Summary of Significant Accounting Policies

12 Months Ended

Jun. 30, 2025

Summary of Significant Accounting Policies [Abstract]

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

NOTE 2 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

GOING CONCERN

The accompanying consolidated financial statements (“CFS”) were prepared assuming the Company will continue as a going concern, which contemplates continuity of operations, realization of assets, and liquidation of liabilities in the normal course of business. For the years ended June 30, 2025 and 2024, the Company had a net loss of approximately $5.09 million and $11.38 million, respectively. The Company had an accumulated deficit of approximately $44.53 million as of June 30, 2025, and negative cash flow from operating activities of approximately $2.37 million and $6.40 million for the years ended June 30, 2025 and 2024, respectively. The historical operating results including recurring losses from operations raise substantial doubt about the Company’s ability to continue as a going concern. 

If deemed necessary, management could seek to raise additional funds by way of admitting strategic investors, or private or public offerings, or by seeking to obtain loans from banks or others, to support the Company’s research and development (“R&D”), procurement, marketing and daily operation. While management of the Company believes in the viability of its strategy to generate sufficient revenues and its ability to raise additional funds on reasonable terms and conditions, there can be no assurances to that effect. The ability of the Company to continue as a going concern depends upon the Company’s ability to further implement its business plan and generate sufficient revenue and its ability to raise additional funds by way of a public or private offering. There is no assurance that the Company will be able to obtain funds on commercially acceptable terms, if at all. There is also no assurance that the amount of funds the Company might raise will enable the Company to complete its initiatives or attain profitable operations. If the Company is unable to raise additional funding to meet its working capital needs in the future, it may be forced to delay, reduce or cease its operations.

BASIS OF PRESENTATION AND CONSOLIDATION

The CFS were prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”) and applicable rules and regulations of the SEC regarding CFS. The accompanying CFS include the financial statements of the Company and its 100% owned subsidiaries Shuhai Information Skill (HK) Limited (“Shuhai Skill (HK)”), and Tianjin Information Sea Information Technology Co., Ltd.  (“Tianjin Information”), and its VIE, Shuhai Beijing, and Shuhai Beijing’s 100% owned subsidiaries – Heilongjiang Xunrui Technology Co. Ltd. (“Xunrui”), Guozhong Times (Beijing) Technology Ltd. (“Guozhong Times”), Guohao Century (Beijing) Technology Ltd. (“Guohao Century”), Guozhong Haoze, and Shuhai Jingwei (Shenzhen) Information Technology Co., Ltd. (“Jingwei”), and Shuhai Beijing’s 99% owned subsidiary Nanjing Shuhai Equity Investment Fund Management Co. Ltd. (“Shuhai Nanjing”). During the year ended June 30, 2022, the Company incorporated two new subsidiaries Shuhai (Shenzhen) Acoustic Effect Technology Co., Ltd (“Shuhai Acoustic”) and Shenzhen Acoustic Effect Management Partnership (“Shenzhen Acoustic MP”). All significant inter-company transactions and balances were eliminated in consolidation. The chart below depicts the corporate structure of the Company as of June 30, 2025.

 

VARIABLE INTEREST ENTITY

Pursuant to the Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) Section 810, “Consolidation” (“ASC 810”), the Company is required to include in its CFS, the financial statements of Shuhai Beijing, its VIE. ASC 810 requires a VIE to be consolidated if the Company is subject to a majority of the risk of loss for the VIE or is entitled to receive a majority of the VIE’s residual returns. A VIE is an entity in which a company, through contractual arrangements, bears the risk of, and enjoys the rewards of such entity, and therefore the Company is the primary beneficiary of such entity. 

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

Through the VIE agreements, Tianjin Information, an indirect subsidiary of Datasea is deemed the primary beneficiary of Shuhai Beijing and its subsidiaries. Accordingly, the results of Shuhai Beijing and its subsidiaries were included in the accompanying CFS. Shuhai Beijing has no assets that are collateral for or restricted solely to settle their obligations. The creditors of Shuhai Beijing do not have recourse to the Company’s general credit.

VIE Agreements

Operation and Intellectual Property Service Agreement – The Operation and Intellectual Property Service Agreement allows Tianjin Information Sea Information Technology Co., Ltd (“WFOE”) to manage and operate Shuhai Beijing and collect an operating fee equal to Shuhai Beijing’s pre-tax income, per month. If Shuhai Beijing suffers a loss and as a result does not have pre-tax income, such loss shall be carried forward to the following month to offset the operating fee to be paid to WFOE if there is pre-tax income of Shuhai Beijing the following month.

Furthermore, if Shuhai Beijing cannot pay off its debts, WFOE shall pay off the debt on Shuhai Beijing’s behalf. If Shuhai Beijing’s net assets fall lower than its registered capital balance, WFOE shall provide capital for Shuhai Beijing to make up for the deficit.

Under the terms of the Operation and Intellectual Property Service Agreement, Shuhai Beijing entrusts Tianjin Information to manage its operations, manage and control its assets and financial matters, and provide intellectual property services, purchasing management services, marketing management services and inventory management services to Shuhai Beijing. Shuhai Beijing and its stockholders shall not make any decisions nor direct the activities of Shuhai Beijing without Tianjin Information’s consent.

Stockholders’ Voting Rights Entrustment Agreement – Tianjin Information has entered into a stockholders’ voting rights entrustment agreement (the “Entrustment Agreement”) under which Zhixin Liu and Fu Liu (collectively the “Shuhai Beijing Stockholders”) have vested their voting power in Shuhai Beijing to Tianjin Information or its designee(s). The Entrustment Agreement does not have an expiration date, but the parties can agree in writing to terminate the Entrustment Agreement. Zhixin Liu, is the Chairman of the Board, President, CEO of DataSea and Corporate Secretary, and Fu Liu, a Director of DataSea (Fu Liu is the father of Zhixin Liu).

