UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM
For the quarterly period ended
Commission file number
(Exact name of registrant as specified in its charter)
| (State or other jurisdiction of | (I.R.S. Employer | |
| incorporation or organization) | Identification No.) |
| (Address of principal executive offices) | (Zip Code) |
| (Registrant’s telephone number, including area code) |
| 20th Floor, Tower B, Guorui Plaza 1 Ronghua South Road, Technological Development Zone Beijing, People’s Republic of |
| (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 | ||
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.
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).
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 | |
| ☒ | 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 May 13, 2025,
DATASEA INC.
TABLE OF CONTENTS
| Page No. | ||||
| Part I - Financial Information | 1 | |||
| Item 1 | Financial Statements | 1 | ||
| Item 2 | Management’s Discussion and Analysis of Financial Condition and Results of Operations | 28 | ||
| Item 3 | Quantitative and Qualitative Disclosures about Market Risk | 60 | ||
| Item 4 | Controls and Procedures | 61 | ||
| Part II - Other Information | 63 | |||
| Item 1 | Legal Proceedings | 63 | ||
| Item 1A | Risk Factors | 63 | ||
| Item 2 | Unregistered Sales of Equity Securities and Use of Proceeds | 63 | ||
| Item 3 | Defaults Upon Senior Securities | 63 | ||
| Item 4 | Mine Safety Disclosures | 63 | ||
| Item 5 | Other Information | 63 | ||
| Item 6 | Exhibits | 64 |
i
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
DATASEA INC.
CONSOLIDATED BALANCE SHEETS
| MARCH 31, 2025 | JUNE 30, 2024 | |||||||
| (UNAUDITED) | ||||||||
| ASSETS | ||||||||
| CURRENT ASSETS | ||||||||
| Cash | $ | $ | ||||||
| Accounts receivable | ||||||||
| Inventory, net | ||||||||
| Value-added tax prepayment | ||||||||
| Prepaid expenses and other current assets | ||||||||
| Total current assets | ||||||||
| NONCURRENT ASSETS | ||||||||
| Property and equipment, net | ||||||||
| Intangible assets, net | ||||||||
| Right-of-use assets, net | ||||||||
| Total noncurrent assets | ||||||||
| TOTAL ASSETS | $ | $ | ||||||
| LIABILITIES AND STOCKHOLDERS’ EQUITY | ||||||||
| CURRENT LIABILITIES | ||||||||
| Accounts payable | $ | $ | ||||||
| Unearned revenue | ||||||||
| Accrued expenses and other payables | ||||||||
| Due to related parties | ||||||||
| Operating lease liabilities | ||||||||
| Bank loan payable | ||||||||
| Total current liabilities | ||||||||
| NONCURRENT LIABILITIES | ||||||||
| Operating lease liabilities | - | |||||||
| Total noncurrent liabilities | ||||||||
| TOTAL LIABILITIES | ||||||||
| COMMITMENTS AND CONTINGENCIES | ||||||||
| STOCKHOLDERS’ EQUITY (DEFICIT) | ||||||||
| Common stock, $ | ||||||||
| Additional paid-in capital | ||||||||
| Accumulated comprehensive income | ||||||||
| Accumulated deficit | ( | ) | ( | ) | ||||
| TOTAL COMPANY STOCKHOLDERS’ EQUITY (DEFICIT) | ( | ) | ||||||
| Noncontrolling interest | ( | ) | ( | ) | ||||
| TOTAL STOCKHOLDERS’ EQUITY (DEFICIT) | ( | ) | ||||||
| TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY (DEFICIT) | $ | $ | ||||||
The accompanying notes are an integral part of these consolidated financial statements.
1
DATASEA INC.
CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS
(UNAUDITED)
| THREE MONTHS ENDED MARCH 31, | NINE MONTHS ENDED MARCH 31, | |||||||||||||||
| 2025 | 2024 | 2025 | 2024 | |||||||||||||
| Revenues | $ | $ | $ | $ | ||||||||||||
| Cost of revenues | ||||||||||||||||
| Gross profit | ||||||||||||||||
| Operating expenses | ||||||||||||||||
| Selling | ||||||||||||||||
| General and administrative | ||||||||||||||||
| Research and development | ||||||||||||||||
| Total operating expenses | ||||||||||||||||
| Loss from operations | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| Non-operating income (expenses) | ||||||||||||||||
| Other income (expenses), net | ( | ) | ( | ) | ( | ) | ||||||||||
| Interest income | ||||||||||||||||
| Total non-operating income (expenses), net | ( | ) | ( | ) | ( | ) | ||||||||||
| Loss before income tax | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| Income tax | ||||||||||||||||
| Loss before noncontrolling interest from continuing operations | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| Income before noncontrolling interest from discontinued operations | ||||||||||||||||
| Less: loss attributable to noncontrolling interest from continuing operations | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| Less: loss attributable to noncontrolling interest from discontinued operations | ||||||||||||||||
| Net loss attribute to noncontrolling interest | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| Net loss to the Company from continuing operations | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| Net income to the Company from discontinued operations | ||||||||||||||||
| Net loss to the Company | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| Other comprehensive item | ||||||||||||||||
| Foreign currency translation gain (loss) attributable to the Company | ( | ) | ( | ) | ( | ) | ||||||||||
| Foreign currency translation gain (loss) attributable to noncontrolling interest | ( | ) | ( | ) | ||||||||||||
| Comprehensive loss attributable to the Company | $ | ( | ) | $ | ( | ) | $ | ( | ) | $ | ( | ) | ||||
| Comprehensive income (loss) attributable to noncontrolling interest | $ | ( | ) | $ | ( | ) | $ | $ | ( | ) | ||||||
| Basic and diluted net loss per share | $ | ( | ) | $ | ( | ) | $ | ( | ) | $ | ( | ) | ||||
| Weighted average shares used for computing basic and diluted loss per share * | ||||||||||||||||
| * |
The accompanying notes are an integral part of these consolidated financial statements.
2
DATASEA INC.
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY
NINE AND THREE MONTHS ENDED MARCH 31, 2025 AND 2024
(UNAUDITED)
| Accumulated | ||||||||||||||||||||||||||||
| Additional | other | |||||||||||||||||||||||||||
| Common Stock | paid-in | Accumulated | comprehensive | Noncontrolling | ||||||||||||||||||||||||
| Shares | Amount | capital | deficit | income | Total | interest | ||||||||||||||||||||||
| Balance at July 1, 2024 | $ | $ | $ | ( | ) | $ | $ | ( | ) | $ | ( | ) | ||||||||||||||||
| Net loss | - | ( | ) | ( | ) | ( | ) | |||||||||||||||||||||
| Noncontrolling interest disposal at closure of the entity | - | |||||||||||||||||||||||||||
| Issuance of common stock for equity financing | ||||||||||||||||||||||||||||
| Issuance of common stock for equity financing - related parties | ||||||||||||||||||||||||||||
| Shares issued for stock compensation expense | ||||||||||||||||||||||||||||
| Shares issued for purchase of intangible assets from the Company’s major shareholders | ( | ) | ||||||||||||||||||||||||||
| Foreign currency translation gain (loss) | - | ( | ) | ( | ) | |||||||||||||||||||||||
| Balance at September 30, 2024 | ( | ) | ( | ) | ||||||||||||||||||||||||
| Net loss | - | ( | ) | ( | ) | |||||||||||||||||||||||
| Forgiveness of debt by shareholders | - | |||||||||||||||||||||||||||
| Shares issued for stock compensation expense | ||||||||||||||||||||||||||||
| Foreign currency translation gain (loss) | - | ( | ) | ( | ) | |||||||||||||||||||||||
| Balance at December 31, 2024 | ( | ) | ( | ) | ||||||||||||||||||||||||
| Net loss | - | ( | ) | ( | ) | ( | ) | |||||||||||||||||||||
| Forgiveness of debt by shareholders | - | |||||||||||||||||||||||||||
| Shares issued for stock compensation expense | ||||||||||||||||||||||||||||
| Shares issued for paying officers’ accrued salary and bonus | ||||||||||||||||||||||||||||
| Foreign currency translation gain (loss) | - | ( | ) | |||||||||||||||||||||||||
| Balance at March 31, 2025 | $ | $ | $ | ( | ) | $ | $ | $ | ( | ) | ||||||||||||||||||
| Balance at July 1, 2023 | $ | $ | $ | ( | ) | $ | $ | ( | ) | $ | ( | ) | ||||||||||||||||
| Net loss | - | ( | ) | ( | ) | ( | ) | |||||||||||||||||||||
| Issuance of common stock for equity financing | ||||||||||||||||||||||||||||
| Shares issued for stock compensation expense | - | |||||||||||||||||||||||||||
| Foreign currency translation loss | - | ( | ) | ( | ) | ( | ) | |||||||||||||||||||||
| Balance at September 30, 2023 | ( | ) | ( | ) | ||||||||||||||||||||||||
| Net loss | - | ( | ) | ( | ) | ( | ) | |||||||||||||||||||||
| Shares issued for stock compensation expense | - | |||||||||||||||||||||||||||
| Foreign currency translation gain | - | |||||||||||||||||||||||||||
| Balance at December 31, 2023 | ( | ) | ( | ) | ||||||||||||||||||||||||
| Net loss | - | ( | ) | ( | ) | ( | ) | |||||||||||||||||||||
| Shares issued for stock compensation expense | ||||||||||||||||||||||||||||
| Shares issued for paying officers’ accrued salary and bonus | ||||||||||||||||||||||||||||
| Foreign currency translation loss | - | ( | ) | ( | ) | ( | ) | |||||||||||||||||||||
| Balance at March 31, 2024 | $ | $ | $ | ( | ) | $ | $ | $ | ( | ) | ||||||||||||||||||
The accompanying notes are an integral part of these consolidated financial statements.
3
DATASEA INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
| NINE MONTHS ENDED MARCH 31, | ||||||||
| 2025 | 2024 | |||||||
| Cash flows from operating activities: | ||||||||
| Loss including noncontrolling interest | $ | ( |
) | $ | ( |
) | ||
| Adjustments to reconcile loss including noncontrolling interest to net cash used in operating activities: | ||||||||
| Gain on disposal of subsidiary | ( |
) | ||||||
| Bad debt reversal | ( |
) | ||||||
| Depreciation and amortization | ||||||||
| Loss on disposal of fixed assets | ||||||||
| Operating lease expense | ||||||||
| Loan forgiveness by shareholder | ||||||||
| Stock compensation expense | ||||||||
| Changes in assets and liabilities: | ||||||||
| Accounts receivable | ( |
) | ||||||
| Inventory | ( |
) | ||||||
| Value-added tax prepayment | ( |
) | ( |
) | ||||
| Prepaid expenses and other current assets | ( |
) | ||||||
| Accounts payable | ( |
) | ( |
) | ||||
| Unearned revenue | ( |
) | ||||||
| Accrued expenses and other payables | ( |
) | ( |
) | ||||
| Payment on operating lease liabilities | ( |
) | ( |
) | ||||
| Net cash used in operating activities | ( |
) | ( |
) | ||||
| Cash flows from investing activities: | ||||||||
| Acquisition of property and equipment | ( |
) | ( |
) | ||||
| Acquisition of intangible assets | ( |
) | ( |
) | ||||
| Cash disposed due to disposal of subsidiary | ( |
) | ||||||
| Net cash used in investing activities | ( |
) | ( |
) | ||||
| Cash flows from financing activities: | ||||||||
| Proceeds from (repayment to) related parties | ( |
) | ||||||
| Proceeds from loan payables | - | |||||||
| Repayment of loan payables | ( |
) | ( |
) | ||||
| Net proceeds from issuance of common stock | ||||||||
| Net cash provided by financing activities | ||||||||
| Effect of exchange rate changes on cash | ( |
) | ( |
) | ||||
| Net increase in cash | ||||||||
| Cash, beginning of period | ||||||||
| Cash, end of period | $ | $ | ||||||
| Supplemental disclosures of cash flow information: | ||||||||
| Cash paid for interest | $ | $ | ||||||
| Cash paid for income tax | $ | $ | ||||||
| Supplemental disclosures of non-cash financing activities: | ||||||||
| Right-of-use assets obtained in exchange for operating lease liabilities | $ | $ | ||||||
| Transfer of debt owing to the Company’s’ CEO to Mr. Wanli Kuai | $ | $ | ||||||
| Shares issued for paying officers’ accrued salary and bonus | $ | $ | ||||||
| Debt forgiveness by shareholders | $ | $ | ||||||
The accompanying notes are an integral part of these consolidated financial statements.
4
DATASEA INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 2025 (UNAUDITED) AND JUNE 30, 2024
NOTE 1 – ORGANIZATION AND DESCRIPTION OF BUSINESS
Datasea
Inc. (the “Company,” “Datasea,” or “we,” “us,” “our”) was incorporated in
the State of Nevada on September 26, 2014 under the name Rose Rock Inc. and changed its name to Datasea Inc. on May 27, 2015. On May 26,
2015, the Company’s founder, Xingzhong Sun, sold
On October
29, 2015, the Company entered into a share exchange agreement (the “Exchange Agreement”) with the shareholders (the “Shareholders”)
of Shuhai Information Skill (HK) Limited (“Shuhai Skill (HK)”), a limited liability company (“LLC”) incorporated
on May 15, 2015 under the laws of the Hong Kong Special Administrative Region of the People’s Republic of China (the “PRC”).
Pursuant to the terms of the Exchange Agreement, the Shareholders, who own
Following
the Share Exchange, the Shareholders, Zhixin Liu and her father, Fu Liu, owned approximately
After the Share Exchange, the Company, through its consolidated subsidiaries and VIE provide smart security solutions primarily to schools, tourist or scenic attractions and public communities in China.
On October 16, 2019, Shuhai Beijing incorporated a wholly owned subsidiary, Heilongjiang Xunrui Technology Co. Ltd. (“Xunrui”), which develops and markets the Company’s smart security system products.
On December
3, 2019, Shuhai Beijing formed Nanjing Shuhai Equity Investment Fund Management Co. Ltd. (“Shuhai Nanjing”), a joint venture
in PRC, in which Shuhai Beijing holds a
In January 2020, the Company acquired ownership in three entities for no consideration from the Company’s management, which set up such entities on the Company’s behalf (described below).
On January
3, 2020, Shuhai Beijing entered into two equity transfer agreements (the “Transfer Agreements”) with the President, and a
Director of the Company. Pursuant to the Transfer Agreements, the Director and the President, each agreed, for no consideration, to (i)
transfer his
5
On January
7, 2020, Shuhai Beijing entered into another equity transfer agreement with the President, the Director described above and an unrelated
individual. Pursuant to this equity transfer agreement, the Director, the President and the unrelated individual each agreed to transfer
his
On August 17, 2020, Beijing Shuhai formed a new wholly-owned subsidiary Shuhai Jingwei to expand the security oriented systems developing, consulting and marketing business overseas.
On November
16, 2020, Guohao Century formed Hangzhou Zhangqi Business Management Limited Partnership (“Zhangqi”) with ownership of
On November
19, 2020, Guohao Century formed a
On February
16, 2022, Shuhai Jingwei formed Shenzhen Acoustic Effect Management Limited Partnership (“Shenzhen Acoustic MP”) with
On February
16, 2022, Shuhai Jingwei formed Shuhai (Shenzhen) Acoustic Effect Technology Co., Ltd (“Shuhai Shenzhen Acoustic Effect”),
a PRC company, in which Shuhai Jingwei holds
On March
4, 2022, Shuhai Beijing formed Beijing Yirui Business Management Development Center (“Yirui”) with
On March
4, 2022, Shuhai Beijing formed Beijing Yiying Business Management Development Center (“Yiying”) with
On July 31, 2023, Datasea established a wholly owned subsidiary Datasea Acoustic, LLC (“Datasea Acoustic”) in the state of Delaware for expanding the products to the market in North America.
On October
24, 2023, Guozhong Times formed Shuhai Yiyun (Shenzhen) digital technology Co, Ltd (“Yiyun”) with
On January
10, 2024, the Company’s Board of Directors approved a reverse stock split of its authorized and issued and outstanding shares of
common stock, par value $
6
NOTE 2 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
GOING CONCERN
The accompanying consolidated
financial statements (“CFS”) were prepared assuming the Company will continue as a going concern, which contemplates
continuity of operations, realization of assets, and liquidation of liabilities in the normal course of business. For the three months
ended March 31, 2025 and 2024, the Company had a net loss of approximately $
If deemed necessary, management could seek to raise additional funds by way of admitting strategic investors, or private or public offerings, or by seeking to obtain loans from banks or others, to support the Company’s research and development (“R&D”), procurement, marketing and daily operation. While management of the Company believes in the viability of its strategy to generate sufficient revenues and its ability to raise additional funds on reasonable terms and conditions, there can be no assurances to that effect. The ability of the Company to continue as a going concern depends upon the Company’s ability to further implement its business plan and generate sufficient revenue and its ability to raise additional funds by way of a public or private offering. There is no assurance that the Company will be able to obtain funds on commercially acceptable terms, if at all. There is also no assurance that the amount of funds the Company might raise will enable the Company to complete its initiatives or attain profitable operations. If the Company is unable to raise additional funding to meet its working capital needs in the future, it may be forced to delay, reduce or cease its operations.
BASIS OF PRESENTATION AND CONSOLIDATION
The CFS
were prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”) and
applicable rules and regulations of the SEC regarding CFS. The accompanying CFS include the financial statements of the Company and
its
7
VARIABLE INTEREST ENTITY
Pursuant to the Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) Section 810, “Consolidation” (“ASC 810”), the Company is required to include in its CFS, the financial statements of Shuhai Beijing, its VIE. ASC 810 requires a VIE to be consolidated if the Company is subject to a majority of the risk of loss for the VIE or is entitled to receive a majority of the VIE’s residual returns. A VIE is an entity in which a company, through contractual arrangements, bears the risk of, and enjoys the rewards of such entity, and therefore the Company is the primary beneficiary of such entity.
Under ASC 810, a reporting entity has a controlling financial interest in a VIE, and must consolidate that VIE, if the reporting entity has both of the following characteristics: (a) the power to direct the activities of the VIE that most significantly affect the VIE’s economic performance; and (b) the obligation to absorb losses, or the right to receive benefits, that could potentially be significant to the VIE. The reporting entity’s determination of whether it has this power is not affected by the existence of kick-out rights or participating rights, unless a single enterprise, including its related parties and de - facto agents, have the unilateral ability to exercise those rights. Shuhai Beijing’s actual stockholders do not hold any kick-out rights that affect the consolidation determination.
Through the VIE agreements, Tianjin Information, an indirect subsidiary of Datasea is deemed the primary beneficiary of Shuhai Beijing and its subsidiaries. Accordingly, the results of Shuhai Beijing and its subsidiaries were included in the accompanying CFS. Shuhai Beijing has no assets that are collateral for or restricted solely to settle their obligations. The creditors of Shuhai Beijing do not have recourse to the Company’s general credit.
VIE Agreements
Operation and Intellectual Property Service Agreement – The Operation and Intellectual Property Service Agreement allows Tianjin Information Sea Information Technology Co., Ltd (“WFOE”) to manage and operate Shuhai Beijing and collect an operating fee equal to Shuhai Beijing’s pre-tax income, per month. If Shuhai Beijing suffers a loss and as a result does not have pre-tax income, such loss shall be carried forward to the following month to offset the operating fee to be paid to WFOE if there is pre-tax income of Shuhai Beijing the following month. Furthermore, if Shuhai Beijing cannot pay off its debts, WFOE shall pay off the debt on Shuhai Beijing’s behalf. If Shuhai Beijing’s net assets fall lower than its registered capital balance, WFOE shall provide capital for Shuhai Beijing to make up for the deficit.
Under the terms of the Operation and Intellectual Property Service Agreement, Shuhai Beijing entrusts Tianjin Information to manage its operations, manage and control its assets and financial matters, and provide intellectual property services, purchasing management services, marketing management services and inventory management services to Shuhai Beijing. Shuhai Beijing and its stockholders shall not make any decisions nor direct the activities of Shuhai Beijing without Tianjin Information’s consent.
8
Stockholders’ Voting Rights Entrustment Agreement – Tianjin Information has entered into a stockholders’ voting rights entrustment agreement (the “Entrustment Agreement”) under which Zhixin Liu and Fu Liu (collectively the “Shuhai Beijing Stockholders”) have vested their voting power in Shuhai Beijing to Tianjin Information or its designee(s). The Entrustment Agreement does not have an expiration date, but the parties can agree in writing to terminate the Entrustment Agreement. Zhixin Liu, is the Chairman of the Board, President, CEO of DataSea and Corporate Secretary, and Fu Liu, a Director of DataSea (Fu Liu is the father of Zhixin Liu).
