0001683168-21-002184.txt : 20210524 0001683168-21-002184.hdr.sgml : 20210524 20210524101503 ACCESSION NUMBER: 0001683168-21-002184 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 49 CONFORMED PERIOD OF REPORT: 20210331 FILED AS OF DATE: 20210524 DATE AS OF CHANGE: 20210524 FILER: COMPANY DATA: COMPANY CONFORMED NAME: Luduson G Inc. CENTRAL INDEX KEY: 0001737193 STANDARD INDUSTRIAL CLASSIFICATION: SERVICES-PREPACKAGED SOFTWARE [7372] IRS NUMBER: 823184409 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 000-55930 FILM NUMBER: 21951686 BUSINESS ADDRESS: STREET 1: 17/F, 80 GLOUCESTER ROAD CITY: WANCHAI STATE: K3 ZIP: 00000 BUSINESS PHONE: 852-2818-7199 MAIL ADDRESS: STREET 1: 17/F, 80 GLOUCESTER ROAD CITY: WANCHAI STATE: K3 ZIP: 00000 FORMER COMPANY: FORMER CONFORMED NAME: Baja Custom Design, Inc. DATE OF NAME CHANGE: 20180411 10-Q 1 luduson_10q-033121.htm FORM 10-Q

Table of Contents

 

U.S. SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q

 

(Mark One)    
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 2021
 

 

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: 001-38457

 

 

 

Luduson G Inc.

(Exact Name of Registrant as Specified in its Charter)

 

Delaware 82-3184409
(State of other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification Number)

 

17/F, 80 Gloucester Road

Wanchai, Hong Kong

(Address of principal executive offices) (Zip Code) 

 

+852 2818 7199

Registrant's Phone:

 

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

 

Title of each Class Trading Symbol Name of each exchange on which registered
Common Stock, par value US$0.0001 LDSN N/A

 

Indicate by check mark whether the registrant (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) has been subject to such filing requirements for the past 90 days. Yes [_] No [X]

 

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted 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 such files). Yes [X] No [_]

 

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

 

Large accelerated filer [_]   Accelerated filer [_]
     
Non-accelerated filer [_] Smaller reporting company [X]
     
Emerging growth company [_]  

 

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. [_]

 

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

 

As of May 13, 2021, the issuer had 28,100,000 shares of common stock issued and outstanding.

 

 

   

 

 

 

  TABLE OF CONTENTS Page
 
PART I – FINANCIAL INFORMATION
     
Item 1. Financial Statements 4
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operation 17
Item 3. Quantitative and Qualitative Disclosures about Market Risk 22
Item 4. Controls and Procedures 22
 
PART II – OTHER INFORMATION
     
Item 1. Legal Proceedings 23
Item 1A. Risk Factors 23
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds 23
Item 3. Defaults Upon Senior Securities 23
Item 4. Submission of Matters to a Vote of Security Holders 23
Item 5. Other Information 23
Item 6. Exhibits 24

 

 

 2 

 

 

CAUTIONARY NOTE CONCERNING FORWARD-LOOKING STATEMENTS

 

This Quarterly Report on Form 10-Q includes "forward-looking statements" within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended, or the Exchange Act, that are not historical facts, and involve risks and uncertainties that could cause actual results to differ materially from those expected and projected. All statements, other than statements of historical facts, included in this Form 10-Q including, without limitation, statements in the “Management’s Discussion and Analysis of Financial Condition and Results of Operations” regarding the Company’s financial position, business strategy and the plans and objectives of management for future operations, events or developments which the Company expects or anticipates will or may occur in the future, including such things as future capital expenditures (including the amount and nature thereof); expansion and growth of the Company's business and operations; and other such matters are forward-looking statements. These statements are based on certain assumptions and analyses made by the Company in light of its experience and its perception of historical trends, current conditions and expected future developments, as well as other factors it believes are appropriate under the circumstances. However, whether actual results or developments will conform with the Company's expectations and predictions is subject to a number of risks and uncertainties, including general economic, market and business conditions; the business opportunities (or lack thereof) that may be presented to and pursued by the Company; changes in laws or regulation; and other factors, most of which are beyond the control of the Company.

 

These forward-looking statements can be identified by the use of predictive, future-tense or forward-looking terminology, such as "believes," "anticipates," "expects," "estimates," "plans," "may," "will," or similar terms. These statements appear in a number of places in this filing and include statements regarding the intent, belief or current expectations of the Company, and its directors or its officers with respect to, among other things: (i) trends affecting the Company's financial condition or results of operations for its limited history; (ii) the Company's business and growth strategies; and, (iii) the Company's financing plans. Investors are cautioned that any such forward-looking statements are not guarantees of future performance and involve significant risks and uncertainties, and that actual results may differ materially from those projected in the forward-looking statements as a result of various factors. Such factors that could adversely affect actual results and performance include, but are not limited to, the Company's limited operating history, potential fluctuations in quarterly operating results and expenses, government regulation, technological change and competition. For information identifying important factors that could cause actual results to differ materially from those anticipated in the forward-looking statements, please refer to our filings with the SEC under the Exchange Act and the Securities Act of 1933, as amended, including the Risk Factors section of the Company’s Current Report on Form 8-K filed with the U.S. Securities and Exchange Commission (the “SEC”) on May 22, 2020.

 

Consequently, all of the forward-looking statements made in this Form 10-Q are qualified by these cautionary statements and there can be no assurance that the actual results or developments anticipated by the Company will be realized or, even if substantially realized, that they will have the expected consequence to or effects on the Company or its business or operations. The Company assumes no obligations to update any such forward-looking statements.

 

 

 

 

 3 

 

 

PART I – FINANCIAL INFORMATION

 

ITEM 1. FINANCIAL STATEMENTS

 

 

LUDUSON G INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(Currency expressed in United States Dollars (“US$”), except for number of shares)

 

   March 31, 2021   December 31, 2020 
   (Unaudited)   (Audited) 
ASSETS          
Current asset:          
Cash and cash equivalents  $10,000   $40,447 
Accounts receivable   4,660,147    4,499,746 
Deposits, prepayments and other receivables   663,193    665,052 
           
Total current assets   5,333,340    5,205,245 
           
Non-current asset:          
Plant and equipment   381,578    422,414 
           
TOTAL ASSETS  $5,714,918   $5,627,659 
           
LIABILITIES AND STOCKHOLDERS’ EQUITY          
Current liabilities:          
Accrued liabilities and other payables  $19,426   $26,772 
Tax payable   754,295    743,562 
Amount due to a director   18,616    28,290 
           
Total current liabilities   792,337    798,624 
           
TOTAL LIABILITIES   792,337    798,624 
           
Commitments and contingencies        
           
STOCKHOLDERS’ EQUITY          
           
Preferred stock, $0.0001 par value, 20,000,000 shares authorized, no shares issued and outstanding at March 31, 2021 and December 31, 2020, respectively        
Common stock, $0.0001 par value, 100,000,000 shares authorized, 28,110,000 shares issued and outstanding at March 31, 2021 and December 31, 2020, respectively   2,811    2,811 
Additional paid in capital   332,189    332,189 
Accumulated other comprehensive (loss) income   (3,193)   10,573 
Retained earnings   4,590,774    4,483,462 
           
Stockholders’ equity   4,922,581    4,829,035 
           
TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY  $5,714,918   $5,627,659 

 

 

 

See accompanying notes to condensed consolidated financial statements.

 

 4 

 

 

LUDUSON G INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

AND COMPREHENSIVE INCOME

(Currency expressed in United States Dollars (“US$”))

(Unaudited)

 

   Three Months ended March 31, 
   2021   2020 
         
Revenue, net  $193,376   $96,519 
           
Cost of revenue   (34,371)   (3,681)
           
Gross profit   159,005    92,838 
           
Operating expenses:          
General and administrative expenses   (38,853)   (36,692)
Total operating expenses   (38,853)   (36,692)
           
INCOME BEFORE INCOME TAXES   120,152    56,146 
           
Income tax expense   (12,840)   (4,717)
           
NET INCOME   107,312    51,429 
           
Other comprehensive (loss) income:          
Foreign currency translation (loss) gain   (13,766)   4,735 
           
COMPREHENSIVE INCOME  $93,546   $56,164 
           

Net income per share

Basic and diluted

  $0.00   $0.01 
           

Weighted average shares outstanding

Basic and diluted

   28,110,000    10,000,000 

 

 

 

 

See accompanying notes to condensed consolidated financial statements.

 

 

 5 

 

 

LUDUSON G INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Currency expressed in United States Dollars (“US$”))

(Unaudited)

 

   Three Months ended March 31, 
   2021   2020 
Cash flow from operating activities:          
Net income  $107,312   $51,429 
Adjustments to reconcile net income to net cash used in operating activities:          
Depreciation of plant and equipment   39,743    1,254 
Non-cash lease expenses       9,433 
           
Change in operating assets and liabilities:          
Accounts receivable   (160,401)   (1,881)
Deposits and prepayments and other receivables       (108,859)
Accrued expenses and other payables   (7,346)    
Lease liabilities       (9,674)
Tax payable   10,733    4,717 
           
 Net cash used in operating activities   9,959    (53,581)
           
Cash flow from financing activities:          
Repayment to a director   (9,674)    
Dividends paid       (186,084)
           
Net cash used in financing activities   (9,674)   (186,084)
           
Effect on exchange rate change on cash and cash equivalents   (10,814)   5,356 
           
Net change in cash and cash equivalents   (30,447)   (234,309)
           
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD   40,447    269,691 
           
CASH AND CASH EQUIVALENTS, END OF PERIOD  $10,000   $35,382 
           
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION          
Cash paid for tax  $   $ 
Cash paid for interest  $   $ 

 

 

See accompanying notes to condensed consolidated financial statements.

 

 

 6 

 

 

LUDUSON G INC.

CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY

(Currency expressed in United States Dollars (“US$”), except for number of shares)

(Unaudited)

 

 

   For the Three Months ended March 31, 2020 and 2021 
   Common stock   Additional
paid-in
  

Accumulated
other
comprehensive

   Retained   Total
Stockholders’
 
   No. of shares   Amount   Capital   income (loss)   earnings   equity 
                         
Balance as at January 1, 2020 (restated)   10,000,000   $1,000   $9,000   $5,435   $1,024,195   $1,039,630 
                               
Dividends paid                   (186,084)   (186,084)
Foreign currency translation adjustment               4,735        4,735 
Net income for the period                   51,429    51,429 
                               
Balance as at March 31, 2020   10,000,000   $1,000   $9,000   $10,170   $889,540   $909,710 
                               
                               
                               
Balance as at January 1, 2021 (audited)   28,110,000   $2,811   $332,189   $10,573   $4,483,462   $4,829,035 
                               
Foreign currency translation adjustment               (13,766)       (13,766)
Net income for the period                   107,312    107,312 
                               
Balance as at March 31, 2021   28,110,000   $2,811   $332,189   $(3,193)  $4,590,774   $4,922,581 

 

 

 

See accompanying notes to condensed consolidated financial statements.

 

 

 7 

 

 

LUDUSON G INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

FOR THE THREE MONTHS ENDED MARCH 31, 2021 AND 2020

(Currency expressed in United States Dollars (“US$”), except for number of shares)

(Unaudited)

 

NOTE – 1 DESCRIPTION OF BUSINESS AND ORGANIZATION

 

Luduson G Inc. was organized under the laws of the State of Delaware on March 6, 2014. The Company changed its current name on July 15, 2020.

 

Description of subsidiaries

 

Name  

Place of incorporation

and kind of

legal entity

 

Principal activities

and place of operation

 

Particulars of registered/paid up share

capital

 

Effective interest

held

                 
Luduson Holding Company Limited   British Virgin Island   Investment holding   10,000 ordinary shares   100%
                 
Luduson Entertainment Limited   Hong Kong   Sales and marketing  

10,000 ordinary shares at

par value of HK$1

  100%
                 
G Music Asia Limited   British Virgin Islands   Event planning  

2 ordinary shares at par

value of US$1

  100%

 

The Company and its subsidiaries are hereinafter referred to as (the "Company").

 

 

NOTE – 2 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

 

The accompanying condensed consolidated financial statements reflect the application of certain significant accounting policies as described in this note and elsewhere in the accompanying financial statements and notes.

 

l   Basis of presentation

 

These accompanying condensed consolidated financial statements have been prepared in U.S. Dollars in conformity with generally accepted accounting principles in the United States of America (“U.S. GAAP”) for interim financial information pursuant to the rules and regulations of the Securities and Exchange Commission (the “SEC”). Accordingly, they do not include all of the information and footnotes required by U.S. GAAP for complete financial statements. In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary to make the financial statements not misleading have been included. Operating results for the interim period ended March 31, 2021 are not necessarily indicative of the results that may be expected for the fiscal year ending December 31, 2021. The information included in this Form 10-Q should be read in conjunction with Management’s Discussion and Analysis, and the financial statements and notes thereto included in the Company’s Form 10-K for the fiscal year ended December 31, 2020, filed with the SEC on May 25, 2021.

 

l   Use of estimates and assumptions

 

In preparing these condensed consolidated financial statements, management makes estimates and assumptions that affect the reported amounts of assets and liabilities in the balance sheet and revenues and expenses during the periods reported. Actual results may differ from these estimates.

 

 

 8 

 

 

LUDUSON G INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

FOR THE THREE MONTHS ENDED MARCH 31, 2021 AND 2020

(Currency expressed in United States Dollars (“US$”), except for number of shares)

(Unaudited)

 

l   Basis of consolidation

 

The condensed consolidated financial statements include the financial statements of the Company and its subsidiaries. All significant inter-company balances and transactions within the Company have been eliminated upon consolidation.

 

l   Cash and cash equivalents

 

Cash and cash equivalents are carried at cost and represent cash on hand, demand deposits placed with banks or other financial institutions and all highly liquid investments with an original maturity of three months or less as of the purchase date of such investments.

