| SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES | NOTE 2 – SUMMARY OF SIGNIFICANT ACCOUNTING
POLICIES GOING CONCERN The accompanying consolidated financial statements
(CFS) were prepared assuming the Company will continue as a going concern, which contemplates continuity of operations, realization
of assets, and liquidation of liabilities in the normal course of business. For the years ended June 30, 2021 and 2020, the Company had
a net loss of $4.64 million and $1.86 million, respectively. The Company had an accumulated deficit of $12.06 million as of June 30, 2021
and negative cash flow from operating activities of $3.95 million and $4.57 million for the years ended June 30, 2021 and 2020. The historical
operating results indicate the Company has recurring losses from operations which raise the question related to the Company’s ability
to continue as a going concern.. There can be no assurance the Company will become profitable or obtain necessary financing for its business
or that it will be able to continue in business. The consolidated financial statements do not include any adjustments that might result
from the outcome of these uncertainties. As discussed in Note 13, on July 20, 2021, the Company sold 2,436,904 shares of common stock
at $3.48 per share. The net proceeds from the transactions were approximately $7,636,796, after deducting offering costs, which mitigates
the liquidity concern and the initial doubt about the Company’s ability to continue as a going concern. The Company continues to improve and upgrade
the safe campus, smart community and other smart systems, and formed a new business model, providing online shopping and other value-added
services; the Company also provides artificial intelligence payment products and services based on face recognition for more institutional
customers; and set up a 5G messaging project company to release new 5G messaging products. The Company generates revenue from its core
business as well as the expansion of new businesses and services. Management also intends to raise additional funds by way of private
or public offerings, or by obtaining loans from banks or others, which are planned to be used altogether with operating turnover to support
Company’s research and development (“R&D”), procurement, marketing and daily operation, while the Company believes
in the viability of its strategy to generate sufficient revenue and in its ability to raise additional funds on reasonable terms and conditions,
there can be no assurances to that effect. The ability of the Company to continue as a going concern depends upon the Company’s
ability to further implement its business plan and generate sufficient revenue and its ability to raise additional funds by way of a public
or private offering. On June 25, 2020, the Company’s registration statement on Form S-3 was declared effective by Securities
and Exchange Commission (“SEC”). The Company may from time to time issue up to $100,000,000 of common stock, debt securities,
warrants or units of securities. The Company will describe the plan of distribution for any particular offering of these securities in
the applicable prospectus supplement. There can be no assurance the Company will be successful in any future fund raising. BASIS
OF PRESENTATION AND CONSOLIDATION The accompanying CFS were prepared in accordance
with accounting principles generally accepted in the United States of America (“U.S. GAAP”) and applicable rules and regulations
of the SEC regarding consolidated financial reporting. The accompanying CFS include the financial statements of the Company and its 100%
owned subsidiaries “Shuhai Skill (HK)”, and “Tianjin Information”, and its VIE, Shuhai Beijing, and Shuhai Beijing’s
100% owned subsidiaries – Xunrui, Guozhong Times, Guohao Century, Guozhong Haoze, and Jingwei, and Guohao Century’s 69.81%
owned subsidiary – Zhangxun, and Shuhai Beijing’s 99% owned subsidiary - Shuhai Nanjing. All significant inter-company transactions
and balances were eliminated in consolidation. The chart below depicts the corporate structure of the Company as of the date of this
report. VARIABLE INTEREST ENTITY Pursuant to Financial Accounting Standards
Board (“FASB”) Accounting Standards Codification (“ASC”) Section 810, “Consolidation” (“ASC
810”), the Company is required to include in its CFS, the financial statements of Shuhai Beijing, its VIE. ASC 810 requires a VIE
to be consolidated if the Company is subject to a majority of the risk of loss for the VIE or is entitled to receive a majority of the
VIE’s residual returns. A VIE is an entity in which a company, through contractual arrangements, bears the risk of, and enjoys the
rewards normally associated with ownership of the entity, and therefore the Company is the primary beneficiary of the entity. Under ASC 810, a reporting entity has a controlling
financial interest in a VIE, and must consolidate that VIE, if the reporting entity has both of the following characteristics: (a) the
power to direct the activities of the VIE that most significantly affect the VIE’s economic performance; and (b) the obligation
to absorb losses, or the right to receive benefits, that could potentially be significant to the VIE. The reporting entity’s determination
of whether it has this power is not affected by the existence of kick-out rights or participating rights, unless a single enterprise,
including its related parties and de - facto agents, have the unilateral ability to exercise those rights. Shuhai Beijing’s actual
stockholders do not hold any kick-out rights that affect the consolidation determination. Through the VIE agreements, the Company is
deemed the primary beneficiary of Shuhai Beijing and its subsidiaries. Accordingly, the results of Shuhai Beijing and its subsidiaries
were included in the accompanying CFS. Shuhai Beijing has no assets that are collateral for or restricted solely to settle their obligations.
