance with generally accepted accounting principles in the United States (GAAP) for interim financial reporting, and in accordance with instructions for Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements. In the opinion of management, the unaudited consolidated financial statements contained in this report reflect all adjustments that are normal and recurring in nature and considered necessary for a fair presentation of the financial position and the results of operations for the interim periods presented. The year-end balance sheet data was derived from audited financial statements, but does not include all disclosures required by GAAP. The results of operations for the interim period are not necessarily indicative of the results expected for the full year. These unaudited, consolidated financial statements, footnote disclosures and other information should be read in conjunction with the financial statements and the notes thereto included in the Companys Annual Report on Form 10-K for the year ended December 31, 2018.

The consolidated financial statements are presented in US Dollars and include the accounts of the Group 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 income statement 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 subsidiary:

Name of SubsidiaryPlace of IncorporationAttributable Equity Interest %Registered CapitalGreen Standard Technologies Enterprise, Inc. (1)Nevada100USD
    100Syndicore Asia Limited (2)Hong Kong100HKD
    1Z-Line International E-Commerce Limited (3)Hong Kong55HKD
    8,000,000Hunan Syndicore Asia LimitedPRC100HKD  10,000,000


Note:

(1) Wholly owned subsidiary of ZZLL, discontinuous as at Dec 29, 2017

(2) Wholly owned subsidiary of ZZLL

(3) 55% owned subsidiary of Syndicore Asia Limited

(4) Wholly owned subsidiary of Syndicore Asia Limited

The results of subsidiaries acquired or disposed of during the years are included in the consolidated income statement from the effective date of acquisition or up to the effective date of disposal.

Use of estimates

In preparing financial statements in conformity with accounting principles generally accepted in the United States of America, 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 Group to significant concentrations of credit risk consist principally of accounts receivable.  In respect of accounts receivable, the Group 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 Group 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 Group 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 Group consider that the Group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 Group currently maintains bank accounts in HK and PRC only.



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NOTE 4.-SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

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 Group will not be able to collect all amounts due according to original terms of receivables.  Bad debts are written off when identified.  The Group 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 Group does not accrue interest on trade accounts receivable. The Group has a credit policy in place and the exposure to credit risk is monitored on an ongoing basis credit evaluations are preferred on all customers requiring credit over a certain amount.  The Group had experienced the bad debts of $nil and $nil during the three months period ended March 31, 2019 and 2018 respectively.

Plant and equipment

Plant and equipment are stated at cost less accumulated depreciation.  Cost represents the purchase price of the asset and other costs incurred to bring the asset into its existing use.  Maintenance, repairs and betterments, including replacement of minor items, are charged to expense; major additions to physical properties are capitalized.

Depreciation of plant and equipment is provided using the straight-line method over their estimated useful lives at the following annual rates:

| |                        |           |  | 
| | ---------------------- | --------- |  | 
| |                        |           |  | 
| | Furniture and fixtures | 20% - 50% |  | 
| | Office equipment       | 20%       |  | 

Property 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.

Revenue recognition

The Group recognizes revenue when it is earned and realizable based on the following criteria: persuasive evidence that an arrangement exists, services have been rendered, the price is fixed or determinable and collectability is reasonably assured.

The Group also evaluates the presentation of revenue on a gross versus a net basis through application of Emerging Issues Task Force No. (EITF) 99-19, Reporting Revenue Gross as a Principal versus Net as an Agent. The consensus of this literature is that the presentation of revenue as the gross amount billed to a customer because it has earned revenue from the sale of goods or services or the net amount retained (that is, the amount billed to a customer less the amount paid to a supplier) because it has earned a commission or fee is a matter of judgment that depends on the relevant facts and circumstances. In making an evaluation of this issue, some of the factors that should be considered are: whether the Group is the primary obligor in the arrangement (strong indicator); whether it has general inventory risk (before customer order is placed or upon customer return) (strong indicator); and whether we have latitude in establishing price. The guidance clearly indicates that the evaluations of these factors, which at times can be contradictory, are subject to significant judgment and subjectivity. If the conclusion drawn is that the Group performs as an agent or a broker without assuming the risks and rewards of ownership of goods, revenue should be reported on a net basis.

Cost of sales

Cost of sales includes the cost of direct labor, merchandise, materials and installation charges on the service being provided.

Operating lease rental

The Company did not have a lease that met the criteria of a capital lease. Leases that do not qualify as a capital lease are classified as an operating lease. Operating lease rental expenses included in selling, general and administrative expenses for the three months ended March 31, 2019 and 2018 were $7,161 and $7,783, respectively.



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NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS



NOTE 4.-SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

Selling expenses

Selling expenses include store-related expense, other than store occupancy costs, as well as advertising, depreciation and amortization, and certain expenses associated with operating the Companys corporate headquarters.

Advertising expenses

Advertising expenses are charged to expense as incurred. The advertising expenses incurred for the three months ended March 31, 2019 and March 31, 2018 were $Nil and $Nil respectively.

Retirement Benefit Plans

Full time employees of the Company in the PRC participate in a government mandated defined contribution plan, pursuant to which certain pension benefits, medical care, employee housing fund and other welfare benefits are provided to employees. Chinese labor regulations require the Company to make contributions to the government for these benefits based on certain percentages of the employees salaries. The Company accounts the mandated defined contribution plan under the vested benefit obligations approach based on the guidance of ASC 715, CompensationRetirement Benefits.

The total amounts for such employee benefits which were expensed were $4,606 and $923 for the three months ended March 31, 2019 and 2018, respectively.

Product warranty

The company is the legal obligor for the warranties of the services provided to customers. Since our inception to present, we have not incurred any direct warranty expenses and accordingly, the accrual and associated expenses recognized in the financial statements has been recorded as zero.

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.

The FASB issued Accounting Standard Codification Topic 740 (ASC 740) Income Taxes. ASC 740 clarifies the accounting for uncertainty in tax positions. This requires that an entity recognized in the consolidated financial statements the impact of a tax position, if that position is more likely than not of being sustained upon examination, based on the technical merits of the position. The adoption of ASC 740 did not have any impact on the Groups results of operations or financial condition for the three months ended March 31, 2019.  As of the date of the adoption of ASC 740, the Group has no material unrecognized tax benefit which would favorably affect the effective income tax rate in future periods.  The Group has elected to classify interest and penalties related to unrecognized tax benefits, if and when required, as part of income tax expense in the consolidated statements of operations.

Comprehensive income

Other comprehensive income refers to revenues, expenses, gains and losses that under U.S. GAAP are included in comprehensive income but are excluded from net income as these amounts are recorded as a component of stockholders equity.  The Groups other comprehensive income represented foreign currency translation adjustments.





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NOTE 4.-SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

Foreign currency translation

For financial reporting purposes, the financial statements of the Group which are prepared using the functional currency have been translated into United States Dollars (US$). The functional currencies of the Companys subsidiary operating business unit based in Hong Kong and PRC are the Hong Kong Dollar (HK$) and Chinese Renminbi (RMB) respectively. Transactions in foreign currencies are initially recorded at the functional currency rate ruling at the date of transaction. Any differences between the initially recorded amount and the settlement amount are recorded as a gain or loss on foreign currency transaction in the consolidated statements of income. 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 statements of income.

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 statements of income and cash flows are translated at an average rate during the reporting period and stockholders equity is translated at historical exchange rates. Adjustments resulting from the translation are recorded in shareholders equity as part of accumulated other comprehensive income.

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

|                                                                             |               |   |              |  |     |               |   |         |  |  |     |  |   |         | 
|---------------------------------------------------------------------------- | ------------- | - | ------------ |  | --- | ------------- | - | ------- |  |  | --- |  | - | ------- | 
|For the three months and year ended, (Average Rate)                          | Mar. 31, 2019 |   | Dec 31, 2018 |  |     | Mar. 31, 2018 |  
|Chinese Renminbi (RMB)                                                       | RMB           |   | 6.71719      |  | RMB |               |   | 6.72356 |  |  | RMB |  |   | 6.35819 | 
|United States dollar ($)                                                     |               | $ | 1.00000      |  |     |               | $ | 1.00000 |  |  |     |  | $ | 1.00000 | 
|                                                                             |               |   |              |  |     |               |   |         | 
|As of (Closing Rate)                                                         | Mar. 31, 2019 |   | Dec 31, 2018 |  |     | Mar. 31, 2018 |  
|Chinese Renminbi (RMB)                                                       | RMB           |   | 6.68151      |  | RMB |               |   | 6.85052 |  |  | RMB |  |   | 6.28068 | 
|United States dollar ($)                                                     |               | $ | 1.00000      |  |     |               | $ | 1.00000 |  |  |     |  | $ | 1.00000 | 
|                                                                             |               |   |              |  |     |               |   |         |  |  |     |  |   |         | 
|For the three months and year ended, (Average Rate) and as of (Closing Rate) | Mar. 31, 2019 |   | Dec 31, 2018 |  |     | Mar. 31, 2018 |  
|Hong Kong (HKD)                                                              | HKD           |   | 7.80000      |  | HKD |               |   | 7.80000 |  |  | HKD |  |   | 7.80000 | 
|United States dollar ($)                                                     |               | $ | 1.00000      |  |     |               | $ | 1.00000 |  |  |     |  | $ | 1.00000 | 

Fair value of financial instruments

The carrying values of the Groups financial instruments, including cash and cash equivalents, trade and other receivables, deposits, trade and other payables approximate their fair values due to the short-term maturity of such instruments. The carrying amounts of borrowings approximate their fair values because the applicable interest rates approximate current market rates.

