0001520138-17-000354.txt : 20171114 0001520138-17-000354.hdr.sgml : 20171114 20171114120255 ACCESSION NUMBER: 0001520138-17-000354 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 53 CONFORMED PERIOD OF REPORT: 20170930 FILED AS OF DATE: 20171114 DATE AS OF CHANGE: 20171114 FILER: COMPANY DATA: COMPANY CONFORMED NAME: DATASEA INC. CENTRAL INDEX KEY: 0001631282 STANDARD INDUSTRIAL CLASSIFICATION: SERVICES-MANAGEMENT CONSULTING SERVICES [8742] IRS NUMBER: 472019013 STATE OF INCORPORATION: NV FISCAL YEAR END: 0630 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 333-202071 FILM NUMBER: 171199599 BUSINESS ADDRESS: STREET 1: 1 XINGHUO RD, CHANGNING BLDG, STE.11D2E STREET 2: FENGTAI DISTRICT CITY: BEIJING STATE: F4 ZIP: 100070 BUSINESS PHONE: (86)10-58401996 MAIL ADDRESS: STREET 1: 1 XINGHUO RD, CHANGNING BLDG, STE.11D2E STREET 2: FENGTAI DISTRICT CITY: BEIJING STATE: F4 ZIP: 100070 FORMER COMPANY: FORMER CONFORMED NAME: ROSE ROCK INC. DATE OF NAME CHANGE: 20150121 10-Q 1 dtss-20170930_10q.htm FORM 10-Q FOR PERIOD ENDED SEPTEMBER 30, 2017
 
 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q

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

For the quarterly period ended September 30, 2017

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

Commission file number 333-202071

DATASEA INC.
(Exact name of registrant as specified in its charter)
     
Nevada   45-2019013
(State or other jurisdiction of   (I.R.S. Employer
incorporation or organization)   Identification No.)

 

1 Xinghuo Rd. Changning Building, Suite 11D2E

   
Fengtai District, Beijing, P.R. China   100070
(Address of principal executive offices)   (Zip Code)
     
(86)10-58401996
(Registrant's telephone number, including area code)

 

N/A

(Former name, former address and former fiscal year, if changed since last report)

 

Indicate by check mark whether the issuer (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the past 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes No  

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes No  

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

Large accelerated filer   Accelerated filer  
Non-accelerated filer   Smaller reporting company  
(Do not check if a smaller reporting company)   Emerging growth company  

 

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

 

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

 

As of November 13, 2017, 57,511,771 shares of common stock, $0.001 par value per share, were outstanding.

 
 
 
 

DATASEA INC.

 

TABLE OF CONTENTS

 

  Part I – Financial Information  Page No.
Item 1 Financial Statements 1
Item 2 Management’s Discussion and Analysis of Financial Condition and Results of Operation 15
Item 3 Quantitative and Qualitative Disclosures about Market Risk 19
Item 4 Controls and Procedures 19
     
  Part II – Other Information  
Item 1 Legal Proceedings 20
Item 1A Risk Factors 20
Item 2 Unregistered Sales Of Equity Securities And Use Of Proceeds 20
Item 3 Defaults Upon Senior Securities 20
Item 4 Mine Safety Disclosures 20
Item 5 Other Information 20
Item 6 Exhibits 21
     
 

PART I – FINANCIAL INFORMATION

 

DATASEA INC.

 

CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

 

SEPTEMBER 30, 2017 AND 2016

  

 Table of Contents   
   Page 
 Condensed Consolidated Balance Sheets  2
 Condensed Consolidated Statements of Comprehensive Income   3
 Condensed Consolidated Statements of Cash Flows  4
 Notes to Condensed Consolidated Financial Statements  4-14

 

 -1-

DATASEA INC.

CONSOLIDATED BALANCE SHEETS

 

   September 30,  June 30,
   2017  2017
    (Unaudited)      
ASSETS          
Current Assets          
Cash  $2,320,210   $1,174,950 
Accounts receivable   —      221 
Inventory   103,163    101,300 
Prepaid expenses and other current assets   166,503    94,439 
Total Current Assets   2,589,876    1,370,910 
           
Property and equipment, net   58,456    59,286 
Intangible assets, net   13,621    13,783 
Total Assets  $2,661,953   $1,443,979 
           
LIABILITIES AND STOCKHOLDERS' EQUITY          
           
Current Liabilities          
   Accounts payable  $13,505   $13,261 
Accrued expenses and other payables   80,746    66,975 
Advance for sale of common stock   —      675,235 
Loan payable-shareholder   134,517    129,874 
Total Current Liabilities   228,768    885,345 
           
Stockholders' Equity          
Common stock, $0.001 par value, 375,000,000 shares authorized, 57,511,771 and 56,610,271 shares issued and outstanding at September 30, 2017 and June 30, 2017, respectively   57,512    56,610 
Additional paid-in capital   5,082,761    2,965,138 
Accumulated comprehensive income   222,255    57,692 
Deficit   (2,929,343)   (2,520,806)
Total Stockholders' Equity   2,433,185    558,634 
           
Total Liabilities and Stockholders' Equity  $2,661,953   $1,443,979 

 

See accompanying notes to the unaudited consolidated financial statements

 

 -2-

DATASEA INC.

CONSOLIDATED STATEMENTS OF OPERATION AND COMPREHENSIVE LOSS

(UNAUDITED)

 

   Three Months Ended
   September 30, 2017  September 30, 2016
       
Revenues  $8,994   $—   
Cost of goods sold   21    —   
Gross profit   8,973    —   
           
Operating expenses:          
Selling expenses   34,379    44,718 
General and administrative expenses   407,112    225,176 
Total operating expenses:   441,491    269,894 
           
Loss from operations   (432,518)   (269,894)
           
Other income :          
   Other (expense)income, net   23,981    (3,028)
Interest income   —      (32)
Total other income(expense)   23,981    (3,060)
           
Net loss   (408,537)   (266,834)
           
Other comprehensive loss          
Foreign currency translation adjustment   164,563    38,932 
Total comprehensive loss  $(243,974)  $(227,902)
           
Net loss per share          
Basic and diluted  $(0.01)  $(0.00)
           
Weighted average shares outstanding          
Basic and diluted   57,027,005    54,823,551 

 

See accompanying notes to the unaudited consolidated financial statements

 

 -3-

DATASEA INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

(UNAUDITED)

 

   Three Months Ended
   September 30, 2017  September 30, 2016
       
Cash flows from operating activities:          
    Net loss  $(408,537)  $(266,834)
Adjustments to reconcile net loss to net cash used in operating activities:          
    Depreciation and amortization   7,084    6,341 
Changes in current assets and current liabilities:          
    Accounts receivable   225      
    Inventory   —      (608)
Prepaid expenses and other current assets   (70,155)   28,486 
Accounts payable   —      (12,663)
Accrued expenses and other payables   12,521    76 
Net cash used in operating activities   (458,861)   (245,202)
           
Cash flows from investing activities:          
    Acquisition of office equipment and intangible assets   (4,753)   (1,795)
           
Net cash used in investing activities   (4,753)   (1,795)
           
Cash flows from financing activities:          
Proceeds(payment) of related party, net   2,249    (92,259)
Net proceeds from sale of common stock   1,432,550    420,900 
Net cash provided by financing activities   1,434,799    328,641 
           
Effect of exchange rate changes on cash   174,075    (80)
           
Net increase in cash   1,145,260    81,564 
           
Cash – beginning of period   1,174,950    11,802 
           
Cash – ending of period  $2,320,210   $93,366 
           
Supplemental disclosures of cash flow information:          
Cash paid for interest  $—     $—   
Cash paid for income tax  $—     $—   

 

See accompanying notes to the unaudited consolidated financial statements

 

 -4-

DATASEA INC.

Notes to Condensed Consolidated Financial Statements (Unaudited)

 

NOTE 1 – ORGANIZATION AND DESCRIPTION OF BUSINESS

 

Datasea Inc. (the “Company”) was incorporated in the State of Nevada on September 26, 2014 under the name Rose Rock Inc. and changed its name to Datasea Inc. on May 27, 2015 by amending its articles of incorporation.

 

On May 26, 2015, the Company’s founder, Xingzhong Sun, sold 20,000,000 shares of common stock of the Company (the “Common Stock”) to Zhixin Liu, one of the owners of Shuhai Skill (HK) as defined below. On October 27, 2016, Mr. Sun sold his remaining 5,000,000 shares of Common Stock of the Company to Ms. Liu.

 

On October 29, 2015, the Company entered into a share exchange agreement (the “Exchange Agreement”) with the members (“Members”) of Shuhai Information Skill (HK) Limited (“Shuhai Skill (HK)”), a limited liability company incorporated on May 15, 2015 under the laws of the Hong Kong Special Administrative Region of the People’s Republic of China (the “PRC”). Pursuant to the terms of the Exchange Agreement, the Members, who together own 100% of the ownership rights in Shuhai Skill (HK), transferred all of their membership interests of Shuhai Skill (HK) to the Company in exchange for the issuance of an aggregate of 20,000,000 shares of Common Stock, thereby causing Shuhai Skill (HK) and its consolidated subsidiaries , Tianjin Information Sea Information Technology Co., Ltd. (“Tianjin Information”), a limited liability company incorporated under the laws of the PRC, , to become wholly-owned subsidiary  of the Company, and Shuhai Information Technology Co., Ltd., also a limited liability company incorporated under the laws of the PRC (“Shuhai Beijing”), to become a variable interest entity (“VIE”) of the Company through a series of contractual agreements between Shuhai Beijing and Tianjin Information. The transaction was accounted for as a reverse merger, with Shuhai Skill (HK) and its subsidiaries being the accounting acquirer. Accordingly, the historical financial statements presented are those of Shuhai Skill (HK) and its consolidated subsidiaries. 

 

Following the Share Exchange, the Shareholders, being Zhixin Liu and her father, Fu Liu, owned approximately 85.45% of the outstanding shares of Common Stock. As of October 29, 2015, there were 55,000,000 shares of Common Stock issued and outstanding, 45,000,000 of which were beneficially owned by Zhixin Liu and Fu Liu.

 

After the Share Exchange, the Company, through its consolidated subsidiaries is engaged in the business of providing Internet security products, new media advertising, micro-marketing, and data analysis services in the PRC.

 

NOTE 2 – GOING CONCERN

 

The accompanying unaudited condensed consolidated financial statements have been prepared assuming that the Company will continue as a going concern. As shown in the accompanying unaudited condensed consolidated financial statements, the Company has generated revenues of $8,994 during three months ended September 30, 2017, has a deficit of approximately $2,930,000 at September 30, 2017, and continues to incur significant losses since inception. These circumstances, among others, raise substantial doubt about the Company’s ability to continue as a going concern. The condensed consolidated financial statements do not include any adjustments that might result from the outcome of this uncertainty.

 

The Company’s management recognizes that the Company must generate sales and additional resources to enable it to continue to develop its operations. Based on increased demand for internet services in China, including internet security and big data integration, the Company’s management team expects healthy growth in its business. The Company’s management intends to raise additional financing through debt and/or equity financing or through other means that it deems necessary, with a view to moving forward and sustaining prolonged growth in its initial phases. However, no assurance can be given that the Company will be successful in raising additional capital or obtaining financing and ultimately achieving profitable operations to sustain the Company.

 

 -5-

DATASEA INC.

Notes to Condensed Consolidated Financial Statements (Unaudited)

 

NOTE 3 — SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

 

Basis of Presentation and Consolidation

 

The accompanying unaudited condensed consolidated financial statements include the financial statements of the Company and its 100% owned subsidiaries of Shuhai Skill (HK)”), Tianjin Information and Shuhai Beijing.  