Equity
Option Agreement – the Shuhai Beijing Stockholders and Tianjin Information entered into an equity option agreement (the
“Option Agreement”), pursuant to which the Shuhai Beijing Stockholders have granted Tianjin Information or its designee(s)
the irrevocable right and option to acquire all or a portion of Shuhai Beijing Stockholders’ equity interests in Shuhai Beijing
for an option price of RMB
Equity Pledge Agreement – Tianjin Information and the Shuhai Beijing Stockholders entered into an equity pledge agreement on October 27, 2015 (the “Equity Pledge Agreement”). The Equity Pledge Agreement serves to guarantee the performance by Shuhai Beijing of its obligations under the Operation and Intellectual Property Service Agreement and the Option Agreement. Pursuant to the Equity Pledge Agreement, Shuhai Beijing Stockholders have agreed to pledge all of their equity interests in Shuhai Beijing to Tianjin Information. Tianjin Information has the right to collect any and all dividends, bonuses and other forms of investment returns paid on the pledged equity interests during the pledge period. Pursuant to the terms of the Equity Pledge Agreement, the Shuhai Beijing Stockholders have agreed to certain restrictive covenants to safeguard the rights of Tianjin Information. Upon an event of default or certain other agreed events under the Operation and Intellectual Property Service Agreement, the Option Agreement and the Equity Pledge Agreement, Tianjin Information may exercise the right to enforce the pledge.
As of this report date, there were no dividends paid from the VIE to the U.S. parent company or the shareholders of the Company. There has been no change in facts and circumstances to consolidate the VIE.
The following financial statement amounts and balances of the VIE were included in the accompanying CFS as of March 31, 2025 and June 30, 2024, and for the three and nine months ended March 31, 2025 and 2024, respectively.
| March 31, 2025 | June 30, 2024 | |||||||
| Cash | $ | $ | ||||||
| Accounts receivable | ||||||||
| Inventory | ||||||||
| Other current assets | ||||||||
| Total current assets | ||||||||
| Property and equipment, net | ||||||||
| Intangible asset, net | ||||||||
| Right-of-use asset, net | ||||||||
| Total non-current assets | ||||||||
| Total assets | $ | $ | ||||||
| Accounts payable | $ | $ | ||||||
| Accrued liabilities and other payables | ||||||||
| Lease liability | ||||||||
| Loans payable | ||||||||
| Other current liabilities | ||||||||
| Total current liabilities | ||||||||
| Lease liability - noncurrent | ||||||||
| Total non-current liabilities | ||||||||
| Total liabilities | $ | $ | ||||||
9
| For the Three Months Ended March 31, 2025 | For the Three Months Ended March 31, 2024 | |||||||
| Revenues | $ | $ | ||||||
| Gross profit | ||||||||
| Net loss | $ | $ | ( | ) | ||||
| For the Nine Months Ended March 31, 2025 | For the Nine Months Ended March 31, 2024 | |||||||
| Revenues | $ | $ | ||||||
| Gross profit | ||||||||
| Net loss | $ | $ | ( | ) | ||||
USE OF ESTIMATES
The preparation of CFS in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting periods. Actual results could differ from those estimates. The significant areas requiring the use of management estimates include, but are not limited to, the estimated useful life and residual value of property, plant and equipment, provision for staff benefits, recognition and measurement of deferred income taxes and the valuation allowance for deferred tax assets. Although these estimates are based on management’s knowledge of current events and actions management may undertake in the future, actual results may ultimately differ from those estimates and such differences may be material to the CFS.
CONTINGENCIES
Certain conditions may exist as of the date the CFS are issued, which may result in a loss to the Company but which will only be resolved when one or more future events occur or fail to occur. The Company’s management and legal counsel assess such contingent liabilities, and such assessment inherently involves an exercise of judgment. In assessing loss contingencies related to legal proceedings that are pending against the Company or unasserted claims that may result in such proceedings, the Company’s legal counsel evaluates the perceived merits of any legal proceedings or unasserted claims as well as the perceived merits of the amount of relief sought or expected to be sought. If the assessment of a contingency indicates that it is probable that a material loss has been incurred and the amount of the liability can be estimated, the estimated liability would be accrued in the Company’s CFS.
If the assessment indicates that a potential material loss contingency is not probable but is reasonably possible, or is probable but cannot be estimated, the nature of the contingent liability, together with an estimate of the range of possible loss if determinable and material, would be disclosed. As of March 31, 2025, and June 30, 2024, the Company has no such contingencies.
10
CASH
Cash includes cash on hand and demand deposits that are highly liquid in nature and have original maturities when purchased of three months or less.
ACCOUNTS RECEIVABLE
The Company’s policy is to maintain an allowance for potential credit losses on accounts receivable. The Company adopted Accounting Standards Update (“ASU”) 2016-13, Financial Instruments – Credit Losses (Topic 326): Measurement of Credit losses on financial instruments later codified as Accounting Standard codification (“ASC”) 326 (“ASC 326”), on July 1, 2023. The guidance introduces a revised approach to the recognition and measurement of credit losses, emphasizing an updated model based on expected losses rather than incurred losses. There was no significant impact on the date of adoption of ASC 326.
Under ASC 326, accounts receivable are recorded at the invoiced amount, net of allowance for expected credit losses. The Company’s primary allowance for credit losses is the allowance for doubtful accounts. The allowance for doubtful accounts reduces the accounts receivable balance to the estimated net realizable value. The Company regularly reviews the adequacy of the allowance for credit losses based on a combination of factors. In establishing any required allowance, management considers historical losses adjusted for current market conditions, the Company’s customers’ financial condition, the amount of any receivables in dispute, the current receivables aging, current payment terms and expectations of forward-looking loss estimates.
All provisions
for the allowance for doubtful accounts are included as a component of general and administrative expenses on the accompanying consolidated
statements of operations and comprehensive loss. Accounts receivable deemed uncollectible are charged against the allowance for credit
losses when identified. Subsequent recoveries of amounts previously written off are credited to earnings in the period recovered. As of
March 31, 2025 and June 30, 2024, the Company had a $
INVENTORY
Inventory
is comprised principally of intelligent temperature measurement face recognition terminal and identity information recognition products,
and is valued at the lower of cost or net realizable value. The value of inventory is determined using the first-in, first-out method.
The Company periodically estimates an inventory allowance for estimated unmarketable inventories when necessary. Inventory amounts are
reported net of such allowances. There were $
PROPERTY AND EQUIPMENT
Property
and equipment are stated at cost, less accumulated depreciation. Major repairs and improvements that significantly extend original useful
lives or improve productivity are capitalized and depreciated over the period benefited. Maintenance and repairs are expensed as incurred.
When property and equipment are retired or otherwise disposed of, the related cost and accumulated depreciation are removed from the respective
accounts, and any gain or loss is included in operations.
| Furniture and fixtures | ||
| Office equipment | ||
| Vehicles | ||
| Leasehold improvement |
Leasehold improvements are depreciated utilizing the straight-line method over the shorter of their estimated useful lives or remaining lease term.
11
INTANGIBLE ASSETS
Intangible assets with finite lives are amortized using the straight-line method over their estimated period of benefit. Evaluation of the recoverability of intangible assets is made to take into account events or circumstances that warrant revised estimates of useful lives or that indicate that impairment exists. All of the Company’s intangible assets are subject to amortization. No impairment of intangible assets has been identified as of the balance sheet date.
Intangible
assets include licenses, certificates, patents and other technology and are amortized over their useful life of
FAIR VALUE (“FV”) OF FINANCIAL INSTRUMENTS
The carrying value of the Company’s short-term financial instruments, such as cash, accounts receivable, prepaid expenses, accounts payable, unearned revenue, accrued expenses and other payables approximates their FV due to their short maturities. FASB ASC Topic 825, “Financial Instruments,” requires disclosure of the FV of financial instruments held by the Company. The carrying amounts reported in the balance sheets for current liabilities qualify as financial instruments and are a reasonable estimate of their FV because of the short period of time between the origination of such instruments and their expected realization and the current market rate of interest.
FAIR VALUE MEASUREMENTS AND DISCLOSURES
FASB ASC Topic 820, “Fair Value Measurements,” defines FV, and establishes a three-level valuation hierarchy for disclosures that enhances disclosure requirements for FV measures. The three levels are defined as follows:
| ● | Level 1 inputs to the valuation methodology are quoted prices (unadjusted) for identical assets or liabilities in active markets. |
| ● | Level 2 inputs to the valuation methodology include other than those in level 1 quoted prices for similar assets and liabilities in active markets, and inputs that are observable for the asset or liability, either directly or indirectly, for substantially the full term of the financial instrument. |
| ● | Level 3 inputs to the valuation methodology are unobservable and significant to the FV measurement. |
As of March 31, 2025 and June 30, 2024, the Company did not identify any assets or liabilities required to be presented on the balance sheet at FV on a recurring basis.
IMPAIRMENT OF LONG-LIVED ASSETS
In accordance with FASB ASC 360-10, “Accounting for the Impairment or Disposal of Long-Lived Assets”, long-lived assets such as property and equipment are reviewed for impairment whenever events or changes in circumstances indicate that the carrying value of an asset may not be recoverable, or it is reasonably possible that these assets could become impaired as a result of technological or other changes. The determination of recoverability of assets to be held and used is made by comparing the carrying amount of an asset to future undiscounted cash flows expected to be generated by the asset.
12
If such assets are considered impaired, the impairment to be recognized is measured as the amount by which the carrying amount of the asset exceeds its FV. FV generally is determined using the asset’s expected future undiscounted cash flows or market value, if readily determinable. Assets to be disposed of are reported at the lower of the carrying amount or FV less cost to sell. For the three and nine months ended March 31, 2025 and 2024, there was no impairment loss recognized on long-lived assets.
UNEARNED REVENUE
The Company records payments received in advance from its customers or sales agents for the Company’s products as unearned revenue, mainly consisting of deposits or prepayment for 5G products from the Company’s sales agencies. These orders normally are delivered based upon contract terms and customer demand, and the Company will recognize it as revenue when the products are delivered to the end customers.
LEASES
The Company determines if an arrangement is a lease at inception under FASB ASC Topic 842. Right of Use Assets (“ROU”) and lease liabilities are recognized at commencement date based on the present value of remaining lease payments over the lease term. For this purpose, the Company considers only payments that are fixed and determinable at the time of commencement. As most of its leases do not provide an implicit rate, it uses its incremental borrowing rate based on the information available at commencement date in determining the present value of lease payments. The Company’s incremental borrowing rate is a hypothetical rate based on its understanding of what its credit rating would be. The ROU assets include adjustments for prepayments and accrued lease payments. The ROU asset also includes any lease payments made prior to commencement and is recorded net of any lease incentives received. The Company’s lease terms may include options to extend or terminate the lease when it is reasonably certain that it will exercise such options.
ROU assets are reviewed for impairment when indicators of impairment are present. ROU assets from operating and finance leases are subject to the impairment guidance in ASC 360, Property, Plant, and Equipment, as ROU assets are long-lived nonfinancial assets.
ROU assets are tested for impairment individually or as part of an asset group if the cash flows related to the ROU asset are not independent from the cash flows of other assets and liabilities. An asset group is the unit of accounting for long-lived assets to be held and used, which represents the lowest level for which identifiable cash flows are largely independent of the cash flows of other groups of assets and liabilities. The Company recognized no impairment of ROU assets as of March 31, 2025 and June 30, 2024
REVENUE RECOGNITION
The Company follows Accounting Standards Codification Topic 606, Revenue from Contracts with Customers (ASC 606).
The core principle underlying FASB ASC 606 is that the Company will recognize revenue to represent the transfer of goods and services to customers in an amount that reflects the consideration to which the Company expects to be entitled in such exchange. This will require the Company to identify contractual performance obligations and determine whether revenue should be recognized at a point in time or over time, based on when control of goods and services transfers to a customer. The Company’s revenue streams are identified when possession of goods and services is transferred to a customer.
FASB ASC Topic 606 requires the use of a five-step model to recognize revenue from customer contracts. The five-step model requires the Company (i) identify the contract with the customer, (ii) identify the performance obligations in the contract, (iii) determine the transaction price, including variable consideration to the extent that it is probable that a significant future reversal will not occur, (iv) allocate the transaction price to the respective performance obligations in the contract, and (v) recognize revenue when (or as) the Company satisfies each performance obligation.
13
The Company derives its revenues from product sales, software sales, and 5G messaging service contracts with its customers, with revenues recognized upon delivery of services and products. Persuasive evidence of an arrangement is demonstrated via product sale contracts and professional service contracts, with performance obligations identified. The transaction price, such as product selling price, and the service price to the customer with corresponding performance obligations are fixed upon acceptance of the agreement. The Company recognizes revenue when it satisfies each performance obligation, the customer receives the products and passes the inspection and when professional service is rendered to the customer, collectability of payment is probable. These revenues are recognized at a point in time after each performance obligations is satisfied. Revenue is recognized net of returns and value-added tax charged to customers
The following table shows the Company’s revenue by revenue sources:
| For the Three Months Ended March 31, 2025 | For the Three Months Ended March 31, 2024 | |||||||
| 5G AI Multimodal Digital Business | $ | $ | ||||||
| 5G AI Multimodal top up | ||||||||
| 5G AI digital technical service | ||||||||
| Acoustic Intelligence Business | ||||||||
| Ultrasonic Sound Air Disinfection Equipment | ||||||||
| Upgraded Sonic Sterilization and Purification Guardian | ||||||||
| Sleep Monitor | ||||||||
| Sell of Software | ||||||||
| Other | ||||||||
| Total revenue | $ | $ | ||||||
| For the Nine Months Ended March 31, 2025 | For the Nine Months Ended March 31, 2024 | |||||||
| 5G AI Multimodal communication | $ | $ | ||||||
| 5G AI Multimodal communication | ||||||||
| 5G AI digital technical service | ||||||||
| Acoustic Intelligence Business | ||||||||
| Ultrasonic Sound Air Disinfection Equipment | ||||||||
| Upgraded Sonic Sterilization and Purification Guardian | ||||||||
| Sleep Monitor | ||||||||
| Sell of Software | ||||||||
| Smart City business | ||||||||
| Smart community | ||||||||
| Other | ||||||||
| Total revenue | $ | $ | ||||||
SEGMENT INFORMATION
FASB ASC Topic 280, “Segment Reporting,” requires use of the “management approach” model for segment reporting. The management approach model is based on the method a company’s management organizes segments within the company for making operating decisions and assessing performance. Reportable segments are based on products and services, geography, legal structure, management structure, or any other manner in which management disaggregates a company. Management determined the Company’s current operations constitutes a single reportable segment in accordance with ASC 280. The Company’s only business and industry segment is high technology and advanced information systems (“TAIS”). TAIS includes smart city solutions that meet the security needs of residential communities, schools and commercial enterprises, and 5G messaging services including 5G SMS, 5G MMCP and 5G multi-media video messaging.
14
All of the Company’s customers are in the PRC and all revenues for the three and nine months ended March 31, 2025 and 2024 were generated from the PRC. All identifiable assets of the Company are located in the PRC. Accordingly, no geographical segments are presented.
INCOME TAXES
The Company uses the asset and liability method of accounting for income taxes in accordance with FASB ASC Topic 740, “Income Taxes.” Under this method, income tax expense is recognized for the amount of: (i) taxes payable or refundable for the current period and (ii) deferred tax consequences of temporary differences resulting from matters that have been recognized in an entity’s financial statements or tax returns. Deferred tax assets also include the prior years’ net operating losses carried forward. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in the results of operations in the period that includes the enactment date. A valuation allowance is provided to reduce the deferred tax assets reported if based on the weight of the available positive and negative evidence, it is more likely than not some portion or all of the deferred tax assets will not be realized.
The Company follows FASB ASC Topic 740, which prescribes a more-likely-than-not threshold for financial statement recognition and measurement of a tax position taken or expected to be taken in a tax return. FASB ASC Topic 740 also provides guidance on recognition of income tax assets and liabilities, classification of current and deferred income tax assets and liabilities, accounting for interest and penalties associated with tax positions, accounting for income taxes in interim periods, and income tax disclosures.
Under the
provisions of FASB ASC Topic 740, when tax returns are filed, it is likely some positions taken would be sustained upon examination by
the taxing authorities, while others are subject to uncertainty about the merits of the position taken or the amount of the position that
would be ultimately sustained. The benefit of a tax position is recognized in the financial statements in the period during which, based
on all available evidence, management believes it is more likely than not that the position will be sustained upon examination, including
the resolution of appeals or litigation processes, if any. Tax positions taken are not offset or aggregated with other positions. Tax
positions that meet the more-likely-than-not recognition threshold are measured as the largest amount of tax benefit that is more than
RESEARCH AND DEVELOPMENT EXPENSES
Research and development expenses are expensed in the period when incurred. These costs primarily consist of cost of materials used, salaries paid for the Company’s development department, and fees paid to third parties.
NONCONTROLLING INTERESTS
The Company follows FASB ASC Topic 810, “Consolidation,” governing the accounting for and reporting of noncontrolling interests (“NCIs”) in partially owned consolidated subsidiaries and the loss of control of subsidiaries. Certain provisions of this standard indicate, among other things, that NCI (previously referred to as minority interests) be treated as a separate component of equity, not as a liability, that increases and decreases in the parent’s ownership interest that leave control intact be treated as equity transactions rather than as step acquisitions or dilution gains or losses, and that losses of a partially-owned consolidated subsidiary be allocated to non-controlling interests even when such allocation might result in a deficit balance.
15
The net
income (loss) attributed to NCI was separately designated in the accompanying statements of operations and comprehensive income (loss).
Losses attributable to NCI in a subsidiary may exceed a non-controlling interest’s interests in the subsidiary’s equity. The
excess attributable to NCIs is attributed to those interests. NCIs shall continue to be attributed their share of losses even if that
attribution results in a deficit NCI balance. On December 20, 2022, Guohao Century acquired a
Zhangqi
was
CONCENTRATION OF CREDIT RISK
The Company
maintains cash in accounts with state-owned banks within the PRC. Cash in state-owned banks less than RMB
Cash held
in accounts at U.S. financial institutions is insured by the Federal Deposit Insurance Corporation or other programs subject to certain
limitations up to $
FOREIGN CURRENCY TRANSLATION AND COMPREHENSIVE INCOME (LOSS)
The accounts of the Company’s Chinese entities are maintained in RMB and the accounts of the U.S. parent company are maintained in United States dollar (“USD”). The financial statements of the Chinese entities were translated into USD in accordance with FASB ASC Topic 830 “Foreign Currency Matters.” All assets and liabilities were translated at the exchange rate on the balance sheet date; stockholders’ equity is translated at historical rates and the statements of operations and cash flows are translated at the weighted average exchange rate for the period. The resulting translation adjustments are reported under other comprehensive income (loss) in accordance with FASB ASC Topic 220, “Comprehensive Income.” Gains and losses resulting from foreign currency transactions are reflected in the statements of operations.
The Company follows FASB ASC Topic”220-10, “Comprehensive Income (loss).” Comprehensive income (loss) comprises net income (loss) and all changes to the statements of changes in stockholders’ equity, except those due to investments by stockholders, changes in additional paid-in capital and distributions to stockholders.
The exchange rates used to translate amounts in RMB to USD for the purposes of preparing the CFS were as follows:
| March 31, | March 31, | June 30, | ||||||||||
| 2025 | 2024 | 2024 | ||||||||||
| Period-end date USD: RMB exchange rate | ||||||||||||
| Average USD for the reporting period: RMB exchange rate | ||||||||||||
BASIC AND DILUTED EARNINGS (LOSS) PER SHARE (EPS)
Basic EPS is computed by dividing income available to common shareholders by the weighted average number of common shares outstanding for the period. Diluted EPS is computed similarly, except that the denominator is increased to include the number of additional common shares that would have been outstanding if the potential common shares had been issued and if the additional common shares were dilutive. Diluted EPS is based on the assumption that all dilutive convertible shares and stock options were converted or exercised. Dilution is computed by applying the treasury stock method. Under this method, options and warrants are assumed to have been exercised at the beginning of the period (or at the time of issuance, if later), and as if funds obtained thereby were used to purchase common stock at the average market price during the period.
16
STATEMENT OF CASH FLOWS
In accordance with FASB ASC Topic 230, “Statement of Cash Flows,” cash flows from the Company’s operations are calculated based upon the local currencies. As a result, amounts shown on the statement of cash flows may not necessarily agree with changes in the corresponding asset and liability on the balance sheet.
