10-Q

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, 2019

☐ 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.)
20th Floor, Tower B, Guorui Plaza
1 Ronghua South Road, Technological Development Zone Beijing, People’s Republic of China	100176
(Address of principal executive offices)	(Zip Code)

+86 10-56145240

(Registrant’s telephone number, including area code)

N/A

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

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

Title of each class	Trading Symbol	Name of each exchange on which registered
Common Stock, $0.001 par value	DTSS	NASDAQ Capital Market

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

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐

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

☐	Large accelerated filer	☐	Accelerated filer
☒	Non-accelerated filer	☒	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 14, 2019, 20,943,846 shares of common stock, $0.001 par value per share, were outstanding.

DATASEA INC.

TABLE OF CONTENTS

		Page No.
	Part I – Financial Information
Item 1	Financial Statements	1
Item 2	Management’s Discussion and Analysis of Financial Condition and Results of Operation	2
Item 3	Quantitative and Qualitative Disclosures about Market Risk	5
Item 4	Controls and Procedures	5
	Part II – Other Information
Item 1	Legal Proceedings	7
Item 1A	Risk Factors	7
Item 2	Unregistered Sales Of Equity Securities And Use Of Proceeds	7
Item 3	Defaults Upon Senior Securities	7
Item 4	Mine Safety Disclosures	7
Item 5	Other Information	7
Item 6	Exhibits	7

i

PART I – FINANCIAL INFORMATION

DATASEA INC.

CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 30, 2019

Table of Contents
	Page
Condensed Consolidated Balance Sheets	F-1
Condensed Consolidated Statements of Operations and Comprehensive Loss	F-2
Condensed Consolidated Statements of Changes In Stockholders’ Equity	F-3
Condensed Consolidated Statements of Cash Flows	F-4
Notes to Condensed Consolidated Financial Statements	F-5 - F-17

1

DATASEA INC.

CONSOLIDATED BALANCE SHEETS

	September 30,			June 30,
	2019			2019
ASSETS
Current Assets
Cash	$	3,318,155		$	6,072,637
Inventory		70,406			73,294
Prepaid expenses and other current assets		252,233			105,932
Total Current Assets		3,640,794			6,251,863
Property and equipment, net		35,757			41,116
Intangible assets, net		2,235,234			555,811
Prepaid expense - non current		221,396			-
Escrow		600,000			600,000
Right-of-use assets		1,197,819			-
Total Assets	$	7,931,000		$	7,448,790
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities
Accounts payable	$	12,572		$	13,088
Accrued expenses and other payables		78,652			264,684
Advances from customer		1,266,941			1,318,897
Loan payable-shareholder		-			86,733
Operating lease liabilities		358,938			-
Total Current Liabilities		1,717,103			1,683,402
Other liability
Operating lease liabilities		838,881			-
Total Other Liability		838,881			-
Total Liabilities		2,555,984			1,683,402.0
Commitments and Contingencies
Stockholders' Equity
Common stock, $0.001 par value, 375,000,000 shares authorized, 20,943,846 shares issued and outstanding at September 30 and June 30, 2019, respectively		20,944			20,944
Additional paid-in capital		11,104,666			11,104,666
Accumulated comprehensive income		196,519			189,906
Deficit		(5,947,113	)		(5,550,128	)
Total Stockholders' Equity		5,375,016			5,765,388
Total Liabilities and Stockholders' Equity	$	7,931,000		$	7,448,790

See accompanying notes to the consolidated financial statements

F-1

DATASEA INC.

CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS

(Unaudited)

	Three Months Ended
	September 30, 2019			September 30, 2018
Revenues	$	-		$	-
Cost of goods sold		-			7,434
Gross deficit		-			(7,434	)
Operating expenses:
Selling expenses		51,175			76,879
General and administrative expenses		307,259			226,571
Research and development expenses		51,207			62,771
Total operating expenses:		409,641			366,221
Loss from operations		(409,641	)		(373,655	)
Other income :
Other (expense), net		(9,504	)		(3,925	)
Interest income		22,160			5,921
Total other income		12,656			1,996
Net loss		(396,985	)		(371,659	)
Other comprehensive loss
Foreign currency translation adjustment		6,613			31,573
Total comprehensive (loss)	$	(390,372	)	$	(340,086	)
Net loss per share
Basic and diluted	$	(0.02	)	$	(0.02	)
Weighted average shares outstanding
Basic and diluted		20,943,846			19,171,759

See accompanying notes to the consolidated financial statements

F-2

DATASEA INC.

CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY

										Accumulated
					Additional					Other		Total
	Common		Par		Paid in					Comprehensive		Stockholders’
	Shares		Value		Capital		Deficit			Income		Equity
Balance at June 30, 2017		18,870,346	$	18,870	$	3,002,878		(2,520,806	)	$	57,692	$	558,634
Sale of common stock		300,500		301		2,118,224		-			-		2,118,525
Net loss		-		-		-		(1,604,141	)		-		(1,604,141	)
Foreign currency translation gain		-		-		-		-			113,103		113,103.00
Balance at June 30, 2018		19,170,846		19,171		5,121,102		(4,124,947	)		170,795		1,186,121
Sale of common stock		84,000		84		244,581		-			-		244,665
Net loss		-		-		-		(371,659	)		-		(371,659	)
Foreign currency translation gain		-		-		-					31,573		31,573
Balance at September 30, 2018 (unaudited)		19,254,846	$	19,255	$	5,365,683	$	(4,496,606	)	$	202,368	$	1,090,700
Balance at June 30, 2018		19,170,846	$	19,171	$	5,121,102	$	(4,124,947	)	$	170,795	$	1,186,121
Sale of common stock		105,500		106		307,340		-			-		307,446
Sale of common stock-offering		1,667,500		1,667		5,676,224							5,677,891
Net loss		-		-		-		(1,425,181	)		-		(1,425,181	)
Foreign currency translation gain		-		-		-		-			19,111		19,111
Balance at June 30, 2019		20,943,846		20,944		11,104,666		(5,550,128	)		189,906		5,765,388
Net loss		-		-		-		(396,985	)		-		(396,985	)
Foreign currency translation gain		-		-		-		-			6,613		6,613
Balance at September 30, 2019 (unaudited)		20,943,846	$	20,944	$	11,104,666	$	(5,947,113	)	$	196,519	$	5,375,016

See accompanying notes to the consolidated financial statements

F-3

DATASEA INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)

	Three Months Ended
	September 30, 2019			September 30, 2018
Cash flows from operating activities:
Net loss	$	(396,985	)	$	(371,659	)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation and amortization		6,969			12,162
Expenses paid by president					-
Changes in current assets and current liabilities:
Prepaid expenses and other assets		(378,368	)		5,556
Right-of-use assets		(1,219,937	)		-
Accrued expenses and other payables		(176,000	)		(81,449	)
Operating lease liabilities		1,219,937			-
Net cash used in operating activities		(944,384	)		(435,390	)
Cash flows from investing activities:
Acquisition of office equipment		(1,408	)		(4,881	)
Acquisition of intangible assets		(1,688,575	)		(14,703	)
Net cash used in investing activities		(1,689,983	)		(19,584	)
Cash flows from financing activities:
Payment of loan payable - shareholder, net		(84,855	)		(26,471	)
Net proceeds from sale of common stock		-			246,944
Net cash provided by financing activities		(84,855	)		220,473
Effect of exchange rate changes on cash		(35,261	)		35,092
Net increase in cash		(2,754,482	)		(199,408	)
Cash – beginning of period		6,072,637			1,031,486
Cash – end of period	$	3,318,155		$	832,078
Supplemental disclosures of cash flow information:
Cash paid for interest	$	-		$	-
Cash paid for income tax	$	-		$	-

See accompanying notes to the consolidated financial statements

F-4

NOTE 1 – ORGANIZATION AND DESCRIPTION OF BUSINESS

Datasea Inc. (the “Company”, or “we”, “us”, “our” or similar terminology) 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 6,666,667 shares of common stock, par value $0.001 per share, 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 1,666,667 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 shareholders (the “Shareholders”) 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 Shareholders, who together own 100% of the ownership rights in Shuhai Skill (HK), transferred all of the issued and outstanding ordinary shares of Shuhai Skill (HK) to the Company in exchange for the issuance of an aggregate of 6,666,667 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, and Harbin Information Sea Information Technology Co., Ltd., 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 survivor. Accordingly, the historical financial statements presented are those of Shuhai Skill (HK) and its consolidated subsidiaries and VIE.

Following the Share Exchange, the Shareholders, being Zhixin Liu and her father, Fu Liu, owned approximately 82% of the outstanding shares of Common Stock. As of October 29, 2015, there were 18,333,333 shares of Common Stock issued and outstanding, 15,000,000 of which were beneficially owned by Zhixin Liu and Fu Liu.

On May 1, 2018, the Company implemented a 1 for 3 reverse stock split decreasing the shares outstanding from 57,511,711 to 19,170,846. The unaudited condensed consolidated financial statements have been retroactively adjusted to reflect the reverse split.

After the Share Exchange, the Company, through its consolidated subsidiaries and VIE is engaged in providing smart security solutions primarily to schools, tourist or scenic attractions and public communities in China.

NOTE 2 – 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 its VIE, 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, 2019. The results for the three months ended September 30, 2019 are not necessarily indicative of the results to be expected for the full year ending June 30, 2020. 

F-5

NOTE 2 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

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 Shuhai Beijing, its VIE. ASC 810 requires a VIE to be consolidated if the company is subject to a majority of the risk of loss for the VIE or is entitled to receive a majority of the VIE’s residual returns. A VIE is an entity in which a company, through contractual arrangements, bears the risk of, and enjoys the rewards normally associated with ownership of the entity, and therefore the company is the primary beneficiary of the entity.

Under ASC 810, a reporting entity has a controlling financial interest in a VIE, and must consolidate that VIE, if the reporting entity has both of the following characteristics: (a) the power to direct the activities of the VIE that most significantly affect the VIE’s economic performance; and (b) the obligation to absorb losses, or the right to receive benefits, that could potentially be significant to the VIE. The reporting entity’s determination of whether it has this power is not affected by the existence of kick-out rights or participating rights, unless a single enterprise, including its related parties and de - facto agents, have the unilateral ability to exercise those rights. Shuhai Beijing’s actual stockholders do not hold any kick-out rights that affect the consolidation determination.

Through the VIE agreements, the Company is deemed the primary beneficiary of Shuhai Beijing. 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.

VIE Agreements

Operation and Intellectual Property Service Agreement – This agreement allows Tianjin Information to manage and operate Shuhai Beijing and collect 100% of their net profits. Under the terms of the Operation and Intellectual Property Service Agreement, Shuhai Beijing entrusts Tianjin Information to manage its operations, manage and control its assets and financial matters, and provide intellectual property services, purchasing management services, marketing management services and inventory management services to Shuhai Beijing. Shuhai Beijing and its shareholders shall not make any decisions nor direct the activities of Shuhai Beijing without Tianjin Information’s consent.

Shareholders’ Voting Rights Entrustment Agreement – Tianjin Information has entered into a shareholders’ voting rights entrustment agreement (the “Entrustment Agreement”) under which Zhixin Liu and Fu Liu (collectively the “Shuhai Beijing Shareholders”) have vested their voting power in Shuhai Beijing to Tianjin Information or its designee(s). The Entrustment Agreement does not have an expiration date.

Equity Option Agreement –the Shuhai Beijing Shareholders and Tianjin Information entered into an equity option agreement (the “Option Agreement”), pursuant to which the Shuhai Beijing Shareholders have granted Tianjin.

Information or its designee(s) the irrevocable right and option to acquire all or a portion of Shuhai Beijing Shareholders’ equity interests in Shuhai Beijing for an option price of RMB 0.001 for each capital contribution of RMB1.00. Pursuant to the terms of the Option Agreement, Tianjin Information and the Shuhai Beijing shareholders have agreed to certain restrictive covenants to safeguard the rights of Tianjin Information under the option Agreement. Tianjin Information agreed to pay RMB1.00 annually to Shuhai Beijing Shareholders to maintain the option rights. Tianjin Information may terminate the Option Agreement upon prior written notice. The Option Agreement is valid for a period of 10 years from the effective date and renewable at Tianjin Information’s option.

Equity Pledge Agreement – Tianjin Information and the Shuhai Beijing Shareholders entered into an equity pledge agreement on October 27, 2015 (the “Equity Pledge Agreement”). The Equity Pledge Agreement serves to guarantee the performance by Shuhai Beijing of its obligations under the Operation and Intellectual Property Service Agreement and the Option Agreement. Pursuant to the Equity Pledge Agreement, Shuhai Beijing Shareholders have agreed to pledge all of their equity interests in Shuhai Beijing to Tianjin Information. Tianjin Information has the right to collect any and all dividends paid on the pledged equity interests during the pledge period. Pursuant to the terms of the Equity Pledge Agreement, the Shuhai Beijing Shareholders have agreed to certain restrictive covenants to safeguard the rights of Tianjin Information. Upon an event of default or certain other agreed events under the Operation and Intellectual Property Service Agreement, the Option Agreement and the Equity Pledge Agreement, Tianjin Information may exercise the right to enforce the pledge.

F-6

NOTE 2 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

The following financial statement amounts and balances of the VIE were included in the accompanying consolidated financial statements as of September 30, 2019 and June 30, 2019 and for the three months ended September 30, 2019 and 2018, respectively:

	September 30, 2019 (Unaudited)		June 30, 2019
Current assets	$	702,885	$	1,573,413
Non-current assets		309,044		96,927
Total assets	$	1,011,929	$	1,670,340
Current liabilities	$	5,736,211	$	6,232,836
Non-current liabilities		-		-
Total liabilities	$	5,736,211	$	6,232,836

	Three Months Ended September 30 (Unaudited)
	2019			2018
Revenue	$	-		$	-
Gross profit		-			-
Net loss	$	(347,824	)	$	(366,615	)

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 periods. Actual results could differ from those estimates. The significant areas requiring the use of management estimates include, but are not limited to, the estimated useful life and residual value of property, plant and equipment, provision for staff benefits, recognition and measurement of deferred income taxes and the valuation allowance for deferred tax assets. Although these estimates are based on management’s knowledge of current events and actions management may undertake in the future, actual results may ultimately differ from those estimates and such differences may be material to 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.

F-7

NOTE 2 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

If the assessment indicates that a potential material loss contingency is not probable but is reasonably possible, or is probable but cannot be estimated, the nature of the contingent liability, together with an estimate of the range of possible loss if determinable and material, would be disclosed. As of September 30, 2019 and June 30, 2019, the Company has no such contingencies.

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.

Inventory

Inventory, comprised principally of smart student identification cards related to the Company’s “Safe Campus” security product, as well as products associated therewith comprised of routers to be 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, 2019 and June 30, 2019.

ESCROW

Escrow represents cash held in an indemnification escrow account related to requirements of the financing agreement signed with the underwriter of the Company’s initial public offering for a period of 18 months or longer subsequent to the closing of the initial public offering on December 21, 2018.

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
Vehicles	5 years

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

INTANGIBLE ASSETS

Intangible assets with finite lives are amortized using the straight-line method over their estimated period of benefit. Evaluation of the recoverability of intangible assets is made to take into account events or circumstances that warrant revised estimates of useful lives or that indicate that impairment exists. All of the Company’s intangible assets are subject to amortization. No impairment of intangible assets has been identified as of the balance sheet dates.

Intangible assets include licenses, certificates, patents and other technology and are amortized over their useful life of five to ten years.

F-8

NOTE 2 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

FAIR VALUE MEASUREMENTS AND DISCLOSURES

FASB ASC Topic 820, “Fair Value Measurements,” defines fair value, and establishes a three-level valuation hierarchy for disclosures 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 other than those in level 1 quoted prices for similar assets and liabilities in active markets, and inputs that are observable for the asset or liability, either directly or indirectly, for substantially the full term of the financial instrument.