 

The accompanying unaudited condensed consolidated financial statements have been prepared pursuant to the rules and regulations of the Securities and Exchange Commission. The information furnished herein reflects all adjustments (consisting of normal recurring accruals and adjustments and elimination of intercompany transactions upon consolidation) which are, in the opinion of management, necessary to fairly present the operating results for the respective periods. Certain information and footnote disclosures normally present in the annual consolidated financial statements prepared in accordance with accounting principles generally accepted in the United States of America have been omitted pursuant to such rules and regulations. These unaudited condensed consolidated financial statements should be read in conjunction with the audited consolidated financial statements and notes for the year ended June 30, 2017. The results of the three month periods ended September 30, 2017 are not necessarily indicative of the results to be expected for the full year ending June 30, 2018.

 

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 consolidated financial statements, the financial statements of its variable interest entity (“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 is 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. Accordingly, the results of Shuhai Beijing have been included in the accompanying unaudited condensed consolidated financial statements. 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.

 

USE OF ESTIMATES

 

The preparation of unaudited condensed consolidated financial statements in conformity with accounting principles generally accepted in the United States of America 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 period. 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 our unaudited condensed consolidated financial statements.

 

 -6-

DATASEA INC.

Notes to Condensed Consolidated Financial Statements (Unaudited)

 

NOTE 3 — SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

 

Contingencies

 

Certain conditions may exist as of the date the unaudited condensed consolidated financial statements are issued, which may result in a loss to the Company but which will only be resolved when one or more future events occur or fail to occur. The Company’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 unaudited condensed consolidated financial statements.

 

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.

 

Cash and Cash Equivalents

 

Cash and cash equivalents include cash on hand, demand deposits and short-term cash investments that are highly liquid in nature and have original maturities of three months or less. The Company has no cash equivalents as of September 30, 2017 and June 30, 2017.

Inventory

 

Inventory, comprised principally of products purchased comprised of routers used in installations, 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 no allowances for inventory as of September 30, 2017 and June 30, 2017.

 

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 

5-10 years

Office equipment 3-5 years

 

Leasehold improvements are depreciated on a straight-line method over the shorter of their estimated useful lives or remaining lease terms.

 

 -7-

DATASEA INC.

Notes to Condensed Consolidated Financial Statements (Unaudited)

 

NOTE 3 — SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

 

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 our intangible assets are subject to amortization. No impairment of intangible assets has been identified as of the balance sheet dates.

Intangible assets include licenses and certificates and are amortized over their useful life of five years.

FAIR VALUE MEASUREMENTS AND DISCLOSURES

 

FASB ASC Topic 820, “Fair Value Measurements,” defines fair value, and establishes a three-level valuation hierarchy for disclosures of fair value measurement that enhances disclosure requirements for fair value 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 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 fair value measurement.

 

The carrying value of cash, accounts receivable, inventory, prepaid expenses and other current assets, accounts payable, accrued expenses and other payables, advances for sale of common stock and loan payable-shareholder, are carried at costs, which approximate their fair values due to their short maturities.   

 

As of September 30, 2017, the Company did not identify any assets and liabilities that are required to be presented on the balance sheet at fair value 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, plant 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 industrial 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 to be generated by the assets.

 

If such assets are considered to be impaired, the impairment to be recognized is measured as the amount by which the carrying amount of the asset exceeds its fair value. Assets to be disposed of are reported at the lower of the carrying amount or fair value less cost to sell. During the reporting periods there was no impairment loss recognized on long-lived assets.

 

 -8-

DATASEA INC.

Notes to Condensed Consolidated Financial Statements (Unaudited)

 

NOTE 3 — SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

 

Revenue Recognition

 

The Company recognizes revenues from professional services contracts. Customers are billed, according to individual agreements. Revenues from professional services are recognized on a completed-contract basis, in accordance with ASC Topic 605-35, “Construction-Type and Production-Type Contracts.” Under the completed-contract basis, contract costs are recorded to projects in process and billings and/or cash received are recorded to a deferred revenue liability account during the periods of construction. Costs include direct material, direct labor and subcontract labor. All revenues, costs, and profits are recognized in operations upon completion of the contract. A contract is considered completed when all costs except insignificant items have been incurred and final acceptance has been received from the customer. Corporate general and administrative expenses are charged to the periods as incurred. However, in the event a loss on a contract is foreseen, the Company will recognize the loss as incurred. For uncompleted contracts, the deferred asset (accumulated contract costs) in excess of the deferred liability (billings and/or cash received) is classified under current assets as costs in excess of billings on uncompleted contracts. The deferred liability (billings and/or cash received) in excess of the deferred asset (accumulated contract costs) is classified under current liabilities as billings in excess of costs on uncompleted contracts. Contract retentions are included in accounts receivable.

 

During the three months ended September 30, 2017, one customer accounted for 100% of the Company’s total sales.

 

INCOME TAXES

 

The Company uses the asset and liability method of accounting for income taxes in accordance with 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 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.

 

ASC Topic 740.10.30 clarifies the accounting for uncertainty in income taxes recognized in an enterprise’s financial statements and prescribes a recognition threshold and measurement attribute for the financial statement recognition and measurement of a tax position taken or expected to be taken in a tax return. ASC Topic 740.10.40 provides guidance on derecognition, classification, interest and penalties, accounting in interim periods, disclosure, and transition. The Company has no material uncertain tax positions for any of the reporting periods presented.

 

CONCENTRATION OF CREDIT RISK 

 

The Company maintains cash in accounts with state-owned banks within the PRC. Cash in state-owned banks is not covered by insurance. Should any of these institutions 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.

 

 -9-

DATASEA INC.

Notes to Condensed Consolidated Financial Statements (Unaudited)

 

NOTE 3 — SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

 

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 USD. The accounts of the Chinese entities were translated into USD in accordance with 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 in accordance with ASC Topic 220, “Comprehensive Income.” Gains and losses resulting from the 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 paid-in capital and distributions to stockholders.

 

RECENT ACCOUNTING PRONOUNCEMENTS

 

In February 2016, the FASB issued ASU 2016-02 Amendments to the ASC 842 Leases. This update requires a lessee to recognize the assets and liability (the lease liability) arising from operating leases on the balance sheet for the lease term. When measuring assets and liabilities arising from a lease, a lessee (and a lessor) should include payments to be made in optional periods only if the lessee is reasonably certain to exercise an option to extend the lease or not to exercise an option to terminate the lease. Within a twelve months or less lease term, a lessee is permitted to make an accounting policy election not to recognize lease assets and liabilities. If a lessee makes this election, it should recognize lease expense on a straight-line basis over the lease term. In transition, this update will be effective for public entities for fiscal years beginning after December 15, 2018, including interim periods within those fiscal years. The Company does not currently expect the adoption of ASU 2016-02 to have a material impact on the Company’s condensed consolidated financial statements unless it enters into a new long-term lease.

 

In April 2016, the FASB issued ASU 2016-10, Revenue from Contracts with Customers (ASC 606): Identifying Performance Obligations and Licensing. The objective is to clarify the two aspects of Topic 606: identifying performance obligations and the licensing implementation guidance, while retaining the related principles for these areas. The ASU affects the guidance in ASU 2014-09, Revenue from Contracts with Customers (ASC 606), which is not yet effective. The effective date and transition requirements for this ASU are the same as the effective date and transition requirements in ASC 606 (and any other Topic amended by ASU 2014-09). ASU 2015-14, Revenue from Contracts with Customers (ASC 606): Deferral of the Effective Date, defers the effective date of ASU 2014-09 by one year. The Company does not expect the adoption of ASU 2016-10 to have a material impact on the Company’s condensed consolidated financial statements.

 

 -10-

DATASEA INC.

Notes to Condensed Consolidated Financial Statements (Unaudited)

 

NOTE 3 — SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

 

In May 2016, the FASB issued ASU 2016-12, Revenue from Contracts with Customers (ASC 606): Narrow-Scope Improvements and Practical Expedients. The objective is to address certain issues identified by the FASB-IASB Joint Transition Resource Group for Revenue Recognition. The amendments in this Update affect the guidance in Accounting Standards Update 2014-09, Revenue from Contracts with Customers (ASC 606), which is not yet effective. The effective date and transition requirements for the amendments in this Update are the same as the effective date and transition requirements for ASC 606 (and any other Topic amended by Update 2014-09). Accounting Standards Update 2015-14, Revenue from Contracts with Customers (ASC 606): Deferral of the Effective Date, defers the effective date of Update 2014-09 by one year. The Company does not expect the adoption of ASU 2016-12 to have a material impact on the Company’s condensed consolidated financial statements

 

In November 2016, the FASB issued ASU 2016-18, Restricted Cash. The amendments in this update address diversity in practice that exists in the classification and presentation of changes in restricted cash and require that a statement of cash flows explain the change during the period in the total of cash, cash equivalents, and amounts generally described as restricted cash or restricted cash equivalents. ASU 2016-18 is effective for the Company beginning January 1, 2018 and is required to be applied using a retrospective transition method to each period presented. The Company does not expect the adoption of the amendment in this ASU to have a significant impact on the Company's condensed consolidated financial statements.

 

In January 2017, the FASB issued ASU 2017-01, Clarifying the Definition of a Business, which clarifies the definition of a business with the objective of adding guidance to assist entities with evaluating whether transactions should be accounted for as acquisitions (or disposals) of assets or businesses. The Company does not expect the adoption of the amendment in this ASU to have a significant impact on the Company's condensed consolidated financial statements.

 

In February 2017, the FASB issued ASU 2017-05, Clarifying the Scope of Asset Derecognition Guidance and Accounting for Partial Sales of Nonfinancial Assets, which defines the term "in-substance nonfinancial asset" and clarifies the scope and accounting of a financial asset that meets the definition. ASU 2017-05 also provides guidance for partial sales of nonfinancial assets. The Company does not expect the adoption of the amendment in this ASU to have a significant impact on the Company's condensed consolidated financial statements.

 

Management does not believe that any recently issued, but not yet effective, accounting standards, if currently adopted, would have a material effect on the accompanying unaudited condensed consolidated financial statements.

 

Note 4 – PROPERTY AND EQUIPMENT

 

Property and equipment are summarized as follows:

   September 30, 2017  June 30, 2017
Office furniture and fixtures  $59,131   $58,064 
Office equipment   45,754    40,248 
    Subtotal   104,885    98,312 
Less: Accumulated depreciation   46,429    39,026 
   Total  $58,456   $59,286 

 

Depreciation expense for the three months ended September 30, 2017 and 2016 were $6,669 and $6,005 respectively.

 

 -11-

DATASEA INC.

Notes to Condensed Consolidated Financial Statements (Unaudited)

 

NOTE 5 –intangible assets

 

Intangible assets are summarized as follows:

   September 30, 2017  June 30, 2017
Software registration right  $4,591    4,508 
Value-added telecommunications business license   12,050    11,833 
    Subtotal   16,641    16,341 
Less: Accumulated depreciation   3,020    2,558 
   Total  $13,621    13,783 

 

Amortization expense for the three months ended September 30, 2017 and 2016 were $415 and $336, respectively.

 

Note 6 – Prepaid expenses and other current assets

 

Prepaid expenses and other current assets consisted of the following

   September 30, 2017  June 30, 2017
Security deposit  $55,538   $54,830 
Prepaid expenses and advances   102,866    32,471 
Others   8,099    7,138 
Total  $166,503   $94,439 

 

Note 7 – accrued expenses and other payables

 

Accrued expenses and other payable consisted of the following:

   September 30, 2017  June 30, 2017
Deposit  $31,017   $30,515 
Salary payable and other payable   48,061    36,460 
Advances from customers   1,668    —   
Total  $80,746   $66,975 

 

Note 8 – related party transactions

 

The Company’s President, Zhixin Liu, paid certain operating expenses on behalf of the Company. As of September 30, 2017 and June 30, 2017, the amounts due to the President were $134,517 and $129,874, respectively. These amounts are interest-free, unsecured and due on demand. The Company has not received any demand for payments.