Equity Option Agreement – the Shuhai Beijing Stockholders and Tianjin Information entered into an equity option agreement (the “Option Agreement”), pursuant to which the Shuhai Beijing Stockholders have granted Tianjin Information or its designee(s) the irrevocable right and option to acquire all or a portion of Shuhai Beijing Stockholders’ equity interests in Shuhai Beijing for an option price of RMB0.001 for each capital contribution of RMB1.00. Pursuant to the terms of the Option Agreement, Tianjin Information and the Shuhai Beijing Stockholders 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 Stockholders 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 Stockholders 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 Stockholders 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, bonuses and other forms of investment returns paid on the pledged equity interests during the pledge period. Pursuant to the terms of the Equity Pledge Agreement, the Shuhai Beijing Stockholders 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. 

As of this report date, there were no dividends paid from the VIE to the U.S. parent company or the shareholders of the Company. There has been no change in facts and circumstances to consolidate the VIE. The following financial statement amounts and balances of the VIE were included in the accompanying CFS as of June 30, 2025 and 2024, and for the years ended June 30, 2025 and 2024, respectively.

Condensed Consolidating Statements of Operation Information:

	Year Ended June 30, 2025
	Parent			Subsidiaries			WOFE			VIE			Elimination			Consolidated
Revenue - third parties	$	-		$	-		$	-		$	71,616,820					$	71,616,820
Revenue-Parent provide service to WOFE		99,200												(99,200	)		-
Revenue-Parent provide service to VIE		154,200												(154,200	)		-
Revenue - WOFE’s provide service to VIE								1,350,560						(1,350,560	)		-
Revenue - VIE purchase materials from WOFE								121,072						(121,072	)		-
Revenue - from VIE’s label that is used by WOFE											926,286			(926,286	)		-
Revenue - WOFE purchase materials from VIE											400			(400	)
																	-
Cost of Revenue - third parties								90,763			69,082,109						69,172,872
COST - VIE purchase materials from WOFE								400						(400	)		-
COST - WOFE purchase materials from VIE								-			121,072			(121,072	)		-
														-			-
Gross profit		253,400			-			1,380,469			3,340,325			(2,530,246	)		2,443,948
Operating expenses		2,391,610			130,465			2,410,541			2,666,047						7,598,663
Operating expenses-VIE cost that was purchased from WOFE											1,350,560			(1,350,560	)		-
Operating expenses-WOFE cost that was purchased from VIE								926,286						(926,286	)		-
Operating expenses-WOFE cost that service provided by Parent								100,641						(100,641	)		-
Operating expenses-VIE cost that service provided by Parent											155,799			(155,799	)		-
Loss from operations		(2,138,210	)		(130,465	)		(2,056,999	)		(832,081	)		3,040			(5,154,715	)
Other income (expenses), net		2,533			(5	)		119,757			(47,100	)					75,185
Income tax expense											6,596						6,596
Loss before noncontrolling interest		(2,135,677	)		(130,470	)		(1,937,242	)		(885,777	)		3,040			(5,086,126	)
Less: loss attributable to noncontrolling interest											(432	)					(432	)
Net loss to the Company from continuing operation		(2,135,677	)		(130,470	)		(1,937,242	)		(885,345	)		3,040			(5,085,694	)

	Year Ended June 30, 2024
	Parent			Subsidiaries			WOFE			VIE			Elimination			Consolidated
Revenue - third parties	$	-		$	-		$	69,541		$	23,906,326					$	23,975,867
Revenue-Parent provided service to WOFE		275,100												(275,100	)		-
Revenue-Parent provided service to VIE		143,600												(143,600	)		-
Revenue - WOFE provided service to VIE								489,386						(489,386	)		-
Revenue - VIE purchased materials from WOFE								57,082						(57,082	)
Revenue - from VIE’s label that was used by WOFE											264,533			(264,533	)		-
Revenue - WOFE purchased materials  from VIE											57,082			(57,082	)
																	-
Cost of Revenue - third parties								69,156			23,432,606						23,501,762
COST - VIE purchased materials from WOFE								57,082						(57,082	)
COST - WOFE purchased materials from VIE								-			57,082			(57,082	)
														-			-
Gross profit		418,700			-			489,771			738,253			(1,172,619	)		474,105
Operating expenses		6,996,227			324,954			3,535,554			1,742,757						12,599,492
Operating expenses - VIE expenses, corresponding to services provided by WOFE											489,386			(489,386	)		-
Operating expenses - WOFE expenses for using VIE’s label								264,533						(264,533	)
Operating expenses – WOFE expenses, corresponding to services provided by  Parent								278,862						(278,862	)
Operating expenses - VIE expenses, corresponding to services provided by  Parent											146,150			(146,150	)		-
Loss from operations		(6,577,527	)		(324,954	)		(3,589,178	)		(1,640,040	)		6,312			(12,125,387	)
Other income (expenses), net		(1,665	)		(61	)		3,108			(97,300	)					(95,918	)
Income tax expense																	-
Loss before noncontrolling interest		(6,579,192	)		(325,015	)		(3,586,070	)		(1,737,340	)		6,312			(12,221,305	)
Less: loss attributable to noncontrolling interest											(10,695	)					(10,695	)
Net loss to the Company		(6,579,192	)		(325,015	)		(3,586,070	)		(1,726,645	)		6,312			(12,210,610	)

Condensed Consolidating Balance Sheets Information:

