| 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 three months
ended September 30, 2022 and 2021, the Company had a net loss of approximately $1.34 million and $1.44 million, respectively.
The Company had an accumulated deficit of approximately $19.92 million as of September 30, 2022, and negative cash flow from operating
activities of approximately $0.75 million and $1.40 million for the three months ended September 30, 2022 and 2021, respectively.
The historical operating results indicate the Company has recurring losses from operations which raise the question related to the substantial
doubt about 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. If deemed necessary,
management could seek to raise additional funds by way of private or public offerings, or by seeking to obtain loans from banks or
others, to support the Company’s research and development (“R&D”), procurement, marketing and daily operation.
While management of the Company believes in the viability of its strategy to generate sufficient revenues and 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. Based on the Company’s most recent cash flows projection and working
capital requirements, management of the Company believes that the Company will be able to continue to operate as a going concern in
the foreseeable future and it will have sufficient working capital to meet its operating needs for at least the next 12
months. BASIS
OF PRESENTATION AND CONSOLIDATION The accompanying consolidated
financial statements (“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 CFS. The accompanying CFS include the financial
statements of the Company and its 100% owned subsidiaries Shuhai Information Skill (HK) Limited (“Shuhai Skill (HK)”), and
Shuhai Information Technology Co., Ltd. (“Tianjin Information”), and its VIE, Shuhai Beijing, and Shuhai Beijing’s 100%
owned subsidiaries – Heilongjiang Xunrui Technology Co. Ltd. (“Xunrui”), Guozhong Times (Beijing) Technology Ltd. (“Guozhong
Times”), Guohao Century (Beijing) Technology Ltd. (“Guohao Century”), Guozhong Haoze, and Shuhai Jingwei (Shenzhen)
Information Technology Co., Ltd. (“Jingwei”), and Guohao Century’s 99% owned subsidiary – Hangzhou Zhangqi Business
Management Partnership (“Zhangqi”, a limited partnership) and 69.81% owned subsidiary – Hangzhou Shuhai Zhangxun Information
Technology Co., Ltd. (“Zhangxun”) which consisted of 51% ownership from Guohao Century and 19% ownership from Zhangqi, and
Shuhai Beijing’s 99% owned subsidiary - Nanjing Shuhai Equity Investment Fund Management Co. Ltd. (“Shuhai Nanjing”).
During the year ended June 30, 2022, the Company incorporated two new subsidiaries Shuhai (Shenzhen) Acoustic Effect Technology Co., Ltd
(“Shuhai Acoustic”) and Shenzhen Acoustic Effect Management Partnership (“Shenzhen Acoustic MP”). 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 of such entity, and therefore the Company is the primary beneficiary of such 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, Tianjin
Information, an indirect subsidiary of DataSea 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 Under the terms of the Operation and Intellectual Property Service
Agreement, Shuhai Beijing entrusts Tianjin Information to manage its operations, manage and control its assets and financial matters,
and provide intellectual property services, purchasing management services, marketing management services and inventory management services
to Shuhai Beijing. Shuhai Beijing and its stockholders shall not make any decisions nor direct the activities of Shuhai Beijing without
Tianjin Information’s consent. Stockholders’ Voting Rights Entrustment Agreement Equity Option Agreement Equity Pledge Agreement As of this
report date, there was no dividends paid from the VIE to the U.S. 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 September 30, 2022 and June 30, 2022, and for the three months ended September 30, 2022 and 2021, respectively.