 

On January 1, 2016, the Company’s President entered into a car rental agreement with the Company. Pursuant to the agreement, the Company rents a car from the Company’s President for a monthly rent of approximately $751. The agreement expired on December 31, 2016. The agreement was renewed and the term was extended to December 31, 2018.

 

The rent paid under this agreement was $2,253 and $2,250 for the three months ended September 30, 2017 and 2016 respectively.

 

 -12-

DATASEA INC.

Notes to Condensed Consolidated Financial Statements (Unaudited)

 

Note 9 – income taxes

 

The Company was incorporated in the United States of America, is subject to U.S. tax and plans to file U.S. federal income tax returns. The Company conducts all of its businesses through its subsidiaries and affiliated entities principally in the PRC. No provision for US federal income tax was made for the three months ended September 30, 2017 and 2016 as the US entity incurred losses.

 

The Company’s offshore subsidiary, Shuhai Skill (HK), did not earn any income that was derived in Hong Kong for the three months ended September 30, 2017 and 2016, and therefore did not incur any Hong Kong Profits tax.

 

Under the Corporate Income Tax Law of the PRC, the corporate income tax rate is 25%.

 

The reconciliation of income tax expense (benefit) at the U.S. statutory rate of 34% to the Company’s effective tax is as follows:

 

   Three Months ended
September 30, 2017
  Three Months ended
September 30, 2016
U.S. Statutory rate of 34%  $(61,281)  $(40,026)
Tax rate difference between China and U.S.   (40,854)   (26,684)
Change in valuation allowance   102,135    66,709 
Effective income rate  $—     $—   

 

The provisions for income taxes are summarized as follows:

 

   Three Months ended September 30, 2017  Three Months ended September 30, 2016
Current  $—     $—   
Deferred   102,135    66,709 
Change in valuation allowance   (102,135)   (66,709)
Total  $—     $—   

 

The valuation allowance increased by $102,135 and $66,709 for the three months ended September 30, 2017 and 2016, respectively.

 

The Company’s net deferred tax asset as of September 30, 2017 and June 30, 2017 is as follows:

 

   September 30, 2017  June 30, 2017
Deferred tax asset  $687,194   $585,059 
Valuation allowance   (687,194)   (585,059)
Net deferred tax asset  $—     $—   

 

 -13-

NOTE 10 – SHAREHOLDERS’ EQUITY

 

During the three months ended, the Company sold to investors 901,500 shares of common stock at $2.35 per share and received proceeds of $2,118,525.

 

NOTE 11 – CommitMents

 

Lease Agreement

 

In December 2016, the Company renewed the one-year operating lease agreement. The lease will expire on February 28, 2018 and has a monthly rent of RMB 35,192 (or approximately $5,276). Future rental payment due under the lease is RMB 281,536 (or approximately $42,204).

 

Rent expense for the three months ended September 30, 2017 and 2016 was $15,828 and $12,777, respectively.

 

In December 2016, the Company renewed the one-year property management contract. The Contract will expire on February 28, 2018 and has a monthly management fee of RMB 70,384 (or approximately $10,551). Future management fee due under the contract is RMB563, 072(or approximately $84,408).

 

NOTE 12 – SUBSEQUENT EVENTS 

 

The Company has reviewed its subsequent events through November 13, 2017, the date these financial statements were issued and has determined that no material subsequent events have occurred that require recognition in or disclosure to the financial statements. 

 

 -14-

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

Forward-Looking Statements

 

This report contains forward-looking statements within the meaning of Section 27A of the Securities Act and Section 21E of the Exchange Act. All statements other than statements of historical fact are “forward-looking statements” for purposes of federal and state securities laws, including, but not limited to, any projections of earnings, revenue or other financial items; any statements of the plans, strategies and objectives of management for future operations; any statements concerning proposed new services or developments; any statements regarding future economic conditions of performance; and statements of belief; and any statements of assumptions underlying any of the foregoing. Such forward-looking statements involve known and unknown risks, uncertainties and other factors that may cause our actual results, performance or achievements to be materially different from any future results, performance or achievements expressed or implied by such forward-looking statements.

 

In some cases, you can identify forward looking statements by terms such as “may,” “intend,” “might,” “will,” “should,” “could,” “would,” “expect,” “believe,” “anticipate,” “estimate,” “predict,” “potential,” or the negative of these terms. These terms and similar expressions are intended to identify forward-looking statements. The forward-looking statements in this report are based upon management’s current expectations and belief, which management believes are reasonable. However, we cannot assess the impact of each factor on our business or the extent to which any factor or combination of factors, or factors we are aware of, may cause actual results to differ materially from those contained in any forward-looking statements. You are cautioned not to place undue reliance on any forward-looking statements. These statements represent our estimates and assumptions only as of the date of this report. Except to the extent required by federal securities laws, we undertake no obligation to update any forward-looking statement to reflect events or circumstances after the date hereof or to reflect the occurrence of unanticipated events.

 

You should be aware that our actual results could differ materially from those contained in the forward-looking statements due to a number of factors, including:

 

·uncertainties relating to our ability to establish and operate our business in China;
·uncertainties relating to general economic and business conditions;
·industry trends; changes in demand for our products and services;
·uncertainties relating to customer plans and commitments and the timing of orders received from customers;
·announcements or changes in our pricing policies or that of our competitors;
·unanticipated delays in the development, market acceptance or installation of our products and services;
·changes in Chinese government regulations;
·availability, terms and deployment of capital; relationships with third-party equipment suppliers; and
·political stability and economic growth in China.

 

Overview and Recent Developments

 

The Company was incorporated in the State of Nevada on September 26, 2014 under the name Rose Rock Inc. and changed its name to the current name on May 27, 2015 by amending its articles of incorporation.

 

 -15-

On October 29, 2015, the Company entered into Exchange Agreement with the members of Shuhai Skill (HK). Pursuant to the terms of the Exchange Agreement, the members, who together owned 100% of the ordinary shares of Shuhai Skill (HK), transferred all of membership interests of Shuhai Skill (HK) to the Company in exchange for the issuance of an aggregate of 20,000,000 shares of the our common stock, thereby causing Shuhai Skill (HK) and its consolidated subsidiaries, Tianjin Information, to become wholly-owned subsidiary of the Company, and Shuhai Beijing to become the VIE of the Company through a series of contractual relationships between Shuhai Beijing and Tianjin Information. The transaction was accounted for as a reverse merger, with Shuhai Skill (HK) and its consolidated subsidiaries being the accounting acquirer. Accordingly, the historical financial statements presented are those of Shuhai Skill (HK) and its consolidated subsidiaries.

 

On October 27, 2015, the Company’s founder, Xingzhong Sun, sold all his 5,000,000 shares of common stock of the Company to Zhixin Liu. Following the transaction, Zhixin Liu and her father, Fu Liu, beneficially owned approximately 85.45% of the outstanding shares of our common stock. As of October 29, 2015, there were 55,000,000 (post-split) shares of common stock issued and outstanding, 45,000,000 of which were owned by Zhixin Liu and Fu Liu.

 

On November 12, 2015, the Company effected a five-for-one forward split (the “Forward Split”) of the common stock, pursuant to which each shareholder of the Company was issued five shares of common stock in exchange for each share of their then-issued common stock. In conjunction with the Forward Split, the Company’s authorized shares of common stock increased from 75,000,000 shares to 375,000,000 shares. Immediately following the Forward Split, the Company had a total of 55,000,000 issued and outstanding shares of common stock. All shares and per share amounts in this quarterly report on Form 10-Q have been retroactively adjusted to give effect to this stock split.

 

Following the reverse merger, the Company, through its consolidated subsidiaries, is in the business of providing Internet security products, new media advertising, micro-marketing, and data analysis services in the PRC.

 

The Company started to sell its products during the calendar year 2016. In January 2016, the Company secured a government procurement contract with the Bureau of Public Security of Daqing City in Heilongjiang Province, China. Pursuant to the contract, the Company will install wireless internet terminal collection equipment and 3G wireless network cards, as well as provide training services related to the use of the equipment for a total contract price of RMB1,050,000 (approximately US$154,000).  The project was accepted by the customer in the quarter ended December 31, 2016.The Company recognized $8,994 of revenue from the service rendered to the Daqing project during three months ended September 30, 2017.

 

The Company believes that the increased demand for security equipment and related services in China, presents a great opportunity for the Company to establish and grow its business in the next twelve months.

 

Since year 2017, the Company focused on the development of its “Safe Campus” program that uses its Xin Platform to provide teachers, students and families with comprehensive campus information, student safety management and integrated education information. Until now, the Company has signed agreements with 30 schools in ten provinces covering approximately 3,000 students, to use our “Safe Campus” program. We have begun to implement our system as well as to further introduce this program to more schools. With the increase in user base, we hope to generate revenue from sales of advertisements in our program.

 

 -16-

Results of Operations

 

Three Months Ended September 30, 2017 and 2016

 

Revenue

 

The Company recognized $8,994 of revenue from the service rendered to the Daqing project during three months ended September 30, 2017. As of the date of report, the Company has not executed any procurement contracts. The Company has suspended its marketing efforts on the cybersecurity program in order to focus its resources on the “Safe Campus” and “Smart Elevator” programs. As such, until the Company decides to resume its marketing efforts for the cyber security program, it is unlikely for the Company to secure additional government procurement contracts or generate additional revenues under this program.

 

Cost of Goods and Gross Loss

 

The Company recorded $21 and $0 of cost of goods sold and had gross profit of $8,973 and $0 for the three months ended September 30, 2017 and 2016, respectively. 

 

Selling, General and Administrative Expenses:

 

Selling expenses were $34,379 and $44,178 for the three months ended September 30, 2017 and 2016, respectively. The decrease was primarily due to decrease in salaries since the Company hired additional employees to complete work under the procurement agreement with Bureau of Public Security of Daqing City during three months ended September 30, 2016.

 

For the three months ended September 30, 2017, we had general and administrative expenses of $407,112, as compared to $225,176 for the three months ended September 30, 2016, an increase of approximately $181,936 or 80.8%. The increase was primarily due to increase in professional fees related to the Company’s proposed uplisting to a national exchange and other expense related to seminars held by the Company to obtain additional financial resources to develop its business.

 

Liquidity and Capital Resources

 

We have funded our operations to date primarily through the sale of equity securities, shareholder loans and capital contributions. Based on our current cash level and management’s forecast of operating cash flows, management has determined that the Company will require additional funds to finance our planned operations for the next twelve months.

 

Due to our negative cash flow from operating activities since inception, there is substantial doubt about the Company’s ability to continue as a going concern. The Company’s management recognizes that the Company must generate sales and obtain additional financial resources to continue to develop its operations. Based on increased demand for internet services in China, including internet security and big data integration, the Company expects to generate revenue during 2018, which will be used to fund its operations. In addition, the Company intends to raise additional funds through debt and/or equity financing or through other means that it deems necessary. However, there can be no assurance that financing will be available in amounts or terms acceptable to the Company, if at all. 

 

As of September 30, 2017, we had a working capital of $2,361,108. Our current assets on September 30, 2017 were $2,589,876 primarily consisting of cash of $2,320,210, inventory of $103,163 and prepaid expenses of $166,503. Our current liabilities were primarily composed of accounts payable of $13,505, accrued expenses and other payables of $80,746 and loans payable to a shareholder of $134,517. 

 

 -17-

As of June 30, 2017, we had a working capital of $485,565. Our current assets on June 30, 2017 were $1,370,910, primarily consisting of cash of $1,174,950, inventory of $101,300 and prepaid expenses of $94,439. Our current liabilities were primarily composed of accounts payable of $13,261, accrued expenses and other payables of $66,975, advances for sale of common stock of $675,235 and loans payable to a shareholder of $129,874. 