The creditors of Shuhai Beijing do not have recourse to the Company’s general credit. VIE Agreements Operation and Intellectual Property
Service Agreement Shareholders’ Voting Rights Entrustment
Agreement Equity Option Agreement Equity Pledge Agreement There are no restrictions on assets of the
VIE for payment of dividends to shareholders of the Company. As of this report date, there was no dividends paid from the VIE to the US
parent company or the shareholders of the Company. There has been no change in facts and circumstances to consolidate the VIE. The following
financial statement amounts and balances of the VIE were included in the accompanying CFS as of June 30, 2021 and June 30, 2020, and for
the years ended June 30, 2021 and 2020, respectively.
June 30, June 30,
Cash $ 26,916 $ 149,511
Accounts receivable 1,856 1,119
Inventory 9,522 9,787
Other receivables 489,780 694,419
Other current assets 139,295 40,485
Total current assets 667,369 895,321
Property and equipment, net 167,194 222,312
Intangible asset, net 10,984 9,443
Right-of-use asset, net 442,441 692,782
Other non-current assets 16,816 -
Total non-current assets 637,435 924,537
Total assets $ 1,304,804 $ 1,819,858
Accounts payable $ 12,887 $ 11,759
Accrued liabilities and other payables 559,389 237,062
Lease liability 256,676 346,629
Loans payable 1,455,860 -
Other current liabilities 268,527 23,213
Total current liabilities 2,553,339 618,663
Lease liability - noncurrent 79,676 341,273
Total non-current liabilities 79,676 341,273
Total liabilities $ 2,633,015 $ 959,936
Year Year
Revenues $ 174,804 $ 1,414,781
Gross profit $ 93,963 $ 1,312,638
Net loss $ (3,098,147 ) $ (580,767 ) The
following is the tabular form condensed consolidating schedule - depicting the financial position, cash flows and results of operations
for the parent, the consolidated variable interest entity, and any eliminating adjustments separately - as of and for the years ending
June 30, 2021 and 2020. Consolidating
Statements of Income Information
Year Ended June 30, 2021
PARENT SUBSIDIARIES VIE Eliminations Consolidated
Revenue $ - $ 58,870 $ 434,851 $ (318,583 ) $ 175,138
Cost of Revenue - 243,728 153,002 (315,595 ) 81,135
Gross profit (loss) - (184,858 ) 281,849 (2,988 ) 94,003
Operating expenses 588,562 951,916 3,414,811 - 4,955,289
Loss from operations (588,562 ) (1,136,774 ) (3,132,962 ) (2,988 ) (4,861,286 )
Other expenses, net (762 ) (12,117 ) (10,151 ) - (23,030 )
Provision for income tax - - - - -
Loss before noncontrolling interest (589,324 ) (1,148,891 ) (3,143,113 ) (2,988 ) (4,884,316 )
Less: loss attributable to noncontrolling interest - - (235,839 ) - (235,839 )
Net loss $ (589,324 ) $ (1,148,891 ) $ (2,907,274 ) $ (2,988 ) $ (4,648,477 )
Year Ended June 30, 2020
PARENT SUBSIDIARIES VIE Eliminations Consolidated
Revenue $ - $ 352,981 $ 2,317,127 $ (1,255,328 ) $ 1,414,780
Cost of Revenue - 897,602 255,319 (1,006,541 ) 146,380
Gross profit (loss) - (544,621 ) 2,061,808 (248,787 ) 1,268,400
Operating expenses 361,854 910,487 1,901,112 - 3,173,453
Income (loss) from operations (361,854 ) (1,455,108 ) 160,696 (248,787 ) (1,905,053 )
Other income (expenses), net 8,190 40,142 (1,374 ) - 46,958
Income tax expense 5,158 - - - 5,158
Income (loss) before noncontrolling interest (358,822 ) (1,414,966 ) 159,322 (248,787 ) (1,863,253 )
Less: loss attributable to noncontrolling interest - - - - -
Net loss $ (358,822 ) $ (1,414,966 ) $ 159,322 $ (248,787 ) $ (1,863,253 ) Consolidating
Balance Sheets Information
As of June 30, 2021
PARENT SUBSIDIARIES VIE Eliminations Consolidated
Cash $ 14,042 $ 8,718 $ 26,916 $ - $ 49,676
Accounts receivable - 501,288 1,856 (501,288 ) 1,856
Inventory - 202,792 210,894 (219,422 ) 194,264
Other current asset 70,520 6,627,136 443,471 (6,500,938 ) 640,189
Total current asset 84,562 7,339,934 683,137 (7,221,648 ) 885,985
Property and equipment, net - 142,215 167,193 - 309,408
Intangible asset, net - 1,081,163 10,984 - 1,092,147
Right of use asset, net - 908,149 442,441 - 1,350,590
Other-non-current asset 5,860,480 88,744 168,243 (5,860,480 ) 256,987
Total Non-current asset 5,860,480 2,220,271 788,861 (5,860,480 ) 3,009,132
Total Asset $ 5,945,042 $ 9,560,205 $ 1,471,998 $ (13,082,128 ) $ 3,895,117
Accounts payable $ 99,500 $ 62,332 $ 514,175 $ (501,289 ) $ 174,718
Lease liability - 473,509 256,676 - 730,185
Loan payable - 30,959 1,455,860 - 1,486,819