RECENT ACCOUNTING PRONOUNCEMENTS
In October 2023, the FASB issued ASU No. 2023-06, “Disclosure Improvements — Codification Amendments in Response to the SEC’s Disclosure Update and Simplification Initiative.” The ASU amends the disclosure or presentation requirements related to various subtopics in the FASB ASC. The ASU was issued in response to the SEC’s August 2018 final amendments in Release No. 33-10532, Disclosure Update and Simplification that updated and simplified disclosure requirements that the SEC believed were duplicative, overlapping, or outdated. The guidance in ASU 2023-06 is intended to align GAAP requirements with those of the SEC and to facilitate the application of GAAP for all entities. The amendments introduced by ASU 2023-06 are effective if the SEC removes the related disclosure or presentation requirement from its existing regulations by June 30, 2027. If, by June 30, 2027, the SEC has not removed the applicable requirements from its existing regulations, the pending content of the associated amendment will be removed from the ASC and will not become effective for any entities. Early adoption is permitted. The adoption of ASU 2023-06 is not expected to have a material impact on the Company’s consolidated financial statements or related disclosures.
In December 2023, the FASB issued ASU 2023-09, Income Taxes (Topic 740): Improvements to Income Tax Disclosures (ASU 2023-09), which requires disclosure of incremental income tax information within the rate reconciliation and expanded disclosures of income taxes paid, among other disclosure requirements. ASU 2023-09 is effective for fiscal years beginning after December 15, 2024. Early adoption is permitted. The Company’s management does not believe the adoption of ASU 2023-09 will have a material impact on its financial statements and disclosures.
On November 4, 2024, the FASB issued an ASU No. 2024-03, Disaggregation of Income Statement Expenses (“ASU 2024 03”) to improve the disclosures about a public business entity’s expenses and address requests from investors for more detailed information about the types of expenses in commonly presented expense captions (such as cost of sales; selling, general, and administrative expenses; and research and development). The amendments in the ASU require disclosure in the notes to financial statements of specified information about certain costs and expenses. The amendments require that at each interim and annual reporting period an entity: 1.Disclose the amounts of (a) purchases of inventory, (b) employee compensation, (c) depreciation, (d) intangible asset amortization, and (e) depreciation, depletion, and amortization recognized as part of oil- and gas-producing activities (or other amounts of depletion expense) included in each relevant expense caption. A relevant expense caption is an expense caption presented on the face of the income statement within continuing operations that contains any of the expense categories listed in (a)–(e). 2. Include certain amounts that are already required to be disclosed under current generally accepted accounting principles in the same tabular disclosure as the other disaggregation requirements. 3. Disclose a qualitative description of the amounts remaining in relevant expense captions that are not separately disaggregated quantitatively. 4) Disclose the total amount of selling expenses and, in annual reporting periods, an entity’s definition of selling expenses. In January 2025, the FASB issued ASU No. 2025-01, Clarifying the Effective Date (“ASU 2025-01”). The amendments, as clarified by ASU 2025-01, are effective for annual reporting periods beginning after December 15, 2026, and interim reporting periods within annual reporting periods beginning after December 15, 2027. Early adoption is permitted. The amendments in this ASU should be applied either (1) prospectively to financial statements issued for reporting periods after the effective date of the ASU or (2) retrospectively to any or all prior periods presented in the financial statements. The Company is evaluating the impact that ASU 2024-03 will have on its consolidated financial statements and related disclosures.
The Company does not believe other recently issued but not yet effective accounting standards, if currently adopted, would have a material effect on the Company’s consolidated financial position, statements of comprehensive income and cash flows.
NOTE 3 – PROPERTY AND EQUIPMENT
Property and equipment are summarized as follows:
| March 31, 2025 | June 30, 2024 | |||||||
| Furniture and fixtures | $ | $ | ||||||
| Vehicle | ||||||||
| Leasehold improvement | ||||||||
| Office equipment | ||||||||
| Subtotal | ||||||||
| Less: accumulated depreciation | ||||||||
| Total | $ | $ | ||||||
17
Depreciation
for the three months ended March 31, 2025 and 2024 was $
NOTE 4 – INTANGIBLE ASSETS
Intangible assets are summarized as follows:
| March 31, 2025 | June 30, 2024 | |||||||
| Software registration or using right | $ | $ | ||||||
| Patent | ||||||||
| Software and technology development costs | ||||||||
| Value-added telecommunications business license | ||||||||
| Subtotal | ||||||||
| Less: Accumulated amortization | ||||||||
| Total | $ | $ | ||||||
Software registration or using right represented the purchase cost of customized software with its source code from third party software developer.
Software and technology development cost represented development costs incurred internally after the technological feasibility was established and a working model was produced and was recorded as intangible asset.
On October 14, 2024, Tianjin
Information, as the purchaser, entered into a patent purchase agreement with Hangzhou Liuhuan Technology Limited Company (“Liuhuan”),
as the seller, for the acquisition of an audio playback system based on voltage following. The total purchase price is RMB
On October
14, 2024, Tianjin Information, as the purchaser, entered into another patent purchase agreement with Hangzhou Liuhuan Technology Limited
Company (“Liuhuan”), as the seller, for the acquisition of a B-ultrasound image target detection method and B-ultrasound scanner.
The total purchase price is RMB
Amortization
for the three months ended March 31, 2025 and 2024 was $
NOTE 5 – PREPAID EXPENSES AND OTHER CURRENT ASSETS
Prepaid expenses and other current assets consisted of the following:
| March 31, 2025 | June 30, 2024 | |||||||
| Security deposit | $ | $ | ||||||
| Prepaid expenses | ||||||||
| Other receivables – Heqin | ||||||||
| Advance to third party individuals, no interest, payable upon demand | ||||||||
| Others | ||||||||
| Total | ||||||||
| Less: allowance for other receivables – Heqin | ||||||||
| Total | $ | $ | ||||||
18
As
of March 31, 2025, prepaid expenses mainly consisted of input VAT for purchasing patents of $
As of June
30, 2024, prepaid expenses mainly consisted of prepaid marketing expense of $
Prepaid marketing expense
On September
16, 2023, Tianjin Information entered an Operation Cooperation Agreement with an unrelated company, Beijing Jincheng Haoda Construction
Engineering Co., Ltd (“Jincheng Haoda”), for marketing and promoting the sale of 5G messaging and acoustic intelligence series
products in oversea market. The cooperation term is from September 16, 2023 through September 15, 2026. Jincheng Haoda is committed to
complete RMB
On September
18, 2023, Tianjin Information entered an Operation Cooperation Agreement with an unrelated company, Beijing Jiajia Shengshi Trading Co.,
Ltd (‘Jiajia Shengshi”), for marketing and promoting the sale of 5G messaging and acoustic intelligence series products in
domestic market. The cooperation term is from September 18, 2023 through September 17, 2026. Jiajia Shengshi is committed to complete
RMB
Other receivables – Heqin
On February 20, 2020, Guozhong Times entered an Operation Cooperation Agreement with an unrelated company, Heqin (Beijing) Technology Co, Ltd. (“Heqin”), for marketing and promoting the sale of Face Recognition Payment Processing equipment and related technical support, and other products of the Company including Epidemic Prevention and Control Systems. Heqin has a sales team which used to work with Fortune 500 companies and specializes in business marketing and sales channel establishment and expansion, especially in education industry and public area.
19
The cooperation
term is from February 20, 2020 through March 1, 2023; however, Heqin is the exclusive distributor of the Company’s face Recognition
Payment Processing products for the period to July 30, 2020. During March and April 2020, Guozhong Times provided operating funds to Heqin,
together with a credit line provided by Guozhong Times to Heqin from May 2020 through August 2020, for a total borrowing of RMB
No profits
will be allocated and distributed before full repayment of the borrowing. After Heqin pays in full the borrowing, Guozhong Times and Heqin
will distribute profits of sale of Face Recognition Payment Processing equipment and related technical support at
In November
2022, Hangzhou Yuetianyun Data Technology Company Ltd (“Yuetianyun”) agreed and acknowledged a Debt Transfer Agreement, wherein
Heqin transferred its debt from Yuetianyun to Guozhong Times in the amount of RMB
NOTE 6 – Unearned revennue
The balance
of unearned revenue was $
The following presents the roll-forward schedule of unearned revenue for the nine months ended March 31, 2025 and 2024:
| Nine Months Ended March 31, | ||||||||
| 2025 | 2024 | |||||||
| Balance, beginning of period | $ | $ | ||||||
| Received during the period, amount excluding VAT | ||||||||
| Transferred to revenue | ( | ) | ( | ) | ||||
| Effect of foreign currency translation | ( | ) | ||||||
| Balance, end of period | $ | $ | ||||||
NOTE 7 – ACCRUED EXPENSES AND OTHER PAYABLES
Accrued expenses and other payables consisted of the following:
| March 31, 2025 | June 30, 2024 | |||||||
| Other payables | $ | $ | ||||||
| Due to third parties | ||||||||
| Security deposit | ||||||||
| Social security payable | ||||||||
| Salary payable – employees | ||||||||
| Total | $ | $ | ||||||
20
Due to third parties were the short-term advance from third party individual or companies, bear no interest and payable upon demand.
NOTE 8 – LOANS PAYABLE
Loan from banks
On December 12, 2022, Beijing
Shuhai entered a loan agreement with Shenzhen Qianhai WeBank Co., Ltd for the amount of RMB
On January 13, 2023, Shenzhen
Jingwei entered a loan agreement with Shenzhen Qianhai WeBank Co., Ltd for the amount of RMB
On April 10, 2024, Guozhong Times
entered a loan agreement with Bank of Beijing for the amount of RMB
On April 23, 2024, Guozhong Times
entered a loan agreement with Beijing Rural Commercial Bank Economic and Technological Development Zone Branch for the amount of RMB
On April 25, 2024, Shuhai Beijing
entered a loan agreement with Industrial Bank Co., Ltd for the amount of RMB
On May 28,
2024, Guozhong Times entered a loan agreement with China Everbright Bank for the amount of RMB
On June
20, 2024, Shuhai Beijing entered a loan agreement with Bank of China for the amount of RMB
On March 31, 2025, Shuhai Beijing entered a loan
agreement with Bank of China for the amount of RMB
21
The following table summarizes the loan balance as of March 31, 2025:
| Lender | Loan amount | Borrowing date | Loan term: Months | Interest rate | Outstanding balance | ||||||||||||
| Bank of Beijing | % | ||||||||||||||||
| Beijing Rural Commercial Bank Economic and Technological Development Zone Branch | % | ||||||||||||||||
| Industrial Bank Co., Ltd | % | ||||||||||||||||
| China Everbright Bank | % | ||||||||||||||||
| Bank of China | % | ||||||||||||||||
| Bank of China | % | ||||||||||||||||
| Total | $ | $ | |||||||||||||||
NOTE 9 – RELATED PARTY TRANSACTIONS
On October
1, 2020, the Company’s CEO (also the president) entered into an office rental agreement with Xunrui. Pursuant to the agreement,
the Company rents an office in Harbin city with a total payment of RMB
On July
1, 2022, the Company entered a one-year lease for two cars with the Company’s CEO for each car’s monthly rent of RMB
On September 1, 2022, the Company
entered a six-month lease for senior officers’ dormitory in Beijing for a total rent of RMB
On February 20, 2025, the Company entered
into a 5G AI multimodal solution service agreement with Beijing Meimei (shareholder of the Company). The agreement had a term ending on March 28, 2025, with a
total contract value of RMB
Due to related parties
As of March
31, 2025 and June 30, 2024, the Company had due to related parties of $
22
Due to related parties of $
NOTE 10 – COMMON STOCK AND WARRANTS
Shares Issued for Equity Financing
On July
2, 2024, the Company entered into a securities purchase agreement, pursuant to which the Company agreed to issue and sell to an investor
in a registered direct offering
On September
27, 2024, the Company entered into subscription agreements with three non-U.S. investors, including Zhixin Liu, the Company’s Chairman
of the Board, Chief Executive Officer, President and Secretary, and Fu Liu, a Director of the Company, pursuant to which the Company
agreed to sell and the investors agreed to purchase an aggregate of
Shares Issued for Acquiring Intangible Assets from Related Parties
On August
9, 2024, the Company entered into an intellectual property purchase agreement with Ms. Zhixin Liu, the Company’s Chairwoman and
CEO, pursuant to which Ms. Zhixin Liu transferred to the Company two intangible assets (software copyrights) owned by her personally.
The Committee has decided to grant Zhixin Liu
On August
9, 2024, the Company entered into an intellectual property purchase agreement with Mr. Fu Liu, the Company’s director of board,
pursuant to which Mr. Fu Liu transferred to the Company two intangible assets (software copyrights) owned by himself. The Committee
has decided to grant Fu Liu
The purchase
was accounted for at the historical cost of the intangible assets which was $
23
Shares to Independent Directors as Compensation
During the
three months ended March 31, 2025 and 2024, the Company recorded $
Shares to Officers as Compensation
On September
24, 2021, under the 2018 Equity Inventive plan, the Company’s Board of Directors granted
Shares to individual Consultants
During the nine months ended March 31, 2025, the
Company issued
Shares to Officers in Lieu of Salary Payable
On February 28, 2025, the Board of Directors approved
to issue
NOTE 11 – INCOME TAXES
The Company is subject to income taxes by entity on income arising in or derived from the tax jurisdiction in which each entity is domiciled. The Company’s PRC subsidiaries file their income tax returns online with PRC tax authorities. The Company conducts all of its businesses through its subsidiaries and affiliated entities, principally in the PRC.
The Company’s
U.S. parent company is subject to U.S. income tax rate of
The Company’s
offshore subsidiary, Shuhai Skill (HK), a HK holding company is subject to
As of March
31, 2025 and June 30, 2024, the Company has approximately $
24
The following table reconciles the U.S. statutory rates to the Company’s effective tax rate for the three months ended March 31, 2025 and 2024:
| 2025 | 2024 | |||||||
| US federal statutory rates | ( | )% | ( | )% | ||||
| Tax rate difference – current provision | ( | )% | ( | )% | ||||
| Permanent difference | % | % | ||||||
| Effect of PRC tax holiday | ( | )% | % | |||||
| Valuation allowance | % | % | ||||||
| Effective tax rate | % | % | ||||||
The following table reconciles the U.S. statutory rates to the Company’s effective tax rate for the nine months ended March 31, 2025 and 2024:
| 2025 | 2024 | |||||||
| US federal statutory rates | ( | )% | ( | )% | ||||
| Tax rate difference – current provision | ( | )% | ( | )% | ||||
| Permanent difference | % | % | ||||||
| Effect of PRC tax holiday | ( | )% | % | |||||
| Valuation allowance | % | % | ||||||
| Effective tax rate | % | % | ||||||
The Company’s net deferred tax assets as of March 31, 2025 and June 30, 2024 is as follows:
| March 31, 2025 | June 30, 2024 | |||||||
| Deferred tax asset | ||||||||
| Net operating loss | $ | $ | ||||||
| R&D expense | ||||||||
| Depreciation and amortization | ||||||||
| Bad debt expense | ||||||||
| Social security and insurance accrual | ||||||||
| Inventory impairment | ||||||||
| ROU, net of lease liabilities | ( | ) | ( | ) | ||||
| Total | ||||||||
| Less: valuation allowance | ( | ) | ( | ) | ||||
| Net deferred tax asset | $ | $ | ||||||
NOTE 12 – COMMITMENTS
Leases
On July
30, 2019, the Company entered into an operating lease for its office in Beijing. Pursuant to the lease, the delivery date of the
property was August 8, 2019 but the lease term started on October 8, 2019 and expires on
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On November
8, 2023, Shuhai Beijing entered into a new lease agreement for its office in Beijing. Pursuant to the agreement, the agreement commenced
on November 8, 2023 and expired on
On November
8, 2023, Tianjin information entered into a lease agreement for its office in Beijing. Pursuant to the agreement, the agreement commenced
on November 8, 2023 and expired on
In August
2020, the Company entered into a lease for an office in Shenzhen City, China for three years from August 8, 2020 through August 7,
2023, with a monthly rent of RMB
On August
26, 2020, Tianjin Information entered into a lease for the office in Hangzhou City, China from September 11, 2020 to October 5, 2022. The
first year rent is RMB
On May 10,
2023, Guo Hao Century entered into a lease for the office in Hangzhou City, China from May 10, 2023 to May 9, 2025.
| Start Date | End Date | Rent expense | ||||||||
| RMB | USD | |||||||||
| $ | ||||||||||
| $ | ||||||||||
On September 30, 2023, the lease was early terminated due to the management’s decision of transferring operations in Hangzhou to Beijing headquarter office for maximizing the efficiency and cost saving.
On August
16, 2024, Shenzhen Jingwei entered into a lease agreement for its office in Shenzhen. Pursuant to the agreement, the lease commenced on
August 16, 2024 with expiration on August 15, 2027, and has a monthly rent of RMB
On November
29, 2024, Shuhai Information entered into a lease agreement for an office in Beijing City, China from March 1, 2025 to February 29, 2028,
with a monthly rent of RMB
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On December
10, 2024, the Company entered into a lease agreement for an office in Beijing City, China for 15 months from December 10, 2024 through
March 10, 2026, with a monthly rent of RMB
The Company adopted FASB ASC Topic 842 on July 1, 2019. The components of lease costs, lease term and discount rate with respect of the Company’s office lease and the senior officers’ dormitory lease with an initial term of more than 12 months are as follows:
| Three Months Ended March 31, 2025 | Three Months Ended March 31, 2024 | |||||||
| Operating lease expense | $ | $ | ||||||
| Nine Months Ended March 31, 2025 | Nine Months Ended March 31, 2024 | |||||||
| Operating lease expense | $ | $ | ||||||
| March 31, 2025 | June 30, 2024 | |||||||
| Right-of-use assets | $ | $ | ||||||
| Lease liabilities - current | ||||||||
| Lease liabilities - noncurrent | ||||||||
| Weighted average remaining lease term | ||||||||
| Weighted average discount rate | % | % | ||||||
The following is a schedule, by years, of maturities of the operating lease liabilities as of March 31, 2025:
| 12 Months Ending March 31, | Minimum Lease Payment | |||
| 2026 | $ | |||
| 2027 | ||||
| 2028 | ||||
| Total undiscounted cash flows | ||||
| Less: imputed interest | ||||
| Present value of lease liabilities | $ | |||
NOTE 13 – SUBSEQUENT EVENTS
The Company follows the guidance in FASB ASC 855-10 for the disclosure of subsequent events. The Company evaluated subsequent events through the date the financial statements were issued and determined the Company had no subsequent events that need to be disclosed.
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ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Cautionary Note Regarding Forward-Looking Statements
This report contains forward-looking statements within the meaning of Section 27A of the Securities Act and Section 21E of the Exchange Act. All statements other than statements of historical fact are “forward-looking statements” for purposes of federal and state securities laws, including, but not limited to, any projections of earnings, revenue, or other financial items; any statements of the plans, strategies, and objectives of management for future operations; any statements concerning proposed new services or developments; any statements regarding future economic conditions of performance; and statements of belief; and any statements of assumptions underlying any of the foregoing. Such forward-looking statements involve known and unknown risks, uncertainties, and other factors that may cause our actual results, performance, or achievements to be materially different from any future results, performance, or achievements expressed or implied by such forward-looking statements.
In some cases, you can identify forward-looking statements by terms such as “may,” “intend,” “might,” “will,” “should,” “could,” “would,” “expect,” “believe,” “anticipate,” “estimate,” “predict,” “potential,” or the negative of these terms. These terms and similar expressions are intended to identify forward-looking statements. The forward-looking statements in this report are based upon management’s current expectations, which it believes are reasonable. However, we cannot assess the impact of each factor on our business or the extent to which any factor or combination of factors, or factors we are aware of, may cause actual results to differ materially from those contained in any forward-looking statements. You are cautioned not to place undue reliance on any forward-looking statements. These statements represent our estimates and assumptions only as of the date of this report. Except to the extent required by federal securities laws, we undertake no obligation to update any forward-looking statement to reflect events or circumstances after the date hereof or to reflect the occurrence of unanticipated events.