 

Cash Flow from Operating Activities

 

Net cash used in operating activities was $458,861 during the three months ended September 30, 2017, which consisted of our net loss of $408,537, offset by depreciation and amortization of $7,084, a change of accounts receivable of $225, a change of prepaid expenses and other current assets of $70,155, and a change of accrued expenses and other payables of $12,521.

 

Net cash used in operating activities was $245,202 during the three months ended September 30, 2016, which primarily consisted of our net loss of $266,834, offset by a noncash adjustment of $6,341, a change in prepaid expenses and other current assets of $28,486, and accounts payable of $12,663. 

 

Cash Flow from Investing Activities

 

Net cash used in investing activities totaled $4,753 for the three months ended September 30, 2017, which primarily related to cash paid for the acquisition of intangible assets and office equipment.

 

Net cash used in investing activities totaled $1,795 for the three months ended September 30, 2016, which primarily used for the acquisition of office equipment. 

 

Cash Flow from Financing Activities 

 

Net cash provided by financing activities was $1,434,799 during the three months ended September 30, 2017, which primarily consisted of proceeds of related party loans of $2,249, the proceeds from sales of the Company’s common stock of $2,118,525 and offset by advance for sale of common stock of $685,975 given in the previous period.

 

Net cash provided by financing activities was $328,641 during the three months ended September 30, 2016, which primarily consisted of payment to related party of $92,259 and the proceeds from sales of the Company’s common stock of $420,900.

 

Off-Balance Sheet Arrangements

 

There are no off-balance sheet arrangements that have or are reasonably likely to have a current or future effect on our financial condition, changes in financial condition, revenues, expenses, results of operations, liquidity, capital expenditures or capital resources.

 

Inflation

 

We do not believe our business and operations have been materially affected by inflation. 

 

 -18-

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

This item is not applicable as we are currently considered a smaller reporting company.

 

ITEM 4. CONTROLS AND PROCEDURES

 

Disclosure Controls and Procedures

 

As required by Rule 13a-15 of the Securities Exchange Act of 1934, our principal executive officer and principal financial officer evaluated our disclosure controls and procedures (as defined in Rules 13a-15(e) or 15d-15(e) of the Securities Exchange Act of 1934, as amended) as of the end of the period covered by this report. Based on this evaluation, our principal executive officer and principal financial officer concluded that as of the end of the period covered by this report, these disclosure controls and procedures were not effective to ensure that the information required to be disclosed by the Company in the reports it files or submits under the Securities Exchange Act of 1934 is recorded, processed, summarized and reported within the time periods specified in the rules and forms of the SEC and to ensure that such information is accumulated and communicated to our company’s management, including our principal executive officer and principal financial officer, to allow timely decisions regarding required disclosure. The conclusion that our disclosure controls and procedures were not effective was due to the presence of the following material weaknesses in internal control over financial reporting which are indicative of many small companies with a small staff: (i) inadequate segregation of duties and effective risk assessment; (ii) lack of personnel adequately trained in U.S. GAAP; and (iii) insufficient written policies and procedures for accounting and financial reporting with respect to the requirements and application of both U.S. GAAP and SEC guidelines. Management anticipates that such disclosure controls and procedures will not be effective until the above material weaknesses are remediated.

 

We plan to take steps to enhance and improve the design of our internal controls over financial reporting. During the period covered by this report, we have not been able to remediate the material weaknesses identified above. We expect to implement the following measures in the fiscal year ending June 30, 2018 to remediate the material weaknesses identified, subject to obtaining additional financing: (i) appoint additional qualified personnel to address inadequate segregation of duties and ineffective risk management; and (ii) adopt sufficient written policies and procedures for accounting and financial reporting. The remediation efforts set out above are largely dependent upon our securing additional financing to cover the costs of implementing the changes required. If we are unsuccessful in securing such funds, remediation efforts may be adversely affected in a material manner.

 

Because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues, if any, within our company have been detected. These inherent limitations include the realities that judgments in decision-making can be faulty and that breakdowns can occur because of simple error or mistake.

 

Changes in Internal Control over Financial Reporting

 

There were no changes in our internal control over financial reporting during the quarter ended September 30, 2017 that have materially affected or are reasonably likely to materially affect, our internal control over financial reporting.

 

 -19-

PART II OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

 

The Company is not a party to any pending legal proceedings and no such proceedings are known to be contemplated.

No director, officer or affiliate of the issuer, and no owner of record or beneficiary of more than five percent of the securities of the issuer, or any security holder is a party adverse to the small business issuer or has a material interest adverse to the small business issuer.

ITEM 1A. RISK FACTORS

A smaller reporting company is not required to provide the information required by this item.

ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES

On July 14, 2017, we conducted the closing of a private placement transaction pursuant to certain subscription agreements with a total of 53 investors, all of whom are non-U.S. persons (as defined in Regulation S (“Regulation S”) promulgated under the Securities Act of 1933, as amended (the “Securities Act”)). The investors are all individuals residing in the People’s Republic of China. Pursuant to such agreements, we have issued and sold to the investors, and the investors have purchased from the Company, an aggregate of 286,000 shares of common stock, par value $0.001 per share, of the Company, for a purchase price of $2.35 per share, for total cash proceeds of $672,100. Pursuant to such agreements, we have no obligation to register these shares for resale under the Securities Act.

 

On August 21, 2017, we conducted the closing of a private placement transaction pursuant to certain subscription agreements with a total of 50 investors, all of whom are non-U.S. persons (as defined in Regulation S promulgated under the Securities Act). The investors are all individuals residing in the People’s Republic of China. Pursuant to such agreements, we have issued and sold to the investors, and the investors have purchased from the Company, an aggregate of 355,500 shares of common stock, par value $0.001 per share, of the Company, for a purchase price of $2.35 per share, for total cash proceeds of $835,425. Pursuant to such agreements, we have no obligation to register these shares for resale under the Securities Act.

 

On September 21, 2017, we conducted the closing of a private placement transaction pursuant to certain subscription agreements with a total of 44 investors, all of whom are non-U.S. persons (as defined in Regulation S promulgated under the Securities Act). The Investors are all individuals residing in the People’s Republic of China. Pursuant to such agreements, we have issued and sold to the investors, and the investors have purchased from the Company, an aggregate of 260,000 shares of common stock, par value $0.001 per share, of the Company, for a purchase price of $2.35 per share, for total cash proceeds of $611,000. Pursuant to such agreements, we have no obligation to register these shares for resale under the Securities Act.

 

All shares described above were offered and sold in reliance upon Regulation S of the Securities Act and are exempt from the registration requirements of the Securities Act. These shares have not been registered under the Securities Act or any other applicable securities laws and, unless so registered, may not be offered or sold in the United States except pursuant to an exemption from the registration requirements of the Securities Act. All these investors have acknowledged that these shares issued have not been registered under the Securities Act.

 

ITEM 3. DEFAULTS UPON SENIOR SECURITIES

 

Not applicable.

 

ITEM 4. MINE SAFETY DISCLOSURES.

 

Not applicable.

 

ITEM 5. OTHER INFORMATION

 

None.

 

 -20-

ITEM 6.  EXHIBITS.

 

Exhibit   Description
31.1*   Certification by Chief Executive Officer and Chief Financial Officer pursuant to Sarbanes Oxley Section 302
32.1**   Certification by Chief Executive Officer and Chief Financial Officer pursuant to 18 U.S.C. Section 1350
101.INS *   XBRL Instance Document
101.SCH *   XBRL Taxonomy Extension Schema Document
101.CAL *   XBRL Taxonomy Extension Calculation Linkbase Document
101.DEF *   XBRL Taxonomy Extension Definition Linkbase Document
101.LAB *   XBRL Taxonomy Extension Label Linkbase Document XBRL
101.PRE *   XBRL Taxonomy Extension Presentation Linkbase Document

 

* Filed herewith.
** Furnished herewith.

 

 -21-

SIGNATURES

 

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

 

  DATASEA INC.
     
Date: November 14, 2017 By: /s/ Zhixin Liu
  Name:  Zhixin Liu
  Title:  Chief Executive Officer (principal executive officer) and Interim Chief Financial Officer (principal accounting and financial officer)

 

 -22-

EX-31.1 2 dtss-20170930_10qex31z1.htm EXHIBIT 31.1

Exhibit 31.1

 

CERTIFICATION OF CHIEF EXECUTIVE OFFICER

AND CHIEF FINANCIAL OFFICER

PURSUANT TO SECTION 302 OF THE

SARBANES-OXLEY ACT OF 2002

 

I, Zhixin Liu, certify that:

 

1. I have reviewed this Quarterly Report on Form 10-Q of Datasea Inc.;

 

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

 

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

 

4. I am responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a–15(e) and 15d–15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a–15(f) and 15d–15(f)) for the registrant and have:

 

(a)       Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under my supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to me by others within those entities, particularly during the period in which this report is being prepared;

 

(b)       Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under my supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

 

(c)       Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report my conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

 

(d)       Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's last fiscal quarter that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and

 

5. I have disclosed, based on my most recent evaluation of internal control over financial reporting, to the registrant's auditors and the registrant's board of directors:

 

(a)       All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and

 

(b)       Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.

 

 

Dated: November 14, 2017 By: /s/ Zhixin Liu
    Zhixin Liu
    President, Chief Executive Officer and Interim Chief Financial Officer (principal executive officer and principal financial and accounting officer)
     

  

EX-32.1 3 dtss-20170930_10qex32z1.htm EXHIBIT 32.1

Exhibit 32.1

CERTIFICATION PURSUANT TO

18 U.S.C. SECTION 1350

AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

 

In connection with the Quarterly Report of Datasea Inc. (the “Company”) on Form 10-Q for the quarter ended September 30, 2017, as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Zhixin Liu, Chief Executive Officer and Interim Chief Financial Officer of the Company, certify, pursuant to 18 U.S.C. ss.1350, as adopted pursuant to ss.906 of the Sarbanes-Oxley Act of 2002, that:

 

1.       The Report fully complies with the requirements of Sections 13(a) or 15(d) of the Securities Exchange Act of 1934; and

 

2.       The information contained in the report fairly presents, in all material respects, the financial condition and results of operations of the Company.

