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What changed in DATASEA INC.'s 10-K — 2022 vs 2023

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Paragraph-level year-over-year comparison of DATASEA INC.'s 2022 and 2023 10-K annual filings, covering the Business, Risk Factors, Legal Proceedings, Cybersecurity, MD&A and Market Risk sections. Every new, removed and edited paragraph is highlighted side-by-side so you can see exactly what management changed in the 2023 report.

+571 added−604 removedSource: 10-K (2023-09-27) vs 10-K (2022-09-28)

Top changes in DATASEA INC.'s 2023 10-K

571 paragraphs added · 604 removed · 169 edited across 6 sections

Item 1. Business

Business — how the company describes what it does

54 edited+175 added−322 removed49 unchanged
Biggest changeCertification Certificate No. 53 Campus danger alarm system V1.0 Softcopy Registration No.7177594 54 Community prevention and control personnel information registration system V1.0 Softcopy Registration No.714470 55 Intelligent Community Management System V1.0 Softcopy Registration No.7125871 56 Community prevention and control health information Management system V1.0 Softcopy Registration No.7131600 57 Campus epidemic prevention and control personnel access management system based on face recognition Softcopy Registration No.7263518 58 Campus epidemic prevention and control temperature measurement data management system Softcopy Registration No.7242759 59 Intelligent community intelligent monitoring and management system V1.0 Softcopy Registration No.7558127 60 Campus information Management System V1.0 Softcopy Registration No.7561345 61 Intelligent community access control management system Softcopy Registration No.7568924 62 Community prevention and control temperature measurement data management system Softcopy Registration No.7565701 63 Campus monitoring system V1.0 Softcopy Registration No.7570612 64 Community prevention and control personnel information Management system V1.0 Softcopy Registration No.7570807 65 Campus Intelligent acoustic Warning System V2.0 Softcopy Registration No. 8580724 66 Intelligent acoustic Early warning System V2.0 for medical and nursing environment Softcopy Registration No. 8580553 67 Intelligent acoustic Early warning system V2.0 for public places Softcopy Registration No. 8580552 68 Swimming pool intelligent acoustic warning system V2.0 Softcopy Registration No. 8580686 69 Home Intelligent Acoustic Warning System V2.0 Softcopy Registration No. 8580685 70 Hotel Intelligent acoustic warning system V2.0 Softcopy Registration No. 8580725 38 Software Copyrights owned by Shuhai Zhangxun 71 Messaging platform V1.0 Softcopy Registration No. 8185990 72 Message Marketing Cloud Platform V2.0 Softcopy Registration No. 8187558 73 The CRM platform V2.0 Softcopy Registration No. 8187327 74 Marketing Tools Platform V2.0 Softcopy Registration No. 8185994 Software Copyrights owned by Acoustic Effect Technology 75 High frequency acoustic effect air coupling algorithm software V1.0 Softcopy Registration No. 9854777 76 High frequency acoustic effect air coupling and collaborative ultraviolet control algorithm software V1.0 Softcopy Registration No. 9877299 77 Variable frequency acoustic effect coronavirus feature elimination algorithm software V1.0 Softcopy Registration No. 9864534 Softcopy Rights owned by Xunrui Techonolgy(Under review) 1 Xunruirong media information marketing platform acceptance number: 2022R11S1174489 2 Xunrui comprehensive online Office OA System acceptance number: 2022R11S1174483 3 Xunrui integrated security cloud platform acceptance number: 2022R11S1174473 4 Xunrui Smart Apartment management system acceptance number: 2022R11S1174505 5 Xunrui Aggregate payment and settlement system acceptance number: 2022R11S1174493 6 Xunrui AI intelligent algorithm analysis platform acceptance number: 2022R11S1174485 7 Xunrui intelligent acoustic recognition system acceptance number: 2022R11S1174499 8 Xunrui Intelligent Park management system acceptance number: 2022R11S1174502 9 Xunrui Wisdom Catering System acceptance number: 2022R11S1174496 10 Xunrui satellite remote sensing - Agricultural Management System acceptance number: 2022R11S1174465 Soft Copyrights owned by Shuhai Jingwei(under review) 11 Square intelligent acoustic early warning and recognition system 1.0 Acceptance No. : 2022R11S1205098 12 Community medical center intelligent acoustic early warning recognition system 1.0 acceptance number: 2022R11S1205039 13 Stadium intelligent acoustic early warning and identification system 1.0 Acceptance NO: 2022R11S1204961 14 Home intelligent acoustic early warning recognition system 1.0 Acceptance NO: 2022R11S1205121 15 College intelligent acoustic Early warning and recognition system 1.0 acceptance number: 2022R11S1205071 16 Apartment intelligent acoustic Early warning and recognition system 1.0 acceptance No. : 2022R11S1205154 39 Intelligent hardware terminal : Based on the principles and application characteristics of acoustics (ultrasonic, infrasound), Datasea Acoustics team has developed unique intelligent hardware products.
Biggest changeCertification Certificate No. 63 Campus danger alarm system V1.0 Ruan Zhu Deng Zi No.7177594 64 Community prevention and control personnel information registration system V1.0 Ruan Zhu Deng Zi n No.7140470 65 Intelligent Community Management System V1.0 Ruan Zhu Deng Zi No.7125871 66 Community prevention and control health information Management system V1.0 Ruan Zhu Deng Zi No.7131600 67 Campus epidemic prevention and control personnel access management system based on face recognition Ruan Zhu Deng Zi No.7263518 68 Campus epidemic prevention and control temperature measurement data management system Ruan Zhu Deng Zi No.7242759 69 Intelligent community intelligent monitoring and management system V1.0 Ruan Zhu Deng Zi No.7558127 70 Campus information Management System V1.0 Ruan Zhu Deng Zi No.7561345 71 Intelligent community access control management system Ruan Zhu Deng Zi No.7568924 72 Community prevention and control temperature measurement data management system Ruan Zhu Deng Zi No.7565701 73 Campus monitoring system V1.0 Ruan Zhu Deng Zi No.7570612 74 Community prevention and control personnel information Management system V1.0 Ruan Zhu Deng Zi No.7570807 75 Campus Intelligent acoustic Warning System V2.0 Ruan Zhu Deng Zi No. 8580724 76 Intelligent acoustic Early warning System V2.0 for medical and nursing environment Ruan Zhu Deng Zi No. 8580553 77 Intelligent acoustic Early warning system V2.0 for public places Ruan Zhu Deng Zi No. 8580552 78 Swimming pool intelligent acoustic warning system V2.0 Ruan Zhu Deng Zi No. 8580686 79 Home Intelligent Acoustic Warning System V2.0 Ruan Zhu Deng Zi No. 8580685 80 Hotel Intelligent acoustic warning system V2.0 Ruan Zhu Deng Zi No. 8580725 81 5G message data acquisition System 1.0 Ruan Zhu Deng Zi No.11109956 82 5G message aggregation cloud platform Ruan Zhu Deng Zi No.11109703 83 Cockpit management platform Ruan Zhu Deng Zi No.11109957 84 Data Asset Management Platform 1.0 Ruan Zhu Deng Zi No.11109896 85 Digital Employee Management System 1.0 Ruan Zhu Deng Zi No.11109704 29 Software Copyrights owned by Acoustic Effect Technology 86 High frequency acoustic effect air coupling algorithm software V1.0 Ruan Zhu Deng Zi No.9854777 87 High frequency acoustic effect air coupling and collaborative ultraviolet control algorithm software V1.0 Ruan Zhu Deng Zi No. 9877299 88 Variable frequency acoustic effect coronavirus feature elimination algorithm software V1.0 Ruan Zhu Deng Zi No.9864534 Soft Copyrights owned by Shuhai Jingwei 89 Square intelligent acoustic early warning and recognition system 1.0 Ruan Zhu Deng Zi No.10322358 90 Community medical center intelligent acoustic early warning recognition system 1.0 Ruan Zhu Deng Zi No.10322366 91 Stadium intelligent acoustic early warning and identification system 1.0 Ruan Zhu Deng Zi No.10319630 92 Home intelligent acoustic early warning recognition system 1.0 Ruan Zhu Deng Zi No.10322359 93 College intelligent acoustic Early warning and recognition system 1.0 Ruan Zhu Deng Zi No.10322365 94 Apartment intelligent acoustic Early warning and recognition system 1.0 Ruan Zhu Deng Zi No.10319699 95 Shuhai Jingwei 5G message aggregation cloud platform Ruan Zhu Deng Zi No.10688735 96 Shuhai Jingwei Data collection system V1.0 Ruan Zhu Deng Zi No.10688734 97 Shuhai Jingwei digital team management system Ruan Zhu Deng Zi No.10688737 98 Shuhai Jingwei messaging platform 1.0 Ruan Zhu Deng Zi No.10688736 99 Shuhai Jingwei message marketing cloud platform 1.0 Ruan Zhu Deng Zi No.10688734 100 Shuhai Jingwei data asset management platform V1.0 Ruan Zhu Deng Zi No.11022539 101 Shuhai Jingwei SOP management system Ruan Zhu Deng Zi No.10688732 102 Shuhai Jingwei smart community integrated management client platform Ruan Zhu Deng Zi No.10688733 103 Shuhai Jingwei Intelligent Park security cloud platform Ruan Zhu Deng Zi No.10688731 104 High frequency acoustic effect air coupling algorithm software V1.0 Ruan Zhu Deng Zi No.10688740 105 High frequency acoustic effect air coupling and collaborative ultraviolet control algorithm software V1.0 Ruan Zhu Deng Zi No.10688739 106 Variable frequency acoustic effect coronavirus feature elimination algorithm software V1.0 Ruan Zhu Deng Zi No.10688738 30 Intellectual Property Planning Datasea is dedicated to cultivating a core product portfolio within the realm of acoustic intelligence, with a primary focus on the integration of acoustics and artificial intelligence.
Our common stock that currently listed on the Nasdaq Capital Markets are shares of our Nevada holding company that maintains service agreements with the associated operating companies. The Chinese regulatory authorities could disallow our structure, which could result in a material change in our operations and the value of our securities could decline or become worthless.
Our common stock currently listed on the Nasdaq Capital Markets are shares of our Nevada holding company that maintains service agreements with the associated operating companies. The Chinese regulatory authorities could disallow our structure, which could result in a material change in our operations and the value of our securities could decline or become worthless.
We believe that our corporate structure and contractual arrangements comply with the current applicable PRC laws and regulations. We also believe that each of the contracts among the wholly-owned PRC subsidiary, the consolidated VIE and its shareholders is valid, binding and enforceable in accordance with its terms.
We believe that our corporate structure and contractual arrangements comply with the current applicable PRC laws and regulations. We also believe that each of the contracts among our wholly-owned PRC subsidiary, our consolidated VIE and its shareholders is valid, binding and enforceable in accordance with its terms.
Some of our competitors may have more marketing, financial, distribution and manufacturing resources than we do and may be more responsive to changes in market, policy or customer needs. We anticipate that the future may face an increasingly competitive environment.
Some of our competitors may have more marketing, financial, distribution and manufacturing resources than we do and may be more responsive to changes in market, policy or customer needs. We anticipate that we may face an increasingly competitive environment in the future.
Certification Certificate No. 1 Shuhai XIN Platform internet activity audit security management system V1.0 Ruan Zhu Deng Zi No.1054520 2 Shuhai XIN Platform WIFI device feature collection management system V1.0 Ruan Zhu Deng Zi No.1111383 3 Shuhai XIN Platform micro mall system V1.0 Ruan Zhu Deng Zi No.1111535 4 Shuhai XIN Platform SMS platform system V1.0 Ruan Zhu Deng Zi No.1111683 5 Shuhai XIN platform 3G website content management system V1.0 Ruan Zhu Deng Zi No.1111690 6 Shuhai media advertising system V1.0 Ruan Zhu Deng Zi No.1111694 7 Shuhai XIN platform micro marketing system V1.0 Ruan Zhu Deng Zi No.1111700 8 “Shuhai Safe Campus” mobile end - security management system V2.0 Ruan Zhu Deng Zi No.1575317 9 “Shuhai Safe Campus” security management system V2.0 Ruan Zhu Deng Zi No.1575313 10 “Shuhai XIN Platform” front-end equipment control system for smart elevator detection V2.0 Ruan Zhu Deng Zi No.1574419 11 “Shuhai XIN Platform” smart elevator inspection & pre-alarm management platformV2.0 Ruan Zhu Deng Zi No.1575648 12 “Shuhai XIN Platform” smart elevator real-time monitoring and alarm management platform V2.0 Ruan Zhu Deng Zi No.1575758 13 “Shuhai XIN Platform” smart elevator screen equipment monitoring system V2.0 Ruan Zhu Deng Zi No.1575665 14 “Shuhai XIN Platform” smart advertisement launching system V2.0 Ruan Zhu Deng Zi No.1575670 15 Shuhai Information smart safe campus management system V1.0 Ruan Zhu Deng Zi No.2888248 16 Shuhai Information XIN Platform security management system (Android Version) V2.21 Ruan Zhu Deng Zi No.2918496 17 Shuhai information XIN platform security management system (IOS version) V2.21 Ruan Zhu Deng Zi No.2918467 18 Shuhai Information big data smart decision-making platform for governmental affairs V1.0 Ruan Zhu Deng Zi No.2962930 19 Shuhai Information campus smart brain information management platform V1.0 Ruan Zhu Deng Zi No.2961899 20 Shuhai Information university big data innovation laboratory platform V1.0 Ruan Zhu Deng Zi No.2962919 21 Shuhai Information Food Traceability Management System V1.0 Ruan Zhu Deng Zi No.10176578 22 Shuhai information comprehensive canteen management application system V1.0 Ruan Zhu Deng Zi No.10176482 23 Shuhai information integrated community intelligent management user platform V1.0 Ruan Zhu Deng Zi No.10176481 24 Shuhai Information campus cloud security management system V1.0 Ruan Zhu Deng Zi No.10176483 25 Shuhai information physical network edge transmission gateway platform V1.0 Ruan Zhu Deng Zi No.10176483 26 Shuhai information aggregation message marketing cloud platform V1.0 Ruan Zhu Deng Zi No.10176528 27 Shuhai Communication 5G message application management system V1.0 Ruan Zhu Deng Zi No.10176582 28 Shuhai Information integrated community group Shopping Mall system V1.0 Ruan Zhu Deng Zi No.10176530 29 Shuhai Information online shopping retail service platform V1.0 Ruan Zhu Deng Zi No.10176529 30 Shuhai information integrated community intelligent management platform V1.0 Ruan Zhu Deng Zi No.10176484 31 The three-dimensional linkage system for Epidemic Prevention and control in Shuhai Information Community V1.0 Softcopy Registration No.7128687 32 Shuhai information scanning code aggregation payment system Softcopy Registration No.7299094 33 Shuhai information social group purchase system Softcopy Registration No.7296663 34 Shuhai information face recognition payment system V1.0 Softcopy Registration No.7298094 35 Shuhai information online shopping mall System Softcopy Registration No.7300125 37 Software Copyright owned by Xunrui Technology No.
