| 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, 2024 and 2023, the
Company had a net loss of approximately $11.38 million and $9.48 million, respectively. The Company had an accumulated deficit
of approximately $39.44 million as of June 30, 2024, and negative cash flow from operating activities of approximately $6.40 million
and $3.14 million for the years ended June 30, 2024 and 2023, respectively. The historical operating results including recurring
losses from operations raise substantial doubt about the Company’s ability to continue as a going concern. During the year ended June 30, 2024, the Company
made total prepayments of $3.78 million for marketing and promoting the sale of acoustic intelligence series products and 5G Multimodal
communication in oversea and domestic markets. For the year ended June 30, 2024, the Company recorded an amortization of prepaid expense
of $2.84 million in the selling expense. If deemed necessary, management could seek to
raise additional funds by way of admitting strategic investors, or 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. There is no assurance that the Company will be able to
obtain funds on commercially acceptable terms, if at all. There is also no assurance that the amount of funds the Company might raise
will enable the Company to complete its initiatives or attain profitable operations. If the Company is unable to raise additional funding
to meet its working capital needs in the future, it may be forced to delay, reduce or cease its operations. BASIS OF PRESENTATION AND
CONSOLIDATION The 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 Tianjin Information sea 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 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 June 30, 2024. VARIABLE INTEREST ENTITY Pursuant to the 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 were 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 June 30, 2024 and 2023, and for the years ended June 30, 2024 and 2023, respectively. Condensed Consolidating Statements of Operation
Information
Year Ended June 30, 2024
PARENT SUBSIDIARIES WOFE VIE Elimination Consolidated
Revenue - third parties $ - $ - $ 69,541 $ 23,906,326 $ 23,975,867
Revenue-Parent provided service to WOFE 275,100 (275,100 ) -
Revenue-Parent provided service to VIE 143,600 (143,600 ) -
Revenue - WOFE provided service to VIE 489,386 (489,386 ) -
Revenue - VIE purchased materials from WOFE 57,082 (57,082 )
Revenue - from VIE’s label that was used by WOFE 264,533 (264,533 ) -
Revenue - WOFE purchased materials from VIE 57,082 (57,082 )
-
Cost of Revenue - third parties 69,156 23,432,606 23,501,762
COST - VIE purchased materials from WOFE 57,082 (57,082 )
COST - WOFE purchased materials from VIE - 57,082 (57,082 )
- -
Gross profit 418,700 - 489,771 738,253 (1,172,619 ) 474,105
Operating expenses 6,996,227 324,954 3,535,554 1,742,757 12,599,492
Operating expenses - VIE expenses, corresponding to services
provided by WOFE 489,386 (489,386 ) -
Operating expenses - WOFE expenses for using VIE’s
label 264,533 (264,533 )
Operating expenses – WOFE expenses, corresponding
to services provided by Parent 278,862 (278,862 )
Operating expenses - VIE expenses,
corresponding to services provided by Parent 146,150 (146,150 ) -
Loss from operations (6,577,527 ) (324,954 ) (3,589,178 ) (1,640,040 ) 6,312 (12,125,387 )
Other income (expenses), net (1,665 ) (61 ) 3,108 (97,300 ) (95,918 )
Income tax expense -
Loss before noncontrolling interest (6,579,192 ) (325,015 ) (3,586,070 ) (1,737,340 ) 6,312 (12,221,305 )
Less: loss attributable to noncontrolling
interest (10,695 ) (10,695 )
Net loss to the
Company (6,579,192 ) (325,015 ) (3,586,070 ) (1,726,645 ) 6,312 (12,210,610 )
Year Ended June 30, 2023
PARENT SUBSIDIARIES WOFE VIE Elimination Consolidated
Revenue - third parties $ - $ - $ - $ 7,045,311 $ 7,045,311
Revenue -Parent provided service to VIE 453,500 (453,500 ) -
Revenue - WOFE’s label that was used by VIE 81,544 (81,544 ) -
Revenue - from VIE’s label that was used by WOFE 751,125 (751,125 ) -
Cost of Revenue - third parties 6,704,380 6,704,380