 

l   Accounts receivable

 

Accounts receivable are recorded at the invoiced amount and do not bear interest, which are due within contractual payment terms, generally 30 to 90 days from completion of service. Credit is extended based on evaluation of a customer's financial condition, the customer credit-worthiness and their payment history. Accounts receivable outstanding longer than the contractual payment terms are considered past due. Past due balances over 90 days and over a specified amount are reviewed individually for collectibility. At the end of fiscal year, the Company specifically evaluates individual customer’s financial condition, credit history, and the current economic conditions to monitor the progress of the collection of accounts receivables. The Company will consider the allowance for doubtful accounts for any estimated losses resulting from the inability of its customers to make required payments. For the receivables that are past due or not being paid according to payment terms, the appropriate actions are taken to exhaust all means of collection, including seeking legal resolution in a court of law. Account balances are charged off against the allowance after all means of collection have been exhausted and the potential for recovery is considered remote. The Company does not have any off-balance-sheet credit exposure related to its customers. As of March 31, 2021 and December 31, 2020, there was no allowance for doubtful accounts.

 

l   Plant and equipment

 

Plant and equipment are stated at cost less accumulated depreciation and accumulated impairment losses, if any. Depreciation is calculated on the straight-line basis over the following expected useful lives from the date on which they become fully operational and after taking into account their estimated residual values:

 

    Expected useful lives  
Computer equipment   3 years  
Furniture and equipment   5 years  

 

Expenditures for repairs and maintenance are expensed as incurred. When assets have been retired or sold, the cost and related accumulated depreciation are removed from the accounts and any resulting gain or loss is recognized in the results of operations.

 

Depreciation expense for the three months ended March 31, 2021 and 2020 were $39,743 and $1,254, respectively.

 

l   Revenue recognition

 

The Company adopted Accounting Standards Codification (“ASC”) 606 – Revenue from Contracts with Customers” (“ASC 606”). Under ASC 606, a performance obligation is a promise within a contract to transfer a distinct good or service, or a series of distinct goods and services, to a customer. Revenue is recognized when performance obligations are satisfied and the customer obtains control of promised goods or services. The amount of revenue recognized reflects the consideration to which the Company expects to be entitled to receive in exchange for goods or services. Under the standard, a contract’s transaction price is allocated to each distinct performance obligation. To determine revenue recognition for arrangements that the Company determines are within the scope of ASC 606, the Company performs the following five steps:

 

  identify the contract with a customer;
  identify the performance obligations in the contract;
  determine the transaction price;
  allocate the transaction price to performance obligations in the contract; and
  recognize revenue as the performance obligation is satisfied.

 

 

 9 

 

LUDUSON G INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

FOR THE THREE MONTHS ENDED MARCH 31, 2021 AND 2020

(Currency expressed in United States Dollars (“US$”), except for number of shares)

(Unaudited)

 

l   Income taxes

 

The Company adopted the ASC 740 Income tax provisions of paragraph 740-10-25-13, which addresses the determination of whether tax benefits claimed or expected to be claimed on a tax return should be recorded in the condensed consolidated financial statements. Under paragraph 740-10-25-13, the Company may recognize the tax benefit from an uncertain tax position only if it is more likely than not that the tax position will be sustained on examination by the taxing authorities, based on the technical merits of the position. The tax benefits recognized in the financial statements from such a position should be measured based on the largest benefit that has a greater than fifty percent (50%) likelihood of being realized upon ultimate settlement. Paragraph 740-10-25-13 also provides guidance on de-recognition, classification, interest and penalties on income taxes, accounting in interim periods and requires increased disclosures. The Company had no material adjustments to its liabilities for unrecognized income tax benefits according to the provisions of paragraph 740-10-25-13.

 

The estimated future tax effects of temporary differences between the tax basis of assets and liabilities are reported in the accompanying balance sheets, as well as tax credit carry-backs and carry-forwards. The Company periodically reviews the recoverability of deferred tax assets recorded on its balance sheets and provides valuation allowances as management deems necessary.

 

l   Uncertain tax positions

 

The Company did not take any uncertain tax positions and had no adjustments to its income tax liabilities or benefits pursuant to the ASC 740 provisions of Section 740-10-25 for the three months ended March 31, 2021 and 2020.

 

l   Foreign currencies translation

 

Transactions denominated in currencies other than the functional currency are translated into the functional currency at the exchange rates prevailing at the dates of the transaction. Monetary assets and liabilities denominated in currencies other than the functional currency are translated into the functional currency using the applicable exchange rates at the balance sheet dates. The resulting exchange differences are recorded in the consolidated statement of operations.

 

The reporting currency of the Company is United States Dollar ("US$") and the accompanying consolidated financial statements have been expressed in US$. In addition, the Company is operating in Hong Kong and maintain its books and record in its local currency, Hong Kong Dollars (“HKD”), which is a functional currency as being the primary currency of the economic environment in which their operations are conducted. In general, for consolidation purposes, assets and liabilities of its subsidiary whose functional currency is not US$ are translated into US$, in accordance with ASC Topic 830-30, “Translation of Financial Statement”, using the exchange rate on the balance sheet date. Revenues and expenses are translated at average rates prevailing during the period. The gains and losses resulting from translation of financial statements of foreign subsidiary are recorded as a separate component of accumulated other comprehensive income within the statements of changes in stockholder’s equity.

 

Translation of amounts from HKD into US$ has been made at the following exchange rates for the three months ended March 31, 2021 and 2020:

 

    March 31, 2021   March 31, 2020
Period-end HKD:US$ exchange rate   0.12863   0.12899
Period average HKD:US$ exchange rate   0.12892   0.12869

 

l   Comprehensive income

 

ASC Topic 220, “Comprehensive Income”, establishes standards for reporting and display of comprehensive income, its components and accumulated balances. Comprehensive income as defined includes all changes in equity during a period from non-owner sources. Accumulated other comprehensive income, as presented in the accompanying condensed consolidated statements of changes in stockholders’ equity, consists of changes in unrealized gains and losses on foreign currency translation. This comprehensive income is not included in the computation of income tax expense or benefit.

 

 

 10 

 

LUDUSON G INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

FOR THE THREE MONTHS ENDED MARCH 31, 2021 AND 2020

(Currency expressed in United States Dollars (“US$”), except for number of shares)

(Unaudited)

 

l   Related parties

 

The Company follows the ASC 850-10, Related Party for the identification of related parties and disclosure of related party transactions.

 

Pursuant to section 850-10-20 the related parties include a) affiliates of the Company; b) entities for which investments in their equity securities would be required, absent the election of the fair value option under the Fair Value Option Subsection of section 825–10–15, to be accounted for by the equity method by the investing entity; c) trusts for the benefit of employees, such as pension and Income-sharing trusts that are managed by or under the trusteeship of management; d) principal owners of the Company; e) management of the Company; f) other parties with which the Company may deal if one party controls or can significantly influence the management or operating policies of the other to an extent that one of the transacting parties might be prevented from fully pursuing its own separate interests; and g) other parties that can significantly influence the management or operating policies of the transacting parties or that have an ownership interest in one of the transacting parties and can significantly influence the other to an extent that one or more of the transacting parties might be prevented from fully pursuing its own separate interests.

 

The condensed consolidated financial statements shall include disclosures of material related party transactions, other than compensation arrangements, expense allowances, and other similar items in the ordinary course of business. However, disclosure of transactions that are eliminated in the preparation of consolidated or combined financial statements is not required in those statements. The disclosures shall include: a) the nature of the relationship(s) involved; b) a description of the transactions, including transactions to which no amounts or nominal amounts were ascribed, for each of the periods for which income statements are presented, and such other information deemed necessary to an understanding of the effects of the transactions on the financial statements; c) the dollar amounts of transactions for each of the periods for which income statements are presented and the effects of any change in the method of establishing the terms from that used in the preceding period; and d) amount due from or to related parties as of the date of each balance sheet presented and, if not otherwise apparent, the terms and manner of settlement.

 

l   Commitments and contingencies

 

The Company follows the ASC 450-20, Commitments to report accounting for contingencies. Certain conditions may exist as of the date the financial statements are issued, which may result in a loss to the Company but which will only be resolved when one or more future events occur or fail to occur. The Company assesses such contingent liabilities, and such assessment inherently involves an exercise of judgment. In assessing loss contingencies related to legal proceedings that are pending against the Company or un-asserted claims that may result in such proceedings, the Company evaluates the perceived merits of any legal proceedings or un-asserted claims as well as the perceived merits of the amount of relief sought or expected to be sought therein.

 

If the assessment of a contingency indicates that it is probable that a material loss has been incurred and the amount of the liability can be estimated, then the estimated liability would be accrued in the Company’s condensed consolidated financial statements. If the assessment indicates that a potentially material loss contingency is not probable but is reasonably possible, or is probable but cannot be estimated, then the nature of the contingent liability, and an estimate of the range of possible losses, if determinable and material, would be disclosed.

 

Loss contingencies considered remote are generally not disclosed unless they involve guarantees, in which case the guarantees would be disclosed. Management does not believe, based upon information available at this time that these matters will have a material adverse effect on the Company’s financial position, results of operations or cash flows. However, there is no assurance that such matters will not materially and adversely affect the Company’s business, financial position, and results of operations or cash flows.

 

 

 11 

 

LUDUSON G INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

FOR THE THREE MONTHS ENDED MARCH 31, 2021 AND 2020

(Currency expressed in United States Dollars (“US$”), except for number of shares)

(Unaudited)

  

l   Fair value of financial instruments

 

The Company follows paragraph 825-10-50-10 of the FASB Accounting Standards Codification for disclosures about fair value of its financial instruments and has adopted paragraph 820-10-35-37 of the FASB Accounting Standards Codification (“Paragraph 820-10-35-37”) to measure the fair value of its financial instruments. Paragraph 820-10-35-37 of the FASB Accounting Standards Codification establishes a framework for measuring fair value in generally accepted accounting principles (GAAP), and expands disclosures about fair value measurements. To increase consistency and comparability in fair value measurements and related disclosures, paragraph 820-10-35-37 of the FASB Accounting Standards Codification establishes a fair value hierarchy which prioritizes the inputs to valuation techniques used to measure fair value into three (3) broad levels. The fair value hierarchy gives the highest priority to quoted prices (unadjusted) in active markets for identical assets or liabilities and the lowest priority to unobservable inputs. The three (3) levels of fair value hierarchy defined by paragraph 820-10-35-37 of the FASB Accounting Standards Codification are described below:

 

Level 1   Quoted market prices available in active markets for identical assets or liabilities as of the reporting date.
     
Level 2   Pricing inputs other than quoted prices in active markets included in Level 1, which are either directly or indirectly observable as of the reporting date.
     
Level 3   Pricing inputs that are generally observable inputs and not corroborated by market data.

 

Financial assets are considered Level 3 when their fair values are determined using pricing models, discounted cash flow methodologies or similar techniques and at least one significant model assumption or input is unobservable.

 

The fair value hierarchy gives the highest priority to quoted prices (unadjusted) in active markets for identical assets or liabilities and the lowest priority to unobservable inputs. If the inputs used to measure the financial assets and liabilities fall within more than one level described above, the categorization is based on the lowest level input that is significant to the fair value measurement of the instrument.

 

The carrying amounts of the Company’s financial assets and liabilities, such as cash and cash equivalents, accounts receivable, deposits, prepayments and other receivables and operating lease right-of-use assets approximate their fair values because of the short maturity of these instruments.

 

l   Recent accounting pronouncements

 

From time to time, new accounting pronouncements are issued by the Financial Accounting Standard Board (“FASB”) or other standard setting bodies and adopted by the Company as of the specified effective date. Unless otherwise discussed, the Company believes that the impact of recently issued standards that are not yet effective will not have a material impact on its financial position or results of operations upon adoption.

 

Simplifying the Accounting for Debt with Conversion and Other Options.

 

In June 2020, the FASB issued ASU 2020-06 to simplify the accounting in ASC 470, “Debt with Conversion and Other Options” and ASC 815, “Contracts in Equity’s Own Entity”. The guidance simplifies the current guidance for convertible instruments and the derivatives scope exception for contracts in an entity’s own equity. Additionally, the amendments affect the diluted EPS calculation for instruments that may be settled in cash or shares and for convertible instruments. This ASU will be effective beginning in the first quarter of the Company’s fiscal year 2022. Early adoption is permitted. The amendments in this update must be applied on either full retrospective basis or modified retrospective basis through a cumulative-effect adjustment to retained earnings/(deficit) in the period of adoption. The Company is currently evaluating the impact of ASU 2020-06 on its consolidated financial statements and related disclosures, as well as the timing of adoption.

 

 12 

 

LUDUSON G INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

FOR THE THREE MONTHS ENDED MARCH 31, 2021 AND 2020

(Currency expressed in United States Dollars (“US$”), except for number of shares)

(Unaudited)

  

Financial Instruments

 

In June 2016, the FASB issued ASU 2016-13, “Financial Instruments - Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments” (“ASU 2016-13”), which modifies the measurement of expected credit losses of certain financial instruments. In February 2020, the FASB issued ASU 2020-02 and delayed the effective date of ASU 2016-13 until fiscal year beginning after December 15, 2022. The Company is currently evaluating the impact of adopting ASU 2016-13 on its consolidated financial statements.

 

Simplifying the Accounting for Income Taxes

 

In December 2019, the FASB issued ASU 2019-12 to simplify the accounting in ASC 740, “Income Taxes.” This guidance removes certain exceptions related to the approach for intra-period tax allocation, the methodology for calculating income taxes in an interim period, and the recognition of deferred tax liabilities for outside basis differences. This guidance also clarifies and simplifies other areas of ASC 740. This ASU will be effective beginning in the first quarter of the Company’s fiscal year 2021. Early adoption is permitted. Certain amendments in this update must be applied on a prospective basis, certain amendments must be applied on a retrospective basis, and certain amendments must be applied on a modified retrospective basis through a cumulative-effect adjustment to retained earnings/(deficit) in the period of adoption. The adoption of ASU 2019-12 does not have a significant impact on the Company’s consolidated financial statements as of and for the three-month period ended March 31, 2021.

 

Earnings Per Share

 

In April 2021, the FASB issued ASU 2021-04, which included Topic 260 “Earnings Per Share”. This guidance clarifies and reduces diversity in an issuer’s accounting for modifications or exchanges of freestanding equity-classified written call options due to a lack of explicit guidance in the FASB Codification. The ASU 2021-04 is effective for all entities for fiscal years beginning after December 15, 2021. Early adoption is permitted. The Company is currently evaluating the impact of adopting ASU 2021-04 on its consolidated financial statements.

