Financial Data and Key Metrics Changes - Datasea reported revenues of $17.08 million for the fiscal year ended June 30, 2022, a significant increase of $16.9 million or 9,653% compared to $0.17 million in the previous year [6][7] - The gross margin for the 12 months ended June 30, 2022, was 5.6%, with expectations for improvement due to economies of scale and increased brand recognition [10] - R&D expenses increased by $0.41 million or 48% year-on-year, totaling $1.26 million for the year ended June 30, 2022 [11] Business Line Data and Key Metrics Changes - The revenue from the 5G messaging business was $17.02 million, which included $11.93 million from 5G SMS and $3.26 million from value-added services [7][8] - The Smart City project generated $56,000 in revenue during the reporting period [7] Market Data and Key Metrics Changes - Datasea's customer base expanded across various provinces in China, including Beijing, Liaoning, and Guangdong, with agreements signed with over 11 industry customers [9] - The company aims to expand its global market exposure, particularly in North America, through the establishment of U.S. business subsidiaries [20] Company Strategy and Development Direction - Datasea's primary operational goals include providing best-in-class products in 5G messaging and acoustic intelligence, maximizing sustainable growth, and generating cash flows for shareholders [23] - The company is focusing on four key initiatives: enhancing digital communication, assisting companies in meeting marketing needs, investing in long-term growth areas, and leveraging innovation to provide unique solutions [24][26][29] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the company's development for the new fiscal year, citing a $41.72 million procurement agreement for 5G messaging services [15] - The management noted that while the current economic environment poses challenges, the fundamentals of China's economy are improving, and the company is well-positioned for future growth [19][33] Other Important Information - Datasea plans to invest approximately $10 million in technological development over the next three years [13] - The company has developed ultrasonic sound sterilization equipment with a 99.83% efficacy against COVID-19, with significant orders already placed [12][16] Q&A Session Summary Question: How will you describe the company's competitiveness in the 5G messaging and acoustic intelligence? - Management highlighted the large market potential in China, authorization by major operators, a comprehensive product portfolio, and strong industry relationships as key competitive advantages [37][39][40] Question: If the Smart City solutions are not generating significant revenue, why does the company decide to keep it? - Management emphasized the promising market position and the strong synergies between Smart City solutions and the 5G messaging and acoustic intelligence businesses [44][45]

Financial Performance - Datasea reported a net loss of approximately $6.52 million for the year ended June 30, 2022, compared to a net loss of $4.65 million for the previous year, indicating a worsening financial performance [416]. - The company had an accumulated deficit of approximately $18.58 million as of June 30, 2022, and negative cash flow from operating activities of approximately $5.14 million for the year [416]. - Revenues for the year ended June 30, 2022, were $17,080,911, representing a $16,905,773 or 9,653% increase compared to $175,138 in 2021, primarily driven by the expansion into 5G messaging services [422]. - Cost of revenues increased to $16,125,238 for the year ended June 30, 2022, reflecting a $16,044,103 or 19,775% increase from $81,135 in 2021, mainly due to the costs associated with the 5G SMS service platform [426]. - Gross profit for the year ended June 30, 2022, was $955,673, a $861,670 or 917% increase from $94,003 in 2021, attributed to the delivery of services related to the 5G SMS service platform [427]. - Net loss for the year ended June 30, 2022, was $6,521,708, a $1,873,231 or 40% increase from $4,648,477 in 2021, mainly due to increased operating expenses [434]. - As of June 30, 2022, the company had a working capital deficit of $867,774, improving from a deficit of $2,372,682 in 2021, with a current ratio of 0.59:1 [436]. - Net cash used in operating activities was $5,139,712 for the year ended June 30, 2022, an increase of $1,191,363 compared to $3,948,349 in 2021, primarily due to increased net loss and accounts receivable [439]. - Total liabilities decreased by 43.52% to $2,156,045 as of June 30, 2022, attributed to the alignment of accounts payable with accounts receivable, indicating improved working capital management [442]. Business Development and Strategy - Datasea signed a $14.99 million procurement agreement to supply 5G messaging services with Zhangzhou Baina Intelligent Technology Co., demonstrating its capability to provide rich messaging experiences at scale [410]. - The company entered into a $22.3 million sales agreement to provide 5G messaging services with Hangzhou Runsheng Network Technology Ltd, reflecting an acceleration in demand for its services [411]. - Datasea aims to diversify its product portfolio and improve operating efficiency to maximize long-term sustainable growth of earnings and operating funds [402]. - Datasea's digital smart city platform integrates IoT, big data, and AI to enhance urban management and improve citizens' quality of life [406]. - The company plans to expand its addressable clients and market by offering a wider selection of acoustic intelligence products, including ultrasonic air sterilizers [443]. - Datasea intends to strengthen its acoustic intelligence business operations in the U.S. to enhance design, innovation, and sales capabilities [443]. - New products will be developed for a broader range of applications, with an emphasis on upgrading the 5G messaging business to capture market share [443]. - The company aims to improve margins through operational discipline and growth in higher-margin hardware, services, and solutions [443]. - Global sales will be expanded, and core products will be localized to better meet customer demands [445]. - The company plans to establish production lines for vertical integration to achieve cost advantages [445]. - Strategic alliances will be created through mergers and acquisitions or joint ventures to enhance synergy [445]. - Datasea will enhance brand awareness through marketing and obtain PCT international patents to increase the value of intangible assets [445]. Research and Development - The company holds 27 patents and 77 software copyrights, with 20 patent applications pending, indicating a strong focus on innovation and R&D [401]. - Research and development expenses rose to $1,259,739 for the year ended June 30, 2022, marking a $407,900 or 48% increase from $851,839 in 2021, with plans to invest approximately $10 million in technological product development over the next three years [429]. - Management believes the company will have sufficient working capital to meet its operating needs for at least the next 12 months [418].