September 30, June 30,
Cash $ 81,186 $ 135,734
Accounts receivable 155,280 259,410
Inventory 202,897 206,167
Other current assets 406,868 502,255
Total current assets 846,231 1,103,566
Property and equipment, net 65,746 93,469
Intangible asset, net 902,892 936,421
Right-of-use asset, net 48,656 127,285
Other non-current assets 56,340 29,800
Total non-current assets 1,073,634 1,186,975
Total assets $ 1,919,865 $ 2,290,541
Accounts payable $ 75,146 $ 35,669
Accrued liabilities and other payables 1,297,465 1,190,564
Lease liability 28,833 43,713
Loans payable 866,644 81,950
Other current liabilities 126,810 359,543
Total current liabilities 2,394,898 1,711,439
Lease liability - noncurrent - -
Total non-current liabilities - -
Total liabilities $ 2,394,898 $ 1,711,439 For the For the Revenues $ 1,164,305 $ 671,130 Gross profit $ 150,198 $ 56,008 Net loss $ (757,146 ) $ (870,189 ) USE
OF ESTIMATES The preparation of CFS in conformity
with U.S. GAAP 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 CFS. 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 September 30, 2022 and June 30, 2022, 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. INVENTORY Inventory is comprised principally
of intelligent temperature measurement face recognition terminal and 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 $53,854 and $56,971 allowances for slow-moving and obsolete inventory (mainly for Smart-Student Identification cards) as
of September 30, 2022 and June 30, 2022, 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
Leasehold 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 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 approximates 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. As of September
30,2022 and June 30, 2022, the Company did not identify any assets or liabilities required to be presented on the balance sheet at FV
on a recurring basis. 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 undiscounted 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 three months ended September 30, 2022 and 2021, there
was no impairment loss recognized on long-lived assets. UNEARNED
REVENUE The Company records payments
received in advance from its customers or sales agents for the Company’s products as unearned revenue, mainly consisting of deposits
or prepayment for 5G products from the Company’s sales agencies. These orders normally are delivered based upon contract terms and
customer demand, and will recognize as revenue when the products are delivered to the end customers. 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. LEASES The Company determines if an
arrangement is a lease at inception under FASB ASC Topic 842. 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 September 30 2022 and June 30, 2022. Operating leases are included
in operating lease ROU and operating lease liabilities (current and non-current), on the consolidated balance sheets. As of September
30, 2022, the net ROU was $305,146 for the operating leases of the Company’s offices in various cities of China and senior
officers’ dormitory in Beijing. As of September 30, 2022, total operating lease liabilities (includes current and noncurrent) were
$320,826, 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 to 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 identified when possession of goods and services is transferred
to a customer. FASB ASC Topic 606 requires the
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 5G messaging 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, with performance obligations identified. The transaction price, such as product selling price, and the service price to
the customer with corresponding performance obligations are fixed upon acceptance of the agreement. The Company recognizes revenue
when it satisfies each performance obligation, the customer receives the products and passes the inspection and when professional
service is rendered to the customer, collectability of payment is probable. These revenues are recognized at a point in time after
each performance obligations is satisfied. Revenue is recognized net of returns and value-added tax charged to
customers. During the three months ended
September 30, 2022, the Company’s revenue of $1.04 million was mainly from 5G messaging services including 5G Short
Message Services (“SMS”), 5G integrated message marketing cloud platform (“5G MMCP”) and 5G multi-media
video messaging (a value-added service). In addition, during the three months ended September 30, 2022, the Company’s revenue of
$124,544 was from Smart Public Broadcasting project which was mainly for the auditory system design, music database management and update,
and intelligent broadcasting system customization. SEGMENT INFORMATION FASB ASC Topic 280, “Segment
Reporting,” requires use of the “management approach” model for segment reporting. The management approach model
is based on the method a company’s management organizes segments within the company for making operating decisions and assessing
performance. Reportable segments are based on products and services, geography, legal structure, management structure, or any other
manners in which management disaggregates a company. Management determining the Company’s current operations constitutes a
single reportable segment in accordance with ASC 280. The Company’s only business and industry segment is high technology and advanced
information systems (“TAIS”). TAIS include smart city solutions that meet the security needs of residential communities,
schools and commercial enterprises, and 5G messaging services including 5G SMS, 5G MMCP and 5G multi-media video messaging. All of the Company’s customers
are in the PRC and all revenues for the three months ended September 30, 2022 and 2021 were generated from the PRC. All identifiable assets
of the Company are located in the PRC. Accordingly, no geographical segments are presented. 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 September 30, 2022, the Company had no unrecognized tax benefits and no charges during
the three months ended September 30, 2022, 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 September 30, 2022. The Company files a U.S. and PRC income tax return.
With few exceptions, the Company’s U.S. income tax returns filed for the years ending on June 30, 2018 and thereafter are subject
to examination by the relevant taxing authorities; the Company uses calendar year-end for its PRC income tax return filing, PRC income
tax returns filed for the years ending on December 31, 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 a 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 September 30, 2022, Zhangxun
was 30.19% owned by noncontrolling interest, Zhangqi was 1% owned by noncontrolling interest, and Shuhai Nanjing was 1%
owned by noncontrolling interest, Shenzhen Acoustic MP was 1% owned by noncontrolling interest, Shuhai Shenzhen Acoustic was 30.1%
owned by noncontrolling interest, Guozhong Times was 0.091% owned by noncontrolling interest, Guozhong Haoze was 0.091% owned
by noncontrolling interest. During the three months ended September 30, 2022 and 2021, the Company had loss of $96,624 and $112,100 attributable
to the noncontrolling interest, 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 insolvent, or if the Company is unable to withdraw funds for any reason,
the Company could lose the cash on deposit with that institution. The Company has not experienced any losses in such accounts and believes
it is not exposed to any risks on its cash in these bank accounts. Cash denominated in RMB with a U.S. dollar equivalent of $84,929 and
$153,607 as of September 30, 2022 and June 30, 2022, respectively, was held in accounts at financial institutions located in the
PRC‚ which is not freely convertible into foreign currencies. Cash held in accounts at U.S.