 

NOTE – 3 ACCOUNTS RECEIVABLE

 

The majority of the Company’s sales are on open credit terms and in accordance with terms specified in the contracts governing the relevant transactions. The Company evaluates the need of an allowance for doubtful accounts based on specifically identified amounts that management believes to be uncollectible. If actual collections experience changes, revisions to the allowance may be required. Based upon the aforementioned criteria, the Company has not provide the allowance for the three months ended March 31, 2021 and 2020.

 

   March 31, 2021   December 31, 2020 
       (Audited) 
           
Accounts receivable, cost  $4,660,147   $4,499,746 
Less: allowance for doubtful accounts        
Accounts receivable, net  $4,660,147   $4,499,746 

 

The Company expects these balances to be recovered in the next 12 months.

 

 

 13 

 

 

LUDUSON G INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

FOR THE THREE MONTHS ENDED MARCH 31, 2021 AND 2020

(Currency expressed in United States Dollars (“US$”), except for number of shares)

(Unaudited)

  

NOTE – 4 DEPOSITS, PREPAYMENTS AND OTHER RECEIVABLES

 

Deposits, prepayments and other receivables consisted of the following,

 

   March 31, 2021   December 31, 2020 
       (Audited) 
           
Prepayments for business project  $139,024   $139,414 
Prepayments for vending machine   520,953    522,413 
Rental deposit   3,216    3,225 
   $663,193   $665,052 

 

Purchase deposits represent deposit payments made to vendors for procurement of equipment, which are interest-free, unsecured and relieved against accounts payable when goods are received by the Company.

 

 

NOTE – 5 STOCKHOLDERS’ EQUITY

 

Authorized shares

 

As of March 31, 2021 and December 31, 2020, the authorized share capital of the Company consisted of 100,000,000 shares of common stock with $0.0001 par value, and 20,000,000 shares of preferred stock also with $0.0001 par value. No other classes of stock are authorized.

 

The Court also ordered the distribution of 2,500,000 warrants in the Company to all administrative creditors of PSD, with these creditors to receive five warrants in the Company for each $0.10 of PSD's administrative debt which they held. These creditors received 2,500,000 warrants consisting of 500,000 "A Warrants" each convertible into one share of common stock at an exercise price of $4.00; 500,000 "B Warrants" each convertible into one share of common stock at an exercise price of $5.00; 500,000 "C Warrants" each convertible into one share of common stock at an exercise price of $6.00; 500,000 "D Warrants" each convertible into one share of common stock at an exercise price of $7.00; and 500,000 "E Warrants" each convertible into one share of common stock at an exercise price of $8.00. All warrants are exercisable at any time prior to August 30, 2020.

 

As of March 31, 2021, no warrants have been exercised.

 

Issued and outstanding shares

 

As of March 31, 2021 and December 31, 2020, 28,110,000 common shares issued and outstanding, and 2,500,000 warrants to acquire common shares issued and outstanding.

 

 

NOTE – 6 INCOME TAX

 

The Company mainly operates in Hong Kong that is subject to taxes in the governing jurisdictions in which it operates. The effective tax rate in the period presented is the result of the mix of income earned in various tax jurisdictions that apply a broad range of income tax rate, as follows:

 

BVI

 

Under the current BVI law, the Company is not subject to tax on income.

 

 

 14 

 

LUDUSON G INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

FOR THE THREE MONTHS ENDED MARCH 31, 2021 AND 2020

(Currency expressed in United States Dollars (“US$”), except for number of shares)

(Unaudited)

  

Hong Kong

 

The Company’s subsidiary operating in Hong Kong is subject to the Hong Kong Profits Tax at the two-tiered profits tax rates from 8.25% to 16.5% on the estimated assessable profits arising in Hong Kong during the current year, after deducting a tax concession for the tax year. The reconciliation of income tax rate to the effective income tax rate for the three months ended March 31, 2021 and 2020 is as follows:

 

   Three Months ended March 31, 
   2021   2020 
         
Income before income taxes  $120,152   $56,146 
Statutory income tax rate   16.5%    16.5% 
Income tax expense at statutory rate   19,825    9,264 
Tax effect of non-deductible items   6,558    207 
Tax effect of deductible items   (703)   (28)
Tax holiday   (12,840)   (4,726)
 Income tax expense  $12,840   $4,717 

 

 

NOTE – 7 RELATED PARTY TRANSACTIONS

 

Apart from the transactions and balances detailed elsewhere in these accompanying condensed consolidated financial statements, the Company has no other significant or material related party transactions during the periods presented.

 

 

NOTE – 8 CONCENTRATIONS OF RISK

 

The Company is exposed to the following concentrations of risk:

 

(a)       Major customers

 

For the three months ended March 31, 2021 and 2020, the individual customer who accounts for 10% or more of the Company’s revenues and its outstanding receivable balances as at period-end dates, are presented as follows:

 

   Three months ended March 31, 2021       March 31, 2021 

 

Customers

  Revenues   Percentage
of revenues
       Accounts
receivable
 
                 
Customer A   116,026    60%        $2,132,021 
Customer B   38,675    20%         1,398,494 
Customer C   38,675    20%         1,124,229 
                     
Total:  $193,376    100%    Total:   $4,654,744 

 

   Three months ended March 31, 2020       March 31, 2020 
Customers  Revenues   Percentage
of revenues
       Accounts
receivable
 
                 
Customer A  $38,608    40%        $202,514 
Customer C   38,608    40%         165,107 
Customer D   19,303    20%         118,671 
                     
Total:  $96,519    100%    Total:   $486,292 

 

 

 15 

 

LUDUSON G INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

FOR THE THREE MONTHS ENDED MARCH 31, 2021 AND 2020

(Currency expressed in United States Dollars (“US$”), except for number of shares)

(Unaudited)

  

(b)       Economic and political risk

 

The Company’s major operations are conducted in Hong Kong. Accordingly, the political, economic, and legal environments in Hong Kong, as well as the general state of Hong Kong’s economy may influence the Company’s business, financial condition, and results of operations.

 

(c)       Exchange rate risk

 

The Company cannot guarantee that the current exchange rate will remain steady; therefore there is a possibility that the Company could post the same amount of profit for two comparable periods and because of the fluctuating exchange rate actually post higher or lower profit depending on exchange rate of HKD converted to US$ on that date. The exchange rate could fluctuate depending on changes in political and economic environments without notice.

 

 

9.       COMMITMENTS AND CONTINGENCIES

 

As of March 31, 2021, the Company has no material commitments or contingencies.

 

 

10.       SUBSEQUENT EVENTS

 

In accordance with ASC Topic 855, “Subsequent Events”, which establishes general standards of accounting for and disclosure of events that occur after the balance sheet date but before consolidated financial statements are issued, the Company has evaluated all events or transactions that occurred after March 31, 2021, up through the date the Company issued the unaudited condensed consolidated financial statements. The Company determined that there were no further events to disclose.

 

 

 16 

 

 

 

ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

 

The following discussion and analysis of our Company’s financial condition and results of operations should be read in conjunction with our unaudited condensed consolidated financial statements and the related notes included elsewhere in the report. This discussion contains forward-looking statements that involve risks and uncertainties. Actual results and the timing of selected events could differ materially from those anticipated in these forward-looking statements as a result of various factors. See “Cautionary Note Concerning Forward-Looking Statements” on page 2.

 

The description of our business included in this quarterly report is summary in nature and only includes material developments that have occurred since the latest full description. The full discussion of the history and general development of our business is included in “Item 1. Description of Business” section of the Company’s Annual Report on Form 10-K filed with the SEC on March 25, 2021, which section is incorporated by reference.

 

Currency and exchange rate

 

Unless otherwise noted, all currency figures quoted as “U.S. dollars”, “dollars” or “US$” refer to the legal currency of the United States. References to “Hong Kong Dollar” are to the Hong Kong Dollar, the legal currency of the Hong Kong Special Administrative Region of the People’s Republic of China. Throughout this report, assets and liabilities of the Company’s subsidiaries are translated into U.S. dollars using the exchange rate on the balance sheet date. Revenue and expenses are translated at average rates prevailing during the period. The gains and losses resulting from translation of financial statements of foreign subsidiaries are recorded as a separate component of accumulated other comprehensive income within the statement of stockholders’ equity.

 

Overview

 

We were incorporated under the laws of the State of Delaware on March 6, 2014, under the name “Jovanovic-Steele, Inc.” Our name was changed to Baja Custom Designs, Inc. on October 26, 2017. On May 8, 2020, we acquired Luduson Holding Company Limited, a limited liability company organized under the laws of British Virgin Islands (“LHCL”). As a result of our acquisition of LHCL, we entered into the business-to-business gaming technology industry.

 

We are business-to-business gaming technology company that provides events marketing strategies with a combination of digital interactive solutions and content production services in Hong Kong. In digital marketing industry, we offer business-to-business digital marketing solutions on our proprietary and secure network, which accommodates a wide range of devices and theme-based gaming content, including multi-touch table, body motion sensing, indoor positioning device and electronic circuit system, together with the customized game contents, as an integrated marketing solution. We are principally engaged in developing and granting a right-to-use digital entertainment - interactive game software and providing system development consultancy and maintenance services to our customers and interactive games installations in shopping mall events, exhibitions and brand promotions.

 

We provide our business customers in entertainment industry with a full line of custom-made interactive gaming services. In this entertainment segment, we offer a customized device box with a library of self-developed interactive game contents, such as, sport-themed social games, motion-sensing action games, logic and puzzle games, original IP characters education game for children, etc., to meet with our business customers’ operational use or business-to-business social solutions.

 

Our goal is to provide an innovative and effective interactive solution services to satisfy diverse marketing needs. We are committed to working at a high-quality standard to address the needs of differing budgets. We provide services to wide range of customer across different industry segments and regions.

 

Our principal executive and registered offices are located at 17/F, 80 Gloucester Road, Wanchai, Hong Kong, telephone number +852-2119 1031.

 

 

 17 

 

 

Results of Operations

 

Comparison of the three months ended March 31, 2021 and 2020

 

The following table sets forth certain operational data for the three months ended March 31, 2021 and 2020:

 

         
   Three Months Ended March 31, 
   2021   2020 
Revenues  $193,376   $96,519 
Cost of revenue   (34,371)   (3,681)
Gross profit   159,005    92,838 
Total operating expenses   (38,853)   (36,692)
Other income        
Income before Income Taxes   120,152    56,146 
Income tax expense   (12,840)   (4,717)
Net income   107,312    51,429 

 

Revenue. We generated revenues of $193,376 and $96,519 for the three months ended March 31, 2021 and 2020. The significant increase is due to the increase in business volume in digital advertising income from our online entertainment portal. To cope with changing entertainment consumption patterns since the COVID-19 pandemic, we launched our self-developed online portal and shared freely our game contents with users.

 

During the three months ended March 31, 2021 and 2020, the following customers accounted for 10% or more of our total net revenues:

 

                   
    Three Months ended
March 31, 2021
    March 31, 2021  
    Revenues     Percentage
of revenues
    Accounts
receivable
 
                   
Ease Audio Group Limited   $ 116,026       60%     $ 2,132,021  
Yu Lin Nuo Ya Interactive Entertainment Company Limited     38,675       20%       1,398,494  
Shenzhen Jiu Sheng Optoelectronic Comm Tech Co., Ltd     38,675       20%       1,124,229  
                         
    $ 96,519       100%     $ 4,654,744  

 

   Three months ended March 31, 2020       March 31, 2020 
Customer  Revenues   Percentage
of revenues
       Accounts
receivable
 
Yu Lin Nuo Ya Interactive Entertainment Company Limited  $38,608    40%        $202,514 
Ease Audio Group Limited   38,608    40%         165,107 
Shenzhen Jiu Sheng Optoelectronic Comm Tech Co., Ltd   19,303    20%         118,671 
Total:  $96,519    100%    Total:   $486,292 

 

 All of our major customers are located in Hong Kong and the PRC

 

Cost of Revenue. Cost of revenue for the three months ended March 31, 2021, was $34,371, and as a percentage of net revenue, approximately 17.8%. Cost of revenue for the three months ended March 31, 2020, was $96,519, and as a percentage of net revenue, approximately 19.7%. Cost of revenue increased primarily as a result of the increase in our business volume.

 

 

 18 

 

 

Gross Profit. We achieved a gross profit of $159,005 and $92,838 for the three months ended March 31, 2021 and 2020, respectively. The increase in gross profit is primarily attributable to the increase in our business volume.

  

General and Administrative Expenses (“G&A”). We incurred G&A expenses of $38,853 and $36,692 for the three months ended March 31, 2021, and 2020, respectively. The increase in G&A is primarily attributable to the increase in our business volume.

 

Income Tax Expense. Our income tax expenses for the quarters ended March 31, 2021 and 2020 was $12,840 and $4,717, respectively.

 

Net Income. During the three months ended March 31, 2021, we incurred a net income of $107,312, as compared to $51,429 for the same period ended March 31, 2020. The decrease in net income is primarily attributable to the decrease in our business volume amid the coronavirus (COVID-19) outbreak in 2020.

 

Liquidity and Capital Resources

 

As of March 31, 2021, we had cash and cash equivalents of $10,000, accounts receivable of $4,660,147, deposits, prepayments and other receivables of $663,193.

 

We believe that our current cash and other sources of liquidity discussed below are adequate to support general operations for at least the next 12 months.

 

   Three Months Ended March 31, 
   2021   2020 
Net cash used in operating activities  $(9,959)  $(53,581)
Net cash provided by (used in) investing activities        
Net cash (used in) provided by financing activities   (9,674)   (186,084)

  

Net Cash Used In Operating Activities.

 

For the three months ended March 31, 2021, net cash used in operating activities was $9,959, which consisted primarily of a net income of $107,312, an increase in income tax payable of $10,733, offset by an increase in accounts receivables of $160,401, an decrease in accrued expenses and other payables of $7,346, and depreciation of plant and equipment of $39,743.

 

For the three months ended March 31, 2020, net cash used in operating activities was $53,581, which consisted primarily of non-cash items, $1,254 of depreciation of plant and equipment and $9,433 of lease expenses, offset by, an increase in accounts receivables of $1,881, an increase in deposits, prepayments and other receivables of $108,859. 