Other current liabilities 39,750 207,768 7,187,837 (6,568,410 ) 866,945
Total current liabilities 139,250 774,568 9,414,548 (7,069,699 ) 3,258,667
Lease liability-NC - 479,063 79,676 - 558,739
Total non-current liabilities - 479,063 79,676 - 558,739
Total liabilities 139,250 1,253,631 9,494,224 (7,069,699 ) 3,817,406
Accumulated deficit (937,751 ) (2,686,249 ) (8,179,987 ) (257,870 ) (12,061,858 )
Other equity 6,743,543 10,992,823 157,761 (5,754,559 ) 12,139,569
Total equity 5,805,792 8,306,574 (8,022,226 ) (6,012,429 ) 77,711
Total Liability and stockholders’ equity $ 5,945,042 $ 9,560,205 $ 1,471,998 $ (13,082,128 ) $ 3,895,117
As of June 30, 2020
PARENT SUBSIDIARIES VIE Eliminations Consolidated
Cash $ 915,735 $ 600,690 $ 149,511 $ - $ 1,665,936
Accounts receivable - 395,508 1,119 (395,508 ) 1,119
Inventory - 111,894 193,540 (200,224 ) 105,210
Other current asset - 6,353,427 734,905 (4,962,074 ) 2,126,258
Total current asset 915,735 7,461,519 1,079,075 (5,557,806 ) 3,898,523
Property and equipment, net - 68,719 222,312 - 291,031
Intangible asset, net - 11,250 9,444 - 20,694
Right of use asset, net - 10,170 692,782 - 702,952
Other-non-current asset 4,500,480 - - (4,500,480 ) -
Total Non-current asset 4,500,480 90,139 924,538 (4,500,480 ) 1,014,677
Total Asset $ 5,416,215 $ 7,551,658 $ 2,003,613 $ (10,058,286 ) $ 4,913,200
Accounts payable $ - $ 35,214 $ 407,269 $ (395,508 ) $ 46,975
Lease liability - - 346,629 - 346,629
Loan payable - - - - -
Other current liabilities 3,750 31,861 5,222,347 (4,962,071 ) 295,887
Total current liabilities 3,750 67,075 5,976,245 (5,357,579 ) 689,491
Lease liability-NC - - 341,273 - 341,273
Total non-current liabilities - - 341,273 - 341,273
Total liabilities 3,750 67,075 6,317,518 (5,357,579 ) 1,030,764
Accumulated deficit (348,426 ) (1,537,359 ) (5,269,725 ) (257,870 ) (7,413,381 )
Other equity 5,760,891 9,021,942 955,820 (4,442,837 ) 11,295,817
Total equity 5,412,465 7,484,583 (4,313,905 ) (4,700,707 ) 3,882,436
Total Liability and stockholders’ equity $ 5,416,215 $ 7,551,658 $ 2,003,613 $ (10,058,286 ) $ 4,913,200 Consolidating
Cash Flows Information
Year Ended June 30, 2021
PARENT SUBSIDIARIES VIE Eliminations Consolidated
Net cash (used in)/provided by operating activities $ (511,693 ) $ (1,082,949 ) $ (2,389,879 ) $ 36,172 $ (3,948,349 )
Net cash (used in)/provided by investing activities (1,360,000 ) (105,907 ) (62,777 ) 1,360,000 (168,685 )
Net cash (used in)/provided by financing activities 970,000 565,766 2,319,182 (1,406,101 ) 2,448,847
Net increase in cash and cash equivalents $ (901,693 ) $ (583,074 ) $ (122,595 ) $ (8,898 ) $ (1,616,260 )
Year Ended June 30, 2020
PARENT SUBSIDIARIES VIE Eliminations Consolidated
Net cash (used in)/provided by operating activities $ (355,822 ) $ (2,789,559 ) $ (1,427,971 ) $ - $ (4,573,352 )
Net cash (used in)/provided by investing activities - (78,551 ) (228,262 ) - (306,813 )
Net cash (used in)/provided by financing activities - (533,101 ) 443,235 5,024 (84,842 )
Net increase in cash and cash equivalents $ (355,822 ) $ (3,406,201 ) $ (1,244,678 ) $ - $ (5,006,701 ) USE OF ESTIMATES The preparation of CFS in conformity with
US GAPP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure
of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during
the reporting periods. Actual results could differ from those estimates. The significant areas requiring the use of management estimates
include, but are not limited to, the estimated useful life and residual value of property, plant and equipment, provision for staff benefits,
recognition and measurement of deferred income taxes and the valuation allowance for deferred tax assets. Although these estimates are
based on management’s knowledge of current events and actions management may undertake in the future, actual results may ultimately
differ from those estimates and such differences may be material to the consolidated financial statements. CONTINGENCIES Certain conditions may exist as of the date
the CFS 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’s management and legal counsel assess 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
unasserted claims that may result in such proceedings, the Company’s legal counsel evaluates the perceived merits of any legal proceedings