	As of June 30, 2025
	Parent			Subsidiaries			WOFE			VIE			Elimination			Consolidated
Cash	$	24,488		$	1,598		$	14,481		$	580,240					$	620,807
Accounts receivable								789,095			585,085						1,374,180
Accounts receivable - VIE														-			-
Accounts receivable - WOFE											31,766			(31,766	)
Inventory											206,610						206,610
Inventory - VIE																	-
Inventory - WOFE											47,738			(47,738	)		-
Value-added tax prepayment								22,088			114,937						137,025
Other receivables-Subsidiaries		32,515						2,666			2,417			(37,598	)		-
Other receivables - VIE		993,088						14,187,221						(15,180,309	)		-
Other receivables - WOFE		10,249,731									1,423,840			(11,673,571	)		-
Other receivables - Parent					5,000									(5,000	)
Other current assets								336,120			247,530			-			583,650
Total current assets		11,299,822			6,598			15,351,671			3,240,163			(26,975,982	)		2,922,272
Property and equipment, net								6,920			18,640						25,560
Intangible assets, net								3,045,369			503,000			(52,385	)		3,495,984
Right of use asset, net								7,720			284,345						292,065
Investment into subsidiaries		15,820,480												(15,820,480	)		-
Investment into WOFE					13,949,894									(13,949,894	)		-
Other non-current assets		-						-			-						-
Total non-current assets		15,820,480			13,949,894			3,060,009			805,985			(29,822,759	)		3,813,609
Total Assets	$	27,120,302		$	13,956,492		$	18,411,680			4,046,148			(56,798,741	)	$	6,735,881
Accounts payable	$	260,700			2,500		$	41,066		$	115,772					$	420,038
Accounts payable - VIE								31,766			-			(31,766	)
Accounts payable - WOFE														-			-
Short term loan																	-
Advance from customer								461			149,627						150,088
Accrued expense and other payable		750						1,117			804,862			(259,023	)		547,706
Due to ralated parties								4,961			1,165						6,126
Lease liability								5,764			122,761						128,525
Loan payable								-			2,374,767						2,374,767
Other payables - Datasea					32,514			10,031,174			726,742			(10,790,430	)		-
Other payables - Subsidiaries		5,000												(5,000	)
Other payables - VIE					2,536			1,423,840						(1,426,376	)		-
Other payables - WOFE					2,677						14,187,221			(14,189,898	)		-
Other current liabilities																	-
Total current liabilities		266,450			40,227			11,540,149			18,482,917			(26,702,493	)		3,627,250
Lease liability - noncurrent											166,436						166,436
Long term loan								-									-
Total non-current liabilities		-			-			-			166,436			-			166,436
Total liabilities		266,450			40,227			11,540,149			18,649,353			(26,702,493	)		3,793,686
Accumulated deficit		(15,519,912	)		(1,904,215	)		(11,652,066	)		(15,363,739	)		(86,084	)		(44,526,016	)
Other equity		42,373,764			15,820,480			18,523,597			760,534			(30,010,164	)		47,468,211
Total equity		26,853,852			13,916,265			6,871,531			(14,603,205	)		(30,096,248	)		2,942,195
Total liabilities and stockholders’ equity	$	27,120,302		$	13,956,492		$	18,411,680		$	4,046,148			(56,798,741	)	$	6,735,881

	As of June 30, 2024
	Parent			Subsidiaries			WOFE			VIE			Elimination			Consolidated
Cash	$	79,225		$	1,249		$	7,634		$	93,154					$	181,262
Accounts receivable											718,546						718,546
Accounts receivable - VIE								760,708						(760,708	)		-
Accounts receivable - WOFE														-
Inventory								34,530			119,053						153,583
Inventory - VIE								-									-
Inventory - WOFE											41,147			(41,147	)		-
Other receivables-Subsidiaries		5,015						832			2,427			(8,274	)		-
Other receivables - VIE		475,223						12,971,457						(13,446,680	)		-
Other receivables - WOFE		6,304,226									1,412,607			(7,716,833	)		-
Other receivables - Parent					5,000									(5,000	)
Other current assets		5,000			-			1,292,945			295,305			1,251			1,594,501
Total current assets		6,868,689			6,249			15,068,106			2,682,239			(21,977,391	)		2,647,892
Property and equipment, net								17,532			30,934						48,466
Intangible assets, net					101,042			62,406			441,485			(58,932	)		546,001
Right of use asset, net								38,300			11,045						49,345
Investment into subsidiaries		14,320,480												(14,320,480	)		-
Investment into WOFE					12,450,340									(12,450,340	)		-
Other non-current assets		-						-			-						-
Total non-current assets		14,320,480			12,551,382			118,238			483,464			(26,829,752	)		643,812
Total Assets	$	21,189,169		$	12,557,631		$	15,186,344		$	3,165,703			(48,807,143	)	$	3,291,704
Accounts payable	$	262,385			2,500		$	44,758		$	765,998					$	1,075,641
Accounts payable - VIE								-			-			-
Accounts payable - WOFE											760,708			(760,708	)		-
Short term loan											1,170,298						1,170,298
Advance from customers								463			48,776						49,239
Accrued expenses and other payables		23,254						109,121			713,827			(249,488	)		596,714
Lease liability								41,549			11,981						53,530
Loan payable								-									-
Other payables - Datasea					5,015			6,182,249			468,998			(6,656,262	)		-
Other payables - Subsidiaries		5,000												(5,000	)
Other payables - VIE					2,536			1,412,607						(1,415,143	)		-
Other payables - WOFE					845						12,971,457			(12,972,302	)		-
Other current liabilities		32,000						520,501			102,059						654,560
Total current liabilities		322,639			10,896			8,311,248			17,014,102			(22,058,903	)		3,599,982
Accumulated deficit		(13,649,331	)		(1,773,745	)		(9,705,672	)		(14,479,788	)		168,214			(39,440,322	)
Other equity		34,515,861			14,320,480			16,580,768			631,389			(26,916,454	)		39,132,044
Total equity		20,866,530			12,546,735			6,875,096			(13,848,399	)		(26,748,240	)		(308,278	)
Total liabilities and stockholders’ equity	$	21,189,169		$	12,557,631		$	15,186,344		$	3,165,703			(48,807,143	)	$	3,291,704