● Level 3 inputs to the valuation methodology are unobservable and significant to the fair value measurement.

The carrying value of cash, inventory, prepaid expenses and other current assets, accounts payable, accrued expenses and other payables, advances from customers, and loan payable-shareholder, approximate their fair values due to their short maturities.

As of September 30, 2019 and June 30, 2019, 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 and equipment are reviewed for impairment whenever events or changes in circumstances indicate that the carrying value of an asset may not be recoverable, or it is reasonably possible that these assets could become impaired as a result of technological or other changes. The determination of recoverability of assets to be held and used is made by comparing the carrying amount of an asset to future undiscounted cash flows to be generated by the asset.

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

On July 1, 2018, the Company adopted Accounting Standards Update (“ASU”) 2014-09 Revenue from Contracts with Customers (ASC 606) using the modified retrospective method for contracts that were not completed as of July 1, 2018.  This did not result in an adjustment to retained earnings upon adoption of this new guidance, as the Company’s revenue was recognized based on the amount of consideration, we expect to receive in exchange for satisfying the performance obligations.

The core principle underlying the ASC 606 is that the Company will recognize revenue to represent the transfer of goods and services to customers in an amount that reflects the consideration to which the Company expects to be entitled in such exchange. This will require the Company to identify contractual performance obligations and determine whether revenue should be recognized at a point in time or over time, based on when control of goods and services transfers to a customer. The Company’s revenue streams are recognized at a point in time, based on when control of goods and services transfers to a customer.

ASC 606 requires the use of a new five-step model to recognize revenue from customer contracts. The five-step model requires that the Company (i) identify the contract with the customer, (ii) identify the performance obligations in the contract, (iii) determine the transaction price, including variable consideration to the extent that it is probable that a significant future reversal will not occur, (iv) allocate the transaction price to the respective performance obligations in the contract, and (v) recognize revenue when (or as) the Company satisfies each performance obligation. The application of the five-step model to the revenue streams compared to the prior guidance did not result in significant changes in the way the Company records its revenue. Upon adoption, the Company evaluated its revenue recognition policy for all revenue streams within the scope of the ASC 606 under previous standards and using the five-step model under the new guidance and confirmed that there were no differences in the pattern of revenue recognition.

F-9

NOTE 2 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

The Company is seeking to derive its revenues from professional service contracts with its customers, with revenues being recognized upon delivery of services and products. Persuasive evidence of an arrangement is demonstrated via professional service contracts and invoices; and the service price to the customer is fixed upon acceptance of the professional services contract. The Company will recognize revenue when professional service is rendered to the customer by the Company and collectability of payment is reasonably assured. These revenues will be recognized at a point in time after all performance obligations are satisfied.

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 also include the prior years’ net operating losses carried forward. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in the results of operations in the period that includes the enactment date. A valuation allowance is provided to reduce the deferred tax assets reported if based on the weight of the available positive and negative evidence, it is more likely than not some portion or all of the deferred tax assets will not be realized.

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.

RESEARCH AND DEVELOPMENT EXPENSES

Research and development expenses are expensed in the period when they are incurred. For the three months ended September 30, 2019 and 2018, the Company incurred research and development expenses of $51,207 and $62,771, respectively. 

CONCENTRATION OF CREDIT RISK 

The Company maintains cash in accounts with state-owned banks within the PRC. Cash in state-owned banks less than RMB500,000 ($69,946) is 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.

Cash denominated in RMB with a U.S. dollar equivalent of $117,611 and $1,395,104 at September 30 and June 30, 2019, respectively, were held in accounts at financial institutions located in the PRC‚ which is not freely convertible into foreign currencies. In addition, as of September 30, 2019, approximately $48,000 of such funds were not covered by insurance in the PRC. While management believes that these financial institutions are of high credit quality, it also continually monitors their credit worthiness. The Company, its subsidiaries and VIE have not experienced any losses in such accounts and do not believe the cash is exposed to any significant risk. Cash held in accounts at U.S. financial institutions are insured by the Federal Deposit Insurance Corporation or other programs subject to certain limitations up to $250,000 per depositor. As of September 30, 2019, the cash balance of approximately $578,684 was maintained at U.S. financial institutions, of which approximately $329,000 was not insured. Cash was maintained at financial institutions in Hong Kong, and were insured by the Hong Kong Deposit Protection Board up to a limit of HK $500,000 (approximately $64,000). As of September 30, 2019, the cash balance of approximately $2,621,860 was maintained at financial institutions in Hong Kong, of which approximately $2,578,000 of cash balance was not insured.

F-10

NOTE 2 – 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 United States dollars(“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 (loss) in accordance with ASC Topic 220, “Comprehensive Income.” Gains and losses resulting from foreign currency transactions are reflected in the statements of operations. 

The Company follows FASB ASC Topic 220-10, “Comprehensive Income (loss).” Comprehensive income(loss) comprises net income(loss) and all changes to the statements of changes in stockholders’ equity, except those due to investments by stockholders, changes in additional paid-in capital and distributions to stockholders.

The exchange rates used to translate amounts in RMB to USD for the purposes of preparing the consolidated financial statements were as follows

	September 30,		September 30,		June 30,
	2019		2018		2019
Period end USD: RMB exchange rate		7.1484		6.8665		6.8668
Average USD: RMB exchange rate		7.0188		6.8031		6.8263

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-month 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. The Company adopted ASU 2016-02 on July 1, 2019. The Company adopted the practical expedient that allows lessees to treat the lease and non-lease components a lease as single lease component. On July 1, 2019, the Company adopted the Topic 842, as of July 1, 2019, the adoption of this standard resulted in the recording of right-of use assets and operating lease liabilities, (see Note 12).

In February 2018, the FASB issued ASU 2018-02, Income Statement - Reporting Comprehensive Income (Topic 220): Reclassification of Certain Tax Effects from Accumulated Other Comprehensive Income. The amendments in this ASU affect any entity that is required to apply the provisions of Topic 220, Income Statement – Reporting Comprehensive Income, and has items of other comprehensive income for which the related tax effects are presented in other comprehensive income as required by GAAP. The amendments in this ASU are effective for all entities for fiscal years beginning after December 15, 2018, and interim periods within those fiscal years. Management does not believe the adoption of this ASU would have a material effect on the Company’s consolidated financial statements.

In August 2018, the FASB issued ASU 2018-13, “Fair Value Measurement (Topic 820): Disclosure Framework — Changes to the Disclosure Requirements for Fair Value Measurement” (“ASU 2018-13”). ASU 2018-13 removes, modifies and adds certain disclosure requirements in Topic 820 “Fair Value Measurement”. ASU 2018-13 eliminates certain disclosures related to transfers and the valuations process, modifies disclosures for investments that are valued based on net asset value, clarifies the measurement uncertainty disclosure, and requires additional disclosures for Level 3 fair value measurements. ASU 2018-13 is effective for the Company for annual and interim reporting periods beginning August 1, 2020. The Company is currently evaluating the impact of this new standard on its consolidated financial statements and related disclosures.

F-11

NOTE 2 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

In May 2019, the FASB issued ASU 2019-05, which is an update to ASU Update No. 2016-13, Financial Instruments—Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments, which introduced the expected credit losses methodology for the measurement of credit losses on financial assets measured at amortized cost basis, replacing the previous incurred loss methodology. The amendments in Update 2016-13 added Topic 326, Financial Instruments—Credit Losses, and made several consequential amendments to the Codification. Update 2016-13 also modified the accounting for available-for-sale debt securities, which must be individually assessed for credit losses when fair value is less than the amortized cost basis, in accordance with Subtopic 326-30, Financial Instruments—Credit Losses—Available-for-Sale Debt Securities. The amendments in this Update address those stakeholders’ concerns by providing an option to irrevocably elect the fair value option for certain financial assets previously measured at amortized cost basis. For those entities, the targeted transition relief will increase comparability of financial statement information by providing an option to align measurement methodologies for similar financial assets. Furthermore, the targeted transition relief also may reduce the costs for some entities to comply with the amendments in Update 2016-13 while still providing financial statement users with decision-useful information. ASU 2019-05 is effective for the Company for annual and interim reporting periods beginning August 1, 2020. The Company is currently evaluating the impact of this new standard on its consolidated financial statements and related disclosures.

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

Note 3 – PROPERTY AND EQUIPMENT

Property and equipment is summarized as follows:

	September 30, 2019 (Unaudited)		June 30, 2019
Furniture and fixtures	$	77,980	$	83,437
Vehicle		2,798		2,913
Office equipment		56,042		54,641
Subtotal		136,820		140,991
Less: accumulated depreciation		101,063		99,875
Total	$	35,757	$	41,116

Depreciation expense for the three months ended September 30, 2019 and 2018 was $5,217 and $11,445 respectively.

NOTE 4 – intangible assets

Intangible assets are summarized as follows:

	September 30, 2019 (Unaudited)		June 30, 2019
Software registration right	$	36,352	$	37,843
Patent		14,684		15,286
Value-added telecommunications business license		11,218		11,678
Technology development		2 ,183,343		500,000
Subtotal		2,245,597		564,807
Less: Accumulated amortization		10,363		8,996
Total	$	2,235,234	$	555,811

F-12

NOTE 4 – intangible assets (Continued)

Amortization expense for the three months ended September 30, 2019 and 2018 were $1,753 and $717, respectively.

On May 28, 2019, the Company entered into an agreement  with SDT Trade Co., Ltd., an unaffiliated party (“SDT”). SDT will assist the Company with technical development work related to the Company’s security-related software and systems. Pursuant to the agreement, SDT will complete certain development work within twelve months and thereafter maintain the system for thirty-six months. The total amount to be paid under the agreement is $1,200,000. As of September 30, 2019, the Company paid SDT $1,000,000 recorded as intangible assets. However, the development has not commenced yet since the Company has not finalized the technology specifications.

On July 2, 2019, the Company entered into a technology development service agreement  with HW (HK) Limited, an unaffiliated party. Pursuant to the agreement, the Company appointed HW (HK) Limited to develop an eye protection technical system for a two period ending July 1, 2021. The total payments to made under the agreement is $1,200,000. As of September 30, 2019, the Company paid HW (HK) Limited $900,000 and the technology development is in process.

On July 16, 2019, the Company entered into an agreement with Beijing Chuangyan Zhixing Education Technology Co., Ltd., an unaffiliated party, to develop and promote an essential-qualities-oriented education (the so-called Suzhi education) platform. The Company plans to introduce this platform to schools across China. Pursuant to the agreement, the Company will pay RMB 2,000,000 (approximately $285,000) as fund to purchase the product needed. As of September 30, 2019, the Company paid $283,343 recorded as intangible assets.

Note 5 – Prepaid expenses and other current assets

Prepaid expenses and other current assets consisted of the following:

	September 30, 2019 (Unaudited)		June 30, 2019
Security deposit	$	156,189	$	46,933
Prepaid expenses and advances		82,505		34,181
Others		13,539		24,818
Total	$	252,233	$	105,932

Note 6 – Prepaid expenses – non Current

Prepaid expenses-noncurrent assets consisted of the following:

	September 30, 2019 (Unaudited)		June 30, 2019
Prepaid expenses	$	125,509	$	-
Lease deposits		95,887		-
Total	$	221,396	$	-

Note 7 – accrued expenses and other payables

Accrued expenses and other payable consisted of the following:

	September 30, 2019 (Unaudited)		June 30, 2019
Deposit	$	-	$	30,525
Salary and other payables		78,652		234,159
Total	$	78,652	$	264,684

NOTE 8 – ADVANCES FROM CUSTOMERS

On March 5, 2018, the Company entered into separate agreements with two sales agents. Pursuant to the agreements, the Company authorized the agents to market the Company’s Safe Campus Management System. The term of the agreements are for five years and will expire on March 6, 2023 and July 1, 2023, respectively.

As of September 30 and June 30, 2019, the Company recorded $1,266,941 and $1,318,897 of advances from the sales agents, respectively.

F-13

Note 9 – related party transactions

The Company’s President, Zhixin Liu, paid certain operating expenses on behalf of the Company. As of September 30 and June 30, 2019, the amounts due to the President were $0 and $86,733 respectively. These amounts were interest-free, unsecured and due on demand.

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 $750. The agreement expired on December 31, 2016. The agreement was renewed and the term was extended to December 31, 2020. The rent paid under this agreement was $2,137 and $2,205 for the three months ended September 30, 2019 and 2018, respectively.

On November 11, 2017, the Company bought a used car for $3,000 from Harbin Jinfenglvyuan Biotechnology Co., Ltd, a related entity owned by Mr. Fu Liu, a director of the Company.

In April 2017, the Company’s President entered into an apartment rental agreement with the Company. Pursuant to the agreement, the Company rents an apartment from the Company’s President with an annual rent of approximately $2,849. The agreement was renewed and the term was extended to April 30, 2020. The rent paid under this agreement was $712 and $735 for the three months ended September 30, 2019 and 2018, respectively. 

On April 22, 2019, the Company borrowed RMB400,000 (or approximately $57,000) with no interest from the Company’s President to pay operating expenses. The loan was repaid on July 8, 2019.

Note 10 – COMMON STOCK

On August 22, 2018, the Company’s Board of Directors and majority stockholders adopted the 2018 Equity Incentive Plan (the “2018 Plan”) for the Company to award up to a maximum of 4,000,000 shares of its Common Stock, to attract and retain the best available personnel, provide additional incentives to employees, directors and consultants and promote the success of its business. No awards have been granted under the 2018 Plan as of the date of this report, but the Company’s Board of Directors or a designated committee thereof will have the ability in its discretion from time to time to make awards under the 2018 Plan, including to its officers and directors of the Company.

In September 2018, the Company sold 84,000 shares of Common Stock to third party investors at RMB 20 (approximately $2.94) per share and received proceeds of RMB 1,680,000 (approximately $244,666).

In November 2018, the Company sold 21,500 shares of Common Stock to third party investors at $2.92 per share and received proceeds of $62,780.

On December 21, 2018, the Company successfully completed a registered, underwritten initial public offering and concurrent listing of the Company’s Common Stock on the NASDAQ Capital Market, which offering generated gross proceeds of $6.7 million before deducting underwriter’s commissions and other offering costs, resulting in net proceeds of approximately $5.7 million, of which $1,000,000 was placed in an escrow account. The escrow fund is being held and disbursed by the escrow agent pursuant to the terms and conditions of a certain Indemnification Escrow Agreement between the Company and the underwriter of the offering. $400,000 of the escrow fund was disbursed to the Company in February 2019 when the underwriter confirmed receipt of a written legal opinion from PRC legal counsel in connection with such offering. The Company sold 1,667,500 shares of Common Stock (including shares issued pursuant to the underwriter’s over-allotment option) at an offering price of $4 per share. The Company’s Common Stock began trading on the NASDAQ Capital Market beginning on December 19, 2018 under the symbol “DTSS.”

In addition, the Company issued warrants to the representative of the underwriters to purchase 101,500 shares of Common Stock at an exercise price of $6 per share. These warrants may be purchased in cash or via cashless exercise, will be exercisable for five years from December 21, 2018 through December 17, 2023.

F-14

Note 11 – 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, 2018 as the US entity incurred losses. For the three months ended September 30, 2019, US entity had $72,873 of net loss.

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, 2019 and 2018 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 Company received a tax holiday with a 15% corporate income tax rate since it qualified as a high-tech company.