Datasea Inc. (NASDAQ:DTSS) Q2 2022 Earnings Conference Call February 14, 2022 8:00 AM ET Company Participants Annabelle Zhang - Investor Relations Zhixin Liu - Chief Executive Officer Mingzhou Sun - Chief Financial Officer Conference Call Participants Operator Greetings. Welcome to Datasea's Second Quarter Fiscal Year 2022 Financial Highlights and Updates. At this time, all participants are in a listen-only mode. A question-and-answer session will follow the formal presentation. [Operator Instructions] Plea ...

Financial Performance - Total revenues for the six months ended December 31, 2021, were $9,650,609, compared to $135,239 for the same period in 2020, representing a significant increase [10]. - Gross profit for the six months ended December 31, 2021, was $309,894, up from $78,226 in the same period of 2020, indicating a strong improvement in profitability [10]. - Operating expenses totaled $3,724,842 for the six months ended December 31, 2021, compared to $1,935,243 for the same period in 2020, reflecting increased investment in operations [10]. - The net loss attributable to the company for the six months ended December 31, 2021, was $3,118,527, compared to a net loss of $1,830,860 in the same period in 2020 [10]. - The company reported a basic and diluted net loss per share of $0.13 for the six months ended December 31, 2021, compared to a loss of $0.09 in the same period in 2020 [10]. - For the six months ended December 31, 2021, the company reported a net loss of approximately $3.11 million, compared to a net loss of $1.83 million for the same period in 2020, indicating an increase in losses of 70.5% [24]. - The company had negative cash flow from operating activities of approximately $3.82 million for the six months ended December 31, 2021, compared to $1.85 million for the same period in 2020, reflecting a 106.5% increase in cash outflow [24]. Assets and Liabilities - Total assets as of December 31, 2021, were $11,873,723, compared to $3,895,117 as of December 31, 2020, showing substantial growth in asset base [8]. - Total liabilities as of December 31, 2021, were $6,802,163, compared to $3,817,406 in the previous year, indicating increased leverage [8]. - Cash and cash equivalents were $2,240,708 as of December 31, 2021, compared to $49,676 in the previous year, highlighting improved liquidity [7]. - The total accumulated deficit increased to $15,180,385 as of December 31, 2021, reflecting ongoing operational challenges [12]. - Total current assets as of December 31, 2021, were approximately $6.59 million, a significant increase from $667,369 as of June 30, 2021 [39]. Research and Development - Research and development expenses increased to $719,571 for the six months ended December 31, 2021, from $329,235 in the same period of 2020, reflecting a focus on innovation [10]. - The company has a total of 9 patents and 47 software copyrights, with 12 patent applications pending, indicating a focus on innovation and technology development [22]. - The company is focused on providing advanced technology solutions in 5G messaging, acoustic intelligence, and smart city sectors [22]. Financing Activities - The company issued 2,436,904 common shares for equity financing, raising $7,681,796 during the period [12]. - The company sold 2,436,904 shares of common stock at $3.48 per share on July 20, 2021, generating net proceeds of approximately $7.64 million, which alleviated liquidity concerns [24]. - The company is exploring additional funding options through private or public offerings to support its R&D and operations [26]. - Management believes that the company will have sufficient working capital to meet its operating needs for at least the next 12 months [26]. Inventory and Assets Management - The company had allowances for slow-moving and obsolete inventory amounting to $59,970 as of December 31, 2021 [49]. - The company recognized no impairment loss on long-lived assets for the six and three months ended December 31, 2021 [58]. - The net Right of Use (ROU) assets for operating leases were $962,056 as of December 31, 2021, with total operating lease liabilities of $917,544 [64]. Taxation and Deferred Revenue - The Company is subject to income taxes based on income derived from the tax jurisdiction in which each entity is domiciled, primarily in the PRC [125]. - The U.S. parent company has net operating loss (NOL) carry forwards of $1.57 million as of December 31, 2021, and $0.94 million as of June 30, 2021, with a 100% deferred tax asset valuation allowance established due to uncertainty in realizing these benefits [126]. - Deferred revenue primarily consists of local government financial support for technology innovation, which will be recorded as income upon passing inspection [60].