Certification Certificate No. 1 Shuhai XIN Platform internet activity audit security management system V1.0 Ruan Zhu Deng Zi No.1054520 2 Shuhai XIN Platform WIFI device feature collection management system V1.0 Ruan Zhu Deng Zi No.1111383 3 Shuhai XIN Platform micro mall system V1.0 Ruan Zhu Deng Zi No.1111535 4 Shuhai XIN Platform SMS platform system V1.0 Ruan Zhu Deng Zi No.1111683 5 Shuhai XIN platform 3G website content management system V1.0 Ruan Zhu Deng Zi No.1111690 6 Shuhai media advertising system V1.0 Ruan Zhu Deng Zi No.1111694 7 Shuhai XIN platform micro marketing system V1.0 Ruan Zhu Deng Zi No.1111700 8 “Shuhai Safe Campus” mobile end - security management system V2.0 Ruan Zhu Deng Zi No.1575317 9 “Shuhai Safe Campus” security management system V2.0 Ruan Zhu Deng Zi No.1575313 10 “Shuhai XIN Platform” front-end equipment control system for smart elevator detection V2.0 Ruan Zhu Deng Zi No.1574419 11 “Shuhai XIN Platform” smart elevator inspection & pre-alarm management platformV2.0 Ruan Zhu Deng Zi No.1575648 12 “Shuhai XIN Platform” smart elevator real-time monitoring and alarm management platform V2.0 Ruan Zhu Deng Zi No.1575758 13 “Shuhai XIN Platform” smart elevator screen equipment monitoring system V2.0 Ruan Zhu Deng Zi No.1575665 14 “Shuhai XIN Platform” smart advertisement launching system V2.0 Ruan Zhu Deng Zi No.1575670 15 Shuhai Information smart safe campus management system V1.0 Ruan Zhu Deng Zi No.2888248 16 Shuhai Information XIN Platform security management system (Android Version) V2.21 Ruan Zhu Deng Zi No.2918496 17 Shuhai information XIN platform security management system (IOS version) V2.21 Ruan Zhu Deng Zi No.2918467 18 Shuhai Information big data smart decision-making platform for governmental affairs V1.0 Ruan Zhu Deng Zi No.2962930 19 Shuhai Information campus smart brain information management platform V1.0 Ruan Zhu Deng Zi No.2961899 20 Shuhai Information university big data innovation laboratory platform V1.0 Ruan Zhu Deng Zi No.2962919 21 Shuhai Information Food Traceability Management System V1.0 Ruan Zhu Deng Zi No.10176578 22 Shuhai information comprehensive canteen management application system V1.0 Ruan Zhu Deng Zi No.10176482 23 Shuhai information integrated community intelligent management user platform V1.0 Ruan Zhu Deng Zi No.10176481 24 Shuhai Information campus cloud security management system V1.0 Ruan Zhu Deng Zi No.10176483 25 Shuhai information physical network edge transmission gateway platform V1.0 Ruan Zhu Deng Zi No.10176483 26 Shuhai information aggregation message marketing cloud platform V1.0 Ruan Zhu Deng Zi No.10176528 27 Shuhai Communication 5G message application management system V1.0 Ruan Zhu Deng Zi No.10176582 28 Shuhai Information integrated community group Shopping Mall system V1.0 Ruan Zhu Deng Zi No.10176530 29 Shuhai Information online shopping retail service platform V1.0 Ruan Zhu Deng Zi No.10176529 30 Shuhai information integrated community intelligent management platform V1.0 Ruan Zhu Deng Zi No.10176484 31 The three-dimensional linkage system for Epidemic Prevention and control in Shuhai Information Community V1.0 Softcopy Registration No.7128687 32 Shuhai information scanning code aggregation payment system Softcopy Registration No.7299094 33 Shuhai information social group purchase system Softcopy Registration No.7296663 34 Shuhai information face recognition payment system V1.0 Softcopy Registration No.7298094 35 Shuhai information online shopping mall System Softcopy Registration No.7300125 27 Software Copyright owned by Xunrui Technology No.
As of the date of this report, neither Shuhai Beijing nor any of Datasea’s subsidiaries have ever paid dividends, made earnings distributions, transferred cash or other assets by kind to Datasea directly or indirectly. Also Datasea has not made any distributions or paid dividends to its shareholders, including U.S. investors, as of the date of this report.
As of the date of this report, neither Shuhai Beijing nor any of Datasea’s subsidiaries have ever paid dividends, made earnings distributions, transferred cash or other assets by kind to Datasea directly or indirectly. Datasea has not made any distributions or paid dividends to its shareholders, including U.S. investors, as of the date of this report.
Due to PRC legal restrictions on foreign ownership in any internet-related businesses we may explore and operate, we do not have any equity ownership of the VIE, instead we receive the economic benefits of the VIE’s business operations through certain contractual arrangements.
Due to PRC legal restrictions on foreign ownership in any internet-related businesses we may explore and operate, we do not have any equity ownership of the VIE, but instead we receive the economic benefits of the VIE’s business operations through certain contractual arrangements.
Summary Consolidated Financial Data The following historical statements of operations and statements of cash flows for the fiscal years ended June 30, 2021 and June 30, 2022, and balance sheet data as of June 30, 2021 and June 30, 2022, which have been derived from our audited financial statements for those periods.
Summary Consolidated Financial Data The following historical statements of operations and statements of cash flows for the fiscal years ended June 30, 2022 and June 30, 2023, and balance sheet data as of June 30, 2022 and June 30, 2023, which have been derived from our audited financial statements for those periods.
In the post-epidemic era, launched a series of acoustic sterilization products that utilize the interaction between ultrasound and biology. Mastering the core technology of solving practical problems using the characteristics of sound waves (especially ultrasonic and infrasound) enables the company to seize the opportunity in the field of acoustic intelligence industry.
In the post-epidemic era, the Company launched a series of acoustic sterilization products that utilize the interaction between ultrasound and biology. Mastering the core technology to solve practical problems using the characteristics of sound waves (especially ultrasound and infrasound) enables the Company to seize the opportunity in the field of acoustic intelligence industry.
If the PRC government deems that the VIE Agreements do not comply with PRC regulatory restrictions on foreign investment in the relevant industries or other laws or regulations of the PRC, or if these regulations or the interpretation of existing regulations change in the future, we could be subject to severe penalties or be forced to relinquish our interests in those operations, which may therefore materially reduce the value of our common stock.
If the PRC government deems that the VIE Agreements do not comply with PRC regulatory restrictions on foreign investment in the relevant industries or other laws or regulations of the PRC, or if these regulations or the interpretation of existing regulations change in the future, we could be subject to severe penalties or be forced to relinquish our interests in those operations, which may therefore materially reduce the value of our ordinary shares.
At the same time, the R&D management process from “approval-node monitoring-assessment” was established, and the standard manufacturing process and construction management process were optimized to guide factory production, supply chain procurement and project site construction.
At the same time, the Company has established the R&D management process from “approval-node monitoring-assessment”, and optimized the standard manufacturing process and construction management process to guide factory production, supply chain procurement and project site construction.
Through contractual arrangements with Shuhai Beijing, and its shareholders, Zhixin Liu, a 35% shareholder as well as the Chairman, President, CEO and Corporate Secretary of DataSea, and Fu Liu, a 65% shareholder as well as a Director of Datasea (Fu Liu is the Father of Zhixin Liu), we receive benefits from the business and lead the daily operation.
Through contractual arrangements (the “VIE Agreements”) with Shuhai Beijing, and its shareholders, Zhixin Liu, a stockholder as well as the Chairman, President, CEO and Corporate Secretary of Datasea, and Fu Liu, a stockholder as well as a Director of Datasea (Fu Liu is the father of Zhixin Liu), we receive benefits from the business and lead the daily operation of Shuhai Beijing.
We believe our ability to remain competitive will depend on our ability to predict well the features and functionality that our customers and partners will need, and our ability to deliver consistent products at acceptable levels of quality and competitive prices quantity.
We believe our ability to remain competitive will depend on our ability to predict well the features and functionality that our customers and partners will need, and our ability to deliver consistent products at high quality and competitive prices.
As of September 2022, Shuhai Beijing has two currently valid patents(all patents herby are PRC registered), Xunrui Technology has four valid patents and Tianjin Information has one currently valid patent; Shuhai Beijing also has nine patent applications pending substantive examination, as shown below: The company actively develops and uses acoustic intelligent technologies and products to establishes technical barriers and thresholds that are different from other competitors.
As of September 2023, Shuhai Beijing has four currently valid patents (all patents here are PRC registered), Xunrui Technology has two valid patents and Tianjin Information has one currently valid patent, Shenzhen Jingwei has three valid patents, Shenzhen Acoustic has four valid patents, Shuhai Beijing also has twelve patent applications under substantive examination, as shown below: The Company actively develops and uses acoustic intelligent technologies and products to establish technical barriers and thresholds that are different from other competitors.
Zhixin Liu, is the Chairman of the Board, President, CEO of DataSea and Corporate Secretary, and Fu Liu, a Director of the DataSea (Fu Liu is the father of Zhixin Liu). 1 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 RMB0.001 for each capital contribution of RMB1.00.
Equity Option Agreement – 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 RMB0.001 for each capital contribution of RMB1.00.
Publication Number Description Application Status Patents Owned by Shuhai Beijing 1 CN108922101A An smart security campus management system of Shuhai Information Granted 2 CN108961661A Shuhai security intelligent sensor system Granted Patents Owned by Tianjin Information 3 CN108961661B Three-dimensional smart security alarm linkage system Granted Patents owned by Xunrui Technology 4 CN110374479B A type of intelligent security equipment Granted 5 CN108871456B security intelligent sensor system Granted 6 CN111179546B An adaptive distributed audio alarm method and system Granted 7 CN109033874B A multi-role login method and system of Android program based on SQlite database Granted 35 Substantive Examination No.
Publication Number Description Application Status Patents Owned by Shuhai Beijing 1 CN108922101B An smart security campus management system of Shuhai Information Granted 2 CN108871456B Shuhai security intelligent sensor system Granted 3 CN109033874B A multi-role login method and system of Android program based on SQlite database Granted 4 CN111179546 An adaptive distributed audio alarm method and system Granted Patents Owned by Tianjin Information 5 CN108961661B Three-dimensional smart security alarm linkage system Granted Patents owned by Xunrui Technology 6 CN110374479B A type of intelligent security equipment Granted 7 CN112964372B The invention relates to a new infrared temperature measuring device and a temperature measuring method.
The following table sets forth the number of our employees categorized by function as of that date: Function Total Number of Employees Management 12 Human Resources Administrative Management 11 Internal Controls 2 Capital Operation 3 Purchase 2 Marketing and Sales 34 Research & Development 51 Finance & Accounting 8 Total 123
The following table sets forth the number of our employees categorized by function as of that date: Function Total Number of Employees Management 5 Human Resources Administrative Management 10 Internal Controls 1 Capital Operation 2 Purchase 3 Marketing and Sales 5 Research & Development 21 Finance & Accounting 6 Total 53
Certification Certificate No. 36 Xunrui smart security integrated management platform v1.0 Ruan Zhu Deng Zi No.5201855 37 Xunrui big data visual analytics platform v1.0 Ruan Zhu Deng Zi No.5201772 38 Xunrui visual recognition algorithm platform v1.0 Ruan Zhu Deng Zi No.5201824 39 Xunrui non-visual recognition algorithm platform v1.0 Ruan Zhu Deng Zi No.5201861 40 Xunrui epidemic prevention and control linkage early warning system v1.0 Ruan Zhu Deng Zi No.5201704 41 Xunrui smart campus security management system v1.0 Ruan Zhu Deng Zi No.5201776 42 Xunrui smart scenic area security management system v1.0 Ruan Zhu Deng Zi No.5201574 43 Xunrui smart community security management system v1.0 Ruan Zhu Deng Zi No.5201869 44 Xunrui smart one-key alarm management system v1.0 Ruan Zhu Deng Zi No.5201784 45 Xunrui smart guest management system v1.0 Ruan Zhu Deng Zi No.5201780 46 Xunrui O2O community group Shopping Mall system V1.0 soft registration No. 9940999 47 Xunrui Smart Campus Security cloud platform system V1.0 soft registration No. 9941054 48 Xunrui Wisdom canteen arrangement system V1.0 soft registration No. 9941000 49 Xunrui aggregation message cloud platform V1.0 soft registration No. 9941047 50 Xunrui B2B2C online mall system V1.0 soft registration No. 9941055 51 Xunrui Wisdom Canteen Food traceability system V1.0 soft registration No. 9995289 52 Xunrui 5G message cloud platform V1.0 soft registration No. 9995307 Software Copyrights owned by Tianjin Information No.