The Company has generated net operating losses (“NOL”) of $396,985 and $371,659 during three months ended September 30, 2019 and 2018, respectively. As of September 30, 2019, the Company has approximately $369,870 of NOL related to its PRC subsidiaries and VIEs that expire in years 2019 through 2023. In assessing the realization of deferred tax assets, management considers whether it is more likely than not that some portion or all of the deferred tax assets will not be realized. The ultimate realization of deferred tax assets is dependent upon the Company’s future generation of taxable income during the periods in which temporary differences representing net future deductible amounts become deductible. Management considers the scheduled reversal of deferred tax liabilities, projected future taxable income and tax planning strategies in making this assessment. After consideration of all the information available, management believes that significant uncertainty exists with respect to future realization of the deferred tax assets and has therefore established a full valuation allowance as of September 30, 2019 and 2018.

The following table reconciles the U.S. statutory rates to the Company’s effective tax rate for the three months ended September 30, 2019 and 2018:

	Three Months ended September 30, (Unaudited)
	2019			2018
Statutory PRC. tax rate		25.0	%		25.0	%
Effect of PRC tax rate holiday		-10.0	%		-10.0	%
Valuation allowance		15.0	%		15.0	%
		0.0	%		0.0	%

The provisions for income taxes is summarized as follows:

	Three months ended September 30, 2019 (Unaudited)			Three months ended September 30, 2018 (Unaudited)
Current	$	-		$	-
Deferred		48,617			92,915
Increase in valuation allowance		(48,617	)		(92,915	)
Total	$	-		$	-

The Company’s net deferred tax asset as of September 30, 2019 and June 30, 2019 is as follows:

	September 30, 2019 (Unaudited)			June 30, 2019
Deferred tax asset – net operating loss	$	1,248,489		$	1,199,872
Valuation allowance		(1,248,489	)		(1,199,872	)
Net deferred tax asset	$	-		$	-

The valuation allowance increased by $48,617 and $92,915 for the three months ended September 30, 2019 and 2018, respectively.

F-15

NOTE 12 – Commiments

Lease Agreement

In December 2017, the Company renewed a one-year operating lease agreement for its office in Beijing. The lease was to expire on February 28, 2019 and has a monthly rent of RMB 35,192 (or approximately $5,000). The lease was renewed and expired on August 31, 2019.

In December 2017, the Company renewed the one-year property management contract. The contract was to expire on February 28, 2019 and has a monthly management fee of RMB 70,384 (or approximately $10,000). The contract was renewed and expired to August 31, 2019.

On March 20, 2019, the Company entered into the one-year operating lease agreement for a senior management’s dormitory. Pursuant to the lease agreement, the lease expires on March 22, 2020 and has a monthly rent of RMB 5,200 (or approximately $760). Future rental payment due under the lease is RMB 30,781 (or approximately $4,400).

On July 30, 2019, the Company entered into an operating lease agreement for its office in Beijing. Pursuant to the lease agreement, the lease will start on October 8, 2019 and expire on October 7, 2022 and has a monthly rent of RMB 225,923 (or approximately $32,000). The lease required a security deposit of three months’ rent of RMB677,769 (or approximately $97,000) The Company will receive a six-month rent abatement. Future rental payment due under the lease is RMB6,386,935 (or approximately $910,000).

On July 30, 2019, the Company entered into a property service agreement for its office in Beijing. Pursuant to the property service agreement, the agreement commenced on August 9, 2019 and will expire on October 8, 2022, and has a quarterly fee of RMB 202,352 (or approximately $29,000). The deposit was RMB202,352 (or approximately $29,000). Future payment due under the agreement is RMB2,144,777 (or approximately $305,500).

The following table summarizes the impact of our operating leasing on our consolidated unaudited financial statements:

Consolidated statement of Operations

	Three Months Ended September 30,
	2019
	(Unaudited)
Operating lease expense	$	32,306

Consolidated Balance Sheet

	September 30, 2019 (Unaudited)
Right-of-use assets	$	1,197,819
Lease liabilities	$	358,938
Lease liabilities-non current	$	838,881
Weighted average remaining lease term		2.95 years
Weighted average discount rate		4.75	%

Consolidated Statement of Cash Flows

	Three Months Ended September 30,
	2019 (Unaudited)
Cash flow from operating activities
Right-of-use assets recognized in exchange for operating lease liabilities	$	1,219,937

The total future minimum lease payment and management fee as of September 30, 2019 are payable as follows:

Twelve months ending September 30,	Minimum Lease Payment
2020	$	450,730
2021		467,630
2022		279,459
2023		-
2024		-
Thereafter		-
Total minimum payments required	$	1,197,819

F-16

Note 13 – Parent COMPANY Financial INFORMATION

The following schedules present the balance sheets of Datasea, Inc. (the parent company) as of September 30 and June 30, 2019, and the income statements for the three months ended September 30, 2019 and 2018.

	September 30, 2019 (Unaudited)			June 30, 2019
Cash	$	578,684		$	6,751,557
Long term investment		4,500,480			4,500,480
Other receivable and prepaid expense		20,000			-
Escrow		600,000			600,000
Total Assets	$	5,699,164		$	5,772,037
Accrued expenses and other payables	$	750		$	750
Total liabilities		750			750
Common stock		20,944			20,944
Additional paid-in capital		5,739,948			5,739,948
Deficit		(62,478	)		(10,395	)
Total Stockholders’ Equity		5,698,414			5,771,287
Total Liabilities and Stockholders’ Equity	$	5,699,164		$	5,772,037

	Three Months Ended September 30, (Unaudited)
	2019			2018
Revenue	$	-		$	-
Cost of goods sold		-			-
Gross profit		-			-
Selling expenses		-			-
General and administrative expenses		75,458			-
Total operating expenses:		75,458			-
Other income(expense):
Other (expense)		(165	)
Interest income		2,750			-
Total other income		2,585			-
Net loss	$	(72,873	)	$	-

NOTE 14 – SUBSEQUENT EVENTS 

The Company has reviewed its subsequent events through November 14, 2019, 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. 

F-17

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

Cautionary Note Regarding 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 and generate revenue;

● uncertainties relating to general economic, political and business conditions in China;

● industry trends and 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 advertising model and related 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; and

● availability, terms and deployment of capital; relationships with third-party equipment suppliers;

Overview

We were 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 6,666,667 shares of common stock of the Company to Zhixin Liu, one of the owners of Shuhai Skill (HK) as defined below. On October 27, 2016, Mr. Sun sold his remaining 1,666,667 shares of common stock of the Company to Ms. Liu.

2

On October 29, 2015, the Company entered into a share exchange agreement (the “Exchange Agreement”) with the shareholders (the “Shareholders”) 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 Shareholders, who together owned 100% of the ownership rights in Shuhai Skill (HK), transferred all of the issued and outstanding ordinary shares of Shuhai Skill (HK) to the Company in exchange for the issuance of an aggregate of 6,666,667 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, and Harbin Information Sea Information Technology Co., Ltd., 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 survivor. Accordingly, the historical financial statements presented are those of Shuhai Skill (HK) and its consolidated subsidiaries and VIE.

Following the Share Exchange, the Shareholders, being Zhixin Liu and her father, Fu Liu, owned approximately 82% of the outstanding shares of common stock. As of October 29, 2015, there were 18,333,333 shares of common stock issued and outstanding, 15,000,000 of which were beneficially owned by Zhixin Liu and Fu Liu.

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

On April 12, 2018, our board of directors and stockholders approved a one-for-three reverse stock split of our issued and outstanding shares of common stock, which became effective on May 1, 2018, decreasing the number of outstanding shares from 57,511,771 to 19,170,827. Subsequent to the split, the number of our outstanding shares increased from to 19,170,827 to 19,170,846 to accommodate certain shareholders’ positions due to rounding elections payable at the beneficial owner level. Unless otherwise stated, all shares and per share amounts in this Report have been retroactively adjusted to give effect to this stock split.

On August 22, 2018, our board of directors and majority stockholders adopted the Company’s 2018 Equity Incentive Plan (the “2018 Plan”) under which we may award up to a maximum of 4,000,000 shares of common stock to attract and retain personnel, provide additional incentives to employees, directors and consultants and promote the success of our business. No awards have been granted under the 2018 Plan as of the date of this Report, but our Board or a designated committee thereof will have the ability in its discretion from time to time to make awards under the 2018 Plan, including to our officers and directors.

On December 21, 2018, the Company successfully completed a registered, underwritten initial public offering and concurrent listing of the Company’s common stock on the NASDAQ Capital Market, which offering generated gross proceeds of $6.7 million before deducting underwriter’s commissions and other offering costs, resulting in net proceeds of approximately $5.7 million, of which $1,000,000 was placed in an escrow account. $600,000 of the escrow fund was held and disbursed by the escrow agent pursuant to the terms and conditions of a certain Indemnification Escrow Agreement between the Company and the underwriter of the offering. $400,000 of the escrow fund was disbursed to the Company in February 2019 when the underwriter confirmed receipt of a written legal opinion from PRC legal counsel in connection with such offering. The Company sold 1,667,500 shares of common stock (including shares issued pursuant to the underwriter’s over-allotment option) at an offering price of $4 per share. In connection with the offering, the Company’s common stock began trading on the NASDAQ Capital Market beginning on December 19, 2018 under the symbol “DTSS.”

In addition, the Company issued warrants to the representative of the underwriters to purchase 101,500 shares of common stock at an exercise price of $6.00 per share. These warrants may be purchased in cash or via cashless exercise, will be exercisable for five years from December 21, 2018 through December 17, 2023.

We believe that the increased demand for security equipment and related products in China presents an attractive opportunity for the Company to establish and grow its business in the next twelve months.

3

Results of Operations

Three Months Ended September 30, 2019 and 2018

Revenue

We did not generate any revenue during three months ended September 30, 2019 and 2018.

Cost of Goods and Gross Profit

We recorded $0 and $7,434 of cost of goods sold and $0 and $7,434 of gross deficit for the three months ended September 30, 2019 and 2018, respectively.

Selling, General and Administrative Expenses:

Selling expenses were $51,175 and $76,879 for the three months ended September 30, 2019 and 2018, respectively. For the three months ended September 30, 2019 and 2018, general and administrative expenses were $307,259 and $226,571, respectively.

We incurred research and development expenses of $51,207 and $62,771 during the three months ended September 30, 2019 and 2018, respectively.

Net Loss

Due to our lack of recurring revenue, we generated net losses of $396,985 and $371,659 for the three months ended September 30, 2019 and 2018, respectively.

Liquidity and Capital Resources

We have funded our operations to date primarily through the sale of our common stock and shareholder loans. During the six months period ended September 30, 2019, we paid $1.9 million to two third-party agencies for research and development of our new product, which reduced our liquidity position. However, based on our current cash level and management’s forecast of operating cash flows, we believe we have sufficient resources to fund our operations through December 2020.

Our management recognizes that we must generate sales and additional cash resources in order for our Company to continue our operations. Based on increased demand for security services in China, our management believes in the potential for growth in our business. On December 18, 2018, we completed a registered underwritten common stock offering with net proceeds $5.7 million after deducting underwriter’s commission and other offering costs, which will help our cash flow during fiscal 2020.

We expect to generate revenue through expanding our current Safe Campus business and through product innovation and development, which is expected to lead to the introduction of new products such as the scenic area and public community security products. If revenues are not generated or do not reach the level anticipated in the our plan, in order to maintain working capital sufficient to support the Company’s operations and finance the future growth of its business, we expect to fund any cash flow shortfall through financial support from our majority stockholders (who are also our board members or officers) and public or private issuance of securities. However, readers are cautioned that additional cash resources may not be available to us on desirable terms, or at all, if and when needed by us.

As of September 30, 2019, we had a working capital of $1,923,691. Our current assets on September 30, 2019 were $3,640,794 primarily consisting of cash of $3,318,155, inventory of $70,406 and prepaid expenses and other current assets of $252,233. Our current liabilities were primarily composed of accounts payable of $12,572, accrued expenses and other payables of $78,652, operating lease liabilities of $358,938 and advances from customer of $1,266,941.

4

As of June 30, 2019, we had a working capital of $4,568,461. Our current assets on June 30, 2019 were $6,251,863 primarily consisting of cash of $6,072,637, inventory of $73,294 and prepaid expenses and other current assets of $105,932. Our current liabilities were primarily composed of accounts payable of $13,088, accrued expenses and other payables of $264,684, loan payable to shareholder of $86,733 and advances from customer of $1,318,897.

Cash Flow from Operating Activities

Net cash used in operating activities was  $944,384 during the three months ended September 30, 2019, which consisted of our net loss of $396,985, offset by depreciation and amortization of $6,969, a change of prepaid expenses and other current assets of $378,368, and a change of accrued expenses and other payables of $176,000.

Net cash used in operating activities was $435,390 during the three months ended September 30, 2018, which consisted of our net loss of $371,659, offset by depreciation and amortization of $12,162, a change of prepaid expenses and other current assets of $5,556, and a change of accrued expenses and other payables of $81,449.

Cash Flow from Investing Activities

Net cash used in investing activities totaled $1,689,983 for the three months ended September 30, 2019, which primarily related to cash paid for the acquisition of office furniture and equipment of $1,408, and for intangible assets of $1,688,575.

Cash used in investing activities totaled $19,584 for the three months ended September 30, 2018, which primarily related to cash paid for the acquisition of office furniture and equipment of $4,881 and for a patent of $14,703.

Cash Flow from Financing Activities

Net cash used in financing activities was $84,855 during the three months ended September 30, 2019, which primarily consisted of payment of a shareholder loan, net of $84,855.

Net cash provided by financing activities was $220,473 during the three months ended September 30, 2018, which primarily consisted of payment of a shareholder loan, net of $26,471, and the net proceeds from issuance of the Company’s common stock of $246,944.

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.

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.

5

Upon the closing of our registered underwritten offering in December 2018, we appointed Jijin Zhang as our chief financial officer to lead our accounting and financial reporting effort. We also established an audit committee of our board of directors to oversee all aspects of our internal accounting control and corporate governance functions. In addition, we have adopted internal control policies, including but not limited to a cash flow control policy, review of the accounting professional’s duties and responsibilities handbook, a travel allowance policy, a budget approval process, a reimbursement policy, a receivable policies, an asset control policy, an internal auditing policy and a cost accounting policy. Besides, we established an internal audit department led by the director of internal audit and a legal team to ensure proper compliance and risk management. We plan to take steps to enhance and improve the design of our internal controls over financial reporting. We expect to further implement the following measures in the fiscal year ending June 30, 2020 to remediate the material weaknesses identified, subject to obtaining additional financing, including: (i) appointing additional qualified personnel to address inadequate segregation of duties and ineffective risk management; and (ii) adopting sufficient written policies and procedures for accounting and financial reporting. The remediation efforts set out above are largely dependent upon our generating more revenue to cover the costs of implementing the changes required.

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

Other than as described above, there were no changes in our internal control over financial reporting during the quarter ended September 30, 2019 that have materially affected or are reasonably likely to materially affect, our internal control over financial reporting.

6

PART II OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

We are 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

None.

ITEM 3. DEFAULTS UPON SENIOR SECURITIES

Not applicable.

ITEM 4. MINE SAFETY DISCLOSURES.

Not applicable.

ITEM 5. OTHER INFORMATION

None.

ITEM 6. EXHIBITS.

Exhibit	Description
31.1*	Certification by Chief Executive Officer pursuant to Sarbanes Oxley Section 302
31.2*	Certification by 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.

7

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, 2019	By:	/s/ Zhixin Liu
	Name:	Zhixin Liu
	Title:	Chief Executive Officer (principal executive officer)

Date: November 14, 2019	By:	/s/ Jijin Zhang
	Name:	Jijin Zhang
	Title:	Chief Financial Officer (principal accounting officer)

8

EX-31.1

Exhibit 31.1

CERTIFICATION OF PRINCIPAL EXECUTIVE OFFICER PURSUANT TO RULE 13a-14(a)

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. The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal 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 our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

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

(c) evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based 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 most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

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

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

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

Date: November 14, 2019

/s/ Zhixin Liu

Zhixin Liu

President (principal executive officer),
Chief Executive Office and Chair of the Board of Directors

EX-31.2

Exhibit 31.2

CERTIFICATION OF PRINCIPAL FINANCIAL OFFICER PURSUANT TO RULE 13a-14(a)

I, Jijin Zhang, 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. The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal 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 our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

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

(c) evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based 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 most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

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

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

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

Date: November 14, 2019

/s/ Jijing Zhang

Jijin Zhang

Chief Financial Officer (principal accounting officer)

EX-32.1

Exhibit 32.1

DATASEA INC.