Stock-Based Compensation

Financial Accounting Standards Board (FASB) Accounting Standards Codification (ASC) Topic 718, Share-Compensation (formerly, FASB Statement 123R), the Group measures the cost of employee services received in exchange for an award of equity instruments based on the grant-date fair value of the award and recognizes the costs over the period the employee is required to provide service in exchange for the award, which generally is the vesting period.

During the three months ended March 31, 2019 and March 31, 2018, the Group did not record any stock-based compensation expense respectively.



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NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS



NOTE 4.-SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

Basic and diluted earnings per share

The Group computes earnings per share (EPS) in accordance with FASB Accounting Standard Codification Topic 260 (ASC 260) Earnings Per Share, and SEC Staff Accounting Bulletin No. 98 (SAB 98). ASC 260 requires companies with complex capital structures to present basic and diluted EPS. Basic EPS is measured as the income or loss available to common shareholders divided by the weighted average common shares outstanding for the period. Diluted EPS is similar to basic EPS but presents the dilutive effect on a per share basis of potential common shares (e.g., convertible securities, options, and warrants) as if they had been converted at the beginning of the periods presented, or issuance date, if later. Potential common shares that have an anti-dilutive effect (i.e., those that increase income per share or decrease loss per share) are excluded from the calculation of diluted EPS.

The calculation of diluted weighted average common shares outstanding for three months ended March 31, 2019 and 2018 are based on the estimate fair value of the Groups common stock during such periods applied to options using the treasury stock method to determine if they are dilutive.

Effective on October 5, 2017, the Company executed a reverse stock split pursuant to which fifty (50) shares of the Companys Common Stock, par value $.0001 per share, issued and outstanding, was reclassified as and changed, into one (1) share of the Companys outstanding Common Stock.

The following tables are a reconciliation of the weighted average shares used in the computation of basic and diluted earnings per share for the periods presented:

|                                                    |                                   |  |                                  
|--------------------------------------------------- | --------------------------------- |  | ---------------------------------
|                                                    | Three Months Ended
March 31, 2019 |  | Three Months Ended
March 31, 2018
|                                                    | (unaudited)                       |  | (unaudited)                      
|Numerator for basic and diluted earnings per share: | $                                 |  | $                                
|                                                    |                                   |  |                                  
|Net Income                                          | 169,178                           |  | 82,490                           
|Denominator:                                        |                                   |  |                                  
|Basic weighted average shares                       | 20,277,448                        |  | 19,624,115                       
|Effect of dilutive securities                       | -                                 |  | -                                
|Diluted weighted average shares                     | 20,277,448                        |  | 19,624,115                       
|Basic earnings per share:                           | 0.83 cents                        |  | 0.42 cents                       
|Diluted earnings per share:                         | 0.83 cents                        |  | 0.42 cents                       

No dilution effect due to negative stockholders equity for the periods ended March 31, 2019 and 2018.

Related parties transactions

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

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.



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NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS



NOTE 4.-SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

Recently issued accounting pronouncements

FASB Simplifies Adoption of New Leases Standard for Certain Land Easements. The FASB has issued Accounting Standards Update (ASU) No. 2018-01, Leases (Topic 842):Land Easement Practical Expedient for Transition to Topic 842,which clarifies the application of the new leases guidance to land easements and eases adoption efforts for some land easements.

ASU 2018-01 is expected to reduce the cost of adopting the new leases standard for certain land easements. It is also an attempt to help ensure that companies can make a successful transition to the standard without compromising the quality of information provided to investors about these transactions.

Land easements (also commonly referred to as rights of way) represent the right to use, access, or cross another entitys land for a specified purpose. Land easements are used by utility and telecommunications companies, for example, when they need to take a small strip of land, or easement, to bury wires. Not all companies have historically accounted for them as leases.

Stakeholders pointed out that the requirement to evaluate all old and existing land easements, sometimes numbering in the tens of thousands, to determine if they meet the definition of a lease under the new standard could be very costly. They also noted there would be limited benefit to applying this requirement, as many of their land easements would not meet the definition of a lease, or even if they met that definition, many of their easements are prepaid and, therefore, already are recognized on the balance sheet.

The land easements ASU addresses this by:

·Providing an optional transition practical expedient that, if elected, would not require an organization to reconsider their accounting for existing land easements that are not currently accounted for under the old leases standard; and

·Clarifying that new or modified land easements should be evaluated under the new leases standard, once an entity has adopted the new standard.

The FASB issued an Accounting Standards Update (ASU) that helps organizations address certain stranded income tax effects in accumulated other comprehensive income (AOCI) resulting from the Tax Cuts and Jobs Act.

ASU No. 2018-02, Income StatementReporting Comprehensive Income (Topic 220): Reclassification of Certain Tax Effects from Accumulated Other Comprehensive Income, provides financial statement preparers with an option to reclassify stranded tax effects within AOCI to retained earnings in each period in which the effect of the change in the U.S. federal corporate income tax rate in the Tax Cuts and Jobs Act (or portion thereof) is recorded.

The ASU requires financial statement preparers to disclose:

·A description of the accounting policy for releasing income tax effects from AOCI;

·Whether they elect to reclassify the stranded income tax effects from the Tax Cuts and Jobs Act; and

·Information about the other income tax effects that are reclassified.

The amendments affect any organization that is required to apply the provisions of Topic 220, Income StatementReporting Comprehensive Income, and has items of other comprehensive income for which the related tax effects are presented in other comprehensive income as required by GAAP.

The amendments are effective for all organizations for fiscal years beginning after December 15, 2018, and interim periods within those fiscal years. Early adoption is permitted. Organizations should apply the proposed amendments either in the period of adoption or retrospectively to each period (or periods) in which the effect of the change in the U.S. federal corporate income tax rate in the Tax Cuts and Jobs Act is recognized.



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NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS



NOTE 4.-SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

Recently issued accounting pronouncements (continued)

FASB Issues Corrections and Improvements to Financial Instruments.The FASB has issued Accounting Standards Update (ASU) No. 2018-03, Technical Corrections and Improvements to Financial InstrumentsOverall (Subtopic 825-10): Recognition and Measurement of Financial Assets and Financial Liabilities, that clarifies the guidance in ASU No. 2016-01, Financial InstrumentsOverall (Subtopic 825-10), as follows:

·

Issue 1: Equity Securities without a Readily Determinable Fair Value Discontinuation.The amendment clarifies that an entity measuring an equity security using the measurement alternative may change its measurement approach to a fair value method in accordance with Topic 820,Fair Value Measurement, through an irrevocable election that would apply to that security and all identical or similar investments of the same issuer. Once an entity makes this election, the entity should measure all future purchases of identical or similar investments of the same issuer using a fair value method in accordance with Topic 820.

·

Issue 2: Equity Securities without a Readily Determinable Fair Value Adjustments. The amendment clarifies that the adjustments made under the measurement alternative are intended to reflect the fair value of the security as of the date that the observable transaction for a similar security took place.

·

Issue 3: Forward Contracts and Purchased Options. The amendment clarifies that remeasuring the entire value of forward contracts and purchased options is required when observable transactions occur on the underlying equity securities.

·

Issue 4: Presentation Requirements for Certain Fair Value Option Liabilities. The amendment clarifies that when the fair value option is elected for a financial liability, the guidance in paragraph 825-10- 45-5 should be applied, regardless of whether the fair value option was elected under either Subtopic 815-15,Derivatives and Hedging Embedded Derivatives, or 825-10,Financial Instruments Overall.

·

Issue 5: Fair Value Option Liabilities Denominated in a Foreign Currency.The amendments clarify that for financial liabilities for which the fair value option is elected, the amount of change in fair value that relates to the instrument-specific credit risk should first be measured in the currency of denomination when presented separately from the total change in fair value of the financial liability. Then, both components of the change in the fair value of the liability should be remeasured into the functional currency of the reporting entity using end-of-period spot rates.

·

Issue 6: Transition Guidance for Equity Securities without a Readily Determinable Fair Value. The amendment clarifies that the prospective transition approach for equity securities without a readily determinable fair value in the amendments in ASU No. 2016-01 is meant only for instances in which the measurement alternative is applied. An insurance entity subject to the guidance in Topic 944,Financial Services Insurance, should apply a prospective transition method when applying the amendments related to equity securities without readily determinable fair values. An insurance entity should apply the selected prospective transition method consistently to the entitys entire population of equity securities for which the measurement alternative is elected.

For public business entities, ASU 2018-03 is effective for fiscal years beginning after December 15, 2017, and interim periods within those fiscal years beginning after June 15, 2018. Public business entities with fiscal years beginning between December 15, 2017, and June 15, 2018, are not required to adopt ASU 2018-03 until the interim period beginning after June 15, 2018, and public business entities with fiscal years beginning between June 15, 2018, and December 15, 2018, are not required to adopt these amendments before adopting the amendments in ASU 2016-01. For all other entities, the effective date is the same as the effective date in ASU 2016-01.