 

We expect to continue to rely on cash generated through financing from our existing shareholders and private placements of our securities, however, to finance our operations and future acquisitions.

 

Net Cash Provided By (Used In) Investing Activities.

 

For the three months ended March 31, 2021, there is no net cash provided by investing activities.

 

For the three months ended March 31, 2020, there is no net cash provided by investing activities.

   

Net Cash Provided By Financing Activities.

 

For the three months ended March 31, 2021, net cash used in financing activities was $9,674 consisting primarily of a repayment to a director.

 

For the three months ended March 31, 2020, net cash used in financing activities was $186,084, consisting primarily of dividends paid to the former shareholder of the Company.

 

 

 19 

 

 

Off-Balance Sheet Arrangements

 

We have no outstanding off-balance sheet guarantees, interest rate swap transactions or foreign currency contracts.  We do not engage in trading activities involving non-exchange traded contracts.

 

Critical Accounting Policies and Estimates.

 

The preparation of financial statements in conformity with accounting principles generally accepted in the United States requires our management to make assumptions, estimates and judgments that affect the amounts reported, including the notes thereto, and related disclosures of commitments and contingencies, if any. We have identified certain accounting policies that are significant to the preparation of our financial statements. These accounting policies are important for an understanding of our financial condition and results of operations. Critical accounting policies are those that are most important to the presentation of our financial condition and results of operations and require management's subjective or complex judgment, often as a result of the need to make estimates about the effect of matters that are inherently uncertain and may change in subsequent periods. Certain accounting estimates are particularly sensitive because of their significance to financial statements and because of the possibility that future events affecting the estimate may differ significantly from management's current judgments. We believe the following accounting policies are critical in the preparation of our financial statements.

 

l  Basis of presentation

 

These accompanying consolidated financial statements have been prepared in accordance with generally accepted accounting principles in the United States of America (“US GAAP”).

 

l  Use of estimates and assumptions

 

In preparing these consolidated financial statements, management makes estimates and assumptions that affect the reported amounts of assets and liabilities in the balance sheet and revenues and expenses during the period reported. Actual results may differ from these estimates.

 

l  Basis of consolidation

 

The consolidated financial statements include the accounts of the Company and its subsidiaries. All significant inter-company balances and transactions within the Company have been eliminated upon consolidation.

 

l  Accounts receivable

 

Accounts receivable are recorded at the invoiced amount and do not bear interest, which are due within contractual payment terms, generally 30 to 90 days from completion of service. Credit is extended based on evaluation of a customer's financial condition, the customer credit-worthiness and their payment history. Accounts receivable outstanding longer than the contractual payment terms are considered past due. Past due balances over 90 days and over a specified amount are reviewed individually for collectibility. At the end of fiscal year, the Company specifically evaluates individual customer’s financial condition, credit history, and the current economic conditions to monitor the progress of the collection of accounts receivables. The Company will consider the allowance for doubtful accounts for any estimated losses resulting from the inability of its customers to make required payments. For the receivables that are past due or not being paid according to payment terms, the appropriate actions are taken to exhaust all means of collection, including seeking legal resolution in a court of law. Account balances are charged off against the allowance after all means of collection have been exhausted and the potential for recovery is considered remote. The Company does not have any off-balance-sheet credit exposure related to its customers.

 

 

 20 

 

 

l  Revenue recognition

 

The Company adopted Accounting Standards Codification (“ASC”) 606 – Revenue from Contracts with Customers” (“ASC 606”). Under ASC 606, a performance obligation is a promise within a contract to transfer a distinct good or service, or a series of distinct goods and services, to a customer. Revenue is recognized when performance obligations are satisfied and the customer obtains control of promised goods or services. The amount of revenue recognized reflects the consideration to which the Company expects to be entitled to receive in exchange for goods or services. Under the standard, a contract’s transaction price is allocated to each distinct performance obligation. To determine revenue recognition for arrangements that the Company determines are within the scope of ASC 606, the Company performs the following five steps:

 

  identify the contract with a customer;
  identify the performance obligations in the contract;
  determine the transaction price;
  allocate the transaction price to performance obligations in the contract; and
  recognize revenue as the performance obligation is satisfied.

 

l  Foreign currencies translation

 

Transactions denominated in currencies other than the functional currency are translated into the functional currency at the exchange rates prevailing at the dates of the transaction. Monetary assets and liabilities denominated in currencies other than the functional currency are translated into the functional currency using the applicable exchange rates at the balance sheet dates. The resulting exchange differences are recorded in the consolidated statement of operations.

 

The reporting currency of the Company is United States Dollar ("US$") and the accompanying consolidated financial statements have been expressed in US$. In addition, the Company’s operating subsidiaries in Hong Kong and Seychelles maintain their books and record in its local currency, Hong Kong Dollars (“S$”), which is a functional currency as being the primary currency of the economic environment in which their operations are conducted. In general, for consolidation purposes, assets and liabilities of its subsidiaries whose functional currency is not US$ are translated into US$, in accordance with ASC Topic 830-30, “ Translation of Financial Statement”, using the exchange rate on the balance sheet date. Revenues and expenses are translated at average rates prevailing during the year. The gains and losses resulting from translation of financial statements of foreign subsidiaries are recorded as a separate component of accumulated other comprehensive income within the statements of changes in stockholder’s equity.

 

l  Leases

 

The Company adopted Topic 842, Leases (“ASC 842”). At the inception of an arrangement, the Company determines whether the arrangement is or contains a lease based on the unique facts and circumstances present. Leases with a term greater than one year are recognized on the balance sheet as right-of-use (“ROU”) assets, lease liabilities and long-term lease liabilities. The Company has elected not to recognize on the balance sheet leases with terms of one year or less. Operating lease liabilities and their corresponding right-of-use assets are recorded based on the present value of lease payments over the expected remaining lease term. However, certain adjustments to the right-of-use asset may be required for items such as prepaid or accrued lease payments. The interest rate implicit in lease contracts is typically not readily determinable. As a result, the Company utilizes its incremental borrowing rates, which are the rates incurred to borrow on a collateralized basis over a similar term an amount equal to the lease payments in a similar economic environment.

 

In accordance with the guidance in ASC 842, components of a lease should be split into three categories: lease components (e.g. land, building, etc.), non-lease components (e.g. common area maintenance, consumables, etc.), and non-components (e.g. property taxes, insurance, etc.). Subsequently, the fixed and in-substance fixed contract consideration (including any related to non-components) must be allocated based on the respective relative fair values to the lease components and non-lease components.

 

Lease expense is recognized on a straight-line basis over the lease terms. Lease expense includes amortization of the ROU assets and accretion of the lease liabilities. Amortization of ROU assets is calculated as the periodic lease cost less accretion of the lease liability. The amortized period for ROU assets is limited to the expected lease term.

 

 

 21 

 

 

The Company has elected a practical expedient to combine the lease and non-lease components into a single lease component. The Company also elected the short-term lease measurement and recognition exemption and does not establish ROU assets or lease liabilities for operating leases with terms of 12 months or less.

 

l  Recent accounting pronouncements

 

From time to time, new accounting pronouncements are issued by the Financial Accounting Standards Board (FASB), or other standard setting bodies and adopted by the Company as of the specified effective date. Under the Jumpstart Our Business Startups Act of 2012 (JOBS Act), the Company meets the definition of an emerging growth company. The Company has elected to use the extended transition period for complying with new or revised accounting standards pursuant to Section 107(b) of the JOBS Act. Unless otherwise discussed, the impact of recently issued standards that are not yet effective will not have a material impact on the Company's financial position or results of operations upon adoption.

 

Recently Adopted Accounting Pronouncements

 

On January 1, 2021, the Company adopted Accounting Standards Update (“ASU”) No. 2016-02 (Topic 842) “Leases” which supersedes the lease recognition requirements in ASC Topic 840, “Leases”. Under ASU No. 2016-02, lessees are required to recognize assets and liabilities on the consolidated balance sheets for most leases and provide enhanced disclosures. For companies that are not emerging growth companies (“EGCs”), the ASU was effective for fiscal years beginning after December 15, 2018. For EGCs, the ASU is effective for fiscal years beginning after December 15, 2021. The Company early adopted the new standard using the modified retrospective method by recording and right-of-use asset of $13.2 million, short-term portion of lease liabilities of $6.3 million and long-term portion of lease liabilities of $7.2 million as of the effective date. Prior periods will not be restated and will continue to be reported under Topic 840 guidance in effect during those periods. The Company applied the package of practical expedients to leases that commenced before the effective date whereby the Company elected to not reassess the following: (i) whether any expired or existing contracts contain leases; (ii) the lease classification for any expired or existing leases; and (iii) initial direct costs for any existing leases. The adoption did not have a material impact on its consolidated statements of operations or its consolidated statements of cash flows. See Note 13, Leases, for further information and disclosures related to the adoption of this standard.

 

In December 2019, the FASB issued ASU No. 2019-12, Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes (“ASU No. 2019-12”), which is intended to simplify various aspects of the accounting for income taxes. ASU No. 2019-12 removes certain exceptions to the general principles in Topic 740 and clarifies and amends existing guidance to improve consistent application. This standard is effective for fiscal years and interim periods within those fiscal years, beginning after December 15, 2020. Early adoption is permitted. The Company has adopted the pronouncement and it did not have a material impact on its consolidated financial statements and related disclosures.

 

 

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

 

As a smaller reporting company, as defined by Item 10 (f)(1) of Regulation S-K, we are not required to provide the information required by this item.

 

CONTROLS AND PROCEDURES

 

ITEM 4. CONTROLS AND PROCEDURES

 

Evaluation of Disclosure Controls and Procedures

 

As required by Rule 13a-15 under the Securities Exchange Act of 1934 (the “1934 Act”), as of March 31, 2021, we carried out an evaluation of the effectiveness of the design and operation of our disclosure controls and procedures. This evaluation was carried out under the supervision and with the participation of our Chief Executive Officer (our principal executive officer) and our Chief Financial Officer (our principal financial officer), who concluded, that because of the material weakness in our internal control over financial reporting (“ICFR”) described in our Annual Report on Form 10-K filed with the SEC on March 25, 2021, our disclosure controls and procedures were not effective as of December 31, 2020.

 

 

 22 

 

 

Disclosure controls and procedures are controls and other procedures that are designed to ensure that information required to be disclosed in our reports filed or submitted under the Securities Exchange Act is recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission’s rules and forms.  Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed in our reports filed under the Exchange Act is accumulated and communicated to our management, including our principal executive officer and our principal financial officer, as appropriate, to allow timely decisions regarding required disclosure.

 

Changes in Internal Control over Financial Reporting

 

There have been no changes in our internal control over financial reporting identified in connection with the evaluation required by paragraph (d) of Exchange Act Rules 13a-15 or 15d-15 that occurred during our last quarter ended March 31, 2021, that have materially affected, or are reasonable likely to materially affect, our internal control over financial reporting.

 

 

PART II OTHER INFORMATION

 

ITEM 1. LEGAL PROCEEDINGS

 

The Company is not a party to any legal proceedings.

 

ITEM 1A. RISK FACTORS

 

None.

 

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

 

There were no sales of unregistered equity securities during the covered time period.

 

ITEM 3. DEFAULTS UPON SENIOR SECURITIES

 

None.

 

ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

 

None.

 

ITEM 5. OTHER INFORMATION

 

None.

 

 

 23 

 

 

 

ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K

 

Exhibit Number Description
2.1 Plan of Reorganization (1)
3.1 Certificate of Incorporation (1)
3.2 Certificate of Amendment to Certificate of Incorporation (1)
3.3 Certificate of Amendment to Certificate of Incorporation (2)
3.4 Amended and Restated Bylaws (2)
4.1 Form of “A” Common Stock Purchase Warrant (1)
4.2 Form of “B” Common Stock Purchase Warrant (1)
4.3 Form of “C” Common Stock Purchase Warrant (1)
4.4 Form of “D” Common Stock Purchase Warrant (1)
4.5 Form of “E” Common Stock Purchase Warrant (1)
4.6 Description of Securities (3)
10.1 Lease Agreement, dated December 28, 2018, by and between Luduson Entertainment Limited and Chen Xiu Ying (3)
22 List of Subsidiaries (3)
31.1 Certification of Chief Executive Officer pursuant to Exchange Act Rule 13a-14 and 15d-14*
31.2 Certification of Principal Financial Officer pursuant to Exchange Act Rule 13a-14 and 15d-14*
32.1 Certification of the Company’s Chief Executive Officer and Chief Financial Officer, pursuant to 18 U.S.C. Section 1350 as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.*
32.2 Certification of the Company’s Principal Financial Officer, pursuant to 18 U.S.C. Section 1350 as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.*
101.INS ** XBRL Instance Document
101.SCH ** XBRL Taxonomy Extension Schema Document
101.CAL ** XBRL Taxonomy Extension Calculation Linkbase Document
101.DEF ** XBRL Taxonomy Extension Definition Linkbase Document
101.LAB ** XBRL Taxonomy Extension Label Linkbase Document
101.PRE ** XBRL Taxonomy Extension Presentation Linkbase Document

 

* Filed Herewith.
** XBRL (Extensible Business Reporting Language) information is furnished and not filed or a part of a registration statement or prospectus for purposes of Sections 11 or 12 of the Securities Act of 1933, as amended, is deemed not filed for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, and otherwise is not subject to liability under these sections.

 

(1) Incorporated by reference to the Exhibits to Registration Statement on Form 10 filed with the Securities and Exchange Commission on April 30, 2018.
(2) Incorporated by reference to the Exhibits to the Definitive Information Statement of Schedule 14C filed with the Securities and Exchange Commission on June 8, 2020.
(3) Incorporated by reference to the Annual Report on Form 10-K filed with the Securities and Exchange Commission on March 25, 2021.

