Datasea(DTSS) - 2025 Q3 - Quarterly Report

Part I - Financial Information Financial Statements Financial statements for March 31, 2025, show total assets at $6.15 million, a shift to $2.83 million in stockholders' equity, and revenues of $51.89 million Consolidated Balance Sheets As of March 31, 2025, total assets increased to $6.15 million, driven by intangible assets, while liabilities decreased, improving stockholders' equity to $2.83 million Consolidated Balance Sheet Highlights (Unaudited) | | March 31, 2025 | June 30, 2024 | | :--- | :--- | :--- | | Total Assets | $6,154,373 | $3,291,704 | | Total Current Assets | $1,989,796 | $2,647,892 | | Intangible assets, net | $3,805,383 | $546,001 | | Total Liabilities | $3,321,879 | $3,599,982 | | Total Current Liabilities | $3,131,890 | $3,599,982 | | Total Stockholders' Equity (Deficit) | $2,832,494 | ($308,278) | Consolidated Statements of Operations and Comprehensive Loss For the nine months ended March 31, 2025, revenues surged to $51.89 million, gross profit increased significantly, and net loss narrowed to $4.88 million Statement of Operations Highlights (Unaudited) | Metric | Nine Months Ended Mar 31, 2025 | Nine Months Ended Mar 31, 2024 | | :--- | :--- | :--- | | Revenues | $51,891,475 | $19,612,213 | | Gross Profit | $912,223 | $186,841 | | Loss from Operations | ($5,038,381) | ($6,754,003) | | Net Loss to the Company | ($4,881,265) | ($5,996,815) | | Basic and Diluted Net Loss per Share | ($0.24) | ($1.55) | Consolidated Statements of Changes in Stockholders' Equity Stockholders' equity increased to $2.84 million for the nine months ended March 31, 2025, primarily due to $5.94 million in equity financing and $1.47 million in stock compensation - The company issued 692,308 shares for equity financing, raising $1.96 million, and an additional 1,932,224 shares to related parties for $3.98 million[13] - A total of 554,365 shares were issued for stock compensation expense, valued at approximately $1.47 million during the nine-month period[13] - Shareholders forgave debt totaling $462,208, which was recorded as an increase in additional paid-in capital[13][17] Consolidated Statements of Cash Flows For the nine months ended March 31, 2025, operating cash outflow improved to $1.79 million, investing activities used $4.04 million, and financing provided $6.55 million Cash Flow Summary (Unaudited) | Cash Flow Activity | Nine Months Ended Mar 31, 2025 | Nine Months Ended Mar 31, 2024 | | :--- | :--- | :--- | | Net Cash Used in Operating Activities | ($1,785,456) | ($5,954,352) | | Net Cash Used in Investing Activities | ($4,043,776) | ($108,911) | | Net Cash Provided by Financing Activities | $6,553,450 | $6,209,131 | | Net Increase in Cash | $685,475 | $32,801 | | Cash, End of Period | $866,737 | $52,529 | - The company received net proceeds of $5.94 million from the issuance of common stock[16] - Cash used for the acquisition of intangible assets was $4.04 million[16] Notes to Consolidated Financial Statements Notes detail the company's VIE structure, 'Going Concern' warning due to losses, revenue sources, and significant transactions including intangible asset purchases - The company operates in the PRC primarily through a Variable Interest Entity (VIE), Shuhai Beijing, controlled via contractual arrangements[19][39] - Substantial doubt exists about the Company's ability to continue as a going concern due to recurring net losses (approx. $4.88 million) and negative operating cash flow (approx. $1.79 million)[35] Revenue by Source (Nine Months Ended March 31, 2025) | Revenue Source | Amount | | :--- | :--- | | 5G AI Multimodal communication | $51,503,911 | | Sell of Software | $326,936 | | Acoustic Intelligence Business | $56,908 | | Smart City business | $3,046 | | Other | $674 | | Total Revenue | $51,891,475 | - On January 19, 2024, the company executed a 1-for-15 reverse stock split, retroactively restating all share amounts[34] Management's Discussion and Analysis of Financial Condition and Results of Operations Management attributes 164.6% revenue growth to 5G+AI business expansion, highlights strategic advancements, and addresses 'going concern' risk with recent financing and improved financial metrics Overview and Business Summary Datasea, a Nevada holding company operating via a VIE in China, focuses on acoustic high-tech and 5G+AI multimodal digital technologies, achieving $51.9 million revenue growth - Datasea is a Nevada holding company operating in China through a VIE structure, not a Chinese operating company[160] Financial Highlights (Nine Months Ended March 31, 2025) | Metric | Value | YoY Change | | :--- | :--- | :--- | | Revenue | $51,891,475 | +164.59% | | Gross Profit | $912,223 | +388.23% | | Net Loss | ($4,881,265) | -18.60% | | Cash Balance | $866,737 | +378.17% | | Accounts Receivable | $49,066 | -93.17% | | Net Intangible Assets | $3,805,383 | +596.96% | - The company reiterates confidence in achieving the full-year fiscal 2025 revenue target of $90 million[163] Results of Operations