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, 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)

Nevada		45-2019013
(State or other jurisdiction of		(I.R.S. Employer
incorporation or organization)		Identification No.)

20th Floor, Tower B, Guorui Plaza

1 Ronghua South Road,

Technological Development Zone

Beijing, People’s Republic of China

100176

(Address of principal executive offices)

(Zip Code)

+86 10-56145240

(Registrant’s telephone number, including area code)

N/A

(Former name, former address and former fiscal year, if changed since last report)

Securities registered pursuant to Section 12(b) of the Act:

Title of each class		Trading Symbol		Name of each exchange on which registered
Common Stock, $0.001 par value		DTSS		NASDAQ Capital Market

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

☐	Large accelerated filer	☐	Accelerated filer
☒	Non-accelerated filer	☒	Smaller reporting company
		☐	Emerging growth company

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒

As of February 13, 2024, 2,538,286 shares of common stock, $0.001 par value per share, were outstanding.

DATASEA INC.

TABLE OF CONTENTS

		Page No.
	Part I - Financial Information
Item 1	Financial Statements	1
Item 2	Management’s Discussion and Analysis of Financial Condition and Results of Operations	30
Item 3	Quantitative and Qualitative Disclosures about Market Risk	52
Item 4	Controls and Procedures	52

	Part II - Other Information
Item 1	Legal Proceedings	55
Item 1A	Risk Factors	55
Item 2	Unregistered Sales of Equity Securities and Use of Proceeds	55
Item 3	Defaults Upon Senior Securities	55
Item 4	Mine Safety Disclosures	55
Item 5	Other Information	55
Item 6	Exhibits	55

PART I - FINANCIAL INFORMATION

DATASEA INC.

CONSOLIDATED BALANCE SHEETS

	DECEMBER 31, 2023 (UNAUDITED)			JUNE 30, 2023

ASSETS
CURRENT ASSETS
Cash	$	437,716		$	19,728
Accounts receivable		54,123			255,725
Inventory, net		185,806			241,380
Value-added tax prepayment		82,987			71,261
Prepaid expenses and other current assets		3,297,619			701,423
Total current assets		4,058,251			1,289,517

NONCURRENT ASSETS
Long-term investment		56,476			55,358
Property and equipment, net		62,512			85,930
Intangible assets, net		660,080			1,185,787
Right-of-use assets, net		107,329			137,856
Total noncurrent assets		886,397			1,464,931

TOTAL ASSETS	$	4,944,648		$	2,754,448

LIABILITIES AND STOCKHOLDERS’ EQUITY
CURRENT LIABILITIES
Accounts payable	$	339,897		$	1,005,059
Unearned revenue		58,456			609,175
Accrued expenses and other payables		670,596			1,409,939
Due to related parties		568,492			1,162,856
Operating lease liabilities		116,594			124,640
Bank loan payable		502,836			594,906
Loan payable		155,308			-
Total current liabilities		2,412,179			4,906,575

NONCURRENT LIABILITIES
Operating lease liabilities		-			26,449
Loan payable					1,310,306
Bank loan payable		672			91,215
Total noncurrent liabilities		672			1,427,970

TOTAL LIABILITIES		2,412,851			6,334,545

COMMITMENTS AND CONTINGENCIES

STOCKHOLDERS’ EQUITY (DEFICIT)
Common stock, $0.001 par value, 25,000,000 shares authorized, 2,538,286 and 1,852,346 shares issued and outstanding as of December 31, 2023 and June 30, 2023, respectively *		2,538			1,852
Additional paid-in capital		32,251,708			24,148,905
Accumulated comprehensive income		266,637			393,252
Accumulated deficit		(29,918,353	)		(28,063,258	)
TOTAL COMPANY STOCKHOLDERS’ EQUITY (DEFICIT)		2,602,530			(3,519,249	)

Noncontrolling interest		(70,733	)		(60,848	)

TOTAL EQUITY (DEFICIT)		2,531,797			(3,580,097	)

TOTAL LIABILITIES AND EQUITY (DEFICIT)	$	4,944,648		$	2,754,448

*	retroactively reflect 1-for-15 reverse stock split effective on January 19, 2024

The accompanying notes are an integral part of these consolidated financial statements.

DATASEA INC.

CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS

(UNAUDITED)

	THREE MONTHS ENDED DECEMBER 31,						SIX MONTHS ENDED DECEMBER 31,
	2023			2022			2023			2022

Revenues	$	11,348,469		$	131,459		$	18,229,212		$	131,459
Cost of goods sold		11,246,234			96,030			18,052,242			96,030

Gross profit		102,235			35,429			176,970			35,429

Operating expenses
Selling		1,149,944			45,588			1,234,391			149,702
General and administrative		623,456			866,399			1,316,516			1,751,359
Research and development		117,371			148,812			272,375			255,440

Total operating expenses		1,890,771			1,060,799			2,823,282			2,156,501

Loss from operations		(1,788,536	)		(1,025,370	)		(2,646,312	)		(2,121,072	)

Non-operating income (expenses)
Other expenses		(46,187	)		(34,326	)		(54,051	)		(35,565	)
Interest income		1,623			29			1,729			93

Total non-operating expenses, net		(44,564	)		(34,297	)		(52,322	)		(35,472	)

Loss before income tax		(1,833,100	)		(1,059,667	)		(2,698,634	)		(2,156,544	)

Income tax		-			-			-			8

Loss before noncontrolling interest from continuing operation		(1,833,100	)		(1,059,667	)		(2,698,634	)		(2,156,552	)
Income (loss) before noncontrolling interest from discontinued operation		-			(351,418	)		833,546			(688,480	)

Less: loss attributable to noncontrolling interest from continuing operation		(61	)		(14,002	)		(9,993	)		(8,867	)
Less: loss attributable to noncontrolling interest from discontinued operation		-			(106,093	)		-			(207,852	)

Net loss attribute to noncontrolling interest		(61	)		(120,095	)		(9,993	)		(216,719	)

Net loss to the Company from continuing operation		(1,833,039	)		(1,045,665	)		(2,688,641	)		(2,147,685	)
Net income (loss) to the Company from discontinued operation		-			(245,325	)		833,546			(480,628	)

Net loss to the Company		(1,833,039	)		(1,290,990	)		(1,855,095	)		(2,628,313	)

Other comprehensive item
Foreign currency translation gain (loss) attributable to the Company		34,601			(61,105	)		(126,615	)		(48,767	)
Foreign currency translation gain attributable to noncontrolling interest		116			32,426			29,850			28,736

Comprehensive loss attributable to the Company	$	(1,798,438	)	$	(1,352,095	)	$	(1,981,710	)	$	(2,677,080	)

Comprehensive income (loss) attributable to noncontrolling interest	$	55		$	(87,669	)	$	19,857		$	(187,983	)

Basic and diluted net loss per share	$	(0.72	)	$	(0.80	)	$	(0.82	)	$	(1.62	)

Weighted average shares used for computing basic and diluted loss per share *		2,538,286			1,621,642			2,250,711			1,621,642

retroactively reflect 1-for-15 reverse stock split effective on January 19, 2024

The accompanying notes are an integral part of these consolidated financial statements.

DATASEA INC.

CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY

SIX AND THREE MONTHS ENDED DECEMBER 31, 2023 AND 2022

(UNAUDITED)

	Common Stock				Additional paid-in			Accumulated			Accumulated other comprehensive						Noncontrolling
	Shares		Amount		capital			deficit			income			Total			interest

Balance at July 1, 2023		1,852,346	$	1,852	$	24,148,905		$	(28,063,258	)	$	393,252		$	(3,519,249	)	$	(60,848	)

Net loss		-		-		-			(22,056	)		-			(22,056	)		(9,932	)

Issuance of common stock for equity financing		685,940		686		8,060,600			-			-			8,061,286			-

Shares issued for stock compensation expense		-		-		20,100			-			-			20,100			-

Foreign currency translation loss		-		-		-			-			(161,216	)		(161,216	)		(8	)

Balance at September 30, 2023		2,538,286		2,538		32,229,605			(28,085,314	)		232,036			4,378,865			(70,788	)

Net loss		-		-		-			(1,833,039	)		-			(1,833,039	)		(61	)

Shares issued for stock compensation expense		-		-		22,103			-			-			22,103			-

Foreign currency translation gain		-		-		-			-			34,601			34,601			116

Balance at December 31, 2023		2,538,286	$	2,538	$	32,251,708		$	(29,918,353	)	$	266,637		$	2,602,530		$	(70,733	)

Balance at July 1, 2022		1,621,642	$	1,622	$	20,752,262		$	(18,583,566	)	$	283,587		$	2,453,905		$	(854,273	)

Net loss		-		-		-			(1,337,323	)		-			(1,337,323	)		(96,624	)

Shares issued for stock compensation expense		-		-		116,250			-			-			116,250			-

Foreign currency translation gain (loss)		-		-		-			-			12,338			12,338			(3,690	)

Balance at September 30, 2022		1,621,642		1,622		20,868,512			(19,920,889	)		295,925			1,245,170			(954,587	)

Net loss		-		-		-			(1,290,990	)		-			(1,290,990	)		(120,095	)

Shares issued for stock compensation expense		-		-		117,000			-			-			117,000			-

Purchase of minority interest ownership		-		-		(982,014	)		-			-			(

SEC Form 10-Q filed by Datasea Inc.