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 March 31, 2023 ☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 Commission file number 001-38767 DATASEA INC. (Exact name of registrant as specified in its charter) | --- | --- | |-------------------------------------------------------------------------|------------- ...

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 December 31, 2022 ☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 Commission file number 001-38767 DATASEA INC. (Exact name of registrant as specified in its charter) | --- | --- | |------------------------------------------------------------------------------------ ...

Financial Performance - Revenues for the three months ended September 30, 2022, were $1,164,305, representing a 73.4% increase from $671,130 in the same period of 2021[9] - Gross profit for the same period was $150,197, compared to $63,595 in the prior year, indicating a significant improvement in profitability[9] - The net loss attributable to the Company for the three months ended September 30, 2022, was $1,337,323, a slight improvement from a net loss of $1,441,234 in the same period of 2021[9] - For the three months ended September 30, 2022, the company reported a net loss of approximately $1.34 million, compared to a net loss of $1.44 million for the same period in 2021[27] - The Company had a comprehensive loss attributable to the Company of $1,324,985 for the three months ended September 30, 2022, compared to $1,445,931 in the prior year[9] - The net loss for the three months ended September 30, 2022, was $(757,146), a reduction from a net loss of $(870,189) in the same period of 2021, showing a narrowing of losses[41] - For the period ending September 30, 2022, the net loss was $19,920,889, compared to a net loss of $12,061,858 for the same period in 2021, representing a 65% increase in losses year-over-year[11] Assets and Liabilities - Total current assets decreased to $979,033 from $1,256,801, a decline of approximately 22.1%[6] - Total liabilities increased to $2,801,523 from $2,156,045, representing a rise of about 30%[6] - Total current liabilities increased to $2,394,898 as of September 30, 2022, compared to $1,711,439 as of June 30, 2022, reflecting a rise of approximately 39.9%[41] - As of September 30, 2022, total assets amounted to $1,919,865, a decrease from $2,290,541 as of June 30, 2022, representing a decline of approximately 16.2%[41] - Total stockholders' equity decreased to $1,245,170 from $2,453,905, a decline of approximately 49.3%[6] Cash Flow - Cash and cash equivalents decreased to $93,074 from $164,217, indicating a decline of approximately 43.3%[6] - Negative cash flow from operating activities was approximately $752,697 for the three months ended September 30, 2022, compared to $1,399,969 for the same period in 2021[27] - Cash provided by financing activities amounted to $790,302, a decrease from $7,172,459 in the prior year[13] - The company ended the period with cash of $93,074, a significant decrease from $5,805,362 at the end of the previous period[13] Operational Insights - The company is exploring options to raise additional funds through private or public offerings to support R&D and operations[28] - The company has recurring losses from operations, raising substantial doubt about its ability to continue as a going concern[27] - Management believes that the company will be able to continue operations for at least the next 12 months[28] - The Company anticipates that its financial resources will be sufficient to handle challenges associated with COVID-19[25] Revenue Recognition and Business Segments - The Company follows ASC 606 for revenue recognition, which requires identifying performance obligations and recognizing revenue when those obligations are satisfied[62] - The company’s only business segment is high technology and advanced information systems, focusing on smart city solutions and 5G messaging services[67] - The company recognized revenue of $1.04 million during the three months ended September 30, 2022, primarily from 5G messaging services[65] - The Company recognized an additional revenue of $124,544 from the Smart Public Broadcasting project during the same period[65] Subsidiaries and Market Expansion - The company has expanded its operations through the establishment of new subsidiaries and joint ventures, including Shuhai Jingwei and Shuhai Nanjing, to enhance its market presence and access funding for technology development[19][22] - The company incorporated two new subsidiaries during the year ended June 30, 2022, indicating ongoing market expansion efforts[30] Expenses and Cost Management - Total operating expenses decreased to $1,606,841 from $1,637,486 year-over-year, reflecting a reduction of approximately 1.9%[9] - The company incurred a stock compensation expense of $116,250 for the nine months ended September 30, 2022, down from $164,250 in the same period of 2021, suggesting cost control measures[13] - Operating lease expense for the three months ended September 30, 2022, was $203,111, down from $218,829 in the same period of 2021[137] Tax and Valuation - The Company has established a full valuation allowance for deferred tax assets as of September 30, 2022, due to uncertainty regarding future realization[126] - The effective tax rate for the Company was impacted by a valuation allowance of 21.3% for the three months ended September 30, 2022[129] Miscellaneous - The Company had no impairment loss recognized on long-lived assets for the three months ended September 30, 2022[55] - The exchange rate for USD to RMB at the end of September 30, 2022, was 7.0998, compared to 6.7114 at June 30, 2022[83] - The average USD to RMB exchange rate for the reporting period ended September 30, 2022, was 6.8287[83]

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].