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 this Quarterly Report of Datasea Inc. (the “Company”) on Form 10-Q for the quarter ended September 30, 2019, as filed with the Securities and Exchange Commission on the date hereof (the “Report”), we, Zhixin Liu, Chief Executive Officer of the Company, and Jijin Zhang, Chief Financial Officer of the Company, each certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that, to the best of my knowledge and belief:

(1) The Report fully complies with the requirements of Section 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 result of operations of the Company.

Dated: November 14, 2019	By:	/s/ Zhixin Liu
		Zhixin Liu
		President and Chief Executive Officer

Dated: November 14, 2019	By:	/s/ Jijin Zhang
		Jijin Zhang
		Chief Financial Officer

XML

Parent Company Financial Information (Details 1) - USD ($)	3 Months Ended
	Sep. 30, 2019	Sep. 30, 2018
Income Statement
Cost of goods sold		$ 7,434
Gross profit		(7,434)
General and administrative expenses	307,259	226,571
Parent [Member]
Income Statement
Revenue
Cost of goods sold
Gross profit
Selling expenses
General and administrative expenses	75,458
Total operating expenses:	75,458
Other income(expense) :
Other (expense)	(165)
Interest income	2,750
Total other income	2,585
Net loss	$ (72,873)

XML

Commitments (Details 2) - USD ($)	3 Months Ended
	Sep. 30, 2019	Sep. 30, 2018
Cash flow from operating activities
Right-of-use assets recognized in exchange for operating lease liabilities	$ 1,219,937

XML

Related Party Transactions

3 Months Ended

Sep. 30, 2019

Related Party Transactions [Abstract]

RELATED PARTY TRANSACTIONS

Note 9 – related party transactions

The Company's President, Zhixin Liu, paid certain operating expenses on behalf of the Company. As of September 30 and June 30, 2019, the amounts due to the President were $0 and $86,733 respectively. These amounts were interest-free, unsecured and due on demand.

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 $750. The agreement expired on December 31, 2016. The agreement was renewed and the term was extended to December 31, 2020. The rent paid under this agreement was $2,137 and $2,205 for the three months ended September 30, 2019 and 2018, respectively.

On November 11, 2017, the Company bought a used car for $3,000 from Harbin Jinfenglvyuan Biotechnology Co., Ltd, a related entity owned by Mr. Fu Liu, a director of the Company.

In April 2017, the Company's President entered into an apartment rental agreement with the Company. Pursuant to the agreement, the Company rents an apartment from the Company's President with an annual rent of approximately $2,849. The agreement was renewed and the term was extended to April 30, 2020. The rent paid under this agreement was $712 and $735 for the three months ended September 30, 2019 and 2018, respectively. 

On April 22, 2019, the Company borrowed RMB400,000 (or approximately $57,000) with no interest from the Company's President to pay operating expenses. The loan was repaid on July 8, 2019.

XML

Prepaid Expenses and Other Current Assets

3 Months Ended

Sep. 30, 2019

Deferred Costs, Capitalized, Prepaid, and Other Assets Disclosure [Abstract]

PREPAID EXPENSES AND OTHER CURRENT ASSETS

Note 5 – Prepaid expenses and other current assets

Prepaid expenses and other current assets consisted of the following:

	September 30, 2019 (Unaudited)		June 30, 2019
Security deposit	$	156,189	$	46,933
Prepaid expenses and advances		82,505		34,181
Others		13,539		24,818
Total	$	252,233	$	105,932

XML

Parent Company Financial Information

3 Months Ended

Sep. 30, 2019

Condensed Financial Information Disclosure [Abstract]

PARENT COMPANY FINANCIAL INFORMATION

Note 13 – Parent COMPANY Financial INFORMATION

The following schedules present the balance sheets of Datasea, Inc. (the parent company) as of September 30 and June 30, 2019, and the income statements for the three months ended September 30, 2019 and 2018.

	September 30, 2019 (Unaudited)			June 30, 2019
Cash	$	578,684		$	6,751,557
Long term investment		4,500,480			4,500,480
Other receivable and prepaid expense		20,000			-
Escrow		600,000			600,000
Total Assets	$	5,699,164		$	5,772,037
Accrued expenses and other payables	$	750		$	750
Total liabilities		750			750
Common stock		20,944			20,944
Additional paid-in capital		5,739,948			5,739,948
Deficit		(62,478	)		(10,395	)
Total Stockholders' Equity		5,698,414			5,771,287
Total Liabilities and Stockholders' Equity	$	5,699,164		$	5,772,037

	Three Months Ended September 30, (Unaudited)
	2019			2018
Revenue	$	-		$	-
Cost of goods sold		-			-
Gross profit		-			-
Selling expenses		-			-
General and administrative expenses		75,458			-
Total operating expenses:		75,458			-
Other income(expense):
Other (expense)		(165	)
Interest income		2,750			-
Total other income		2,585			-
Net loss	$	(72,873	)	$	-

XML

Summary of Significant Accounting Policies (Details) - USD ($)	3 Months Ended
	Sep. 30, 2019	Sep. 30, 2018	Jun. 30, 2019
Summary Of Significant Accounting Policies
Current assets	$ 702,885		$ 1,573,413
Non-current assets	309,044		96,927
Total assets	1,011,929		1,670,340
Current liabilities	5,736,211		6,232,836
Non-current liabilities
Total liabilities	5,736,211		$ 6,232,836
Revenue
Gross profit
Net loss	$ (347,824)	$ (366,615)

XML

Property and Equipment (Details) - USD ($)	Sep. 30, 2019	Jun. 30, 2019
Subtotal	$ 136,820	$ 140,991
Less: Accumulated depreciation	101,063	99,875
Total	35,757	41,116
Furniture and Fixtures [Member]
Subtotal	77,980	83,437
Vehicle [Member]
Subtotal	2,798	2,913
Office equipment [Member]
Subtotal	$ 56,042	$ 54,641

XML

Accrued Expenses and Other Payables (Tables)

3 Months Ended

Sep. 30, 2019

Payables and Accruals [Abstract]

Schedule of accrued expenses and other payable

	September 30, 2019 (Unaudited)		June 30, 2019
Deposit	$	-	$	30,525
Salary and other payables		78,652		234,159
Total	$	78,652	$	264,684

XML

Property and Equipment (Tables)

3 Months Ended

Sep. 30, 2019

Property, Plant and Equipment [Abstract]

Schedule of property and equipment

	September 30, 2019 (Unaudited)		June 30, 2019
Furniture and fixtures	$	77,980	$	83,437
Vehicle		2,798		2,913
Office equipment		56,042		54,641
Subtotal		136,820		140,991
Less: accumulated depreciation		101,063		99,875
Total	$	35,757	$	41,116

XML

Prepaid Expenses and Other Current Assets (Details Textual)	3 Months Ended
	Sep. 30, 2019 USD ($)
Prepaid expenses (Textual)
Prepaid expenses	$ 283,343
Payment to purchase the product	285,000
RMB [Member]
Prepaid expenses (Textual)
Payment to purchase the product	$ 2,000,000

XML

Common Stock (Details)		1 Months Ended		3 Months Ended
	Dec. 21, 2018 USD ($) $ / shares shares	Feb. 28, 2019 USD ($)	Nov. 30, 2018 USD ($) $ / shares shares	Sep. 30, 2019 USD ($) $ / shares shares	Sep. 30, 2018 USD ($) $ / shares shares	Sep. 30, 2018 CNY (¥) shares	Jun. 30, 2019 USD ($) $ / shares shares	Sep. 30, 2018 ¥ / shares	Aug. 22, 2018 shares
Maximum common stock awarded | shares				375,000,000			375,000,000
Common stock, outstanding | shares				20,943,846			20,943,846
Common stock, per share | $ / shares				$ 0.001			$ 0.001
Common stock,shares | shares				20,943,846			20,943,846
Proceeds from common stock | $	$ 5,700,000				$ 246,944
Gross proceeds from common stock | $	$ 6,700,000
Deposit on escrow account | $				$ 600,000			$ 600,000
2018 Plan [Member]
Maximum common stock awarded | shares									4,000,000
Investor [Member]
Number of common stock sold | shares					84,000	84,000
Common stock, per share | $ / shares					$ 2.94
Proceeds from common stock | $					$ 244,666
Investor [Member] | RMB [Member]
Common stock, per share | ¥ / shares								¥ 20
Proceeds from common stock | ¥						¥ 1,680,000
Third Party Investor [Member]
Number of common stock sold | shares			21,500
Common stock, per share | $ / shares			$ 2.92
Proceeds from common stock | $			$ 62,780
Escrow Agreement [Member]
Number of common stock sold | shares	1,667,500
Common stock, per share | $ / shares	$ 4
Deposit on escrow account | $	$ 1,000,000
Escrow deposit disbursed | $		$ 400,000
Description of warrants issued	In addition, the Company issued warrants to the representative of the underwriters to purchase 101,500 shares of Common Stock at an exercise price of $6 per share. These warrants may be purchased in cash or via cashless exercise, will be exercisable for five years from December 21, 2018 through December 17, 2023.

XML

Consolidated Statements of Cash Flows (Unaudited) - USD ($)	3 Months Ended
	Sep. 30, 2019	Sep. 30, 2018
Cash flows from operating activities:
Net loss	$ (396,985)	$ (371,659)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation and amortization	6,969	12,162
Expenses paid by president
Changes in current assets and current liabilities:
Prepaid expenses and other assets	(378,368)	5,556
Right-of-use assets	(1,219,937)
Accrued expenses and other payables	(176,000)	(81,449)
Operating lease liabilities	1,219,937
Net cash used in operating activities	(944,384)	(435,390)
Cash flows from investing activities:
Acquisition of office equipment	(1,408)	(4,881)
Acquisition of intangible assets	(1,688,575)	(14,703)
Net cash used in investing activities	(1,689,983)	(19,584)
Cash flows from financing activities:
Payment of loan payable - shareholder, net	(84,855)	(26,471)
Net proceeds from sale of common stock		246,944
Net cash provided by financing activities	(84,855)	220,473
Effect of exchange rate changes on cash	(35,261)	35,092
Net increase in cash	(2,754,482)	(199,408)
Cash - beginning of period	6,072,637	1,031,486
Cash - end of period	3,318,155	832,078
Supplemental disclosures of cash flow information:
Cash paid for interest
Cash paid for income tax

XML

Consolidated Balance Sheets - USD ($)	Sep. 30, 2019	Jun. 30, 2019
Current Assets
Cash	$ 3,318,155	$ 6,072,637
Inventory	70,406	73,294
Prepaid expenses and other current assets	252,233	105,932
Total Current Assets	3,640,794	6,251,863
Property and equipment, net	35,757	41,116
Intangible assets, net	2,235,234	555,811
Prepaid expense - non current	221,396
Escrow	600,000	600,000
Right-of-use assets	1,197,819
Total Assets	7,931,000	7,448,790
Current Liabilities
Accounts payable	12,572	13,088
Accrued expenses and other payables	78,652	264,684
Advances from customer	1,266,941	1,318,897
Loan payable-shareholder		86,733
Operating lease liabilities	358,938
Total Current Liabilities	1,717,103	1,683,402
Other liability
Operating lease liabilities	838,881
Total Other Liability	838,881
Total Liabilities	2,555,984	1,683,402
Commitments and Contingencies
Stockholders' Equity
Common stock, $0.001 par value, 375,000,000 shares authorized, 20,943,846 shares issued and outstanding at September 30 and June 30, 2019, respectively	20,944	20,944
Additional paid-in capital	11,104,666	11,104,666
Accumulated comprehensive income	196,519	189,906
Deficit	(5,947,113)	(5,550,128)
Total Stockholders' Equity	5,375,016	5,765,388
Total Liabilities and Stockholders' Equity	$ 7,931,000	$ 7,448,790

XML

Prepaid Expenses - Non Current (Tables)

3 Months Ended

Sep. 30, 2019

Notes To Financial Statements [Abstract]

Schedule of prepaid expenses non current

	September 30, 2019 (Unaudited)		June 30, 2019
Prepaid expenses	$	125,509	$	-
Lease deposits		95,887		-
Total	$	221,396	$	-

XML

Summary of Significant Accounting Policies (Tables)

3 Months Ended

Sep. 30, 2019

Accounting Policies [Abstract]

Schedule of depreciation of property and equipment

Furniture and fixtures	5-10 years
Office equipment	3-5 years
Vehicles	5 years

Schedule of balances of the VIE

	September 30, 2019 (Unaudited)		June 30, 2019
Current assets	$	702,885	$	1,573,413
Non-current assets		309,044		96,927
Total assets	$	1,011,929	$	1,670,340
Current liabilities	$	5,736,211	$	6,232,836
Non-current liabilities		-		-
Total liabilities	$	5,736,211	$	6,232,836

	Three Months Ended September 30 (Unaudited)
	2019			2018
Revenue	$	-		$	-
Gross profit		-			-
Net loss	$	(347,824	)	$	(366,615	)

Schedule of exchange rates used to translate amounts

	September 30,		September 30,		June 30,
	2019		2018		2019
Period end USD: RMB exchange rate		7.1484		6.8665		6.8668
Average USD: RMB exchange rate		7.0188		6.8031		6.8263

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Organization and Description of Business

3 Months Ended

Sep. 30, 2019

Accounting Policies [Abstract]

ORGANIZATION AND DESCRIPTION OF BUSINESS

NOTE 1 – ORGANIZATION AND DESCRIPTION OF BUSINESS

Datasea Inc. (the "Company", or "we", "us", "our" or similar terminology) 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 6,666,667 shares of common stock, par value $0.001 per share, 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 1,666,667 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 shareholders (the "Shareholders") 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 Shareholders, who together own 100% of the ownership rights in Shuhai Skill (HK), transferred all of the issued and outstanding ordinary shares of Shuhai Skill (HK) to the Company in exchange for the issuance of an aggregate of 6,666,667 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, and Harbin Information Sea Information Technology Co., Ltd., 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 survivor. Accordingly, the historical financial statements presented are those of Shuhai Skill (HK) and its consolidated subsidiaries and VIE.

Following the Share Exchange, the Shareholders, being Zhixin Liu and her father, Fu Liu, owned approximately 82% of the outstanding shares of Common Stock. As of October 29, 2015, there were 18,333,333 shares of Common Stock issued and outstanding, 15,000,000 of which were beneficially owned by Zhixin Liu and Fu Liu.

On May 1, 2018, the Company implemented a 1 for 3 reverse stock split decreasing the shares outstanding from 57,511,711 to 19,170,846. The unaudited condensed consolidated financial statements have been retroactively adjusted to reflect the reverse split.

After the Share Exchange, the Company, through its consolidated subsidiaries and VIE is engaged in providing smart security solutions primarily to schools, tourist or scenic attractions and public communities in China.