 

Dated: November 14, 2017 By: /s/ Zhixin Liu
    Zhixin Liu
    Chief Executive Officer and Interim Chief Financial Officer (principal executive officer and principal financial and accounting officer)

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Document and Entity Information - shares
3 Months Ended
Sep. 30, 2017
Nov. 13, 2017
Document And Entity Information    
Entity Registrant Name DATASEA INC.  
Entity Central Index Key 0001631282  
Document Type 10-Q  
Document Period End Date Sep. 30, 2017  
Amendment Flag false  
Current Fiscal Year End Date --06-30  
Is Entity a Well-known Seasoned Issuer? No  
Is Entity a Voluntary Filer? No  
Is Entity's Reporting Status Current? Yes  
Entity Filer Category Smaller Reporting Company  
Entity Common Stock, Shares Outstanding   57,251,771
Document Fiscal Period Focus Q1  
Document Fiscal Year Focus 2017  
XML 11 R2.htm IDEA: XBRL DOCUMENT v3.8.0.1
CONSOLIDATED BALANCE SHEETS (Unaudited) - USD ($)
Sep. 30, 2017
Jun. 30, 2017
Current Assets    
Cash $ 2,320,210 $ 1,174,950
Accounts receivable 221
Inventory 103,163 101,300
Prepaid expenses and other current assets 166,503 94,439
Total Current Assets 2,589,876 1,370,910
Property and equipment, net 58,456 59,286
Intangible assets, net 13,621 13,783
Total Assets 2,661,953 1,443,979
Current Liabilities    
Accounts payable 13,505 13,261
Accrued expenses and other payables 80,746 66,975
Advances for sale of common stock 675,235
Loan payable-shareholder 134,517 129,874
Total current liabilities 228,768 885,345
Stockholders' Equity    
Common stock, $0.001 par value, 375,000,000 shares authorized, 57,511,771 and 56,610,271 shares issued and outstanding at September 30, 2017 and June 30, 2017, respectively 57,512 56,610
Additional paid in capital 5,082,761 2,965,138
Accumulated other comprehensive loss 222,255 57,692
Deficit (2,929,343) (2,520,806)
Total Stockholders' Equity 2,433,185 558,634
Total Liabilities and Stockholders' Equity $ 2,661,953 $ 1,443,979
XML 12 R3.htm IDEA: XBRL DOCUMENT v3.8.0.1
CONSOLIDATED BALANCE SHEETS (Unaudited) (Parenthetical) - $ / shares
Sep. 30, 2017
Jun. 30, 2017
Consolidated Balance Sheets Parenthetical    
Common Stock, par value $ 0.001 $ 0.001
Common Stock, shares authorized 375,000,000 375,000,000
Common Stock, shares issued 57,511,771 56,610,271
Common Stock, shares outstanding 57,511,771 56,610,271
XML 13 R4.htm IDEA: XBRL DOCUMENT v3.8.0.1
CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS - USD ($)
3 Months Ended
Sep. 30, 2017
Sep. 30, 2016
Consolidated Statements Of Comprehensive Loss    
Revenue $ 8,994
Cost of Goods 21
Gross Profit 8,973
Operating expenses    
Selling expenses 34,379 44,718
General and administrative expenses 407,112 225,176
Total operating expenses 441,491 269,894
Loss from operation (432,518) (269,894)
Other income:    
Other expense(income), net 23,981 (3,028)
Interest income (32)
Total other expenses 23,981 (3,060)
Net loss (408,537) (266,834)
Other Comprehensive Loss    
Foreign currency translation 164,563 38,932
Total Comprehensive Loss $ (243,974) $ (227,902)
Net loss per share Basic and diluted $ (0.01) $ (0.00)
Weighted average shares outstanding Basic and diluted 57,027,005 54,823,551
XML 14 R5.htm IDEA: XBRL DOCUMENT v3.8.0.1
CONSOLIDATED STATEMENTS OF CASH FLOWS - USD ($)
3 Months Ended
Sep. 30, 2017
Sep. 30, 2016
Cash Flows From Operating Activities    
Net loss $ (408,537) $ (266,834)
Adjustments to reconcile net loss to net cash used in operating activities:    
Depreciation and amortization 7,084 6,341
Changes in current assets and current liabilities:    
Accounts receivable 225  
Inventory (608)
Prepaid expenses and other current assets (70,155) 28,486
Accounts payable (12,663)
Accrued expenses and other payables 12,521 76
Net Cash Used in Operating Activities (458,861) (245,202)
Cash Flows From Investing Activities    
Acquisition of office equipment and intangible assets (4,753) (1,795)
Net Cash Used in Investing Activities (4,753) (1,795)
Cash Flows From Financing Activities    
(Repayment) proceeds of related party loans, net 2,249 (92,259)
Net proceeds from sale of common stock 1,432,550 420,900
Net Cash Provided by Financing Activities 1,434,799 328,641
Effect of Exchange Rate Changes on Cash 174,075 (80)
Net Increase (decrease) in Cash 1,145,260 81,564
Cash - beginning of year 1,174,950 11,802
Cash - ending of year 2,320,210 93,366
Supplemental Disclosure of Cash Flow Information    
Cash paid for interest
Cash paid for income tax
XML 15 R6.htm IDEA: XBRL DOCUMENT v3.8.0.1
ORGANIZATION AND DESCRIPTION OF BUSINESS
3 Months Ended
Sep. 30, 2017
Organization And Description Of Business  
ORGANIZATION AND DESCRIPTION OF BUSINESS

NOTE 1 – ORGANIZATION AND DESCRIPTION OF BUSINESS

 

Datasea Inc. (the “Company”) was incorporated in the State of Nevada on September 26, 2014 under the name Rose Rock Inc. and changed its name to Datasea Inc. on May 27, 2015 by amending its articles of incorporation.

 

On May 26, 2015, the Company’s founder, Xingzhong Sun, sold 20,000,000 shares of common stock of the Company (the “Common Stock”) to Zhixin Liu, one of the owners of Shuhai Skill (HK) as defined below. On October 27, 2016, Mr. Sun sold his remaining 5,000,000 shares of Common Stock of the Company to Ms. Liu.

 

On October 29, 2015, the Company entered into a share exchange agreement (the “Exchange Agreement”) with the members (“Members”) of Shuhai Information Skill (HK) Limited (“Shuhai Skill (HK)”), a limited liability company incorporated on May 15, 2015 under the laws of the Hong Kong Special Administrative Region of the People’s Republic of China (the “PRC”). Pursuant to the terms of the Exchange Agreement, the Members, who together own 100% of the ownership rights in Shuhai Skill (HK), transferred all of their membership interests of Shuhai Skill (HK) to the Company in exchange for the issuance of an aggregate of 20,000,000 shares of Common Stock, thereby causing Shuhai Skill (HK) and its consolidated subsidiaries , Tianjin Information Sea Information Technology Co., Ltd. (“Tianjin Information”), a limited liability company incorporated under the laws of the PRC, , to become wholly-owned subsidiary  of the Company, and Shuhai Information Technology Co., Ltd., also a limited liability company incorporated under the laws of the PRC (“Shuhai Beijing”), to become a variable interest entity (“VIE”) of the Company through a series of contractual agreements between Shuhai Beijing and Tianjin Information. The transaction was accounted for as a reverse merger, with Shuhai Skill (HK) and its subsidiaries being the accounting acquirer. Accordingly, the historical financial statements presented are those of Shuhai Skill (HK) and its consolidated subsidiaries. 

 

Following the Share Exchange, the Shareholders, being Zhixin Liu and her father, Fu Liu, owned approximately 85.45% of the outstanding shares of Common Stock. As of October 29, 2015, there were 55,000,000 shares of Common Stock issued and outstanding, 45,000,000 of which were beneficially owned by Zhixin Liu and Fu Liu.

 

After the Share Exchange, the Company, through its consolidated subsidiaries is engaged in the business of providing Internet security products, new media advertising, micro-marketing, and data analysis services in the PRC.

XML 16 R7.htm IDEA: XBRL DOCUMENT v3.8.0.1
GOING CONCERN
3 Months Ended
Sep. 30, 2017
Going Concern  
GOING CONCERN

NOTE 2 – GOING CONCERN

 

The accompanying unaudited condensed consolidated financial statements have been prepared assuming that the Company will continue as a going concern. As shown in the accompanying unaudited condensed consolidated financial statements, the Company has generated revenues of $8,994 during three months ended September 30, 2017, has a deficit of approximately $2,930,000 at September 30, 2017, and continues to incur significant losses since inception. These circumstances, among others, raise substantial doubt about the Company’s ability to continue as a going concern. The condensed consolidated financial statements do not include any adjustments that might result from the outcome of this uncertainty.

 

The Company’s management recognizes that the Company must generate sales and additional resources to enable it to continue to develop its operations. Based on increased demand for internet services in China, including internet security and big data integration, the Company’s management team expects healthy growth in its business. The Company’s management intends to raise additional financing through debt and/or equity financing or through other means that it deems necessary, with a view to moving forward and sustaining prolonged growth in its initial phases. However, no assurance can be given that the Company will be successful in raising additional capital or obtaining financing and ultimately achieving profitable operations to sustain the Company.

XML 17 R8.htm IDEA: XBRL DOCUMENT v3.8.0.1
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
3 Months Ended
Sep. 30, 2017
Summary Of Significant Accounting Policies  
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

NOTE 3 — SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

 

Basis of Presentation and Consolidation

 

The accompanying unaudited condensed consolidated financial statements include the financial statements of the Company and its 100% owned subsidiaries of Shuhai Skill (HK)”), Tianjin Information and Shuhai Beijing.  

 

The accompanying unaudited condensed consolidated financial statements have been prepared pursuant to the rules and regulations of the Securities and Exchange Commission. The information furnished herein reflects all adjustments (consisting of normal recurring accruals and adjustments and elimination of intercompany transactions upon consolidation) which are, in the opinion of management, necessary to fairly present the operating results for the respective periods. Certain information and footnote disclosures normally present in the annual consolidated financial statements prepared in accordance with accounting principles generally accepted in the United States of America have been omitted pursuant to such rules and regulations. These unaudited condensed consolidated financial statements should be read in conjunction with the audited consolidated financial statements and notes for the year ended June 30, 2017. The results of the three month periods ended September 30, 2017 are not necessarily indicative of the results to be expected for the full year ending June 30, 2018.

 

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 consolidated financial statements, the financial statements of its variable interest entity (“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 is 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. Accordingly, the results of Shuhai Beijing have been included in the accompanying unaudited condensed consolidated financial statements. 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.

 

USE OF ESTIMATES

 

The preparation of unaudited condensed consolidated financial statements in conformity with accounting principles generally accepted in the United States of America 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 period. 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 our unaudited condensed consolidated financial statements.

 

Contingencies

 

Certain conditions may exist as of the date the unaudited condensed consolidated financial statements are issued, which may result in a loss to the Company but which will only be resolved when one or more future events occur or fail to occur. The Company’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 unaudited condensed consolidated financial statements.

 

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.

 

Cash and Cash Equivalents

 

Cash and cash equivalents include cash on hand, demand deposits and short-term cash investments that are highly liquid in nature and have original maturities of three months or less. The Company has no cash equivalents as of September 30, 2017 and June 30, 2017.

 

Inventory

 

Inventory, comprised principally of products purchased comprised of routers used in installations, 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 no allowances for inventory as of September 30, 2017 and June 30, 2017.

 

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  5-10 years
Office equipment 3-5 years

 

Leasehold improvements are depreciated on a straight-line method over the shorter of their estimated useful lives or remaining lease terms.

 

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 our intangible assets are subject to amortization. No impairment of intangible assets has been identified as of the balance sheet dates.

 

Intangible assets include licenses and certificates and are amortized over their useful life of five years.

 

FAIR VALUE MEASUREMENTS AND DISCLOSURES

 

FASB ASC Topic 820, “Fair Value Measurements,” defines fair value, and establishes a three-level valuation hierarchy for disclosures of fair value measurement that enhances disclosure requirements for fair value 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 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 fair value measurement.

 

The carrying value of cash, accounts receivable, inventory, prepaid expenses and other current assets, accounts payable, accrued expenses and other payables, advances for sale of common stock and loan payable-shareholder, are carried at costs, which approximate their fair values due to their short maturities.   

 

As of September 30, 2017, the Company did not identify any assets and liabilities that are required to be presented on the balance sheet at fair value 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, plant 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 industrial 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 to be generated by the assets.

 

If such assets are considered to be impaired, the impairment to be recognized is measured as the amount by which the carrying amount of the asset exceeds its fair value. Assets to be disposed of are reported at the lower of the carrying amount or fair value less cost to sell. During the reporting periods there was no impairment loss recognized on long-lived assets.