You should be aware that our actual results could differ materially from those contained in the forward-looking statements due to several factors, including:
| ● | uncertainties relating to our ability to establish and operate our business and generate revenue; |
| ● | uncertainties relating to general economic, political, and business conditions in China; |
| ● | industry trends and changes in demand for our products and service; |
| ● | uncertainties relating to customer plans and commitments and the timing of orders received from customers; |
| ● | announcements or changes in our advertising model and related pricing policies or those of our competitors; |
| ● | unanticipated delays in the development, market acceptance, or installation of our products and services; |
| ● | changes in Chinese government regulations; and |
| ● | availability, terms and deployment of capital, relationships with third-party equipment suppliers. |
Overview
Company Structure
Datasea Inc. is a technology company incorporated in Nevada, USA, on September 26, 2014. The Company went public on the NASDAQ in December 2028, under the symbol of DTSS. Datasea is not a Chinese operating company but a Nevada-based holding company with its Delaware subsidiary, Datasea Acoustics LLC, serving as our U.S.-based international business platform. Additionally, through the Company’s subsidiary in China – Tianjin Information Sea Information Technology Co., Ltd and the VIE, Shuhai Information Technology Co., Ltd. (“Shuhai Beijing”), we carry out business activities in China, along with their subsidiary entities.
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Datasea is dedicated to providing advanced acoustic high-tech technologies and products, along with cutting-edge 5G+ Artificial Intelligence (“AI”) multimodal digital innovation technologies and products. The Company serves a broad spectrum of corporate and individual clients globally.
For the third quarter of fiscal year 2025, ended March 31, 2025, Datasea reported strong financial performance, with revenue reaching $51,891,475, a 164.59% year-over-year increase, driven by the continued rapid expansion of its 5G+AI multimodal digital business in China, where the Company holds a leading market position. Gross profit rose to $912,223, up 388.23% year-over-year, reflecting improved results of operation and operational efficiency. In the third quarter alone, net loss narrowed 57.0% to $1,782,998, while the nine-month net loss decreased by 18.60% to $4,881,265. Meanwhile, the Company’s cash balance increased by 378.17%, and accounts receivable dropped by 93.17%, significantly enhancing capital turnover. The net value of intangible assets rose 596.96%, underscoring growing innovation capacity and long-term competitiveness. Datasea reiterates its confidence in achieving the full-year fiscal 2025 revenue target of $90 million.
Our Business Summary
Acoustics high tech Segment:
We deeply understand the market’s demand for new application areas, technologies, and requirements. Therefore, through the relentless efforts of our team, we have achieved leading-edge advancements in acoustic understanding and algorithms.
I. Overview of the Company’s Acoustic High-Tech Business
As one of the global pioneers of the “acoustic effect” concept, Datasea is committed to establishing a leading technological framework in the acoustic field and driving the global acoustic industry’s transition toward intelligence and digitalization. Through precision acoustic manufacturing and ongoing innovation, the Company has developed a core technology architecture that deeply integrates acoustic science, 5G digital capabilities, and artificial intelligence. This “Acoustic + AI” model enables Datasea to deliver globally competitive, high-tech acoustic products and solutions across multiple industries.
From a technological implementation perspective, Datasea combines fundamental acoustic theory with artificial intelligence to construct a robust system centered on the study and application of non-audible mechanical wave effects. This emerging interdisciplinary field of “Acoustic + AI” not only advances the scientific boundaries of acoustic technologies but also facilitates the transformation of theoretical breakthroughs into industrial applications. By leveraging acoustic technologies and AI-driven intelligent processing, Datasea aims to address complex challenges across a broad spectrum of sectors.
The Company is focusing on five key application areas: acoustic industry, acoustic agriculture, acoustic healthcare, acoustic health, and acoustic IoT technologies. Through in-depth cooperation with leading academic institutions and research centers both domestically and internationally, Datasea continues to drive innovation in acoustic technology and its industrialization, aiming to become a global leader in the acoustic high-tech field.
| ● | Acoustic Agriculture Applications |
| ● | Acoustic Industry Applications |
| ● | Acoustic Healthcare Applications |
| ● | Acoustic Health Applications |
| ● | Acoustic IoT Technology |
Datasea’s acoustic business is not only an innovation of traditional acoustic technology but also a reshaping of the global high-tech industry landscape. Through close collaboration with top domestic and international academic institutions and research centers, and by deeply integrating Acoustic + AI, the Company is providing new technological solutions for agriculture, industry, healthcare, and health sectors, improving industry efficiency and sustainability, and creating higher commercial and social value for global customers.
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II. Acoustic Technology and Products
1. Acoustic Technology Innovation
Datasea focuses on the development of various acoustic technologies, including research and application of high-tech acoustic technologies such as ultrasound, infrasound, and Schumann resonance. By integrating the latest research results from the fields of acoustics, mechanical energy conversion, and vibrational dynamics, and combining artificial intelligence (AI) with acoustic high-tech products, the Company has developed a highly competitive technological combination. In particular, Datasea has demonstrated its unique technological advantages in the study and application of non-audible mechanical wave effects.
In the field of ultrasound technology, we utilize the cavitation effect, thermal effect, and mechanical effect of ultrasound to meet various application needs, including environmental disinfection and sterilization, crop pest control, photosynthetic absorption, seed treatment, water purification safety monitoring, skincare, and healthcare. For example, in ultrasound disinfection applications, when ultrasound stimulates microorganisms (including viruses like the coronavirus), it causes significant vibrational strain, disrupting the outer shell and internal RNA of the virus. Ultimately, through a combination of mechanical disruption, cavitation effects, and advanced oxidation processes, pathogenic microorganisms are eliminated. This method offers a broad-spectrum, non-selective environmental disinfection and air purification alternative, potentially replacing the use of antibiotics.
2. Acoustic Product Series
Based on the combination of acoustic technology and artificial intelligence, Datasea has successfully developed a series of innovative products, including:
| ● | Acoustic Health Products: Ultrasonic disinfectants, acoustic sterilizing cleaners, ultrasonic skin repair devices, widely applied in hospitals, airports, hotels, transportation, and other sectors. |
| ● | Acoustic Health: The “Xingmei” brand non-contact sleep aid device, using low-frequency and brainwave magnetic induction technology to improve deep sleep quality. |
| ● | Acoustic Medicine: AI medical robots, ultrasonic wrinkle removal devices, ultrasonic fat reduction and body shaping devices, serving the medical aesthetics industry. |
3. New Products in Acoustic Technology Planning
| ● | Short-Term Plan (Expected to be launched in 2025): Around environmental acoustic technology applications and cardio-brain acoustic technology applications, including: |
| ● | Pet Disinfection and Deodorizing Purifier: Utilizes ultrasonic technology to eliminate pet environment odors and provide strong air disinfection, suitable for households and pet-related facilities. |
| ● | Mechanical Wave Brain Tissue Cortisol Level Regulation Device: Uses sound wave technology to regulate cortisol concentration in the brain, improving mental state and learning efficiency, applicable in mental health and education fields. |
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| ● | Mid-Term Plan: Around environmental acoustic technology applications and cardio-brain acoustic technology applications, including: |
| ● | Food and Water Cleaning and Sterilization Devices: Combines ultrasonic cleaning and sterilization technology to provide convenient home-use products, ensuring food safety and clean drinking water. |
| ● | Cardiovascular Health Products: Develops acoustic technology-based health monitoring and treatment devices for cardiovascular and cerebrovascular systems, promoting innovation in the medical health sector. |
| ● | Long-Term Plan: Precision design and manufacturing of acoustic products, including: |
| ● | Acoustic Agriculture: |
| o | Ultrasonic Agricultural Product Preservation and Pest Control Devices: Extends the shelf life of agricultural products, reduces pesticide use, and enhances agricultural production efficiency. |
| o | Acoustic Plant Growth Stimulators: Optimizes plant growth environments through sound wave technology, improving crop yield and quality. |
| ● | Acoustic Industry: |
| o | Ultrasound-Assisted Liquid-Phase Separation Machines: Enhances liquid separation efficiency in manufacturing, reducing energy consumption. |
| o | Ultrasonic Metal 3D Printing Technology: Drives the upgrading of the manufacturing industry, enabling high-precision and high-efficiency metal processing. |
| ● | Acoustic Medical and Elderly Care: |
| o | Develops acoustic technology-based medical devices, such as ultrasonic therapy instruments and acoustic rehabilitation equipment, serving the medical and elderly care sectors. |
| ● | Acoustic Internet of Things (IoT) Technology: |
| o | Integrates acoustic technology with IoT to develop intelligent acoustic sensors and devices, promoting the development of smart cities and smart homes. |
Recent Development
Key Customers and Agreements
On December 25, 2024, Datasea’s wholly owned subsidiary, Shuhai Jingwei (Shenzhen) Information Technology Co., Ltd. (“Shuhai Jingwei”), entered into an agreement with Tianjin Qianli Cultural Media Co., Ltd. (“Qianli Media”) to distribute air purifiers. As of March 31, 2025, revenue from Qianli Media totally RMB 267,936 (approximately USD 37,500). The execution of this agreement marks Datasea’s acoustic environmental disinfection products’ formal entry into the end-consumer market, laying a solid foundation for future business expansion and brand awareness.
On March 4, 2025, Shuhai Jingwei signed a product agreement with Tianjin Zhongzhi Shidai Technology Development Co., Ltd. (“Zhongzhi Shidai”) for the distribution of Datasea’s acoustic high-tech products. As of March 31, 2025, revenue from Zhongzhi Shidai amounted to RMB 44,248 (approximately USD 6,189).
As of the end of March 2025, the Company’s VIE entity subsidiary, Guozhong Haoze, had entered into agreements with 14 beauty industry service providers in cities including Tianjin and Beijing. Under these agreements, Datasea’s acoustic high-tech products have been deployed in 263 beauty and body care stores across Northern China, including in Tianjin and Hebei Province. By the end of 2025, the Company plans to sell approximately 140,000 units—including acoustic air purifiers, sleep-aid devices, and 5G AI digital service systems specifically developed for the beauty industry—generating expected revenue of USD 11 million (approximately RMB 77 million). These agreements have significantly expanded Datasea’s market share in the beauty sector and strengthened its regional presence in Northern China, further advancing the industrial application of its technologies and products.
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In January 2025, Datasea signed additional agreements with nine health management companies in Tianjin to further expand regional coverage. Under these agreements, the Company’s acoustic high-tech products will be introduced into 200 beauty stores across key Northern China markets including Tianjin and Hebei. By year-end 2025, approximately 90,000 units are expected to be sold, generating an estimated USD 6.8 million in additional revenue. These new agreements further reinforce Datasea’s leadership position in the health management and beauty sectors, creating enhanced opportunities for long-term growth and market expansion.
As of the report date, Datasea’s acoustic high-tech products had been introduced to 463 beauty and body care stores, with a projected total of 140,000 units to be sold by the end of 2025, generating approximately USD 17.8 million in revenue.
IV. Industry Space and Position of the Acoustic Business
Datasea is deeply rooted in the acoustic high-tech industry and has experienced rapid growth in technological innovation, product development, and industry applications. The Company emphasizes robust domestic and international collaboration to foster the integration of industry, academia, and research. With a focus on the acoustic intelligence sector, we have established five key sub-sectors within the acoustic field—including acoustic health, acoustic industry, acoustic agriculture, as well as acoustic applications in IoT and other related areas—leading the industry by providing cutting-edge acoustic intelligence technologies and products.
Datasea holds a leading position in various acoustic technologies, such as ultrasound, infrasound, and Schumann resonance. To promote research and innovation in these areas, the Company actively collaborates with numerous renowned research institutions and universities, including the Institute of Acoustics, Chinese Academy of Sciences; the Cloud Computing and Big Data Research Institute, China Academy of Information and Communications Technology; the Internet Industry Research Institute at Tsinghua University; the Artificial Intelligence Research Institute at Harbin Institute of Technology; Beijing Union University; and the Remote Sensing Research Institute of Jilin University. Through these partnerships, we are committed to pioneering new research topics and developing innovative technological applications that drive progress within the acoustic field. To better achieve these objectives, Datasea has established joint laboratories to enhance the integration and collaboration of research resources.
Furthermore, the Company, in collaboration with the Ministry of Industry and Information Technology, the Key Laboratory for Artificial Intelligence Technology and Applications Evaluation, and the Cloud Computing and Big Data Research Institute of the China Academy of Information and Communications Technology, has jointly released China’s first white paper on the acoustic high-tech industry. This white paper provides a detailed discussion on the applications of acoustic high-tech across various industries, demonstrating Datasea’s proactive role in leading industry development. It highlights the Company’s prominent position in the acoustic high-tech field both domestically and globally, and further reinforces the strategic importance of Datasea in driving the nationalization and globalization of acoustic technology.
V. International Expansion of the Acoustic Business
The international development of acoustic products is a strategic priority for Datasea. Since the establishment of its wholly owned subsidiary, Datasea Acoustics LLC, in Delaware in 2023, the Company has gradually expanded its business operations in the United States. Datasea has partnered with several well-known online e-commerce platforms and brick-and-mortar distributors in the U.S. to broaden the market for its acoustic products, including collaborations with companies such as iPower (NASDAQ: IPW) and Meglio Interiors LLC.
In addition, the Company has collaborated with the century-old U.S. intellectual property firm Paul & Paul to pursue patent applications and acquisitions, thereby building a robust international intellectual property portfolio. Datasea is focusing on expanding its presence in areas such as acoustic agriculture, acoustic industry, acoustic medicine, and acoustic health, and is actively seeking potential merger and acquisition opportunities to drive global business expansion and international growth.
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VI. Future Outlook for the Acoustic Business
Datasea will continue to deepen its “Acoustic + AI Precision Manufacturing” strategy, leveraging technological innovation to drive global market expansion and reinforce its leadership in the high-tech acoustic sector. The Company’s acoustic business development strategy unfolds across the following three dimensions:
1. Technology R&D Dimension:
The Company will focus its R&D efforts on five core areas: acoustic industry, acoustic agriculture, acoustic healthcare, acoustic wellness, and acoustic IoT technologies. By pushing the boundaries of acoustic technology applications, Datasea aims to drive the global adoption and industrial upgrading of high-tech acoustic products.
2. Market Expansion Dimension:
On one hand, Datasea will pursue mergers and acquisitions to integrate high-quality resources and establish a comprehensive high-tech acoustic industry chain. On the other, it will strengthen strategic partnerships in key global markets such as the United States, enhance its international intellectual property portfolio, and accelerate globalization.
3. Talent and Production Capacity Dimension:
The Company is committed to building an international R&D team and fostering collaborative innovation among domestic and global talents. It will continue to improve the R&D and manufacturing capabilities of precision acoustic products, ensuring solid support for its global strategy.
5G+AI multimodal digital Segment
Our achievements of 5G+AI Multimodal digital
5G+ AI multimodal digital Segment
As one of China’s leading service providers in the 5G+AI multimodal digitalization sector, Datasea has developed an intelligent digital platform that serves as an industry benchmark by deeply integrating multimodal messaging, AI capabilities, and service functions. With its innovative technical architecture and comprehensive service capabilities, the platform is accelerating digital transformation across industries.
From a technical perspective, Datasea’s 5G+AI multimodal digital platform has built a complete intelligent data processing system. The platform employs advanced multimodal machine learning models capable of processing vast amounts of data in real time from various formats, including text, images, audio, and video. By integrating DeepSeek’s distributed training and mixed-precision computing techniques, the platform achieves industry-leading performance in data processing efficiency and decision-making accuracy. Notably, in cutting-edge areas such as sentiment analysis, machine translation, and natural language processing, the platform’s technological breakthroughs have significantly expanded the application boundaries of intelligent systems.
In terms of functionality, Datasea has created a truly intelligent service ecosystem. The platform achieves full-process automation from data acquisition and analysis to decision-making, and through continuous optimization of AI algorithms, delivers personalized solutions to clients. Whether it’s operational optimization, risk forecasting, or customer experience enhancement, the platform uses intelligent multimodal data analysis to help clients maximize business value. This highly intelligent service model not only improves efficiency but also significantly reduces operational costs.
In terms of real-world application, Datasea’s platform has demonstrated strong commercial capabilities. It currently serves key industries such as finance, healthcare, and education. Through deep integration of AI and big data, the platform has helped most of clients achieve over 30% average efficiency gains, with customer satisfaction consistently exceeding 95%. These tangible outcomes are a testament to the platform’s technological sophistication and commercial viability.
As an industry innovation leader, Datasea’s 5G+AI multimodal digital platform has not only set a new technological benchmark but also pioneered a new model for intelligent services. Its innovative practices have been widely recognized within the industry, giving Datasea a significant competitive edge. Looking ahead, as technology continues to evolve and application scenarios expand, the platform will further drive the digital transformation of industries to a deeper and more advanced level.
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I. Technological Innovation and Application of 5G+AI
At the forefront of 5G and artificial intelligence integration, Datasea has built a distinctive technological framework that is driving the leapfrog development of multimodal digital services. Our technological breakthroughs are reflected in several key areas:
1. Core Technical Architecture:
Datasea has independently developed a unified model architecture based on the Transformer framework. This innovative design utilizes a self-attention mechanism that can process multimodal inputs—such as audio, text, image, and video—in parallel. It deeply uncovers complex relationships between different modalities. The architecture delivers outstanding performance in applications like image-text correlation analysis and audio-video synchronization, significantly enhancing the system’s generalization capabilities and adaptability across various scenarios.
2. Algorithm Optimization:
By integrating DeepSeek’s distributed training methods, our platform has achieved notable advancements across several critical domains:
| ● | Natural Language Processing: Enables high-quality text generation and multilingual translation. |
| ● | Intelligent Programming: Supports automatic code generation, debugging, and optimization. |
| ● | Logical Reasoning: Establishes chain-of-thought output to enhance decision-making quality. |
3. Application Innovation:
| ● | Smart Marketing: AI digital human technology enables automated content creation and targeted delivery, forming an efficient video-based marketing matrix. |
| ● | User Experience Optimization: Intelligent analysis of user behavior data enables personalized service recommendations. |
| ● | Risk Management: Real-time monitoring of operational data to predict and prevent potential risks. |
Notably, our 5G+AI intelligent analysis system features three core capabilities:
| ● | Dynamic Resource Allocation: Intelligently allocates computing resources based on real-time data. |
| ● | Anomaly Detection and Alerting: Identifies abnormal system operations in advance. |
| ● | Process Optimization: Continuously improves operational efficiency and reduces enterprise costs. |
Through innovations like cross-modal semantic calibration and multi-head attention mechanisms, Datasea has achieved efficient integration of multimodal data. These technological breakthroughs have not only greatly enhanced the accuracy of feature recognition but also optimized the cost of model training. Empowered by the low-latency, high-bandwidth characteristics of 5G networks, our solutions are delivering tangible commercial value to enterprises, including:
| ● | Marketing conversion rate improvements of over 30% |
| ● | Operational cost reductions of 25% |
| ● | Customer satisfaction increases of 20 percentage points |
These innovations and practical achievements underscore Datasea’s leadership in the field of 5G+AI integrated applications. Moving forward, we will continue to deepen our R&D efforts, expand diversified application scenarios, and support industries in achieving transformative digital development.
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II. 5G+AI Product and Application Scenarios
In the current era of continuous digital transformation driven by the mobile internet, the demand for 5G+AI multimodal digital applications is experiencing explosive growth. Datasea has deeply cultivated its presence in various sectors including finance, entertainment, logistics, agriculture, and healthcare. For example, in the media and entertainment domain, the combination of 5G+AI multimodal digital technology delivers a richer user experience. Users can access high-quality media content such as ultra-high-definition videos and interactive entertainment services anytime and anywhere. Moreover, AI algorithms can recommend personalized content based on user interests and behaviors, thereby enhancing user satisfaction and engagement in 5G+AI-related services.
Beyond these, numerous other industries and scenarios are urgently in need of intelligent upgrades through technological innovation. Whether it is to boost production efficiency, optimize resource allocation, improve user experience, or create entirely new business models, 5G+AI multimodal digital technology demonstrates enormous potential. As the technology matures and its application scenarios expand, it is becoming a core driving force for transforming various industries and is opening up broad application spaces.
In the field of smart manufacturing, 5G+AI multimodal digital technology promotes the automation and intelligence of production processes. By real-time monitoring and analyzing production data, AI algorithms can optimize production planning, enhance efficiency, and improve quality. Simultaneously, intelligent AI-based inspections of product samples can quickly detect issues, ensuring product quality remains stable.
In the realm of smart healthcare, 5G+AI multimodal digital technology has brought revolutionary changes to remote medical services and health management. Physicians can access patients’ medical data in real time to perform remote diagnoses and treatments. By integrating multimodal data such as CT scans, MRIs, ultrasound images, and pathology slides through intelligent AI analysis and detection, doctors are assisted in accurately identifying lesions and quickly understanding patient conditions. AI algorithms can also continuously monitor and analyze patients’ health data to provide personalized health management recommendations.