Condensed Consolidating Cash Flows Information:

	Year Ended June 30, 2025
	Parent			Subsidiaries			WOFE			VIE			Elimination			Consolidated
Net cash provided by/(used in) operating activities	$	(258,984	)	$	(29,428	)	$	(186,960	)	$	(1,899,308	)				$	(2,374,680	)
Net cash provided by/(used in) operating activities (WOFE to VIE)																	-
																	-
Net cash provided by/(used in) investing activities								(3,847,448	)		(237,749	)					(4,085,197	)
Net cash provided by/(used in) investing activities (Parent to subsidiaries)		(1,500,000	)											1,500,000			-
Net cash provided by/(used in) investing activities (Parent to WOFE)														-
Net cash provided by/(used in) investing activities (Subsidiaries to WOFE)					(1,499,554	)		1,524,032						(24,478	)		-
Net cash provided by/(used in) investing activities (WOFE to VIE)								(1,255,657	)					1,255,657			-
Net cash provided by/(used in) investing activities (Parent to VIE)														-			-
Net cash provided by/(used in) financing activities		5,939,133						(102,795	)		1,109,032						6,945,370
Net cash provided by/(used in) financing activities ( Parent to VIE )		(258,842	)					3,875,709			259,782			(3,876,649	)		-
Net cash provided by/(used in) financing activities ( Parent to subsidiaries)		(27,500	)		1,527,500									(1,500,000	)		-
Net cash provided by/(used in) financing activities ( VIE to subsidiaries )														-			-
Net cash provided by/(used in) financing activities WOFE to parent)		(3,945,505	)											3,945,505			-
Net cash provided by/(used in) financing activities (WOFE to subsidiaries )					1,830									(1,830	)		-
Net cash provided by/(used in) financing activities (WOFE to VIE)											1,255,657			(1,255,657	)		-
Net increase (decrease) in cash and cash equivalents	$	(51,698	)	$	(2,691	)	$	6,848			487,086			-		$	439,545

	Year Ended June 30, 2024
	Parent			Subsidiaries			WOFE			VIE			Elimination			Consolidated
Net cash provided by/(used in) operating activities	$	134,284		$	(5,849	)	$	(5,076,644	)	$	(1,450,675	)				$	(6,398,884	)
Net cash provided by/(used in) operating activities (WOFE to VIE)								(1,992,684	)		1,992,684						-
																	-
Net cash provided by/(used in) investing activities								-			(167,957	)					(167,957	)
Net cash provided by/(used in) investing activities (Parent to subsidiaries)		(1,405,015	)											1,405,015			-
Net cash provided by/(used in) investing activities (Parent to WOFE)		(6,231,281	)											6,231,281
Net cash provided by/(used in) investing activities (Subsidiaries to WOFE)					(1,399,449	)								1,399,449			-
Net cash provided by/(used in) investing activities (WOFE to VIE)								(2,859,142	)					2,859,142			-
Net cash provided by/(used in) investing activities (Parent to VIE)		(475,223	)											475,223			-
Net cash provided by/(used in) investing activities (VIE to subsidiaries)											2,536			(2,536	)		-
Net cash provided by/(used in) financing activities		8,061,286						418,608			(1,640,317	)					6,839,577
Net cash provided by/(used in) financing activities (Parent to VIE)											483,698			(483,698	)		-
Net cash provided by/(used in) financing activities (Parent to Subsidiaries)					1,405,015									(1,405,015	)		-
Net cash provided by/(used in) financing activities (VIE to subsidiaries)					(2,536	)								2,536			-
Net cash provided by/(used in) financing activities (parent to WOFE)								6,097,306						(6,097,306	)		-
Net cash provided by/(used in) financing activities (subsidiaries to WOFE)								1,424,455						(1,424,455	)		-
Net cash provided by/(used in) financing activities (WOFE to VIE)											2,859,142			(2,859,142	)		-
Net increase (decrease) in cash and cash equivalents	$	77,738		$	(2,819	)	$	(1,988,041	)	$	2,074,656			-		$	161,534

USE OF ESTIMATES 

The preparation of CFS in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting periods. Actual results could differ from those estimates. The significant areas requiring the use of management estimates include, but are not limited to, the estimated useful life and residual value of property, plant and equipment, provision for staff benefits, recognition and measurement of deferred income taxes and the valuation allowance for deferred tax assets. Although these estimates are based on management’s knowledge of current events and actions management may undertake in the future, actual results may ultimately differ from those estimates and such differences may be material to the CFS.  

CONTINGENCIES

Certain conditions may exist as of the date the CFS are issued, which may result in a loss to the Company but which will only be resolved when one or more future events occur or fail to occur. The Company’s management and legal counsel assess such contingent liabilities, and such assessment inherently involves an exercise of judgment. In assessing loss contingencies related to legal proceedings that are pending against the Company or unasserted claims that may result in such proceedings, the Company’s legal counsel evaluates the perceived merits of any legal proceedings or unasserted claims as well as the perceived merits of the amount of relief sought or expected to be sought. If the assessment of a contingency indicates that it is probable that a material loss has been incurred and the amount of the liability can be estimated, the estimated liability would be accrued in the Company’s CFS.  

If the assessment indicates that a potential material loss contingency is not probable but is reasonably possible, or is probable but cannot be estimated, the nature of the contingent liability, together with an estimate of the range of possible loss if determinable and material, would be disclosed. As of June 30, 2025 and 2024, the Company has no such contingencies.