 

Revenue Recognition

 

The Company recognizes revenues from professional services contracts. Customers are billed, according to individual agreements. Revenues from professional services are recognized on a completed-contract basis, in accordance with ASC Topic 605-35, “Construction-Type and Production-Type Contracts.” Under the completed-contract basis, contract costs are recorded to projects in process and billings and/or cash received are recorded to a deferred revenue liability account during the periods of construction. Costs include direct material, direct labor and subcontract labor. All revenues, costs, and profits are recognized in operations upon completion of the contract. A contract is considered completed when all costs except insignificant items have been incurred and final acceptance has been received from the customer. Corporate general and administrative expenses are charged to the periods as incurred. However, in the event a loss on a contract is foreseen, the Company will recognize the loss as incurred. For uncompleted contracts, the deferred asset (accumulated contract costs) in excess of the deferred liability (billings and/or cash received) is classified under current assets as costs in excess of billings on uncompleted contracts. The deferred liability (billings and/or cash received) in excess of the deferred asset (accumulated contract costs) is classified under current liabilities as billings in excess of costs on uncompleted contracts. Contract retentions are included in accounts receivable.

 

During the three months ended September 30, 2017, one customer accounted for 100% of the Company’s total sales.

 

INCOME TAXES

 

The Company uses the asset and liability method of accounting for income taxes in accordance with 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 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.

 

ASC Topic 740.10.30 clarifies the accounting for uncertainty in income taxes recognized in an enterprise’s financial statements and prescribes a recognition threshold and measurement attribute for the financial statement recognition and measurement of a tax position taken or expected to be taken in a tax return. ASC Topic 740.10.40 provides guidance on derecognition, classification, interest and penalties, accounting in interim periods, disclosure, and transition. The Company has no material uncertain tax positions for any of the reporting periods presented.

 

CONCENTRATION OF CREDIT RISK 

 

The Company maintains cash in accounts with state-owned banks within the PRC. Cash in state-owned banks is not covered by insurance. Should any of these institutions 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.

 

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 USD. The accounts of the Chinese entities were translated into USD in accordance with 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 in accordance with ASC Topic 220, “Comprehensive Income.” Gains and losses resulting from the 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 paid-in capital and distributions to stockholders.

 

RECENT ACCOUNTING PRONOUNCEMENTS

 

In February 2016, the FASB issued ASU 2016-02 Amendments to the ASC 842 Leases. This update requires a lessee to recognize the assets and liability (the lease liability) arising from operating leases on the balance sheet for the lease term. When measuring assets and liabilities arising from a lease, a lessee (and a lessor) should include payments to be made in optional periods only if the lessee is reasonably certain to exercise an option to extend the lease or not to exercise an option to terminate the lease. Within a twelve months or less lease term, a lessee is permitted to make an accounting policy election not to recognize lease assets and liabilities. If a lessee makes this election, it should recognize lease expense on a straight-line basis over the lease term. In transition, this update will be effective for public entities for fiscal years beginning after December 15, 2018, including interim periods within those fiscal years. The Company does not currently expect the adoption of ASU 2016-02 to have a material impact on the Company’s condensed consolidated financial statements unless it enters into a new long-term lease.

 

In April 2016, the FASB issued ASU 2016-10, Revenue from Contracts with Customers (ASC 606): Identifying Performance Obligations and Licensing. The objective is to clarify the two aspects of Topic 606: identifying performance obligations and the licensing implementation guidance, while retaining the related principles for these areas. The ASU affects the guidance in ASU 2014-09, Revenue from Contracts with Customers (ASC 606), which is not yet effective. The effective date and transition requirements for this ASU are the same as the effective date and transition requirements in ASC 606 (and any other Topic amended by ASU 2014-09). ASU 2015-14, Revenue from Contracts with Customers (ASC 606): Deferral of the Effective Date, defers the effective date of ASU 2014-09 by one year. The Company does not expect the adoption of ASU 2016-10 to have a material impact on the Company’s condensed consolidated financial statements.

 

In May 2016, the FASB issued ASU 2016-12, Revenue from Contracts with Customers (ASC 606): Narrow-Scope Improvements and Practical Expedients. The objective is to address certain issues identified by the FASB-IASB Joint Transition Resource Group for Revenue Recognition. The amendments in this Update affect the guidance in Accounting Standards Update 2014-09, Revenue from Contracts with Customers (ASC 606), which is not yet effective. The effective date and transition requirements for the amendments in this Update are the same as the effective date and transition requirements for ASC 606 (and any other Topic amended by Update 2014-09). Accounting Standards Update 2015-14, Revenue from Contracts with Customers (ASC 606): Deferral of the Effective Date, defers the effective date of Update 2014-09 by one year. The Company does not expect the adoption of ASU 2016-12 to have a material impact on the Company’s condensed consolidated financial statements

 

In November 2016, the FASB issued ASU 2016-18, Restricted Cash. The amendments in this update address diversity in practice that exists in the classification and presentation of changes in restricted cash and require that a statement of cash flows explain the change during the period in the total of cash, cash equivalents, and amounts generally described as restricted cash or restricted cash equivalents. ASU 2016-18 is effective for the Company beginning January 1, 2018 and is required to be applied using a retrospective transition method to each period presented. The Company does not expect the adoption of the amendment in this ASU to have a significant impact on the Company's condensed consolidated financial statements.

 

In January 2017, the FASB issued ASU 2017-01, Clarifying the Definition of a Business, which clarifies the definition of a business with the objective of adding guidance to assist entities with evaluating whether transactions should be accounted for as acquisitions (or disposals) of assets or businesses. The Company does not expect the adoption of the amendment in this ASU to have a significant impact on the Company's condensed consolidated financial statements.

 

In February 2017, the FASB issued ASU 2017-05, Clarifying the Scope of Asset Derecognition Guidance and Accounting for Partial Sales of Nonfinancial Assets, which defines the term "in-substance nonfinancial asset" and clarifies the scope and accounting of a financial asset that meets the definition. ASU 2017-05 also provides guidance for partial sales of nonfinancial assets. The Company does not expect the adoption of the amendment in this ASU to have a significant impact on the Company's condensed consolidated financial statements.

 

Management does not believe that any recently issued, but not yet effective, accounting standards, if currently adopted, would have a material effect on the accompanying unaudited condensed consolidated financial statements.

XML 18 R9.htm IDEA: XBRL DOCUMENT v3.8.0.1
PROPERTY AND EQUIPMENT
3 Months Ended
Sep. 30, 2017
Property And Equipment  
PROPERTY AND EQUIPMENT

Note 4 – PROPERTY AND EQUIPMENT

 

Property and equipment are summarized as follows:

 

    September 30, 2017   June 30, 2017
Office furniture and fixtures   $ 59,131     $ 58,064  
Office equipment     45,754       40,248  
    Subtotal     104,885       98,312  
Less: Accumulated depreciation     46,429       39,026  
   Total   $ 58,456     $ 59,286  

 

Depreciation expense for the three months ended September 30, 2017 and 2016 were $6,669 and $6,005 respectively.

XML 19 R10.htm IDEA: XBRL DOCUMENT v3.8.0.1
INTANGIBLE ASSETS
3 Months Ended
Sep. 30, 2017
Intangible Assets  
INTANGIBLE ASSETS

NOTE 5 –intangible assets

 

Intangible assets are summarized as follows:

 

    September 30, 2017   June 30, 2017
Software registration right   $ 4,591       4,508  
Value-added telecommunications business license     12,050       11,833  
    Subtotal     16,641       16,341  
Less: Accumulated depreciation     3,020       2,558  
   Total   $ 13,621       13,783  

 

Amortization expense for the three months ended September 30, 2017 and 2016 were $415 and $336, respectively.

XML 20 R11.htm IDEA: XBRL DOCUMENT v3.8.0.1
PREPAID EXPENSES AND OTHER CURRENT ASSETS
3 Months Ended
Sep. 30, 2017
Prepaid Expenses And Other Current Assets  
PREPAID EXPENSES AND OTHER CURRENT ASSETS

Note 6 – Prepaid expenses and other current assets

 

Prepaid expenses and other current assets consisted of the following

 

    September 30, 2017   June 30, 2017
Security deposit   $ 55,538     $ 54,830  
Prepaid expenses and advances     102,866       32,471  
Others     8,099       7,138  
Total   $ 166,503     $ 94,439  
XML 21 R12.htm IDEA: XBRL DOCUMENT v3.8.0.1
ACCRUED EXPENSES AND OTHER PAYABLES
3 Months Ended
Sep. 30, 2017
Accrued Expenses And Other Payables  
ACCRUED EXPENSES AND OTHER PAYABLES

Note 7 – accrued expenses and other payables

 

Accrued expenses and other payable consisted of the following:

 

    September 30, 2017   June 30, 2017
Deposit   $ 31,017     $ 30,515  
Salary payable and other payable     48,061       36,460  
Advances from customers     1,668       —    
Total   $ 80,746     $ 66,975  
XML 22 R13.htm IDEA: XBRL DOCUMENT v3.8.0.1
RELATED PARTY TRANSACTIONS
3 Months Ended
Sep. 30, 2017
Related Party Transactions  
RELATED PARTY TRANSACTIONS

Note 8 – related party transactions

 

The Company’s President, Zhixin Liu, paid certain operating expenses on behalf of the Company. As of September 30, 2017 and June 30, 2017, the amounts due to the President were $134,517 and $129,874, respectively. These amounts are interest-free, unsecured and due on demand. The Company has not received any demand for payments.

 

On January 1, 2016, the Company’s President entered into a car rental agreement with the Company. Pursuant to the agreement, the Company rents a car from the Company’s President for a monthly rent of approximately $751. The agreement expired on December 31, 2016. The agreement was renewed and the term was extended to December 31, 2018.

 

The rent paid under this agreement was $2,253 and $2,250 for the three months ended September 30, 2017 and 2016 respectively. 

XML 23 R14.htm IDEA: XBRL DOCUMENT v3.8.0.1
INCOME TAXES
3 Months Ended
Sep. 30, 2017
Income Taxes  
INCOME TAXES

Note 9 – income taxes

 

The Company was incorporated in the United States of America, is subject to U.S. tax and plans to file U.S. federal income tax returns. The Company conducts all of its businesses through its subsidiaries and affiliated entities principally in the PRC. No provision for US federal income tax was made for the three months ended September 30, 2017 and 2016 as the US entity incurred losses.

 

The Company’s offshore subsidiary, Shuhai Skill (HK), did not earn any income that was derived in Hong Kong for the three months ended September 30, 2017 and 2016, and therefore did not incur any Hong Kong Profits tax.

 

Under the Corporate Income Tax Law of the PRC, the corporate income tax rate is 25%.

 

The reconciliation of income tax expense (benefit) at the U.S. statutory rate of 34% to the Company’s effective tax is as follows:

 

    Three Months ended
September 30, 2017
  Three Months ended
September 30, 2016
U.S. Statutory rate of 34%   $ (61,281 )   $ (40,026 )
Tax rate difference between China and U.S.     (40,854 )     (26,684 )
Change in valuation allowance     102,135       66,709  
Effective income rate   $ —       $ —    

 

The provisions for income taxes are summarized as follows:

 

    Three Months ended September 30, 2017   Three Months ended September 30, 2016
Current   $ —       $ —    
Deferred     102,135       66,709  
Change in valuation allowance     (102,135 )     (66,709 )
Total   $ —       $ —    

 

The valuation allowance increased by $102,135 and $66,709 for the three months ended September 30, 2017 and 2016, respectively.

 

The Company’s net deferred tax asset as of September 30, 2017 and June 30, 2017 is as follows:

 

    September 30, 2017   June 30, 2017
Deferred tax asset   $ 687,194     $ 585,059  
Valuation allowance     (687,194 )     (585,059 )
Net deferred tax asset   $ —       $ —  
XML 24 R15.htm IDEA: XBRL DOCUMENT v3.8.0.1
SHAREHOLDERS' EQUITY
3 Months Ended
Sep. 30, 2017
Shareholders Equity  
SHAREHOLDERS' EQUITY

NOTE 10 – SHAREHOLDERS’ EQUITY

 

During the three months ended, the Company sold to investors 901,500 shares of common stock at $2.35 per share and received proceeds of $2,118,525.