Certification Certificate No. 36 Xunrui smart security integrated management platform v1.0 Ruan Zhu Deng Zi No.5201855 37 Xunrui big data visual analytics platform v1.0 Ruan Zhu Deng Zi No.5201772 38 Xunrui visual recognition algorithm platform v1.0 Ruan Zhu Deng Zi No.5201824 39 Xunrui non-visual recognition algorithm platform v1.0 Ruan Zhu Deng Zi No.5201861 40 Xunrui epidemic prevention and control linkage early warning system v1.0 Ruan Zhu Deng Zi No.5201704 41 Xunrui smart campus security management system v1.0 Ruan Zhu Deng Zi No.5201776 42 Xunrui smart scenic area security management system v1.0 Ruan Zhu Deng Zi No.5201574 43 Xunrui smart community security management system v1.0 Ruan Zhu Deng Zi No.5201869 44 Xunrui smart one-key alarm management system v1.0 Ruan Zhu Deng Zi No.5201784 45 Xunrui smart guest management system v1.0 Ruan Zhu Deng Zi No.5201780 46 Xunrui O2O community group Shopping Mall system V1.0 Ruan Zhu Deng Zi No.9940999 47 Xunrui Smart Campus Security cloud platform system V1.0 Ruan Zhu Deng Zi No.9941054 48 Xunrui Wisdom canteen arrangement system V1.0 Ruan Zhu Deng Zi No.9941000 49 Xunrui aggregation message cloud platform V1.0 Ruan Zhu Deng Zi No.9941047 50 Xunrui B2B2C online mall system V1.0 Ruan Zhu Deng Zi No.9941055 51 Xunrui Wisdom Canteen Food traceability system V1.0 Ruan Zhu Deng Zi No.9995289 52 Xunrui 5G message cloud platform V1.0 Ruan Zhu Deng Zi No.9995307 53 Xunruirong media information marketing platform Ruan Zhu Deng Zi No.10318231 54 Xunrui comprehensive online Office OA System Ruan Zhu Deng Zi No.10318229 55 Xunrui integrated security cloud platform Ruan Zhu Deng Zi No.10318227 56 Xunrui Smart Apartment management system Ruan Zhu Deng Zi No.10318271 57 Xunrui Aggregate payment and settlement system Ruan Zhu Deng Zi No.10318221 58 Xunrui AI intelligent algorithm analysis platform Ruan Zhu Deng Zi No.10318230 59 Xunrui intelligent acoustic recognition system Ruan Zhu Deng Zi No.10318269 60 Xunrui Intelligent Park management system Ruan Zhu Deng Zi No.10318270 61 Xunrui Wisdom Catering System Ruan Zhu Deng Zi No.10318268 62 Xunrui satellite remote sensing - Agricultural Management System Ruan Zhu Deng Zi No.10318228 28 Software Copyrights owned by Tianjin Information No.
Publication Number Description Application Status Shuhai Beijing 1 CN109146406A The attendance system of Shuhai Information based on GPS positioning information supported RFID technologies substantive examination 2 CN108985423A An electronic student card system of Shuhai Information substantive examination 3 CN111191540A An object status analysis method and system based on thermal gradient substantive examination 4 CN111243623A A method, device and system concerning progressive audio alarm substantive examination 5 CN111179527A An alarm method, device, system and storage medium based on dynamic audio information substantive examination 6 CN111191656A Behavior recognition method and system based on multi-spectral image information substantive examination 7 CN2019113640070 An S-AIOT information management method and system based on consensus mechanism substantive examination 8 CN111212445A An S-AIOT information processing method and system based on neural network substantive examination 9 CN111179969A An alarm method, device, system and storage medium based on audio information substantive examination Xunrui Technology 10 202110164267.4 The invention relates to an intelligent temperature detection method, device and electronic equipment substantive examination 11 202110163396.1 The invention relates to a new infrared temperature measuring device and a temperature measuring method. substantive examination 12 202110162293.3 Facial expression recognition method, device and electronic equipment based on complex scene substantive examination Shuhai Zhangxun 13 2021114316160 Intelligent information communication system based on 5G message substantive examination Acoustic Effect Technology 14 202230336336.0 Acoustic effect disinfection man-machine coexistence instrument I has been accepted 15 202230336646.2 Acoustic effect disinfection instrument I (high-end version) has been accepted 16 202230320646.3 Acoustic effect disinfection instrument type I (universal) has been accepted 17 202230336653.2 Intelligent acoustic effect handle type I has been accepted 18 202221777917.9 Ultraviolet ultrasonic plasma disinfection equipment has been accepted 19 202221781894.9 The handle used for sterilizing the device has been accepted 20 202210811431.0 A high frequency acoustic effect air coupled microbial elimination method and device has been accepted 2.
Publication Number Description Application Status Shuhai Beijing: 1 CN109146406A The attendance system of Shuhai Information based on GPS positioning information supported RFID technologies Substantive examination 2 CN108985423A An electronic student card system of Shuhai Information Substantive examination 3 CN111191540A An object status analysis method and system based on thermal gradient Substantive examination 4 CN111243623A A method, device and system concerning progressive audio alarm Substantive examination 5 CN111179527A An alarm method, device, system and storage medium based on dynamic audio information Substantive examination 6 CN111191656A Behavior recognition method and system based on multi-spectral image information Substantive examination 7 CN2019113640070 An S-AIOT information management method and system based on consensus mechanism Substantive examination 8 CN111212445A An S-AIOT information processing method and system based on neural network Substantive examination 9 CN111179969A An alarm method, device, system and storage medium based on audio information substantive examination Xunrui Technology : 10 202110164267.4 The invention relates to an intelligent temperature detection method, device and electronic equipment Substantive examination 11 202110162293.3 Facial expression recognition method, device and electronic equipment based on complex scene Substantive examination Shuhai Zhangxun: 12 2021114316160 Intelligent information communication system based on 5G message Substantive examination Shuhai Jingwei: 13 202210811431.0 A high frequency acoustic effect air coupled microbial elimination method and device Accepted 26 Major products The Company mainly focuses on developing the following two categories of products: software and smart hardware devices.
The research and development of technology plays a vital role for the Company and is what makes us different. The Company has acoustic intelligence and 5G messaging application trailblazer and has visual intelligent algorithms, as well as non-visual intelligent algorithms and techniques like acoustic intelligence.
The research and development of intelligent acoustics technology plays a vital role for the Company and is what makes us different. The Company has non-visual intelligent algorithms and techniques, intelligent acoustics technologies such as ultrasound and directional sound, and 5G messaging related technology.
For a detailed discussion of risks facing the Company as a result of this VIE structure, please see “Risks Related to our Corporate Structure” from page 53 to page 56 in the Annual Report. The investor may never hold interests in the Chinese operating company.
For a detailed discussion of risks facing the Company as a result of this VIE structure, please see “Risks Relating to our Corporate Structure” from page 42 to page 45 in the Annual Report.
We also believe that the main competitive factors in the 5G news, digital smart city market are market-side competition, including product performance, breadth of product offerings, access to customers, partners and distribution channels, software support, pricing and cost.
The industry applications are extremely broad. We also believe that the main competitive factors about the 5G messaging business in China is the competition at the market end, including product performance, breadth of product offerings, access to customers, partners and distribution channels, software support, pricing and cost.
R&D has always been the core and driving force of the company. Strengthens the application and industrialization of acoustic intelligence’s unique technology Landed services, fully implemented the industrial and technological layout of acoustic sterilization, acoustic medical beauty, acoustic medical care, acoustic agriculture, acoustic detection, etc.
Research and Development has always been the core and driving force of the Company’s development. The Company strengthens the application and industrialization of the unique intelligent acoustics technology Landing services and fully implements the industrial and technological layout of acoustic sterilization, acoustic medical beauty, acoustic medical treatment, acoustic agriculture, and acoustic detection.
There are a number of uncertainties regarding the status of the rights of the Nevada holding company with respect to its contractual arrangements with the VIE, its founders and owners, including whether the PRC legal system could limit our ability to enforce these contractual agreements due to uncertainties under Chinese law and jurisdictional limits.
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. 4 There are a number of uncertainties regarding the status of the rights of Datasea, our Nevada holding company, with respect to its contractual arrangements with the VIE, its founders and owners, including whether the PRC legal system could limit our ability to enforce these contractual agreements due to uncertainties under Chinese law and jurisdictional limits.
Please see a condensed consolidating schedule that disaggregates the operations and depicts the financial position, cash flows, and results of operations as of the same dates and for the same periods for which audited consolidated financial statements in tabular form in pages F-12 to F-14 of the Annual Report.
Please refer to a condensed consolidating schedule that disaggregates the operations and depicts the financial position, cash flows, and results of operations as of the dates and for the periods stated therein at pages F-12 to F-16 of this Annual Report.
The Company checks whether the manufacturing quality of outsourcing partners meets the Company’s requirements by assigning resident personnel to do sample testing of manufactured goods and collecting feedback on customers’ actual use experience. 41 3. Outsourcing partner and outsourced products As of June 30, 2022, we had partnerships with around 50 outsourcing partners.
The Company checks whether the manufacturing quality of outsourcing partners meets the Company’s requirements by assigning resident personnel to do sample test of manufactured goods and collecting feedback from the customer experience. 32 Outsourcing partners and outsourced products As of June 30, 2023, we have established partnerships with approximately 60 outsourcing partners.
As a consequence, we cannot be certain that the equity interest will be disposed pursuant to the contractual arrangement or ownership by the record holder of the equity interest. 30 A condensed consolidating schedule that disaggregates the operations and depicts the financial position, cash flows, and results of operations as of the same dates and for the fiscal years ended June 30, 2022 and 2021 in tabular form was contained in pages F-12 to F-14 of the 2021 Annual Report.
A condensed consolidating schedule that breaks down the operations and depicts the financial position, cash flows, and results of operations as of the same dates and for the fiscal years ended June 30, 2021 and 2020 in tabular form was contained in pages F-12 to F-16 of the 2021 Annual Report.
PRC laws and regulations governing the validity of these contractual arrangements are uncertain and the relevant government authorities have broad discretion in interpreting these laws and regulations. 2 Having our operations conducted by the subsidiaries and through contractual arrangements with a variable interest entity (VIE) based in China involves unique risks to investors.
Having our operations conducted by the subsidiaries and through contractual arrangements with a variable interest entity (VIE) based in China involves unique risks to investors.
It is uncertain whether any new PRC laws or regulations relating to variable interest entity structure will be adopted or if adopted, what they would provide.
It is uncertain whether any new PRC laws or regulations relating to variable interest entity structure will be adopted or if adopted, what they would provide. PRC laws and regulations governing the validity of these contractual arrangements are uncertain and the relevant government authorities have broad discretion in interpreting these laws and regulations.
Outsourcing partners shall pass through ISO9001:2008, ISO14001:2004, OHSAS18001:2007 and CCC certification, and meet our production and manufacturing standards. 3. Outsourcing partners should have a separate quality management department to take charge of the overall quality management system including establishment, maintenance and continuous improvement. 4.
Outsourcing partners should have a separate quality management department to take charge of the overall quality management system including establishment, maintenance and continuous improvement. 4.
Our current competitors include: Competing companies in the field of 5G messaging, Chinese listed companies with similar service systems or platforms, Montnets Technology, Zhongjia Bochuang, Xinguomai, Caixun, Tianyuan Dike, etc. Competing companies in the field of acoustic intelligence have similar ultrasound technologies but different directions of use, including Gute Ultrasound, Hivi Technology, China Electronics Technology, Xinzhi Bio, etc.
Our current competitors in the field of 5G messaging include Chinese listed companies with similar service systems or platforms, such as Montnets Technology, Zhongjia Bochuang, Xinguomai, Caixun, Tianyuan Dike.
In addition, Contractual arrangements entered into by the subsidiary and the PRC operating affiliate may be subject to scrutiny by the PRC tax authorities. Such scrutiny may lead to additional tax liability and fines, which would hinder our ability to achieve or maintain profitability.
Such scrutiny may lead to additional tax liability and fines, which would hinder our ability to achieve or maintain profitability.
The VIE structure is used to allow foreign investment in China-based companies where Chinese law prohibits or restricts direct foreign investment in the operating entities. The VIE contractual agreement has not been tested in court. We may have to incur substantial costs and expend significant resources to enforce such arrangements in reliance on legal remedies under PRC law.
The VIE structure is used to allow foreign investment in China-based companies where Chinese law prohibits or restricts direct foreign investment in the operating entities, and Datasea’s shareholders may never directly hold equity interests in our Chinese operating entities. The VIE contractual agreement has not been tested in court.
The Company has set up the main direction of technical innovation and application with visual and nonvisual fusion perception algorithm as the core. As of September 2022, the Company has made the following achievements in patent applications from the State Intellectual Property Bureau: Publication and Granted No.
As of September 2023, the Company has made the following achievements in patent applications from the State Intellectual Property Bureau: Publication and Granted Patents: No.
R&D investment As for the fiscal year ended June 30, 2021 and 2022, we spent $851,839 and $1,259,739 in research and development, respectively. Datasea, Shuhai Beijing as VIE, and its subsidiaries intend to invest approximately $10 million in technological product development over the next three years, of which the budget for each sector is presented in the table below. No.
Datasea, the VIE, and its subsidiaries intend to invest approximately $10 million in technological product development over the next three years. The budget for each sector is presented in the table below. No.
Industry recognition: In January, Shuhai Beijing released China’s inaugural white paper with co-authors, MIIT, Key Laboratory of Artificial Intelligence Key Technology and Application Evaluation and Informatization, CAICT Cloud Computing & Big Data Research Institute, to uncover detailed facts and compelling analyses of the acoustic-intelligence technology, commercial applications, and the industry outlook.
Additionally, the Company, together with MIIT, Key Laboratory of Artificial Intelligence Key Technology and Application Evaluation and Informatization, CAICT Cloud Computing & Big Data Research Institute, released China’s inaugural white paper on the acoustic intelligence industry. The paper shares compelling analysis and fact findings on intelligent acoustics technology, the commercialization of the technology, and the industry outlook.