or unasserted claims as well as the perceived merits of the amount of relief sought or expected to be sought. 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, the estimated liability
would be accrued in the Company’s CFS. If the assessment indicates that a potential
material loss contingency is not probable but is reasonably possible, or is probable but cannot be estimated, the nature of the contingent
liability, together with an estimate of the range of possible loss if determinable and material, would be disclosed. As of June 30, 2021
and 2020, the Company has no such contingencies. CASH
AND EQUIVALENTS Cash and equivalents include cash on hand,
demand deposits and short-term cash investments that are highly liquid in nature and have original maturities when purchased of three
months or less. RESTRICTED
CASH / ESCROW Restricted cash is cash held in an indemnification
escrow account under requirements of the financing agreement signed with the underwriter of the Company’s initial public offering
for 18 months or longer subsequent to the closing of the initial public offering on December 21, 2018, but in no event it shall be held
in escrow for longer than 24 months. The restricted cash was released during the year ended June 30, 2021. INVENTORY Inventory is comprised principally of intelligent
temperature measurement face recognition terminal, identity information recognition products, and is valued at the lower of cost or net
realizable value. The value of inventory is determined using the first-in, first-out method. The Company periodically estimates an inventory
allowance for estimated unmarketable inventories when necessary. Inventory amounts are reported net of such allowances. There were $59,187
and $44,237 allowances for slow-moving and obsolete inventory (mainly for Smart-Student Identification cards) as of June 30, 2021 and
2020, respectively. PROPERTY AND EQUIPMENT Property and equipment are stated at cost,
less accumulated depreciation. Major repairs and improvements that significantly extend original useful lives or improve productivity
are capitalized and depreciated over the period benefited. Maintenance and repairs are expensed as incurred. When property and equipment
are retired or otherwise disposed of, the related cost and accumulated depreciation are removed from the respective accounts, and any
gain or loss is included in operations. Depreciation of property and equipment is provided using the straight-line method over estimated
useful lives as follows:
Furniture and fixtures 3-5 years
Office equipment 3-5 years
Vehicles 5 years
Lease improvement 3 years Leasehold improvements are depreciated utilizing
the straight-line method over the shorter of their estimated useful lives or remaining lease term. INTANGIBLE ASSETS Intangible assets with finite lives are amortized
using the straight-line method over their estimated period of benefit. Evaluation of the recoverability of intangible assets is made to
take into account events or circumstances that warrant revised estimates of useful lives or that indicate that impairment exists. All
of the Company’s intangible assets are subject to amortization. No impairment of intangible assets has been identified as of the
balance sheet date. Intangible assets include licenses, certificates,
patents and other technology and are amortized over their useful life of three years. FAIR VALUE (“FV”) OF FINANCIAL
INSTRUMENTS The carrying amounts of certain of the Company’s
financial instruments, including cash and equivalents, accrued liabilities and accounts payable, approximate their FV due to their short
maturities. FASB ASC Topic 825, “Financial Instruments,” requires disclosure of the FV of financial instruments held by the
Company. The carrying amounts reported in the balance sheets for current liabilities qualify as financial instruments and are a reasonable
estimate of their FV because of the short period of time between the origination of such instruments and their expected realization and
the current market rate of interest. FAIR VALUE MEASUREMENTS AND DISCLOSURES FASB ASC Topic 820, “Fair Value Measurements,”
defines FV, and establishes a three-level valuation hierarchy for disclosures that enhances disclosure requirements for FV measures. The
three levels are defined as follows:
● Level 1 inputs to the valuation methodology are quoted prices (unadjusted) for identical assets or liabilities in active markets.
