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Datasea Reports Second Quarter Fiscal Year 2023 Financial


BEIJING, Feb. 13, 2023 (GLOBE NEWSWIRE) — 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, 2022, and provided an update on its key strategic and operational initiatives.

“As we progressed through the second quarter, it became evident that the evolving Covid-19 pandemic and the changing prevention and control mechanisms would significantly impact our quarterly earnings and ability to fulfill customer orders, we also adjust our internal policy on 5G SMS business. Therefore, our second quarter revenue was not in-line with our expectations,” said Zhixin Liu, CEO of Datasea. “Fortunately, Datasea saw and continues to see demand, particularly for air purifiers. Furthermore, with the pace of China’s reopening after lifting the Zero-Covid policy, we do not expect similar levels of sequential declines beyond the second quarter of 2023. Moreover, we remain committed to enhancing our product portfolio, streamlining operational efficiencies, and expanding market reach and client acquisition.”

Second Quarter 2023 Financial Results

  • We had revenues of $425,710 and $8,979,479 for the three months ended December 31, 2022 and December 31, 2021 respectively, which shows a $8,553,769 or 95% decrease by comparing with the same period of 2021. The decrease in revenues was mainly due to the sharp decline in 5G SMS services in China amid the global COVID-19 pandemic. To mitigate operational risks and maintain control over cash flow, the Company implemented a revised business policy for 5G SMS services that involves collecting payment from clients in advance before making any purchases from suppliers. This approach will ensure that the Company’s long-term operations can progress at a rapid and stable pace, while help minimizing financial risks. Gross profit was $54,330 for the three months ended December 31, 2022, compared to $246,299 for the three months ended December 31, 2021, representing a decrease of $191,969 or 78%. The decrease in gross profit was mainly due to the decreased delivery of services related to the 5G SMS service platform in 2022.
  • Gross margin was 12.8% for the three months ended December 31, 2022, compared to 3.0% for the three months ended December 31, 2021. The increase in gross margin was mainly due to decreased activities from the lower margin 5G SMS business and indicated that the Company’s measures to improve gross profit margin are gradually showing effect.

Second Quarter 2023 Business Highlights

5G Messaging

  • Client expansion
    In December 2022, Datasea’s converged cloud platform product passed the relevant audits, officially coming to market as the SaaS product of China Mobile Cloud Energy Center. Following this approval, the product is formally a provider for China Mobile’s ecosystem. According to the enterprise search engine APP, Datasea can now meet the potential needs of more than 60000 business entities, more than 17 million group enterprise customers, and more than 957 million mobile customers.
  • Product update
    With a unique SaaS and PaaS business model and subscription service, Datasea provides personalized launch services for different industries, rapidly enhanced brand strength, and sustainable marketing growth for enterprise customers. With customizable solutions and applications that can serve broad industries, the Company intends to target more enterprise customers in various sectors such as finance, e-commerce, logistics, tourism, government affairs, education, and power.

Acoustic Intelligence

In the second quarter of 2023, Datasea continued to develop its ultrasonic sterilization and antivirus products under the brand name Hailijia. Hailijia concentrates on air purification and has five models focused on in-vehicle sterilization and deodorization, restroom sterilization and deodorization, and air disinfection and sterilization meant to respond to a wide range of market needs.

  • Client expansion
    On December 23, 2022, as announced by the Heilongjiang Provincial Government Procurement Network, Shuhai Beijing won the equipment procurement project bid to supply disinfection and sterilization equipment to Tieli Fangcang Hospital, the designated hospital in Yichun City. This achievement is especially notable because procurement projects are characterized by “high requirements and strict review,” which is a “touchstone” to test an enterprise’s comprehensive strength. The agreement also shows that key customers recognize the technical capacity of the Company’s disinfection and sterilization equipment.
  • Marketing and sales expansion
    On December 3, 2022, the Company kicked off a national Hailijia marketing campaign with an online event and several in-person product showcase events in some of China’s largest cities, such as Beijing, Shenzhen, Tianjin, Hangzhou, and Harbin. With over 50 trade and distribution institutions from China, Southeast Asia, and the Middle East participating in the event, Datasea entered into eight marketing and distribution agreements.