The application areas of multimodal technology include:
| 1. | Smart Voice Assistants: Combining speech recognition and natural language processing with image or video information (such as screen content) to provide a more comprehensive interactive experience. For example, a voice assistant can offer more accurate responses and operational suggestions by integrating voice commands with information displayed on the mobile screen. |
| 2. | Image and Video Understanding: By integrating image or video data with textual descriptions, a deeper understanding of content is achieved. This has broad applications in image classification, object detection, and video content analysis. For instance, in autonomous driving, a vehicle can capture image information via cameras and combine it with textual data such as maps and traffic regulations to make more accurate decisions. |
| 3. | Sentiment Analysis: Integrating multiple modalities—such as textual content, vocal tone, and facial expressions—to perform sentiment analysis. This aids in better understanding emotional states, which is crucial for customer service and social media monitoring. |
| 4. | Education and Training: Creating immersive learning environments by merging text, images, audio, and video elements to enhance educational outcomes. For example, virtual laboratories can simulate experimental scenarios combined with textual explanations and audio narrations to help students better understand experimental principles and procedures. |
| 5. | Healthcare: In the medical field, multimodal technology can be used for disease diagnosis, medical image analysis, and patient monitoring. For example, doctors can integrate patient history, medical images (such as X-rays and CT scans), and physiological data (such as heart rate and blood pressure) to make more accurate diagnoses and develop effective treatment plans. |
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| 6. | Advertising and Marketing: By analyzing consumers’ multimodal data, such as browsing behavior, purchase history, and social media activities, along with the content and format of advertisements, more precise ad targeting and marketing strategies can be developed. |
| 7. | Virtual Reality and Augmented Reality: Merging virtual or augmented information with real-world scenes to provide users with immersive experiences. Multimodal technology plays a vital role in scene understanding, interaction design, and content generation. |
| 8. | Security Surveillance: Integrating video surveillance, audio monitoring, and data analytics to enhance security measures. For instance, an intelligent monitoring system can recognize abnormal behavior, sounds, and visual features to promptly issue alerts. |
In summary, multimodal technology holds extensive prospects across numerous fields, offering richer and smarter services and experiences. As the technology continues to evolve, its applications will expand further, driving innovation and transformation across industries.
III. Value of 5G+AI Multimodal Digital Products
Datasea’s 5G+AI multimodal digital business currently operates a core platform that serves high-demand sectors such as banking, insurance, gaming, and news apps, while also offering intelligent system solutions spanning multiple industries—including small and micro enterprises, rural revitalization, logistics and express delivery, and healthcare. This comprehensive digital ecosystem is designed to facilitate the digital transformation of various industries.
1. Industry-Wide Digital Empowerment
Through deep collaboration with major mobile network operators, the platform provides intelligent traffic operations solutions to industries such as logistics, finance, and entertainment. With open API interfaces, clients can implement features like points redemption and precision marketing. The platform currently supports over 20 typical business scenarios, helping industry clients improve marketing efficiency by more than 50%.
2. Inclusive Digital Services
The platform’s service network covers 52 million enterprises in China, 99% of which are small and micro-sized businesses, as well as 124 million individual business owners. To meet the unique needs of different business scales, Datasea offers tailored solutions:
| ● | Lightweight SaaS tools for rapid digital deployment by small and micro enterprises. |
| ● | Custom mobile applications for individual entrepreneurs, enabling the integration of online and offline operations. |
| ● | Bespoke system development for industry leaders to achieve end-to-end digital upgrades. |
3. Cross-Industry Innovation Applications and Solutions
Leveraging cloud computing and the SaaS model, the platform supports intelligent transformation across multiple industries:
| ● | In rural revitalization, it offers agricultural product traceability and e-commerce marketing solutions. |
| ● | In logistics, it enables intelligent route planning and last-mile delivery optimization. |
| ● | In healthcare, it supports the development of intelligent health management platforms. |
These innovative applications have helped clients reduce operating costs by an average of 30% and improve service efficiency by 40%.
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4. 5G+AI Multimodal Intelligent Service System
The platform’s technological innovations are reflected across three critical dimensions:
| ● | Data Processing: Utilizes cross-modal semantic alignment for accurate synchronization of multimodal data. |
| ● | Algorithm Optimization: Employs a twin-tower contrastive learning framework to enhance model training efficiency. |
| ● | Application Innovation: AI digital human technology automates the creation and deployment of marketing content. |
A key highlight is the use of synthetic data technology, which addresses the data scarcity challenge in AI training while safeguarding user privacy and significantly enhancing model performance. Combined with 5G’s advantages, the system supports:
| ● | Millisecond-level real-time data interaction |
| ● | Concurrent access by massive numbers of devices |
| ● | Personalized and precise content distribution |
These innovations are giving rise to entirely new business models. For example, in intelligent marketing, the platform enables:
| ● | A 3x increase in content production efficiency |
| ● | A 60% improvement in targeting accuracy |
| ● | A 35% reduction in customer acquisition costs |
As technology continues to evolve, Datasea’s 5G+AI multimodal platform will further expand its application boundaries, providing robust support for the digital transformation of more industries. Over the next three years, the platform is expected to serve over 200 million enterprises and individual business owners, becoming a key player in the infrastructure development of China’s digital economy.
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IV. Recent Developments in the 5G+AI Business
| 1. | Ongoing Service Provision for Key 5G+AI Customer Contracts |
On August 12, 2024, Datasea Information Technology Co., Ltd. (“Datasea Beijing”), Heilongjiang Xunrui Technology Co., Ltd. (“Xunrui Technology”), Datasea Jingwei (Shenzhen) Information Technology Co., Ltd. (“Datasea Jingwei”), Guozhong Haoze (Beijing) Technology Co., Ltd. (“Guozhong Haoze”), and Guozhong Times (Beijing) Technology Co., Ltd. (“Guozhong Times”) entered into an agreement with Qingdao Ruizhi Yixing Information Technology Co., Ltd. (“Ruizhi Yixing”). The agreement stipulates the purchase of 5G+AI multimodal data recharge cards with face values ranging from RMB 10 to RMB 500 (approximately USD 1.38 to USD 69.4) over a 12-month period from the effective date of the agreement.From July 1, 2024, to March 31, 2025, revenue from Ruizhi Yixing amounted to RMB 273,490,853.06 (approximately USD 38.25 million). From April 1 to April 30, 2025, Datasea’s operating entities in China received a prepayment of approximately RMB 35.34 million (around USD 4.94 million) from Ruizhi Yixing.
On August 9, 2024, Datasea Beijing signed an agreement with Shanghai Shixun Network Technology Co., Ltd. (“Shixun Network”). Under the agreement, Shixun Network will purchase 5G+AI multimodal data cards with face values ranging from RMB 10 to RMB 500 (approximately USD 1.38 to USD 69.4) over a 12-month period from the effective date. From July 1, 2024, to March 31, 2025, revenue generated from Shixun Network reached RMB 10,981,054 (approximately USD 1.54 million).
From August 9, 2024, to October 18, 2024, Datasea Beijing, Heilongjiang Xunrui, and Guozhong Times signed an agreement with Wuhan Xiaoming Technology Co., Ltd. (“Xiaoming Technology”). Under this agreement, over a 12-month period from its effective date, Xiaoming Technology will purchase 5G+AI multimodal data recharge cards with face values ranging from RMB 10 to RMB 500 (approximately USD 1.38 to USD 69.4). From July 1, 2024, to December 31, 2024, revenue from Xiaoming Technology reached RMB 20,521,919.34 (approximately USD 2.875 million).
| ● | From August 9 to October 18, 2024, Datasea Beijing, Heilongjiang Xunrui, and Guozhong Times entered into an agreement with Wuhan Xiaoming Technology Co., Ltd. (“Xiaoming Technology”).According to the agreement, Xiaoming Technology will purchase 5G+AI multimodal data recharge cards with face values ranging from RMB 10 to RMB 500 (approximately USD 1.38 to USD 69.4) over a 12-month period.From July 1, 2024, to March 31, 2025, revenue from Xiaoming Technology amounted to RMB 20,521,919.34 (approximately USD 2.87 million). |
| ● | From August 8, 2024, to February 13, 2025, Guozhong Times, Guozhong Haoze, and Datasea Beijing signed an agreement with Xinyi Xinfanfa Information Technology Co., Ltd. (“Xinfanfa Technology”).Under this agreement, Xinfanfa Technology will purchase 5G+AI multimodal data recharge cards with face values between RMB 10 and RMB 500 (approximately USD 1.38 to USD 69.4) over a 12-month period. From July 1, 2024, to March 31, 2025, revenue from Xinfanfa Technology totaled RMB 33,027,616.58 (approximately USD 4.62 million). |
| ● | From October 8 to November 11, 2024, Datasea Beijing, Guozhong Haoze, and Guozhong Times entered into an agreement with Jiajie Technology Co., Ltd. (“Jiajie”).Under the terms of the agreement, Jiajie will purchase 5G+AI multimodal data recharge cards with face values ranging from RMB 10 to RMB 500 (approximately USD 1.38 to USD 69.4) over a 12-month period.From July 1, 2024, to March 31, 2025, revenue from Jiajie reached RMB 23,843,624.39 (approximately USD 3.34 million). |
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| 2. |
New Customer Agreements and Efficient Service Delivery This Quarter
On November 1, 2024, Guozhong Haoze signed an agreement with Nanjing Linghui Information Engineering Co., Ltd. (“Linghui Information”), under which, upon the agreement’s effective date, two software copyrights were purchased for a total price of RMB 2,333,451. As of March 31, 2025, revenue from Linghui Information totaled RMB 2,333,451 (approximately USD 327,000). |
| 3. |
Market Achievements in the 5G+AI Business
Datasea’s 5G+AI multimodal digital platform offers comprehensive and intelligent digital solutions to a wide range of industries, spanning from small and micro enterprises to large industry clients. By deeply integrating advanced AI technologies with the inherent capabilities of 5G networks, Datasea not only optimizes service processes but also innovates business models, driving sustained growth for its clients.
During the reporting period, the Company’s primary revenue was derived from service fees related to its 5G+AI multimodal digital business. From July 1, 2024, to March 31, 2025, revenue reached USD 51.09 million, representing a 162.67% increase compared to USD 19.45 million in the same period in 2024. This revenue growth was primarily driven by the rapid expansion of the 5G+AI multimodal digital business in China, where the Company has consistently maintained a leading position in the industry. The continuously growing customer base has further supported the Company’s significant business expansion. |
The Company is currently fulfilling service obligations not yet recognized as revenue in the current fiscal year, with the total value of service contracts expected to exceed USD 100 million in future financial statements.
ESG Management – Quarterly Update
During this quarter, Datasea continued to deepen its Environmental, Social, and Governance (ESG) management framework, implementing more targeted initiatives to advance its sustainability goals. Compared to the previous quarter, this quarter’s practices focused more on supply chain collaboration and measurable outcomes, ensuring that every action delivers tangible environmental and social benefits.
Supply Chain Management Upgrades
Datasea partnered closely with its core supplier, Shenzhen Fubon New Technology Co., Ltd., to enhance ESG performance across the supply chain. Through jointly established green production standards, the supplier achieved the following improvements:
| ● | Upgraded energy-efficient equipment in the injection molding workshop, reducing energy consumption per production line by 18%, saving over 150,000 kWh of electricity annually; |
| ● | Established a full lifecycle management system for products, increasing compliant waste disposal rate to 98%. |
Thanks to quarterly on-site audits and data tracking mechanisms, the supplier’s overall ESG performance score rose by 23% compared to the previous quarter, leading to a 6.2% reduction in carbon emission intensity across the supply chain.
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Green Operations – Enhanced Practices
Datasea’s Shenzhen subsidiary continued upgrading its green office operations:
| ● | Introduced a smart waste sorting system with a dedicated biodegradable waste channel, increasing sorting accuracy for recyclables to 91%; |
| ● | Optimized paperless workflows, resulting in a 38% year-over-year reduction in quarterly paper consumption-equivalent to saving approximately 120 mature trees; |
| ● | Office energy consumption per square meter: 0.72 kWh/㎡, a 15% decrease year-over-year. |
Employee Development and Innovation Enablement
The Company further improved its talent development system:
| ● | ESG training coverage among employees rose to 85%, a 10 percentage point increase over the previous quarter; |
| ● | The number of adopted internal green proposals grew by 35%. |
Building the ESG Ecosystem
The following mechanisms were optimized this quarter:
| 1. | Internal ESG Action Points Program: Over 90% employee participation, with a cumulative total of more than 12,000 kilometers of green commuting completed; |
| 2. | ESG Data Transparency Platform: Added a supply chain carbon footprint tracking module, enabling real-time data integration from the majority of Tier 1 suppliers. |
Through these initiatives, Datasea not only advanced its own green transformation but also fostered sustainable development across its value chain. Going forward, the Company will focus on establishing supplier carbon accounting systems and enhancing employee development, continuing to set a benchmark for ESG management within the industry.
Going Concern
The accompanying unaudited consolidated financial statements were prepared assuming the Company will continue as a going concern, which contemplates continuity of operations, realization of assets, and liquidation of liabilities in the normal course of business. For the three months ended March 31, 2025 and 2024, the Company had a net loss of approximately $1.78 million and $4.14 million, respectively. For the nine months ending March 31, 2025 and 2024, the Company had a net loss of approximately $4.88 million and $6.0 million. The Company had an accumulated deficit of approximately $44.32 million as of March 31, 2025, and negative cash flow from operating activities of approximately $1.79 million and $5.95 million for the nine months ended March 31, 2025 and 2024, respectively.
The historical operating results indicate the Company has recurring losses from operations which raise the question related to the Company’s ability to continue as a going concern although the range of such recurring operating losses has narrowed in recent years. There can be no assurance the Company will become profitable or obtain necessary financing for its business and investments or that it will be able to continue in business and investments. The consolidated financial statements do not include any adjustments that might result from the outcome of these uncertainties. As of March 31, 2025, the Company had cash of $866,737.
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On August 15, 2023, the Company entered into a subscription agreement with a non-U.S. investor to purchase an aggregate of 2,962,963 shares of common stock price at a $1.35 per share purchase price, with a total subscription price of $4,000,000. The shares must be held for a period of 180 days. On September 13, 2023, our Company announced the closing of an underwritten public offering of 5,000,000 shares of common stock at a public offering price of $0.40 per share, for net proceeds of $1,635,000, after deducting underwriting discounts and other offering expenses. On July 3, 2024, we closed an offering for net proceeds of $2.2 million after deducting underwriting discounts and other offering expenses. We believe these fundings demonstrate our investors’ confidence in our strategy and business.
We will continue to bring in additional investors to support the Company’s research and development, marketing and operations.
Use multiple marketing channels to attract customers, enhance brand awareness and increase sales. By optimizing and integrating multiple marketing channels, it can cover a wider range of target customer groups, improve efficiency and effectiveness, meet customer needs, reduce risks, achieve multi-channel comprehensive coverage, and achieve success in market competition.
Strengthen brand image building, design a unique brand identity, unify the brand image, strengthen word-of-mouth marketing, use social media and word-of-mouth network, increase the authority and visibility of the brand, and continue to follow up and maintain the brand image, improve product strength and creativity.
Maintain enterprise competitiveness and achieve sustainable development. Strengthen research and development investment and in-depth understanding of market needs, establish an innovation culture, encourage employees to propose new ideas and creativity, and create an open innovation atmosphere. Reward and recognize the innovation results to stimulate the innovation enthusiasm of employees. Strengthen cooperation and exchanges, establish cooperative relations with universities and scientific research institutions, and jointly carry out research and development projects.
Participate in industry exhibitions, seminars and other activities to exchange experience with peers and obtain the latest technology and information. Optimize product development process, adopt agile development, lean production and other methods to improve product development efficiency and quality. We will pay attention to the protection of intellectual property rights, apply for patents, trademarks and other intellectual property rights in a timely manner, and protect innovation achievements.
On October 3, 2024, Datasea entered into subscription agreements, dated September 27, 2024 (the “Subscription Agreements”), with three non-U.S. investors (the “Investors”), including Zhixin Liu, the Company’s Chairwoman of the Board, Chief Executive Officer, President and Secretary, and Fu Liu, a Director of the Company, pursuant to which the Company agreed to sell and the Investors agreed to purchase an aggregate of 1,932,224 shares (the “Shares”) of the Company’s common stock, par value $0.001 per share (“Common Stock”), at a purchase price of $2.06 per share (the “Purchase Price”), which was equal to the closing price of the Common Stock on The Nasdaq Capital Market on September 26, 2024 (the “Offering”). Pursuant to the terms of the Subscription Agreements, each Investor was required to pay the Purchase Price for the number of Shares such Investor purchased within 15 business days of September 27, 2024. As of October 15, 2024, the Company had received the Purchase Price from each Investor, representing gross proceeds in the aggregate amount of approximately $4.0 million, and all of the Shares had been issued. The proceeds raised in the Offering will primarily be used to support the Company’s future business operations, including investments in acoustic high-tech related products design upgrade, working capital for mass production and on-line sales, acquiring intellectual property, and working capital for the promotion and sales of 5G AI multimodal digital business products.
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If deemed necessary, management could seek to raise additional funds by the way of introducing strategic investors or private or public offerings, or by obtaining loans from banks or others, to support the Company’s research and development, procurement, marketing and daily operation. However, there can be no assurance that additional funds will be available when needed from any source or, if available, will be available on terms that are acceptable to us. We may be required to pursue sources of additional capital through various means, including debt or equity financings.
Future financings through equity investments are likely to be dilutive to existing stockholders. Also, the terms of securities we may issue in the future capital transactions may be more favorable for new investors. Further, we may incur substantial costs in pursuing future capital and/or financing, including investment banking fees, legal fees, accounting fees, printing and distribution expenses and other costs. Our ability to obtain needed financing may be impaired by such factors as the capital markets and our history of losses, which could impact the availability or cost of future financings. If the amount of capital we are able to raise from financing activities, together with our revenues from operations, is not sufficient to satisfy our capital needs, even to the extent that we reduce our operations accordingly, we may be required to cease operations.
Sustainable operation can help enterprises improve operating efficiency, enhance the competitiveness of enterprises, and enhance the market share of enterprises.
Sustainable operation can help enterprises better control risks, reduce operating costs, and ensure the safety of enterprises.
Sustainable operation can help enterprises better grasp market opportunities, grasp market trends, and achieve a win-win situation between enterprises and society.
Significant Accounting Policies
Please refer to our significant accounting policies in Note 2 to our consolidated financial statements included in this report.
Recent Developments
On July 2, 2024, the Company entered into a securities purchase agreement (the “Purchase Agreement”) to issue and sell to an investor in a registered direct offering (the “Registered Direct Offering”) 179,400 shares of Common Stock at $3.25 per share and pre-funded warrants to purchase up to 512,908 shares of Common Stock at $3.24 per share with an exercise price of $0.01 per share (the “Pre-Funded Warrants”).
The securities in the Registered Direct Offering were issued under the Company’s shelf registration statement on Form S-3 (File No. 333-272889), filed with the SEC on June 23, 2023, and declared effective on July 21, 2023. A prospectus supplement was filed with the SEC on July 3, 2024.
The Pre-Funded Warrants are exercisable upon issuance and remain so until fully exercised. If the Company fails to deliver shares upon valid exercise of the Pre-Funded Warrants, it must pay the holder liquidated damages as outlined in the warrants. The warrants also provide customary buy-in rights should the Company fail to deliver shares within specified timeframes.
Under the Pre-Funded Warrants’ terms, a holder may not exercise the warrant if it would result in ownership of more than 4.99% of the outstanding shares of Common Stock, unless the holder elects to increase this limit to 9.99% with 61 days’ notice to the Company.
Under the Purchase Agreement, the Company agreed not to issue, enter into any agreement to issue, or announce the issuance or proposed issuance of any Common Stock or equivalents, nor to file any new registration statement, for 60 days after the Registered Direct Offering’s closing. The Company also agreed not to enter into any variable rate transactions while the investor holds any pre-funded warrants.
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The Registered Direct Offering closed on July 3, 2024, with gross proceeds of approximately $2.25 million, before deducting fees payable to the Placement Agent and other expenses. The Company intends to use the net proceeds for R&D, market development, and general corporate purposes.