 

 

 

 24 

 

 

SIGNATURES

 

In accordance with Section 13 or 15 (d) of the Exchange Act, the registrant caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

 

 

Date: May 24, 2021

 

  Luduson G Inc.
  Registrant
   
   
  By: /s/ Ka Leung Wong
 

Ka Leung Wong

Chief Executive Officer and Director

 

 

 

 

 

 25 

 

EX-31.1 2 luduson_10q-ex3101.htm CERTIFICATION

EXHIBIT 31.1 

CERTIFICATION PURSUANT TO

18 USC, SECTION 1350,

AS ADOPTED PURSUANT TO

SECTION 302 OF THE SARBANES OXLEY ACT OF 2002

 

I, Ka Leung Wong, certify that:

 

  1. I have reviewed this quarterly report on Form 10-Q of Luduson G Inc.;
     
  2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary in order to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
     
  3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
     
  4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal controls over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

 

  a. Designed such disclosure controls and procedures, or caused such disclosure controls and procedure to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
     
  b. Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
     
  c. Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based upon such evaluation; and
     
  d. Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

 

  5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

 

  a. All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and
     
  b. Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

 

Dated: May 24, 2021

/s/ Ka Leung Wong

Ka Leung Wong

Chief Executive Officer

EX-31.2 3 luduson_10q-ex3102.htm CERTIFICATION

EXHIBIT 31.2

CERTIFICATION PURSUANT TO

18 USC, SECTION 1350,

AS ADOPTED PURSUANT TO

SECTION 302 OF THE SARBANES OXLEY ACT OF 2002

 

I, Lan Chan, certify that:

 

  1. I have reviewed this quarterly report on Form 10-Q of Luduson G Inc.;
     
  2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary in order to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
     
  3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
     
  4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal controls over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

 

  a. Designed such disclosure controls and procedures, or caused such disclosure controls and procedure to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
     
  b. Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
     
  c. Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based upon such evaluation; and
     
  d. Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

 

  5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

 

  a. All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and
     
  b. Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

 

Dated: May 24, 2021 /s/ Lan Chan
 

Lan Chan

Chief Financial Officer, Chief Operating Officer and Secretary

EX-32.1 4 luduson_10q-ex3201.htm CERTIFICATION

Exhibit 32.1

 

CERTIFICATION PURSUANT TO

18 USC, SECTION 1350,

AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

 

 

In connection with the Quarterly Report of Luduson G Inc. (the “Company”) on Form 10-Q for the period ending March 31, 2021 (the “Report”), I, Ka Leung Wong, Chief Executive Officer of the Company, certify, pursuant to 18 USC Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that to the best of my knowledge and belief:

 

  1. The Report fully complies with the requirements of Rule 13(a) or 15(d) of the Securities Exchange Act of 1934; and
     
  2. The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

 

Dated: May 24, 2021

/s/ Ka Leung Wong

Ka Leung Wong

Chief Executive Officer

EX-32.2 5 luduson_10q-ex3202.htm CERTIFICATION

Exhibit 32.2

 

CERTIFICATION PURSUANT TO

18 USC, SECTION 1350,

AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

 

 

In connection with the Quarterly Report of Luduson G Inc. (the “Company”) on Form 10-Q for the period ending March 31, 2021 (the “Report”), I, Lan Chan, Chief Financial Officer, Chief Operating Officer and Secretary of the Company, certify, pursuant to 18 USC Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that to the best of my knowledge and belief:

 

  1. The Report fully complies with the requirements of Rule 13(a) or 15(d) of the Securities Exchange Act of 1934; and
     
  2. The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

 

Dated: May 24, 2021 /s/ Lan Chan
 

Lan Chan

Chief Financial Officer, Chief Operating Officer and Secretary

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Entity File Number 001-38457  
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Mar. 31, 2021
Dec. 31, 2020
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Cash and cash equivalents $ 10,000 $ 40,447
Accounts receivable 4,660,147 4,499,746
Deposits, prepayments and other receivables 663,193 665,052
Total current assets 5,333,340 5,205,245
Non-current asset:    
Plant and equipment 381,578 422,414
TOTAL ASSETS 5,714,918 5,627,659
Current liabilities:    
Accrued liabilities and other payables 19,426 26,772
Tax payable 754,295 743,562
Amount due to a director 18,616 28,290
Total current liabilities 792,337 798,624
TOTAL LIABILITIES 792,337 798,624
Commitments and contingencies
STOCKHOLDERS' EQUITY    
Preferred stock, $0.0001 par value, 20,000,000 shares authorized, no shares issued and outstanding at March 31, 2021 and December 31, 2020, respectively 0 0
Common stock, $0.0001 par value, 100,000,000 shares authorized, 28,110,000 shares issued and outstanding at March 31, 2021 and December 31, 2020, respectively 2,811 2,811
Additional paid in capital 332,189 332,189
Accumulated other comprehensive income (3,193) 10,573
Retained earnings 4,590,774 4,483,462
Stockholders' equity 4,922,581 4,829,035
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Mar. 31, 2021
Dec. 31, 2020
Statement of Financial Position [Abstract]    
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Preferred stock, shares authorized 200,000,000 200,000,000
Preferred stock, shares issued 0 0
Preferred stock, shares outstanding 0 0
Common stock, par value $ .0001 $ 0.0001
Common stock, shares authorized 100,000,000 100,000,000
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Common stock, shares outstanding 28,110,000 28,110,000
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Mar. 31, 2020
Income Statement [Abstract]    
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Cost of revenue (34,371) (3,681)
Gross profit 159,005 92,838
Operating expenses:    
General and administrative expenses (38,853) (36,692)
Total operating expenses (38,853) (36,692)
INCOME BEFORE INCOME TAXES 120,152 56,146
Income tax expense (12,840) (4,717)
NET INCOME 107,312 51,429
Other comprehensive (loss) income:    
Foreign currency translation (loss) gain (13,766) 4,735
COMPREHENSIVE INCOME $ 93,546 $ 56,164
Net income per share Basic and diluted $ 0.00 $ 0.01
Weighted average shares outstanding Basic and diluted 28,110,000 10,000,000
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3 Months Ended
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Mar. 31, 2020
Cash flow from operating activities:    
Net income $ 107,312 $ 51,429
Adjustments to reconcile net income to net cash used in operating activities:    
Depreciation of plant and equipment 39,743 1,254
Non-cash lease expenses 0 9,433
Change in operating assets and liabilities:    
Accounts receivable (160,401) (1,881)
Deposits, prepayments and other receivables 0 (108,859)
Accrued expenses and other payables (7,346) 0
Lease liabilities 0 (9,674)
Tax payable 10,733 4,717
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Cash flow from financing activities:    
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Effect on exchange rate change on cash and cash equivalents (10,814) 5,356
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CASH AND CASH EQUIVALENTS, END OF PERIOD 10,000 35,382
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION    
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Condensed Consolidated Statements of Changes In Stockholders' Equity (Unaudited) - USD ($)
Common Stock
Additional Paid-In Capital
Accumulated Other Comprehensive income (loss)
Retained Earnings
Total
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Beginning balance, value at Dec. 31, 2019 $ 1,000 $ 9,000 $ 5,435 $ 1,024,195 $ 1,039,630
Dividends paid (186,084) (186,084)
Foreign currency translation adjustment 4,735 4,735
Net income 51,429 51,429
Ending balance, shares at Mar. 31, 2020 10,000,000        
Ending balance, value at Mar. 31, 2020 $ 1,000 9,000 10,170 889,540 909,710
Beginning balance, shares at Dec. 31, 2020 28,110,000        
Beginning balance, value at Dec. 31, 2020 $ 2,811 332,189 10,573 4,483,462 4,829,035
Foreign currency translation adjustment (13,766) (13,766)
Net income 107,312 107,312
Ending balance, shares at Mar. 31, 2021 28,110,000        
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1. Description of Business and Organization
3 Months Ended
Mar. 31, 2021
Accounting Policies [Abstract]  
Description of Business and Organization

NOTE – 1 DESCRIPTION OF BUSINESS AND ORGANIZATION

 

Luduson G Inc. was organized under the laws of the State of Delaware on March 6, 2014. The Company changed its current name on July 15, 2020.

 

Description of subsidiaries

 

Name  

Place of incorporation

and kind of

legal entity

 

Principal activities

and place of operation

 

Particulars of registered/paid up share

capital

 

Effective interest

held

                 
Luduson Holding Company Limited   British Virgin Island   Investment holding   10,000 ordinary shares   100%
                 
Luduson Entertainment Limited   Hong Kong   Sales and marketing  

10,000 ordinary shares at

par value of HK$1

  100%
                 
G Music Asia Limited   British Virgin Islands   Event planning  

2 ordinary shares at par

value of US$1

  100%

 

The Company and its subsidiaries are hereinafter referred to as (the "Company").

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2. Summary of Significant Accounting Policies
3 Months Ended
Mar. 31, 2021
Accounting Policies [Abstract]  
Summary of Significant Accounting Policies

NOTE – 2 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

 

The accompanying condensed consolidated financial statements reflect the application of certain significant accounting policies as described in this note and elsewhere in the accompanying financial statements and notes.

 

l   Basis of presentation

 

These accompanying condensed consolidated financial statements have been prepared in U.S. Dollars in conformity with generally accepted accounting principles in the United States of America (“U.S. GAAP”) for interim financial information pursuant to the rules and regulations of the Securities and Exchange Commission (the “SEC”). Accordingly, they do not include all of the information and footnotes required by U.S. GAAP for complete financial statements. In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary to make the financial statements not misleading have been included. Operating results for the interim period ended March 31, 2021 are not necessarily indicative of the results that may be expected for the fiscal year ending December 31, 2021. The information included in this Form 10-Q should be read in conjunction with Management’s Discussion and Analysis, and the financial statements and notes thereto included in the Company’s Form 10-K for the fiscal year ended December 31, 2020, filed with the SEC on May 25, 2021.

 

l   Use of estimates and assumptions

 

In preparing these condensed consolidated financial statements, management makes estimates and assumptions that affect the reported amounts of assets and liabilities in the balance sheet and revenues and expenses during the periods reported. Actual results may differ from these estimates.

 

l   Basis of consolidation

 

The condensed consolidated financial statements include the financial statements of the Company and its subsidiaries. All significant inter-company balances and transactions within the Company have been eliminated upon consolidation.

 

l   Cash and cash equivalents

 

Cash and cash equivalents are carried at cost and represent cash on hand, demand deposits placed with banks or other financial institutions and all highly liquid investments with an original maturity of three months or less as of the purchase date of such investments.

 

l   Accounts receivable

 

Accounts receivable are recorded at the invoiced amount and do not bear interest, which are due within contractual payment terms, generally 30 to 90 days from completion of service. Credit is extended based on evaluation of a customer's financial condition, the customer credit-worthiness and their payment history. Accounts receivable outstanding longer than the contractual payment terms are considered past due. Past due balances over 90 days and over a specified amount are reviewed individually for collectibility. At the end of fiscal year, the Company specifically evaluates individual customer’s financial condition, credit history, and the current economic conditions to monitor the progress of the collection of accounts receivables. The Company will consider the allowance for doubtful accounts for any estimated losses resulting from the inability of its customers to make required payments. For the receivables that are past due or not being paid according to payment terms, the appropriate actions are taken to exhaust all means of collection, including seeking legal resolution in a court of law. Account balances are charged off against the allowance after all means of collection have been exhausted and the potential for recovery is considered remote. The Company does not have any off-balance-sheet credit exposure related to its customers. As of March 31, 2021 and December 31, 2020, there was no allowance for doubtful accounts.

 

l   Plant and equipment

 

Plant and equipment are stated at cost less accumulated depreciation and accumulated impairment losses, if any. Depreciation is calculated on the straight-line basis over the following expected useful lives from the date on which they become fully operational and after taking into account their estimated residual values:

 

    Expected useful lives  
Computer equipment   3 years  
Furniture and equipment   5 years  

 

Expenditures for repairs and maintenance are expensed as incurred. When assets have been retired or sold, the cost and related accumulated depreciation are removed from the accounts and any resulting gain or loss is recognized in the results of operations.

 

Depreciation expense for the three months ended March 31, 2021 and 2020 were $39,743 and $1,254, respectively.

 

l   Revenue recognition

 

The Company adopted Accounting Standards Codification (“ASC”) 606 – Revenue from Contracts with Customers” (“ASC 606”). Under ASC 606, a performance obligation is a promise within a contract to transfer a distinct good or service, or a series of distinct goods and services, to a customer. Revenue is recognized when performance obligations are satisfied and the customer obtains control of promised goods or services. The amount of revenue recognized reflects the consideration to which the Company expects to be entitled to receive in exchange for goods or services. Under the standard, a contract’s transaction price is allocated to each distinct performance obligation. To determine revenue recognition for arrangements that the Company determines are within the scope of ASC 606, the Company performs the following five steps:

 

  identify the contract with a customer;
  identify the performance obligations in the contract;
  determine the transaction price;
  allocate the transaction price to performance obligations in the contract; and
  recognize revenue as the performance obligation is satisfied.

 

l   Income taxes

 

The Company adopted the ASC 740 Income tax provisions of paragraph 740-10-25-13, which addresses the determination of whether tax benefits claimed or expected to be claimed on a tax return should be recorded in the condensed consolidated financial statements. Under paragraph 740-10-25-13, the Company may recognize the tax benefit from an uncertain tax position only if it is more likely than not that the tax position will be sustained on examination by the taxing authorities, based on the technical merits of the position. The tax benefits recognized in the financial statements from such a position should be measured based on the largest benefit that has a greater than fifty percent (50%) likelihood of being realized upon ultimate settlement. Paragraph 740-10-25-13 also provides guidance on de-recognition, classification, interest and penalties on income taxes, accounting in interim periods and requires increased disclosures. The Company had no material adjustments to its liabilities for unrecognized income tax benefits according to the provisions of paragraph 740-10-25-13.

 

The estimated future tax effects of temporary differences between the tax basis of assets and liabilities are reported in the accompanying balance sheets, as well as tax credit carry-backs and carry-forwards. The Company periodically reviews the recoverability of deferred tax assets recorded on its balance sheets and provides valuation allowances as management deems necessary.

 

l   Uncertain tax positions

 

The Company did not take any uncertain tax positions and had no adjustments to its income tax liabilities or benefits pursuant to the ASC 740 provisions of Section 740-10-25 for the three months ended March 31, 2021 and 2020.

 

l   Foreign currencies translation

 

Transactions denominated in currencies other than the functional currency are translated into the functional currency at the exchange rates prevailing at the dates of the transaction. Monetary assets and liabilities denominated in currencies other than the functional currency are translated into the functional currency using the applicable exchange rates at the balance sheet dates. The resulting exchange differences are recorded in the consolidated statement of operations.