    Datasea continues to sell its acoustic intelligence products through a direct sales force and a select network of distributors and channel partners. As of the end of the second quarter of 2023, Datasea has 6 channel partners and 3 OEMs.

Smart City

  • Client expansion
    In November 2022, Datasea’s Shuhai Information Technology Co., Ltd. signed an agreement with Zhongjing Hengji. Under the terms, Shuhai will provide Zhongjing Hengji with a 5G smart elevator platform. Moreover, Shuhai will spearhead several research and development projects for Zhongjing Hengji, including a payment module interface, a payment management module, a financial module, various Internet of Things projects, a smart community, 5G messaging, and other systems.

ESG Management
Datasea believes incorporating ESG considerations into our operations and strategy will effectively help manage risks and identify opportunities supporting our long-term success. Furthermore, a strong ESG approach can foster positive relationships with stakeholders and enhance the Company’s reputation, positioning us for competitive advantages in an industry undergoing rapid change.

Therefore, in the second quarter, Datasea decided to adopt a comprehensive ESG framework. The objective is to align our operations with our values and to make decisions that support sustainable growth and success over the long term.

In 2023, Datasea will begin disclosing information about ESG practices and performance to stakeholders through quarterly and annual ESG reports and sustainability statements. This is an initial step in the Company’s evolution as we build a more unified sustainability framework.

Datasea has started internal preparation and analysis of ESG disclosures aligned with the Sustainability Accounting Standards Board (SASB) framework. The Company plans to distribute its first ESG report soon and present a clear and concise picture of its current ESG performance.

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: 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 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


    2022     2021     2022     2021  
Revenues   $ 1,590,015     $ 9,650,609     $ 425,710     $ 8,979,479  
Cost of goods sold     1,385,488       9,340,715       371,380       8,733,180  
Gross profit     204,527       309,894       54,330       246,299  
Operating expenses                                
Selling     422,779       386,991       129,715       156,192  
General and administrative     2,200,736       2,618,280       1,150,291       1,498,809  
Research and development     412,390       719,571       149,058       432,355  
Total operating expenses     3,035,905       3,724,842       1,429,064       2,087,356  
Loss from operations     (2,831,378 )     (3,414,948 )     (1,374,734 )     (1,841,057 )
Non-operating income (expenses)                                
Other income (expense)     (13,791 )     5,247       (36,397 )     5,224  
Interest income     145       32,893       46       12,359  
Total non-operating income (expenses), net     (13,646 )     38,140       (36,351 )     17,583  
Loss before income tax     (2,845,024 )     (3,376,808 )     (1,411,085 )     (1,823,474 )
Income tax     8                    
Loss before noncontrolling interest     (2,845,032 )     (3,376,808 )     (1,411,085 )     (1,823,474 )
Less: loss attributable to noncontrolling interest     (216,719 )     (258,281 )     (120,095 )     (146,181 )
Net loss to the Company     (2,628,313 )     (3,118,527 )     (1,290,990 )     (1,677,293 )
Other comprehensive item                                
Foreign currency translation gain (loss) attributable to the Company     (48,767 )     69,992       (61,105 )     74,689  
Foreign currency translation gain attributable to noncontrolling interest     28,736       2,294       32,426       2,548  
Comprehensive loss attributable to the Company   $ (2,677,080 )   $ (3,048,535 )   $ (1,352,095 )   $ (1,602,604 )
Comprehensive loss attributable to noncontrolling interest   $ (187,983 )   $ (255,987 )   $ (87,669 )   $ (143,633 )
Basic and diluted net loss per share   $ (0.11 )   $ (0.13 )   $ (0.05 )   $ (0.07 )
Weighted average shares used for computing basic and diluted loss per share     24,324,633       23,637,930       24,324,633       23,919,867  