All entities may early adopt ASU 2018-03 for fiscal years beginning after December 15, 2017, including interim periods within those fiscal years, as long as they have adopted ASU 2016-01.



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NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS



NOTE 4.-SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

Recently issued accounting pronouncements (continued)

FASB Adds SEC Guidance to the Codification on the Tax Cuts and Jobs Act.The FASB has issued Accounting Standards Update (ASU) No. 2018-05, Income Taxes (Topic 740): Amendments to SEC Paragraphs Pursuant to SEC Staff Accounting Bulletin No. 118. ASU 2018-05 amends certain SEC material in Topic 740 for the income tax accounting implications of the recently issued Tax Cuts and Jobs Act (Act).

ASU 2018-05 adds the following guidance, among other things, to the FASB Accounting Standards CodificationTM regarding the Act:

·

Question 1:If the accounting for certain income tax effects of the Act is not completed by the time a company issues its financial statements that include the reporting period in which the Act was enacted, what amounts should a company include in its financial statements for those income tax effects for which the accounting under Topic 740 is incomplete?

·

Answer 1:In a companys financial statements that include the reporting period in which the Act was enacted, a company must first reflect the income tax effects of the Act in which the accounting under Topic 740 is complete. These completed amounts would not be provisional amounts. The company would then also report provisional amounts for those specific income tax effects of the Act for which the accounting under Topic 740 will be incomplete but a reasonable estimate can be determined. For any specific income tax effects of the Act for which a reasonable estimate cannot be determined, the company would not report provisional amounts and would continue to apply Topic 740 based on the provisions of the tax laws that were in effect immediately prior to the Act being enacted. For those income tax effects for which a company was not able to determine a reasonable estimate (such that no related provisional amount was reported for the reporting period in which the Act was enacted), the company would report provisional amounts in the first reporting period in which a reasonable estimate can be determined.

·

Question 2:If an entity accounts for certain income tax effects of the Act under a measurement period approach, what disclosures should be provided?

·

Answer 2:The staff believes an entity should include financial statement disclosures to provide information about the material financial reporting impacts of the Act for which the accounting under Topic 740 is incomplete, including:

a)

Qualitative disclosures of the income tax effects of the Act for which the accounting is incomplete;

b)

Disclosures of items reported as provisional amounts;

c)

Disclosures of existing current or deferred tax amounts for which the income tax effects of the Act have not been completed;

d)

The reason why the initial accounting is incomplete;

e)

The additional information that is needed to be obtained, prepared, or analyzed in order to complete the accounting requirements under Topic 740;

f)

The nature and amount of any measurement period adjustments recognized during the reporting period;

g)

The effect of measurement period adjustments on the effective tax rate; and

h)

When the accounting for the income tax effects of the Act has been completed.

ASU 2018-05 is effective upon inclusion in the FASB Codification.



The FASB Issues ASU No. 2018-06 to Supersede Circular 202 for Depository and Lending Institutions.The FASB has issued Accounting Standards Update (ASU) No.2018-06,Codification Improvements to Topic 942, Financial ServicesDepository and Lending. ASU 2018-06 removes outdated guidance related to the Office of the Comptroller of the Currencys Banking Circular 202, Accounting for Net Deferred Tax Charges (Circular 202) in Subtopic 942-740, Financial ServicesDepository and LendingIncome Taxes and should have no effect on reporting entities.

The amendments in ASU 2018-06 are effective immediately.



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NOTE 4.-SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

Recently issued accounting pronouncements (continued)

The FASB has issued an Accounting Standards Update (ASU) intended to reduce cost and complexity and to improve financial reporting for nonemployee share-based payments.

The ASU expands the scope of Topic 718, CompensationStock Compensation (which currently only includes share-based payments to employees) to include share-based payments issued to nonemployees for goods or services. Consequently, the accounting for share-based payments to nonemployees and employees will be substantially aligned. The ASU supersedes Subtopic 505-50, EquityEquity-Based Payments to Non-Employees.

The amendments in this ASU are effective for public companies for fiscal years beginning after December 15, 2018, including interim periods within that fiscal year. For all other companies, the amendments are effective for fiscal years beginning after December 15, 2019, and interim periods within fiscal years beginning after December 15, 2020. Early adoption is permitted, but no earlier than a companys adoption date of Topic 606, Revenue from Contracts with Customers.

FASB Releases ASU No. 2018-09.The FASB has released Accounting Standards Update (ASU) No. 2018-09, Codification Improvements. ASU 2018-09 affects a wide variety of Topics in the Codification including:

·

Amendments to Subtopic 220-10,Income Statement Reporting Comprehensive IncomeOverall. The guidance in paragraph 220-10-45-10B(b) states that taxes not payable in cash are required to be reported as a direct adjustment to paid-in capital. This requirement conflicts with other guidance in Topic 740,Income Taxes, Subtopic 805-740,Business CombinationsIncome Taxes, and Subtopic 852-740,ReorganizationsIncome Taxes, which generally states that income taxes and adjustments to those accounts upon a business combination or a bankruptcy that is eligible for fresh-start reporting must be recognized in income. ASU No. 2018-09 clarifies the guidance in paragraph 220-10-45-10B by removing the generic phrase taxes not payable in cash and adding guidance that is specific to certain quasi-reorganizations.

·

Amendments to Subtopic 470-50,DebtModifications and Extinguishments. The guidance in paragraph 470-50-40-2 requires that the difference between the reacquisition price of debt and the net carrying amount of extinguished debt be recognized in income in the period of extinguishment. The guidance in that paragraph was not amended by FASB Statement No. 155, Accounting for Certain Hybrid Financial Instruments, or FASB Statement No. 159, The Fair Value Option for Financial Assets and Financial Liabilities; therefore, it does not specifically address extinguishments of debt when the fair value option is elected. ASU No. 2018-09 clarifies that:

1.

When the fair value option has been elected on debt that is extinguished, the net carrying amount of the extinguished debt equals its fair value at the reacquisition date, and

2.

Related gains or losses in other comprehensive income must be included in net income upon extinguishment of the debt.

·

Amendments to Subtopic 480-10,Distinguishing Liabilities from EquityOverall.The guidance in paragraph 480-10-25-15 prohibits the combination of freestanding financial instruments within the scope of Subtopic 480-10 with noncontrolling interest, unless the combination is required by Topic 815,Derivatives and Hedging. The example in paragraphs 480-10-55-55 and 480-10-55-59 conflicts with that guidance by stating that freestanding option contracts with the terms in Derivative 2 should be accounted for on a combined basis with the noncontrolling interest. The source of the example in paragraph 480-10-55-59 is from EITF Issue No. 00-4, Majority Owners Accounting for a Transaction in the Shares of a Consolidated Subsidiary and a Derivative Indexed to the Noncontrolling Interest in That Subsidiary. Issue 00-4 was nullified by FASB Statement No. 150,Accounting for Certain Financial Instruments with Characteristics of both Liabilities and Equity, but a conforming amendment to the example in paragraph 480-10-55-59 was not made to align it with the guidance in Statement 150. The amendment in this Update conforms the guidance in paragraphs 480-10-55-55 and 480-10-55-59 with the guidance in Statement 150.

·

Amendments to Subtopic 718-740,CompensationStock CompensationIncome Taxes. The guidance in paragraph 718-740-35-2, as amended, is unclear on whether an entity should recognize excess tax benefits (or tax deficiencies) for compensation expense that is taken on the entitys tax return. The amendment to paragraph 718-740-35-2 in ASU No. 2018-09 clarifies that an entity should recognize excess tax benefits (that is, the difference in tax benefits between the deduction for tax purposes and the compensation cost recognized for financial statement reporting) in the period when the tax deduction for compensation expense is taken on the entitys tax return. This includes deductions that are taken on the entitys return in a different period from when the event that gives rise to the tax deduction occurs and the uncertainty about whether (1) the entity will receive a tax deduction and (2) the amount of the tax deduction is resolved.



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NOTE 4.-SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

Recently issued accounting pronouncements (continued)

·

Amendments to Subtopic 805-740,Business Combinations Income Taxes. The amendments to paragraph 805-740-25-13 removes a list of three methods for allocating the consolidated tax provision to an acquired entity after acquisition that is inconsistent with guidance in Topic 740. The three methods for tax allocation described in paragraph 805-740-25-13 do not follow the broad principles of being systematic, rational, and consistent with Topic 740. The amendment removes the allocation methods in paragraph 805-740-25-13 and conforms the guidance in Subtopic 805-740 with the guidance in Topic 740.

·

Amendments to Subtopic 815-10,Derivatives and Hedging Overall. The amendment to paragraphs 815-10-45-4 and 815-10-45-5 in ASU No. 2018-09 clarifies the circumstances in which derivatives may be offset. Under certain specific conditions, derivatives may be offset if three of the four criteria in paragraph 210-20-45-1 are met. One of the criteriathe intent to set offis not required to offset derivative assets and liabilities for certain amounts arising from derivative instruments recognized at fair value and executed with the same counterparty under a master netting agreement.