 

The reporting currency of the Company is United States Dollar ("US$") and the accompanying consolidated financial statements have been expressed in US$. In addition, the Company is operating in Hong Kong and maintain its books and record in its local currency, Hong Kong Dollars (“HKD”), which is a functional currency as being the primary currency of the economic environment in which their operations are conducted. In general, for consolidation purposes, assets and liabilities of its subsidiary whose functional currency is not US$ are translated into US$, in accordance with ASC Topic 830-30, “Translation of Financial Statement”, using the exchange rate on the balance sheet date. Revenues and expenses are translated at average rates prevailing during the period. The gains and losses resulting from translation of financial statements of foreign subsidiary are recorded as a separate component of accumulated other comprehensive income within the statements of changes in stockholder’s equity.

 

Translation of amounts from HKD into US$ has been made at the following exchange rates for the three months ended March 31, 2021 and 2020:

 

    March 31, 2021   March 31, 2020
Period-end HKD:US$ exchange rate   0.12863   0.12899
Period average HKD:US$ exchange rate   0.12892   0.12869

 

l   Comprehensive income

 

ASC Topic 220, “Comprehensive Income”, establishes standards for reporting and display of comprehensive income, its components and accumulated balances. Comprehensive income as defined includes all changes in equity during a period from non-owner sources. Accumulated other comprehensive income, as presented in the accompanying condensed consolidated statements of changes in stockholders’ equity, consists of changes in unrealized gains and losses on foreign currency translation. This comprehensive income is not included in the computation of income tax expense or benefit.

 

l   Related parties

 

The Company follows the ASC 850-10, Related Party for the identification of related parties and disclosure of related party transactions.

 

Pursuant to section 850-10-20 the related parties include a) affiliates of the Company; b) entities for which investments in their equity securities would be required, absent the election of the fair value option under the Fair Value Option Subsection of section 825–10–15, to be accounted for by the equity method by the investing entity; c) trusts for the benefit of employees, such as pension and Income-sharing trusts that are managed by or under the trusteeship of management; d) principal owners of the Company; e) management of the Company; f) other parties with which the Company may deal if one party controls or can significantly influence the management or operating policies of the other to an extent that one of the transacting parties might be prevented from fully pursuing its own separate interests; and g) other parties that can significantly influence the management or operating policies of the transacting parties or that have an ownership interest in one of the transacting parties and can significantly influence the other to an extent that one or more of the transacting parties might be prevented from fully pursuing its own separate interests.

 

The condensed consolidated financial statements shall include disclosures of material related party transactions, other than compensation arrangements, expense allowances, and other similar items in the ordinary course of business. However, disclosure of transactions that are eliminated in the preparation of consolidated or combined financial statements is not required in those statements. The disclosures shall include: a) the nature of the relationship(s) involved; b) a description of the transactions, including transactions to which no amounts or nominal amounts were ascribed, for each of the periods for which income statements are presented, and such other information deemed necessary to an understanding of the effects of the transactions on the financial statements; c) the dollar amounts of transactions for each of the periods for which income statements are presented and the effects of any change in the method of establishing the terms from that used in the preceding period; and d) amount due from or to related parties as of the date of each balance sheet presented and, if not otherwise apparent, the terms and manner of settlement.

 

l   Commitments and contingencies

 

The Company follows the ASC 450-20, Commitments to report accounting for contingencies. Certain conditions may exist as of the date the financial statements are issued, which may result in a loss to the Company but which will only be resolved when one or more future events occur or fail to occur. The Company assesses such contingent liabilities, and such assessment inherently involves an exercise of judgment. In assessing loss contingencies related to legal proceedings that are pending against the Company or un-asserted claims that may result in such proceedings, the Company evaluates the perceived merits of any legal proceedings or un-asserted claims as well as the perceived merits of the amount of relief sought or expected to be sought therein.

 

If the assessment of a contingency indicates that it is probable that a material loss has been incurred and the amount of the liability can be estimated, then the estimated liability would be accrued in the Company’s condensed consolidated financial statements. If the assessment indicates that a potentially material loss contingency is not probable but is reasonably possible, or is probable but cannot be estimated, then the nature of the contingent liability, and an estimate of the range of possible losses, if determinable and material, would be disclosed.

 

Loss contingencies considered remote are generally not disclosed unless they involve guarantees, in which case the guarantees would be disclosed. Management does not believe, based upon information available at this time that these matters will have a material adverse effect on the Company’s financial position, results of operations or cash flows. However, there is no assurance that such matters will not materially and adversely affect the Company’s business, financial position, and results of operations or cash flows.

 

l   Fair value of financial instruments

 

The Company follows paragraph 825-10-50-10 of the FASB Accounting Standards Codification for disclosures about fair value of its financial instruments and has adopted paragraph 820-10-35-37 of the FASB Accounting Standards Codification (“Paragraph 820-10-35-37”) to measure the fair value of its financial instruments. Paragraph 820-10-35-37 of the FASB Accounting Standards Codification establishes a framework for measuring fair value in generally accepted accounting principles (GAAP), and expands disclosures about fair value measurements. To increase consistency and comparability in fair value measurements and related disclosures, paragraph 820-10-35-37 of the FASB Accounting Standards Codification establishes a fair value hierarchy which prioritizes the inputs to valuation techniques used to measure fair value into three (3) broad levels. The fair value hierarchy gives the highest priority to quoted prices (unadjusted) in active markets for identical assets or liabilities and the lowest priority to unobservable inputs. The three (3) levels of fair value hierarchy defined by paragraph 820-10-35-37 of the FASB Accounting Standards Codification are described below:

 

Level 1   Quoted market prices available in active markets for identical assets or liabilities as of the reporting date.
     
Level 2   Pricing inputs other than quoted prices in active markets included in Level 1, which are either directly or indirectly observable as of the reporting date.
     
Level 3   Pricing inputs that are generally observable inputs and not corroborated by market data.

 

Financial assets are considered Level 3 when their fair values are determined using pricing models, discounted cash flow methodologies or similar techniques and at least one significant model assumption or input is unobservable.

 

The fair value hierarchy gives the highest priority to quoted prices (unadjusted) in active markets for identical assets or liabilities and the lowest priority to unobservable inputs. If the inputs used to measure the financial assets and liabilities fall within more than one level described above, the categorization is based on the lowest level input that is significant to the fair value measurement of the instrument.

 

The carrying amounts of the Company’s financial assets and liabilities, such as cash and cash equivalents, accounts receivable, deposits, prepayments and other receivables and operating lease right-of-use assets approximate their fair values because of the short maturity of these instruments.

 

l   Recent accounting pronouncements

 

From time to time, new accounting pronouncements are issued by the Financial Accounting Standard Board (“FASB”) or other standard setting bodies and adopted by the Company as of the specified effective date. Unless otherwise discussed, the Company believes that the impact of recently issued standards that are not yet effective will not have a material impact on its financial position or results of operations upon adoption.

 

Simplifying the Accounting for Debt with Conversion and Other Options.

 

In June 2020, the FASB issued ASU 2020-06 to simplify the accounting in ASC 470, “Debt with Conversion and Other Options” and ASC 815, “Contracts in Equity’s Own Entity”. The guidance simplifies the current guidance for convertible instruments and the derivatives scope exception for contracts in an entity’s own equity. Additionally, the amendments affect the diluted EPS calculation for instruments that may be settled in cash or shares and for convertible instruments. This ASU will be effective beginning in the first quarter of the Company’s fiscal year 2022. Early adoption is permitted. The amendments in this update must be applied on either full retrospective basis or modified retrospective basis through a cumulative-effect adjustment to retained earnings/(deficit) in the period of adoption. The Company is currently evaluating the impact of ASU 2020-06 on its consolidated financial statements and related disclosures, as well as the timing of adoption.

 

Financial Instruments

 

In June 2016, the FASB issued ASU 2016-13, “Financial Instruments - Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments” (“ASU 2016-13”), which modifies the measurement of expected credit losses of certain financial instruments. In February 2020, the FASB issued ASU 2020-02 and delayed the effective date of ASU 2016-13 until fiscal year beginning after December 15, 2022. The Company is currently evaluating the impact of adopting ASU 2016-13 on its consolidated financial statements.

 

Simplifying the Accounting for Income Taxes

 

In December 2019, the FASB issued ASU 2019-12 to simplify the accounting in ASC 740, “Income Taxes.” This guidance removes certain exceptions related to the approach for intra-period tax allocation, the methodology for calculating income taxes in an interim period, and the recognition of deferred tax liabilities for outside basis differences. This guidance also clarifies and simplifies other areas of ASC 740. This ASU will be effective beginning in the first quarter of the Company’s fiscal year 2021. Early adoption is permitted. Certain amendments in this update must be applied on a prospective basis, certain amendments must be applied on a retrospective basis, and certain amendments must be applied on a modified retrospective basis through a cumulative-effect adjustment to retained earnings/(deficit) in the period of adoption. The adoption of ASU 2019-12 does not have a significant impact on the Company’s consolidated financial statements as of and for the three-month period ended March 31, 2021.

 

Earnings Per Share

 

In April 2021, the FASB issued ASU 2021-04, which included Topic 260 “Earnings Per Share”. This guidance clarifies and reduces diversity in an issuer’s accounting for modifications or exchanges of freestanding equity-classified written call options due to a lack of explicit guidance in the FASB Codification. The ASU 2021-04 is effective for all entities for fiscal years beginning after December 15, 2021. Early adoption is permitted. The Company is currently evaluating the impact of adopting ASU 2021-04 on its consolidated financial statements.

XML 21 R9.htm IDEA: XBRL DOCUMENT v3.21.1
3. Accounts Receivable
3 Months Ended
Mar. 31, 2021
Credit Loss [Abstract]  
Accounts Receivable

NOTE – 3 ACCOUNTS RECEIVABLE

 

The majority of the Company’s sales are on open credit terms and in accordance with terms specified in the contracts governing the relevant transactions. The Company evaluates the need of an allowance for doubtful accounts based on specifically identified amounts that management believes to be uncollectible. If actual collections experience changes, revisions to the allowance may be required. Based upon the aforementioned criteria, the Company has not provide the allowance for the three months ended March 31, 2021 and 2020.

 

   March 31, 2021   December 31, 2020 
       (Audited) 
           
Accounts receivable, cost  $4,660,147   $4,499,746 
Less: allowance for doubtful accounts        
Accounts receivable, net  $4,660,147   $4,499,746 

 

The Company expects these balances to be recovered in the next 12 months.

XML 22 R10.htm IDEA: XBRL DOCUMENT v3.21.1
4. Deposits, Prepayments and Other Receivables
3 Months Ended
Mar. 31, 2021
Deferred Costs, Capitalized, Prepaid, and Other Assets Disclosure [Abstract]  
Deposits, Prepayments and Other Receivables

NOTE – 4 DEPOSITS, PREPAYMENTS AND OTHER RECEIVABLES

 

Deposits, prepayments and other receivables consisted of the following,

 

   March 31, 2021   December 31, 2020 
       (Audited) 
           
Prepayments for business project  $139,024   $139,414 
Prepayments for vending machine   520,953    522,413 
Rental deposit   3,216    3,225 
   $663,193   $665,052 

 

Purchase deposits represent deposit payments made to vendors for procurement of equipment, which are interest-free, unsecured and relieved against accounts payable when goods are received by the Company.

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5. Stockholders' Equity
3 Months Ended
Mar. 31, 2021
Equity [Abstract]  
Stockholders' Equity

NOTE – 5 STOCKHOLDERS’ EQUITY

 

Authorized shares

 

As of March 31, 2021 and December 31, 2020, the authorized share capital of the Company consisted of 100,000,000 shares of common stock with $0.0001 par value, and 20,000,000 shares of preferred stock also with $0.0001 par value. No other classes of stock are authorized.

 

The Court also ordered the distribution of 2,500,000 warrants in the Company to all administrative creditors of PSD, with these creditors to receive five warrants in the Company for each $0.10 of PSD's administrative debt which they held. These creditors received 2,500,000 warrants consisting of 500,000 "A Warrants" each convertible into one share of common stock at an exercise price of $4.00; 500,000 "B Warrants" each convertible into one share of common stock at an exercise price of $5.00; 500,000 "C Warrants" each convertible into one share of common stock at an exercise price of $6.00; 500,000 "D Warrants" each convertible into one share of common stock at an exercise price of $7.00; and 500,000 "E Warrants" each convertible into one share of common stock at an exercise price of $8.00. All warrants are exercisable at any time prior to August 30, 2020.

 

As of March 31, 2021, no warrants have been exercised.

 

Issued and outstanding shares

 

As of March 31, 2021 and December 31, 2020, 28,110,000 common shares issued and outstanding, and 2,500,000 warrants to acquire common shares issued and outstanding.

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6. Income Tax
3 Months Ended
Mar. 31, 2021
Income Tax Disclosure [Abstract]  
Income Tax

NOTE – 6 INCOME TAX

 

The Company mainly operates in Hong Kong that is subject to taxes in the governing jurisdictions in which it operates. The effective tax rate in the period presented is the result of the mix of income earned in various tax jurisdictions that apply a broad range of income tax rate, as follows:

 

BVI

 

Under the current BVI law, the Company is not subject to tax on income.

  

Hong Kong

 

The Company’s subsidiary operating in Hong Kong is subject to the Hong Kong Profits Tax at the two-tiered profits tax rates from 8.25% to 16.5% on the estimated assessable profits arising in Hong Kong during the current year, after deducting a tax concession for the tax year. The reconciliation of income tax rate to the effective income tax rate for the three months ended March 31, 2021 and 2020 is as follows:

 

   Three Months ended March 31, 
   2021   2020 
         
Income before income taxes  $120,152   $56,146 
Statutory income tax rate   16.5%    16.5% 
Income tax expense at statutory rate   19,825    9,264 
Tax effect of non-deductible items   6,558    207 
Tax effect of deductible items   (703)   (28)
Tax holiday   (12,840)   (4,726)
 Income tax expense  $12,840   $4,717 
XML 25 R13.htm IDEA: XBRL DOCUMENT v3.21.1
7. Related Party Transactions
3 Months Ended
Mar. 31, 2021
Related Party Transactions [Abstract]  
Related Party Transactions

NOTE – 7 RELATED PARTY TRANSACTIONS

 

Apart from the transactions and balances detailed elsewhere in these accompanying condensed consolidated financial statements, the Company has no other significant or material related party transactions during the periods presented.

