Datasea Inc. (NASDAQ: DTSS) (“Datasea” or the “Company”), incorporated in Nevada in September 2014, and 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 March 31, 2022 and provided an update on its key strategic and operational initiatives.

“Datasea delivered record third quarter results with year-over-year growth, mainly driven by accelerating demand for our 5G messaging solutions. This quarter marked a significant inflection point to scale and transform Datasea, underscoring our continued diversification and competitiveness building across 5G messaging, acoustic intelligence, and smart city businesses,” said Zhixin Liu, CEO of Datasea. “Moving forward, underpinned by momentum from increased customer wins, leadership expansion, great synergy effects among the business lines, and strong business resilience, Datasea is well-positioned for future growth.”

Third Quarter 2022 Financial Highlights

  • Revenue was $6,643,538 for the three months ended March 31, 2022 compared to 17,686 for the quarter ended March 31, 2021 representing an increase of $6,625,852, or 37463%.
  • Gross profit was $588,404 for the three months ended March 31, 2022 compared to $7,774 for the three months ended March 31, 2021, representing an increase of $580,630 or 7469%. The increase in gross profit was mainly due to the delivery of services related to the 5G SMS service platform in 2022.
  • R&D expenses were $248,832 for the three months ended March 31, 2022 compared to $207,774 for the three months ended March 31, 2021, representing an increase of $41,058, or 19.76%.
  • More than $17.05 million worth of 5G messaging business contracts have been signed.

Third Quarter 2022 Business Highlights

5G Messaging

  • Client expansion. The number of enterprises that engaged with Datasea’s 5G message authorization development increased from about 100 to nearly 200 which directly resulted in the Company becoming a leading service provider in China.
  • Marketing and sales expansion. The Company adopted an integrated sales strategy to boost sales to better promote business development and meet with the demand of customers, which includes 1) an expansion of the sales team for direct sales; 2) partner and broker mode; 3) joint marketing mode; 4) the enterprise key customer project cooperation mode.
  • Industry recognition. Shuhai Zhangxun, a company indirectly contractually controlled by Datasea focusing on the 5G messaging business, was named the "Top 10 Enterprises of 5G Messaging in 2021" by New 5G Messaging (New Media) and 5G New Business Center. In January 2022, Shuhai Zhangxun took the lead in drafting the overall technical requirements for 5G messaging applications in the express delivery industry.

Acoustic Intelligence

In this quarter, the Company demonstrated the commercial potential of acoustic intelligence, through direct sales of acoustic intelligence powered disinfection equipment and agreements with different businesses to apply acoustic intelligence in the areas such as automotive systems and smart home appliances.

  • Client expansion. The Company entered into a three-year collaboration agreement with Guangdong Canbo Electrical Co., Ltd to apply Datasea’s innovative acoustic intelligence-enabled sterilization technology to the disinfection cabinets. The Company worked with Shanghai Zhuifeng Automotive System Co., Ltd to promote the acoustic intelligent module products in vehicle application scenarios. Datasea added Jiangsu Xinrong Network Technology Research Institute Co., Ltd. as a new customer of acoustic intelligence powered disinfection equipment and the total value of the engagement would be RMB 20 million (approximately USD 3.14 million) over the course of the two-year agreement.
  • Marketing and sales expansion. Datasea worked with Unicorner LLC to expand acoustic intelligence products distribution in the US market.
  • Industry recognition. In January, Datasea released China’s inaugural white paper with co-authors to uncover detailed facts and compelling analyses of the acoustic-intelligence technology, commercial applications, and the industry outlook.

Smart City

  • Client expansion. The Company was engaged by Jiangsu Xinrong Network Technology Research Institution Co., Ltd to provide 5G messaging smart city solutions, and the value of this engagement would be RMB 500,000 (approximately USD 78,800) per residential community over the course of the two-year agreement.
  • Product update. The Company recently laid out a series of upgrades, including IoT cloud platform 2.0 and Campus Security Cloud System 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 9 a.m. ET (9 p.m. Beijing and Hong Kong Time) on Monday, May 16, 2022.

Dial-in details for the earnings conference call are as follows:Toll Free: 1-877-451-6152Toll/International: 1-201-389-0879

Participants should dial-in at least 5 minutes before the scheduled start time. Additionally, a live and archived webcast of the conference call will be available at: https://viavid.webcasts.com/starthere.jsp?ei=1550068&tp_key=f65ec48b63

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

Toll Free: 1-844-512-2921Toll/International: 1-412-317-6671Replay Pin Number: 13730116Replay Start: Monday May 16, 2022, 12:00 PM ETReplay Expiry: Monday May 23, 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)

    NINE MONTHSENDEDMARCH 31,     THREE MONTHSENDEDMARCH 31,  
    2022     2021     2022     2021  
                         
Revenues   $ 16,294,147     $ 152,925     $ 6,643,538     $ 17,686  
Cost of goods sold     15,395,849       66,925       6,055,134       9,912  
                                 
Gross profit     898,298       86,000       588,404       7,774  
                                 
Operating expenses                                
Selling     612,253       295,252       225,262       121,216  
General and administrative     3,990,789       2,377,257       1,372,509       945,285  
Research and development     968,403       537,009       248,832       207,774  
                                 
Total operating expenses     5,571,445       3,209,518       1,846,603       1,274,275  
                                 
Loss from operations     (4,673,147 )     (3,123,518 )     (1,258,199 )     (1,266,501 )
                                 
Non-operating income (expenses)                                
Other income (expenses)     12,917       (22,160 )     7,670       (9,958 )
Interest income     37,730       1,916       4,837       112  
                                 
Total non-operating income (expenses), net     50,647       (20,244 )     12,507       (9,846 )
                                 
