Datasea(DTSS) - 2026 Q2 - Quarterly Report

Financial Performance - Total revenues for the three months ended December 31, 2025, were $12,995,014, a decrease of 36.2% compared to $20,456,404 for the same period in 2024[12] - Gross profit for the six months ended December 31, 2025, was $2,362,050, compared to $614,433 for the same period in 2024, indicating a significant improvement[12] - The company reported a net loss of $538,759 for the three months ended December 31, 2025, compared to a net loss of $1,136,278 for the same period in 2024, reflecting a 52.5% reduction in losses[12] - For the six months ended December 31, 2025, the net loss was $739,826 compared to a net loss of $3,098,385 for the same period in 2024, indicating a significant improvement[16] - The basic and diluted net loss per share for the three months ended December 31, 2025, was $0.06, an improvement from $0.16 for the same period in 2024[12] - The net loss for the three months ended December 31, 2025, was approximately $262,330, compared to a net loss of $10,091 for the same period in 2024[51] - For the six months ended December 31, 2025, revenues were approximately $26.81 million, down 35.5% from $41.54 million in the same period of 2024[51] Assets and Liabilities - Total current assets increased to $3,024,170 as of December 31, 2025, compared to $2,922,272 as of June 30, 2025, showing a growth of 3.5%[10] - Total liabilities decreased to $5,171,197 as of December 31, 2025, from $3,793,686 as of June 30, 2025, indicating a reduction of 26.7%[10] - The company’s total stockholders' equity increased to $3,471,543 as of December 31, 2025, compared to $2,942,195 as of June 30, 2025, marking an 18.0% increase[10] - The total assets as of December 31, 2025, were approximately $5.61 million, an increase from $2.54 million as of June 30, 2025[50] - Total liabilities as of December 31, 2025, were approximately $5.05 million, compared to $3.74 million as of June 30, 2025[50] Cash Flow and Financing - Cash flows from operating activities provided $1,540,994, contrasting with cash used in operating activities of $1,587,572 in the previous year[16] - The net cash provided by financing activities was $1,333,960, compared to $5,659,128 in the previous year, reflecting a decrease in financing inflows[16] - The company incurred $2,833,662 in cash used for the acquisition of intangible assets during the six months ended December 31, 2025[16] - The company has no contingencies as of December 31, 2025, indicating no potential material loss liabilities[54] Research and Development - Research and development expenses for the three months ended December 31, 2025, were $733,243, significantly higher than $74,402 for the same period in 2024, reflecting a focus on innovation[12] - The company has adopted a strategic transition towards technology-driven, high-value-added business models, reducing low-margin services while increasing higher-margin offerings[187] - Significant advancements were made in the acoustic high-tech segment, including progress in brain-computer interface technologies and industrial precision acoustics[188] - The company is focusing on customized, solution-oriented services in its 5G+AI multimodal digitalization business to improve profitability[190] Acquisitions and Investments - The company issued 1,376,440 shares for the purchase of intangible assets from major shareholders, indicating strategic asset acquisition[13] - The company acquired a 30% ownership interest in Zhangxun for $0.15 (RMB 1.00) and subsequently increased its ownership to 99.9%[29] - The company acquired a patent for an audio playback system for RMB 14,900,000 ($2.1 million), which will be amortized over three years[105] - The company acquired a patent for a Resource Allocation Method for Non-overlapping Interference in 6G Dense Networking for RMB 8,600,000 ($1.2 million), to be amortized over three years[178] Stock and Equity - The Company approved a reverse stock split at a ratio of 1-for-15, effective January 19, 2024, reducing authorized shares from 375 million to 25 million[34] - The Company recorded stock compensation expenses of $1,216,124 for the six months ended December 31, 2025, compared to $556,500 in the same period of 2024[16] - The Company issued 404,886 shares to third-party professionals and consultants, with a fair value of $706,674 recorded as stock compensation expense for the three months ended December 31, 2025[159] Operational Changes - The company established a wholly owned subsidiary, Datasea Acoustic, LLC, in Delaware to expand its market presence in North America[33] - The company dissolved Hangzhou Zhangqi Business Management Limited Partnership in November 2023 due to the disposal of Zhuangxun, which had no operations[28] - The lease for the Hangzhou office was terminated early on September 30, 2023, to transfer operations to maximize efficiency and cost savings[170] Tax and Regulatory - The Company had amounts due to related parties of $74,171 as of December 31, 2025, primarily representing expenses paid by the CEO[142] - The Company has no unrecognized tax positions as of December 31, 2025, and June 30, 2025, and did not incur any interest or penalties related to unrecognized tax benefits[83] - The effective tax rate for the three months ended December 31, 2025, was impacted by a permanent difference of 36.7% and a valuation allowance of (9.9)%[166] Technology Development - The Company is developing acoustic technologies for industrial precision processing, focusing on enhancing manufacturing precision, surface quality, and process consistency[206] - Target application areas for the acoustic technology include semiconductor substrate processing, aerospace material machining, and biomedical micro- and nano-fabrication[207] - The Company introduced an Acoustic-Coupled EEG Signal Enhancement System to improve signal-to-noise ratio and data completeness during non-invasive EEG acquisition[208] - A Real-Time Closed-Loop Vibration-Enhanced BCI System was developed to support dynamic signal decoding and feedback modulation through real-time acoustic stimulation[208] - A BCI-based upper-limb rehabilitation robot control system is being explored to translate decoded neural signals into structured control logic for rehabilitation training devices[208]