·

Amendments to Subtopic 820-10,Fair Value Measurement Overall. The amendments to paragraph 820-10-35-16D in ASU No. 2018-09 clarify the Boards decisions about the measurement of the fair value of a liability or instrument classified in a reporting entitys shareholders equity from the perspective of a market participant that holds an identical item as an asset at the measurement date. A technical inquiry questioned how transfer restrictions embedded in an asset should affect the fair value of the corresponding liability or equity instrument from the perspective of the issuer. The amendments correct the wording of paragraph 820-10-35-16D to clarify how an entity should account for those restrictions. The amendments are not intended to substantively change the application of GAAP. However, it is possible that the amendments may result in a change to existing practice for some entities.

The amendments to paragraphs 820-10-35-18D through 35-18F and 820-10-35- 18H through 35-18L revise the current guidance to allow portfolios of financial instruments and nonfinancial instruments accounted for as derivatives in accordance with Topic 815 to use the portfolio exception to valuation. The amendments improve guidance by adding wording that explicitly states that a group of financial assets, financial liabilities, nonfinancial items accounted for as derivatives in accordance with Topic 815, or a combination of these items that otherwise meet the criteria to do so are permitted to apply the portfolio exception for measuring fair value of the group. This allows entities to measure fair value on a net basis for those portfolios in which financial assets and financial liabilities and nonfinancial instruments are managed and valued together.

·

Amendments to Subtopic 940-405,Financial ServicesBrokers and DealersLiabilities. Paragraph 940-405-55-1 contains incomplete guidance about offsetting on the balance sheet. The current guidance focuses only on explicit settlement dates as a determining criterion for offsetting when, in fact, an entity should consider all the requirements in Section 210-20-45,Balance SheetOffsettingOther Presentation Matters, to determine whether a right of offset exists. There is similar guidance in paragraph 942-210-45-3. Paragraphs 940-405-55-1 and 942-210-45- 3 originated from two different AICPA Audit and Accounting Guides and paraphrase the guidance in Subtopic 210-20, albeit each slightly differently. The Board decided to amend both paragraphs so that the industry Topic guidance refers to the complete guidance for offsetting.

·

Amendments to Subtopic 962-325,Plan AccountingDefined Contribution Pension PlansInvestmentsOther. The amendment to Subtopic 962-325 removes the stable value common collective trust fund from the illustrative example in paragraph 962-325-55-17 to avoid the interpretation that such an investment would never have a readily determinable fair value and, therefore, would always use the net asset value per share practical expedient. Rather, a plan should evaluate whether a readily determinable fair value exists to determine whether those investments may qualify for the practical expedient to measure at net asset value in accordance with Topic 820.

Transition and Effective Date. The transition and effective date guidance is based on the facts and circumstances of each amendment. Some of the amendments in ASU No. 2018-09 do not require transition guidance and will be effective upon issuance of ASU No. 2018-09. However, many of the amendments do have transition guidance with effective dates for annual periods beginning after December 15, 2018, for public business entities.

In addition, there are some conforming amendments in ASU No. 2018-09 that have been made to recently issued guidance that is not yet effective that may require application of the transition and effective date guidance in the original ASU. For example, there are conforming amendments to Topic 820 and Subtopic 944-310, Financial ServicesInsuranceReceivables, that are related to the amendments in Accounting Standards Update No. 2016-01, Financial InstrumentsOverall (Subtopic 825-10): Recognition and Measurement of Financial Assets and Financial Liabilities, which require application of the transition and effective date guidance in that ASU.



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NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS



NOTE 4.-SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

Recently issued accounting pronouncements (continued)

The FASB has issued Accounting Standards Update (ASU) No. 2018-10,Codification Improvements to Topic 842, Leases.

ASU No. 2018-10, among other things, amends Topic 842 as follows:

·

Issue 1: Residual Value Guarantees - Paragraph 460-10-60-32in Topic 460, Guarantees - This paragraph incorrectly refers readers to the guidance in Topic 842 about sale-leaseback-sublease transactions, when, in fact, it should refer readers to the guidance about guarantees by a seller-lessee of the underlying assets residual value in a sale and leaseback transaction. The amendment corrects the cross-reference in paragraph 460-10-60-32.

·

Issue 2: Rate Implicit in the Lease- The amendment clarifies that a rate implicit in the lease of zero should be used when applying the definition of the term rate implicit in the lease results in a rate that is less than zero.

·

Issue 3: Lessee Reassessment of Lease Classification- The amendment consolidates the requirements about lease classification reassessments into one paragraph and better articulates that an entity should perform the lease classification reassessment on the basis of the facts and circumstances, and the modified terms and conditions, if applicable, as of the date the reassessment is required.

·

Issue 4: Lessor Reassessment of Lease Term and Purchase Option- The amendment clarifies that a lessor should account for the exercise by a lessee of an option to extend or terminate the lease or to purchase the underlying asset as a lease modification unless the exercise of that option by the lessee is consistent with the assumptions that the lessor made in accounting for the lease at the commencement date of the lease (or the most recent effective date of a modification that is not accounted for as a separate contract).

·

Issue 5: Variable Lease Payments That Depend on an Index or a Rate- The amendment clarifies that a change in a reference index or rate upon which some or all of the variable lease payments in the contract are based does not constitute the resolution of a contingency subject to the guidance in paragraph 842-10-35-4(b). Variable lease payments that depend on an index or a rate should be remeasured, using the index or rate at the remeasurement date, only when the lease payments are remeasured for another reason (that is, when one or more of the events described in paragraph 842-10-35- 4(a) or (c) occur or when a contingency unrelated to a change in a reference index or rate under paragraph 842-10-35-4(b) is resolved).

·

Issue 6: Investment Tax Credits- There is an inconsistency in terminology used about the effect that investment tax credits have on the fair value of the underlying asset between the definition of the term rate implicit in the lease and the lease classification guidance in paragraph 842-10-55-8. The amendment removes that inconsistency by clarifying that the period covered by a lessor-only option to terminate the lease is included in the lease term.

·

Issue 7: Lease Term and Purchase Option- The description in paragraph 842-10-55- 24 about lessor-only termination options is inconsistent with the description in paragraph 842-10-55- 23 about the noncancellable period of a lease. The amendment removes that inconsistency by clarifying that the period covered by a lessor-only option to terminate the lease is included in the lease term.

·

Issue 8: Transition Guidance for Amounts Previously Recognized in Business Combinations- The transition guidance for lessors in paragraph 842-10-65-1(h)(3) is unclear because it relates to leases classified as direct financing leases or sales-type leases under Topic 840, while the lead-in sentence to paragraph 842-10-65-1(h) provides transition guidance for leases classified as operating leases under Topic 840. The amendment clarifies that paragraph 842-10-65-1(h)(3) applies to lessors for leases classified as direct financing leases or sales-type leases under Topic 842, not Topic 840. In other words, paragraph 842- 10-65-1(h)(3) applies when an entity does not elect the package of practical expedients in paragraph 842-10-65-1(f), and, for a lessor, an operating lease acquired as part of a previous business combination is classified as a direct financing lease or a sales-type lease when applying the lease classification guidance in Topic 842. The amendment also cross-references to other transition guidance applicable to those changes in lease classification for lessors.

·

Issue 9: Certain Transition Adjustments- The amendments clarify whether to recognize a transition adjustment to earnings rather than through equity when an entity initially applies Topic 842 retrospectively to each prior reporting period.



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NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS



NOTE 4.-SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

Recently issued accounting pronouncements (continued)

·

Issue 10: Transition Guidance for Leases Previously Classified as Capital Leases under Topic 840- Paragraph 842-10-65-1(r) provides guidance to lessees for leases previously classified as capital leases under Topic 840 and classified as finance leases under Topic 842. Paragraph 842-10-65-1(r)(4) provides subsequent measurement guidance before the effective date when an entity initially applies Topic 842 retrospectively to each prior reporting period, but it refers readers to the subsequent measurement guidance in Topic 840 about operating leases. It should refer them to the subsequent measurement guidance applicable to capital leases. The amendment corrects that reference.

·

Issue 11: Transition Guidance for Modifications to Leases Previously Classified as Direct Financing or Sales-Type Leases under Topic 840- Paragraph 842-10-65-1(x) provides transition guidance applicable to lessors for leases previously classified as direct financing leases or sales-type leases under Topic 840 and classified as direct financing leases or sales-type leases under Topic 842. For modifications to those leases beginning after the effective date, paragraph 842-10-65-1(x)(4) refers readers to other applicable guidance in Topic 842 to account for the modification, specifically paragraphs 842-10-25-16 through 25- 17, depending on how the lease is classified after the modification. Stakeholders noted that it should refer to how the lease is classified before the modification to be consistent with the guidance provided in paragraphs 842-10-25-16 through 25-17. The amendment corrects that inconsistency.

·

Issue 12: Transition Guidance for Sale and Leaseback Transactions- The amendments clarify that the transition guidance on sale and leaseback transactions in paragraph 842-10-65-1(aa) through (ee) applies to all sale and leaseback transactions that occur before the effective date and corrects the referencing issues noted.