Loss before income tax     (4,622,500 )     (3,143,762 )     (1,245,692 )     (1,276,347 )
                                 
Income tax     -       -       -       -  
                                 
Loss before noncontrolling interest     (4,622,500 )     (3,143,762 )     (1,245,692 )     (1,276,347 )
                                 
Less: (loss) income attributable to noncontrolling interest     (226,561 )     (93,902 )     31,720       (57,347 )
                                 
Net loss to the Company     (4,395,939 )     (3,049,860 )     (1,277,412 )     (1,219,000 )
                                 
Other comprehensive item                                
Foreign currency translation gain (loss) attributable to the Company     89,911       105,471       19,919       (7,072 )
Foreign currency translation gain (loss) attributable to noncontrolling interest     2,076       (1,582 )     (218 )     (192 )
                                 
Comprehensive loss attributable to the Company   $ (4,306,028 )   $ (2,944,389 )   $ (1,257,493 )   $ (1,226,072 )
                                 
Comprehensive loss (income) attributable to noncontrolling interest   $ (224,485 )   $ (95,484 )   $ 31,502     $ (57,539 )
                                 
Basic and diluted net loss per share   $ (0.18 )   $ (0.14 )   $ (0.05 )   $ (0.06 )
                                 
Weighted average shares used for computing basic and diluted loss per share   $ 23,837,047     $ 21,214,197       24,244,130       21,470,487  
                                 

DATASEA INC.CONSOLIDATED BALANCE SHEETS

    MARCH 31,2022     JUNE 30,2021  
    (Unaudited)        
             
ASSETS            
CURRENT ASSETS            
Cash   $ 1,628,750     $ 49,676  
Accounts receivable     5,521,461       1,856  
Inventory     247,378       194,264  
Value-added tax prepayment     66,295       171,574  
Prepaid expenses and other current assets     381,658       468,615  
Total current assets     7,845,542       885,985  
                 
NONCURRENT ASSETS                
Security deposit for rents     281,040       256,987  
Long term investment     63,010       -  
Property and equipment, net     217,100       309,408  
Intangible assets, net     1,263,219       1,092,147  
Right-of-use assets, net     760,957       1,350,590  
Total noncurrent assets     2,585,326       3,009,132  
                 
TOTAL ASSETS   $ 10,430,868     $ 3,895,117  
                 
LIABILITIES AND STOCKHOLDERS’ EQUITY                
CURRENT LIABILITIES                
Accounts payable   $ 4,874,633     $ 174,718  
Unearned revenue     255,280       189,527  
Deferred revenue     72,682       46,439  
Accrued expenses and other payables     494,185       561,674  
Due to related party     29,063       69,305  
Loans payable     -       1,486,819  
Operating lease liabilities     506,699       730,185  
Total current liabilities     6,232,542       3,258,667  
                 
NONCURRENT LIABILITIES                
Operating lease liabilities     132,257       558,739  
Total noncurrent liabilities     132,257       558,739  
                 
TOTAL LIABILITIES     6,364,799       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     20,602,889       12,086,788  
Accumulated comprehensive income     363,161       273,250  
Accumulated deficit     (16,457,797 )     (12,061,858 )
TOTAL COMPANY STOCKHOLDERS’ EQUITY     4,532,497       319,654  
                 
Noncontrolling interest     (466,428 )     (241,943 )
                 
TOTAL EQUITY     4,066,069       77,711  
                 
TOTAL LIABILITIES AND EQUITY   $ 10,430,868     $ 3,895,117  
                 

DATASEA INC.CONSOLIDATED STATEMENTS OF CASH FLOWS(UNAUDITED)

    NINE MONTHSENDEDMARCH 31  
    2022     2021  
             
Cash flows from operating activities:            
Loss including noncontrolling interest   $ (4,622,500 )   $ (3,143,762 )
Adjustments to reconcile loss including noncontrolling interest to net cash used in operating activities:                
Loss on disposal on fixed assets     679       9,619  
Depreciation and amortization     412,771       112,350  
Bad debt expense     287,214       -  
Operating lease expense     654,029       588,924  
Stock compensation expense     515,250       12,000  
Changes in assets and liabilities:                
Accounts receivable     (5,469,460 )     (12,380 )
Inventory     (49,239 )     (19,278 )
Value-added tax prepayment     107,320       (75,765 )
Prepaid expenses and other current assets     (262,428 )     (130,638 )
Accounts payable     4,655,575       81,903  
Advance from customers     87,041       41,823  
Accrued expenses and other payables     179,998       91,615  
Payment on operating lease liabilities     (712,738 )     (618,366 )
                 
Net cash used in operating activities     (4,216,488 )     (3,061,955 )
                 
Cash flows from investing activities:                
Acquisition of property and equipment     (32,188 )     (103,054 )
Acquisition of intangible assets     (402,118 )     (25,934 )
Long-term investment     (62,438 )     -  
                 
Net cash used in investing activities     (496,744 )     (128,988 )
                 
Cash flows from financing activities:                
Due to related parties     (40,760 )     -  
Payment of loan payable     (1,499,291 )     728,824  
Proceeds from capital contribution from a major shareholder     62,438       -  
Net proceeds from issuance of common stock     7,681,796       931,000  
                 
Net cash provided by financing activities     6,204,183       1,659,824  
                 
Effect of exchange rate changes on cash     88,123       36,360  
                 
Net increase (decrease) in cash     1,579,074       (1,494,759 )
                 
Cash, beginning of period     49,676       1,665,936  
                 
Cash, end of period   $ 1,628,750     $ 171,177  
                 
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     $ 1,000,000  
Right-of-use assets obtained in exchange for new operating lease liabilities   $ -     $ 1,294,315  
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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