    DECEMBER 31,
    JUNE 30,
CURRENT ASSETS            
Cash   $ 43,309     $ 164,217  
Accounts receivable     388,316       259,410  
Inventory, net     253,473       211,353  
Value-added tax prepayment     57,359       46,509  
Prepaid expenses and other current assets     582,694       575,312  
Total current assets     1,325,151       1,256,801  
NONCURRENT ASSETS                
Security deposit for rents           17,181  
Long-term investment     57,433       29,800  
Property and equipment, net     111,042       187,831  
Intangible assets, net     1,447,672       1,741,791  
Right-of-use assets, net     316,305       522,273  
Total noncurrent assets     1,932,452       2,498,876  
TOTAL ASSETS   $ 3,257,603     $ 3,755,677  
Accounts payable   $ 628,452     $ 197,573  
Unearned revenue     123,073       289,888  
Accrued expenses and other payables     1,340,622       994,884  
Due to related party     97,279       102,331  
Loan payables – current     1,592,403       81,950  
Operating lease liabilities     339,571       457,949  
Total current liabilities     4,121,400       2,124,575  
Operating lease liabilities           31,470  
Loan payables – non-current     168,384        
Total noncurrent liabilities     168,384       31,470  
TOTAL LIABILITIES     4,289,784       2,156,045  
Common stock, $0.001 par value, 375,000,000 shares authorized, 24,324,633 shares issued and outstanding as of December 31, 2022 and June 30, 2022 , respectively     24,325       24,325  
Additional paid-in capital     19,980,795       20,729,559  
Accumulated comprehensive income     234,820       283,587  
Accumulated deficit     (21,211,879 )     (18,583,566 )
Noncontrolling interest     (60,242 )     (854,273 )
TOTAL EQUITY (DEFICIENCY)     (1,032,181 )     1,599,632  
TOTAL LIABILITIES AND EQUITY (DEFICIENCY)   $ 3,257,603     $ 3,755,677  


    2022     2021  
Cash flows from operating activities:            
Loss including noncontrolling interest   $ (2,845,032 )   $ (3,376,808 )
Adjustments to reconcile loss including noncontrolling interest to net cash used in operating activities:                
Loss (gain) on disposal on fixed assets     (7 )     460  
Depreciation and amortization     367,616       233,544  
Bad debt expense           286,055  
Operating lease expense     371,871       435,762  
Stock compensation expense     233,250       294,750  
Changes in assets and liabilities:                
Accounts receivable     (138,565 )     (5,175,377 )
Inventory     (49,886 )     (13,850 )
Value-added tax prepayment     (12,561 )     16,702  
Prepaid expenses and other current assets     (46,374 )     (1,165,822 )
Accounts payable     434,637       4,803,114  
Unearned revenue     (156,533 )     63,507  
Accrued expenses and other payables     391,950       191,289  
Payment on operating lease liabilities     (316,856 )     (417,948 )
Net cash used in operating activities     (1,766,490 )     (3,824,622 )
Cash flows from investing activities:                
Acquisition of property and equipment     (2,276 )     (23,787 )
Refund / (acquisition) of intangible assets     (1,985 )     (198,151 )
Long-term investment     (28,764 )     (62,186 )
Net cash provided by (used in) investing activities     (33,025 )     (284,124 )
Cash flows from financing activities:                
Due to related parties     (1,387 )     (13,391 )
Proceeds (repayment) of loan payables     1,684,595       (1,493,237 )
Proceeds from capital contribution from a major shareholder           62,186  
Net proceeds from issuance of common stock           7,681,796  
Net cash provided by financing activities     1,683,208       6,237,354  
Effect of exchange rate changes on cash     (4,601 )     62,424  
Net increase (decrease) in cash     (120,908 )     2,191,032  
Cash, beginning of period     164,217       49,676  
Cash, end of period   $ 43,309     $ 2,240,708  
Supplemental disclosures of cash flow information:                
Cash paid for interest   $     $  
Cash paid for income tax   $     $  
Supplemental disclosures of non-cash operating, investing and financing activities:                
Right-of-use assets obtained in exchange for operating lease liabilities   $ 172,612     $  
Transfer of prepaid software development expenditure to intangible assets   $     $ 50,000  
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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