In connection with the Registered Direct Offering, the Company entered into a placement agency agreement (the “Placement Agency Agreement”) with EF Hutton LLC on July 2, 2024. Under this agreement, the Company will pay the Placement Agent a cash fee of 6.5% of the gross proceeds and reimburse expenses up to $75,000.
Additionally, as a condition to the closing of the Purchase Agreement, the Company’s officers and directors entered into “lock-up” agreements, prohibiting them from disposing of any Company securities for 60 days from the Registered Direct Offering’s closing date, subject to certain exceptions.
As disclosed in a Current Report on Form 8-K filed with the Securities and Exchange Commission on October 3, 2024, the Company entered into subscription agreements dated September 27, 2024 (the “Subscription Agreements”) with three non-U.S. investors, including Zhixin Liu, the Company’s Chairwoman, CEO, President, and Secretary, and Fu Liu, a Director of the Company. Under these agreements, the Company agreed to sell, and the Investors agreed to purchase, a total of 1,932,224 shares of Common Ctock, at a purchase price of $2.06 per share, which was the closing price on the Nasdaq Capital Market as of September 26, 2024 (the “Offering”). Each Investor was required to pay for their Shares within 15 business days of September 27, 2024.
As of October 15, 2024, the Company received the purchase price from each Investor, totaling approximately $4.0 million, and all Shares have been issued. The proceeds from the Offering will primarily support the Company’s future operations, including investments in high-tech acoustic product design upgrades, mass production, online sales, IP acquisition, and marketing for its 5G AI multimodal digital business products.
New Software Copyright Acquired From July 1, 2024 to March 31, 2025
Software Copyright Owned by Shuhai Beijing
| No. | Certification | Certificate No. | ||
| 1 | Shuhai Information Beauty multimodal assistant user end | Ruan Zhu Deng Zi No. 13940802 | ||
| 2 | Park customer situation multimodal data management system | Ruan Zhu Deng Zi No. 13935684 | ||
| 3 | Digital marketing cloud document integrated management system | Ruan Zhu Deng Zi No. 13934629 | ||
| 4 | 5G intelligent multimodal ERP management system | Ruan Zhu Deng Zi No. 13941972 | ||
| 5 | Acoustic intelligent living terminal equipment management system | Ruan Zhu Deng Zi No. 14412403 | ||
| 6 | Store interactive intelligent service management system | Ruan Zhu Deng Zi No. 14280647 |
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| Software Copyright owned by Xunrui Technology |
| No. | Certification | Certificate No. | ||
| 1 | 5G message integrated order management system | Ruan Zhu Deng Zi No. 14292596 | ||
| 2 | Beauty store operation management system | Ruan Zhu Deng Zi No. 14301728 | ||
| 3 | Smart agriculture plant growth analysis system | Ruan Zhu Deng Zi No.14292600 | ||
| 4 | Intelligent Internet of Things health care management system | Ruan Zhu Deng Zi No. 13927009 | ||
| 5 | Intelligent emergency integrated management system | Ruan Zhu Deng Zi No.14292610 | ||
| 6 | Interactive intelligent service management system for stores | Ruan Zhu Deng Zi No.14280647 |
Software Copyright owned by Tianjin Information Sea
| No. | Certification | Certificate No. | ||
| 1 | Interactive integrated service procurement management system | Ruan Zhu Deng Zi No. 13935831 | ||
| 2 | Decompression acoustic brain wave software | Ruan Zhu Deng Zi No. 14129289 | ||
| 3 | Acoustic equipment performance test management platform | Ruan Zhu Deng Zi No.14129243 | ||
| 4 | Acoustic sleep environment noise control management system | Ruan Zhu Deng Zi No. 14129261 | ||
| 5 | Intelligent acoustic health sleep management software | Ruan Zhu Deng Zi No.14129276 |
Software Copyright owned by Guozhong Time
| No. | Certification | Certificate No. | ||
| 1 | Enterprise digital procurement service platform | Ruan Zhu Deng Zi No. 14422388 | ||
| 2 | Online transaction collection digital system | Ruan Zhu Deng Zi No. 14246469 | ||
| 3 | Online transaction intelligent service robot management platform | Ruan Zhu Deng Zi No.14247983 |
Patent owned by Tianjin Information Sea
| No. | Certification | Certificate No. | ||
| 1 | Audio playback system based on voltage following | ZL 2018 1 0008029.2 | ||
| 2 | A B-ultrasound image target detection method and a B-ultrasound scanner | ZL 2022 1 0061012.X |
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Results of Operations
Comparison of the three months ended March 31, 2025, and 2024
The following table sets forth the results of our operations for the three months ended March 31, 2025, and 2024, respectively, indicated as a percentage of net sales. Certain columns may not add up due to rounding.
| 2025 | % f Revenues | 2024 | % of Revenues | |||||||||||||
| Revenues | $ | 10,353,977 | $ | 1,383,001 | ||||||||||||
| Cost of revenues | 10,056,187 | 97.1 | % | 1,373,130 | 99.3 | % | ||||||||||
| Gross profit | 297,790 | 2.9 | % | 9,871 | 0.7 | % | ||||||||||
| Selling expenses | 185,354 | 1.8 | % | 970,443 | 70.2 | % | ||||||||||
| Research and development | 347,532 | 3.4 | % | 71,178 | 5.1 | % | ||||||||||
| General and administrative expenses | 1,534,383 | 14.8 | % | 3,075,941 | 222.4 | % | ||||||||||
| Total operating expenses | 2,067,269 | 20.0 | % | 4,117,562 | 297.7 | % | ||||||||||
| Loss from operations | (1,769,479 | ) | (17.1 | )% | (4,107,691 | ) | (297.7 | )% | ||||||||
| Non-operating income (expenses), net | (13,613 | ) | (0.1 | )% | (34,134 | ) | (2.5 | )% | ||||||||
| Loss before income taxes | (1,783,092 | ) | (17.2 | )% | (4,141,825 | ) | (299.5 | )% | ||||||||
| Income tax expense | - | - | % | - | % | |||||||||||
| Loss before noncontrolling interest from continuing operation | (1,783,092 | ) | (17.2 | )% | (4,141,825 | ) | (299.5 | )% | ||||||||
| Income before noncontrolling interest from discontinued operation | - | - | % | - | - | % | ||||||||||
| Less: loss attributable to noncontrolling interest from continuing operation | (94 | ) | (0.001 | )% | (105 | ) | (0.01 | )% | ||||||||
| Net loss to the Company from continuing operation | (1,782,998 | ) | (17.2 | )% | (4,141,720 | ) | (299.5 | )% | ||||||||
| Net income (loss) to the Company from discontinued operation | - | - | % | - | - | % | ||||||||||
| Net loss to the Company | $ | (1,782,998 | ) | (17.2 | )% | (4,141,720 | ) | (299.5 | )% | |||||||
Revenues
We had revenues of $10,353,977 and $1,383,001 for the three months ended March 31, 2025 and 2024, respectively, which shows a $8,970,976 increase by comparing with the same period of 2024, an increase of 648.7% over the same period last year. The increase in revenues was mainly due to the rapid increase of 5G AI multimodal digital business in China. For the three months ended March 31, 2025, revenues mainly consisted of service fees from our 5G AI Multimodal digital. The Company’s 5G AI multimodal digital business is an industry leader, and the continued expansion of the Company’s customer base supports the continued significant improvement of the business.
From January 1, 2025, to March 31, 2025, the Company generated revenue of $10,353,977, including $10,342,339 from the 5G AI multimodal digital business, $11,140 from acoustic intelligence business and $498 from other. From January 1, 2024 to March 31, 2024, the Company generated revenue of $1,383,001, including $1,381,986 from the 5G AI multimodal communication business, $841 from the acoustic intelligence and $174 from others.
The reasons for the sustained high-speed growth of the 5G business.
Firstly, the empowerment of AI technology. Through its innovative 5G+AI technology, Datasea has achieved the efficient integration of multimodal data. By utilizing cross-modal semantic calibration and multi-head cross-attention mechanisms, the Company significantly improves the accuracy of projecting multimodal feature spaces while optimizing AI model training costs, thereby advancing its industry-leading technological position. The platform further optimizes resource allocation and scheduling through intelligent algorithms, enabling real-time monitoring and remediation of potential issues in marketing applications. This provides enterprises with personalized and refined marketing services, reducing operational risks and enhancing customer satisfaction. Leveraging the low latency and high-speed transmission capabilities of 5G technology alongside robust AI intelligent analysis, Datasea creates entirely new business models and marketing opportunities for enterprises, thereby enhancing market competitiveness and driving revenue growth. Datasea has deeply cultivated its presence in various sectors including finance, entertainment, logistics, agriculture, and healthcare. For example, in the media and entertainment domain, the combination of 5G+AI multimodal digital technology delivers a richer user experience. Users can access high-quality media content such as ultra-high-definition videos and interactive entertainment services anytime and anywhere. Moreover, AI algorithms can recommend personalized content based on user interests and behaviors, thereby enhancing user satisfaction and engagement in 5G+AI-related services.
Secondly, The Company’s upstream and downstream chain maintenance and experience accumulation and precipitation eventually formed a huge loyal customer base, but also closely related to the thriving vitality of the 5G market.
Through its own sales team, the Company vigorously promotes and publicizes its research and development results and technology display in 5G sales, actively participates in important seminars and business fairs around the country, and deeply explores the target customers related to 5G news. Through painstaking efforts and keen business acumen, we have actually obtained a stable customer flow.
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The Company’s top five customers for 5G AI multimodal digital business at this stage are Qingdao Ruizhi Yixing Information Technology Co., LTD., Shanghai Shixun Network Technology Co., LTD., Wuhan Xiaoming Technology Co., LTD., Xinyi Xinfanfa Information Technology Co., LTD., Nanjing Linghui Information Engineering Co., LTD.
Through close business cooperation, the above customers have become stable and loyal partners of the Company, and will work together in the future.
1. Marketing Strategy & Performance Growth
The Company has achieved significant business breakthroughs and acquired premium customers through its professional cooperative marketing team. Since Q4 2023, the 5G Multimodal Communication business has demonstrated explosive growth, with Q2 2024 sales achieving a substantial leap compared to the same period last year.
2. Technological Edge & Business Expansion
With industry-leading R&D capabilities in 5G AI multimodal digital technology, the Company has established a stable customer base. To further strengthen market leadership, we have formed strategic partnerships with specialized institutions possessing extensive IoT expertise. These partners offer unique advantages in mobile internet and IoT industry chain integration, providing strong support for business development. As a core growth segment, the 5G AI multimodal digital business will maintain its steady and rapid expansion momentum.
Cost of Revenues
We recorded $10,056,187 and $1,373,130 cost of revenues for the three months ended March 31, 2025 and 2024, respectively, which shows a $8,683,057 increase by comparing with the same period of 2024. For the three months ended March 31, 2025, cost of revenues was mainly the 5G AI multimodal digital platform fees and Cloud Platform construction to suppliers. The increase in cost of revenues was due mainly to the increased revenue of 5G AI multimodal digital. For the three months ended March 31, 2025, the cost of 5G AI multimodal digital was $10.04 million, the cost of acoustic intelligence business was $13,567 and $62 from other. For the three months ended March 31, 2024, the cost of 5G Multimodal communication was $1.37 million, the cost of intelligent acoustics business was $482, and the cost of others was $172.
Gross Profit
Gross profit for the three months ended March 31, 2025, was $297,790 compared to $9,871 for the three months ended March 31, 2024, which shows a $287,919 increase by comparing with the same period of 2024. The increase in gross profit was mainly due to the increase in sales for the three months ended March 31, 2025.
Gross margin is 2.9% and 0.7% for the three months ended March 31, 2025, and 2024. The increase in gross margin was mainly due to the Company’s significant increase in market share and significant increase in operating income. The increase in gross profit means that the Company has great potential for development and operation.
Improved shareholder returns: For shareholders, an increase in the gross profit of a business usually leads to an increase in net profit, which increases the dividend distribution and stock value for shareholders. This helps to increase shareholder confidence in the Company and attract more investors.
Consolidation of market position: Higher gross profit makes enterprises more competitive in the market, and can attract more customers through price advantages, product quality or service differentiation, expand market share, and further consolidate the market position of enterprises.
Innovation and R&D investment: The increase in gross profit provides companies with more funds for innovation and R&D activities. This helps enterprises to continuously launch new products, improve existing products and services, meet the changes in market demand, and maintain the technological leadership of enterprises and sustainable development capabilities.
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Further measures to improve the gross profit margin of enterprises:
| 1. | Reasons for the Company’s choice of temporary cost leadership strategy: Due to the fierce competition in the 5G AI multimodal digital business market, the Company has established a good cooperative relationship with major customers in order to quickly occupy the market, promote the Company’s 5G AI multimodal digital business, and temporarily yield profits at this stage, which is a period of market expansion. |
| 2. | Sales rebate and marketing reasons: In the marketing of 5G AI multimodal digital business, centralized procurement is made for customers’ prepaid accounts to ensure the security of the Company’s funds. At this stage, sales to customers have a certain amount of sales rebates and marketing expenses. |
| 3. | According to the progress of the Company’s strategic development, the cost of marketing promotion and sales rebate will be reduced and the gross profit rate will gradually increase after the customer group is stable and competitive. |
| 4. | The Company vigorously expands 5G related businesses, the most important purpose is to obtain market traffic and improve market brand influence. It can let more people know about the Company, and increase its exposure and visibility. 5G related services have become a tool to attract traffic and improve brands, which can drive revenue of other projects. |
| 5. | Actively carrying out 5G AI multimodal digital related business can attract more users’ attention and establish a good interactive relationship with users, which can firmly obtain a large number of loyal long-term user groups for the Company, which has great potential for us to expand other revenue businesses and obtain new profit growth. It can drive business and revenue expansion in 5G AI micro, small and medium-sized enterprises platform, 5G Internet of Things and other fields. In addition, the Company will continue to deploy its 5G+AI digital system tailored to the needs of Meikang in more than 460 offline stores, providing personalized customer service, data-driven marketing and efficient store management, and is expected to earn more than 10% of the technical service fee revenue. |
| 6. | Upgrade the business model, increase the proportion of sales of acoustic high-tech products, Scale-up of acoustic disinfection products through signed home beauty industry partners covering more than 460 stores. Including ultrasonic sterilizers and non-contact sleep AIDS, driving sales of high-margin acoustic products. As well as the promotion of different industry application areas, high additional areas, improve gross profit margin. |
| 7. | High gross profit acoustic high -tech products short-term plan (Expected to launch in 2025): Applications of environmental acoustic technology and cardio-brain acoustic technology include: Pet disinfection and deodorization purifier, mechanical wave-based cortisol regulation device for brain tissue. |
| 8. | High gross profit acoustic high -tech product long-term planning: precision design and manufacturing of acoustic industrial products, acoustic agricultural products, acoustic medical products, acoustic medical products, acoustic IoT products. |
Market prospects and technological innovation
From the perspective of market prospects, according to the prediction of Global Association for Mobile Communication Systems, by 2025, the number of 5G connections in China will exceed the sum of North America and Europe, ranking first in the world. The number of 5G connections will reach 460 million, accounting for 28% of the total connections in the country. 5G messaging has become an international standard.2 China will become one of the largest single contributors to the global growth of mobile internet users in the coming years, accounting for nearly 20% of the total global increase.
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Combining the advantages of “Internet of Things+” intelligent terminals and 5G Multimodal industry chain, Shuhai Beijing is advancing with the time, taking the train of the 5G era, and developing 5G Multimodal communication/phone top up business. At this stage, Shuhai Beijing is carrying out the development, operation and promotion services of the Internet of Things market and increasing the effective combination of resources with Mobile Internet enterprises and the Internet of Things industrial chain.
Technological innovation and application of digital sea platform
The 5G+AI multi-modal digital platform of Suhai integrates advanced AI algorithms and multi-modal data processing technology, which can efficiently process multi-source data from text, image, audio, video and other sources, and provide accurate and efficient data support. The core advantage of this platform is the strong AI technology development capability, which can automate complex business processes and improve the efficiency and accuracy of data processing. By applying Transformer model to multi-modal data fusion, Suhai realizes the whole process of data collection, analysis and decision making, which significantly improves service efficiency and user experience.
The platform has a wide range of application scenarios, involving many fields such as improving the understanding ability of artificial intelligence systems and natural human-computer interaction. Especially in the field of marketing, the application of AI digital human technology enables the platform to achieve automated promotion, intelligent content generation and accurate information transmission, further promoting the intelligence and efficiency of the platform.
Future outlook and gross margin improvement
In 2023, the 5G AI multimodal digital business of Shuhai Information accounts for a relatively large proportion of total revenue, because at this stage, the business belongs to the early stage of the development, operation and promotion services of the Internet of Things market, and the investment in all aspects is large. In addition, the gross profit of the traffic top-up business is generally low. As a result, the annual gross margin level is low, with a gross margin of about 0.9%. In 2024, through revenue diversification, the Company increased software copyright sales and 5G AI micro, small and medium-sized enterprise platform sales, while the sales of acoustic high-tech products have achieved a small launch, and these revenues belong to high gross profit products and services, generally pushing up the average level of gross profit margin. Gross margin of 2% in 2025.
The Company’s focus on 5G AI multimodal top up business is to integrate new resources, expand 5G-related new business, combined with the Company’s deep cultivation and accumulation in 5G AI digital related over the years, take this opportunity to develop more 5G-related business, use the private domain traffic of end customers, and convert it into end customers of acoustic high-tech products, so as to increase the revenue of the Company’s two major business modules.
To increase the proportion of sales of acoustic high-tech products, Scale-up of acoustic disinfection products through signed home beauty industry partners covering more than 460 stores. Including ultrasonic sterilizers and non-contact sleep AIDS, driving sales of high-margin acoustic products. As well as the promotion of different industry application areas, high additional areas, improve gross profit margin.
In China’s mature and transparent market today, gross margins on services are far greater than those on hardware sales. The improvement of gross profit margin shows that the Company’s measures to improve gross profit margin are gradually showing effect: 1) costs will be reduced by economic scale over a larger number of customers base and the increase in production; 2) the Company, by adopting the differentiation strategy, grows brand recognition and customer loyalty, strengthening the Company’s pricing power; 3) As the scale of 5G AI multimodal communication traffic top up services and the number of serviced customers, along with service quality, continue to improve, customized and value-added services, as well as service fees, will gradually increase. This will boost the profitability of the Company’s related businesses. The Company will continue to increase the share of high-gross profit products in the sales while increasing the revenue, so as to further improve the gross profit rate and give investors a better return on investment.
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Selling, General and Administrative, and Research and Development Expenses
Selling expenses were $185,354 and $970,443 for the three months ended March 31, 2025 and 2024, respectively, representing a decrease of $785,089 or 80.9%. The decrease was mainly due to the decreased in advertising and marketing expenses by $828,590, which was partly offset by increased professional service fee by $20,727, increased rent expense and property management fee by $15,322 and increased other selling expenses by $7,450.
Currently, we are focusing on expanding the Company’s leading acoustics high-tech technologies and products and continuing to develop 5G-related applications. We incurred R&D expenses of $347,532 and $71,178 during the three months ended March 31, 2025, and 2024, respectively, which shows a $276,354 or 388.3% decrease by comparing with the same period of 2024.
Research and development expenses of $347,532 for three months ended March 31, 2025. The Company’s research and development results include but are not limited to the following:
As one of the leading service providers in China’s 5G AI multimodal digital field, Datasea has several primary products and services targeting different customers and needs, including: 5G AI multimodal new media marketing service platform,5G AI multimodal Smart Agriculture (Digital Rural) Service Platform, 5G AI multimodal platform for small and micro-enterprise services platform and 5G AI multimodal traffic top up platform. 5G AI multimodal digital business applications applicable to various industries in China, and payment system applications combined with artificial intelligence (AI), big prediction mode and data analysis capabilities.
Datasea has completed a revolutionary upgrade of its core 5G multimodal communication business with AI processing technology. Currently, it can achieve AI creation and generation of various information forms including sound, text, images, and videos, as well as efficient transmission and AI digital human marketing functions. This capability can empower numerous industries and clients with potent marketing and video matrix capabilities. It can contribute to clients in brand enhancement, customer acquisition, market promotion, and revenue uplift.