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Consolidated Balance Sheets (Parenthetical) - $ / shares	Sep. 30, 2019	Jun. 30, 2019
Statement of Financial Position [Abstract]
Common stock, par value (in dollars per share)	$ 0.001	$ 0.001
Common stock, authorized	375,000,000	375,000,000
Common stock, issued	20,943,846	20,943,846
Common stock, outstanding	20,943,846	20,943,846

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Accrued Expenses and Other Payables (Details) - USD ($)	Sep. 30, 2019	Jun. 30, 2019
Payables and Accruals [Abstract]
Deposit		$ 30,525
Salary payable and other payable	78,652	156,164
Total	$ 78,652	$ 264,684

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Income Taxes (Details)	3 Months Ended
	Sep. 30, 2019	Sep. 30, 2018
Income Tax Disclosure [Abstract]
Statutory PRC. tax rate	25.00%	25.00%
Effect of PRC tax rate holiday	(10.00%)	(10.00%)
Valuation allowance	15.00%	15.00%
Total tax rate	0.00%	0.00%

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Parent Company Financial Information (Details) - USD ($)	Sep. 30, 2019	Jun. 30, 2019
Balance sheets
Cash	$ 69,946
Escrow	600,000	$ 600,000
Total liabilities	838,881
Common stock	20,944	20,944
Parent [Member]
Balance sheets
Cash	578,684	6,751,557
Long term investment	4,500,480	4,500,480
Other receivable and prepaid expense	20,000
Escrow	600,000	600,000
Total Assets	5,699,164	5,772,037
Accrued expenses and other payables	750	750
Total liabilities	750	750
Common stock	20,944	20,944
Additional paid-in capital	5,739,948	5,739,948
Deficit	(62,478)	(10,395)
Total Stockholders' Equity	5,698,414	5,771,287
Total Liabilities and Stockholders' Equity	$ 5,699,164	$ 5,772,037

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Commitments (Details 1) - USD ($)	Sep. 30, 2019	Jun. 30, 2019
Right-of-use assets	$ 1,197,819
Lease liabilities	358,938
Parent [Member]
Right-of-use assets	1,197,819
Lease liabilities	358,938
Lease liabilities-non current	$ 838,881
Weighted average remaining lease term	2 years 11 months 12 days
Weighted average discount rate	4.75%

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Commitments

3 Months Ended

Sep. 30, 2019

Commitments and Contingencies Disclosure [Abstract]

COMMIMENTS

NOTE 12 – Commiments

Lease Agreement

In December 2017, the Company renewed a one-year operating lease agreement for its office in Beijing. The lease was to expire on February 28, 2019 and has a monthly rent of RMB 35,192 (or approximately $5,000). The lease was renewed and expired on August 31, 2019.

In December 2017, the Company renewed the one-year property management contract. The contract was to expire on February 28, 2019 and has a monthly management fee of RMB 70,384 (or approximately $10,000). The contract was renewed and expired to August 31, 2019.

On March 20, 2019, the Company entered into the one-year operating lease agreement for a senior management's dormitory. Pursuant to the lease agreement, the lease expires on March 22, 2020 and has a monthly rent of RMB 5,200 (or approximately $760). Future rental payment due under the lease is RMB 30,781 (or approximately $4,400).

On July 30, 2019, the Company entered into an operating lease agreement for its office in Beijing. Pursuant to the lease agreement, the lease will start on October 8, 2019 and expire on October 7, 2022 and has a monthly rent of RMB 225,923 (or approximately $32,000). The lease required a security deposit of three months' rent of RMB677,769 (or approximately $97,000) The Company will receive a six-month rent abatement. Future rental payment due under the lease is RMB6,386,935 (or approximately $910,000).

On July 30, 2019, the Company entered into a property service agreement for its office in Beijing. Pursuant to the property service agreement, the agreement commenced on August 9, 2019 and will expire on October 8, 2022, and has a quarterly fee of RMB 202,352 (or approximately $29,000). The deposit was RMB202,352 (or approximately $29,000). Future payment due under the agreement is RMB2,144,777 (or approximately $305,500).

The following table summarizes the impact of our operating leasing on our consolidated unaudited financial statements:

Consolidated statement of Operations

	Three Months Ended September 30,
	2019
	(Unaudited)
Operating lease expense	$	32,306

Consolidated Balance Sheet

	September 30, 2019 (Unaudited)
Right-of-use assets	$	1,197,819
Lease liabilities	$	358,938
Lease liabilities-non current	$	838,881
Weighted average remaining lease term		2.95 years
Weighted average discount rate		4.75	%

Consolidated Statement of Cash Flows

	Three Months Ended September 30,
	2019 (Unaudited)
Cash flow from operating activities
Right-of-use assets recognized in exchange for operating lease liabilities	$	1,219,937

The total future minimum lease payment and management fee as of September 30, 2019 are payable as follows:

Twelve months ending September 30,	Minimum Lease Payment
2020	$	450,730
2021		467,630
2022		279,459
2023		-
2024		-
Thereafter		-
Total minimum payments required	$	1,197,819

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Advances from Customers

3 Months Ended

Sep. 30, 2019

Advances from Customers [Abstract]

ADVANCES FROM CUSTOMERS

NOTE 8 – ADVANCES FROM CUSTOMERS

On March 5, 2018, the Company entered into separate agreements with two sales agents. Pursuant to the agreements, the Company authorized the agents to market the Company's Safe Campus Management System. The term of the agreements are for five years and will expire on March 6, 2023 and July 1, 2023, respectively.

As of September 30 and June 30, 2019, the Company recorded $1,266,941 and $1,318,897 of advances from the sales agents, respectively.

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Intangible Assets

3 Months Ended

Sep. 30, 2019

Goodwill and Intangible Assets Disclosure [Abstract]

INTANGIBLE ASSETS

NOTE 4 – intangible assets

Intangible assets are summarized as follows:

	September 30, 2019 (Unaudited)		June 30, 2019
Software registration right	$	36,352	$	37,843
Patent		14,684		15,286
Value-added telecommunications business license		11,218		11,678
Technology development		2 ,183,343		500,000
Subtotal		2,245,597		564,807
Less: Accumulated amortization		10,363		8,996
Total	$	2,235,234	$	555,811

Amortization expense for the three months ended September 30, 2019 and 2018 were $1,753 and $717, respectively.

On May 28, 2019, the Company entered into an agreement  with SDT Trade Co., Ltd., an unaffiliated party ("SDT"). SDT will assist the Company with technical development work related to the Company's security-related software and systems. Pursuant to the agreement, SDT will complete certain development work within twelve months and thereafter maintain the system for thirty-six months. The total amount to be paid under the agreement is $1,200,000. As of September 30, 2019, the Company paid SDT $1,000,000 recorded as intangible assets. However, the development has not commenced yet since the Company has not finalized the technology specifications.

On July 2, 2019, the Company entered into a technology development service agreement  with HW (HK) Limited, an unaffiliated party. Pursuant to the agreement, the Company appointed HW (HK) Limited to develop an eye protection technical system for a two period ending July 1, 2021. The total payments to made under the agreement is $1,200,000. As of September 30, 2019, the Company paid HW (HK) Limited $900,000 and the technology development is in process.

On July 16, 2019, the Company entered into an agreement with Beijing Chuangyan Zhixing Education Technology Co., Ltd., an unaffiliated party, to develop and promote an essential-qualities-oriented education (the so-called Suzhi education) platform. The Company plans to introduce this platform to schools across China. Pursuant to the agreement, the Company will pay RMB 2,000,000 (approximately $285,000) as fund to purchase the product needed. As of September 30, 2019, the Company paid $283,343 recorded as intangible assets.

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Summary of Significant Accounting Policies (Details 1)	3 Months Ended
	Sep. 30, 2019
Vehicle [Member]
Estimated useful life (in years)	5 years
Minimum [Member] | Office equipment [Member]
Estimated useful life (in years)	3 years
Minimum [Member] | Furniture and fixtures [Member]
Estimated useful life (in years)	5 years
Maximum [Member] | Office equipment [Member]
Estimated useful life (in years)	5 years
Maximum [Member] | Furniture and fixtures [Member]
Estimated useful life (in years)	10 years

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Property and Equipment (Details Textual) - USD ($)	3 Months Ended
	Sep. 30, 2019	Sep. 30, 2018
Property and Equipment (Textual)
Depreciation expense	$ 5,217	$ 11,445

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Intangible Assets (Tables)

3 Months Ended

Sep. 30, 2019

Goodwill and Intangible Assets Disclosure [Abstract]

Schedule of intangible assets

	September 30, 2019 (Unaudited)		June 30, 2019
Software registration right	$	36,352	$	37,843
Patent		14,684		15,286
Value-added telecommunications business license		11,218		11,678
Technology development		2 ,183,343		500,000
Subtotal		2,245,597		564,807
Less: Accumulated amortization		10,363		8,996
Total	$	2,235,234	$	555,811

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Subsequent Events

3 Months Ended

Sep. 30, 2019

Subsequent Events [Abstract]

Subsequent event

NOTE 14 – SUBSEQUENT EVENTS 

The Company has reviewed its subsequent events through November 14, 2019, 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.

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Income Taxes (Tables)

3 Months Ended

Sep. 30, 2019

Income Tax Disclosure [Abstract]

Schedule of reconciliation of effective tax rate

	Three Months ended September 30, (Unaudited)
	2019			2018
Statutory PRC. tax rate		25.0	%		25.0	%
Effect of PRC tax rate holiday		-10.0	%		-10.0	%
Valuation allowance		15.0	%		15.0	%
		0.0	%		0.0	%

Schedule of provisions for income taxes

	Three months ended September 30, 2019 (Unaudited)			Three months ended September 30, 2018   (Unaudited)
Current	$	-		$	-
Deferred		48,617			92,915
Increase in valuation allowance		(48,617	)		(92,915	)
Total	$	-		$	-

Schedule of net deferred tax asset

	September 30, 2019 (Unaudited)			June 30, 2019
Deferred tax asset – Net Operating Loss	$	1,248,489		$	1,199,872
Valuation allowance		(1,248,489	)		(1,199,872	)
Net deferred tax asset	$	-		$	-

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Consolidated Statements of Changes in Stockholders' Equity - USD ($)	Common Shares	Additional Paid in Capital	Deficit	Accumulated Other Comprehensive Income	Total
Balance at Jun. 30, 2017	$ 18,870	$ 3,002,878	$ (2,520,806)	$ 57,692	$ 558,634
Balance, shares at Jun. 30, 2017	18,870,346
Sale of common stock	$ 301	2,118,224			2,118,525
Sale of common stock, shares	300,500
Net loss			(1,604,141)		(1,604,141)
Foreign currency translation gain				113,103	113,103
Balance at Jun. 30, 2018	$ 19,171	5,121,102	(4,124,947)	170,795	1,186,121
Balance, shares at Jun. 30, 2018	19,170,846
Sale of common stock	$ 84	244,581			244,665
Sale of common stock, shares	84,000
Net loss			(371,659)		(371,659)
Foreign currency translation gain				31,573	31,573
Balance at Sep. 30, 2018	$ 19,255	5,365,683	(4,496,606)	202,368	1,090,700
Balance, shares at Sep. 30, 2018	19,254,846
Balance at Jun. 30, 2018	$ 19,171	5,121,102	(4,124,947)	170,795	1,186,121
Balance, shares at Jun. 30, 2018	19,170,846
Sale of common stock	$ 106	307,340			307,446
Sale of common stock, shares	105,500
Sale of common stock-offering	$ 1,667	5,676,224			5,677,891
Sale of common stock-offering, shares	1,667,500
Net loss			(1,425,181)		(1,425,181)
Foreign currency translation gain				19,111	19,111
Balance at Jun. 30, 2019	$ 20,944	11,104,666	(5,550,128)	189,906	5,765,388
Balance, shares at Jun. 30, 2019	20,943,846
Net loss			(396,985)		(396,985)
Foreign currency translation gain				6,613	6,613
Balance at Sep. 30, 2019	$ 20,944	$ 11,104,666	$ (5,947,113)	$ 196,519	$ 5,375,016
Balance, shares at Sep. 30, 2019	20,943,846

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Document and Entity Information - shares	3 Months Ended
	Sep. 30, 2019	Nov. 14, 2019
Document and Entity Information [Abstract]
Entity Registrant Name	DATASEA INC.
Entity Central Index Key	0001631282
Amendment Flag	false
Current Fiscal Year End Date	--06-30
Document Type	10-Q
Document Period End Date	Sep. 30, 2019
Document Fiscal Period Focus	Q1
Document Fiscal Year Focus	2019
Entity Filer Category	Non-accelerated Filer
Entity Current Reporting Status	Yes
Entity Small Business	true
Entity Shell Company	false
Entity Emerging Growth Company	true
Entity Ex Transition Period	true
Entity Common Stock, Shares Outstanding		20,943,846
Entity File Number	333-202071
Entity Interactive Data Current	Yes
Entity Incorporation State Country Code	NV

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Income Taxes (Details 2) - USD ($)	Sep. 30, 2019	Jun. 30, 2019
Net deferred tax asset
Deferred tax asset	$ 1,248,489	$ 1,199,872
Valuation allowance	(1,248,489)	(1,199,872)
Net deferred tax asset

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Prepaid Expenses - Non Current (Details) - USD ($)	Sep. 30, 2019	Jun. 30, 2019
Notes To Financial Statements [Abstract]
Prepaid expenses	$ 221,396
Lease deposits	95,887
Total	$ 221,396

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Property and Equipment

3 Months Ended

Sep. 30, 2019

Property, Plant and Equipment [Abstract]

PROPERTY AND EQUIPMENT

Note 3 – PROPERTY AND EQUIPMENT

Property and equipment is summarized as follows:

	September 30, 2019 (Unaudited)		June 30, 2019
Furniture and fixtures	$	77,980	$	83,437
Vehicle		2,798		2,913
Office equipment		56,042		54,641
Subtotal		136,820		140,991
Less: accumulated depreciation		101,063		99,875
Total	$	35,757	$	41,116

Depreciation expense for the three months ended September 30, 2019 and 2018 was $5,217 and $11,445 respectively.