·

Issue 13: Impairment of Net Investment in the Lease- Paragraph 842-30-35-3 provides guidance to lessors for determining the loss allowance of the net investment in the lease and describes the cash flows that should be considered when the lessor determines that loss allowance. Stakeholders questioned whether the guidance, as written, would accelerate and improperly measure the loss allowance because the cash flows associated with the unguaranteed residual asset appear to be excluded from the evaluation. The amendment clarifies the application of the guidance for determining the loss allowance of the net investment in the lease, including the cash flows to consider in that assessment.

·

Issue 14: Unguaranteed Residual Asset- The amendment clarifies that a lessor should not continue to accrete the unguaranteed residual asset to its estimated value over the remaining lease term to the extent that the lessor sells substantially all of the lease receivable associated with a direct financing lease or a sales-type lease, consistent with Topic 840.

·

Issue 15: Effect of Initial Direct Costs on Rate Implicit in the Lease- The ordering of the illustration in Case C of Example 1 in paragraphs 842-30-55- 31 through 55-39 raised questions about how initial direct costs factor into determining the rate implicit in the lease for lease classification purposes for lessors only. The amendment more clearly aligns the illustration to the guidance in paragraph 842-10-25-4.

·

Issue 16: Failed Sale and Leaseback Transaction- The amendment clarifies that a seller lessee in a failed sale and leaseback transaction should adjust the interest rate on its financial liability as necessary to ensure that the interest on the financial liability does not exceed the total payments (rather than the principal payments) on the financial liability. This clarification is also reflected in the relevant illustration on failed sale and leaseback transactions that is contained in Subtopic 842-40.



Effective Date

The amendments in ASU No. 2018-10 affect the amendments in ASU No. 2016-02, which are not yet effective, but for which early adoption upon issuance is permitted. For entities that early adopted Topic 842, the amendments are effective upon issuance of ASU No. 2018-10, and the transition requirements are the same as those in Topic 842. For entities that have not adopted Topic 842, the effective date and transition requirements will be the same as the effective date and transition requirements in Topic 842.



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NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS



NOTE 4.-SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

Recently issued accounting pronouncements (continued)

FASB Issues Targeted Improvements to Lease Standard .The FASB has issued Accounting Standards Update (ASU) No. 2018-11, Leases (Topic 842): Targeted Improvements. This ASU is intended to reduce costs and ease implementation of the leases standard for financial statement preparers.

The targeted improvements in the ASU address areas our stakeholders identified as sources of unnecessary cost or complexity in the leases standard, stated FASB Chairman Russell G. Golden. They represent the FASBs commitment to proactively address implementation issues raised by our stakeholders to ensure a successful transition to the new standard without compromising the quality of information provided to investors.

ASU 2018-11 provides a new transition method and a practical expedient for separating components of a contract.

Transition: Comparative Reporting at Adoption

The amendments ASU 2018-11 provide entities with an additional (and optional) transition method to adopt the new leases standard. Under this new transition method, an entity initially applies the new leases standard at the adoption date and recognizes a cumulative-effect adjustment to the opening balance of retained earnings in the period of adoption consistent with preparers requests. Consequently, an entitys reporting for the comparative periods presented in the financial statements in which it adopts the new leases standard will continue to be in accordance with current GAAP in Topic 840, Leases.

An entity that elects this additional (and optional) transition method must provide the required Topic 840 disclosures for all periods that continue to be in accordance with Topic 840. The amendments do not change the existing disclosure requirements in Topic 840 (for example, they do not create interim disclosure requirements that entities previously were not required to provide).

Separating Components of a Contract

The amendments in ASU 2018-11 provide lessors with a practical expedient, by class of underlying asset, to not separate nonlease components from the associated lease component and, instead, to account for those components as a single component if the nonlease components otherwise would be accounted for under the new revenue guidance (Topic 606) and both of the following are met:

·

The timing and pattern of transfer of the nonlease component(s) and associated lease component are the same.

·

The lease component, if accounted for separately, would be classified as an operating lease.

An entity electing this practical expedient (including an entity that accounts for the combined component entirely in Topic 606) is required to disclose certain information, by class of underlying asset, as specified in the ASU.

Effective Date

The amendments in ASU 2018-11 related to separating components of a contract affect the amendments in ASU No. 2016-02, which are not yet effective but can be early adopted.

For entities that have not adopted Topic 842 before the issuance of this ASU, the effective date and transition requirements for the amendments in this update related to separating components of a contract are the same as the effective date and transition requirements in ASU 2016-02.

For entities that have adopted Topic 842 before the issuance of ASU 2018-11, the transition and effective date of the amendments related to separating components of a contract in this ASU are as follows:

·

The practical expedient may be elected either in the first reporting period following the issuance of this ASU or at the original effective date of Topic 842 for that entity.

·

The practical expedient may be applied either retrospectively or prospectively.

All entities, including early adopters, that elect the practical expedient related to separating components of a contract in this ASU must apply the expedient, by class of underlying asset, to all existing lease transactions that qualify for the expedient at the date elected.

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NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS



NOTE 4.-SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

Recently issued accounting pronouncements (continued)

FASB Improves Guidance for Insurance Companies that Issue Long-Duration Contracts. The FASB has issued an Accounting Standards Update (ASU) that improves financial reporting for insurance companies that issue long-duration contracts, such as life insurance, disability income, long-term care, and annuities.

To improve this area of financial reporting, the new ASU:

·

Requires updated assumptions for liability measurement.  Assumptions used to measure the liability for traditional insurance contracts, which are typically determined at contract inception, will now be reviewed, and, if there is a change, updated, at least annually, with the effect recorded in net income;

·

Standardizes the liability discount rate. The liability discount rate will be a standardized, market-observable discount rate (upper-medium grade fixed-income instrument yield), with the effect of rate changes recorded in other comprehensive income;

·

Provides greater consistency in measurement of market risk benefits. The two previous measurement models have been reduced to one measurement model (fair value), resulting in greater uniformity across similar market-based benefits and better alignment with the fair value measurement of derivatives used to hedge capital market risk;

·

Simplifies amortization of deferred acquisition costs. Previous earnings-based amortization methods have been replaced with a more level amortization basis; and

·

Requires enhanced disclosures. They include rollforwards and information about significant assumptions and the effects of changes in those assumptions.

For calendar-year public companies, the changes will be effective in 2021. For all other calendar-year companies, the changes will be effective in 2022. Early adoption is permitted.

The FASB has issued Accounting Standards Update (ASU) No. 2018-13, Fair Value Measurement (Topic 820): Disclosure FrameworkChanges to the Disclosure Requirements for Fair Value Measurement.

ASU No. 2018-13 modifies the disclosure requirements on fair value measurements in Topic 820 as follows:

Removals

The following disclosure requirements were removed from Topic 820:

·

The amount of and reasons for transfers between Level 1 and Level 2 of the fair value hierarchy;

·

The policy for timing of transfers between levels;

·

The valuation processes for Level 3 fair value measurements; and

·

For nonpublic entities, the changes in unrealized gains and losses for the period included in earnings for recurring Level 3 fair value measurements held at the end of the reporting period.

Modifications

The following disclosure requirements were modified in Topic 820:

·

In lieu of a rollforward for Level 3 fair value measurements, a nonpublic entity is required to disclose transfers into and out of Level 3 of the fair value hierarchy and purchases and issues of Level 3 assets and liabilities;

·

For investments in certain entities that calculate net asset value, an entity is required to disclose the timing of liquidation of an investees assets and the date when restrictions from redemption might lapse only if the investee has communicated the timing to the entity or announced the timing publicly; and

·

The amendments clarify that the measurement uncertainty disclosure is to communicate information about the uncertainty in measurement as of the reporting date.



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NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS



NOTE 4.-SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

Recently issued accounting pronouncements (continued)

Additions

The following disclosure requirements were added to Topic 820; however, the disclosures are not required for nonpublic entities:

·

The changes in unrealized gains and losses for the period included in other comprehensive income for recurring Level 3 fair value measurements held at the end of the reporting period; and

·

The range and weighted average of significant unobservable inputs used to develop Level 3 fair value measurements. For certain unobservable inputs, an entity may disclose other quantitative information (such as the median or arithmetic average) in lieu of the weighted average if the entity determines that other quantitative information would be a more reasonable and rational method to reflect the distribution of unobservable inputs used to develop Level 3 fair value measurements.

In addition, the amendments eliminate at a minimum from the phrase an entity shall disclose at a minimum to promote the appropriate exercise of discretion by entities when considering fair value measurement disclosures and to clarify that materiality is an appropriate consideration of entities and their auditors when evaluating disclosure requirements.

Effective Date

The amendments in ASU No. 2018-13 are effective for all entities for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2019.

The amendments on changes in unrealized gains and losses, the range and weighted average of significant unobservable inputs used to develop Level 3 fair value measurements, and the narrative description of measurement uncertainty should be applied prospectively for only the most recent interim or annual period presented in the initial fiscal year of adoption. All other amendments should be applied retrospectively to all periods presented upon their effective date.

Early adoption is permitted. An entity is permitted to early adopt any removed or modified disclosures upon issuance of ASU No. 2018-13 and delay adoption of the additional disclosures until their effective date.

The FASB has issued ASU No. 2018-14, CompensationRetirement BenefitsDefined Benefit PlansGeneral (Subtopic 715-20): Disclosure FrameworkChanges to the Disclosure Requirements for Defined Benefit Plans, that applies to all employers that sponsor defined benefit pension or other postretirement plans.