● Level 2 inputs to the valuation methodology include other than those in level 1 quoted prices for similar assets and liabilities in active markets, and inputs that are observable for the asset or liability, either directly or indirectly, for substantially the full term of the financial instrument.
● Level 3 inputs to the valuation methodology are unobservable and significant to the FV measurement. The carrying value of the Company’s
short-term financial instruments, such as cash, accounts receivable, prepaid expenses, accounts payable, advance from customers, accrued
expenses and other payables approximate their FV due to their short maturities. As of June 30, 2021 and 2020, the Company
did not identify any assets or liabilities required to be presented on the balance sheet at FV. IMPAIRMENT OF LONG-LIVED ASSETS In accordance with FASB ASC 360-10, Accounting
for the Impairment or Disposal of Long-Lived Assets, long-lived assets such as property and equipment are reviewed for impairment whenever
events or changes in circumstances indicate that the carrying value of an asset may not be recoverable, or it is reasonably possible that
these assets could become impaired as a result of technological or other changes. The determination of recoverability of assets to be
held and used is made by comparing the carrying amount of an asset to future undiscounted cash flows expected to be generated by the asset. If such assets are considered impaired, the
impairment to be recognized is measured as the amount by which the carrying amount of the asset exceeds its FV. FV generally is determined
using the asset’s expected future discounted cash flows or market value, if readily determinable. Assets to be disposed of
are reported at the lower of the carrying amount or FV less cost to sell. For the years ended June 30, 2021 and 2020, there was no impairment
loss recognized on long-lived assets. UNEARNED REVENUE The Company records payments
received from customers in advance of their orders as unearned revenue, mainly consisting of order deposits from 5G products customers
and sales agencies. These orders normally are delivered based upon contract terms and customer demand. DEFERRED REVENUE Deferred revenue consists primarily of local
government’s financial support under “2020 Harbin Eyas Plan” to Xunrui for technology innovation of developing the Intelligent
Campus Security Management Platform. The Company will record the grant as income when it passes local government’s inspection of
the project. LEASES On July 1, 2019, the Company adopted FASB
ASC Topic 842 using the modified retrospective transition approach by applying the new standard to all leases existing at the date of
initial application. Results and disclosure requirements for reporting periods beginning after July 1, 2019 are presented under FASB ASC
Topic 842, while prior period amounts were not adjusted and continue to be reported in accordance with its historical accounting under
FASB ASC Topic 840. The Company elected the package of practical
expedients permitted under the transition guidance, which allowed it to carry forward its historical lease classification, its assessment
on whether a contract was or contains a lease, and its initial direct costs for any leases that existed prior to July 1, 2019. The Company
also elected to keep leases with an initial term of 12 months or less off its balance sheet and recognize the associated lease payments
in the consolidated statements of operations on a straight-line basis over the lease term. The adoption did not impact the Company’s
beginning accumulated deficit, or its prior year consolidated statement of operations and statement of cash flows. Under FASB ASC Topic 842, the Company determines
if an arrangement is a lease at inception. Right of Use Assets (“ROU”) and lease liabilities are recognized at commencement
date based on the present value of remaining lease payments over the lease term. For this purpose, the Company considers only payments
that are fixed and determinable at the time of commencement. As most of its leases do not provide an implicit rate, it uses its incremental
borrowing rate based on the information available at commencement date in determining the present value of lease payments. The Company’s
incremental borrowing rate is a hypothetical rate based on its understanding of what its credit rating would be. The ROU assets include