CASH

Cash includes cash on hand and demand deposits that are highly liquid in nature and have original maturities when purchased of three months or less.  

ACCOUNTS RECEIVABLE

The Company’s policy is to maintain an allowance for potential credit losses on accounts receivable. The Company adopted Accounting Standards Update (“ASU”) 2016-13, Financial Instruments – Credit Losses (Topic 326): Measurement of Credit losses on financial instruments later codified as Accounting Standard codification (“ASC”) 326 (“ASC 326”), on July 1, 2023. The guidance introduces a revised approach to the recognition and measurement of credit losses, emphasizing an updated model based on expected losses rather than incurred losses. There was no significant impact on the date of adoption of ASC 326.

Under ASC 326, accounts receivable are recorded at the invoiced amount, net of allowance for expected credit losses. The Company’s primary allowance for credit losses is the allowance for doubtful accounts. The allowance for doubtful accounts reduces the accounts receivable balance to the estimated net realizable value. The Company used a combination of method Aging schedule and Roll-rate method to assess the reasonability and adequacy of current allowance.

In establishing any required allowance, management considers historical losses adjusted for current market conditions, the Company’s customers’ financial condition, the amount of any receivables in dispute, the current receivables aging, current payment terms and expectations of forward-looking loss estimates.

All provisions for the allowance for doubtful accounts are included as a component of general and administrative expenses on the accompanying consolidated statements of operations and comprehensive loss. Accounts receivable deemed uncollectible are charged against the allowance for credit losses when identified. Subsequent recoveries of amounts previously written off are credited to earnings in the period recovered. As of June 30, 2025 and 2024, the Company had a $0 bad debt allowance for credit losses. 

INVENTORY

Inventory is comprised principally of intelligent temperature measurement face recognition terminal and identity information recognition products, and is valued at the lower of cost or net realizable value. The value of inventory is determined using the first-in, first-out method. The Company periodically estimates an inventory allowance for estimated unmarketable inventories when necessary. Inventory amounts are reported net of such allowances. There were $152,907 and $53,650 allowances for slow-moving and obsolete inventory (mainly for Smart-Student Identification cards) as of June 30, 2025 and 2024, respectively.

PROPERTY AND EQUIPMENT

Property and equipment are stated at cost, less accumulated depreciation. Major repairs and improvements that significantly extend original useful lives or improve productivity are capitalized and depreciated over the period benefited. Maintenance and repairs are expensed as incurred. When property and equipment are retired or otherwise disposed of, the related cost and accumulated depreciation are removed from the respective accounts, and any gain or loss is included in operations. Depreciation of property and equipment is provided using the straight-line method over estimated useful lives as follows:

Furniture and fixtures	3-5 years
Office equipment	3-5 years
Vehicles	5 years
Leasehold improvement	3 years

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

INTANGIBLE ASSETS

Intangible assets with finite lives are amortized using the straight-line method over their estimated period of benefit. Evaluation of the recoverability of intangible assets is made to take into account events or circumstances that warrant revised estimates of useful lives or that indicate that impairment exists. All of the Company’s intangible assets are subject to amortization. In accordance with the Generally Accepted Accounting Principles (ASC) 360-10-35-21 of the United States, no impairment of intangible assets has been identified as of the balance sheet date.

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

FAIR VALUE (“FV”) OF FINANCIAL INSTRUMENTS

The carrying value of the Company’s short-term financial instruments, such as cash, accounts receivable, prepaid expenses, accounts payable, unearned revenue, accrued expenses and other payables approximates their FV due to their short maturities. FASB ASC Topic 825, “Financial Instruments,” requires disclosure of the FV of financial instruments held by the Company. The carrying amounts reported in the balance sheets for current liabilities qualify as financial instruments and are a reasonable estimate of their FV because of the short period of time between the origination of such instruments and their expected realization and the current market rate of interest. 

FAIR VALUE MEASUREMENTS AND DISCLOSURES

FASB ASC Topic 820, “Fair Value Measurements,” defines FV, and establishes a three-level valuation hierarchy for disclosures that enhances disclosure requirements for FV measures. The three levels are defined as follows:

● Level 1 inputs to the valuation methodology are quoted prices (unadjusted) for identical assets or liabilities in active markets.

● Level 2 inputs to the valuation methodology include other than those in level 1 quoted prices for similar assets and liabilities in active markets, and inputs that are observable for the asset or liability, either directly or indirectly, for substantially the full term of the financial instrument.

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

As of June 30, 2025 and 2024, the Company did not identify any assets or liabilities required to be presented on the balance sheet at FV on a recurring basis.

IMPAIRMENT OF LONG-LIVED ASSETS

In accordance with FASB ASC 360-10, “Accounting for the Impairment or Disposal of Long-Lived Assets”, long-lived assets such as property and equipment are reviewed for impairment whenever events or changes in circumstances indicate that the carrying value of an asset may not be recoverable, or it is reasonably possible that these assets could become impaired as a result of technological or other changes. The determination of recoverability of assets to be held and used is made by comparing the carrying amount of an asset to future undiscounted cash flows expected to be generated by the asset. 

If such assets are considered impaired, the impairment to be recognized is measured as the amount by which the carrying amount of the asset exceeds its FV. FV generally is determined using the asset’s expected future undiscounted cash flows or market value, if readily determinable. Assets to be disposed of are reported at the lower of the carrying amount or FV less cost to sell. For the years ended June 30, 2025 and 2024, there was no impairment loss recognized on long-lived assets. 

UNEARNED REVENUE

The Company records payments received in advance from its customers or sales agents for the Company’s products as unearned revenue, mainly consisting of deposits or prepayment for 5G products from the Company’s sales agencies. These orders normally are delivered based upon contract terms and customer demand, and the Company will recognize it as revenue when the products are delivered to the end customers. 