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Related Party Transactions (Details) - USD ($)			1 Months Ended	3 Months Ended
	Nov. 11, 2017	Jan. 01, 2016	Apr. 30, 2017	Sep. 30, 2019	Sep. 30, 2018	Jun. 30, 2019	Apr. 22, 2019
Related party transaction (Textual)
pay operating expenses				$ 2,137	$ 2,205
Harbin Jinfenglvyuan Biotechnology Co., Ltd [Member]
Related party transaction (Textual)
Purchased a used car	$ 3,000
Zhixin Liu [Member]
Related party transaction (Textual)
Amount due to president				0		$ 86,733
Company borrowed loan							$ 57,000
Zhixin Liu [Member] | RMB [Member]
Related party transaction (Textual)
Company borrowed loan							$ 400,000
Zhixin Liu [Member] | Car Rental Agreement [Member]
Related party transaction (Textual)
Lease expiration date		Dec. 31, 2020
Rent expenses		$ 750
Zhixin Liu [Member] | Apartment Rental Agreement [Member]
Related party transaction (Textual)
Lease expiration date			Apr. 30, 2020
Rent expenses			$ 2,849	$ 712	$ 735

XML

Commitments (Details 3)	Sep. 30, 2019 USD ($)
Commitments and Contingencies Disclosure [Abstract]
2020	$ 450,730
2021	467,630
2022	279,459
2023
2024
Thereafter
Total minimum payments required	$ 1,197,819

XML

Income Taxes (Details Textual) - USD ($)	3 Months Ended		12 Months Ended
	Sep. 30, 2019	Sep. 30, 2018	Jun. 30, 2019	Jun. 30, 2018
Income Taxes (Textual)
Net operating losses	$ (396,985)	$ (371,659)	$ (1,425,181)	$ (1,604,141)
Increase in valuation allowance	$ 48,617	$ 92,915
Income tax rate, description	The corporate income tax rate is 25%. The Company received a tax holiday with a 15% corporate income tax rate since it qualified as a high-tech company.
Net operating loss, description	The Company has approximately $369,870 of NOL related to its PRC subsidiaries and VIEs that expire in years 2019 through 2023.
Net income from interest income	$ 72,873

XML

Intangible Assets (Details Textual) - USD ($)	1 Months Ended	3 Months Ended
	May 28, 2019	Sep. 30, 2019	Sep. 30, 2018
Intangible Assets (Textual)
Amortization expense		$ 1,753	$ 717
Technology development service agreement, description		The Company appointed HW (HK) Limited to develop an eye protection technical system for a two period ending July 1, 2021.
Total paymets to service agreements		$ 1,200,000
SDT Trade Co., Ltd. [Member]
Intangible Assets (Textual)
Amount Payable		1,000,000
SDT Trade Co., Ltd. [Member] | Agreement [Member]
Intangible Assets (Textual)
Payment to Agreement	$ 1,200,000
HW(HK) Limited [Member] | Service Agreements [Member]
Intangible Assets (Textual)
payments to service agreements		$ 900,000

XML

Organization and Description of Business (Details) - $ / shares					3 Months Ended
	May 01, 2018	Oct. 27, 2016	Oct. 29, 2015	May 26, 2015	Sep. 30, 2019	Jun. 30, 2019
Organization and Description of Business (Textual)
Date of incorporation					Sep. 26, 2014
Common stock, issued					20,943,846	20,943,846
Common stock outstanding					20,943,846	20,943,846
Reverse stock split, description	The Company implemented a 1 for 3 reverse stock split decreasing the shares outstanding from 57,511,711 to 19,170,846.
Common stock, par value					$ 0.001	$ 0.001
Zhixin Liu [Member]
Organization and Description of Business (Textual)
Number of new share issued				6,666,667
Ownership rights acquired			82.00%
Shuhai Skill (HK) [Member]
Organization and Description of Business (Textual)
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 shareholders (the “Shareholders”) 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 Shareholders, who together own 100% of the ownership rights in Shuhai Skill (HK), transferred all of the issued and outstanding ordinary shares of Shuhai Skill (HK) to the Company in exchange for the issuance of an aggregate of 6,666,667 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, and Harbin Information Sea Information Technology Co., Ltd., 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 survivor. Accordingly, the historical financial statements presented are those of Shuhai Skill (HK) and its consolidated subsidiaries and VIE.
Common stock, issued			18,333,333
Common stock outstanding			15,000,000
Ms. Liu [Member]
Organization and Description of Business (Textual)
Number of new share issued		1,666,667

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Summary of Significant Accounting Policies (Details Textual)	3 Months Ended		12 Months Ended
	Sep. 30, 2019 USD ($)	Sep. 30, 2018 USD ($)	Jun. 30, 2019 USD ($)	Sep. 30, 2019 CNY (¥)
Summary of Significant Accounting Policies
Research and development expenses	$ 51,207	$ 62,771
Cash in state-owned banks	69,946
Cash denominated in RMB with a U.S. dollar equivalent	117,611		$ 1,395,104
Federal Deposit Insurance Corporation	$ 250,000
Concentration risk, description	As of September 30, 2019, approximately $48,000 of such funds were not covered by insurance in the PRC. While management believes that these financial institutions are of high credit quality, it also continually monitors their credit worthiness. The Company, its subsidiaries and VIE have not experienced any losses in such accounts and do not believe the cash is exposed to any significant risk. Cash held in accounts at U.S. financial institutions are insured by the Federal Deposit Insurance Corporation or other programs subject to certain limitations up to $250,000 per depositor. As of September 30, 2019, the cash balance of approximately $578,684 was maintained at U.S. financial institutions, of which approximately $329,000 was not insured. Cash was maintained at financial institutions in Hong Kong, and were insured by the Hong Kong Deposit Protection Board up to a limit of HK $500,000 (approximately $64,000). As of September 30, 2019, the cash balance of approximately $2,621,860 was maintained at financial institutions in Hong Kong, of which approximately $2,578,000 of cash balance was not insured.
Owned subsidiaries percentage	100.00%			100.00%
Additional uncovered insurance	$ 48,000
Equity Option [Member]
Summary of Significant Accounting Policies
Equity Option Agreement, description	The Shuhai Beijing Shareholders and Tianjin Information entered into an equity option agreement (the "Option Agreement"), pursuant to which the Shuhai Beijing Shareholders have granted Tianjin Information or its designee(s) the irrevocable right and option to acquire all or a portion of Shuhai Beijing Shareholders' equity interests in Shuhai Beijing for an option price of RMB 0.001 for each capital contribution of RMB1.00. Pursuant to the terms of the Option Agreement, Tianjin Information and the Shuhai Beijing shareholders have agreed to certain restrictive covenants to safeguard the rights of Tianjin Information under the option Agreement. Tianjin Information agreed to pay RMB1.00 annually to Shuhai Beijing Shareholders to maintain the option rights. Tianjin Information may terminate the Option Agreement upon prior written notice. The Option Agreement is valid for a period of 10 years from the effective date and renewable at Tianjin Information's option.
RMB [Member]
Summary of Significant Accounting Policies
Cash in state-owned banks | ¥				¥ 500,000
Minimum [Member]
Summary of Significant Accounting Policies
Intangible assets useful life	5 years
Maximum [Member]
Summary of Significant Accounting Policies
Intangible assets useful life	10 years

XML

Common Stock

3 Months Ended

Sep. 30, 2019

Equity [Abstract]

COMMON STOCK

Note 10 – COMMON STOCK

On August 22, 2018, the Company's Board of Directors and majority stockholders adopted the 2018 Equity Incentive Plan (the "2018 Plan") for the Company to award up to a maximum of 4,000,000 shares of its Common Stock, to attract and retain the best available personnel, provide additional incentives to employees, directors and consultants and promote the success of its business. No awards have been granted under the 2018 Plan as of the date of this report, but the Company's Board of Directors or a designated committee thereof will have the ability in its discretion from time to time to make awards under the 2018 Plan, including to its officers and directors of the Company.

In September 2018, the Company sold 84,000 shares of Common Stock to third party investors at RMB 20 (approximately $2.94) per share and received proceeds of RMB 1,680,000 (approximately $244,666).

In November 2018, the Company sold 21,500 shares of Common Stock to third party investors at $2.92 per share and received proceeds of $62,780.

On December 21, 2018, the Company successfully completed a registered, underwritten initial public offering and concurrent listing of the Company's Common Stock on the NASDAQ Capital Market, which offering generated gross proceeds of $6.7 million before deducting underwriter's commissions and other offering costs, resulting in net proceeds of approximately $5.7 million, of which $1,000,000 was placed in an escrow account. The escrow fund is being held and disbursed by the escrow agent pursuant to the terms and conditions of a certain Indemnification Escrow Agreement between the Company and the underwriter of the offering. $400,000 of the escrow fund was disbursed to the Company in February 2019 when the underwriter confirmed receipt of a written legal opinion from PRC legal counsel in connection with such offering. The Company sold 1,667,500 shares of Common Stock (including shares issued pursuant to the underwriter's over-allotment option) at an offering price of $4 per share. The Company's Common Stock began trading on the NASDAQ Capital Market beginning on December 19, 2018 under the symbol "DTSS."

In addition, the Company issued warrants to the representative of the underwriters to purchase 101,500 shares of Common Stock at an exercise price of $6 per share. These warrants may be purchased in cash or via cashless exercise, will be exercisable for five years from December 21, 2018 through December 17, 2023.

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Prepaid Expenses - Non Current

3 Months Ended

Sep. 30, 2019

Notes To Financial Statements [Abstract]

PREPAID EXPENSES - NON CURRENT

Note 6 – Prepaid expenses – non Current

Prepaid expenses-noncurrent assets consisted of the following:

	September 30, 2019 (Unaudited)		June 30, 2019
Prepaid expenses	$	125,509	$	-
Lease deposits		95,887		-
Total	$	221,396	$	-

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Commitments (Details Textual)			1 Months Ended				3 Months Ended
	Mar. 20, 2019 USD ($)	Mar. 20, 2019 CNY (¥)	Jul. 30, 2019 USD ($)	Jul. 30, 2019 CNY (¥)	Dec. 31, 2017 USD ($)	Dec. 31, 2017 CNY (¥)	Jul. 30, 2019 USD ($)	Jul. 30, 2019 CNY (¥)
Property management contract [Member]
Commitments (Textual)
Lease Expired					Feb. 28, 2019	Feb. 28, 2019
Renewed Term					1 year	1 year
Renewed and expired date					Aug. 31, 2019	Aug. 31, 2019
Monthly management fee | $					$ 10,000
RMB [Member] | Property management contract [Member]
Commitments (Textual)
Monthly management fee | ¥						¥ 70,384
Property Service Agreement [Member]
Commitments (Textual)
Rent Deposit | $			$ 29,000
Quarterly fee | $			29,000
Future rental payment | $			$ 305,500
Description of lease term			The agreement commenced on August 9, 2019 and will expire on October 8, 2022.	The agreement commenced on August 9, 2019 and will expire on October 8, 2022.
Property Service Agreement [Member] | RMB [Member]
Commitments (Textual)
Rent Deposit | ¥				¥ 202,352
Quarterly fee | ¥				202,352
Future rental payment | ¥				¥ 2,144,777
Operating lease agreement [Member]
Commitments (Textual)
Monthly rent | $	$ 760		$ 32,000		$ 5,000		$ 97,000
Lease Expired	Mar. 22, 2020	Mar. 22, 2020	Oct. 07, 2022	Oct. 07, 2022	Feb. 28, 2019	Feb. 28, 2019
Renewed Term	1 year	1 year			1 year	1 year
Renewed and expired date					Aug. 31, 2019	Aug. 31, 2019
Future rental payment | $	$ 4,400		$ 910,000
Description of lease term			The lease will start on October 8, 2019 and expire on October 7, 2022.	The lease will start on October 8, 2019 and expire on October 7, 2022.
Operating lease agreement [Member] | RMB [Member]
Commitments (Textual)
Monthly rent | ¥		¥ 5,200		¥ 225,923		¥ 35,192		¥ 677,769
Future rental payment | ¥		¥ 30,781		¥ 6,386,935

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Commitments (Details)	3 Months Ended
	Sep. 30, 2019 USD ($)
Commitments and Contingencies Disclosure [Abstract]
Operating lease expense	$ 32,306

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Parent Company Financial Information (Tables)

3 Months Ended

Sep. 30, 2019

Condensed Financial Information Disclosure [Abstract]

Schedule of Balance Sheet

	September 30, 2019 (Unaudited)			June 30, 2019
Cash	$	578,684		$	6,751,557
Long term investment		4,500,480			4,500,480
Other receivable and prepaid expense		20,000			-
Escrow		600,000			600,000
Total Assets	$	5,699,164		$	5,772,037
Accrued expenses and other payables	$	750		$	750
Total liabilities		750			750
Common stock		20,944			20,944
Additional paid-in capital		5,739,948			5,739,948
Deficit		(62,478	)		(10,395	)
Total Stockholders' Equity		5,698,414			5,771,287
Total Liabilities and Stockholders' Equity	$	5,699,164		$	5,772,037

Schedule of Income Statements

	Three Months Ended September 30, (Unaudited)
	2019			2018
Revenue	$	-		$	-
Cost of goods sold		-			-
Gross profit		-			-
Selling expenses		-			-
General and administrative expenses		75,458			-
Total operating expenses:		75,458			-
Other income(expense):
Other (expense)		(165	)
Interest income		2,750			-
Total other income		2,585			-
Net loss	$	(72,873	)	$	-

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Summary of Significant Accounting Policies (Details 2) - CNY	Sep. 30, 2019	Jun. 30, 2019	Sep. 30, 2018
Period end USD:RMB exchange rate	7.1484	6.8668	68,665
Average USD:RMB exchange rate	7.0188	6.8263	68,031

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Intangible Assets (Details) - USD ($)	Sep. 30, 2019	Jun. 30, 2019
Subtotal	$ 2,245,597	$ 564,807
Less: Accumulated amortization	10,363	8,996
Total	2,235,234	555,811
Software registration right [Member]
Subtotal	36,352	37,843
Patent [Member]
Subtotal	14,684	15,286
Value-added Telecommunications Business License [Member]
Subtotal	11,218	11,678
Technology development [Member]
Subtotal	$ 2,183,343	$ 500,000

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Income Taxes

3 Months Ended

Sep. 30, 2019

Income Tax Disclosure [Abstract]

INCOME TAXES

Note 11 – 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, 2018 as the US entity incurred losses. For the three months ended September 30, 2019, US entity had $72,873 of net loss.

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, 2019 and 2018 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 Company received a tax holiday with a 15% corporate income tax rate since it qualified as a high-tech company.

The Company has generated net operating losses ("NOL") of $396,985 and $371,659 during three months ended September 30, 2019 and 2018, respectively. As of September 30, 2019, the Company has approximately $369,870 of NOL related to its PRC subsidiaries and VIEs that expire in years 2019 through 2023. In assessing the realization of deferred tax assets, management considers whether it is more likely than not that some portion or all of the deferred tax assets will not be realized. The ultimate realization of deferred tax assets is dependent upon the Company's future generation of taxable income during the periods in which temporary differences representing net future deductible amounts become deductible. Management considers the scheduled reversal of deferred tax liabilities, projected future taxable income and tax planning strategies in making this assessment. After consideration of all the information available, management believes that significant uncertainty exists with respect to future realization of the deferred tax assets and has therefore established a full valuation allowance as of September 30, 2019 and 2018.

The following table reconciles the U.S. statutory rates to the Company's effective tax rate for the three months ended September 30, 2019 and 2018:

	Three Months ended September 30, (Unaudited)
	2019			2018
Statutory PRC. tax rate		25.0	%		25.0	%
Effect of PRC tax rate holiday		-10.0	%		-10.0	%
Valuation allowance		15.0	%		15.0	%
		0.0	%		0.0	%

The provisions for income taxes is summarized as follows:

	Three months ended September 30, 2019 (Unaudited)			Three months ended September 30, 2018 (Unaudited)
Current	$	-		$	-
Deferred		48,617			92,915
Increase in valuation allowance		(48,617	)		(92,915	)
Total	$	-		$	-

The Company's net deferred tax asset as of September 30, 2019 and June 30, 2019 is as follows:

	September 30, 2019 (Unaudited)			June 30, 2019
Deferred tax asset – net operating loss	$	1,248,489		$	1,199,872
Valuation allowance		(1,248,489	)		(1,199,872	)
Net deferred tax asset	$	-		$	-

The valuation allowance increased by $48,617 and $92,915 for the three months ended September 30, 2019 and 2018, respectively.

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Accrued Expenses and Other Payables

3 Months Ended

Sep. 30, 2019

Payables and Accruals [Abstract]

ACCRUED EXPENSES AND OTHER PAYABLES

Note 7 – accrued expenses and other payables

Accrued expenses and other payable consisted of the following:

	September 30, 2019 (Unaudited)		June 30, 2019
Deposit	$	-	$	30,525
Salary and other payables		78,652		234,159
Total	$	78,652	$	264,684

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Commitments (Tables)

3 Months Ended

Sep. 30, 2019

Commitments and Contingencies Disclosure [Abstract]

Schedule of impact of operating leasing on our consolidated financial statements

Consolidated statement of Operations

	Three Months Ended September 30,
	2019
	(Unaudited)
Operating lease expense	$	32,306

Consolidated Balance Sheet

	September 30, 2019 (Unaudited)
Right-of-use assets	$	1,197,819
Lease liabilities	$	358,938
Lease liabilities-non current	$	838,881
Weighted average remaining lease term		2.95 years
Weighted average discount rate		4.75	%

Consolidated Statement of Cash Flows

	Three Months Ended September 30,
	2019 (Unaudited)
Cash flow from operating activities
Right-of-use assets recognized in exchange for operating lease liabilities	$	1,219,937

Schedule of future minimum lease payment

Twelve months ending September 30,	Minimum Lease Payment
2020	$	450,730
2021		467,630
2022		279,459
2023		-
2024		-
Thereafter		-
Total minimum payments required	$	1,197,819

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Prepaid Expenses and Other Current Assets (Tables)

3 Months Ended

Sep. 30, 2019

Deferred Costs, Capitalized, Prepaid, and Other Assets Disclosure [Abstract]

Schedule of prepaid asset and other current assets

	September 30, 2019 (Unaudited)		June 30, 2019
Security deposit	$	156,189	$	46,933
Prepaid expenses and advances		82,505		34,181
Others		13,539		24,818
Total	$	252,233	$	105,932

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Summary of Significant Accounting Policies (Policies)

3 Months Ended

Sep. 30, 2019

Accounting Policies [Abstract]

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 its VIE, 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, 2019. The results for the three months ended September 30, 2019 are not necessarily indicative of the results to be expected for the full year ending June 30, 2020. 