The amendments modify the disclosure requirements for employers that sponsor defined benefit pension or other postretirement plans.

Disclosure Requirements Deleted

·

The amounts in accumulated other comprehensive income expected to be recognized as components of net periodic benefit cost over the next fiscal year.

·

The amount and timing of plan assets expected to be returned to the employer.

·

The disclosures related to the June 2001 amendments to the Japanese Welfare Pension Insurance Law.

·

Related party disclosures about the amount of future annual benefits covered by insurance and annuity contracts and significant transactions between the employer or related parties and the plan.

·

For nonpublic entities, the reconciliation of the opening balances to the closing balances of plan assets measured on a recurring basis in Level 3 of the fair value hierarchy. However, nonpublic entities will be required to disclose separately the amounts of transfers into and out of Level 3 of the fair value hierarchy and purchases of Level 3 plan assets.

·

For public entities, the effects of a one-percentage-point change in assumed health care cost trend rates on the (a) aggregate of the service and interest cost components of net periodic benefit costs and (b) benefit obligation for postretirement health care benefits.



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NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS



NOTE 4.-SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

Recently issued accounting pronouncements (continued)

Disclosure Requirements Added

·

The weighted-average interest crediting rates for cash balance plans and other plans with promised interest crediting rates

·

An explanation of the reasons for significant gains and losses related to changes in the benefit obligation for the period.

The amendments also clarify the disclosure requirements in paragraph 715-20-50-3, which state that the following information for defined benefit pension plans should be disclosed:

·

The projected benefit obligation (PBO) and fair value of plan assets for plans with PBOs in excess of plan assets.

·

The accumulated benefit obligation (ABO) and fair value of plan assets for plans with ABOs in excess of plan assets.

Effective Date

ASU No. 2018-14 is effective for fiscal years ending after December 15, 2020, for public business entities and for fiscal years ending after December 15, 2021, for all other entities. Early adoption is permitted for all entities.

The FASB has issued Accounting Standards Update (ASU) No. 2018-15, IntangiblesGoodwill and OtherInternal-Use Software (Subtopic 350-40): Customers Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement That Is a Service Contract, which reduces complexity for the accounting for costs of implementing a cloud computing service arrangement. This standard aligns the accounting for implementation costs of hosting arrangements, regardless of whether they convey a license to the hosted software.

The ASU aligns the following requirements for capitalizing implementation costs:

·

Those incurred in a hosting arrangement that is a service contract, and

·

Those incurred to develop or obtain internal-use software (and hosting arrangements that include an internal-use software license).

For calendar-year public companies, the changes will be effective for annual periods, including interim periods within those annual periods, in 2020. For all other calendar-year companies and organizations, the changes will be effective for annual periods in 2021, and interim periods in 2022.

The FASB has issued Accounting Standards Update (ASU) No. 2018-17,Consolidation (Topic 810): Targeted Improvements to Related Party Guidance for Variable Interest Entities, that reduces the cost and complexity of financial reporting associated with consolidation of variable interest entities (VIEs). A VIE is an organization in which consolidation is not based on a majority of voting rights.

The new guidance supersedes the private company alternative for common control leasing arrangements issued in 2014 and expands it to all qualifying common control arrangements.

Under the new standard, a private company could make an accounting policy election to not apply VIE guidance to legal entities under common control (including common control leasing arrangements) when certain criteria are met. This accounting policy election must be applied by a private company to all current and future legal entities under common control that meet the criteria for applying the alternative. A private company will be required to continue to apply other consolidation guidance, specifically the voting interest entity guidance.

Additionally, a private company electing the alternative is required to provide detailed disclosures about its involvement with, and exposure to, the legal entity under common control.

The ASU also amends the guidance for determining whether a decision-making fee is a variable interest. The amendments require organizations to consider indirect interests held through related parties under common control on a proportional basis rather than as the equivalent of a direct interest in its entirety (as currently required in GAAP). Therefore, these amendments likely will result in more decision makers not consolidating VIEs.



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NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS



NOTE 4.-SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

Recently issued accounting pronouncements (continued)

For organizations other than private companies, the amendments in this ASU are effective for fiscal years beginning after December 15, 2019, and interim periods within those fiscal years. The amendments in this ASU are effective for a private company for fiscal years beginning after December 15, 2020, and interim periods within fiscal years beginning after December 15, 2021. Early adoption is permitted.

The FASB has issued Accounting Standards Update (ASU) No. 2018-18, Collaborative Arrangements (Topic 808): Clarifying the Interaction Between Topic 808 and Topic 606, that clarifies the interaction between the guidance for certain collaborative arrangements and the Revenue Recognition financial accounting and reporting standard.

A collaborative arrangement is a contractual arrangement under which two or more parties actively participate in a joint operating activity and are exposed to significant risks and rewards that depend on the activitys commercial success. The ASU provides guidance on how to assess whether certain transactions between collaborative arrangement participants should be accounted for within the revenue recognition standard.

The ASU also provides more comparability in the presentation of revenue for certain transactions between collaborative arrangement participants. It accomplishes this by allowing organizations to only present units of account in collaborative arrangements that are within the scope of the revenue recognition standard together with revenue accounted for under the revenue recognition standard. The parts of the collaborative arrangement that are not in the scope of the revenue recognition standard should be presented separately from revenue accounted for under the revenue recognition standard.

For public companies, the amendments in ASU No. 2018-18 are effective for fiscal years beginning after December 15, 2019, and interim periods within those fiscal years. For all other organizations, the amendments are effective for fiscal years beginning after December 15, 2020, and interim periods within fiscal years beginning after December 15, 2021. Early adoption is permitted.





NOTE 5. -AMOUNT DUE FROM NSML

Amount due form Network Service Management Limited (NSML) was the capital-in-arrear to be invested to Z-Line International E-Commerce Limited (Z-Line).  Z-Line is a corporation formed and incorporated on August 17, 2016 by the Company and NSML under the laws of Hong Kong.  The shareholdings of Z-Line are 55% for the Company and 45% for NSML. The shareholdings of Z-Line for NSML has $294,872 (HKD 2,300,000) not yet paid up as at March 31, 2019.





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NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS



NOTE 6.-INCOME TAXES

The Company and its subsidiaries file separate income tax returns. The Company and one subsidiary, which was discontinued in cooperation, were incorporated in the United States, and are subject to United States federal and state income taxes. The Company did not generate taxable income in the United States for the three months periods ended March 31, 2019 and March 31, 2018. Two subsidiaries are incorporated in Hong Kong, and are subject to Hong Kong Profits Tax at 16.5% for the three months periods ended March 31, 2019 and 2018. Provision for Hong Kong profits tax has been made for the periods presented as the subsidiaries have no assessable profits during the periods. One subsidiary is incorporated in PRC, and is subject to PRC Income Tax at 25% for the three months periods ended March 31, 2019 and March 31, 2018.  Provision for PRC Income Tax has not been made for the year presented as the subsidiary has 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 three months periods ended March 31, 2019 and 2018, the Group 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.

The Company did not have U.S, taxable income due to operating in Hong Kong SAR and PRC.

A reconciliation of the provision for income taxes with amounts determined by applying the Hong Kong profits rate of 16.5% to income before income taxes is as follows:

March 31, 2019March 31, 2018Profit /(Loss) before income tax$(7,867)$(6,387)Temporary Difference--Permanent Difference--Taxable income (loss)$(7,867)$(6,387)Hong Kong Income Tax rate16.5%16.5%Current tax expenses$1,298$1,054Less: Valuation allowance(1,298)(1,054)Income tax expenses$-$-


A reconciliation for the three months period ended March 31, 2019 and 2018, were attributed to operations in China, on the income tax expenses consisted of the following:



March 31, 2019March 31, 2018Loss before income tax$(16,776)$(9,366)Temporary Difference--Permanent Difference--Taxable (loss)/ income$(16,776)$(9,366)China Enterprise Income Tax rate25.0%25.0%Current tax credit$4,194$2,341Less: Valuation allowance(4,194)(2,341)Income tax expenses$-$-






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NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS



NOTE 7.-OTHER PAYABLES AND ACCRUED LIABILITIES

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



March 31, 2019December 31, 2018Accrued expenses$239,250$249,118Other payables45,92820,779$285,178$269,897




NOTE 8.-AMOUNT DUE FROM/TO RELATED PARTIES

Amount due to related parties are as follows:



March 31, 2019December 31, 2018Amount due to related parties:Sean Webster (a)86,30060,665Wei Zhu (a)232,179232,179Hunan Longitudinal Uned Information Technology Co., Ltd (b)57,36925,883Hunan Zhang Zhong Wan Fu Company Limited (c)20,1912,777Zhang Wan Internet (c)615-Hunan Zong Hui Information Technology Co., Ltd (c)449-$397,103$321,504


As at March 31, 2019 and December 31, 2018, the amount due to related parties represent advances from shareholders of the Group and its related parties are interest free, unsecured and have no fixed repayment terms.