In the field of acoustic high-tech business, the Company is one of the units that proposed the concept of “acoustic effect” in the world, and exports acoustic high-tech products and solutions to the world. The Company combines basic acoustic theory with artificial intelligence, takes acoustic technology and acoustic effect as the technical system, and researches and applies non-audible mechanical wave effects to collect and process acoustic data and solve problems. Datasea utilizes cutting-edge technologies in the field of acoustic high technology and has the world’s leading acoustic equipment to acoustic algorithm models. Acoustic technology and products are widely used in various industries and fields, including acoustic agricultural applications, acoustic industrial applications, acoustic medical, acoustic health and acoustic iot technology. Especially in the field of ultrasonic technology, the use of ultrasonic cavitation effect, thermal effect, mechanical effect to solve the needs of various application scenarios, to achieve disinfection and sterilization, crop drying, safety monitoring, beauty and skin care and medical health and other applications.
Our Acoustics and 5G intelligent products and solutions are able to serve more than 52 million enterprises and businesses of all types (over 99% are SMEs) and households in China with digital and intelligent services.
Market Promotion Team
The Company has collaborated with three influential Chinese market promotion enterprises, which leverage extensive market resources to recommend new clients for the Company and facilitate the signing of contracts with these new clients.
General and administration expenses decreased $1,541,558, or 50.1% from $3,075,941 during the three months ended March 31, 2024, to $1,534,383 during the three months ended March 31, 2025. The decrease was mainly due to decreased stock compensation expense by $861,188 and decreased professional service fee by $749,367 which was partly offset by increased payroll expense by $71,396.
We are treating human capital as a key indicator to drive business growth and technical innovation, also pursuing better integrated channels with related industries.
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Non-Operating Expenses, net
Non-operating expense was $13,613 for the three months ended March 31, 2025, consisting mainly of interest income of $16 and other expenses of $13,629. Non-operating expenses were $34,134 for the three months ended March 31, 2024, consisting mainly of interest income of $217 and other expenses of $34,351.
Net Loss from continuing operation
We generated net loss from continuing operation of $1,782,998 and $4,141,720 for the three months ended March 31, 2025, and 2024, respectively, a $2,358,722 or 57.0% decrease as compared with the same period of 2024. The decrease in net loss was mainly due to the increase in gross profit, decrease in operating expenses, and decrease in other expenses as explained above.
Comparison of the nine months ended March 31, 2025, and 2024
The following table sets forth the results of our operations for the nine months ended March 31, 2025, and 2024, respectively, indicated as a percentage of net sales. Certain columns may not add up due to rounding.
| 2025 | % of Revenues | 2024 | % of Revenues | |||||||||||||
| Revenues | $ | 51,891,475 | $ | 19,612,213 | ||||||||||||
| Cost of revenues | 50,979,252 | 98.2 | % | 19,425,372 | 99.0 | % | ||||||||||
| Gross profit | 912,223 | 1.8 | % | 186,841 | 1.0 | % | ||||||||||
| Selling expenses | 1,589,072 | 3.1 | % | 2,204,834 | 11.2 | % | ||||||||||
| Research and development | 525,013 | 1.0 | % | 343,553 | 1.8 | % | ||||||||||
| General and administrative expenses | 3,836,519 | 7.4 | % | 4,392,457 | 22.4 | % | ||||||||||
| Total operating expenses | 5,950,604 | 11.5 | % | 6,940,844 | 35.4 | % | ||||||||||
| Loss from operations | (5,038,381 | ) | (9.7 | )% | (6,754,003 | ) | (34.4 | )% | ||||||||
| Non-operating income (expenses), net | 156,904 | 0.3 | % | (86,456 | ) | (0.4 | )% | |||||||||
| Loss before income taxes | (4,881,477 | ) | (9.4 | )% | (6,840,459 | ) | (34.9 | )% | ||||||||
| Income tax expense | - | - | % | - | % | |||||||||||
| Loss before noncontrolling interest from continuing operation | (4,881,477 | ) | (9.4 | )% | (6,840,459 | ) | (34.9 | )% | ||||||||
| Income before noncontrolling interest from discontinued operation | - | - | % | 833,546 | 4.3 | % | ||||||||||
| Less: loss attributable to noncontrolling interest from continuing operation | (212 | ) | (0.0004 | )% | (10,098 | ) | (0.1 | )% | ||||||||
| Net loss to the Company from continuing operation | (4,881,265 | ) | (9.4 | )% | (6,830,361 | ) | (34.8 | )% | ||||||||
| Net income (loss) to the Company from discontinued operation | - | - | % | 833,546 | 4.3 | % | ||||||||||
| Net loss to the Company | $ | (4,881,265 | ) | (9.4 | )% | (5,996,815 | ) | (30.6 | )% | |||||||
Revenues
We had revenues of $51,891,475 and $19,612,213 for the nine months ended March 31, 2025, and 2024, respectively, which shows a $32,279,262 or 164.59% increase as compared with the same period of 2024. The increase in revenues was mainly due to the rapid increase of 5G AI multimodal digital business in China. For the nine months ended March 31, 2025, revenues mainly consisted of service fees from our 5G AI Multimodal digital. The Company’s 5G AI multimodal digital business is an industry leader, and the continued expansion of the Company’s customer base supports the continued significant improvement of the business.
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From July 1, 2024, to March 31, 2025, the Company generated revenue of $51,891,475, including $51,503,911 from the 5G AI multimodal digital business, $3,046 from Smart City Business, $56,908 from acoustic intelligence business, $326,936 from software sales and $674 from others. From July 1, 2023 to March 31, 2024, the Company generated revenue of $19,612,213, including $19,538,768 from the 5G AI multimodal communication business, $69,462 from other services and $3,983 from the acoustic intelligence.
This is inseparable from the Company’s research and development support and personnel support over the years, the Company’s upstream and downstream chain maintenance and experience accumulation and precipitation eventually formed a huge loyal customer base, but also closely related to the thriving vitality of the 5G market.
Through its own sales team, the Company vigorously promotes and publicizes its research and development results and technology display in 5G sales, actively participates in important seminars and business fairs around the country and deeply explores the target customers related to 5G news. Through painstaking efforts and keen business acumen, we have actually obtained a stable customer flow.
The Company’s top five customers for 5G AI multimodal digital business at this stage are Qingdao Ruizhi Yixing Information Technology Co., LTD., Shanghai Shixun Network Technology Co., LTD., Wuhan Xiaoming Technology Co., LTD., Xinyi Xinfanfa Information Technology Co., LTD., Nanjing Linghui Information Engineering Co., LTD. Through close business cooperation, the above customers have become stable and loyal partners of the Company and will work together in the future.
1. Marketing Strategy & Performance Growth
The Company has achieved significant business breakthroughs and acquired premium customers through its professional cooperative marketing team. Since Q4 2023, the 5G Multimodal Communication business has demonstrated explosive growth, with Q2 2024 sales achieving a substantial leap compared to the same period last year.
2. Technological Edge & Business Expansion
With industry-leading R&D capabilities in 5G AI multimodal digital technology, the Company has established a stable customer base. To further strengthen market leadership, we have formed strategic partnerships with specialized institutions possessing extensive IoT expertise. These partners offer unique advantages in mobile internet and IoT industry chain integration, providing strong support for business development. As a core growth segment, the 5G AI multimodal digital business will maintain its steady and rapid expansion momentum.
Furthermore, in terms of the commercialization of acoustic technology, we are scaling up acoustic disinfection products through partnerships with home beauty industry companies, which cover over 460 stores. These products Include ultrasonic sterilizers and non-contact sleep aids. These advanced acoustic technology products not only enhance the service quality of partner stores but also improve the customer experience and drive sales.
Regarding the expansion of the 5G + AI digital health system, The Company will continue to deploy its 5G+AI digital system, tailored to the needs of Meikang, in over 460 offline stores. This system will provide personalized customer service, data-driven marketing and efficient store management, generating revenues through technical service fees.
Cost of Revenues
For the nine months ended March 31, 2025, we recorded a cost of revenues of $50,979,252, compared to $19,425,372 for the same period in 2024, reflecting an increase of $31,553,880 or 162.44%. The cost of revenues for the nine months ended March 31, 2025, was primarily driven by 5G AI multimodal digital platform fees and cloud platform construction costs paid to suppliers. The increase in the cost of revenues was mainly due to the higher revenue generated from the 5G AI multimodal digital segment.
For the nine months ended March 31, 2025, the costs were as follows: $50.63 million for 5G AI multimodal digital, $1,716 for smart city, $317,414 for software sales, and $30,160 for the acoustic intelligence business. For the nine months ended March 31, 2024, the cost of 5G AI Multimodal communication was $19.35 million, the cost of other services was $68,314 and the cost of intelligent acoustics business was $2,342.
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Gross Profit
Gross profit for the nine months ended March 31, 2025, was $912,223 compared to $186,841 for the nine months ended March 31, 2024, representing an increase of $725,382. This increase in gross profit was primarily driven by higher sales during the nine months ended March 31, 2025.
Gross margin was 1.8% for the nine months ended March 31, 2025, compared to 1.0% for the same period in 2024.The increase in gross margin was mainly due to the Company’s significant increase in market share and operating income. The growth in gross profit indicates that the Company has substantial development potential in its operations, including:
| ● | Improved Shareholder Returns: An increase in gross profit typically leads to higher net profit, which boosts dividend distribution and stock value for shareholders. This, in turn, enhances shareholder confidence and attracts more investors. |
| ● | Consolidation of Market Position: A higher gross profit makes the Company more competitive, enabling it to attract more customers through price advantages, superior product quality, or service differentiation. This allows the Company to expand its market share and further strengthen its position in the market. |
| ● | Innovation and R&D Investment: The increase in gross profit provides the Company with more resources for innovation and R&D. This supports the development of new products, improvements to existing offerings, and the ability to adapt to changing market demands, all of which contribute to maintaining technological leadership and sustainable growth. |
Improving Business Model Integration and Market Channels:
| ● | Use Multiple Marketing Channels: By optimizing and integrating various marketing channels, the Company can reach a broader range of target customers, improve efficiency, meet customer needs, and reduce risks. This multi-channel strategy enhances the effectiveness of market coverage, positioning the Company for success in the competitive landscape. |
| ● | Enhance Product Brand: Strengthening brand image is key to building customer loyalty and recognition. The Company should focus on designing a unique brand identity, unifying its image, and leveraging word-of-mouth marketing through social media to increase brand visibility and authority. Continuous maintenance of the brand’s image will improve product strength and creativity. |
| ● | Improve Sales Personnel Effectiveness: Salespeople should be focused on achieving results, ensuring that every sales activity addresses customer pain points and drives conversions. A deep understanding of customer needs allows for tailored solutions, fostering trust and recognition. Salespeople should continuously enhance their communication and negotiation skills, undergo professional development, and adapt to market changes in order to provide the best possible customer service. |
| ● | Foster Innovative Product Development and Production: To maintain competitiveness and achieve sustainable development, the Company should increase investment in R&D and deepen its understanding of market needs. Building a culture of innovation, encouraging employee creativity, and collaborating with universities and research institutions will drive progress. Participation in industry exhibitions and seminars will facilitate knowledge exchange, helping the Company stay updated on the latest technologies. Optimizing the product development process and protecting intellectual property through patents and trademarks will safeguard the Company’s innovations. |
| ● | By focusing on these areas, the Company can strengthen its position in the market, enhance its growth potential, and continue to deliver value to shareholders and customers alike. |
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Selling, General and Administrative, and Research and Development Expenses
Selling expenses for the nine months ended March 31, 2025 were $1,589,072, compared to $2,204,834 for the same period in 2024, reflecting a decrease of $615,762, or 27.93%. The decrease was mainly due to the decrease of advertising and marketing expenses by $731,830, which was partly offset by increased service fee by $32,797, increased payroll expense by $13,348, increased rent expense and property management fee by $52,687 and increased other selling expenses by $16,007.
Currently, we are focusing on expanding the Company’s leading acoustics high-tech technologies and products, while continuing to develop 5G-related applications. We incurred R&D expenses of $525,013 and $343,553 during the nine months ended March 31, 2025, and 2024, respectively, representing an increase of $181,460 or 52.82% as compared to the same period of 2024.
Research and development expenses for the nine months ended March 31, 2025, totaled $525,013. The Company’s research and development efforts have yielded several significant outcomes, including:
As one of the leading service providers in China’s 5G AI multimodal digital field, Datasea has developed a range of primary products and services targeting different customer needs. These include:
| o | 5G AI multimodal new media marketing service platform |
| o | 5G AI multimodal Smart Agriculture (Digital Rural) Service Platform |
| o | 5G AI multimodal platform for small and micro-enterprise services |
| o | 5G AI multimodal traffic top-up platform These 5G AI multimodal digital business applications are designed for various industries in China, incorporating AI-driven payment system applications, big data analytics, and predictive models. |
| ● | Datasea has completed a revolutionary upgrade of its core 5G multimodal communication business with AI processing technology. This upgrade enables the AI creation and generation of diverse forms of information, including sound, text, images, and videos. Additionally, it supports efficient transmission and AI-powered digital human marketing functions. This capability empowers numerous industries and clients by enhancing brand recognition, acquiring customers, promoting markets, and boosting revenue. |
| ● | In the field of acoustic high-tech business, Datasea is one of the pioneers in introducing the concept of “acoustic effect” globally. The Company exports cutting-edge acoustic high-tech products and solutions worldwide. Combining basic acoustic theory with artificial intelligence, Datasea applies acoustic technology and the acoustic effect technical system to collect and process acoustic data. The Company utilizes non-audible mechanical wave effects to address various challenges. With world-leading acoustic equipment and algorithm models, Datasea’s acoustic technologies and products are widely used in sectors such as agriculture, industry, healthcare, and IoT technology. Notably, in the field of ultrasonic technology, the Company applies the effects of ultrasonic cavitation, thermal, and mechanical forces to meet diverse needs, including disinfection and sterilization, crop drying, safety monitoring, beauty and skincare, as well as medical health applications. |
| ● | Datasea’s Acoustics and 5G intelligent products and solutions serve over 52 million businesses and households across China (with more than 99% being SMEs) by providing digital and intelligent services. |
Market Promotion Team
The Company has collaborated with three influential Chinese market promotion enterprises, which leverage extensive market resources to recommend new clients for the Company and facilitate the signing of contracts with these new clients.
General and administration expenses decreased $555,938, or 12.66% from $4,392,457 during the nine months ended March 31, 2024, to $3,836,519 during the nine months ended March 31, 2025. The decrease was mainly due to decreased stock compensation expense by $861,188, which was partly offset by increased professional service fee by $187,837, increased amortization expense of intangible assets by $36,398, increased auto expense by $23,485, increased meeting related expense by $10,491, and increased other G&A expenses by $48,788.
We are treating human capital as a key indicator to drive business growth and technical innovation, also pursuing better integrated channels with related industries.
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Non-Operating Income (Expenses), net
Non-operating income was $156,904 for the nine months ended March 31, 2025, consisting mainly of interest income of $4,946 and other income of $151,958. Non-operating expenses were $86,456 for the nine months ended March31, 2024, consisting mainly of interest income of $1,946 and other expenses of $88,402.
Net (Income) Loss from Discontinued Operation
We generated net income from discontinued operation of $833,546 (which was the gain on disposal of Zhangxun) for the nine months ended March 31, 2024.
Net Loss from continuing operation
We generated net loss from continuing operation of $4,881,265 and $6,830,361 for the nine months ended March 31, 2025, and 2024, respectively, a $1,949,096 or 28.54% decrease by comparing with the same period of 2024. The decrease in net loss was mainly due to increase in gross profit and decrease of operating expenses as explained above.
Accounts receivable
The operating revenue of the nine months ended March 31, 2025, was $51,891,475, the balance of accounts receivable was $49,066 at March 31, 2025. In the same period last year, the operating revenue was $19,612,213, and the accounts receivable balance was $17,044 at March 31, 2024. This quarter, the Company further segmented the market, planned eight regional headquarters, strengthened the collection control, and promoted the fund collection of contracted delivery projects, which led to the benign return of funds and had a far-reaching impact on the future.
Liquidity and Capital Resources
Historically, we have funded our operations primarily through the sale of our common stock and shareholder loans. To strengthe our ability to continue operating as a going concern, we are focusing on generating recurring revenues and sustainable operating cash flows.
We expect to generate revenue through expanding our current 5G AI multimodal digital business and acoustic intelligence business, alongwith continuous product innovation and development as well as various types of value-added services. To maintain sufficient working capital to support our operations and finance the future growth, we anticipate addressing any cash flow shortfall through financial support from our majority stockholders (who are also our board members or officers) and issuing securities public or private issuance of securities. However, such additional financial resources may not be available to us on favorable terms, or at all, if and when needed.
As of March 31, 2025, we had a working capital deficit of $1,142,094 or a current ratio of 0.64:1, and current assets in the amount of $1,989,796. As of June 30, 2024, our working capital deficit was $952,090, with a current ratio of 0.74:1, and current assets were $2,647,892.
We expect the Company to continue supporting its ongoing operations and financing through revenue growth and increased financing activities. However, there is no assurance that the Company will be able to secure such additional working capital on commercially viable terms, or at all.
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The following is a summary of cash provided by or used in each of the indicated types of activities during the nine months ended March 31, 2025 and 2024, respectively.
| 2025 | 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 | ||||
Cash Flow from Operating Activities
Net cash used in operating activities was $1,785,456 during the nine months ended March 31, 2025, compared to net cash used in operating activities of $5,954,352 during the nine months ended March 31, 2024, a decrease in cash outflow of $4,168,896.
The decrease in cash outflow was mainly due to (1) increased collection of accounts receivable by $683,199, (2) decreased cash outflow on prepaid expenses and other current assets by $2.45 million, (3) increased payment received from customers for unearned revenue by $559,170, and (4) decreased net loss by $1.13 million, despite we had increased cash outflow on accounts payable by $468,839 and increased cash outflow on inventory by $225,608.
Cash Flow from Investing Activities
Net cash used in investing activities totaled $4.04 million for the nine months ended March 31, 2025, which consisted of cash paid for the acquisition of office furniture and equipment of $7,243 and cash paid for acquisition of intangible assets by $4.04 million. Net cash used in investing activities totaled $108,911 for the nine months ended March 31, 2024, which consisted of cash paid for the acquisition of office furniture and equipment of $3,692, cash paid for acquisition of intangible assets by $105,184, and cash loss due to disposal of subsidiary of $35.
Cash Flow from Financing Activities
Net cash provided by financing activities was $6,553,450 during the nine months ended March 31, 2025, which was net proceeds from sale of our common stock through an equity financing of $5,939,133, and proceeds from loan payables of $839,229, which was partly offset by repayment of loan payables of $40,629, and repayment to related parties of $184,283. Net cash provided by financing activities was $6,209,131 during the nine months ended March 31, 2024, which was the net proceeds from due to related parties of $417,174 and net proceeds from sale of our common stock through an equity financing of $8,061,286, which was partly offset by repayment of loan payables of $2,269,329.
Loan from banks
On April 10, 2024, Guozhong Times entered into a loan agreement with the Bank of Beijing in the amount of RMB 500,000 ($70,158) for a term of 12 months, and a preferential annual interest rate of 3.45% payable on the 21st of each month. For the three and nine months ended March 31, 2025, the Company recorded and paid $601 and $1,830 interest expense for this loan. As of March 31, 2025, $69,655 was recorded as current liabilities.
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On April 23, 2024, Guozhong Times entered into a loan agreement with the Beijing Rural Commercial Bank Economic and Technological Development Zone Branch in the amount of RMB 550,000 ($77,173) for a term of 12 months and an annual interest rate of 4.95% payable on the 21st of each month. For the three and nine months ended March 31, 2025, the Company recorded and paid $949 and $2,888 interest expense for this loan. As of March 31, 2025, $76,621 was recorded as current liabilities.
On April 25, 2024, Shuhai Beijing entered into a loan agreement with the Industrial Bank Co., Ltd in the amount of RMB 2,000,000 ($280,631) for a term of 12 months and a preferential annual interest rate of 3.88%, payable on the 21st of each month. For the three and nine months ended March 31, 2025, the Company recorded and paid $2,724 and $8,251 interest expense for this loan. As of March 31, 2025, $278,621 was recorded as current liabilities. Liu Fu is the guarantor of this loan agreement.
On May 28, 2024, Guozhong Times entered into a loan agreement with China Everbright Bank in the amount of RMB 1,000,000 ($140,315) for a term of 12 months, and an annual interest rate of 3.4%, payable on the21st of each month. For the three and nine months ended March 31, 2025, the Company recorded and paid $1,171 and $3,593 interest expense for this loan. As of March 31, 2025, $139,311 was recorded as current liabilities.