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 Shuhai Beijing, its VIE. ASC 810 requires a VIE to be consolidated if the company is subject to a majority of the risk of loss for the VIE or is entitled to receive a majority of the VIE's residual returns. A VIE is an entity in which a company, through contractual arrangements, bears the risk of, and enjoys the rewards normally associated with ownership of the entity, and therefore the company is the primary beneficiary of the entity.

Under ASC 810, a reporting entity has a controlling financial interest in a VIE, and must consolidate that VIE, if the reporting entity has both of the following characteristics: (a) the power to direct the activities of the VIE that most significantly affect the VIE's economic performance; and (b) the obligation to absorb losses, or the right to receive benefits, that could potentially be significant to the VIE. The reporting entity's determination of whether it has this power is not affected by the existence of kick-out rights or participating rights, unless a single enterprise, including its related parties and de - facto agents, have the unilateral ability to exercise those rights. Shuhai Beijing's actual stockholders do not hold any kick-out rights that affect the consolidation determination.

Through the VIE agreements, the Company is deemed the primary beneficiary of Shuhai Beijing. 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.

VIE Agreements

Operation and Intellectual Property Service Agreement – This agreement allows Tianjin Information to manage and operate Shuhai Beijing and collect 100% of their net profits. Under the terms of the Operation and Intellectual Property Service Agreement, Shuhai Beijing entrusts Tianjin Information to manage its operations, manage and control its assets and financial matters, and provide intellectual property services, purchasing management services, marketing management services and inventory management services to Shuhai Beijing. Shuhai Beijing and its shareholders shall not make any decisions nor direct the activities of Shuhai Beijing without Tianjin Information's consent.

Shareholders' Voting Rights Entrustment Agreement – Tianjin Information has entered into a shareholders' voting rights entrustment agreement (the "Entrustment Agreement") under which Zhixin Liu and Fu Liu (collectively the "Shuhai Beijing Shareholders") have vested their voting power in Shuhai Beijing to Tianjin Information or its designee(s). The Entrustment Agreement does not have an expiration date.

Equity Option Agreement –the Shuhai Beijing Shareholders and Tianjin Information entered into an equity option agreement (the "Option Agreement"), pursuant to which the Shuhai Beijing Shareholders have granted Tianjin.

Information or its designee(s) the irrevocable right and option to acquire all or a portion of Shuhai Beijing Shareholders' equity interests in Shuhai Beijing for an option price of RMB 0.001 for each capital contribution of RMB1.00. Pursuant to the terms of the Option Agreement, Tianjin Information and the Shuhai Beijing shareholders have agreed to certain restrictive covenants to safeguard the rights of Tianjin Information under the option Agreement. Tianjin Information agreed to pay RMB1.00 annually to Shuhai Beijing Shareholders to maintain the option rights. Tianjin Information may terminate the Option Agreement upon prior written notice. The Option Agreement is valid for a period of 10 years from the effective date and renewable at Tianjin Information's option.

Equity Pledge Agreement – Tianjin Information and the Shuhai Beijing Shareholders entered into an equity pledge agreement on October 27, 2015 (the "Equity Pledge Agreement"). The Equity Pledge Agreement serves to guarantee the performance by Shuhai Beijing of its obligations under the Operation and Intellectual Property Service Agreement and the Option Agreement. Pursuant to the Equity Pledge Agreement, Shuhai Beijing Shareholders have agreed to pledge all of their equity interests in Shuhai Beijing to Tianjin Information. Tianjin Information has the right to collect any and all dividends paid on the pledged equity interests during the pledge period. Pursuant to the terms of the Equity Pledge Agreement, the Shuhai Beijing Shareholders have agreed to certain restrictive covenants to safeguard the rights of Tianjin Information. Upon an event of default or certain other agreed events under the Operation and Intellectual Property Service Agreement, the Option Agreement and the Equity Pledge Agreement, Tianjin Information may exercise the right to enforce the pledge.

The following financial statement amounts and balances of the VIE were included in the accompanying consolidated financial statements as of September 30, 2019 and June 30, 2019 and for the three months ended September 30, 2019 and 2018, respectively:

	September 30, 2019 (Unaudited)		June 30, 2019
Current assets	$	702,885	$	1,573,413
Non-current assets		309,044		96,927
Total assets	$	1,011,929	$	1,670,340
Current liabilities	$	5,736,211	$	6,232,836
Non-current liabilities		-		-
Total liabilities	$	5,736,211	$	6,232,836

	Three Months Ended September 30 (Unaudited)
	2019			2018
Revenue	$	-		$	-
Gross profit		-			-
Net loss	$	(347,824	)	$	(366,615	)

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 periods. Actual results could differ from those estimates. The significant areas requiring the use of management estimates include, but are not limited to, the estimated useful life and residual value of property, plant and equipment, provision for staff benefits, recognition and measurement of deferred income taxes and the valuation allowance for deferred tax assets. Although these estimates are based on management's knowledge of current events and actions management may undertake in the future, actual results may ultimately differ from those estimates and such differences may be material to 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. As of September 30, 2019 and June 30, 2019, the Company has no such contingencies.

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.

INVENTORY

Inventory

Inventory, comprised principally of smart student identification cards related to the Company's "Safe Campus" security product, as well as products associated therewith comprised of routers to be 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, 2019 and June 30, 2019.

ESCROW

ESCROW

Escrow represents cash held in an indemnification escrow account related to requirements of the financing agreement signed with the underwriter of the Company's initial public offering for a period of 18 months or longer subsequent to the closing of the initial public offering on December 21, 2018.

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
Vehicles	5 years

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

INTANGIBLE ASSETS

INTANGIBLE ASSETS

Intangible assets with finite lives are amortized using the straight-line method over their estimated period of benefit. Evaluation of the recoverability of intangible assets is made to take into account events or circumstances that warrant revised estimates of useful lives or that indicate that impairment exists. All of the Company's intangible assets are subject to amortization. No impairment of intangible assets has been identified as of the balance sheet dates.

Intangible assets include licenses, certificates, patents and other technology and are amortized over their useful life of five to ten 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 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 other than those in level 1 quoted prices for similar assets and liabilities in active markets, and inputs that are observable for the asset or liability, either directly or indirectly, for substantially the full term of the financial instrument.

● Level 3 inputs to the valuation methodology are unobservable and significant to the fair value measurement.

The carrying value of cash, inventory, prepaid expenses and other current assets, accounts payable, accrued expenses and other payables, advances from customers, and loan payable-shareholder, approximate their fair values due to their short maturities.

As of September 30, 2019 and June 30, 2019, 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 and equipment are reviewed for impairment whenever events or changes in circumstances indicate that the carrying value of an asset may not be recoverable, or it is reasonably possible that these assets could become impaired as a result of technological or other changes. The determination of recoverability of assets to be held and used is made by comparing the carrying amount of an asset to future undiscounted cash flows to be generated by the asset.

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

On July 1, 2018, the Company adopted Accounting Standards Update ("ASU") 2014-09 Revenue from Contracts with Customers (ASC 606) using the modified retrospective method for contracts that were not completed as of July 1, 2018.  This did not result in an adjustment to retained earnings upon adoption of this new guidance, as the Company's revenue was recognized based on the amount of consideration, we expect to receive in exchange for satisfying the performance obligations.

The core principle underlying the ASC 606 is that the Company will recognize revenue to represent the transfer of goods and services to customers in an amount that reflects the consideration to which the Company expects to be entitled in such exchange. This will require the Company to identify contractual performance obligations and determine whether revenue should be recognized at a point in time or over time, based on when control of goods and services transfers to a customer. The Company's revenue streams are recognized at a point in time, based on when control of goods and services transfers to a customer.

ASC 606 requires the use of a new five-step model to recognize revenue from customer contracts. The five-step model requires that the Company (i) identify the contract with the customer, (ii) identify the performance obligations in the contract, (iii) determine the transaction price, including variable consideration to the extent that it is probable that a significant future reversal will not occur, (iv) allocate the transaction price to the respective performance obligations in the contract, and (v) recognize revenue when (or as) the Company satisfies each performance obligation. The application of the five-step model to the revenue streams compared to the prior guidance did not result in significant changes in the way the Company records its revenue. Upon adoption, the Company evaluated its revenue recognition policy for all revenue streams within the scope of the ASC 606 under previous standards and using the five-step model under the new guidance and confirmed that there were no differences in the pattern of revenue recognition.

The Company is seeking to derive its revenues from professional service contracts with its customers, with revenues being recognized upon delivery of services and products. Persuasive evidence of an arrangement is demonstrated via professional service contracts and invoices; and the service price to the customer is fixed upon acceptance of the professional services contract. The Company will recognize revenue when professional service is rendered to the customer by the Company and collectability of payment is reasonably assured. These revenues will be recognized at a point in time after all performance obligations are satisfied.

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 also include the prior years' net operating losses carried forward. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in the results of operations in the period that includes the enactment date. A valuation allowance is provided to reduce the deferred tax assets reported if based on the weight of the available positive and negative evidence, it is more likely than not some portion or all of the deferred tax assets will not be realized.

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.

RESEARCH AND DEVELOPMENT EXPENSES

RESEARCH AND DEVELOPMENT EXPENSES

Research and development expenses are expensed in the period when they are incurred. For the three months ended September 30, 2019 and 2018, the Company incurred research and development expenses of $51,207 and $62,771, respectively. 

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 less than RMB500,000 ($69,946) is 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.

Cash denominated in RMB with a U.S. dollar equivalent of $117,611 and $1,395,104 at September 30 and June 30, 2019, respectively, were held in accounts at financial institutions located in the PRC‚ which is not freely convertible into foreign currencies. In addition, as of September 30, 2019, approximately $48,000 of such funds were not covered by insurance in the PRC. While management believes that these financial institutions are of high credit quality, it also continually monitors their credit worthiness. The Company, its subsidiaries and VIE have not experienced any losses in such accounts and do not believe the cash is exposed to any significant risk. Cash held in accounts at U.S. financial institutions are insured by the Federal Deposit Insurance Corporation or other programs subject to certain limitations up to $250,000 per depositor. As of September 30, 2019, the cash balance of approximately $578,684 was maintained at U.S. financial institutions, of which approximately $329,000 was not insured. Cash was maintained at financial institutions in Hong Kong, and were insured by the Hong Kong Deposit Protection Board up to a limit of HK $500,000 (approximately $64,000). As of September 30, 2019, the cash balance of approximately $2,621,860 was maintained at financial institutions in Hong Kong, of which approximately $2,578,000 of cash balance was not insured.

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 United States dollars("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 (loss) in accordance with ASC Topic 220, "Comprehensive Income." Gains and losses resulting from foreign currency transactions are reflected in the statements of operations. 

The Company follows FASB ASC Topic 220-10, "Comprehensive Income (loss)." Comprehensive income(loss) comprises net income(loss) and all changes to the statements of changes in stockholders' equity, except those due to investments by stockholders, changes in additional paid-in capital and distributions to stockholders.

The exchange rates used to translate amounts in RMB to USD for the purposes of preparing the consolidated financial statements were as follows

	September 30,		September 30,		June 30,
	2019		2018		2019
Period end USD: RMB exchange rate		7.1484		6.8665		6.8668
Average USD: RMB exchange rate		7.0188		6.8031		6.8263

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-month 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. The Company adopted ASU 2016-02 on July 1, 2019. The Company adopted the practical expedient that allows lessees to treat the lease and non-lease components a lease as single lease component. On July 1, 2019, the Company adopted the Topic 842, as of July 1, 2019, the adoption of this standard resulted in the recording of right-of use assets and operating lease liabilities, (see Note 12).

In February 2018, the FASB issued ASU 2018-02, Income Statement - Reporting Comprehensive Income (Topic 220): Reclassification of Certain Tax Effects from Accumulated Other Comprehensive Income. The amendments in this ASU affect any entity that is required to apply the provisions of Topic 220, Income Statement – Reporting Comprehensive Income, and has items of other comprehensive income for which the related tax effects are presented in other comprehensive income as required by GAAP. The amendments in this ASU are effective for all entities for fiscal years beginning after December 15, 2018, and interim periods within those fiscal years. Management does not believe the adoption of this ASU would have a material effect on the Company's consolidated financial statements.

In August 2018, the FASB issued ASU 2018-13, "Fair Value Measurement (Topic 820): Disclosure Framework — Changes to the Disclosure Requirements for Fair Value Measurement" ("ASU 2018-13"). ASU 2018-13 removes, modifies and adds certain disclosure requirements in Topic 820 "Fair Value Measurement". ASU 2018-13 eliminates certain disclosures related to transfers and the valuations process, modifies disclosures for investments that are valued based on net asset value, clarifies the measurement uncertainty disclosure, and requires additional disclosures for Level 3 fair value measurements. ASU 2018-13 is effective for the Company for annual and interim reporting periods beginning August 1, 2020. The Company is currently evaluating the impact of this new standard on its consolidated financial statements and related disclosures.

In May 2019, the FASB issued ASU 2019-05, which is an update to ASU Update No. 2016-13, Financial Instruments—Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments, which introduced the expected credit losses methodology for the measurement of credit losses on financial assets measured at amortized cost basis, replacing the previous incurred loss methodology. The amendments in Update 2016-13 added Topic 326, Financial Instruments—Credit Losses, and made several consequential amendments to the Codification. Update 2016-13 also modified the accounting for available-for-sale debt securities, which must be individually assessed for credit losses when fair value is less than the amortized cost basis, in accordance with Subtopic 326-30, Financial Instruments—Credit Losses—Available-for-Sale Debt Securities. The amendments in this Update address those stakeholders' concerns by providing an option to irrevocably elect the fair value option for certain financial assets previously measured at amortized cost basis. For those entities, the targeted transition relief will increase comparability of financial statement information by providing an option to align measurement methodologies for similar financial assets. Furthermore, the targeted transition relief also may reduce the costs for some entities to comply with the amendments in Update 2016-13 while still providing financial statement users with decision-useful information. ASU 2019-05 is effective for the Company for annual and interim reporting periods beginning August 1, 2020. The Company is currently evaluating the impact of this new standard on its consolidated financial statements and related disclosures.

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

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Summary of Significant Accounting Policies

3 Months Ended

Sep. 30, 2019

Accounting Policies [Abstract]

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

NOTE 2 – 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 its VIE, 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, 2019. The results for the three months ended September 30, 2019 are not necessarily indicative of the results to be expected for the full year ending June 30, 2020. 

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 Shuhai Beijing, its VIE. ASC 810 requires a VIE to be consolidated if the company is subject to a majority of the risk of loss for the VIE or is entitled to receive a majority of the VIE's residual returns. A VIE is an entity in which a company, through contractual arrangements, bears the risk of, and enjoys the rewards normally associated with ownership of the entity, and therefore the company is the primary beneficiary of the entity.