Gross profit 453,500 81,544 1,092,056 (1,286,169 ) 340,931
Operating expenses 5,082,029 366,767 766,269 3,811,086 10,026,151
Operating expenses -VIE expenses, corresponding to services provided
by WOFE 81,544 (81,544 ) -
Operating expenses -WOFE expenses for using VIE’s label 751,460 (751,460 ) -
Operating expenses -VIE expenses, corresponding
to services provided by Parent 453,500 (453,500 ) -
Loss from operations (4,628,529 ) (366,767 ) (1,436,185 ) (3,253,739 ) (9,685,220 )
Other income (expenses), net (1,005 ) (584 ) (5,260 ) (5,946 ) (12,795 )
Income tax expense -
Loss before noncontrolling interest (4,629,534 ) (367,351 ) (1,441,455 ) (3,259,685 ) (9,698,015 )
Less: loss attributable to noncontrolling
interest (218,323 ) (218,323 )
Net loss to the Company (4,629,534 ) (367,351 ) (1,441,445 ) (3,041,362 ) - (9,479,692 )* * Include the operation of Zhangxun (see Note 13 Disposal of Subsidiary) Condensed Consolidating Balance Sheets Information
As of June 30, 2024
PARENT SUBSIDIARIES WOFE VIE Elimination Consolidated
Cash $ 79,225 $ 1,249 $ 7,634 $ 93,154 $ 181,262
Accounts receivable 718,546 718,546
Accounts receivable - VIE 760,708 (760,708 ) -
Accounts receivable - WOFE -
Inventory 34,530 119,053 153,583
Inventory - VIE - -
Inventory - WOFE 41,147 (41,147 ) -
Other receivables-Subsidiaries 5,015 832 2,427 (8,274 ) -
Other receivables - VIE 475,223 12,971,457 (13,446,680 ) -
Other receivables - WOFE 6,304,226 1,412,607 (7,716,833 ) -
Other receivables - Parent 5,000 (5,000 )
Other current assets 5,000 - 1,292,945 295,305 1,251 1,594,501
Total current assets 6,868,689 6,249 15,068,106 2,682,239 (21,977,391 ) 2,647,892
Property and equipment, net 17,532 30,934 48,466
Intangible assets, net 101,042 62,406 441,485 (58,932 ) 546,001
Right of use asset, net 38,300 11,045 49,345
Investment into subsidiaries 14,320,480 (14,320,480 ) -
Investment into WOFE 12,450,340 (12,450,340 ) -
Other non-current assets - - - -
Total non-current
assets 14,320,480 12,551,382 118,238 483,464 (26,829,752 ) 643,812
Total Assets $ 21,189,169 $ 12,557,631 $ 15,186,344 $ 3,165,703 (48,807,143 ) $ 3,291,704
Accounts payable $ 262,385 2,500 $ 44,758 $ 765,998 $ 1,075,641
Accounts payable - VIE - - -
Accounts payable - WOFE 760,708 (760,708 ) -
Short term loan 1,170,298 1,170,298
Advance from customers 463 48,776 49,239
Accrued expenses and other payables 23,254 109,121 713,827 (249,488 ) 596,714
Lease liability 41,549 11,981 53,530
Loan payable - -
Other payables - Datasea 5,015 6,182,249 468,998 (6,656,262 ) -
Other payables - Subsidiaries 5,000 (5,000 )
Other payables - VIE 2,536 1,412,607 (1,415,143 ) -
Other payables - WOFE 845 12,971,457 (12,972,302 ) -
Other current liabilities 32,000 520,501 102,059 654,560
Total current liabilities 322,639 10,896 8,311,248 17,014,102 (22,058,903 ) 3,599,982
Accumulated deficit (13,649,331 ) (1,773,745 ) (9,705,672 ) (14,479,788 ) 168,214 (39,440,322 )
Other equity 34,515,861 14,320,480 16,580,768 631,389 (26,916,454 ) 39,132,044
Total equity 20,866,530 12,546,735 6,875,096 (13,848,399 ) (26,748,240 ) (308,278 )
Total liabilities
and stockholders’ equity $ 21,189,169 $ 12,557,631 $ 15,186,344 $ 3,165,703 (48,807,143 ) $ 3,291,704
As of June 30, 2023
PARENT SUBSIDIARIES WOFE VIE Elimination Consolidated
Cash $ 1,487 $ 809 $ 3,715 $ 13,717 $ 19,728
Accounts receivable 255,725 255,725
Accounts receivable - VIE 1,181,256 (1,181,256 ) -
Accounts receivable - WOFE 754,242 (754,242 ) -
Inventory 241,380 241,380
Inventory - VIE -
Inventory - WOFE 26,562 (26,562 ) -
Other receivables -Subsidiaries 111 2,394 (2,505 ) -
Other receivables - VIE 8,601,966 (8,601,966 ) -
Other receivables - WOFE 88,145 (88,145 ) -
Other receivables - Parent 5,000 14,884 (19,884 ) -
Other current assets 123,251 649,433 772,684
Total current assets 89,632 5,809 9,910,299 1,958,337 (10,674,560 ) 1,289,517
Property and equipment, net 43,044 42,886 85,930
Intangible assets, net 417,708 68,504 757,700 (58,125 ) 1,185,787
Right of use asset, net 77,508 60,348 137,856
Investment into subsidiaries 12,920,480 (12,920,480 ) -
Investment into WOFE 11,050,890 (11,050,890 ) -
