Datasea Inc. (NASDAQ: DTSS) (“Datasea” or the “Company”), incorporated in Nevada in September 2014, is a digital technology corporation engaged in three converging and innovative business segments: 5G messaging, acoustic intelligence and smart city in China, today announced financial results for the quarter ended December 31, 2021 and provided an update on its key strategic and operational initiatives.

“Datasea had a solid quarter as our 5G messaging business started to demonstrate its great value and capability to improve the Company’s competitiveness and create new sources of revenue and profits. As one of the first movers in this industry, Datasea has been a leading 5G messaging service provider in China. We will continue to leverage our advantages of entering the market early to build brand recognition and customer loyalty,” said Zhixin Liu, CEO of Datasea. “Benefiting from our proprietary technologies and great synergy effects among the business lines, such as acoustic intelligence and smart city, we believe that our business development is on track and is supported by a strong product portfolio. Datasea’s business goals are to focus on the sustainable development, and we are integrating it into every business decision.”

Second Quarter 2022 Financial Highlights

  • Revenue was $8,979,479 and $126,184 for the three months ended December 31, 2021 and 2020, respectively, representing an increase of $8,853,295, or 7016%.
  • Gross profit was $246,299 and $86,070 for the three months ended December 31, 2021 and 2020, respectively, representing an increase of $160,229, or 186%. The increase in gross profit was mainly due to the delivery of services related to the 5G SMS service platform in 2021.
  • R&D expenses were $432,355 and $134,509 for the three months ended December 31, 2021 and 2020, respectively, representing an increase of $297,846, or 221%.
  • 5G messaging sales revenue increased more than 900% this quarter, compared with the immediate prior quarter ended September 30, 2021, representing nine-month consecutive growth.

Second Quarter 2022 Business Highlights

5G Messaging

  • Client expansion. Since 2021, as a leading service provider in the field of 5G messaging in China, the Company has been engaged for services by 100+ institutional clients from express delivery, catering, tourism, e-commerce, financing, and technology industry to establish message marketing cloud platform (“5G MMCP”).
  • Marketing and sales expansion. From October 2021 to the end of December 2021, the Company was engaged in various contracts that were related to SMS, integrated 5G message marketing cloud platform (“5G IMMCP”) and value-added services, with a total contract value of approximately $14.73 million, among which $9.6 million worth of services have been delivered.
  • Industry recognition. In December 2021, the Company assisted ZTO Express to complete the first placement order through 5G messaging services in express delivery industry. The Company cooperated with the National Engineering Laboratory for Logistics Information Technology (“National Engineering Laboratory”), and continually worked to promote the formulation of 5G Messaging standards in the express industry.

Acoustic Intelligence

The Company commits to tap acoustic intelligence’s full business potential and wield acoustic intelligence across industries in meaningful ways.

  • Research Partnerships. The Company has entered into partnerships with top-notch institutions in this area, equipped itself with solid R&D capability, and released China’s inaugural white paper “Industry Development and Technology Application of Acoustic Intelligence in China” with co-authors, Institute of Cloud Computing and Big Data, China Academy of Information and Communications Technology.
  • Product lineup. Currently, the Company has four flagship products to unfold the commercial possibilities of acoustic intelligence in the most wanted areas such as health, security, and environment protection. These products are 1) ultrasonic sound sterilization and antivirus equipment (the first-ever sterilization and antivirus equipment that combines ultrasonic sound effects with optics to address the Covid-19 disinfecting needs); 2) Tianer voice recognition alarm; 3) directional sound recognizer (a solution for noise pollution); 4) sound effect refreshing directional sound device. Datasea has prepared samples, completed laboratory tests and user pilot tests, entered mass production to varying degrees for these products, and they are expected to be introduced to the market in the fiscal year of 2022.

Smart City

  • Client expansion. From October 2021 to the end of December 2021, the Company was engaged in various contracts that were related to smart community solutions and food safety supervision system of the Smart Canteen.
  • Product update. The Company recently laid out a series of upgrades to meet with the client needs in different scenarios and enhance the system’s analysis efficiency and integration capability.

Webcast and Conference Call Information

The Company will host a conference call and webcast to discuss its financial results at 8 a.m. ET (9 p.m. Beijing and Hong Kong Time) on Monday, February 14, 2022.

Dial-in details for the earnings conference call are as follows:

Toll Free: 1-877-451-6152
Toll/International: 1-201-389-0879
 

Participants should dial-in at least 5 minutes before the scheduled start time. Additionally, a live webcast of the conference call will be available at: https://viavid.webcasts.com/starthere.jsp?ei=1530184&tp_key=e52c484915

A replay of the conference call will be accessible approximately soon after the conclusion of the live, by dialing the following telephone numbers:

Toll Free: 1-844-512-2921Toll/International: 1-412-317-6671Replay Pin Number: 13727206Replay Start: Monday February 14, 2022, 11:00 AM ETReplay Expiry: Monday February 21, 2022, 11:59 PM ET
 

