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Datasea Reports Third Quarter Fiscal Year 2022 Earnings and Provides Business Updates

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Datasea Inc.
Datasea Inc.

BEIJING, May 16, 2022 (GLOBE NEWSWIRE) -- 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: 1-877-451-6152
Toll/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: 1-844-512-2921
Toll/International: 1-412-317-6671
Replay Pin Number: 13730116
Replay Start: Monday May 16, 2022, 12:00 PM ET
Replay 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 Zhang
Telephone: +1(646) 866-7989
Email: datasea@iecapitalusa.com

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

NINE MONTHS
ENDED

MARCH 31,

THREE MONTHS
ENDED

MARCH 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 MONTHS
ENDED

MARCH 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.