LEASES

The Company determines if an arrangement is a lease at inception under FASB ASC Topic 842. Right of Use Assets (“ROU”) and lease liabilities are recognized at commencement date based on the present value of remaining lease payments over the lease term. For this purpose, the Company considers only payments that are fixed and determinable at the time of commencement. As most of its leases do not provide an implicit rate, it uses its incremental borrowing rate based on the information available at commencement date in determining the present value of lease payments. The Company’s incremental borrowing rate is a hypothetical rate based on its understanding of what its credit rating would be. The ROU assets include adjustments for prepayments and accrued lease payments. The ROU asset also includes any lease payments made prior to commencement and is recorded net of any lease incentives received. The Company’s lease terms may include options to extend or terminate the lease when it is reasonably certain that it will exercise such options.

ROU assets are reviewed for impairment when indicators of impairment are present. ROU assets from operating and finance leases are subject to the impairment guidance in ASC 360, Property, Plant, and Equipment, as ROU assets are long-lived nonfinancial assets.

ROU assets are tested for impairment individually or as part of an asset group if the cash flows related to the ROU asset are not independent from the cash flows of other assets and liabilities. An asset group is the unit of accounting for long-lived assets to be held and used, which represents the lowest level for which identifiable cash flows are largely independent of the cash flows of other groups of assets and liabilities. The Company recognized no impairment of ROU assets as of June 30, 2025 and 2024.

REVENUE RECOGNITION

The Company follows Accounting Standards Codification Topic 606, Revenue from Contracts with Customers (ASC 606).

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

FASB ASC Topic 606 requires the use of a five-step model to recognize revenue from customer contracts. The five-step model requires the Company (i) identify the contract with the customer, (ii) identify the performance obligations in the contract, (iii) determine the transaction price, including variable consideration to the extent that it is probable that a significant future reversal will not occur, (iv) allocate the transaction price to the respective performance obligations in the contract, and (v) recognize revenue when (or as) the Company satisfies each performance obligation.

The Company derives its revenues from product sales, software sales, and 5G messaging service contracts with its customers, with revenues recognized upon delivery of services and products. Persuasive evidence of an arrangement is demonstrated via product sale contracts and professional service contracts, with performance obligations identified. The transaction price, such as product selling price, and the service price to the customer with corresponding performance obligations are fixed upon acceptance of the agreement. The Company recognizes revenue when it satisfies each performance obligation, the customer receives the products and passes the inspection and when professional service is rendered to the customer, collectability of payment is probable. These revenues are recognized at a point in time after each performance obligations is satisfied. Revenue is recognized net of returns and value-added tax charged to customers

The following table shows the Company’s revenue by revenue sources:

	For the Year Ended June 30, 2025		For the Year Ended June 30, 2024
5G AI Multimodal communication	$	70,682,408	$	23,600,693
5G AI Multimodal communication		69,438,410		23,600,693
5G AI digital technical service		1,243,998		-
Acoustic Intelligence Business		584,788		3,988
Ultrasonic Sound Air Disinfection Equipment		40,109		3,988
Upgraded Sonic Sterilization and Purification Guardian		246,616		-
Sleep Monitor		298,063		-
Sell of Software		325,908		-
Smart City business		-		-
Smart community		-		37,113
Other		23,716		334,073
Total revenue	$	71,616,820	$	23,975,867

SEGMENT INFORMATION

FASB ASC Topic 280, “Segment Reporting,” requires use of the “management approach” model for segment reporting. The management approach model is based on the method a company’s management organizes segments within the company for making operating decisions and assessing performance. Reportable segments are based on products and services, geography, legal structure, management structure, or any other manner in which management disaggregates a company. Management determined the Company’s current operations constitutes a single reportable segment in accordance with ASC 280. The Company’s only business and industry segment is high technology and advanced information systems (“TAIS”). TAIS includes smart city solutions that meet the security needs of residential communities, schools and commercial enterprises, and 5G messaging services including 5G SMS, 5G MMCP and 5G multi-media video messaging.

All of the Company’s customers are in the PRC and all revenues for the years ended June 30, 2025 and 2024 were generated from the PRC. All identifiable assets of the Company are located in the PRC. Accordingly, no geographical segments are presented.

INCOME TAXES

The Company uses the asset and liability method of accounting for income taxes in accordance with FASB ASC Topic 740, “Income Taxes.” Under this method, income tax expense is recognized for the amount of: (i) taxes payable or refundable for the current period and (ii) deferred tax consequences of temporary differences resulting from matters that have been recognized in an entity’s financial statements or tax returns. Deferred tax assets also include the prior years’ net operating losses carried forward. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in the results of operations in the period that includes the enactment date. A valuation allowance is provided to reduce the deferred tax assets reported if based on the weight of the available positive and negative evidence, it is more likely than not some portion or all of the deferred tax assets will not be realized.

The Company follows FASB ASC Topic 740, which prescribes a more-likely-than-not threshold for financial statement recognition and measurement of a tax position taken or expected to be taken in a tax return. FASB ASC Topic 740 also provides guidance on recognition of income tax assets and liabilities, classification of current and deferred income tax assets and liabilities, accounting for interest and penalties associated with tax positions, accounting for income taxes in interim periods, and income tax disclosures.