(a)

Major shareholder of the Company

(b)

With common shareholder

(c)

With common control



NOTE 9.-WARRANTS LIABILITIES

Warranty LiabilitiesBalance at January 1, 2018$685,395Warrants expenses (reversal) for the year(129,512)Balance at December 31, 2018$555,883Warrants expenses (reversal) for the period(141,590)Balance at March 31, 2019$414,293




NOTE 10.-STOCK OPTIONS

The Group has stock option plans that allow it to grant options to its key employees. During the three months ended March 31, 2019 and 2018, the Company did not issue any stock options and there were no stock options being issued or outstanding.



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ZZLL INFORAMTION TECHNOLOGY, INC. AND SUBSIDIARIES

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS



NOTE 11.-FAIR VALUE MEASUREMENTS

The Group adopted FASB ASC 820, Fair Value Measurements and Disclosures (ASC 820), related to The Groups financial assets and liabilities. ASC 820 defines fair value, establishes a framework for measuring fair value in accordance with generally accepted accounting principles and expands disclosures about fair value measurements. ASC 820 defines fair value as the price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. ASC 820 also describes three levels of inputs that may be used to measure fair value:

Level 1  quoted prices in active markets for identical assets and liabilities.

Level 2  observable inputs other than quoted prices in active markets for identical assets and liabilities.

Level 3  unobservable inputs in which there is little or no market data available, which require the reporting entity to develop its own assumptions.

ASC 820 also provides guidance for determining the fair value of a financial asset when the market for that asset is not active, and for determining fair value when the volume and level of activity for an asset or liability have significantly decreased and includes guidance on identifying circumstances that indicate when a transaction is not orderly.

The effective date for certain aspects of ASC 820 was deferred and currently being evaluated by The Group. Areas impacted by the deferral relate to nonfinancial assets and liabilities that are measured at fair value, but are recognized or disclosed at fair value on a nonrecurring basis. The effects of these remaining aspects of ASC 820 are to be applied by the Group to fair value measurements prospectively beginning November 1, 2010. The adoption of the remaining aspects of ASC 820 is not expected to have a material impact on its financial condition or results of operations.

The following table details the fair value measurements of assets and liabilities within the three levels of the fair value hierarchy at March 31, 2019, and Dec 31, 2018:



|                          |  |                |  |                                                               |  |                                               |  |                                                
|------------------------- |  | -------------- |  | ------------------------------------------------------------- |  | --------------------------------------------- |  | -----------------------------------------------
|                          |  |                |  | Fair Value Measurements at
reporting date using:             
|                          |  | March 31, 2019 |  | Quoted Price in active Markets for identical assets
(level 1) |  | Significant Other
Observable Inputs
(Level 2) |  | Significant Other Unobservable Inputs
(Level 3)
|                          |  | $              |  | $                                                             |  | $                                             |  | $                                              
|Assets                    |  |                |  |                                                               |  |                                               |  |                                                
|Restricted cash           |  | -              |  | -                                                             |  | -                                             |  | -                                              
|Cash and cash equivalents |  | 45,508         |  | 45,508                                                        |  | -                                             |  | -                                              



|                          |  |                   |  |                                                               |  |                                               |  |                                                 | 
|------------------------- |  | ----------------- |  | ------------------------------------------------------------- |  | --------------------------------------------- |  | ----------------------------------------------- | 
|                          |  |                   |  | Fair Value Measurements at
reporting date using:             
|                          |  | December 31, 2018 |  | Quoted Price in active Markets for identical assets
(level 1) |  | Significant Other
Observable Inputs
(Level 2) |  | Significant Other Unobservable Inputs
(Level 3)
|                          |  | $                 |  | $                                                             |  | $                                             |  | $                                              
|Assets                    |  |                   |  |                                                               |  |                                               |  |                                                
|Restricted cash           |  | -                 |  | -                                                             |  | -                                             |  | -                                              
|Cash and cash equivalents |  | 10,793            |  | 10,793                                                        |  | -                                             |  | -                                              



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ZZLL INFORAMTION TECHNOLOGY, INC. AND SUBSIDIARIES

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS



NOTE 12.-COMMITMENTS AND CONTINGENCIES

The Company has operating lease agreements for office premises, which expiring through June 2020. Future minimum rental payments under agreements classified as operating leases with non-cancellable terms for the next 12 months and thereafter as follows:



For the period ended March 31, 2019 and the year ended December 31, 2018March 31, 2019December 31, 20182019$17,379$24,5282020 and thereafter8,1668,160Total$25,545$32,688




Rental expense paid for the three months ended March 31, 2019 and 2018 were $7,161 and $7,783 respectively.



NOTE 13.-RELATED PARTY TRANSACTIONS

As of March 31, 2019 and December 31, 2018, the Company had received advancement of $397,103 and $321,504 from the shareholders and its related parties for operating expenses.  These advancements bear no interest, no collateral and have no repayment term.

During the three months period ended March 31, 2019, there is a related party transaction of $28,907 in the form of service income provided by the Company to Hunan Zong Hui Information Technology Company Limited.

During the three months period ended March 31, 2019, there is a related party transaction of $17,865 in the form of consultancy service expenses provided by Hunan Zhang Zhong Wan Fu Company Limited

During the year ended December 31, 2018, there is a related party transaction of $264 in the form of service income provided by the Company to Hunan Zong Hui Information Technology Company Limited.



NOTE 14.-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 group, in deciding how to allocate resources and in assessing performance.

For the three months ended March 31, 2019 and March 31, 2018, the Company is regarded as a single operating segment, being engaged in the operating of mattress and bedroom products retail outlets. This principal activity and geographical market are substantially based in Hong Kong and the Mainland China, accordingly, no operating or geographical segment information are presented.



NOTE 15.-SUBSEQUENT EVENTS

The Company has evaluated all subsequent events through May 20, 2019, the date these financial statements were issued, and determined that there were no other material subsequent event or transaction that require recognition or disclosures in the financial statements.



NOTE 16.-COMPARATIVE FINANCIAL STATEMENTS

The classification of certain 2018 accounts has been changed to conform with the presentation used in 2019.



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ITEM 2: MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERTIONS

CAUTIONARY STATEMENT FOR FORWARD-LOOKING STATEMENTS

This discussion and analysis of our financial condition and results of operations includes forward-looking statements that reflect our current views with respect to future events and financial performance. We use words such as expect, anticipate, believe, and intend and similar expressions to identify forward-looking statements. You should be aware that actual results may differ materially from our expressed expectations because of risks and uncertainties inherent in future events and you should not rely unduly on these forward looking statements. We disclaim any obligation to publicly update these statements, or disclose any difference between its actual results and those reflected in these statements. Reference in the following discussion to our, us and we refer to the operations of the Corporation and its subsidiaries (We), except where the context otherwise indicates or requires.  The following discussion of our financial condition and results of operations should be read in conjunction with the audited financial statements and the notes to the audited financial statements included in this annual report. This discussion contains forward-looking statements that reflect our plans, estimates and beliefs. Our actual results may differ materially from those anticipated in these forward-looking statements.



Current Operating Results

In the three months ended March 31, 2019 and 2018, we derived revenues of $28,907 and $268, respectively, from our current business operations.

Syndicore Asia Limited.

Syndicore Asia Limited is a wholly-owned subsidiary of the Company.  Syndicore Asia Limited is also in the startup phase and is in the process of entering into arrangements and agreements to implement the current business plan.  Syndicore Asia Limited is an online media company that syndicates video in a cloud-based, multimedia conduit serving a growing, global community of content creators, news outlets and leading brands. Syndicore Asia Limited will be a provider of syndicated video media to news organizations in the Asia Pacific region. In addition, Syndicore Asia Limited plans to aggregate content from the Asia Pacific region and provide it to news organizations around the world.

Syndicore Asia Limited is devoting its resources to establishing the new business, and its planned operations have not yet fully commenced. Accordingly, no revenues have been earned during the three months period ended March 31, 2019, and 2018, and $47,436 revenue earned for the period from its inception on April 23, 2013 to March 31, 2019.

Green Standard Technologies Enterprises, Inc.

On August 1, 2014, the Company formed Green Standard Technologies Enterprises, Inc. (F/K/A Green Standard Technologies, Inc.)(GSTEI) as a wholly owned subsidiary incorporated under the laws of the state of Nevada. The Companys second line of business is carried out by this subsidiary. On June 6, 2015, Green Standard Technologies Inc. filed articles of amendment to change its name to Green Standard Technologies Enterprises, Inc.

On Dec 29, 2017, for the best interest of the Company, the Board decided to eliminate all costs in connection with GSTE, agreed not to continue and closed down GSTE with immediate effect.

Z-Line International E-Commerce Limited.

On August 17, 2016, Z-Line International E-Commerce Company Limited (Z-Line), a 55% owned subsidiary of the Company incorporated under the laws of Hong Kong.  Z-Line is a Hong Kong based e-Commerce company that provides consumer-to-consumer, business-to-consumer, and business-to-business-sales services via web portals.

Z-Line has no revenues earned during the three months period ended March 31, 2019, and 2018, and from its incorporation to March 31, 2019.

Hunan Syndicore Asia Limited.

Hunan Syndicore Asia Limited (HSAL), a 100% owned subsidiary of Syndicore Asia Limited incorporated under the laws of PRC.  HSAL is a Wholly Foreign-Owned Enterprise (WFOE) incorporated under the Foreign Enterprise Law of People Republic of China, established in the National High-Tech Industrial Development Zone of Changsha, Hunan.  HSAL is a PRC based e-Commerce company that will endeavor to develop its in E-Commerce, video content and video streaming capabilities.