Major products The Company mainly focuses on developing the following two categories of products: software and smart hardware devices. 1) Software system - mainly refers to software systems and solutions related to 5G messaging cloud platforms/5G digital platforms and smart cities.
Software system - mainly refers to software systems and solutions related to 5G messaging cloud platforms/5G digital platforms and smart cities.
Item % in budget 1 Salary of R&D personnel (incl. the introduction of high-end talents) 58 % 2 Procurement of scientific research facilities 20 % 3 Procurement of testing devices 6 % 4 Intermediate testing and tooling 5 % 5 Establishment of new technical schedule 4 % 6 Appointment of external technical experts 5 % 7 Others 2 % 40 Product Manufacture 1.
Item % in budget 1 Salary of R&D personnel (incl. the introduction of high-end talents) 58 % 2 Procurement of scientific research facilities 20 % 3 Procurement of testing devices 6 % 4 Intermediate testing and tooling 5 % 5 Establishment of new technical schedule 4 % 6 Appointment of external technical experts 5 % 7 Others 2 % 31 Product Manufacturing Intelligent hardware terminals For the fiscal year ended June 30, 2023, our products primarily consist the “HailiJia” series of ultrasonic air sterilizer products, including 1) In-door models (floor and desktop models) suitable for different areas and functions, and 2) In-vehicle models; 3) Restroom and Cloakroom purification and deodorization.
The Entrustment Agreement does not have an expiration date, but the parties can agree in writing to terminate the Entrustment Agreement.
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 the DataSea (Fu Liu is the father of Zhixin Liu).
We also cooperate with several third-party research and development partners such as Institute of Acoustics, Chinese Academy of Sciences, School of Artificial Intelligence, China Academy of Information and Communication technology, China Institute of Standards, China Artificial Intelligence Industry Alliance, and carried out in-depth cooperation on technological innovation, expert resources, and industry standard setting.
In the realm of acoustic intelligence, which includes ultrasound, infrasound, directional sound, and Schumann resonance, the Company has carried out in-depth collaborations with esteemed research institutions such as the Institute of Acoustics at the Chinese Academy of Sciences, the Institute of Artificial Intelligence, the China Institute of Information and Communication Technology, the China Institute of Standards, and the China Artificial Intelligence Industry Alliance in technological innovation, expert resources, and the industry standards development.
Shuhai Beijing also maintains the following certificates that is helpful to its business: ● National High Tech Enterprises Certificate jointly issued by Beijing Municipal Science & Technology Commission, Beijing Municipal Finance Bureau, and Beijing Municipal Tax Service, State Taxation Administration; ● Zhongguancun High Tech Enterprises Certificate issued by Zhongguancun Science Park Administrative Committee; ● Membership Certificate issued by China Security Technology Prevention Industry Association; ● Information Security Management System Certificate issued by Beijing Inspection and Certification Limited Company; and ● Environmental Management System Certificate issued by Huaxinchuang (Beijing) Certification Center Co., Ltd 47 Employees As of the date of this report, we have a total of 123 full time employees and no part time employees.
Although we believe that CSRC’s approval is not required for the listing and trading of our common stock on Nasdaq, we cannot assure you that relevant PRC governmental agencies, including the CSRC, would reach the same conclusion as we do. 33 Shuhai Beijing currently maintains the following licenses issued by the PRC government that are material to its operations: ● Business License issued by Beijing Municipal Industry and Commerce Administration; ● Beijing Statistics Registration Certificate issued by Beijing Municipal Bureau of Statistics; ● Value-Added Telecommunications Business Operating License issued by Ministry of Industry and Information Technology; ● Security Engineering Qualification Certificate issued by China Security Technology Prevention Industry Association; and ● The information security management system certification certificate issued by New Century Inspection and Certification Co., Ltd; ● Environmental Management System Certification Certificate issued by Beijing Xinjiyuan Certification Co., Ltd; ● Occupational Health and Safety Management System Certification Certificate issued by Beijing Xinjiyuan Certification Co., Ltd ● Quality Management System Certification Certificate issued by Zhengbiao Lianxin (Beijing) Certification Service Co., Ltd ● Network Culture Business License issued by the Beijing Municipal Bureau of Culture and Tourism 34 Shuhai Beijing also maintains the following certificates for its business: ● National High Tech Enterprises Certificate jointly issued by Beijing Municipal Science & Technology Commission, Beijing Municipal Finance Bureau, and Beijing Municipal Tax Service, State Taxation Administration; ● Zhongguancun High Tech Enterprises Certificate issued by Zhongguancun Science Park Administrative Committee; ● Membership Certificate issued by China Security Technology Prevention Industry Association; ● Information Security Management System Certificate issued by Beijing Inspection and Certification Limited Company; and ● Environmental Management System Certificate issued by Huaxinchuang (Beijing) Certification Center Co., Ltd Employees As of the date of this report, we have approximately 53 full-time employees and no part-time employees.
All of these contractual arrangements are governed by PRC law and provide for the resolution of disputes through arbitration in the PRC. Accordingly, these contracts would be interpreted in accordance with PRC laws and any disputes would be resolved in accordance with PRC legal procedures.
Accordingly, these contracts would be interpreted in accordance with PRC laws and any disputes would be resolved in accordance with PRC legal procedures. In addition, contractual arrangements entered into by the subsidiary and the PRC operating affiliate may be subject to scrutiny by the PRC tax authorities.
In the reporting period, Shuhai Beijing released China’s inaugural white paper “Industry Development and Technology Application of Acoustic Intelligence in China,” with co-authors, with MIIT, Key Laboratory of Artificial Intelligence Key Technology and Application Evaluation and Informatization, CAICT Cloud Computing & Big Data Research Institute,.
These collaborations further solidify the Company’s leading position in the field of acoustics, providing a strong foundation for future innovations and development. 14 In addition, the Company, together with MIIT, Key Laboratory of Artificial Intelligence Key Technology and Application Evaluation and Informatization, CAICT Cloud Computing & Big Data Research Institute, released China’s inaugural white paper on the acoustic intelligence industry.
Product upgrades: 5G IMMCP Upgraded the 5G message marketing cloud platform (“5G MMCP”) to an Integrated 5G message marketing cloud platform (“5G IMMCP”), expanding connection with existing clients through accesses such as SMS, email, WeChat, applet, APP Push and third-party tools and manage users from different platforms all in one 5G IMMCP.
The 5G Integrated message marketing cloud platform ( “ 5G IMMCP ” ) expands connection with existing clients through accesses such as SMS, email, WeChat, applet, APP Push and third-party tools and manages users. 3. “ Smart Push. ” A new precision marketing solution that integrates 5G technology, big data, and data mining to transform marketing experiences.
The production for global market rollout is expected after the confirmation of the prototype. 2. Control over manufacturing process and quality 1. The Company has the following requirements on outsourcing partners: independent production facilities, advanced manufacturing equipment, smart production lines, abundant outsourcing cooperation cases and a good reputation in the industry. 2.
The Company has the following requirements on outsourcing partners: independent production facilities, advanced manufacturing equipment, smart production lines, abundant outsourcing cooperation cases and a good reputation in the industry. 2. Outsourcing partners shall pass through ISO9001:2008, ISO14001:2004, OHSAS18001:2007 and CCC certification, and meet our production and manufacturing standards. 3.
We are currently expanding into other outsourcers and looking for new opportunities to retain and optimize our outsourcing and supply chain resource pools. No.
We are currently seeking other outsourcing partners and looking for new opportunities to retain and optimize our outsourcing and supply chain resources. Government Regulation and Licenses Our operations are subject to and affected by PRC laws and regulations.
On July 20, 2021, the Company entered into a securities purchase agreement with certain institutional investors, pursuant to which the Company agreed to sell to such investors an aggregate of 2,436,904 shares of common stock of the Company at a purchase price of $3.48 per share.
On August 1, 2023, Datasea entered into two separate subscription agreements with a certain non-U.S. investor (“Investor A”), pursuant to which the Company agreed to sell and Investor A agreed to purchase an aggregate of 4,760,000 shares of common stock price (the “Shares”) at a $1.2 per share purchase price.
The total number of sales teams of Shuhai Beijing and its subsidiaries has exceeded 30, covering China’s core economic belt of Beijing, Northeast China, Yangtze River Delta and Greater bay Area （ Guangdong Hong Kong Macao Bay circle, and comprehensively promoting the company’s various products and services.
The sales team of Shuhai Beijing and its subsidiaries cover the core economic zones of China in Beijing, Northeast China, the Yangtze River Delta, and the Guangdong Hong Kong Macao Greater Bay Area, promoting various products and services. 2) Sales Channels Shuhai Beijing and its subsidiaries have established cooperative relationships with multiple domestic sales and channel merchants and established a nationwide marketing channel network through a partnership system.
As a leading service provider in China’s 5G communication field, Datasea increases and improves the ways in which people and businesses communicate, while delivering brands the opportunity to engage, convert and nurture buying relationships efficiently.
(“Guohao Century”), that improves how people and businesses communicate, while providing brands a platform to engage, convert and efficiently nurture buying relationships by leveraging 5G messaging service.
As a result of the Company’s increased investment in R&D and the onboarding of technical talents, the Company has totally obtained 77 copyright registrations in China for our software, of which Shuhai Beijing owns 35 Software Copyright registrations, Xunrui owns 17 Software Copyright registrations, Tianjin Information owns 18 Software Copyright registrations,Shuhai Zhangxun owns 4 Software Copyright registrations and Shuhai Acoustic Effective owns 3 Software Copyright which are shown in the table below: It mainly refers to software systems and solutions related to 5G message cloud platforms/digital platforms and smart cities. 36 Software Copyright Owned by Shuhai Beijing No.
As a result of the Company’s increased investment in R&D and the training of technical talents, the Company’s software has a total of 106 copyright registrations in China, of which Shuhai Beijing owns 35 Software Copyright registrations, Xunrui owns 27 Software Copyright registrations, Tianjin Information owns 23 Software Copyright registrations and Shuhai Acoustic owns 3 Software Copyrights, and Shenzhen Jingwei owns 18 Software Copyrights.
The video streaming function can provide localized video streaming services to the campus security cloud platform. 29 History and Background Information relating to the history about Datasea, Shuhai Beijing and its subsidiaries is incorporated by reference from our Annual Report on Form 10-K for the fiscal year June 30, 2020 filed with the SEC on September 28, 2020 (“2020 Annual Report”) under the caption “History and Background.” VIE Agreements Information relating to our corporate history is incorporated by reference from our 2020 Annual Report under the caption “VIE Agreements.” Datasea relies on contractual arrangements with the consolidated VIE and its shareholders, Zhixin Liu, Chairman of the Board, President, CEO of DataSea and Corporate Secretary, and Fu Liu, a Director of the DataSea (Fu Liu is the father of Zhixin Liu), to operate our business.
Securities and Exchange Commission (SEC) and declared effective by the SEC on July 21, 2023. 21 Our CORPORATE History and STRUCTURE VIE Agreements Datasea relies on contractual arrangements with the consolidated VIE and its shareholders, Zhixin Liu, Chairman of the Board, President, CEO of Datasea and Corporate Secretary, and Fu Liu, a Director of the Datasea (Fu Liu is the father of Zhixin Liu), to operate our business.
We do not have any equity ownership of the VIE, instead the Company controls and receives the economic benefits of the VIE’s business operations through certain contractual arrangements. Our common stock that currently listed on the Nasdaq Capital Markets are shares of our Nevada holding company that maintains service agreements with the associated operating companies.
Datasea’s common stock currently listed on the Nasdaq Capital Market are shares of our Nevada holding company that maintains service agreements with the associated operating companies which enable us to consolidate the financial results of the VIE and its subsidiaries with Datasea’s corporate group under U.S. GAAP, making Datasea the primary beneficiary of the VIE for accounting purposes.
Mode of production In order to save costs, on the basis of a comprehensive understanding of the industry and the market, the company adopts a manufacturing outsourcing model in the production of acoustic intelligent hardware products, but adopts an independent or joint design model in product appearance.
Comprehensive air disinfection, and specialized sterilization suitable for environments such as hospitals, airports, hotels, transportation and residential buildings. ● Ultrasonic air sterilization products ● Air purification and deodorization products: For restroom model For cloakroom model ● New products planned Skin Repair Robot (Coming soon) Sleep Monitor (Coming soon) Production mode In the Chinese market, on the basis of a comprehensive understanding of the industry and the market, the Company has adopted the model of manufacturing outsourcing in the production of intelligent acoustic hardware products and an independent or joint design model in product appearance, and established the control process of “prototype selection - prototype determination - content determination - replication efficiency and replication effect” on the basis of product line standardization.
Intellectual property rights As of the date of this report, Shuhai Beijing and its subsidiaries own 7(issued by State Intellectual Property Bureau of PRC) Patents and 77 Software Copyrights(issued by National Copyright Administration of PRC), with 20patent applications has been accepted and pending substantive examination 4.
As of the date of this report, Shuhai Beijing and its subsidiaries own 27 Patents and 106 Software Copyrights in the PRC, which include 10 pending patent applications in core technologies, to empower and grow the business.
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Item 1. Description of Business. Overview Datasea Inc. (“Datasea”, with its subsidiaries and VIE, as defined below, collectively, the “Company” or “We” or “Us” or “Our”) was incorporated in Nevada on September 26, 2014.
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Item 1. Description of Business Overview Company Structure Datasea Inc. is a technology company incorporated in Nevada, USA on September 26, 2014, with subsidiaries and operating entities located in Delaware, US and China, that provides intelligent acoustics (including ultrasound, infrasound, directional sound, and Schumann resonance), 5G messaging and other products and services to various corporate and individual customers.
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As a holding company with no material operations of our own, we conduct a substantial majority of our operations through operating entities established in the People’s Republic of China, or the PRC, primarily through a variable interest entity.