Under the provisions of FASB ASC Topic 740, when tax returns are filed, it is likely some positions taken would be sustained upon examination by the taxing authorities, while others are subject to uncertainty about the merits of the position taken or the amount of the position that would be ultimately sustained. The benefit of a tax position is recognized in the financial statements in the period during which, based on all available evidence, management believes it is more likely than not that the position will be sustained upon examination, including the resolution of appeals or litigation processes, if any. Tax positions taken are not offset or aggregated with other positions. Tax positions that meet the more-likely-than-not recognition threshold are measured as the largest amount of tax benefit that is more than 50 percent likely of being realized upon settlement with the applicable taxing authority. The portion of the benefits associated with tax positions taken that exceeds the amount measured as described above is reflected as a liability for unrecognized tax benefits in the accompanying balance sheets along with any associated interest and penalties that would be payable to the taxing authorities upon examination. Interest associated with unrecognized tax benefits is classified as interest expense and penalties are classified in selling, general and administrative expenses in the statement of income.  As of June 30, 2025 and 2024, the Company had no unrecognized tax positions and no charges during the years ended June 30, 2025 and 2024, and accordingly, the Company did not recognize any interest or penalties related to unrecognized tax benefits. The Company files a U.S. and PRC income tax return. With few exceptions, the Company’s U.S. income tax returns filed for the years ending on June 30, 2018 and thereafter are subject to examination by the relevant taxing authorities; the Company uses calendar year-end for its PRC income tax return filing, PRC income tax returns filed for the years ending on December 31, 2019 and thereafter are subject to examination by the relevant taxing authorities.

RESEARCH AND DEVELOPMENT EXPENSES

Research and development expenses are expensed in the period when incurred. These costs primarily consist of cost of materials used, salaries paid for the Company’s development department, and fees paid to third parties.

NONCONTROLLING INTERESTS

The Company follows FASB ASC Topic 810, “Consolidation,” governing the accounting for and reporting of noncontrolling interests (“NCIs”) in partially owned consolidated subsidiaries and the loss of control of subsidiaries. Certain provisions of this standard indicate, among other things, that NCI (previously referred to as minority interests) be treated as a separate component of equity, not as a liability, that increases and decreases in the parent’s ownership interest that leave control intact be treated as equity transactions rather than as step acquisitions or dilution gains or losses, and that losses of a partially-owned consolidated subsidiary be allocated to non-controlling interests even when such allocation might result in a deficit balance. 

The net income (loss) attributed to NCI was separately designated in the accompanying statements of operations and comprehensive income (loss). Losses attributable to NCI in a subsidiary may exceed a non-controlling interest’s interests in the subsidiary’s equity. The excess attributable to NCIs is attributed to those interests. NCIs shall continue to be attributed their share of losses even if that attribution results in a deficit NCI balance. On December 20, 2022, Guohao Century acquired a 30% ownership noncontrolling interests of Zhangxun from Zhengmao Zhang at the price of $0.15 (RMB 1.00). The Company recognized a paid in capital deficit of $982,014 from this purchase due to continued loss of Zhangxun. Subsequent to this purchase, the Company ultimately holds a 99.9% ownership of Zhangxun. On July 20, 2023, the Company sold Zhangxun to a third party for RMB 2 ($0.28).

Zhangqi was 1% owned by noncontrolling interest, in November 2023, the Company dissolved Zhangqi. As of December 31, 2023, Shuhai Nanjing was 1% owned by noncontrolling interest, Shenzhen Acoustic MP was 1% owned by noncontrolling interest, Shuhai Shenzhen Acoustic was 0.1% owned by noncontrolling interest, Guozhong Times was 0.091% owned by noncontrolling interest, and Guozhong Haoze was 0.091% owned by noncontrolling interest. During the years ended June 30, 2025 and 2024, the Company had net loss of $432 and $10,695 attributable to the noncontrolling interest from continuing operations, respectively.  

CONCENTRATION OF CREDIT RISK 

The Company maintains cash in accounts with state-owned banks within the PRC. Cash in state-owned banks less than RMB500,000 ($76,000) is covered by insurance. Should any institution holding the Company’s cash become insolvent, or if the Company is unable to withdraw funds for any reason, the Company could lose the cash on deposit with that institution. The Company has not experienced any losses in such accounts and believes it is not exposed to any risks on its cash in these bank accounts. Cash denominated in RMB with a U.S. dollar equivalent of $594,722 and $100,788 as of June 30, 2025 and 2024, respectively, was held in accounts at financial institutions located in the PRC‚ which is not freely convertible into foreign currencies.

Cash held in accounts at U.S. financial institutions is insured by the Federal Deposit Insurance Corporation or other programs subject to certain limitations up to $250,000 per depositor. As of June 30, 2025 and 2024, cash of $24,487 and $79,225 was maintained at U.S. financial institutions. Cash was maintained at financial institutions in Hong Kong, and was insured by the Hong Kong Deposit Protection Board up to a limit of HK $500,000 ($64,000). As of June 30, 2025 and 2024, the cash balance of $1,598 and $1,249 was maintained at financial institutions in Hong Kong. The Company, its subsidiaries and VIE have not experienced any losses in such accounts and do not believe the cash is exposed to any significant risk.

FOREIGN CURRENCY TRANSLATION AND COMPREHENSIVE INCOME (LOSS)

The accounts of the Company’s Chinese entities are maintained in RMB and the accounts of the U.S. parent company are maintained in United States dollar (“USD”). The financial statements of the Chinese entities were translated into USD in accordance with FASB ASC Topic 830 “Foreign Currency Matters.” All assets and liabilities were translated at the exchange rate on the balance sheet date; stockholders’ equity is translated at historical rates and the statements of operations and cash flows are translated at the weighted average exchange rate for the period. The resulting translation adjustments are reported under other comprehensive income (loss) in accordance with FASB ASC Topic 220, “Comprehensive Income.” Gains and losses resulting from foreign currency transactions are reflected in the statements of operations.