On June 20, 2024, Shuhai Beijing entered into a loan agreement with the Bank of China for the amount of RMB 4,000,000 ($561,262) for a term of 12 months and a preferential annual interest rate of 2.30% payable on the 21st of the third months of each quarter. For the three and nine months ended March 31, 2025, the Company recorded and paid $3,206 and $9,758 interest expense for this loan. As of March 31, 2025, $557,243 was recorded as current liabilities. Liu Fu is the guarantor of this loan agreement.
On March 31, 2025, Shuhai Beijing entered a loan agreement with Bank of China for the amount of RMB 6,000,000 ($835,864) with a term of 12 months with a preferential annual interest rate of 2.30% to be paid every 21st of the third months of each quarter. As of March 31, 2025, $835,864 was recorded as current liabilities.
As of March 31, 2025, the total liabilities of Datasea are $3,321,879, which shows a 8.37% decrease from June 30, 2024. The decrease of liability is due to the decrease of accounts payable by $683,082, decrease due to related parties by $629,296, decreased accrued expense and other payables by $120,070, which was partly offset by increased unearned revenue by $90,974, increased bank loan payable by $787,017, and increased operating lease liabilities by $276,354.
Financial index analysis
For the nine months ended March 31, 2025, the Company demonstrated strong momentum across multiple financial metrics. Revenue reached $51,891,475, representing a 164.59% increase year-over-year, primarily driven by the rapid expansion of the 5G AI multimodal digital business. Gross profit rose significantly to $912,223, a 388.23% increase from the same period last year, underscoring enhanced profitability and operational leverage. In the third quarter alone, The Company’s net loss decreased 57.0% year-over-year, from $4,141,720 to $1,782,998, reflecting improved cost management and revenue scale.Meanwhile, the cash balance increased by 378.17%, providing robust liquidity to support future operations. The 93.17% reduction in accounts receivable significantly improved capital turnover efficiency, and the 596.96% increase in the net value of intangible assets reflects the Company’s strengthened innovation capacity and long-term competitiveness.
For the nine months ended March 31, 2025, and 2024, the Company’s revenue was $51,891,475 and $19,612,213, respectively, reflecting an increase of $32,279,262 or 164.59% from the same period last year. This growth in revenue was primarily driven by the rapid expansion of the 5G AI multimodal digital business. The Company has consistently sought out high-quality customers, maintained its market share, and continuously expanded its customer base.
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Market Share Expansion: Through effective marketing strategies and high-quality products or services, the Company gains a competitive advantage and captures more market share, leading to an increase in operating income.
Sales Channel Expansion: By developing new sales channels, the Company can extend the reach of its products or services, thereby boosting sales revenue.
Customer Base Expansion: The Company has successfully attracted more new customers while maintaining the loyalty of existing ones, leading to a larger customer base and driving revenue growth.
Favorable Industry Trend: The industry is experiencing an upward trend, with a positive market environment providing favorable conditions for the Company’s operating income growth.
Improved Operational Efficiency: Operational improvements, such as optimizing production processes, reducing costs, and enhancing product quality and delivery speed, have bolstered the Company’s competitiveness and sales.
Improved Macroeconomic Environment: As the overall economic situation improves, consumer confidence rises, and business investment increases, demand for the Company’s products or services is likely to grow, further driving operating income growth.
For the nine months ended March 31, 2025, and 2024, the Company’s gross profit was $912,223 and $186,841, respectively, an increase of $725,382, or 388.23% from the same period last year. This significant increase was primarily driven by the Company’s expanded market share and increased operating income. The growth in gross profit highlights the Company’s strong potential for further development and operational success.
Improved Shareholder Returns: A higher gross profit typically leads to an increase in net profit, which, in turn, boosts dividend distribution and stock value for shareholders. This enhances shareholder confidence in the Company and helps attract more investors.
Consolidation of Market Position: Higher gross profit strengthens the Company’s competitive position, allowing it to attract more customers through price advantages, product quality, or service differentiation, thereby expanding market share and solidifying its market position.
Innovation and R&D Investment: The increase in gross profit provides additional funds for innovation and R&D activities, enabling the Company to launch new products, improve existing offerings, and maintain its technological leadership and sustainable development.
As of March 31, 2025, and June 30, 2024, the Company’s cash balance stood at $866,737 and $181,262, respectively, reflecting an increase of $685,475 or 378.17% compared to the end of the prior fiscal year. This increase is primarily attributable to increased gross profit of 5G AI multimodal digital business and getting loan from Bank of China. This fund has enabled the Company to expand its scale, increase research and development, strengthen its intellectual property portfolio, and broaden market expansion, thereby enhancing the competitiveness of the Company’s brand and laying a solid foundation for its sustainable development. The rise in sales revenue, driven by higher demand for products and services, coupled with fund inflows from expanded financing channels, has allowed the Company to optimize its asset structure and bolster its financial strength and liquidity.
As of March 31, 2025, and June 30, 2024, the Company’s inventory was US$316,135 and US$153,583, respectively, reflecting an increase of US$162,552, or a growth rate of 105.84%, compared to the same period as of the end of the previous fiscal year. The Company has achieved a certain production scale through continuous investment in acoustic intelligent products and independent research and development and leveraging existing advantages and capabilities to open new markets and generate additional revenue to meet customer needs.
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Increasing inventory ensures that the Company has enough products or raw materials to meet customer orders, preventing stock shortage, and improving customer satisfaction. Moreover, maintaining higher inventory levels helps the Company address sudden demand spikes or price increases, reduces the risk of supply chain disruptions, and minimizes waiting times in the production process, thereby enhancing production efficiency. By increasing inventory purchases, the Company can also secure discounts and concessions for bulk orders, lowering procurement costs. Additionally, a larger inventory enables the Company to meet market demand promptly and capitalize on sales opportunities during promotions or peak seasons.
As of March 31, 2025, and June 30, 2024, the Company’s accounts receivable balance was $49,066 and $718,546, respectively, marking a decrease of $669,480 or 93.17% from the end of the prior fiscal year. This reduction indicates that the Company has improved its ability to convert claims from credit sales into cash more quickly, thereby enhancing the speed and availability of funds. The Company can now deploy funds more flexibly for production, operations, investment expansion, or debt repayment, reducing the risk of capital shortages. A reduction in accounts receivable contributes to a healthier balance sheet, improving financial indicators such as the current ratio and quick ratio, and strengthening solvency and credit ratings. Additionally, it lowers the Company’s reliance on external financing, thus reducing interest expenses and financing costs. The Company’s focus on strengthening credit management has allowed for faster turnover of external funds, supporting better capital flow.
As of March 31, 2025, and June 30, 2024, the Company’s accounts payable were US $392,559 and US $1,075,641, respectively, a decrease of US $683,082 or 63.50% from the previous period, mainly due to the Company’s optimization of liabilities and reduction of debt ratio according to the capital situation. Better maintain a good and stable relationship with suppliers, enhance the capital turnover ability and supply chain management ability.
As of March 31, 2025, and June 30, 2024, the Company’s accounts received in advance balance were $140,213 and $49,239, respectively, reflecting an increase of $90,974 or 184.76% from the prior fiscal year. The benefits of increased advances include:
Improved Cash Flow and Financial Stability: Advance payments enhance the Company’s cash flow, improving its financial stability.
Reduced Business Risks: With financial security from advance payments, the Company can mitigate potential losses and reduce business risks.
Demand Forecasting: Advance collections provide insights into market demand. By analyzing these payments, the Company can better understand customer needs and purchase intentions, allowing for more accurate production and sales planning and improving resource utilization efficiency.
Enhanced Market Competitiveness: The ability to collect advance payments indicates that the Company’s products or services are attractive and competitive in the market, improving its position and customer base.
Improved Customer Loyalty: Customers willing to pay in advance often demonstrate high trust and satisfaction, and offering advance payment options strengthens customer relationships, increasing loyalty and encouraging long-term cooperation.
Cost of Capital Advantage: Advance payments reduce the Company’s need for external financing, helping to lower financing costs.
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As of March 31, 2025 and June 30, 2024, the Company’s net intangible assets were $3,805,383 and $546,001, respectively. This represents an increase of $3,259,382, or 596.96%. The growth in intangible assets bring several benefits to the Company.
1. Enhanced Competitiveness: Intangible assets provide the Company with unique competitive advantages in the market. These assets can support the development of distinctive products or services that set the Company apart from competitors, attracting more customers and increasing market share.
2. Creation of Economic Benefits: Intangible assets can generate direct economic benefits for the Company, contributing to its overall profitability.
3. Increased Enterprise Value: Intangible assets are a vital component of enterprise value. During mergers, acquisitions, and financing activities, the value of intangible assets plays a crucial role in determining the Company’s worth. A strong portfolio of intangible assets enhances the Company’s overall value and attracts potential investors and partners.
4. Promotion of Innovation and Development: Intangible assets resulting from research and development (R&D), such as new technologies and product designs, help foster innovation and technological progress within the Company. This not only enables the Company to meet evolving market demands but also sets the stage for long-term sustainable development.
5. Attraction and Retention of Talent: Companies with strong intangible assets, such as innovative capabilities and a solid reputation, are more likely to attract top talent. The development of intangible assets creates a dynamic environment for employees, improving job satisfaction, retaining skilled workers, and enhancing the overall quality of human resources within the Company.
In conclusion, increasing intangible assets is of paramount importance for the Company’s growth and success. It strengthens competitiveness, creates economic value, enhances overall enterprise value, and promotes sustainable development, all of which contributes to the long-term success of the business.
Going forward
Since its inception, Datasea Inc. has rapidly emerged as a leading force in the acoustic high-tech and 5G+AI multimodal digital technology sectors through continuous innovation. The Company remains committed to driving technological advancement and global expansion to support high-quality, sustainable growth:
I. Future Outlook of Acoustic High-tech Business
1. Technological Advancement and Global Expansion
Datasea will continue enhancing its Acoustic + AI precision manufacturing system to build a world-class technology framework. Through deeper collaboration with international markets, particularly in the U.S., the Company aims to expand its global industry footprint and strengthen integrated R&D and manufacturing capabilities.
2. Industry Penetration and Global Resource Integration
The Company will expand acoustic technology applications across agriculture, industry, healthcare, IoT, and wellness sectors. It will also pursue strategic M&A opportunities to consolidate global resources and strengthen its intellectual property portfolio.
3. New Product Roadmap
| ● | Short-term (2025): Launch acoustic solutions for pet disinfection and brain cortisol regulation; |
| ● | Mid-term: Develop products for food and water sterilization and cardiovascular health monitoring; |
| ● | Long-term: Advance the design and manufacturing of acoustic devices for industrial, agricultural, medical, and IoT applications |
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II. 5G+AI Multimodal Digital Business
1. Innovation and Intelligent System Optimization
Datasea will continue enhancing its AI-powered multimodal platform for smarter scheduling, personalized delivery, real-time monitoring, and data-driven enterprise solutions.
2. Industry Reach and SME Enablement
With broad market coverage across finance, logistics, media, and healthcare, the Company supports digital transformation for over 124 million individual entrepreneurs and 52 million enterprises, with a focus on empowering SMEs.
3. Scenario Innovation and Cross-Industry Empowerment
Leveraging cloud computing and SaaS, the platform delivers tailored solutions in rural revitalization, logistics, and health management—reducing operational costs and improving efficiency and competitiveness.
4. AI-Driven Analysis and Personalization
Through advanced intelligent analytics, the platform enables risk prediction, process optimization, and personalized service recommendations, helping clients improve conversion rates and customer satisfaction.
III. Strategic Outlook
1. Innovation-Driven Global Scale-Up
Datasea will pursue global expansion through innovation, M&A, and talent integration, accelerating the build-out of a global acoustic and digital intelligence ecosystem.
2. Brand Strengthening and IP Protection
The Company will continue reinforcing its international patent portfolio and enhancing brand value to maintain leadership in the acoustic intelligence field.
3. Risk Control and Compliance
A robust global risk and data compliance system will ensure steady, compliant operations as international expansion deepens.
Through sustained technological innovation and market expansion, Datasea is poised for significant business growth and an increase in market share in the coming years, gradually positioning itself as a global leader in the acoustic high-tech and 5G+AI multi-modal digital technology sectors. With a comprehensive strategy encompassing patent protection, brand enhancement, and risk management, Datasea will solidify its market position and open new opportunities for the future, providing smarter solutions for global clients and generating higher commercial and social value.
Off-Balance Sheet Arrangements
There are no off-balance sheet arrangements that have or are reasonably likely to have a current or future effect on our financial condition, changes in financial condition, revenues, expenses, results of operations, liquidity, capital expenditures or capital resources.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
As a “smaller reporting company”, we are not required to provide the information required by this Item.
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ITEM 4. CONTROLS AND PROCEDURES
Disclosure Controls and Procedures
As required by Rule 13a-15 of the Securities Exchange Act of 1934, our principal executive officer and principal financial officer evaluated our disclosure controls and procedures (as defined in Rules 13a-15(e) or 15d-15(e) of the Securities Exchange Act of 1934, as amended) as of the end of the period covered by this report. Based on this evaluation, our principal executive officer and principal financial officer concluded that as of the end of the period covered by this report, the Company’s disclosure controls and procedures were not effective. This conclusion was reached in light of the following material weaknesses in internal control over financial reporting:
| (i) | inadequate segregation of duties and effective risk assessment; |
| (ii) | lack of personnel adequately trained in U.S. GAAP; and |
| (iii) | insufficient written policies and procedures for accounting and financial reporting with respect to the requirements and application of both U.S. GAAP and SEC guidelines. |
Management’s Strategies for Enhancing Internal Control:
In the previous fiscal year, we recognized the weaknesses in our internal control over financial reporting and have taken proactive steps to enhance and refine our internal control framework. These initiatives primarily include:
1. Strengthen the expansion of market channels
Use multiple marketing channels to attract customers, enhance brand awareness and increase sales. By optimizing and integrating multiple marketing channels, it can cover a wider range of target customer groups, improve efficiency and effectiveness, meet customer needs, reduce risks, achieve multi-channel comprehensive coverage, and achieve success in market competition.
2. Improve gross profit margin
The Company’s focus on 5G AI multi-mode traffic business is to integrate new resources, expand 5G-related new business, combined with the Company’s deep cultivation and accumulation in 5G news over the years, take this opportunity to develop more 5G-related business, use the private domain traffic of end customers, and convert it into end customers of acoustic high-tech products, so as to increase the revenue of the Company’s two major business modules.
3. Introduction of technical personnel
Define the talent needs and objectives, track and manage potential technical talents by creating a good working environment and establishing a talent pool, and strengthen cooperation with scientific research institutions and universities, simplify the process and procedures of talent introduction, and optimize the process of talent introduction. Make the best use of people’s talents.
4. The patent level has been rapidly improved
Encourage employees to study and research professional skills and professional knowledge, and reflect and summarize through practice and application, maintain a continuous learning mentality, and constantly improve themselves and surpass themselves.
5. Continuous Improvement of Internal Control Procedures: We remain committed to refining our internal control processes, encompassing various aspects such as the budget approval process, procurement and asset management, credit control, internal audits, and cost accounting. Additionally, we have compiled a comprehensive internal control policy, incorporating guidelines for procurement control, inventory management, and fraud prevention.
6. Collaborative Oversight Mechanism: To strengthen internal control implementation, we have established a collaborative mechanism between the internal control department and the legal department. This mechanism involves conducting interviews with department heads, promptly addressing identified risk areas, and ensuring corrective actions are taken.
7. Engagement with Financing Underwriters: We have engaged financing underwriters to work closely with our international department to facilitate the Company’s financing efforts. This partnership aims to improve our understanding of investor backgrounds and identify financing methods that align best with our objectives.
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8. Enhanced Collaboration with Legal Professionals: We are reinforcing collaboration between our internal and external legal teams to proactively mitigate risks.
In addition to these efforts, we have adopted various internal control policies, including the review of accounting personnel duties and responsibilities, travel allowances, reimbursement procedures, receivable management, asset control, internal audit processes, and cost accounting. Furthermore, we have established an internal audit department under the leadership of a director of internal audit, along with a legal team, to ensure compliance and effective risk management.
As part of our ongoing efforts to enhance corporate governance and financial oversight, we have implemented and strengthened the following internal controls and procedures to improve operational efficiency, risk management, and regulatory compliance:
| 1. |
Enhanced Cost Control and Economic Efficiency
The Company continues to implement cost control measures aimed at improving financial efficiency. Through proactive engagement and negotiations, the Company has secured investment incentives from the Daxing District Government in Beijing and is in the process of completing relocation procedures. This strategic move is expected to provide the Company with access to preferential tax policies and government subsidies, resulting in improved cash flow and long-term financial benefits. |
| 2. |
Structured New Project Management and Risk Mitigation
A standardized process has been established for new project evaluation and management, incorporating feasibility studies, project discussions, legal and risk assessments, and sign-off procedures by responsible parties. This structured approach ensures comprehensive risk prevention and revenue oversight, improving financial discipline across newly launched initiatives (e.g., the beauty industry mini-program project). |
| 3. |
Optimization of the Proprietary 5G AI Multi-Modal Recharge Platform
The Company continues to refine its internally developed 5G AI multi-modal traffic recharge platform to enhance operational efficiency. By optimizing business processing workflows and reconciliation procedures, the Company ensures the accuracy and timeliness of monthly settlements with both suppliers and customers, reinforcing financial controls and transaction integrity. |
| 4. |
Regulatory Compliance with U.S. Banking Oversight on Fund Transfers
The Company is actively working in close coordination with its U.S. banking partners to comply with regulatory requirements governing fund transfers. This includes ensuring timely, transparent, and compliant utilization of overseas funds, strengthening financial governance in accordance with U.S. banking regulations and reporting standards. |
| 5. |
Tax Compliance and Invoice Management
The Company is continuously refining its tax compliance framework and invoice management by closely collaborating with business personnel and external partners to analyze business models and client distribution. A key focus has been to enhance tax compliance, optimize invoice issuance practices, and mitigate tax-related risks, ensuring alignment with applicable tax laws and regulatory requirements. |
Further Enhancements Include:
| 5. | Personnel Training: We are committed to training our staff to ensure the proper execution of internal control policies and procedures. |
| 6. | Regular Reporting to the Audit Committee: We will continue to provide quarterly summaries of internal control and audit reports to the Audit Committee. |
| 7. | Quarterly Review with U.S. CPA: Each quarter, we will conduct a trial balance review in collaboration with a U.S. Certified Public Accountant (CPA) after their review or audit. |
Changes in Internal Control over Financial Reporting
Other than as described above, there have been no material changes in the Company’s internal control over financial reporting during the most recent fiscal period that have materially affected, or are reasonably likely to materially affect, the Company’s internal controls. The Company remains committed to continuously enhancing its internal control framework to ensure operational efficiency, regulatory compliance, and financial transparency.
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PART II OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
We are not a party to any pending legal proceedings and no such proceedings are known to be contemplated.
ITEM 1A. RISK FACTORS
As a “smaller reporting company”, we are not required to provide the information required by this Item.
ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
Not applicable.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
None.
ITEM 4. MINE SAFETY DISCLOSURES
Not applicable.
ITEM 5. OTHER INFORMATION
| (a) | Not applicable. |
| (b) | During the quarter covered by this Report, there have not been any material changes to the procedures by which security holders may recommend nominees to the Board of Directors. |
| (c) | During the three months ended
December 31, 2024, no director or officer of the Company |
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ITEM 6. EXHIBITS.
| Exhibit | Description | |
| 31.1 | Certification by Chief Executive Officer pursuant to Sarbanes Oxley Section 302 | |
| 31.2 | Certification by Chief Financial Officer pursuant to Sarbanes Oxley Section 302 | |
| 32.1* | Certification by Chief Executive Officer pursuant to 18 U.S.C. Section 1350 | |
| 32.2* | Certification by Chief Financial Officer pursuant to 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 XBRL | |
| 101.PRE | Inline XBRL Taxonomy Extension Presentation Linkbase Document | |
| 104 | Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101). |
| * | The certifications attached as Exhibits 32.1 and 32.2 accompany this quarterly report on Form 10-Q pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 and shall not be deemed “filed” by the Registrant for purposes of Section 18 of the Securities Exchange Act of 1934, as amended. |
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SIGNATURES
In accordance with Section 13 or 15(d) of the Exchange Act, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
| DATASEA INC. | ||
| Date: May 14, 2025 | By: | /s/ Zhixin Liu |
| Name: | Zhixin Liu | |
| Title: | President | |
| Chief Executive Officer | ||
| (principal executive officer) | ||
| Date: May 14, 2025 | By: | /s/ Mingzhou Sun |
| Name: | Mingzhou Sun | |
| Title: | Chief Financial Officer | |
| (principal financial officer and principal accounting officer) |
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