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The acoustic business offers a wide range of cutting-edge products including high-quality sonic air disinfection solutions, skin repair and beauty solutions, as well as sleep-aid devices. Our products find extensive applications across various industries and sectors, including sonic antivirus, sonic beauty, sonic medical treatments, and sonic agriculture.
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For a description of our corporate structure and contractual arrangements, see “Corporate Structure” on page 31 and “VIE Agreements” on page F-10. Datasea is a leading provider of products, services, and solutions in three converging and innovative industries: 5G messaging, acoustic intelligence and smart city to enterprise and retail customers. Datasea Inc., through its VIE, Shuhai Information Technology Co., Ltd.
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For a description of our corporate structure and contractual arrangements, see “Our Organizational Structure” on page 22 and “VIE Agreements” on page 4. 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.
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(“Shuhai Beijing”), operates in China and the VIE holds seven subsidiaries to explore the business possibilities. The company possesses proprietary and cutting-edge technologies, which build a solid foundation for Datasea to design, develop and supply one of the broadest range of solutions in each category.
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Additionally, through the Company’s subsidiary in China – Tianjin Information Sea Information Technology Co., Ltd (“Shuhai Tianjin”) 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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The vision of Datasea is to create connections that make the impossible possible, empower businesses and improve the quality of life with a sustainability focus, and aim to become a multinational company in a decade with a US operation entity as the core of its business operations.
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Shuhai Beijing possesses cutting-edge products and solutions in intelligent acoustics and 5G messaging applications to support commercial enterprises, households and individuals in China. Internationalization has always been a crucial strategy for the Company. Datasea incorporated a wholly-owned subsidiary, Datasea Acoustics LLC, based in the State of Delaware, USA.
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The core of Datasea’s business strategy is to be the foremost technology solutions provider. Through technological advances, we can enable a new kind of connectivity that is affordable and available to the masses, especially in China since there are more than 48.42 million enterprises and business of all types and over 99% are SMEs.
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Datasea Acoustics LLC, established on July 31, 2023, exemplifies our strategy aimed at the global market, driven by the U.S. market, and provides “intelligent acoustics” technology and products, which is a transformative blend of acoustics and artificial intelligence.
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The company's revenue for the fiscal year 2022 achieved a breakthrough of increasing 9,653% in comparison with 2021. As of the date of this report, the company owns PRC registered 27 Patents and 77 Software Copyrights, including 20 patent applications pending in core technologies.
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The launch of Datasea Acoustics LLC in the U.S. serves a dual purpose: it solidifies Datasea’s commitment to the field of Intelligent Acoustics and emphasizes the Company’s plan to introduce cutting-edge antivirus acoustic solutions to the U.S. market.
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By embracing artificial intelligence, machine learning and data analytics capability, Datasea’s intelligence takes insights, make them actionable, then creates more powerful, meaningful, and performance-enhanced products over time. Datasea is engaged in three different business areas but with great synergies among them.
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Datasea Acoustics LLC will begin to provide leading and high-quality ultrasonic air sterilizers, bathroom and cloakroom sterilizers and odor removal products, as well as continuous new products including ultrasonic Skin Repair Robots and Schumann frequency sleep monitors to the global market, mainly the U.S. market, catering to a broad and growing global consumer base.
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Meanwhile, the Company provides a combination of software and hardware products and solutions which have the flexibility to meet with clients of different needs, but also have the abilities to serve customers at scale.
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Technology and Innovation Datasea is the global initiator, promoter and practitioner of the concept of intelligent acoustics. Our commitment to technological advancement and global reach positions us at the forefront of delivering cutting-edge intelligent acoustics solutions, especially focusing on ultrasound, infrasound, directional sound and Schumann resonance technology, to meet the evolving needs of our customers and communities worldwide.
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Datasea adheres to strategic positioning of “digital economy service provider” and focus on the business direction of “digitalize and intelligentize”, “5G messaging and application” and “acoustic intelligence” and its technology capabilities to expand business coverage.
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Combined with artificial intelligence (AI), machine learning and data analytics, our Acoustics and 5G intelligent products and solutions are able to serve more than 48.42 million enterprises of all types (over 99% are SMEs) and households in China.
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China is the Company’s major market and our most revenue comes from this market, while Datasea expects to enter the international market including the United States very soon. VIE Agreements Shuhai Information Technology Co., Ltd. (“Shuhai Beijing” or the “VIE”) is the VIE.
Added
In addition, the U.S. subsidiary, Datasea Acoustics, is actively acquiring U.S. patents, as well as international patents, and collaborating with U.S. universities and world-renowned research institutions. 1 The Company holds an outstanding position in the field of acoustics, particularly in areas such as ultrasound, infrasound, and directional sound.
Removed
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.
Added
To promote research and innovation in these areas, the Company actively collaborates with several prominent research institutions and universities, including Chinese Academy of Sciences Institute of Acoustics, China Academy of Information and Communications Technology Cloud Computing and Big Data Research Institute, Tsinghua University Internet Industry Research Institute, Harbin Institute of Technology Artificial Intelligence Research Institute, Beijing Union University, and Jilin University Remote Sensing Research Institute.
Removed
Our historical results are not necessarily indicative of the results that may be expected in the future. 3 Condensed Consolidating Statements of Operations Information 2022 Year Ended June 30, 2022 PARENT SUBSIDIARY - HK entity WOFE VIE Elimination Consolidated Revenue - third parties $ - $ - $ - $ 17,080,911 $ 17,080,911 Revenue-Parent provide service to VIE 49,600 (49,600 ) - Revenue - WOFE sold inventory to VIE 2,844,126 (2,844,126 ) - Revenue - VIE sold inventory to WOFE 211,053 (211,053 ) - Revenue - from VIE’s label that is used by WOFE 1,782,451 (1,782,451 ) - - Cost of Revenue - third parties - 13,374,932 13,374,932 Cost of Revenue - associated with the inventory that the WOFE sold to the VIE 2,607,564 2,607,564 (2,607,564 ) 2,607,564 Cost of Revenue - associated with the inventory that the VIE sold to the WOFE 142,742 142,742 (142,742 ) 142,742 Cost of Revenue - WOFE use of label that is owned by VIE 1,782,451 (1,782,451 ) - Gross profit 49,600 - (1,688,631 ) 2,949,177 (354,473 ) 955,673 Operating expenses 1,292,158 320,625 871,643 5,708,501 8,192,927 Operating expenses-VIE cost that was purchased from WOFE 206,839 (206,839 ) - Operating expenses-VIE cost that service provided by Parent 51,799 (51,799 ) - Loss from operations (1,242,558 ) (320,625 ) (2,560,274 ) (2,759,324 ) (354,473 ) (7,237,254 ) Other income (expenses), net (1,292 ) 23 45,050 81,791 125,572 Income tax expense - Loss before noncontrolling interest (1,243,850 ) (320,602 ) (2,515,224 ) (2,677,533 ) (354,473 ) (7,111,682 ) Less: loss attributable to noncontrolling interest (589,974 ) (589,974 ) Net loss to the Company (1,243,850 ) (320,602 ) (2,515,224 ) (2,087,559 ) (354,473 ) (6,521,708 ) 4 Condensed Consolidating Statements of Operations Information 2022 Year Ended June 30, 2021 PARENT SUBSIDIARY - HK entity WFOE VIE Eliminations Consolidated Revenue - third parties $ - $ - $ 334 $ 174,804 $ 175,138 Revenue - WFOEE sold inventory to VIE 58,536 (58,536 ) - Revenue - VIE sold inventory to WFOE 2,988 (2,988 ) - Revenue - from VIE’s label that is used by WFOE 170,820 (170,820 ) - Total Revenues - - 58,870 348,612 (232,344 ) 175,138 Cost of Revenue - third parties 294 19,317 19,611 Cost of Revenue - associated with the inventory that the WFOE sold to the VIE 58,536 58,536 (58,536 ) 58,536 Cost of Revenue - associated with the inventory that the VIE sold to the WFOE 2,988 2,988 (2,988 ) 2,988 Cost of Revenue - WFOE use of label that is owned by VIE 170,820 (170,820 ) - Total Cost of Revenues - - 232,638 80,841 (232,344 ) 81,135 Gross profit - - (173,768 ) 267,771 (0 ) 94,003 Operating expenses 588,562 99,947 851,969 3,414,811 4,955,289 Loss from operations (588,562 ) (99,947 ) (1,025,737 ) (3,147,040 ) (0 ) (4,861,286 ) Total non-operating income, net (762 ) (390 ) (11,727 ) (10,151 ) (23,030 ) Income tax expense - Loss before noncontrolling interest (589,324 ) (100,337 ) (1,037,464 ) (3,157,191 ) (0 ) (4,884,316 ) Less: loss attributable to noncontrolling interest (235,839 ) (235,839 ) Net loss to the Company $ (589,324 ) $ (100,337 ) $ (1,037,464 ) $ (2,921,352 ) $ (0 ) $ (4,648,477 ) 5 Condensed Consolidating Balance Sheets Information 2022 As of June 30, 2022 PARENT SUBSIDIARY - HK entity WOFE VIE Consolidated Cash $ 4,175 $ 6,435 $ 17,873 $ 135,734 $ 164,217 Accounts receivable 259,410 259,410 Accounts receivable - VIE 1,322,556 (1,322,556 ) - Inventory 5,186 206,167 211,353 Inventory - VIE - - Inventory - WOFE 28,597 (28,597 ) - Other receivables-Subsidiaries 120 (120 ) - Other receivables - VIE 9,683,156 (9,683,156 ) - Other receivables - WOFE 72,651 (72,651 ) - Other current assets - - 118,238 502,255 1,328 621,821 Total current assets 76,826 6,435 11,147,129 1,132,163 (11,105,752 ) 1,256,801 Property and equipment, net 94,362 93,469 187,831 Intangible assets, net 781,875 90,545 936,421 (67,050 ) 1,741,791 Right of use asset, net 394,988 127,285 522,273 Investment into subsidiaries 12,920,480 (12,920,480 ) - Investment into WOFE 11,050,913 (11,050,913 ) - Other non-current assets - 17,181 29,800 - 46,981 Total non-current assets 12,920,480 11,832,788 597,076 1,186,975 (24,038,443 ) 2,498,876 Total Assets $ 12,997,306 $ 11,839,223 $ 11,744,205 $ 2,319,138 (35,144,195 ) $ 3,755,677 Accounts payable $ 110,800 $ 51,104 $ 35,669 $ 197,573 Accounts payable - WOFE 1,322,556 (1,322,556 ) - Advance from customer 492 289,396 289,888 Accrued expense and other payable 62,593 1,190,564 (258,273 ) 994,884 Lease liability 414,236 43,713 457,949 Loan payable - 81,950 81,950 Other payables - Datasea 69,851 (69,851 ) - Other payables - VIE - Other payables - WOFE 122 9,683,156 (9,683,278 ) - Other current liabilities - 32,184 70,147 102,331 Total current liabilities 110,800 122 630,460 12,717,151 (11,333,958 ) 2,124,575 Lease liability - noncurrent 31,470 - 31,470 Total non-current liabilities - - 31,470 - - 31,470 Total liabilities 110,800 122 661,930 12,717,151 (11,333,958 ) 2,156,045 Accumulated deficit (2,437,676 ) (1,081,379 ) (4,684,988 ) (10,561,552 ) 182,029 (18,583,566 ) Other equity 15,324,182 12,920,480 15,767,263 163,539 (23,992,266 ) 20,183,198 Total equity 12,886,506 11,839,101 11,082,275 (10,398,013 ) (23,810,237 ) 1,599,632 Total liabilities and stockholders’ equity $ 12,997,306 $ 11,839,223 $ 11,744,205 $ 2,319,138 (35,144,195 ) $ 3,755,677 6 Condensed Consolidating Balance Sheets Information 2022 As of June 30, 2021 PARENT SUBSIDIARY - HK entity WFOE VIE Eliminations Consolidated Cash $ 14,042 $ 2,948 $ 5,770 $ 26,916 $ 49,676 Accounts receivable 1,856 1,856 Accounts receivable - VIE 501,288 (501,288 ) - Inventory 1,420 192,844 194,264 Inventory - VIE 201,372 (201,372 ) - Inventory - WFOE 18,051 (18,051 ) - Other receivables-Subsidiaries 124 (124 ) - Other receivables - VIE 6,500,938 (6,500,938 ) - Other receivables - WFOE 30,652 (30,652 ) - Other current assets 39,868 50,000 76,198 474,123 640,189 Total current assets 84,562 52,948 7,287,110 713,790 (7,252,425 ) 885,985 Property and equipment, net 142,215 167,193 309,408 Intangible assets, net 1,052,500 28,663 10,984 1,092,147 Right of use asset, net 908,149 442,441 1,350,590 Investment into subsidiaries 5,860,480 (5,860,480 ) - Investment into WFOE 3,994,377 (3,994,377 ) - Other non-current assets - 88,744 168,243 - 256,987 Total non-current assets 5,860,480 5,046,877 1,167,771 788,861 (9,854,857 ) 3,009,132 Total Assets $ 5,945,042 $ 5,099,825 $ 8,454,881 $ 1,502,651 $ (17,107,282 ) $ 3,895,117 Accounts payable $ 99,500 $ 62,332 $ 12,886 $ 174,718 Accounts payable - WFOE 501,289 (501,289 ) - Advance from customer 189,527 189,527 Accrued expense 1,381 505,905 507,286 Lease liability 473,509 256,676 730,185 Loan payable 30,959 1,455,860 1,486,819 Other payables - Datasea 30,959 (30,959 ) - Other payables – VIE 175,276 (175,276 ) - Other payables - WFOE 122 6,325,662 (6,325,784 ) - Other current liabilities 39,750 152 130,230 170,132 Total current liabilities 139,250 122 774,568 9,378,035 (7,033,308 ) 3,258,667 Lease liability - noncurrent 479,063 79,676 558,739 Total non-current liabilities - - 479,063 79,676 - 558,739 Total liabilities 139,250 122 1,253,631 9,457,711 (7,033,308 ) 3,817,406 Accumulated deficit (937,751 ) (760,777 ) (1,925,470 ) (8,112,821 ) (325,039 ) (12,061,858 ) Other equity 6,743,543 5,860,480 9,126,720 157,761 (9,748,935 ) 12,139,569 Total equity 5,805,792 5,099,703 7,201,250 (7,955,060 ) (10,073,974 ) 77,711 Total liabilities and stockholders’ equity $ 5,945,042 $ 5,099,825 $ 8,454,881 $ 1,502,651 $ (17,107,282 ) $ 3,895,117 7 Condensed Consolidating Statements of Cash Flows Information Year Ended June 30, 2022 PARENT SUBSIDIARIES - HK entity WOFE VIE Consolidated Net cash provided by/(used in) operating activities $ (548,484 ) $ 23 $ (3,280,231 ) $ (1,246,639 ) $ (5,075,331 ) Net cash provided by/(used in) operating activities (WOFE to VIE) (64,381 ) (64,381 ) - Net cash provided by/(used in) investing activities (26,391 ) (1,107,033 ) (1,133,424 ) Net cash provided by/(used in) investing activities (Parent investment to HK) (7,060,000 ) 7,060,000 - Net cash provided by/(used in) investing activities (Parent investment to WOFE) (42,000 ) 42,000 - Net cash provided by/(used in) investing activities (WOFE to VIE) (3,769,866 ) 3,769,866 - Net cash provided by/(used in) investing activities (HK to WOFE) (7,056,536 ) 7,056,536 - - Net cash provided by/(used in) financing activities 7,642,796 2,478 (1,265,970 ) 6,379,304 Net cash provided by/(used in) financing activities (Parent to HK ) - 7,060,000 41,629 (7,101,629 ) - Net cash provided by/(used in) financing activities WOFE to PARENT) - Net cash provided by/(used in) financing activities (WOFE’s cash inflow from HK) 7,074,350 (7,074,350 ) - Net cash provided by/(used in) financing activities (WOFE to VIE) 3,769,866 (3,769,866 ) - Net increase (decrease) in cash and cash equivalents $ (9,867 ) $ 3,487 $ (23,114 ) $ 144,035 $ 114,541 8 Condensed Consolidating Statements of Cash Flows Information Year Ended June 30, 2021 PARENT SUBSIDIARIES - HK entity WFOE VIE Eliminations Consolidated Net cash provided by/(used in) operating activities $ (511,693 ) $ (2,837 ) $ (1,043,939 ) $ (2,389,879 ) $ (3,948,349 ) Net cash provided by/(used in) operating activities (WFOE to VIE) (36,172 ) 36,172 (0 ) Net cash provided by/(used in) investing activities (105,907 ) (62,777 ) (168,685 ) Net cash provided by/(used in) investing activities (Parent investment to HK, but proceeds went to WFOE directly) (1,360,000 )* 1,360,000 Net cash provided by/(used in) investing activities (HK to WFOE) (10,689 )* 10,689 - Net cash provided by/(used in) financing activities 1,000,529 29,190 1,419,128 2,448,847 Net cash provided by/(used in) financing activities (Parent to WFOE) (30,529 ) 30,178 351 0 Net cash provided by/(used in) financing activities (WFOE’s cash inflow from parent and HK) 123 * 1,372,067 * (1,372,190 ) - Net cash provided by/(used in) financing activities (WFOE to VIE) (866,660 ) 866,660 0 Net increase (decrease) in cash and cash equivalents $ (901,693 ) $ (13,403 ) $ (568,521 ) $ (131,493 ) $ (1,150 ) $ (1,616,260 ) * Parent company invested $1,360,000 to HK entity, but the payment went to WFOE bank account directly, WFOE $1,372,067 cash inflow from financing activities included the Parent’s investment of $1,360,000, HK’s investment to WFOE of $10,689, and WFOE paid an expense of $123 for HK entity; the difference of $1,501 is exchange rate difference. 9 Dividend Distribution Shuhai Beijing receives substantially all of its revenue in RMB.