XML 25 R16.htm IDEA: XBRL DOCUMENT v3.8.0.1
COMMITMENTS
3 Months Ended
Sep. 30, 2017
Commitments  
COMMITMENTS

NOTE 11 – CommitMents

 

Lease Agreement

 

In December 2016, the Company renewed the one-year operating lease agreement. The lease will expire on February 28, 2018 and has a monthly rent of RMB 35,192 (or approximately $5,276). Future rental payment due under the lease is RMB 281,536 (or approximately $42,204).

 

Rent expense for the three months ended September 30, 2017 and 2016 was $15,828 and $12,777, respectively.

 

In December 2016, the Company renewed the one-year property management contract. The Contract will expire on February 28, 2018 and has a monthly management fee of RMB 70,384 (or approximately $10,551). Future management fee due under the contract is RMB563, 072(or approximately $84,408).

XML 26 R17.htm IDEA: XBRL DOCUMENT v3.8.0.1
SUBSEQUENT EVENTS
3 Months Ended
Sep. 30, 2017
Subsequent Events  
SUBSEQUENT EVENTS

NOTE 12 – SUBSEQUENT EVENTS 

 

The Company has reviewed its subsequent events through November 13, 2017, the date these financial statements were issued and has determined that no material subsequent events have occurred that require recognition in or disclosure to the financial statements. 

XML 27 R18.htm IDEA: XBRL DOCUMENT v3.8.0.1
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Policies)
3 Months Ended
Sep. 30, 2017
Summary Of Significant Accounting Policies Policies  
BASIS OF PRESENTATION AND CONSOLIDATION

Basis of Presentation and Consolidation

 

The accompanying unaudited condensed consolidated financial statements include the financial statements of the Company and its 100% owned subsidiaries of Shuhai Skill (HK)”), Tianjin Information and Shuhai Beijing.  

 

The accompanying unaudited condensed consolidated financial statements have been prepared pursuant to the rules and regulations of the Securities and Exchange Commission. The information furnished herein reflects all adjustments (consisting of normal recurring accruals and adjustments and elimination of intercompany transactions upon consolidation) which are, in the opinion of management, necessary to fairly present the operating results for the respective periods. Certain information and footnote disclosures normally present in the annual consolidated financial statements prepared in accordance with accounting principles generally accepted in the United States of America have been omitted pursuant to such rules and regulations. These unaudited condensed consolidated financial statements should be read in conjunction with the audited consolidated financial statements and notes for the year ended June 30, 2017. The results of the three month periods ended September 30, 2017 are not necessarily indicative of the results to be expected for the full year ending June 30, 2018.

VARIABLE INTEREST ENTITY

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 consolidated financial statements, the financial statements of its variable interest entity (“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 is 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. Accordingly, the results of Shuhai Beijing have been included in the accompanying unaudited condensed consolidated financial statements. 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.

USE OF ESTIMATES

USE OF ESTIMATES

 

The preparation of unaudited condensed consolidated financial statements in conformity with accounting principles generally accepted in the United States of America 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 period. 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 our unaudited condensed consolidated financial statements.

CONTINGENCIES

Contingencies

 

Certain conditions may exist as of the date the unaudited condensed consolidated financial statements are issued, which may result in a loss to the Company but which will only be resolved when one or more future events occur or fail to occur. The Company’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 unaudited condensed consolidated financial statements.

 

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.

CASH AND CASH EQUIVALENTS

Cash and Cash Equivalents

 

Cash and cash equivalents include cash on hand, demand deposits and short-term cash investments that are highly liquid in nature and have original maturities of three months or less. The Company has no cash equivalents as of September 30, 2017 and June 30, 2017.

INVENTORY

Inventory

 

Inventory, comprised principally of products purchased comprised of routers used in installations, 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 no allowances for inventory as of September 30, 2017 and June 30, 2017.

PROPERTY AND EQUIPMENT

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  5-10 years
Office equipment 3-5 years

 

Leasehold improvements are depreciated on a straight-line method over the shorter of their estimated useful lives or remaining lease terms.

INTANGIBLE ASSETS

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 our intangible assets are subject to amortization. No impairment of intangible assets has been identified as of the balance sheet dates.

 

Intangible assets include licenses and certificates and are amortized over their useful life of five years.

FAIR VALUE MEASUREMENTS AND DISCLOSURES

FAIR VALUE MEASUREMENTS AND DISCLOSURES

 

FASB ASC Topic 820, “Fair Value Measurements,” defines fair value, and establishes a three-level valuation hierarchy for disclosures of fair value measurement that enhances disclosure requirements for fair value 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 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 fair value measurement.

 

The carrying value of cash, accounts receivable, inventory, prepaid expenses and other current assets, accounts payable, accrued expenses and other payables, advances for sale of common stock and loan payable-shareholder, are carried at costs, which approximate their fair values due to their short maturities.   

 

As of September 30, 2017, the Company did not identify any assets and liabilities that are required to be presented on the balance sheet at fair value on a recurring basis.

IMPAIRMENT OF LONG-LIVED ASSETS

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, plant 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 industrial 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 to be generated by the assets.

 

If such assets are considered to be impaired, the impairment to be recognized is measured as the amount by which the carrying amount of the asset exceeds its fair value. Assets to be disposed of are reported at the lower of the carrying amount or fair value less cost to sell. During the reporting periods there was no impairment loss recognized on long-lived assets.

REVENUE RECOGNITION

Revenue Recognition

 

The Company recognizes revenues from professional services contracts. Customers are billed, according to individual agreements. Revenues from professional services are recognized on a completed-contract basis, in accordance with ASC Topic 605-35, “Construction-Type and Production-Type Contracts.” Under the completed-contract basis, contract costs are recorded to projects in process and billings and/or cash received are recorded to a deferred revenue liability account during the periods of construction. Costs include direct material, direct labor and subcontract labor. All revenues, costs, and profits are recognized in operations upon completion of the contract. A contract is considered completed when all costs except insignificant items have been incurred and final acceptance has been received from the customer. Corporate general and administrative expenses are charged to the periods as incurred. However, in the event a loss on a contract is foreseen, the Company will recognize the loss as incurred. For uncompleted contracts, the deferred asset (accumulated contract costs) in excess of the deferred liability (billings and/or cash received) is classified under current assets as costs in excess of billings on uncompleted contracts. The deferred liability (billings and/or cash received) in excess of the deferred asset (accumulated contract costs) is classified under current liabilities as billings in excess of costs on uncompleted contracts. Contract retentions are included in accounts receivable.

 

During the three months ended September 30, 2017, one customer accounted for 100% of the Company’s total sales.

INCOME TAXES

INCOME TAXES

 

The Company uses the asset and liability method of accounting for income taxes in accordance with 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 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.

 

ASC Topic 740.10.30 clarifies the accounting for uncertainty in income taxes recognized in an enterprise’s financial statements and prescribes a recognition threshold and measurement attribute for the financial statement recognition and measurement of a tax position taken or expected to be taken in a tax return. ASC Topic 740.10.40 provides guidance on derecognition, classification, interest and penalties, accounting in interim periods, disclosure, and transition. The Company has no material uncertain tax positions for any of the reporting periods presented.

CONCENTRATION OF CREDIT RISK

CONCENTRATION OF CREDIT RISK 

 

The Company maintains cash in accounts with state-owned banks within the PRC. Cash in state-owned banks is not covered by insurance. Should any of these institutions 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.

FOREIGN CURRENCY TRANSLATION AND COMPREHENSIVE INCOME (LOSS)

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 USD. The accounts of the Chinese entities were translated into USD in accordance with 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 in accordance with ASC Topic 220, “Comprehensive Income.” Gains and losses resulting from the 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 paid-in capital and distributions to stockholders.

RECENT ACCOUNTING PRONOUNCEMENTS

RECENT ACCOUNTING PRONOUNCEMENTS

 

In February 2016, the FASB issued ASU 2016-02 Amendments to the ASC 842 Leases. This update requires a lessee to recognize the assets and liability (the lease liability) arising from operating leases on the balance sheet for the lease term. When measuring assets and liabilities arising from a lease, a lessee (and a lessor) should include payments to be made in optional periods only if the lessee is reasonably certain to exercise an option to extend the lease or not to exercise an option to terminate the lease. Within a twelve months or less lease term, a lessee is permitted to make an accounting policy election not to recognize lease assets and liabilities. If a lessee makes this election, it should recognize lease expense on a straight-line basis over the lease term. In transition, this update will be effective for public entities for fiscal years beginning after December 15, 2018, including interim periods within those fiscal years. The Company does not currently expect the adoption of ASU 2016-02 to have a material impact on the Company’s condensed consolidated financial statements unless it enters into a new long-term lease.

 

In April 2016, the FASB issued ASU 2016-10, Revenue from Contracts with Customers (ASC 606): Identifying Performance Obligations and Licensing. The objective is to clarify the two aspects of Topic 606: identifying performance obligations and the licensing implementation guidance, while retaining the related principles for these areas. The ASU affects the guidance in ASU 2014-09, Revenue from Contracts with Customers (ASC 606), which is not yet effective. The effective date and transition requirements for this ASU are the same as the effective date and transition requirements in ASC 606 (and any other Topic amended by ASU 2014-09). ASU 2015-14, Revenue from Contracts with Customers (ASC 606): Deferral of the Effective Date, defers the effective date of ASU 2014-09 by one year. The Company does not expect the adoption of ASU 2016-10 to have a material impact on the Company’s condensed consolidated financial statements.

 

In May 2016, the FASB issued ASU 2016-12, Revenue from Contracts with Customers (ASC 606): Narrow-Scope Improvements and Practical Expedients. The objective is to address certain issues identified by the FASB-IASB Joint Transition Resource Group for Revenue Recognition. The amendments in this Update affect the guidance in Accounting Standards Update 2014-09, Revenue from Contracts with Customers (ASC 606), which is not yet effective. The effective date and transition requirements for the amendments in this Update are the same as the effective date and transition requirements for ASC 606 (and any other Topic amended by Update 2014-09). Accounting Standards Update 2015-14, Revenue from Contracts with Customers (ASC 606): Deferral of the Effective Date, defers the effective date of Update 2014-09 by one year. The Company does not expect the adoption of ASU 2016-12 to have a material impact on the Company’s condensed consolidated financial statements

 

In November 2016, the FASB issued ASU 2016-18, Restricted Cash. The amendments in this update address diversity in practice that exists in the classification and presentation of changes in restricted cash and require that a statement of cash flows explain the change during the period in the total of cash, cash equivalents, and amounts generally described as restricted cash or restricted cash equivalents. ASU 2016-18 is effective for the Company beginning January 1, 2018 and is required to be applied using a retrospective transition method to each period presented. The Company does not expect the adoption of the amendment in this ASU to have a significant impact on the Company's condensed consolidated financial statements.

 

In January 2017, the FASB issued ASU 2017-01, Clarifying the Definition of a Business, which clarifies the definition of a business with the objective of adding guidance to assist entities with evaluating whether transactions should be accounted for as acquisitions (or disposals) of assets or businesses. The Company does not expect the adoption of the amendment in this ASU to have a significant impact on the Company's condensed consolidated financial statements.

 

In February 2017, the FASB issued ASU 2017-05, Clarifying the Scope of Asset Derecognition Guidance and Accounting for Partial Sales of Nonfinancial Assets, which defines the term "in-substance nonfinancial asset" and clarifies the scope and accounting of a financial asset that meets the definition. ASU 2017-05 also provides guidance for partial sales of nonfinancial assets. The Company does not expect the adoption of the amendment in this ASU to have a significant impact on the Company's condensed consolidated financial statements.