adjustments for prepayments and accrued lease payments. The ROU asset also includes any lease payments made prior to commencement and
is recorded net of any lease incentives received. The Company’s lease terms may include options to extend or terminate the lease
when it is reasonably certain that it will exercise such options. ROU assets are reviewed for impairment when indicators of impairment
are present. ROU assets from operating and finance leases are subject to the impairment guidance in ASC 360, Property, Plant, and Equipment,
as ROU assets are long-lived nonfinancial assets. ROU assets are tested for impairment individually or as part of an
asset group if the cash flows related to the ROU asset are not independent from the cash flows of other assets and liabilities. An asset
group is the unit of accounting for long-lived assets to be held and used, which represents the lowest level for which identifiable cash
flows are largely independent of the cash flows of other groups of assets and liabilities. The Company recognized no impairment of ROU
assets as of June 30, 2021 and 2020. Operating leases are included in operating
lease ROU and operating lease liabilities (current and non-current), on the consolidated balance sheets. At June 30, 2021, the net
ROU was $1,350,590 for the operating leases of the Company’s offices in various cities of China and senior officers’ dormitory
in Beijing. At June 30, 2021, total operating lease liabilities (includes current and noncurrent) was $1,288,924, which was for the operating
leases of the Company’s offices in various cities of China and senior officers’ dormitory in Beijing. REVENUE RECOGNITION The Company follows Accounting Standards Codification
Topic 606, Revenue from Contracts with Customers (ASC 606). The core principle underlying FASB ASC 606
is that the Company will recognize revenue to represent the transfer of goods and services to customers in an amount that reflects the
consideration to which the Company expects to be entitled in such exchange. This will require the Company identify contractual performance
obligations and determine whether revenue should be recognized at a point in time or over time, based on when control of goods and services
transfers to a customer. The Company’s revenue streams are recognized when control of goods and services transferred to a customer. FASB ASC Topic 606 requires use of a new five-step
model to recognize revenue from customer contracts. The five-step model requires the Company (i) identify the contract with the customer,
(ii) identify the performance obligations in the contract, (iii) determine the transaction price, including variable consideration to
the extent that it is probable that a significant future reversal will not occur, (iv) allocate the transaction price to the respective
performance obligations in the contract, and (v) recognize revenue when (or as) the Company satisfies each performance obligation. The Company derives its revenues from product
sales and professional service contracts with its customers, with revenues recognized upon delivery of services and products. Persuasive
evidence of an arrangement is demonstrated via product sale contracts and professional service contracts and invoices; and the product
selling price and the service price to the customer is fixed upon acceptance of the contract. The Company recognizes revenue when the
customer receives the products and passes the inspection and when professional service is rendered to the customer, and collectability
of payment is probable. These revenues are recognized at a point in time after all performance obligations are satisfied. Revenue is recognized
net of returns and value-added tax charged to customers. All the revenue for the years ending June 30, 2021 and 2020 were from the sale
of the products. INCOME TAXES The Company uses the asset and liability method
of accounting for income taxes in accordance with FASB ASC Topic 740, “Income Taxes.” Under this method, income tax expense
is recognized for the amount of: (i) taxes payable or refundable for the current period and (ii) deferred tax consequences of temporary
differences resulting from matters that have been recognized in an entity’s financial statements or tax returns. Deferred tax