Added
The Company, together with these partners, is dedicated to conducting research on new topics and developing novel technology applications to drive advancements in the field of acoustics. To better achieve this goal, the Company collaborated for seven joint laboratories to enhance the integration and collaboration of research resources.

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Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

70 edited+53 added−57 removed209 unchanged
Biggest changeBy the end of the fiscal year ended June 30, 2022, we have established a Risk Control Department led by the internal control director a to ensure the Company’s compliance with relevant regulations and risk management requirements; we also formulated new policies or integrate a series of internal control policies, including but not limited to the process from procurement to payment, the process from payment to the sales, cash management, cost management, budget process, accounts receivable policy, policy to prevent and detect fraud assets and inventory management, internal audit policy and cost accounting, etc., we set up bookkeeping under USGAAP and we provided training for our employees, such as the Finance Department, Marketing Department, and senior executives; we set the International Affair Department to strengthen our compliance and financing management on the international capital market; and we also employed a new legal counsel in China to enhance the Company’s operational compliance on the Chinese market. 52 Our compliance with complicated U.S. regulations concerning corporate governance and public disclosure will result in additional expenses.
Biggest changeWe also formulated new policies or integrated a series of internal control policies, including but not limited to the process from procurement to payment, the process from payment to the sales, cash management, cost management, budget process, accounts receivable policy, policy to prevent and detect fraud, assets and inventory management, internal audit policy and cost accounting.
Furthermore, new PRC laws, rules and regulations may be introduced to impose additional requirements that may be applicable to our corporate structure and contractual arrangements. Occurrence of any of these events could materially and adversely affect our business, financial condition and results of operations and the market price of our common stock.
Furthermore, new PRC laws, rules and regulations may be introduced to impose additional requirements that may be applicable to our corporate structure and contractual arrangements. The occurrence of any of these events could materially and adversely affect our business, financial condition and results of operations and the market price of our common stock.
Zhixin Liu and Mr. Fu Liu are majority shareholders of DataSea and the shareholders of the VIE, Shuhai Beijing. Ms. Liu is our Chairman, Chief Executive Officer, President and Secretary, while Mr. Liu is one of our directors. They may have potential conflicts of interest with us.
Ms. Zhixin Liu and Mr. Fu Liu are majority shareholders of Datasea and the shareholders of the VIE, Shuhai Beijing. Ms. Liu is our Chairman, Chief Executive Officer, President and Secretary, while Mr. Liu is one of our directors. They may have potential conflicts of interest with us.
Pursuant to the Data Security Management Regulations Draft, data processors holding more than one million users/users’ individual information shall be subject to cybersecurity review before listing abroad. Data processing activities refers to activities such as the collection, retention, use, processing, transmission, provision, disclosure, or deletion of data.
Pursuant to the Data Security Management Regulations Draft, data processors holding more than one million users/users’ individual information shall be subject to cybersecurity review before listing abroad. Data processing activities refers to activities such as the collection, retention, use, processing, transmission, provision, disclosure, or deletion of data.
There remains uncertainty, however, as to how the Cybersecurity Review Measures and the Security Administration Draft will be interpreted or implemented and whether the PRC regulatory agencies, including the CAC, may adopt new laws, regulations, rules, or detailed implementation and interpretation related to the Cybersecurity Review Measures and the Security Administration Draft.
There remains uncertainty, however, as to how the Cybersecurity Review Measures and the Security Administration Draft will be interpreted or implemented and whether the PRC regulatory agencies, including the CAC, may adopt new laws, regulations, rules, or detailed implementation and interpretation related to the Cybersecurity Review Measures and the Security Administration Draft.
If any such new laws, regulations, rules, or implementation and interpretation come into effect, we will take all reasonable measures and actions to comply and to minimize the adverse effect of such laws on us.
If any such new laws, regulations, rules, or implementation and interpretation come into effect, we will take all reasonable measures and actions to comply and to minimize the adverse effect of such laws on us.
We cannot guarantee, however, that we will not be subject to cybersecurity review and network data security review in the future, which could materially and adversely affect our business, financial conditions, and results of operations.
We cannot guarantee, however, that we will not be subject to cybersecurity review and network data security review in the future, which could materially and adversely affect our business, financial conditions, and results of operations.
According to the management system imperfections concerning job responsibilities, departmental processes and so on that are identified through self-examination, the Company, by highlighting six elements of “internal environment, risk assessment, control activities, information and communication, and internal supervision” and seven control measures of separate control of incompatible functions, authorization and approval control, accounting system control, property protection control, budget control, operation analysis control and performance appraisal control”, is gradually establishing and improving an internal control system featuring organizational structure, development strategy, human resources, social responsibility, corporate culture, financial activities, procurement business sales business, research and development, financial reports, comprehensive budget, contract management, internal information transfer and information system and other contents, and it is formulating the internal control system applicable to the whole company and organizing related implementation in accordance with relevant laws and regulations and supporting measures..
According to the management system imperfections concerning job responsibilities and departmental processes that are identified through self-examination, the Company, by highlighting six elements of “internal environment, risk assessment, control activities, information and communication, and internal supervision” and seven control measures of separate control of incompatible functions, authorization and approval control, accounting system control, property protection control, budget control, operation analysis control and performance appraisal control”, is gradually establishing and improving an internal control system featuring organizational structure, development strategy, human resources, social responsibility, corporate culture, financial activities, procurement business sales business, research and development, financial reports, comprehensive budget, contract management, internal information transfer and information system and other contents, and it is formulating the internal control system applicable to the whole company and organizing related implementation in accordance with relevant laws and regulations and supporting measures..
Our common stock that currently listed on the Nasdaq Capital Markets are shares of the Nevada holding company that maintains service agreements with the associated operating companies. The Chinese regulatory authorities could disallow our structure, which could result in a material change in our operations and the value of our securities could decline or become worthless.
Our common stock currently listed on the Nasdaq Capital Markets are shares of Datasea, our Nevada holding company, that maintains service agreements with the associated operating companies. The Chinese regulatory authorities could disallow our structure, which could result in a material change in our operations and the value of our securities could decline or become worthless.
The market price for our common stock may be volatile and subject to wide fluctuations due to factors such as: ● the perception of U.S. investors and regulators of U.S. listed Chinese companies; ● actual or anticipated fluctuations in our quarterly operating results; ● changes in financial estimates by securities research analysts; 69 ● negative publicity, studies or reports; ● conditions in Chinese and global cybersecurity product markets; ● our capability to match and compete with technology innovations in the industry; ● changes in the economic performance or market valuations of other companies in the same industry; ● announcements by us or our competitors of acquisitions, strategic partnerships, joint ventures or capital commitments; ● addition or departure of key personnel; ● fluctuations of exchange rates between RMB and the U.S. dollar; and ● general economic or political conditions in or impacting China.
The market price for our common stock may be volatile and subject to wide fluctuations due to factors such as: ● the perception of U.S. investors and regulators of U.S. listed Chinese companies; ● actual or anticipated fluctuations in our quarterly operating results; ● changes in financial estimates by securities research analysts; 56 ● negative publicity, studies or reports; ● conditions in Chinese and global cybersecurity product markets; ● our capability to match and compete with technology innovations in the industry; ● changes in the economic performance or market valuations of other companies in the same industry; ● announcements by us or our competitors of acquisitions, strategic partnerships, joint ventures or capital commitments; ● addition or departure of key personnel; ● fluctuations of exchange rates between RMB and the U.S. dollar; and ● general economic or political conditions in or impacting China.
We also believe that each of the contracts among the wholly-owned PRC subsidiary, the consolidated VIE and its shareholders is valid, binding and enforceable in accordance with its terms. However, there are substantial uncertainties regarding the interpretation and application of current and future PRC laws and regulations.
We also believe that each of the contracts among our wholly-owned PRC subsidiary, the consolidated VIE and its shareholders is valid, binding and enforceable in accordance with its terms. However, there are substantial uncertainties regarding the interpretation and application of current and future PRC laws and regulations.
In addition, the following supply chain-related issues could adversely affect our customer relationships, operating results and financial condition: ● a reduction or interruption in supply of one or more components; ● a significant increase in the price of one or more components ； ● a failure to adequately authorize procurement of inventory by our contract manufacturers; and ● a failure to appropriately cancel, reschedule or adjust our requirements based on our business needs. 49 Over the long term, we intend to invest in engineering, sales, service and marketing activities, and these investments may achieve delayed, or lower than expected, benefits which could harm our operating results.
In addition, the following supply chain-related issues could adversely affect our customer relationships, operating results and financial condition: ● a reduction or interruption in supply of one or more components; ● a significant increase in the price of one or more components； ● a failure to adequately authorize procurement of inventory by our contract manufacturers; and ● a failure to appropriately cancel, reschedule or adjust our requirements based on our business needs. 36 Over the long term, we intend to invest in engineering, sales, service and marketing activities, and these investments may achieve delayed, or lower than expected, benefits which could harm our operating results.
According to the latest amended Cybersecurity Review Measures, which was promulgated on November 16, 2021 and became effective on February 15, 2022, an online platform operator holding more than one million users/users’ individual information shall be subject to cybersecurity review before listing abroad. 66 As of the date of this report, Datasea, its subsidiaries, the VIE and VIE’s subsidiaries have not received any notice from any authorities requiring the PRC subsidiaries to go through cybersecurity review or network data security review by the CAC.
According to the latest amended Cybersecurity Review Measures, which was promulgated on November 16, 2021 and became effective on February 15, 2022, an online platform operator holding more than one million users/users’ individual information shall be subject to cybersecurity review before listing abroad. 52 As of the date of this report, Datasea, its subsidiaries, the VIE and VIE’s subsidiaries have not received any notice from any authorities requiring the PRC subsidiaries to go through cybersecurity review or network data security review by the CAC.