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8. Concentrations of Risk
3 Months Ended
Mar. 31, 2021
Risks and Uncertainties [Abstract]  
Concentrations of Risk

NOTE – 8 CONCENTRATIONS OF RISK

 

The Company is exposed to the following concentrations of risk:

 

(a)       Major customers

 

For the three months ended March 31, 2021 and 2020, the individual customer who accounts for 10% or more of the Company’s revenues and its outstanding receivable balances as at period-end dates, are presented as follows:

 

   Three months ended March 31, 2021       March 31, 2021 

 

Customers

  Revenues   Percentage
of revenues
       Accounts
receivable
 
                 
Customer A   116,026    60%        $2,132,021 
Customer B   38,675    20%         1,398,494 
Customer C   38,675    20%         1,124,229 
                     
Total:  $193,376    100%    Total:   $4,654,744 

 

   Three months ended March 31, 2020       March 31, 2020 
Customers  Revenues   Percentage
of revenues
       Accounts
receivable
 
                 
Customer A  $38,608    40%        $202,514 
Customer C   38,608    40%         165,107 
Customer D   19,303    20%         118,671 
                     
Total:  $96,519    100%    Total:   $486,292 

 

(b)       Economic and political risk

 

The Company’s major operations are conducted in Hong Kong. Accordingly, the political, economic, and legal environments in Hong Kong, as well as the general state of Hong Kong’s economy may influence the Company’s business, financial condition, and results of operations.

 

(c)       Exchange rate risk

 

The Company cannot guarantee that the current exchange rate will remain steady; therefore there is a possibility that the Company could post the same amount of profit for two comparable periods and because of the fluctuating exchange rate actually post higher or lower profit depending on exchange rate of HKD converted to US$ on that date. The exchange rate could fluctuate depending on changes in political and economic environments without notice.

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9. Commitments and Contingencies
3 Months Ended
Mar. 31, 2021
Commitments and Contingencies Disclosure [Abstract]  
Commitments and Contingencies

9.       COMMITMENTS AND CONTINGENCIES

 

As of March 31, 2021, the Company has no material commitments or contingencies.

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10. Subsequent
3 Months Ended
Mar. 31, 2021
Subsequent Events [Abstract]  
Subsequent Events

10.       SUBSEQUENT EVENTS

 

In accordance with ASC Topic 855, “Subsequent Events”, which establishes general standards of accounting for and disclosure of events that occur after the balance sheet date but before consolidated financial statements are issued, the Company has evaluated all events or transactions that occurred after March 31, 2021, up through the date the Company issued the unaudited condensed consolidated financial statements. The Company determined that there were no further events to disclose.

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2. Summary of Significant Accounting Policies (Policies)
3 Months Ended
Mar. 31, 2021
Accounting Policies [Abstract]  
Basis of presentation

l   Basis of presentation

 

These accompanying condensed consolidated financial statements have been prepared in U.S. Dollars in conformity with generally accepted accounting principles in the United States of America (“U.S. GAAP”) for interim financial information pursuant to the rules and regulations of the Securities and Exchange Commission (the “SEC”). Accordingly, they do not include all of the information and footnotes required by U.S. GAAP for complete financial statements. In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary to make the financial statements not misleading have been included. Operating results for the interim period ended March 31, 2021 are not necessarily indicative of the results that may be expected for the fiscal year ending December 31, 2021. The information included in this Form 10-Q should be read in conjunction with Management’s Discussion and Analysis, and the financial statements and notes thereto included in the Company’s Form 10-K for the fiscal year ended December 31, 2020, filed with the SEC on May 25, 2021.

Use of estimates and assumptions

l   Use of estimates and assumptions

 

In preparing these condensed consolidated financial statements, management makes estimates and assumptions that affect the reported amounts of assets and liabilities in the balance sheet and revenues and expenses during the periods reported. Actual results may differ from these estimates.

Basis of consolidation

l   Basis of consolidation

 

The condensed consolidated financial statements include the financial statements of the Company and its subsidiaries. All significant inter-company balances and transactions within the Company have been eliminated upon consolidation.

Cash and cash equivalents

l   Cash and cash equivalents

 

Cash and cash equivalents are carried at cost and represent cash on hand, demand deposits placed with banks or other financial institutions and all highly liquid investments with an original maturity of three months or less as of the purchase date of such investments.

Accounts receivable

l   Accounts receivable

 

Accounts receivable are recorded at the invoiced amount and do not bear interest, which are due within contractual payment terms, generally 30 to 90 days from completion of service. Credit is extended based on evaluation of a customer's financial condition, the customer credit-worthiness and their payment history. Accounts receivable outstanding longer than the contractual payment terms are considered past due. Past due balances over 90 days and over a specified amount are reviewed individually for collectibility. At the end of fiscal year, the Company specifically evaluates individual customer’s financial condition, credit history, and the current economic conditions to monitor the progress of the collection of accounts receivables. The Company will consider the allowance for doubtful accounts for any estimated losses resulting from the inability of its customers to make required payments. For the receivables that are past due or not being paid according to payment terms, the appropriate actions are taken to exhaust all means of collection, including seeking legal resolution in a court of law. Account balances are charged off against the allowance after all means of collection have been exhausted and the potential for recovery is considered remote. The Company does not have any off-balance-sheet credit exposure related to its customers. As of March 31, 2021 and December 31, 2020, there was no allowance for doubtful accounts.

Plant and equipment

l   Plant and equipment

 

Plant and equipment are stated at cost less accumulated depreciation and accumulated impairment losses, if any. Depreciation is calculated on the straight-line basis over the following expected useful lives from the date on which they become fully operational and after taking into account their estimated residual values:

 

    Expected useful lives  
Computer equipment   3 years  
Furniture and equipment   5 years  

 

Expenditures for repairs and maintenance are expensed as incurred. When assets have been retired or sold, the cost and related accumulated depreciation are removed from the accounts and any resulting gain or loss is recognized in the results of operations.

 

Depreciation expense for the three months ended March 31, 2021 and 2020 were $39,743 and $1,254, respectively.

Revenue recognition

l   Revenue recognition

 

The Company adopted Accounting Standards Codification (“ASC”) 606 – Revenue from Contracts with Customers” (“ASC 606”). Under ASC 606, a performance obligation is a promise within a contract to transfer a distinct good or service, or a series of distinct goods and services, to a customer. Revenue is recognized when performance obligations are satisfied and the customer obtains control of promised goods or services. The amount of revenue recognized reflects the consideration to which the Company expects to be entitled to receive in exchange for goods or services. Under the standard, a contract’s transaction price is allocated to each distinct performance obligation. To determine revenue recognition for arrangements that the Company determines are within the scope of ASC 606, the Company performs the following five steps:

 

  identify the contract with a customer;
  identify the performance obligations in the contract;
  determine the transaction price;
  allocate the transaction price to performance obligations in the contract; and
  recognize revenue as the performance obligation is satisfied.
Income taxes

l   Income taxes

 

The Company adopted the ASC 740 Income tax provisions of paragraph 740-10-25-13, which addresses the determination of whether tax benefits claimed or expected to be claimed on a tax return should be recorded in the condensed consolidated financial statements. Under paragraph 740-10-25-13, the Company may recognize the tax benefit from an uncertain tax position only if it is more likely than not that the tax position will be sustained on examination by the taxing authorities, based on the technical merits of the position. The tax benefits recognized in the financial statements from such a position should be measured based on the largest benefit that has a greater than fifty percent (50%) likelihood of being realized upon ultimate settlement. Paragraph 740-10-25-13 also provides guidance on de-recognition, classification, interest and penalties on income taxes, accounting in interim periods and requires increased disclosures. The Company had no material adjustments to its liabilities for unrecognized income tax benefits according to the provisions of paragraph 740-10-25-13.

 

The estimated future tax effects of temporary differences between the tax basis of assets and liabilities are reported in the accompanying balance sheets, as well as tax credit carry-backs and carry-forwards. The Company periodically reviews the recoverability of deferred tax assets recorded on its balance sheets and provides valuation allowances as management deems necessary.

Uncertain tax positions

l   Uncertain tax positions

 

The Company did not take any uncertain tax positions and had no adjustments to its income tax liabilities or benefits pursuant to the ASC 740 provisions of Section 740-10-25 for the three months ended March 31, 2021 and 2020.

Foreign currencies translation

l   Foreign currencies translation

 

Transactions denominated in currencies other than the functional currency are translated into the functional currency at the exchange rates prevailing at the dates of the transaction. Monetary assets and liabilities denominated in currencies other than the functional currency are translated into the functional currency using the applicable exchange rates at the balance sheet dates. The resulting exchange differences are recorded in the consolidated statement of operations.

 

The reporting currency of the Company is United States Dollar ("US$") and the accompanying consolidated financial statements have been expressed in US$. In addition, the Company is operating in Hong Kong and maintain its books and record in its local currency, Hong Kong Dollars (“HKD”), which is a functional currency as being the primary currency of the economic environment in which their operations are conducted. In general, for consolidation purposes, assets and liabilities of its subsidiary whose functional currency is not US$ are translated into US$, in accordance with ASC Topic 830-30, “Translation of Financial Statement”, using the exchange rate on the balance sheet date. Revenues and expenses are translated at average rates prevailing during the period. The gains and losses resulting from translation of financial statements of foreign subsidiary are recorded as a separate component of accumulated other comprehensive income within the statements of changes in stockholder’s equity.

 

Translation of amounts from HKD into US$ has been made at the following exchange rates for the three months ended March 31, 2021 and 2020:

 

    March 31, 2021   March 31, 2020
Period-end HKD:US$ exchange rate   0.12863   0.12899
Period average HKD:US$ exchange rate   0.12892   0.12869
Comprehensive income

l   Comprehensive income

 

ASC Topic 220, “Comprehensive Income”, establishes standards for reporting and display of comprehensive income, its components and accumulated balances. Comprehensive income as defined includes all changes in equity during a period from non-owner sources. Accumulated other comprehensive income, as presented in the accompanying condensed consolidated statements of changes in stockholders’ equity, consists of changes in unrealized gains and losses on foreign currency translation. This comprehensive income is not included in the computation of income tax expense or benefit.

Related parties

l   Related parties

 

The Company follows the ASC 850-10, Related Party for the identification of related parties and disclosure of related party transactions.

 

Pursuant to section 850-10-20 the related parties include a) affiliates of the Company; b) entities for which investments in their equity securities would be required, absent the election of the fair value option under the Fair Value Option Subsection of section 825–10–15, to be accounted for by the equity method by the investing entity; c) trusts for the benefit of employees, such as pension and Income-sharing trusts that are managed by or under the trusteeship of management; d) principal owners of the Company; e) management of the Company; f) other parties with which the Company may deal if one party controls or can significantly influence the management or operating policies of the other to an extent that one of the transacting parties might be prevented from fully pursuing its own separate interests; and g) other parties that can significantly influence the management or operating policies of the transacting parties or that have an ownership interest in one of the transacting parties and can significantly influence the other to an extent that one or more of the transacting parties might be prevented from fully pursuing its own separate interests.

 

The condensed consolidated financial statements shall include disclosures of material related party transactions, other than compensation arrangements, expense allowances, and other similar items in the ordinary course of business. However, disclosure of transactions that are eliminated in the preparation of consolidated or combined financial statements is not required in those statements. The disclosures shall include: a) the nature of the relationship(s) involved; b) a description of the transactions, including transactions to which no amounts or nominal amounts were ascribed, for each of the periods for which income statements are presented, and such other information deemed necessary to an understanding of the effects of the transactions on the financial statements; c) the dollar amounts of transactions for each of the periods for which income statements are presented and the effects of any change in the method of establishing the terms from that used in the preceding period; and d) amount due from or to related parties as of the date of each balance sheet presented and, if not otherwise apparent, the terms and manner of settlement.

Commitments and contingencies

l   Commitments and contingencies

 

The Company follows the ASC 450-20, Commitments to report accounting for contingencies. Certain conditions may exist as of the date the financial statements are issued, which may result in a loss to the Company but which will only be resolved when one or more future events occur or fail to occur. The Company assesses such contingent liabilities, and such assessment inherently involves an exercise of judgment. In assessing loss contingencies related to legal proceedings that are pending against the Company or un-asserted claims that may result in such proceedings, the Company evaluates the perceived merits of any legal proceedings or un-asserted claims as well as the perceived merits of the amount of relief sought or expected to be sought therein.

 

If the assessment of a contingency indicates that it is probable that a material loss has been incurred and the amount of the liability can be estimated, then the estimated liability would be accrued in the Company’s condensed consolidated financial statements. If the assessment indicates that a potentially material loss contingency is not probable but is reasonably possible, or is probable but cannot be estimated, then the nature of the contingent liability, and an estimate of the range of possible losses, if determinable and material, would be disclosed.

 

Loss contingencies considered remote are generally not disclosed unless they involve guarantees, in which case the guarantees would be disclosed. Management does not believe, based upon information available at this time that these matters will have a material adverse effect on the Company’s financial position, results of operations or cash flows. However, there is no assurance that such matters will not materially and adversely affect the Company’s business, financial position, and results of operations or cash flows.

Fair value of financial instruments

l   Fair value of financial instruments

 

The Company follows paragraph 825-10-50-10 of the FASB Accounting Standards Codification for disclosures about fair value of its financial instruments and has adopted paragraph 820-10-35-37 of the FASB Accounting Standards Codification (“Paragraph 820-10-35-37”) to measure the fair value of its financial instruments. Paragraph 820-10-35-37 of the FASB Accounting Standards Codification establishes a framework for measuring fair value in generally accepted accounting principles (GAAP), and expands disclosures about fair value measurements. To increase consistency and comparability in fair value measurements and related disclosures, paragraph 820-10-35-37 of the FASB Accounting Standards Codification establishes a fair value hierarchy which prioritizes the inputs to valuation techniques used to measure fair value into three (3) broad levels. The fair value hierarchy gives the highest priority to quoted prices (unadjusted) in active markets for identical assets or liabilities and the lowest priority to unobservable inputs. The three (3) levels of fair value hierarchy defined by paragraph 820-10-35-37 of the FASB Accounting Standards Codification are described below:

 

Level 1   Quoted market prices available in active markets for identical assets or liabilities as of the reporting date.
     