Under ASC 810, a reporting entity has a controlling financial interest in a VIE, and must consolidate that VIE, if the reporting entity has both of the following characteristics: (a) the power to direct the activities of the VIE that most significantly affect the VIE's economic performance; and (b) the obligation to absorb losses, or the right to receive benefits, that could potentially be significant to the VIE. The reporting entity's determination of whether it has this power is not affected by the existence of kick-out rights or participating rights, unless a single enterprise, including its related parties and de - facto agents, have the unilateral ability to exercise those rights. Shuhai Beijing's actual stockholders do not hold any kick-out rights that affect the consolidation determination.

Through the VIE agreements, the Company is deemed the primary beneficiary of Shuhai Beijing. 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.

VIE Agreements

Operation and Intellectual Property Service Agreement – This agreement allows Tianjin Information to manage and operate Shuhai Beijing and collect 100% of their net profits. Under the terms of the Operation and Intellectual Property Service Agreement, Shuhai Beijing entrusts Tianjin Information to manage its operations, manage and control its assets and financial matters, and provide intellectual property services, purchasing management services, marketing management services and inventory management services to Shuhai Beijing. Shuhai Beijing and its shareholders shall not make any decisions nor direct the activities of Shuhai Beijing without Tianjin Information's consent.

Shareholders' Voting Rights Entrustment Agreement – Tianjin Information has entered into a shareholders' voting rights entrustment agreement (the "Entrustment Agreement") under which Zhixin Liu and Fu Liu (collectively the "Shuhai Beijing Shareholders") have vested their voting power in Shuhai Beijing to Tianjin Information or its designee(s). The Entrustment Agreement does not have an expiration date.

Equity Option Agreement –the Shuhai Beijing Shareholders and Tianjin Information entered into an equity option agreement (the "Option Agreement"), pursuant to which the Shuhai Beijing Shareholders have granted Tianjin.

Information or its designee(s) the irrevocable right and option to acquire all or a portion of Shuhai Beijing Shareholders' equity interests in Shuhai Beijing for an option price of RMB 0.001 for each capital contribution of RMB1.00. Pursuant to the terms of the Option Agreement, Tianjin Information and the Shuhai Beijing shareholders have agreed to certain restrictive covenants to safeguard the rights of Tianjin Information under the option Agreement. Tianjin Information agreed to pay RMB1.00 annually to Shuhai Beijing Shareholders to maintain the option rights. Tianjin Information may terminate the Option Agreement upon prior written notice. The Option Agreement is valid for a period of 10 years from the effective date and renewable at Tianjin Information's option.

Equity Pledge Agreement – Tianjin Information and the Shuhai Beijing Shareholders entered into an equity pledge agreement on October 27, 2015 (the "Equity Pledge Agreement"). The Equity Pledge Agreement serves to guarantee the performance by Shuhai Beijing of its obligations under the Operation and Intellectual Property Service Agreement and the Option Agreement. Pursuant to the Equity Pledge Agreement, Shuhai Beijing Shareholders have agreed to pledge all of their equity interests in Shuhai Beijing to Tianjin Information. Tianjin Information has the right to collect any and all dividends paid on the pledged equity interests during the pledge period. Pursuant to the terms of the Equity Pledge Agreement, the Shuhai Beijing Shareholders have agreed to certain restrictive covenants to safeguard the rights of Tianjin Information. Upon an event of default or certain other agreed events under the Operation and Intellectual Property Service Agreement, the Option Agreement and the Equity Pledge Agreement, Tianjin Information may exercise the right to enforce the pledge.

The following financial statement amounts and balances of the VIE were included in the accompanying consolidated financial statements as of September 30, 2019 and June 30, 2019 and for the three months ended September 30, 2019 and 2018, respectively:

	September 30, 2019 (Unaudited)		June 30, 2019
Current assets	$	702,885	$	1,573,413
Non-current assets		309,044		96,927
Total assets	$	1,011,929	$	1,670,340
Current liabilities	$	5,736,211	$	6,232,836
Non-current liabilities		-		-
Total liabilities	$	5,736,211	$	6,232,836

	Three Months Ended September 30 (Unaudited)
	2019			2018
Revenue	$	-		$	-
Gross profit		-			-
Net loss	$	(347,824	)	$	(366,615	)

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 periods. Actual results could differ from those estimates. The significant areas requiring the use of management estimates include, but are not limited to, the estimated useful life and residual value of property, plant and equipment, provision for staff benefits, recognition and measurement of deferred income taxes and the valuation allowance for deferred tax assets. Although these estimates are based on management's knowledge of current events and actions management may undertake in the future, actual results may ultimately differ from those estimates and such differences may be material to 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. As of September 30, 2019 and June 30, 2019, the Company has no such contingencies.

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.

Inventory

Inventory, comprised principally of smart student identification cards related to the Company's "Safe Campus" security product, as well as products associated therewith comprised of routers to be 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, 2019 and June 30, 2019.

ESCROW

Escrow represents cash held in an indemnification escrow account related to requirements of the financing agreement signed with the underwriter of the Company's initial public offering for a period of 18 months or longer subsequent to the closing of the initial public offering on December 21, 2018.

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
Vehicles	5 years

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

INTANGIBLE ASSETS

Intangible assets with finite lives are amortized using the straight-line method over their estimated period of benefit. Evaluation of the recoverability of intangible assets is made to take into account events or circumstances that warrant revised estimates of useful lives or that indicate that impairment exists. All of the Company's intangible assets are subject to amortization. No impairment of intangible assets has been identified as of the balance sheet dates.

Intangible assets include licenses, certificates, patents and other technology and are amortized over their useful life of five to ten 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 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 other than those in level 1 quoted prices for similar assets and liabilities in active markets, and inputs that are observable for the asset or liability, either directly or indirectly, for substantially the full term of the financial instrument.

● Level 3 inputs to the valuation methodology are unobservable and significant to the fair value measurement.

The carrying value of cash, inventory, prepaid expenses and other current assets, accounts payable, accrued expenses and other payables, advances from customers, and loan payable-shareholder, approximate their fair values due to their short maturities.

As of September 30, 2019 and June 30, 2019, 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 and equipment are reviewed for impairment whenever events or changes in circumstances indicate that the carrying value of an asset may not be recoverable, or it is reasonably possible that these assets could become impaired as a result of technological or other changes. The determination of recoverability of assets to be held and used is made by comparing the carrying amount of an asset to future undiscounted cash flows to be generated by the asset.

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

On July 1, 2018, the Company adopted Accounting Standards Update ("ASU") 2014-09 Revenue from Contracts with Customers (ASC 606) using the modified retrospective method for contracts that were not completed as of July 1, 2018.  This did not result in an adjustment to retained earnings upon adoption of this new guidance, as the Company's revenue was recognized based on the amount of consideration, we expect to receive in exchange for satisfying the performance obligations.

The core principle underlying the ASC 606 is that the Company will recognize revenue to represent the transfer of goods and services to customers in an amount that reflects the consideration to which the Company expects to be entitled in such exchange. This will require the Company to identify contractual performance obligations and determine whether revenue should be recognized at a point in time or over time, based on when control of goods and services transfers to a customer. The Company's revenue streams are recognized at a point in time, based on when control of goods and services transfers to a customer.

ASC 606 requires the use of a new five-step model to recognize revenue from customer contracts. The five-step model requires that the Company (i) identify the contract with the customer, (ii) identify the performance obligations in the contract, (iii) determine the transaction price, including variable consideration to the extent that it is probable that a significant future reversal will not occur, (iv) allocate the transaction price to the respective performance obligations in the contract, and (v) recognize revenue when (or as) the Company satisfies each performance obligation. The application of the five-step model to the revenue streams compared to the prior guidance did not result in significant changes in the way the Company records its revenue. Upon adoption, the Company evaluated its revenue recognition policy for all revenue streams within the scope of the ASC 606 under previous standards and using the five-step model under the new guidance and confirmed that there were no differences in the pattern of revenue recognition.

The Company is seeking to derive its revenues from professional service contracts with its customers, with revenues being recognized upon delivery of services and products. Persuasive evidence of an arrangement is demonstrated via professional service contracts and invoices; and the service price to the customer is fixed upon acceptance of the professional services contract. The Company will recognize revenue when professional service is rendered to the customer by the Company and collectability of payment is reasonably assured. These revenues will be recognized at a point in time after all performance obligations are satisfied.

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 also include the prior years' net operating losses carried forward. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in the results of operations in the period that includes the enactment date. A valuation allowance is provided to reduce the deferred tax assets reported if based on the weight of the available positive and negative evidence, it is more likely than not some portion or all of the deferred tax assets will not be realized.

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.

RESEARCH AND DEVELOPMENT EXPENSES

Research and development expenses are expensed in the period when they are incurred. For the three months ended September 30, 2019 and 2018, the Company incurred research and development expenses of $51,207 and $62,771, respectively. 

CONCENTRATION OF CREDIT RISK 

The Company maintains cash in accounts with state-owned banks within the PRC. Cash in state-owned banks less than RMB500,000 ($69,946) is 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.

Cash denominated in RMB with a U.S. dollar equivalent of $117,611 and $1,395,104 at September 30 and June 30, 2019, respectively, were held in accounts at financial institutions located in the PRC‚ which is not freely convertible into foreign currencies. In addition, as of September 30, 2019, approximately $48,000 of such funds were not covered by insurance in the PRC. While management believes that these financial institutions are of high credit quality, it also continually monitors their credit worthiness. The Company, its subsidiaries and VIE have not experienced any losses in such accounts and do not believe the cash is exposed to any significant risk. Cash held in accounts at U.S. financial institutions are insured by the Federal Deposit Insurance Corporation or other programs subject to certain limitations up to $250,000 per depositor. As of September 30, 2019, the cash balance of approximately $578,684 was maintained at U.S. financial institutions, of which approximately $329,000 was not insured. Cash was maintained at financial institutions in Hong Kong, and were insured by the Hong Kong Deposit Protection Board up to a limit of HK $500,000 (approximately $64,000). As of September 30, 2019, the cash balance of approximately $2,621,860 was maintained at financial institutions in Hong Kong, of which approximately $2,578,000 of cash balance was not insured.

FOREIGN CURRENCY TRANSLATION AND COMPREHENSIVE INCOME (LOSS)

The accounts of the Company's Chinese entities are maintained in RMB and the accounts of the U.S. parent company are maintained in United States dollars("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 (loss) in accordance with ASC Topic 220, "Comprehensive Income." Gains and losses resulting from foreign currency transactions are reflected in the statements of operations. 

The Company follows FASB ASC Topic 220-10, "Comprehensive Income (loss)." Comprehensive income(loss) comprises net income(loss) and all changes to the statements of changes in stockholders' equity, except those due to investments by stockholders, changes in additional paid-in capital and distributions to stockholders.

The exchange rates used to translate amounts in RMB to USD for the purposes of preparing the consolidated financial statements were as follows

	September 30,		September 30,		June 30,
	2019		2018		2019
Period end USD: RMB exchange rate		7.1484		6.8665		6.8668
Average USD: RMB exchange rate		7.0188		6.8031		6.8263

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-month 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. The Company adopted ASU 2016-02 on July 1, 2019. The Company adopted the practical expedient that allows lessees to treat the lease and non-lease components a lease as single lease component. On July 1, 2019, the Company adopted the Topic 842, as of July 1, 2019, the adoption of this standard resulted in the recording of right-of use assets and operating lease liabilities, (see Note 12).

In February 2018, the FASB issued ASU 2018-02, Income Statement - Reporting Comprehensive Income (Topic 220): Reclassification of Certain Tax Effects from Accumulated Other Comprehensive Income. The amendments in this ASU affect any entity that is required to apply the provisions of Topic 220, Income Statement – Reporting Comprehensive Income, and has items of other comprehensive income for which the related tax effects are presented in other comprehensive income as required by GAAP. The amendments in this ASU are effective for all entities for fiscal years beginning after December 15, 2018, and interim periods within those fiscal years. Management does not believe the adoption of this ASU would have a material effect on the Company's consolidated financial statements.

In August 2018, the FASB issued ASU 2018-13, "Fair Value Measurement (Topic 820): Disclosure Framework — Changes to the Disclosure Requirements for Fair Value Measurement" ("ASU 2018-13"). ASU 2018-13 removes, modifies and adds certain disclosure requirements in Topic 820 "Fair Value Measurement". ASU 2018-13 eliminates certain disclosures related to transfers and the valuations process, modifies disclosures for investments that are valued based on net asset value, clarifies the measurement uncertainty disclosure, and requires additional disclosures for Level 3 fair value measurements. ASU 2018-13 is effective for the Company for annual and interim reporting periods beginning August 1, 2020. The Company is currently evaluating the impact of this new standard on its consolidated financial statements and related disclosures.

In May 2019, the FASB issued ASU 2019-05, which is an update to ASU Update No. 2016-13, Financial Instruments—Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments, which introduced the expected credit losses methodology for the measurement of credit losses on financial assets measured at amortized cost basis, replacing the previous incurred loss methodology. The amendments in Update 2016-13 added Topic 326, Financial Instruments—Credit Losses, and made several consequential amendments to the Codification. Update 2016-13 also modified the accounting for available-for-sale debt securities, which must be individually assessed for credit losses when fair value is less than the amortized cost basis, in accordance with Subtopic 326-30, Financial Instruments—Credit Losses—Available-for-Sale Debt Securities. The amendments in this Update address those stakeholders' concerns by providing an option to irrevocably elect the fair value option for certain financial assets previously measured at amortized cost basis. For those entities, the targeted transition relief will increase comparability of financial statement information by providing an option to align measurement methodologies for similar financial assets. Furthermore, the targeted transition relief also may reduce the costs for some entities to comply with the amendments in Update 2016-13 while still providing financial statement users with decision-useful information. ASU 2019-05 is effective for the Company for annual and interim reporting periods beginning August 1, 2020. The Company is currently evaluating the impact of this new standard on its consolidated financial statements and related disclosures.

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

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Prepaid Expenses and Other Current Assets (Details) - USD ($)	Sep. 30, 2019	Jun. 30, 2019
Deferred Costs, Capitalized, Prepaid, and Other Assets Disclosure [Abstract]
Security deposit	$ 156,189	$ 46,933
Prepaid expenses and advances	82,505	34,181
Others	13,539	24,818
Total	$ 252,233	$ 105,932

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Advances from Customers (Details) - USD ($)		3 Months Ended	12 Months Ended
	Mar. 05, 2018	Sep. 30, 2019	Jun. 30, 2019
Advances from Customers (Textual)
Agreement expired, description	The term of the agreements are for five years and will expire on March 6, 2023 and July 1, 2023, respectively.
Advances from customers		$ 1,266,941	$ 1,318,897

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Consolidated Statements of Operations and Comprehensive Loss (Unaudited) - USD ($)	3 Months Ended
	Sep. 30, 2019	Sep. 30, 2018
Income Statement [Abstract]
Revenues
Cost of goods sold		7,434
Gross deficit		(7,434)
Operating expenses:
Selling expenses	51,175	76,879
General and administrative expenses	307,259	226,571
Research and development expenses	51,207	62,771
Total operating expenses:	409,641	366,221
Loss from operations	(409,641)	(373,655)
Other income :
Other (expense), net	(9,504)	(3,925)
Interest income	22,160	5,921
Total other income	12,656	1,996
Net loss	(396,985)	(371,659)
Other comprehensive loss
Foreign currency translation adjustment	6,613	31,573
Total comprehensive (loss)	$ (390,372)	$ (340,086)
Net loss per share
Basic and diluted	$ (0.02)	$ (0.02)
Weighted average shares outstanding
Basic and diluted	20,943,846	19,171,759

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Income Taxes (Details 1) - USD ($)	3 Months Ended
	Sep. 30, 2019	Sep. 30, 2018
Provisions For Income Taxes
Current
Deferred	48,617	92,915
Increase in valuation allowance	(48,617)	(92,915)
Total