All of our business is conducted through Shuhai Beijing, which is considered a VIE for accounting purposes, and we are considered the primary beneficiary, thus enabling us to consolidate our financial results in our consolidated financial statements.
All of our business is conducted through Shuhai Beijing, which is considered a VIE for accounting purposes, and we are considered the primary beneficiary, thus enabling us to consolidate its financial results in our consolidated financial statements.
You may face difficulties in protecting your interests and exercising your rights as a stockholder of ours since we conduct substantially all of our operations in China and all of our officers and directors reside in China. We conduct substantially all of our operations in China through Shuhai Beijing, the consolidated VIE in China.
You may face difficulties in protecting your interests and exercising your rights as a stockholder of ours since we conduct substantially all of our operations in China and all of our officers and directors reside in China. We conduct substantially all of our operations in China through Shuhai Beijing, our consolidated VIE in China.
In addition, if the imposition of any of these penalties or requirement to restructure our corporate structure causes us to lose the rights to direct the activities of the consolidated VIE or our right to receive their economic benefits, we would no longer be able to consolidate the financial results of such VIE in our consolidated financial statements, which may cause the value of our securities to significantly decline or even become worthless. 55 We depend upon the VIE Agreements in conducting our business in the PRC, which may not be as effective as equity ownership.
In addition, if the imposition of any of these penalties or requirement to restructure our corporate structure causes us to lose the rights to direct the activities of the consolidated VIE or our right to receive their economic benefits, we would no longer be able to consolidate the financial results of such VIE in our consolidated financial statements, which may cause the value of our securities to significantly decline or even become worthless. 42 We depend upon the VIE Agreements in conducting our business in the PRC, which may not be as effective as equity ownership.
Our ability to obtain additional capital on acceptable terms or at all is subject to a variety of uncertainties, including: ● investors’ perceptions of, and demand for, companies operating in China; ● conditions of the U.S. and other capital markets in which we may seek to raise funds; 50 ● our future results of operations, financial condition and cash flows ● governmental regulation of foreign investment in China; ● economic, political and other conditions in the United States, China and other countries; and ● governmental policies relating to foreign currency borrowings.
Our ability to obtain additional capital on acceptable terms or at all is subject to a variety of uncertainties, including: ● investors’ perceptions of, and demand for, companies operating in China; ● conditions of the U.S. and other capital markets in which we may seek to raise funds; 37 ● our future results of operations, financial condition and cash flows ● governmental regulation of foreign investment in China; ● economic, political and other conditions in the United States, China and other countries; and ● governmental policies relating to foreign currency borrowings.
Our limited history may not provide a meaningful basis for investors to evaluate our business, financial performance and prospects. 48 Our independent registered public accounting firm’s auditors’ report includes an explanatory paragraph stating that there is substantial doubt about our ability to continue as a going concern. We are an early and development stage company and have limited financial resources.
Our limited history may not provide a meaningful basis for investors to evaluate our business, financial performance and prospects. 35 Our independent registered public accounting firm’s auditors’ report includes an explanatory paragraph stating that there is substantial doubt about our ability to continue as a going concern. We are an early and development stage company and have limited financial resources.
Lastly, the draft contains proposals for significant fines for serious violations of up to RMB 50 million or 5% of annual revenues from the prior year. 67 Interpretation, application and enforcement of these laws, rules and regulations evolve from time to time and their scope may continually change, through new legislation, amendments to existing legislation and changes in enforcement.
Lastly, the draft contains proposals for significant fines for serious violations of up to RMB 50 million or 5% of annual revenues from the prior year. 53 Interpretation, application and enforcement of these laws, rules and regulations evolve from time to time and their scope may continually change, through new legislation, amendments to existing legislation and changes in enforcement.
Compliance with these requirements may make it more difficult and time consuming for holders of our common stock to resell their shares to third parties or to otherwise dispose of them in the market or otherwise. 70 FINRA sales practice requirements may also limit your ability to buy and sell shares of our common stock, which could depress the price of shares of our common stock.
Compliance with these requirements may make it more difficult and time consuming for holders of our common stock to resell their shares to third parties or to otherwise dispose of them in the market or otherwise. 57 FINRA sales practice requirements may also limit your ability to buy and sell shares of our common stock, which could depress the price of shares of our common stock.
In addition, the government may seek to hold our Company liable for successor liability FCPA violations committed by companies in which we invest or that we acquire. 53 We may be subject to liability if private information that we receive is not secure or if we violate privacy laws and regulations.
In addition, the government may seek to hold our Company liable for successor liability FCPA violations committed by companies in which we invest or that we acquire. 40 We may be subject to liability if private information that we receive is not secure or if we violate privacy laws and regulations.
Tianjin Information’s income in turn depends on the service fees paid by the affiliated entities in China. Current PRC regulations permit the subsidiary in China to pay dividends to us only out of its accumulated profits, if any, determined in accordance with Chinese accounting standards and regulations.
Tianjin Information’s income in turn depends on the service fees paid by its affiliated entities, including the VIE, in China. Current PRC regulations permit the subsidiary in China to pay dividends to us only out of its accumulated profits, if any, determined in accordance with Chinese accounting standards and regulations.
Any failure or perceived failure by us or our third-party service-providers to comply with our privacy or security policies or privacy-related legal obligations, or any compromise of security that results in the unauthorized release or transfer of personally identifiable information or other user data, may result in governmental enforcement actions, litigation, or negative publicity, and could have an adverse effect on our business and operating results. 54 Risks Relating to Our Corporate Structure Our corporate structure, in particular, the Variable Interest Entities (or VIE), and their Agreements (or VIE Agreements), are subject to significant risks, as set forth in the following risk factors.
Any failure or perceived failure by us or our third-party service-providers to comply with our privacy or security policies or privacy-related legal obligations, or any compromise of security that results in the unauthorized release or transfer of personally identifiable information or other user data, may result in governmental enforcement actions, litigation, or negative publicity, and could have an adverse effect on our business and operating results. 41 Risks Relating to Our Corporate Structure Our corporate structure, in particular, the Variable Interest Entity (or VIE), and their agreements (or VIE Agreements), are subject to significant risks, as set forth in the following risk factors.
There is no statutory recognition in the PRC of judgments obtained in the United States. 65 Increases in labor costs in the PRC may adversely affect our business and our profitability. The economy of China has been experiencing significant growth, leading to inflation and increased labor costs.
There is no statutory recognition in the PRC of judgments obtained in the United States. 51 Increases in labor costs in the PRC may adversely affect our business and our profitability. The economy of China has been experiencing significant growth, leading to inflation and increased labor costs.
As a result, our business operations and our ability to make distributions to you could be materially and adversely affected. 64 We may be subject to fine due to our insufficient payment of the social insurance and housing fund of the employees.
As a result, our business operations and our ability to make distributions to you could be materially and adversely affected. 50 We may be subject to fine due to our insufficient payment of the social insurance and housing fund of the employees.
Shuhai Beijing may, from time to time, be subject to restrictions on its ability to make distributions to us, including restrictions on the conversion of RMB into U.S. dollars or other hard currency and other regulatory restrictions. 71
Shuhai Beijing may, from time to time, be subject to restrictions on its ability to make distributions to us, including restrictions on the conversion of RMB into U.S. dollars or other hard currency and other regulatory restrictions. 58
We rely on contractual arrangements with the consolidated VIE and its shareholders, Zhixin Liu, Chairman of the Board, CEO and President of DataSea and Corporate Secretary, and Fu Liu, a Director of DataSea (Fu Liu is the father of Zhixin Liu), to operate our business.
We rely on contractual arrangements with the consolidated VIE and its shareholders, Zhixin Liu, Chairman of the Board, CEO and President of Datasea, and Fu Liu, a Director of Datasea (Fu Liu is the father of Zhixin Liu), to operate our business.
If the PRC government deems that the VIE Agreements do not comply with PRC regulatory restrictions on foreign investment in the relevant industries or other laws or regulations of the PRC, or if these regulations or the interpretation of existing regulations change in the future, we could be subject to severe penalties or be forced to relinquish our interests in those operations, which may therefore materially reduce the value of our common stock.
If the PRC government deems that the VIE Agreements do not comply with PRC regulatory restrictions on foreign investment in the relevant industries or other laws or regulations of the PRC, or if these regulations or the interpretation of existing regulations change in the future, we could be subject to severe penalties or be forced to relinquish our interests in those operations, which may therefore materially reduce the value of our ordinary shares.
We are a holding company incorporated in Nevada. As a holding company with no material operations of our own, we conduct a substantial majority of our operations through the operating entities established in the People’s Republic of China, or the PRC, primarily the variable interest entity (the “VIE”).
We are a holding company incorporated in Nevada. As a holding company with no material operations of our own, we conduct a substantial majority of our operations through the operating entities established in the People’s Republic of China, or the PRC, primarily our variable interest entity (the “VIE”) and its subsidiaries.
Development of COVID-19 In addition, the securities market has from time to time experienced significant price and volume fluctuations that are not related to the operating performance of particular companies. These market fluctuations may also materially and adversely affect the market price of our common stock.
In addition, the securities market has from time to time experienced significant price and volume fluctuations that are not related to the operating performance of particular companies. These market fluctuations may also materially and adversely affect the market price of our common stock.
Our securities may be prohibited from trading on a national exchange or over-the-counter in the United States under the Holding Foreign Companies Accountable Act, if the PCAOB determines that it cannot inspect or fully investigate our auditors for three consecutive years beginning in 2021. As a result, an exchange may determine to delist our securities.
Our securities may be prohibited from trading on a national exchange or over-the-counter in the United States under the Holding Foreign Companies Accountable Act, if the PCAOB determines that it cannot inspect or fully investigate our auditors for two consecutive years. As a result, an exchange may determine to delist our securities.
Moreover, the legal uncertainty created by the Data Security Law and the recent Chinese government actions could materially adversely affect our ability, on favorable terms, to raise capital, including engaging in follow-on offerings of our securities in the U.S. market or the Stock Exchange of Hong Kong.
Moreover, the legal uncertainty created by the Data Security Law and the recent Chinese government actions could materially adversely affect our ability, on favorable terms, to raise capital, including engaging in follow-on offerings of our securities in the U.S. market.
As a result, restrictions on currency exchange may limit our ability to use revenue generated in Renminbi to fund any business activities we may have outside China in the future or to make dividend payments to our shareholders in U.S. dollars.
Substantially all of our revenue is denominated in Renminbi. As a result, restrictions on currency exchange may limit our ability to use revenue generated in Renminbi to fund any business activities we may have outside China in the future or to make dividend payments to our shareholders in U.S. dollars.
Our independent registered public accounting firm is headquartered in the United States and in particular, the State of New York and has been inspected by the PCAOB on a regular basis and as such, it is not affected by or subject to the PCAOB’s Determination Report.
Our independent registered public accounting firm is headquartered in the United States and has been inspected by the PCAOB on a regular basis and as such, it is not affected by or subject to the PCAOB’s Determination Report.
Unlike the common law system, prior court decisions in a civil law system may be cited as reference but have limited precedential value. Since 1979, newly introduced PRC laws and regulations have significantly enhanced the protections of interest relating to foreign investments in China.
The PRC legal system is a civil law system based on written statutes. Unlike the common law system, prior court decisions in a civil law system may be cited as reference but have limited precedential value. Since 1979, newly introduced PRC laws and regulations have significantly enhanced the protections of interest relating to foreign investments in China.
While we intend to focus on managing our costs and expenses, over the long term, we also intend to invest in personnel and other resources related to our engineering, sales, service and marketing functions as we realign and dedicate resources to key growth areas, such as smart security products and services.
While we intend to focus on managing our costs and expenses, over the long term, we also intend to invest in personnel and other resources related to our engineering, sales, service and marketing functions as we realign and dedicate resources to key growth areas, such as intelligent acoustics, 5G messaging and other products and services.
Any such restrictions may materially affect such entities’ ability to make dividends or make payments, in service fees or otherwise, to us, which may materially and adversely affect our business, financial condition and results of operations. 61 Uncertainties with respect to the PRC legal system could have a material adverse effect on us The PRC legal system is a civil law system based on written statutes.
Any such restrictions may materially affect such entities’ ability to make dividends or make payments, in service fees or otherwise, to us, which may materially and adversely affect our business, financial condition and results of operations. 47 Uncertainties with respect to the PRC legal system could have a material adverse effect on us.
We are a holding company and rely principally on dividends paid by the subsidiary in China for our cash needs, including paying dividends and other cash distributions to our shareholders to the extent we choose to do so, servicing any debt we may incur and paying our operating expenses.
Datasea is a holding company and relies principally on dividends paid by its subsidiaries in China for our cash needs, including paying dividends and other cash distributions to our shareholders to the extent we choose to do so, servicing any debt we may incur and paying our operating expenses.
In addition, our securities may be prohibited from trading on a national exchange or over-the-counter in the United States under the Holding Foreign Companies Accountable Act, if the PCAOB determines that it cannot inspect or fully investigate our auditors for three consecutive years beginning in 2021. As a result, an exchange may determine to delist our securities.
In addition, our securities may be prohibited from trading on a national exchange or over-the-counter in the United States under the Holding Foreign Companies Accountable Act, if the PCAOB determines that it cannot inspect or fully investigate our auditors for two consecutive years.
For a description of our corporate structure and contractual arrangements, see “Corporate Structure” on page 31 and “VIE Agreements” on page F-10. We believe that our corporate structure and contractual arrangements comply with the current applicable PRC laws and regulations.
For a description of our corporate structure and contractual arrangements, see “Our Organizational Structure” on page 22 and “VIE Agreements” on page 4. We believe that our corporate structure and contractual arrangements comply with the current applicable PRC laws and regulations.
Rapid economic growth can lead to growth in the money supply and rising inflation. If prices for our services and products rise at a rate that is insufficient to compensate for the rise in the costs of supplies, it may have an adverse effect on profitability.