During the three months period ended March 31, 2019 and 2018, HSAL has earned revenue of $28,907 and $268, respectively.

HSAL has earned $77,843 revenue during the period from its incorporation to March 31, 2019.



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Results of Operations for the three months ended March 31, 2019 compared to the three months ended March 31, 2018

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



|                                                        |                                   |  |                                  
|------------------------------------------------------- | --------------------------------- |  | ---------------------------------
|                                                        | Three months Ended
March 31, 2019 |  | Three months Ended
March 31, 2018
|                                                        | $                                 |  | $                                
|Revenue                                                 | 28,907                            |  | 268                              
|Cost of goods sold                                      | (18,781)                          |  | (2,003)                          
|Gross profit                                            | 10,126                            |  | (1,735)                          
|General and administrative
and other operating expenses | 69,379                            |  | 54,299                           
|                                                        |                                   |  |                                  
|Income/(Loss) from operations                           | (59,253)                          |  | (81,478)                         
|Other non-operating income                              | 227,516                           |  | 137,520                          
|Interest expenses                                       | -                                 |  | -                                
|                                                        |                                   |  |                                  
|Income/(Loss) before income taxes                       | 168,263                           |  | 81,486                           
|Income taxes                                            | -                                 |  | -                                
|                                                        |                                   |  |                                  
|Net Loss                                                | 168,263                           |  | 81,486                           
|Non-controlling interest                                | 915                               |  | 1,004                            
|                                                        |                                   |  |                                  
|Net Loss attributable to The Group                      | 169,178                           |  | 82,490                           

Revenue

For the three months period ended March 31, 2019 (2019Q1) and the three months period ended March 31, 2018 (2018Q1), we derived revenues of $28,907 and $268 from our current operation respectively.

Cost of Sales and Gross Profit

For the three months period ended March 31, 2019 and 2018, the cost of goods sold were $18,781 and $2,003 respectively. The gross profit was $10,126 in 2019Q1, compared to a gross loss of $1,735 in 2018Q1, derived from our current operation.

General and administrative and other operating expenses

Total general and administrative and other operating expenses for the three months period ended March 31, 2019 and 2018, were $69,379, and $54,299, respectively. The changes represented an increase of 27.77%.

Other non-operating income

The other non-operating income for the three months period ended March 31, 2019 and 2018, were $227,516, and $137,520, respectively. The changes represented an increase of 65.44%, was mainly due to the changes of warrants expenses reversal of $141,590, a discount on consultancy service fee of $10,058, and a liability write off for the notes payable of $75,000 in the 2019Q1, compared to the changes of warrant expenses reversal was $137,512 in the 2018Q1.

Interest expenses

In the three months period ended March 31, 2019 and 2018, the interest expenses were $Nil and $Nil respectively.

Income Tax

During the three months period ended March 31, 2019 and 2018, the company incurred no tax and its subsidiary has paid $Nil and $Nil tax respectively.

Net Loss Attributable to the Group

The Company recorded a net income of $169,178 and $82,490, for the three months period ended March 31, 2019 and 2018, respectively. The net income was derived after attribution of $915 loss to non-controlling interest in 2019Q1, compared to attribution of $1,004 loss to non-controlling interest for the same period in 2018Q1.



-34-

Liquidity and Capital Resources

The Companys liquidity and capital is dependent on the company to start generate its revenues and increase the capital it can raise to continue the Companys development and expansion of its business.

The Company incurred an accumulated deficits of $2,703,372 as of March 31, 2019 ($2,872,550 as of Dec 31, 2018), generated a net profit of $169,178 for the three months period ended March 31, 2019 (net profit of $82,490 for comparable period ended March 31, 2018). As of March 31, 2019, the Company has its current liabilities exceed its current assets resulting in negative working capital of $746,301 ($913,534 as of Dec 31, 2018). In view of the matters described above, 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 may 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 equity or debt offerings will be successful in raising sufficient funds to assure the eventual profitability of the Company. 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 is 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 a public offering, we will have to find alternative sources, such as a private placement of securities, or loans from our officers, directors or others. The loans are unsecured, non-interest bearing and repayable at demand.

Moreover, management has actively taken steps to revise its operating and financial requirements, which believes that its current and available capital resources will allow the Company to continue its operations throughout this fiscal year.

Working capital

At March 31, 2019, the Company had negative working capital of ($746,301) with current assets of $351,662 and current liabilities of $1,097,963. The current assets consisted cash and cash equivalents of $45,508, other receivables of $5,216, prepaid expenses of $6,066 and amount due from NSML of $294,872. The current liabilities of the Company at March 31, 2019 are composed of other payables of $285,178, warrants liabilities of $414,293, income tax payable of $1,389, and amount due to related parties of $397,103.

As at December 31, 2018, the Company had negative working capital of ($913,534) with current assets of $310,505 and current liabilities of $1,223,673. The current assets consisted cash and cash equivalents of $10,793, other receivables of $4,474, and amount due from NSML of $294,872. The current liabilities of the Company at December 31, 2018 are composed of other payables of $269,897, warrants liabilities of $555,883, note payables of $75,000, income tax payable of $1,389, and amount due to related parties of $321,504.

Operating activities

Net cash used in operating activities during the three months period ended March 31, 2019, was $39,810, compared to net cash used in operation of $43,904 for the same period in 2018Q1. This represents an usage decrease of $4,094.

During the three months period ended March 31, 2019, the cash used was mainly resulted of the net profit $169,178 offset by a non cash-flow reversal of warrants expenses of $141,590, and a non cash-flow written down of notes payable of $75,000, and with the increase of other payables and accrued liabilities of $15,281.

Investing Activities

For the three months period ended March 31, 2019 and 2018, there being no cash flow in investing activities.

Financing Activities:

Net cash provided by financing activities was $75,599 for the three months period ended March 31, 2019, compared to net cash provided of $47,848 for the same period in 2018Q1. This change was primarily an increase in amount due to related parties of $75,599 in the first quarter of 2019.

As of March 31, 2019, stockholders equity was negative $1,029,767 compared to a negative equity of $1,197,871 at December 31, 2018.

As of March 31, 2019, the amounts due from or to related parties, represented advances from shareholders and its related parties of the Company which are interest free, unsecured, and have no fixed repayment terms.

In the current operation, the source of fund was provided by loan from directors and shareholders. In case the directors and shareholders did not continue to support the operation, the Company will be short of fund and cannot operate any longer.



-35-



Off-Balance Sheet Arrangements and Contractual Obligations

As at March 31, 2019, our material off-balance sheet arrangements are operating lease obligations. We excluded these items from the balance sheet in accordance with generally accepted accounting principles in the United States of America (GAAP). Operating lease commitments consist principally of leases for our office and warehouse. These leases frequently include options which permit us to extend the terms beyond the initial fixed lease term. With respect to most of those leases, we intend to renegotiate those leases as they expire.



ITEM 3: QUANTITATIVE AND QUALITAIVE DISCLOSURE 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

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 the Securities Exchange Act of 1934 Rules 13a-15(e) and 15d-15(e)) as of the end of the period covered by this Quarterly Report on Form 10-Q. In designing and evaluating the disclosure controls and procedures, management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives. In addition, the design of disclosure controls and procedures must reflect the fact that there are resource constraints and that management is required to apply its judgment in evaluating the benefits of possible controls and procedures relative to their costs.

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.

Management 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, 2019 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, 2019, 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.  Until we are able to remedy these material weaknesses, we determined that our controls were not effective.

Changes in Internal Control over Financial Reporting

There have been no significant changes in our internal control or other factors over financial reporting that occurred during the three months ended March 31, 2018 or to the date we completed our evaluation, that would materially affect, or are reasonably likely to materially affect, our internal controls and procedures.  Therefore, no corrective actions were taken.



-36-

PART II  OTHER INFORMATION

ITEM 1:  LEGAL PROCEEDINGS

To the best knowledge of the Companys directors and officers, the Company is currently not a party to any material pending legal proceeding.

ITEM 1A:  RISK FACTORS

Not applicable as a smaller reporting company.

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

None

ITEM 3:  DEFAULTS UPON SENIOR SECURITIES.

None

ITEM 4:  MINE SAFETY DISCLOSURES

None

ITEM 5: OTHER INFORMATION

None

ITEM 6: EXHIBITS

|            |  |                                                                                                                                      
|----------- |  | -------------------------------------------------------------------------------------------------------------------------------------
|Exhibit No. |  | Description                                                                                                                          
|            |  |                                                                                                                                      
|31.1        |  | Certification of CEO pursuant to Section 302 of the Sarbanes-Oxley Act of 2002                                                       
|            |  |                                                                                                                                      
|31.2        |  | Certification of CFO pursuant to Section 302 of the Sarbanes-Oxley Act of 2002                                                       
|            |  |                                                                                                                                      
|31.1        |  | Certification of CEO and CFO Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002










SIGNATURE



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





ZZLL INFORMATION TECHNOLOGY INC.

Date: May 20,  2019



By :

/s/Sean Webster



Sean Webster



Chief Executive Officer and



Chief Financial Officer





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