About Datasea Inc. Datasea Inc., through its variable interest entity, Shuhai Information Technology Co., Ltd., a digital technology company in China, engages in three converging and innovative industries: smart city, acoustic intelligence and 5G messaging. Datasea leverages facial recognition technology and other visual intelligence algorithms, combined with cutting-edge acoustic and non-visual intelligence algorithms, to provide smart city solutions that meet the security needs of residential communities, schools and commercial enterprises. Most recently, in response to the growing utilization of 5G technologies and the overall initiative to utilize Datasea’s technology capabilities to expand business coverage and revenue resources, Datasea has also strategically expanded business coverage to 5G messaging and smart payment solutions. Datasea has been certified as one of the High Tech Enterprises (jointly issued by the Beijing Science and Technology Commission, Beijing Finance Bureau, Beijing State Taxation Bureau and Beijing Local Taxation Bureau) and one of the Zhongguancun High Tech Enterprises (issued by the Zhongguancun Science Park Administrative Committee) in recognition of the company’s achievement in high technology products. For additional company information, please visit: www.dataseainc.com. Datasea routinely posts important information on its website.

Cautionary Note Regarding Forward-Looking Statements This press release contains forward-looking statements within the meaning of Section 21E of the Securities Exchange Act of 1934 and as defined in the U.S. Private Securities Litigation Reform Act of 1995. These forward-looking statements can be identified by terminology such as "will", "expects", "anticipates", "future", "intends", "plans", "believes", "estimates", "target", "going forward", "outlook," “objective” and similar terms. Such statements are based upon management's current expectations and current market and operating conditions, and relate to events that involve known or unknown risks, uncertainties and other factors, all of which are difficult to predict and which are beyond Datasea's control, which may cause Datasea's actual results, performance or achievements (including the RMB/USD value of its anticipated benefit to Datasea as described herein) to differ materially and in an adverse manner from anticipated results contained or implied in the forward-looking statements. Further information regarding these and other risks, uncertainties or factors is included in Datasea's filings with the U.S. Securities and Exchange Commission, which are available at www.sec.gov. Datasea does not undertake any obligation to update any forward-looking statement as a result of new information, future events or otherwise, except as required under law.

Datasea investor and media Contact:International Elite Capital Inc. Annabelle ZhangTelephone: +1(646) 866-7989 Email: datasea@iecapitalusa.com

DATASEA INC.CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS(UNAUDITED)

    SIX MONTHS ENDEDDECEMBER 31,     THREE MONTHS ENDEDDECEMBER 31,  
    2021     2020     2021     2020  
                         
Revenues   $ 9,650,609     $ 135,239     $ 8,979,479     $ 126,184  
Cost of goods sold     9,340,715       57,013       8,733,180       40,114  
                                 
Gross profit     309,894       78,226       246,299       86,070  
                                 
Operating expenses                                
Selling     386,991       174,036       156,192       119,971  
General and administrative     2,618,280       1,431,972       1,498,809       812,536  
Research and development     719,571       329,235       432,355       134,509  
                                 
Total operating expenses     3,724,842       1,935,243       2,087,356       1,067,016  
                                 
Loss from operations     (3,414,948 )     (1,857,017 )     (1,841,057 )     (980,946 )
                                 
Non-operating income (expenses)                                
Other income (expenses)     5,247       (12,202 )     5,224       (19,854 )
Interest income     32,893       1,804       12,359       208  
                                 
Total non-operating income (expenses), net     38,140       (10,398 )     17,583       (19,646 )
                                 
Loss before income tax     (3,376,808 )     (1,867,415 )     (1,823,474 )     (1,000,592 )
                                 
Income tax     -       -       -       -  
                                 
Loss before noncontrolling interest     (3,376,808 )     (1,867,415 )     (1,823,474 )     (1,000,592 )
                                 
Less: loss attributable to noncontrolling interest     (258,281 )     (36,555 )     (146,181 )     (36,555 )
                                 
Net loss to the Company     (3,118,527 )     (1,830,860 )     (1,677,293 )     (964,037 )
                                 
Other comprehensive item                                
Foreign currency translation gain attributable to the Company     69,992       112,543       74,689       54,064  
Foreign currency translation gain (loss) attributable to noncontrolling interest     2,294       (1,390 )     2,548       (1,390 )
                                 
Comprehensive loss attributable to the Company   $ (3,048,535 )   $ (1,718,317 )   $ (1,602,604 )   $ (909,973 )
                                 
Comprehensive loss attributable to noncontrolling interest   $ (255,987 )   $ (37,945 )   $ (143,633 )   $ (37,945 )
                                 
Basic and diluted net loss per share   $ (0.13 )   $ (0.09 )   $ (0.07 )   $ (0.05 )
                                 
Weighted average shares used for computing basic and diluted loss per share   $ 23,637,930     $ 21,088,837       23,919,867       21,233,829  
                                 

DATASEA INC.CONSOLIDATED BALANCE SHEETS

    DECEMBER 31, 2021     JUNE 30,2021  
    (Unaudited)        
             
ASSETS            
CURRENT ASSETS            
Cash   $ 2,240,708     $ 49,676  
Accounts receivable     5,223,231       1,856  
Inventory     210,808       194,264  
Value-added tax prepayment     156,995       171,574  
Prepaid expenses and other current assets     1,297,321       468,615  
Total current assets     9,129,063       885,985  
                 