Financial Performance - The company reported revenue of $175,138 for the year ended June 30, 2021, a significant decrease from $1,414,781 in 2020, primarily due to a shift towards 5G messaging and smart payment services [388]. - Gross profit for the year ended June 30, 2021, was $94,003, down from $1,268,400 in 2020, reflecting increased hardware costs and a shift in revenue sources [392]. - The company incurred a net loss of $4,648,477 for the year ended June 30, 2021, compared to a net loss of $1,863,253 in 2020, attributed to business expansion and increased R&D investment [396]. - As of June 30, 2021, the company had a working capital deficit of $2,372,682, with current assets of $885,985, down from a working capital of $2,609,032 in 2020 [399]. - Non-operating income (expenses) was $(23,030) in 2021, compared to $46,958 in 2020, indicating a decline in interest income and an increase in other expenses [395]. Research and Development - Research and development expenses increased to $851,839 in 2021 from $1,114,486 in 2020, with plans to invest approximately $10 million in technological product development over the next three years [393]. - The company is focusing on long-term technological development and strategic deployment to enhance sustainable growth and potential energy accumulation [407]. - The company emphasizes the fusion of perception technologies and cognitive decision-making to create business value for customers [408]. Strategic Agreements and Investments - The company signed a strategic agreement worth approximately $14.76 million (RMB 95.34 million) to provide smart systems for canteens and restaurants in at least 200 schools over the next two years [390]. - Net cash used in investing activities was $168,685 for the year ended June 30, 2021, compared to $306,813 for the year ended June 30, 2020, indicating a decrease of approximately 45% [404]. Cash Flow and Financing - Net cash provided by financing activities was $2,448,847 during the year ended June 30, 2021, a significant increase from a net cash used of $84,842 in the previous year [405]. Market Position and Future Outlook - The company expects to generate revenue through the expansion of smart city, 5G messaging, and acoustic intelligence services, supported by a strong product portfolio [398]. - Datasea is positioned as an emerging technology company in China, dedicated to intelligent product solutions and value-added services [408]. - The company has strategically entered 5G messaging and smart payment sectors, enhancing overall product value and ecological viability [407]. Operational Changes - Selling expenses increased by 30% to $568,034 in 2021, primarily due to increased payroll expenses for sales personnel [392]. - Integration of visual perception technology and artificial intelligence big data technology aims to shift from passive monitoring to active prevention in security solutions [407]. Financial Condition - There are no off-balance sheet arrangements that are likely to affect the company's financial condition or capital resources [409].

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, 2020 ☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 Commission file number 333-202071 DATASEA INC. | --- | --- | --- | --- | --- | |------------------------------|---------------------------------------------------------------------------------------- ...