financial institutions is insured by the Federal Deposit Insurance Corporation or other programs subject to certain limitations up to
$250,000 per depositor. As of September 30, 2022, cash of $2,436 was maintained at U.S. financial institutions. Cash was maintained
at financial institutions in Hong Kong, and was insured by the Hong Kong Deposit Protection Board up to a limit of HK $500,000 ($64,000).
As of September 30, 2022, the cash balance of $5,709 was maintained at financial institutions in Hong Kong. The Company, its subsidiaries
and VIE have not experienced any losses in such accounts and do not believe the cash is exposed to any significant risk. FOREIGN CURRENCY TRANSLATION
AND COMPREHENSIVE INCOME (LOSS) The accounts of the Company’s
Chinese entities are maintained in RMB and the accounts of the U.S. parent company are maintained in United States dollar (“USD”).
The accounts of the Chinese entities were translated into USD in accordance with FASB ASC Topic 830 “Foreign Currency Matters.”
All assets and liabilities were translated at the exchange rate on the balance sheet date; stockholders’ equity is translated at
historical rates and the statements of operations and cash flows are translated at the weighted average exchange rate for the period.
The resulting translation adjustments are reported under other comprehensive income (loss) in accordance with FASB ASC Topic 220, “Comprehensive
Income.” Gains and losses resulting from foreign currency transactions are reflected in the statements of operations. The Company follows FASB ASC
Topic 220-10, “Comprehensive Income (loss).” Comprehensive income (loss) comprises net income (loss) and all changes to the
statements of changes in stockholders’ equity, except those due to investments by stockholders, changes in additional paid-in capital
and distributions to stockholders. The exchange
rates used to translate amounts in RMB to USD for the purposes of preparing the CFS were as follows: September 30, September 30, June 30, 2022 2021 2022 Period-end date USD: RMB exchange rate 7.0998 6.4854 6.7114 Average USD for the reporting period: RMB exchange rate 6.8287 6.4707 6.4571 BASIC
AND DILUTED EARNINGS (LOSS) PER SHARE (EPS) Basic EPS is computed by dividing
income available to common shareholders by the weighted average number of common shares outstanding for the period. Diluted EPS is computed
similarly, except that the denominator is increased to include the number of additional common shares that would have been outstanding
if the potential common shares had been issued and if the additional common shares were dilutive. Diluted EPS is based on the assumption
that all dilutive convertible shares and stock options were converted or exercised. Dilution is computed by applying the treasury stock
method. Under this method, options and warrants are assumed to have been exercised at the beginning of the period (or at the time of issuance,
if later), and as if funds obtained thereby were used to purchase common stock at the average market price during the period. For the
three months ended September 30, 2022 and 2021, the Company’s basic and diluted loss per share are the same as a result of the Company’s
net loss. 1,319,953 and 1,319,953 warrants were anti-dilutive for the three months ended September 30, 2022 and 2021,
respectively. STATEMENT
OF CASH FLOWS In accordance
with FASB ASC Topic 230, “Statement of Cash Flows,” cash flows from the Company’s operations are calculated
based upon the local currencies. As a result, amounts shown on the statement of cash flows may not necessarily agree with changes in the
corresponding asset and liability on the balance sheet. RECENT
ACCOUNTING PRONOUNCEMENTS In June 2016, the FASB issued
ASU No. 2016-13, Financial Instruments-Credit Losses (Topic 326), which requires entities to measure all expected credit losses for financial
assets held at the reporting date based on historical experience, current conditions, and reasonable and supportable forecasts. This replaces
the existing incurred loss model and is applicable to the measurement of credit losses on financial assets measured at amortized cost.
This guidance is effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2022. Early application
will be permitted for all entities for fiscal years, and interim periods within those fiscal years, beginning after Decembe |