Other non -current assets 55,358 55,358
Total non-current
assets 12,920,480 11,468,598 189,056 916,292 (24,029,495 ) 1,464,931
Total Assets $ 13,010,112 $ 11,474,407 $ 10,099,355 $ 2,874,629 $ (34,704,055 ) $ 2,754,448
Accounts payable $ 288,020 $ 66,633 $ 650,406 $ 1,005,059
Accounts payable - VIE 754,242 (754,242 ) -
Accounts payable - WOFE 1,181,256 (1,181,256 ) -
Short term loan 594,906 594,906
Advance from customers 456 608,719 609,175
Accrued expenses and other payables 34,780 107,881 1,480,947 (213,669 ) 1,409,939
Lease liability 85,417 39,223 124,640
Other payables - Datasea 78,926 (78,926 ) -
Other payables - VIE 2,536 (2,536 ) -
Other payables - WOFE 122 8,596,015 (8,596,137 ) -
Other current liabilities 32,000 100,165 1,030,691 1,162,856
Total current liabilities 354,800 2,658 1,193,720 14,182,163 (10,826,766 ) 6,216,881
Lease liability - noncurrent 26,449 26,449
Long term loan 1,401,521 91,215
Total non-current
liabilities 1,427,970 117,664
Total liabilities 354,800 2,658 1,193,720 15,610,133 (10,826,766 ) 6,334,545
Accumulated deficit (7,069,628 ) (1,448,731 ) (6,136,980 ) (13,586,686 ) 178,767 (28,063,258 )
Other equity 19,724,940 12,920,480 15,042,615 851,182 (24,056,056 ) 24,483,161
Total equity 12,655,312 11,471,749 8,905,635 (12,735,504 ) (23,877,289 ) (3,580,097 )
Total liabilities
and stockholders’ equity $ 13,010,112 $ 11,474,407 $ 10,099,355 $ 2,874,629 (34,704,055 ) $ 2,754,448 Condensed Consolidating Cash Flows Information
Year Ended June 30, 2024
PARENT SUBSIDIARIES WOFE VIE Elimination Consolidated
Net cash provided by/(used in) operating activities $ 134,284 $ (5,849 ) $ (5,076,644 ) $ (1,450,675 ) $ (6,398,884 )
Net cash provided by/(used in) operating activities (WOFE
to VIE) (1,992,684 ) 1,992,684 -
-
Net cash provided by/(used in) investing activities - (167,957 ) (167,957 )
Net cash provided by/(used in) investing activities (Parent
to subsidiaries) (1,405,015 ) 1,405,015 -
Net cash provided by/(used in) investing activities (Parent
to WOFE) (6,231,281 ) 6,231,281
Net cash provided by/(used in) investing activities (Subsidiaries
to WOFE) (1,399,449 ) 1,399,449 -
Net cash provided by/(used in) investing activities (WOFE
to VIE) (2,859,142 ) 2,859,142 -
Net cash provided by/(used in) investing activities (Parent
to VIE) (475,223 ) 475,223 -
Net cash provided by/(used in) investing activities 2,536 (2,536 ) -
Net cash provided by/(used in) financing activities 8,061,286 418,608 (1,640,317 ) 6,839,577
Net cash provided by/(used in) financing activities (Parent
to VIE) 483,698 (483,698 ) -
Net cash provided by/(used in) financing activities (Parent
to Subsidiaries) 1,405,015 (1,405,015 ) -
Net cash provided by/(used in) financing activities (2,536 ) 2,536 -
Net cash provided by/(used in) financing activities (parent
to WOFE) 6,097,306 (6,097,306 ) -
Net cash provided by/(used in) financing activities (subsidiaries
to WOFE) 1,424,455 (1,424,455 ) -
Net cash provided by/(used in) financing activities (WOFE
to VIE) 2,859,142 (2,859,142 ) -
Net increase (decrease) in cash and cash equivalents $ 77,738 $ (2,819 ) $ (1,988,041 ) $ 2,074,656 - $ 161,534
Year Ended June 30, 2023
PARENT SUBSIDIARIES WOFE VIE Elimination Consolidated
Net cash provided by/(used in) operating activities $ (41,815 ) $ (3,185 ) $ (528,833 ) $ (2,527,577 ) $ (3,101,410 )
Net cash provided by/(used in) operating activities (WOFE
to VIE) (34,671 ) (34,671 )
Net cash provided by/(used in) investing activities (113,131 ) (113,131 )
Net cash provided by/(used in) investing activities (WOFE
to VIE) 407,905 (407,905 ) -
Net cash provided by/(used in) investing activities (Parent
to VIE) 14,622 (14,622 ) -
Net cash provided by/(used in) investing activities (VIE
to HK entity) 2,536 (2,536 ) -
Net cash provided by/(used in) financing activities 32,000 73,151 3,004,056 3,109,207
Net cash provided by/(used in) financing activities (Parent
to VIE ) (14,622 ) 14,622 -
Net cash provided by/(used in) financing activities (VIE
to HK entity) (2,536 ) 2,536 -
Net cash provided by/(used in) financing activities (WOFE
to VIE) (407,905 ) 407,905 -