 

Management does not believe that any recently issued, but not yet effective, accounting standards, if currently adopted, would have a material effect on the accompanying unaudited condensed consolidated financial statements.

XML 28 R19.htm IDEA: XBRL DOCUMENT v3.8.0.1
PROPERTY AND EQUIPMENT (Tables)
3 Months Ended
Sep. 30, 2017
Property, Plant and Equipment [Abstract]  
Property, Plant and Equipment [Table Text Block]

Property and equipment are summarized as follows:

 

    September 30, 2017   June 30, 2017
Office furniture and fixtures   $ 59,131     $ 58,064  
Office equipment     45,754       40,248  
    Subtotal     104,885       98,312  
Less: Accumulated depreciation     46,429       39,026  
   Total   $ 58,456     $ 59,286
XML 29 R20.htm IDEA: XBRL DOCUMENT v3.8.0.1
INTANGIBLE ASSETS (Tables)
3 Months Ended
Sep. 30, 2017
Intangible Assets Tables  
Schedule of Intangible Assets [Table Text Block]

Intangible assets are summarized as follows:

 

    September 30, 2017   June 30, 2017
Software registration right   $ 4,591       4,508  
Value-added telecommunications business license     12,050       11,833  
    Subtotal     16,641       16,341  
Less: Accumulated depreciation     3,020       2,558  
   Total   $ 13,621       13,783  
XML 30 R21.htm IDEA: XBRL DOCUMENT v3.8.0.1
PREPAID EXPENSES AND OTHER CURRENT ASSETS (Tables)
3 Months Ended
Sep. 30, 2017
Prepaid Expenses And Other Current Assets Tables  
Schedule of Prepaid Asset and Other Current Asset [Table Text Block]

Prepaid expenses and other current assets consisted of the following

 

    September 30, 2017   June 30, 2017
Security deposit   $ 55,538     $ 54,830  
Prepaid expenses and advances     102,866       32,471  
Others     8,099       7,138  
Total   $ 166,503     $ 94,439  
XML 31 R22.htm IDEA: XBRL DOCUMENT v3.8.0.1
ACCRUED EXPENSES AND OTHER PAYABLES (Tables)
3 Months Ended
Sep. 30, 2017
Accrued Expenses And Other Payables Tables  
Schedule of Accounts Payable and Accrued Liabilities [Table Text Block]

Accrued expenses and other payable consisted of the following:

 

    September 30, 2017   June 30, 2017
Deposit   $ 31,017     $ 30,515  
Salary payable and other payable     48,061       36,460  
Advances from customers     1,668       —    
Total   $ 80,746     $ 66,975  
XML 32 R23.htm IDEA: XBRL DOCUMENT v3.8.0.1
INCOME TAXES (Tables)
3 Months Ended
Sep. 30, 2017
Income Taxes Tables  
Schedule of reconciliation of income tax expense (benefit)

The reconciliation of income tax expense (benefit) at the U.S. statutory rate of 15% to the Company’s effective tax is as follows:

 

    Three Months ended
September 30, 2017
  Three Months ended
September 30, 2016
U.S. Statutory rate of 34%   $ (61,281 )   $ (40,026 )
Tax rate difference between China and U.S.     (40,854 )     (26,684 )
Change in valuation allowance     102,135       66,709  
Effective income rate   $ —       $ —  
Schedule of provisions for income taxes

The provisions for income taxes are summarized as follows:

 

    Three Months ended September 30, 2017   Three Months ended September 30, 2016
Current   $ —       $ —    
Deferred     102,135       66,709  
Change in valuation allowance     (102,135 )     (66,709 )
Total   $ —       $ —    
Schedule of net deferred tax asset

The Company’s net deferred tax asset as of September 30, 2017 and June 30, 2017 is as follows:

 

    September 30, 2017   June 30, 2017
Deferred tax asset   $ 687,194     $ 585,059  
Valuation allowance     (687,194 )     (585,059 )
Net deferred tax asset   $ —       $ —  
XML 33 R24.htm IDEA: XBRL DOCUMENT v3.8.0.1
ORGANIZATION AND DESCRIPTION OF BUSINESS (Details Narrative) - shares
3 Months Ended
Oct. 29, 2015
Sep. 30, 2017
Jun. 30, 2017
Date of Incorporation   Sep. 26, 2014  
Common Stock Outstanding, Shares   57,511,771 56,610,271
Shuhai Information Skill (HK) Limited [Member]      
Ownership Rights Acquired 100.00%    
Business Combination, Consideration Transferred

On October 29, 2015, the Company entered into a share exchange agreement (the "Exchange Agreement") with the members ("Members") of Shuhai Information Skill (HK) Limited ("Shuhai Skill (HK)"), a limited liability company incorporated on May 15, 2015 under the laws of the Hong Kong Special Administrative Region of the People's Republic of China (the "PRC"). Pursuant to the terms of the Exchange Agreement, the Members, who together own 100% of the ownership rights in Shuhai Skill (HK), transferred all of their membership interests of Shuhai Skill (HK) to the Company in exchange for the issuance of an aggregate of 20,000,000 shares of Common Stock, thereby causing Shuhai Skill (HK) and its wholly owned subsidiaries, Tianjin Information Sea Information Technology Co., Ltd. ("Tianjin Information"), a limited liability company incorporated under the laws of the PRC, , to become wholly-owned subsidiaries of the Company, and Shuhai Information Technology Co., Ltd., also a limited liability company incorporated under the laws of the PRC ("Shuhai Beijing"), to become a variable interest entity ("VIE") of the Company through a series of contractual agreements between Shuhai Beijing and Tianjin Information. The transaction was accounted for as a reverse merger, with Shuhai Skill (HK) and its subsidiaries being the accounting acquirer. Accordingly, the historical financial statements presented are those of Shuhai Skill (HK) and its wholly owned subsidiary.

   
Common Stock Outstanding, Shares 55,000,000    
XML 34 R25.htm IDEA: XBRL DOCUMENT v3.8.0.1
GOING CONCERN (Details Narrative) - USD ($)
Sep. 30, 2017
Jun. 30, 2017
Going Concern Details Narrative    
Accumulated deficit $ 2,929,343 $ 2,520,806
XML 35 R26.htm IDEA: XBRL DOCUMENT v3.8.0.1
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Details Narrative) - USD ($)
3 Months Ended
Sep. 30, 2017
Jun. 30, 2017
Cash equivalents $ 0 $ 0
Furniture and Fixtures [Member] | Minimum [Member]    
Estimated useful life (in years) 5 years  
Furniture and Fixtures [Member] | Maximum [Member]    
Estimated useful life (in years) 10 years  
Office equipment [Member] | Minimum [Member]    
Estimated useful life (in years) 3 years  
Office equipment [Member] | Maximum [Member]    
Estimated useful life (in years) 5 years  
XML 36 R27.htm IDEA: XBRL DOCUMENT v3.8.0.1
PROPERTY AND EQUIPMENT (Details) - USD ($)
Sep. 30, 2017
Jun. 30, 2017
Property plant and equipment, gross $ 104,885 $ 98,312
Less: accumulated depreciation 46,429 39,026
Property and equipment, Net 58,456 59,286
Furniture and Fixtures [Member]    
Property plant and equipment, gross 59,191 58,064
Office equipment [Member]    
Property plant and equipment, gross $ 45,754 $ 40,248
XML 37 R28.htm IDEA: XBRL DOCUMENT v3.8.0.1
PROPERTY AND EQUIPMENT (Details Narrative) - USD ($)
3 Months Ended
Sep. 30, 2017
Sep. 30, 2016
Property And Equipment Details Narrative    
Depreciation Expenses $ 6,669 $ 6,005
XML 38 R29.htm IDEA: XBRL DOCUMENT v3.8.0.1
INTANGIBLE ASSETS (Details) - USD ($)
Sep. 30, 2017
Jun. 30, 2017
Subtotal $ 16,641 $ 16,341
Less: Accumulated depreciation 3,020 2,558
Total 13,621 13,783
Software Registration Right [Member]    
Subtotal 4,591 4,508
Value-added telecommunications business license [Member]    
Subtotal $ 12,050 $ 11,833
XML 39 R30.htm IDEA: XBRL DOCUMENT v3.8.0.1
INTANGIBLE ASSETS (Details Narrative) - USD ($)
3 Months Ended
Sep. 30, 2017
Sep. 30, 2016
Intangible Assets Details Narrative    
Amortization expense $ 415 $ 336
XML 40 R31.htm IDEA: XBRL DOCUMENT v3.8.0.1
PREPAID EXPENSES AND OTHER CURRENT ASSETS (Details) - USD ($)
Sep. 30, 2017
Jun. 30, 2017
Prepaid Expenses And Other Current Assets Details    
Security deposit $ 55,538 $ 54,830
Prepaid expenses 102,866 32,471
Others 8,099 7,138
Total $ 166,503 $ 94,439
XML 41 R32.htm IDEA: XBRL DOCUMENT v3.8.0.1
ACCRUED EXPENSES AND OTHER PAYABLES (Details) - USD ($)
Sep. 30, 2017
Jun. 30, 2017
Accrued Expenses And Other Payables Details    
Deposit from customers $ 31,017 $ 30,515
Salary payable 48,061 36,460
Commission 1,668
Total $ 80,746 $ 66,975
XML 42 R33.htm IDEA: XBRL DOCUMENT v3.8.0.1
RELATED PARTY TRANSACTIONS (Details Narrative) - USD ($)
3 Months Ended
Sep. 30, 2017
Sep. 30, 2016
Jun. 30, 2017
Rent Received $ 2,253 $ 2,250  
President [Member]      
Amount due to President $ 134,517   $ 129,874
XML 43 R34.htm IDEA: XBRL DOCUMENT v3.8.0.1
INCOME TAXES (Details Narrative)
3 Months Ended
Sep. 30, 2017
Income Taxes Details  
Effective tax rate 34.00%
XML 44 R35.htm IDEA: XBRL DOCUMENT v3.8.0.1
INCOME TAXES (Details) - USD ($)
3 Months Ended
Sep. 30, 2017
Sep. 30, 2016
Reconciliation of Income Tax Expense (Benefit)    
U.S. Statutory rate $ (61,281) $ (40,026)
Tax rate difference between China and U.S. (40,854) (26,684)
Change in valuation allowance 102,135 66,709
Effective income rate
XML 45 R36.htm IDEA: XBRL DOCUMENT v3.8.0.1
INCOME TAXES (Details 2) - USD ($)
3 Months Ended
Sep. 30, 2017
Sep. 30, 2016
Provisions For Income Taxes    
Current
Deferred 102,135 66,709
Change in valuation allowance (102,135) (66,709)
Total
XML 46 R37.htm IDEA: XBRL DOCUMENT v3.8.0.1
INCOME TAXES (Details 3) - USD ($)
Sep. 30, 2017
Jun. 30, 2017
Deferred Tax Asset    
Deferred tax asset $ 687,194 $ 585,059
Valuation allowance (687,194) (585,059)
Net deferred tax asset
XML 47 R38.htm IDEA: XBRL DOCUMENT v3.8.0.1
SHAREHOLDERS' EQUITY (Details Narrative) - USD ($)
3 Months Ended
Sep. 30, 2017
Jun. 30, 2017
Common Stock,shares issued 57,511,771 56,610,271
Investor [Member]    
Common Stock,shares issued 901,500  
Common Stock Issued price per share $ 2.35  
Proceeds from sale of Common Stock $ 2,118,525  
XML 48 R39.htm IDEA: XBRL DOCUMENT v3.8.0.1
COMMITMENTS (Details Narrative) - USD ($)
3 Months Ended
Sep. 30, 2017
Sep. 30, 2016
Commitments Details Narrative    
Rental expenses $ 15,828 $ 12,777
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