NONCURRENT ASSETS                
Security deposit for rents     275,170       256,987  
Long term investment     62,738       -  
Property and equipment, net     249,393       309,408  
Intangible assets, net     1,195,303       1,092,147  
Right-of-use assets, net     962,056       1,350,590  
Total noncurrent assets     2,744,660       3,009,132  
                 
TOTAL ASSETS   $ 11,873,723     $ 3,895,117  
                 
LIABILITIES AND STOCKHOLDERS’ EQUITY                
CURRENT LIABILITIES                
Accounts payable   $ 5,022,008     $ 174,718  
Unearned revenue     256,108       189,527  
Deferred revenue     47,053       46,439  
Accrued expenses and other payables     502,909       561,674  
Due to related party     56,541       69,305  
Loans payable     -       1,486,819  
Operating lease liabilities     688,520       730,185  
Total current liabilities     6,573,139       3,258,667  
                 
NONCURRENT LIABILITIES                
Operating lease liabilities     229,024       558,739  
Total noncurrent liabilities     229,024       558,739  
                 
TOTAL LIABILITIES     6,802,163       3,817,406  
                 
COMMITMENTS AND CONTINGENCIES                
                 
STOCKHOLDERS’ EQUITY                
Common stock, $0.001 par value, 375,000,000 shares authorized, 24,244,130 and 21,474,138 shares issued and outstanding, respectively     24,244       21,474  
Additional paid-in capital     20,382,389       12,086,788  
Accumulated comprehensive income     343,242       273,250  
Accumulated deficit     (15,180,385 )     (12,061,858 )
TOTAL COMPANY STOCKHOLDERS’ EQUITY     5,569,490       319,654  
                 
Noncontrolling interest     (497,930 )     (241,943 )
                 
TOTAL EQUITY     5,071,560       77,711  
                 
TOTAL LIABILITIES AND EQUITY   $ 11,873,723     $ 3,895,117  
                 

DATASEA INC.CONSOLIDATED STATEMENTS OF CASH FLOWS(UNAUDITED)

    SIX MONTHS ENDEDDECEMBER 31  
    2021     2020  
             
Cash flows from operating activities:            
Loss including noncontrolling interest   $ (3,376,808 )   $ (1,867,415 )
Adjustments to reconcile loss including noncontrolling interest to net cash used in operating activities:                
Loss on disposal on fixed assets     460       -  
Depreciation and amortization     233,544       68,239  
Bad debt expense     286,055       -  
Operating lease expense     435,762       369,810  
Stock compensation expense     294,750       -  
Changes in assets and liabilities:                
Accounts receivable     (5,175,377 )     -  
Inventory     (13,850 )     (27,296 )
Value-added tax prepayment     16,702       (49,206 )
Prepaid expenses and other current assets     (1,165,822 )     (123,475 )
Accounts payable     4,803,114       22,838  
Advance from customers     63,507       -  
Accrued expenses and other payables     191,289       89,762  
Payment on operating lease liabilities     (417,948 )     (329,549 )
                 
Net cash used in operating activities     (3,824,622 )     (1,846,292 )
                 
Cash flows from investing activities:                
Acquisition of property and equipment     (23,787 )     (91,214 )
Acquisition of intangible assets     (198,151 )     (8,482 )
Long-term investment     (62,186 )     -  
                 
Net cash used in investing activities     (284,124 )     (99,696 )
                 
Cash flows from financing activities:                
Due to related parties     (13,391 )     -  
Payment of loan payable     (1,493,237 )     -  
Proceeds from capital contribution from a major shareholder     62,186       -  
Net proceeds from issuance of common stock     7,681,796       931,000  
                 
Net cash provided by financing activities     6,237,354       931,000  
                 
Effect of exchange rate changes on cash     62,424       23,449  
                 
Net increase (decrease) in cash     2,191,032       (991,539 )
                 
Cash, beginning of period     49,676       1,665,936  
                 
Cash, end of period   $ 2,240,708     $ 674,397  
                 
Supplemental disclosures of cash flow information:                
Cash paid for interest   $ -     $ -  
Cash paid for income tax   $ -     $ -  
                 
Supplemental disclosures of non-cash investing and financing activities:                
Transfer of prepaid software development expenditure to intangible assets   $ 50,000     $ 850,000  
Right-of-use assets obtained in exchange for new operating lease liabilities   $ -     $ 1,276,944  
Shares issued for accrued bonus to officers   $ 259,023     $ -  
                 

IMPORTANT NOTICE TO USERS (summary only, please refer to the Form 10-Q for full text of notice); All information is unaudited unless otherwise noted or accompanied by an audit opinion and is subject to the more comprehensive information contained in our SEC reports and filings. We do not endorse third-party information. All information speaks as of the last fiscal quarter or year for which we have filed a Form 10-K or 10-Q, or for historical information the date or period expressly indicated in or with such information. We undertake no duty to update the information. Forward-looking statements are subject to risks and uncertainties described in our Forms 10-Q and 10-K.

 

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