assets also include the prior years’ net operating losses carried forward. Deferred tax assets and liabilities are measured using
enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or
settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in the results of operations in the
period that includes the enactment date. A valuation allowance is provided to reduce the deferred tax assets reported if based on the
weight of the available positive and negative evidence, it is more likely than not some portion or all of the deferred tax assets will
not be realized. The Company follows FASB ASC Topic 740, which
prescribes a more-likely-than-not threshold for financial statement recognition and measurement of a tax position taken or expected to
be taken in a tax return. FASB ASC Topic 740 also provides guidance on recognition of income tax assets and liabilities, classification
of current and deferred income tax assets and liabilities, accounting for interest and penalties associated with tax positions, accounting
for income taxes in interim periods, and income tax disclosures. Under the provisions of FASB ASC Topic 740,
when tax returns are filed, it is likely some positions taken would be sustained upon examination by the taxing authorities, while others
are subject to uncertainty about the merits of the position taken or the amount of the position that would be ultimately sustained. The
benefit of a tax position is recognized in the financial statements in the period during which, based on all available evidence, management
believes it is more likely than not that the position will be sustained upon examination, including the resolution of appeals or litigation
processes, if any. Tax positions taken are not offset or aggregated with other positions. Tax positions that meet the more-likely-than-not
recognition threshold are measured as the largest amount of tax benefit that is more than 50 percent likely of being realized upon settlement
with the applicable taxing authority. The portion of the benefits associated with tax positions taken that exceeds the amount measured
as described above is reflected as a liability for unrecognized tax benefits in the accompanying balance sheets along with any associated
interest and penalties that would be payable to the taxing authorities upon examination. Interest associated with unrecognized tax benefits
is classified as interest expense and penalties are classified in selling, general and administrative expenses in the statement of income.
As of June 30, 2021, the Company had no unrecognized tax benefits and no charges during the year ended June 30, 2021, and accordingly,
the Company did not recognize any interest or penalties related to unrecognized tax benefits. There was no accrual for uncertain tax positions
as of June 30, 2021. The Company files a U.S. income tax return. With few exceptions, the Company’s U.S. income tax returns filed
for the years ending on June 30, 2017 and thereafter are subject to examination by the relevant taxing authorities. RESEARCH AND DEVELOPMENT EXPENSES Research and development expenses are expensed
in the period when incurred. These costs primarily consist of cost of materials used, salaries paid for the Company’s development
department, and fees paid to third parties. NONCONTROLLING INTERESTS The Company follows FASB ASC Topic 810, “Consolidation,” The net income (loss) attributed to NCI was
separately designated in the accompanying statements of operations and comprehensive income (loss). Losses attributable to NCI in a subsidiary
may exceed an non-controlling interest’s interests in the subsidiary’s equity. The excess attributable to NCIs is attributed
to those interests. NCIs shall continue to be attributed their share of losses even if that attribution results in a deficit NCI balance. As of June 30, 2021, Zhangxun was 30.19% owned
by noncontrolling interest, and Shuhai Nanjing was 1% owned by noncontrolling interest. During the year ended June 30, 2021, the Company
had loss of $235,839 and $0 attributable to the noncontrolling interest for the six months ended June 30, 2021 and 2020, respectively. CONCENTRATION OF CREDIT RISK The Company maintains cash in accounts with
state-owned banks within the PRC. Cash in state-owned banks less than RMB500,000 ($76,000) is covered by insurance. Should any institution
holding the Company’s cash become insolv |