Net increase (decrease) in cash and cash equivalents $ 9,209 $ (5,649 ) $ (86,346 ) $ (61,703 ) - $ (144,489 ) 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 June 30, 2024
and 2023, the Company has no such contingencies. CASH Cash includes cash on hand and demand deposits
that are highly liquid in nature and have original maturities when purchased of three months or less. ACCOUNTS RECEIVABLE The Company’s policy is to maintain an
allowance for potential credit losses on accounts receivable. The Company adopted Accounting Standards Update (“ASU”) 2016-13, Financial
Instruments – Credit Losses (Topic 326): Measurement of Credit losses on financial instruments later codified as
Accounting Standard codification (“ASC”) 326 (“ASC 326”), on July 1, 2023. The guidance introduces a revised
approach to the recognition and measurement of credit losses, emphasizing an updated model based on expected losses rather than incurred
losses. There was no significant impact on the date of adoption of ASC 326. Under ASC 326, accounts receivable are recorded
at the invoiced amount, net of allowance for expected credit losses. The Company’s primary allowance for credit losses is the allowance
for doubtful accounts. The allowance for doubtful accounts reduces the accounts receivable balance to the estimated net realizable value.
The Company regularly reviews the adequacy of the allowance for credit losses based on a combination of factors. In establishing any required
allowance, management considers historical losses adjusted for current market conditions, the Company’s customers’ financial
condition, the amount of any receivables in dispute, the current receivables aging, current payment terms and expectations of forward-looking
loss estimates. All provisions for the allowance for doubtful
accounts are included as a component of general and administrative expenses on the accompanying consolidated statements of operations
and comprehensive loss. Accounts receivable deemed uncollectible are charged against the allowance for credit losses when identified.
Subsequent recoveries of amounts previously written off are credited to earnings in the period recovered. As of June 30, 2024 and 2023,
the Company had a $0 bad debt allowance for accounts receivable. 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 $53,650 and $52,915 allowances for slow-moving and obsolete inventory (mainly for Smart-Student Identification cards)
as of June 30, 2024 and 2023, 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, unearned revenue, 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 June 30, 2024 and 2023, 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 year ended June 30, 2024, the Company fully impairment of its long-term
investment. For the year ended June 30, 2023, 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 the Company will recognize it as revenue when the products are delivered to the end customers. 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 June 30, 2024 and 2023. 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 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. The following table shows the Company’s
revenue by revenue sources:
For the Year For the Year
5G AI Multimodal communication $ 23,600,693 $ 6,686,691
5G AI Multimodal communication 23,600,693 5,747,539
Aggregate messaging platform 23,816
Cloud platform construction cooperation project - 915,336
Acoustic Intelligence Business 3,988 196,940
Ultrasonic Sound Air Disinfection Equipment 3,988 81,275
Other - 115,665
Smart City business 37,113 161,680
Smart community 37,113 33,123
Smart community broadcasting system - 122,521
Smart agriculture - 6,036
Other 334,073 -
Total revenue $ 23,975,867 $ 7,045,311 * * include the revenue from discontinued entities 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 manner in which management
disaggregates a company. Management determined 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 includes 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 years ended June 30, 2024 and 2023 were generated from the PRC. All identifiable assets of the |