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

The exchange rates used to translate amounts in RMB to USD for the purposes of preparing the CFS were as follows:

	June 30,		June 30,
	2025		2024
Period-end date USD: RMB exchange rate		7.1586		7.1268
Average USD for the reporting period: RMB exchange rate		7.1599		7.1326

BASIC AND DILUTED EARNINGS (LOSS) PER SHARE (EPS) 

Basic EPS is computed by dividing income available to common shareholders by the weighted average number of common shares outstanding for the period. Diluted EPS is computed similarly, except that the denominator is increased to include the number of additional common shares that would have been outstanding if the potential common shares had been issued and if the additional common shares were dilutive. Diluted EPS is based on the assumption that all dilutive convertible shares and stock options were converted or exercised. Dilution is computed by applying the treasury stock method. Under this method, options and warrants are assumed to have been exercised at the beginning of the period (or at the time of issuance, if later), and as if funds obtained thereby were used to purchase common stock at the average market price during the period.

STATEMENT OF CASH FLOWS 

In accordance with FASB ASC Topic 230, “Statement of Cash Flows,” cash flows from the Company’s operations are calculated based upon the local currencies. As a result, amounts shown on the statement of cash flows may not necessarily agree with changes in the corresponding asset and liability on the balance sheet.

RECENT ACCOUNTING PRONOUNCEMENTS

In October 2023, the FASB issued ASU No. 2023-06, “Disclosure Improvements — Codification Amendments in Response to the SEC’s Disclosure Update and Simplification Initiative.” The ASU amends the disclosure or presentation requirements related to various subtopics in the FASB ASC. The ASU was issued in response to the SEC’s August 2018 final amendments in Release No. 33-10532, Disclosure Update and Simplification that updated and simplified disclosure requirements that the SEC believed were duplicative, overlapping, or outdated. The guidance in ASU 2023-06 is intended to align GAAP requirements with those of the SEC and to facilitate the application of GAAP for all entities. The amendments introduced by ASU 2023-06 are effective if the SEC removes the related disclosure or presentation requirement from its existing regulations by June 30, 2027. If, by June 30, 2027, the SEC has not removed the applicable requirements from its existing regulations, the pending content of the associated amendment will be removed from the ASC and will not become effective for any entities. Early adoption is permitted. The adoption of ASU 2023-06 is not expected to have a material impact on the Company’s consolidated financial statements or related disclosures.

In December 2023, the FASB issued ASU 2023-09, Income Taxes (Topic 740): Improvements to Income Tax Disclosures (ASU 2023-09), which requires disclosure of incremental income tax information within the rate reconciliation and expanded disclosures of income taxes paid, among other disclosure requirements. ASU 2023-09 is effective for fiscal years beginning after December 15, 2024. Early adoption is permitted. The Company’s management does not believe the adoption of ASU 2023-09 will have a material impact on its financial statements and disclosures.

On November 4, 2024, the FASB issued an ASU No. 2024-03, Disaggregation of Income Statement Expenses (“ASU 2024 03”) to improve the disclosures about a public business entity’s expenses and address requests from investors for more detailed information about the types of expenses in commonly presented expense captions (such as cost of sales; selling, general, and administrative expenses; and research and development). The amendments in the ASU require disclosure in the notes to financial statements of specified information about certain costs and expenses. The amendments require that at each interim and annual reporting period an entity: 1.Disclose the amounts of (a) purchases of inventory, (b) employee compensation, (c) depreciation, (d) intangible asset amortization, and (e) depreciation, depletion, and amortization recognized as part of oil- and gas-producing activities (or other amounts of depletion expense) included in each relevant expense caption. A relevant expense caption is an expense caption presented on the face of the income statement within continuing operations that contains any of the expense categories listed in (a)–(e). 2. Include certain amounts that are already required to be disclosed under current generally accepted accounting principles in the same tabular disclosure as the other disaggregation requirements. 3. Disclose a qualitative description of the amounts remaining in relevant expense captions that are not separately disaggregated quantitatively. 4) Disclose the total amount of selling expenses and, in annual reporting periods, an entity’s definition of selling expenses. In January 2025, the FASB issued ASU No. 2025-01, Clarifying the Effective Date (“ASU 2025-01”). The amendments, as clarified by ASU 2025-01, are effective for annual reporting periods beginning after December 15, 2026, and interim reporting periods within annual reporting periods beginning after December 15, 2027. Early adoption is permitted. The amendments in this ASU should be applied either (1) prospectively to financial statements issued for reporting periods after the effective date of the ASU or (2) retrospectively to any or all prior periods presented in the financial statements. The Company is evaluating the impact that ASU 2024-03 will have on its consolidated financial statements and related disclosures.

In January 2025, the FASB issued ASU 2025-01 Income Statement-Reporting Comprehensive Income – Expense Disaggregation Disclosures (Subtopic 220-40). The FASB issued ASU 2024-03 on November 4, 2024-03 states that the amendments are effective for public business entities for annual reporting periods beginning after December 15, 2026, and interim reporting periods beginning after December 15, 2027. Following the issuance of ASU 2024-03, the FASB was asked to clarify the initial effective date for entities that do not have an annual reporting period that ends on December 31 (referred to as non-calendar year-end entities). Because of how the effective date guidance was written, a non-calendar year-end entity may have concluded that it would be required to initially adopt the disclosure requirements in ASU 2024-03 in an interim reporting period, rather than in annual reporting period. The FASB’s intent in the basis for conclusions of ASU 2024-03 is clear that all public business entities should initially adopt the disclosure requirements in the first annual reporting period beginning after December 15, 2026, and interim reporting periods within annual reporting periods beginning after December 15, 2027. The Company is currently evaluating the impact that the adoption of ASU 2025-01 will have on its consolidated financial statement presentation or disclosures.

The Company does not believe other recently issued but not yet effective accounting standards, if currently adopted, would have a material effect on the Company’s consolidated financial position, statements of comprehensive income and cash flows.