For the three months ended March 31, 2025, revenue increased 648.7% to $10.4 million, and for nine months, revenue grew 164.6% to $51.9 million, with net loss narrowing Comparison of Operations (Three Months Ended March 31) | Metric | 2025 | 2024 | Change (%) | | :--- | :--- | :--- | :--- | | Revenues | $10,353,977 | $1,383,001 | +648.7% | | Gross Profit | $297,790 | $9,871 | +2917.8% | | Net Loss to Company | ($1,782,998) | ($4,141,720) | -57.0% | Comparison of Operations (Nine Months Ended March 31) | Metric | 2025 | 2024 | Change (%) | | :--- | :--- | :--- | :--- | | Revenues | $51,891,475 | $19,612,213 | +164.6% | | Gross Profit | $912,223 | $186,841 | +388.2% | | Net Loss to Company | ($4,881,265) | ($5,996,815) | -18.6% | - The increase in revenue was mainly due to the rapid growth of the 5G AI multimodal digital business in China, where the company is an industry leader[254][291] - Selling expenses decreased by 80.9% for the quarter and 27.9% for the nine-month period, primarily due to reduced advertising and marketing expenses[278][305] Liquidity and Capital Resources As of March 31, 2025, the company had a $1.14 million working capital deficit, with operations using $1.79 million cash, while financing provided $6.55 million Working Capital Summary | Metric | March 31, 2025 | June 30, 2024 | | :--- | :--- | :--- | | Cash | $866,737 | $181,262 | | Working Capital Deficit | ($1,142,094) | ($952,090) | | Current Ratio | 0.64:1 | 0.74:1 | Cash Flow Summary (Nine Months Ended March 31, 2025) | Activity | Amount | | :--- | :--- | | Net Cash Used in Operating Activities | ($1,785,456) | | Net Cash Used in Investing Activities | ($4,043,776) | | Net Cash Provided by Financing Activities | $6,553,450 | - Net proceeds from the sale of common stock amounted to $5.94 million during the nine months ended March 31, 2025[324] Quantitative and Qualitative Disclosures about Market Risk The company is not required to provide this information as it qualifies as a 'smaller reporting company' - As a "smaller reporting company", Datasea Inc. is not required to provide the information required by this Item[371] Controls and Procedures Management concluded disclosure controls and procedures were ineffective due to material weaknesses, including inadequate segregation of duties and lack of U.S. GAAP trained personnel - The principal executive and financial officers concluded that the Company's disclosure controls and procedures were not effective as of the end of the reporting period[372] - Material weaknesses identified include inadequate segregation of duties, lack of U.S. GAAP trained personnel, and insufficient written accounting policies[377] - Management is implementing remediation strategies, including refining internal control processes and enhancing personnel training[374][375][386] Part II - Other Information Legal Proceedings The company reports that it is not a party to any pending legal proceedings, and none are known to be contemplated - The company is not a party to any pending legal proceedings and no such proceedings are known to be contemplated[389] Risk Factors As a 'smaller reporting company,' Datasea Inc. is not required to provide the information for this item - As a "smaller reporting company", the company is not required to provide the information for this item[390] Unregistered Sales of Equity Securities and Use of Proceeds This item is not applicable to the company for this reporting period - Not applicable[391] Defaults Upon Senior Securities The company reports that there have been no defaults upon senior securities - None[392] Mine Safety Disclosures This item is not applicable to the company - Not applicable[393] Other Information No material changes occurred in procedures for security holder board nominations, and no Rule 10b5-1 trading arrangements were adopted or terminated - There have been no material changes to the procedures by which security holders may recommend nominees to the Board of Directors[394] - During the three months ended December 31, 2024, no director or officer adopted, modified or terminated a "Rule 10b5-1 trading arrangement" or "non-Rule 10b5-1 trading arrangement"[394] Exhibits This section lists exhibits filed with Form 10-Q, including CEO/CFO certifications and Inline XBRL data files List of Exhibits | Exhibit | Description | | :--- | :--- | | 31.1 | Certification by CEO (Sarbanes Oxley Section 302) | | 31.2 | Certification by CFO (Sarbanes Oxley Section 302) | | 32.1 | Certification by CEO (18 U.S.C. Section 1350) | | 32.2 | Certification by CFO (18 U.S.C. Section 1350) | | 101.INS | Inline XBRL Instance Document | | 101.SCH | Inline XBRL Taxonomy Extension Schema Document | | 101.CAL | Inline XBRL Taxonomy Extension Calculation Linkbase Document | | 101.DEF | Inline XBRL Taxonomy Extension Definition Linkbase Document | | 101.LAB | Inline XBRL Taxonomy Extension Label Linkbase Document | | 101.PRE | Inline XBRL Taxonomy Extension Presentation Linkbase Document | | 104 | Cover Page Interactive Data File (Inline XBRL) |