Level 2   Pricing inputs other than quoted prices in active markets included in Level 1, which are either directly or indirectly observable as of the reporting date.
     
Level 3   Pricing inputs that are generally observable inputs and not corroborated by market data.

 

Financial assets are considered Level 3 when their fair values are determined using pricing models, discounted cash flow methodologies or similar techniques and at least one significant model assumption or input is unobservable.

 

The fair value hierarchy gives the highest priority to quoted prices (unadjusted) in active markets for identical assets or liabilities and the lowest priority to unobservable inputs. If the inputs used to measure the financial assets and liabilities fall within more than one level described above, the categorization is based on the lowest level input that is significant to the fair value measurement of the instrument.

 

The carrying amounts of the Company’s financial assets and liabilities, such as cash and cash equivalents, accounts receivable, deposits, prepayments and other receivables and operating lease right-of-use assets approximate their fair values because of the short maturity of these instruments.

Recent accounting pronouncements

l   Recent accounting pronouncements

 

From time to time, new accounting pronouncements are issued by the Financial Accounting Standard Board (“FASB”) or other standard setting bodies and adopted by the Company as of the specified effective date. Unless otherwise discussed, the Company believes that the impact of recently issued standards that are not yet effective will not have a material impact on its financial position or results of operations upon adoption.

 

Simplifying the Accounting for Debt with Conversion and Other Options.

 

In June 2020, the FASB issued ASU 2020-06 to simplify the accounting in ASC 470, “Debt with Conversion and Other Options” and ASC 815, “Contracts in Equity’s Own Entity”. The guidance simplifies the current guidance for convertible instruments and the derivatives scope exception for contracts in an entity’s own equity. Additionally, the amendments affect the diluted EPS calculation for instruments that may be settled in cash or shares and for convertible instruments. This ASU will be effective beginning in the first quarter of the Company’s fiscal year 2022. Early adoption is permitted. The amendments in this update must be applied on either full retrospective basis or modified retrospective basis through a cumulative-effect adjustment to retained earnings/(deficit) in the period of adoption. The Company is currently evaluating the impact of ASU 2020-06 on its consolidated financial statements and related disclosures, as well as the timing of adoption.

 

Financial Instruments

 

In June 2016, the FASB issued ASU 2016-13, “Financial Instruments - Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments” (“ASU 2016-13”), which modifies the measurement of expected credit losses of certain financial instruments. In February 2020, the FASB issued ASU 2020-02 and delayed the effective date of ASU 2016-13 until fiscal year beginning after December 15, 2022. The Company is currently evaluating the impact of adopting ASU 2016-13 on its consolidated financial statements.

 

Simplifying the Accounting for Income Taxes

 

In December 2019, the FASB issued ASU 2019-12 to simplify the accounting in ASC 740, “Income Taxes.” This guidance removes certain exceptions related to the approach for intra-period tax allocation, the methodology for calculating income taxes in an interim period, and the recognition of deferred tax liabilities for outside basis differences. This guidance also clarifies and simplifies other areas of ASC 740. This ASU will be effective beginning in the first quarter of the Company’s fiscal year 2021. Early adoption is permitted. Certain amendments in this update must be applied on a prospective basis, certain amendments must be applied on a retrospective basis, and certain amendments must be applied on a modified retrospective basis through a cumulative-effect adjustment to retained earnings/(deficit) in the period of adoption. The adoption of ASU 2019-12 does not have a significant impact on the Company’s consolidated financial statements as of and for the three-month period ended March 31, 2021.

 

Earnings Per Share

 

In April 2021, the FASB issued ASU 2021-04, which included Topic 260 “Earnings Per Share”. This guidance clarifies and reduces diversity in an issuer’s accounting for modifications or exchanges of freestanding equity-classified written call options due to a lack of explicit guidance in the FASB Codification. The ASU 2021-04 is effective for all entities for fiscal years beginning after December 15, 2021. Early adoption is permitted. The Company is currently evaluating the impact of adopting ASU 2021-04 on its consolidated financial statements.

XML 30 R18.htm IDEA: XBRL DOCUMENT v3.21.1
1. Description of Business and Organization (Tables)
3 Months Ended
Mar. 31, 2021
Accounting Policies [Abstract]  
Description of Subsidiaries

Description of subsidiaries

 

Name  

Place of incorporation

and kind of

legal entity

 

Principal activities

and place of operation

 

Particulars of registered/paid up share

capital

 

Effective interest

held

                 
Luduson Holding Company Limited   British Virgin Island   Investment holding   10,000 ordinary shares   100%
                 
Luduson Entertainment Limited   Hong Kong   Sales and marketing  

10,000 ordinary shares at

par value of HK$1

  100%
                 
G Music Asia Limited   British Virgin Islands   Event planning  

2 ordinary shares at par

value of US$1

  100%
XML 31 R19.htm IDEA: XBRL DOCUMENT v3.21.1
2. Summary of Significant Accounting Policies (Tables)
3 Months Ended
Mar. 31, 2021
Accounting Policies [Abstract]  
Schedule of property and equipment useful lives

Depreciation is calculated on the straight-line basis over the following expected useful lives from the date on which they become fully operational and after taking into account their estimated residual values:

 

    Expected useful lives  
Computer equipment   3 years  
Furniture and equipment   5 years  
Schedule of translation rates

Translation of amounts from HKD into US$ has been made at the following exchange rates for the three months ended March 31, 2021 and 2020:

 

    March 31, 2021   March 31, 2020
Period-end HKD:US$ exchange rate   0.12863   0.12899
Period average HKD:US$ exchange rate   0.12892   0.12869
XML 32 R20.htm IDEA: XBRL DOCUMENT v3.21.1
3. Accounts Receivable (Tables)
3 Months Ended
Mar. 31, 2021
Credit Loss [Abstract]  
Schedule of accounts receivable

   March 31, 2021   December 31, 2020 
       (Audited) 
           
Accounts receivable, cost  $4,660,147   $4,499,746 
Less: allowance for doubtful accounts        
Accounts receivable, net  $4,660,147   $4,499,746 

 

XML 33 R21.htm IDEA: XBRL DOCUMENT v3.21.1
4. Deposits, Prepayments and Other Receivables (Tables)
3 Months Ended
Mar. 31, 2021
Deferred Costs, Capitalized, Prepaid, and Other Assets Disclosure [Abstract]  
Schedule of other receivables

Deposits, prepayments and other receivables consisted of the following,

 

   March 31, 2021   December 31, 2020 
       (Audited) 
           
Prepayments for business project  $139,024   $139,414 
Prepayments for vending machine   520,953    522,413 
Rental deposit   3,216    3,225 
   $663,193   $665,052 

 

XML 34 R22.htm IDEA: XBRL DOCUMENT v3.21.1
6. Income Tax (Tables)
3 Months Ended
Mar. 31, 2021
Income Tax Disclosure [Abstract]  
Reconciliation of income taxes

The reconciliation of income tax rate to the effective income tax rate for the three months ended March 31, 2021 and 2020 is as follows:

 

   Three Months ended March 31, 
   2021   2020 
         
Income before income taxes  $120,152   $56,146 
Statutory income tax rate   16.5%    16.5% 
Income tax expense at statutory rate   19,825    9,264 
Tax effect of non-deductible items   6,558    207 
Tax effect of deductible items   (703)   (28)
Tax holiday   (12,840)   (4,726)
 Income tax expense  $12,840   $4,717 
XML 35 R23.htm IDEA: XBRL DOCUMENT v3.21.1
8. Concentrations of Risk (Tables)
3 Months Ended
Mar. 31, 2021
Risks and Uncertainties [Abstract]  
Concentrations of risk

For the three months ended March 31, 2021 and 2020, the individual customer who accounts for 10% or more of the Company’s revenues and its outstanding receivable balances as at period-end dates, are presented as follows:

 

   Three months ended March 31, 2021       March 31, 2021 

 

Customers

  Revenues   Percentage
of revenues
       Accounts
receivable
 
                 
Customer A   116,026    60%        $2,132,021 
Customer B   38,675    20%         1,398,494 
Customer C   38,675    20%         1,124,229 
                     
Total:  $193,376    100%    Total:   $4,654,744 

 

   Three months ended March 31, 2020       March 31, 2020 
Customers  Revenues   Percentage
of revenues
       Accounts
receivable
 
                 
Customer A  $38,608    40%        $202,514 
Customer C   38,608    40%         165,107 
Customer D   19,303    20%         118,671 
                     
Total:  $96,519    100%    Total:   $486,292 

 

XML 36 R24.htm IDEA: XBRL DOCUMENT v3.21.1
1. Description of Business and Organization (Details)
3 Months Ended
Mar. 31, 2021
Luduson Holding Company Limited [Member]  
Name of subsidiary Luduson Holding Company Limited
Place of incorporation British Virgin Island
Principal activity Investment holding
Share capital 10,000 ordinary shares
Ownership percentage 100.00%
Luduson Entertainment Limited [Member]  
Name of subsidiary Luduson Entertainment Limited
Place of incorporation Hong Kong
Principal activity Sales and marketing
Share capital 10,000 ordinary shares at par value of HK$1
Ownership percentage 100.00%
G Music Asia Limited [Member]  
Name of subsidiary G Music Asia Limited
Place of incorporation British Virgin Islands
Principal activity Event planning
Share capital 2 ordinary shares at par value of US$1
Ownership percentage 100.00%
XML 37 R25.htm IDEA: XBRL DOCUMENT v3.21.1
2. Summary of Significant Accounting Policies (Details - useful lives)
3 Months Ended
Mar. 31, 2021
Computer Equipment and purchased software [Member]  
Property useful lives 3 years
Furniture and Fixtures [Member]  
Property useful lives 5 years
XML 38 R26.htm IDEA: XBRL DOCUMENT v3.21.1
2. Summary of Significant Accounting Policies (Details - Translation rates) - H K D
Mar. 31, 2021
Mar. 31, 2020
Period End [Member]    
Translation rate 0.12863 0.12899
Period Average [Member]    
Translation rate 0.12892 0.12869
XML 39 R27.htm IDEA: XBRL DOCUMENT v3.21.1
2. Summary of Significant Accounting Policies (Details Narrative) - USD ($)
3 Months Ended
Mar. 31, 2021
Mar. 31, 2020
Accounting Policies [Abstract]    
Depreciation $ 39,743 $ 1,254
XML 40 R28.htm IDEA: XBRL DOCUMENT v3.21.1
3. Accounts Receivable (Details) - USD ($)
Mar. 31, 2021
Dec. 31, 2020
Credit Loss [Abstract]    
Accounts receivable, gross $ 4,660,147 $ 4,499,746
Less: allowance for doubtful accounts 0 0
Accounts receivable, net $ 4,660,147 $ 4,499,746
XML 41 R29.htm IDEA: XBRL DOCUMENT v3.21.1
4. Deposits, Prepayments and Other Receivables (Details) - USD ($)
Mar. 31, 2021
Dec. 31, 2020
Deposits, prepayments and other receivables $ 663,193 $ 665,052
Prepayments for business project [Member]    
Deposits, prepayments and other receivables 139,024 139,414
Prepayments for vending machine [Member]    
Deposits, prepayments and other receivables 520,953 522,413
Rental deposit [Member]    
Deposits, prepayments and other receivables $ 3,216 $ 3,225
XML 42 R30.htm IDEA: XBRL DOCUMENT v3.21.1
5. Stockholders' Equity (Details Narrative)
Mar. 31, 2021
$ / shares
shares
Warrants outstanding 2,500,000
A Warrants [Member]  
Warrants outstanding 500,000
Warrant exercise price | $ / shares $ 4.00
B Warrants [Member]  
Warrants outstanding 500,000
Warrant exercise price | $ / shares $ 5.00
C Warrants [Member]  
Warrants outstanding 500,000
Warrant exercise price | $ / shares $ 6.00
D Warrants [Member]  
Warrants outstanding 500,000
Warrant exercise price | $ / shares $ 7.00
E Warrants [Member]  
Warrants outstanding 500,000
Warrant exercise price | $ / shares $ 8.00
XML 43 R31.htm IDEA: XBRL DOCUMENT v3.21.1
6. Income Tax (Details) - USD ($)
3 Months Ended
Mar. 31, 2021
Mar. 31, 2020
Income tax expense $ 12,840 $ 4,717
Inland Revenue, Hong Kong [Member]    
Income before income taxes $ 120,152 $ 56,146
Statutory income tax rate 16.50% 16.50%
Income tax expense at statutory rate $ 19,825 $ 9,264
Tax effect of non-deductible items 6,558 207
Tax effect of deductible items (703) (28)
Tax holiday (12,840) (4,726)
Income tax expense $ 12,840 $ 4,717
XML 44 R32.htm IDEA: XBRL DOCUMENT v3.21.1
8. Concentrations of Risk (Details) - USD ($)
3 Months Ended
Mar. 31, 2021
Mar. 31, 2020
Dec. 31, 2020
Revenues $ 193,376 $ 96,519  
Accounts receivable 4,660,147   $ 4,499,746
Sales Revenue Net [Member]      
Revenues $ 193,376 $ 96,519  
Concentration risk percentage 100.00% 100.00%  
Sales Revenue Net [Member] | Customer A [Member]      
Revenues $ 116,026 $ 38,608  
Concentration risk percentage 60.00% 40.00%  
Sales Revenue Net [Member] | Customer B [Member]      
Revenues $ 38,675    
Concentration risk percentage 20.00%    
Sales Revenue Net [Member] | Customer C [Member]      
Revenues $ 38,675 $ 38,608  
Concentration risk percentage 20.00% 40.00%  
Sales Revenue Net [Member] | Customer D [Member]      
Revenues   $ 19,303  
Concentration risk percentage   20.00%  
Accounts Receivable [Member]      
Accounts receivable $ 4,654,744 $ 486,292  
Accounts Receivable [Member] | Customer A [Member]      
Accounts receivable 2,132,021 202,514  
Accounts Receivable [Member] | Customer B [Member]      
Accounts receivable 1,398,494    
Accounts Receivable [Member] | Customer C [Member]      
Accounts receivable $ 1,124,229 165,107  
Accounts Receivable [Member] | Customer D [Member]      
Accounts receivable   $ 118,671  
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