If prices for our services and products rise at a rate that is insufficient to compensate for the rise in the costs of supplies, it may have an adverse effect on profitability.
Such potential defects might interfere with customer satisfaction, reduce sales opportunities or affect gross margins. As an example, software typically contains bugs that can unexpectedly interfere with expected operations. From time to time, we will have to replace certain components and provide remediation in response to the discovery of defects or bugs in our products.
As an example, software typically contains bugs that can unexpectedly interfere with expected operations. From time to time, we will have to replace certain components and provide remediation in response to the discovery of defects or bugs in our products.
In addition, appreciation or depreciation in the exchange rate of the Renminbi to the U.S. dollar could materially and adversely affect the price of shares of our common stock in U.S. dollars without giving effect to any underlying change in our business or results of operations.
In addition, appreciation or depreciation in the exchange rate of the Renminbi to the U.S. dollar could materially and adversely affect the price of shares of our common stock in U.S. dollars without giving effect to any underlying change in our business or results of operations. 46 Restrictions on currency exchange may limit our ability to receive and use our revenue effectively.
There can be no assurance that a change in leadership, social or political disruption, or unforeseen circumstances affecting the PRC’s political, economic or social life, will not affect the PRC government’s ability to continue to support and pursue these reforms. Such a shift could have a material adverse effect on our business and prospects.
There can be no assurance that a change in leadership, social or political disruption, or unforeseen circumstances affecting the PRC’s political, economic or social life, will not affect the PRC government’s ability to continue to support and pursue these reforms.
Our management has assessed the effectiveness of our internal control over financial reporting with an assessment report as of June 30, 2022, and plans to shorten the cycle and increase the frequency concerning the testing cycle for the effectiveness of internal control measures.
Our management has assessed the effectiveness of our internal control over financial reporting with an assessment report as of June 30, 2023, and plans to shorten the cycle and increase the frequency concerning the testing cycle for the effectiveness of internal control measures. The annual risk control assessment reporting system will be improved to a quarterly risk control assessment system.
If any of the transactions entered into by the subsidiary and the PRC operating affiliate are found not to have been conducted on an arm’s-length basis or to result in an unreasonable reduction in tax under PRC law, the PRC tax authorities have the authority to disallow tax savings, adjust the profits and losses of the respective PRC entities and assess late payment interest and penalties.
If any of the transactions entered into by the subsidiary and the PRC operating affiliate are found not to have been conducted on an arm’s length basis or to result in an unreasonable reduction in tax under PRC law, the PRC tax authorities have the authority to disallow tax savings, adjust the profits and losses of the respective PRC entities and assess late payment interest and penalties. 43 The shareholders of the VIE may have potential conflicts of interest with us, which may materially and adversely affect our business and financial condition.
Our resources and source of funds have primarily consisted of loans and capital contributions from shareholders and funds raised from equity financing. We believe these are sufficient to keep our business operations functioning for the next twelve months. We have generated revenue of approximately $17 million from our business during the year ended June 30, 2022.
Our resources and source of funds have primarily consisted of loans and capital contributions from shareholders and funds raised from equity financing. We believe these are sufficient to keep our business operations functioning for the next twelve months.
If we fail to anticipate and adapt to these changes and evolutions, our sales, gross margins and profitability will be adversely affected. Technologies change rapidly in the security solution, new media advertising, micro marketing and data processing industries with frequent new products and service developments and evolving industry standards.
If we fail to anticipate and adapt to these changes and evolutions, our sales, gross margins and profitability will be adversely affected. Technologies change rapidly in the intelligent acoustics, 5G messaging industries with frequent new products and service developments and evolving industry standards.
The annual risk control assessment reporting system will be improved to a quarterly risk control assessment system Our efforts in the building of internal control system is not limited to the formulation and implementation of financial management and control measures, but focuses on the combination of comprehensive and targeted control to build up an internal control system that best fits us.
Our efforts in the building of our internal control system are not limited to the formulation and implementation of financial management and control measures, but focuses on the combination of comprehensive and targeted control to build up an internal control system that best fits us.
The development of COVID-19 and a slowdown or other adverse developments in the PRC economy may harm our customers and the demand for our services and our products. All of our operations are conducted in the PRC. Although the PRC economy has grown significantly in recent years, there is no assurance that this growth will continue.
All of our operations are conducted in the PRC. Although the PRC economy has grown significantly in recent years, there is no assurance that this growth will continue. A slowdown in overall economic growth, an economic downturn, a recession or other adverse economic developments in the PRC could significantly reduce the demand for our products and services.
Because of this factor, it may be difficult for you to conduct due diligence on our company, our executive officers or directors and attend stockholder meetings if the meetings are held in China.
All of our current officers and directors reside outside the United States and substantially all of the assets of those persons are located outside of the United States. Because of this, it may be difficult for you to conduct due diligence on our company, our executive officers or directors and attend stockholder meetings if the meetings are held in China.
No assurance can be given that we will generate sufficient revenue or obtain the necessary financing to continue as a going concern and the failure to do so could cause us to cease our operations.
The financing sought may be in the form of equity or debt financing or a combination of both from various sources as yet unidentified. No assurance can be given that we will generate sufficient revenue or obtain the necessary financing to continue as a going concern and the failure to do so could cause us to cease our operations.
In the event that the Operation and Intellectual Property Service Agreement is terminated, this would have a severe and detrimental effect on our continuing business viability under our current corporate structure, which, in turn, may affect the value of your investment. 56 Contractual arrangements entered into by the subsidiary and the PRC operating affiliate may be subject to scrutiny by the PRC tax authorities.
In the event that the Operation and Intellectual Property Service Agreement is terminated, this would have a severe and detrimental effect on our continuing business viability under our current corporate structure, which, in turn, may affect the value of your investment.
Such scrutiny may lead to additional tax liability and fines, which would hinder our ability to achieve or maintain profitability. Under PRC law, arrangements and transactions among related parties may be subject to audit or challenge by the PRC tax authorities.
Contractual arrangements entered into by the subsidiary and the PRC operating affiliate may be subject to scrutiny by the PRC tax authorities. Such scrutiny may lead to additional tax liability and fines, which would hinder our ability to achieve or maintain profitability.
Although the PRC government has been pursuing economic reform policies for more than two decades, there is no assurance that the government will continue to pursue such policies or that such policies may not be significantly altered, especially in the event of a change in leadership, social or political disruption, or other circumstances affecting the PRC’s political, economic and social environment.
Although the PRC government has been pursuing economic reform policies for more than two decades, there is no assurance that the government will continue to pursue such policies or that such policies may not be significantly altered, especially in the event of a change in leadership, social or political disruption, or other circumstances affecting the PRC’s political, economic and social environment. 44 The approval and/or other requirements of the CSRC or other mainland China governmental authorities may be required in connection with our issuance of securities overseas under mainland China rules, regulations or policies, and, if required, we cannot predict whether or for how long we will be able to obtain such approval or complete such other requirements.
No assurances can be given that we will be able to obtain funds from our shareholders or others to continue our operations in the future. We may need to seek additional financing. The financing sought may be in the form of equity or debt financing or a combination of both from various sources as of yet unidentified.
Although such liquidity concern may be mitigated by the Company’s sale of shares, no assurances can be given that we will be able to obtain funds from our shareholders or others to continue our operations in the future. We may need to seek additional financing.
As a result, you will not have the same protections afforded to shareholders of companies that are subject to all of the corporate governance requirements of the NASDAQ Stock Market. 58 Risks Associated With Doing Business in China Changes in the policies of the PRC government could have a significant impact upon the business we may be able to conduct in the PRC and the profitability of our business.
Risks Associated With Doing Business in China Changes in the policies of the PRC government could have a significant impact upon the business we may be able to conduct in the PRC and the profitability of our business.
We must remit the offering proceeds to China in a future issuing before they may be used to benefit our business in China, the process of which may be time-consuming, and we cannot assure that we can complete all necessary governmental registration processes in a timely manner.
In light of the various requirements imposed by PRC regulations on loans to and direct investment in PRC entities by offshore holding companies, we cannot assure you that we will be able to complete the necessary government registrations or obtain the necessary government approvals on a timely basis. 49 We must remit offering proceeds to China in a future securities issuance before they may be used to benefit our business in China, the process of which may be time-consuming, and we cannot assure that we can complete all necessary governmental registration processes in a timely manner.
Any political or trade controversies between the United States and China, whether or not directly related to our business, could reduce the price of our common stock. Future inflation in China may inhibit the profitability of our business in China. In recent years, the Chinese economy has experienced periods of rapid expansion and high rates of inflation.
Controversies may arise in the future between these two countries that may affect our economic outlook both in the United States and in China. Any political or trade controversies between the United States and China, whether or not directly related to our business, could reduce the price of our common stock.
The operating entity, Shuhai Beijing, was formed in February 2015 and has yet to generate material revenues and it may not generate material revenue or any profit for the foreseeable future. We are still in the process of developing, marketing and expansion of our business.
Our limited operating history may not provide an adequate basis to judge our future prospects and results of operations. We have a limited operating history. The operating entity, Shuhai Beijing, was formed in February 2015 and may not generate material revenue or any profit in the foreseeable future.
Our officers and directors collectively hold approximately 63.28% beneficial ownership of our Company. Two directors are members of the same family.
Our majority stockholders will control our Company for the foreseeable future, including the outcome of matters requiring shareholder approval. Our officers and directors collectively hold approximately 50.4% beneficial ownership of our Company. Two directors are members of the same family.
Neither we nor our contract manufacturers have developed a sophisticated product testing program due to the limit of available technologies. There can be no assurance that the pre-shipment testing programs we develop in the future will be adequate to detect all defects, including defects in individual products or defects affecting numerous shipments.
There can be no assurance that the pre-shipment testing programs we develop in the future will be adequate to detect all defects, including defects in individual products or defects affecting numerous shipments. Such potential defects might interfere with customer satisfaction, reduce sales opportunities or affect gross margins.
We had cash balances of $49,676 and $164,217 as of June 30, 2021 and June 30, 2022, respectively. We generated revenues of $17,080,911 during the year ended June 30, 2022. We had a net cash inflow of $114,541 during fiscal year ended June 30, 2022. We had a deficit of approximately $18,583,566 as of June 30, 2022.
We had cash balances of $164,217 and $19,728 as of June 30, 2022 and June 30, 2023, respectively. We generated revenues of $7,045,311 during the year ended June 30, 2023. We had a net cash outflow of $144,489 during fiscal year ended June 30, 2023. We had a deficit of approximately $28,067,500 at June 30, 2023.
At various times during recent years, the United States and China have had significant disagreements over political and economic issues. Controversies may arise in the future between these two countries that may affect our economic outlook both in the United States and in China.
If relations between the United States and China worsen, investors may be unwilling to hold or buy our stock and our stock price may decrease . At various times during recent years, the United States and China have had significant disagreements over political and economic issues.
It may therefore be difficult for investors in the United States to enforce their legal rights against us based on the civil liability provisions of the U.S. federal securities laws against us in the courts of either the U.S. or the PRC and, even if civil judgments are obtained in U.S. courts, it may be difficult to enforce such judgments in PRC courts. 62 Certain PRC regulations, including the M&A Rules and national security regulations, may require a complicated review and approval process which could make it more difficult for us to pursue growth through acquisitions in China.
Such a shift could have a material adverse effect on our business and prospects. 48 Certain PRC regulations, including the M&A Rules and national security regulations, may require a complicated review and approval process which could make it more difficult for us to pursue growth through acquisitions in China.
The order of the following risk factors is presented arbitrarily. You should not conclude the significance of a risk factor because of the order of presentation. Our business and operations could be seriously harmed as a result of any of these risks.
No purchase of our common stock should be made by any person who is not in a position to lose the entire amount of his or her investment. The order of the following risk factors is presented arbitrarily. You should not conclude the significance of a risk factor because of the order of presentation.
Any intellectual property litigation could have a material adverse effect on our business, financial condition or results of operations . 68 Risks Relating to Our an Investment in Our Common Stock Our majority stockholders will control our Company for the foreseeable future, including the outcome of matters requiring shareholder approval.
Any intellectual property litigation could have a material adverse effect on our business, financial condition or results of operations . 54 Risks Relating to An Investment in Our Common Stock If we fail to comply with the continued listing requirements of Nasdaq, we would face possible delisting, which would result in a limited public market for our shares and make obtaining future debt or equity financing more difficult for us.
If we do not achieve the benefits anticipated from these investments, or if the achievement of these benefits is delayed, our operating results may be adversely affected. Product quality problems could lead to reduced revenue, gross margins, and net income. The smart security system we provide is highly complex as the products incorporate both hardware and software technologies.
Such an event could also result in a material adverse effect on the market price of our common stock independent of direct effects on our business. Product quality problems could lead to reduced revenue, gross margins, and net income. The sonic air sterilization products we provide is highly complex as the products incorporate both hardware and software technologies.
We expect that our safe campus, scenic area and public community security systems supported by our smart security solutions will be our core business in the future. We have limited experience and operating history in developing and marketing our products and services. In addition, the market for our products and services is highly competitive.
We are still in the process of developing, marketing and expansion of our business. We expect that our intelligent acoustics (including ultrasound, infrasound, directional sound, and Schumann resonance), 5G messaging and other products and services will be our core business in the future. We have limited experience and operating history in developing and marketing our products and services.
Risks Relating to Our Business and Industry We have a limited operating history as a developer of smart security solutions and education technologies. Our limited operating history may not provide an adequate basis to judge our future prospects and results of operations. We have a limited operating history.
Our business and operations could be seriously harmed as a result of any of these risks. Risks Relating to Our Business and Industry We have a limited operating history as a developer of intelligent acoustics, 5G messaging and other products and services.
Removed
You should carefully consider the following risk factors and the other information included herein as well as the information included in other reports and filings made with the SEC before investing in our common stock.
Added
In addition, the market for our products and services is highly competitive.
Removed
The following factors, as well as other factors affecting our operating results and financial condition, could cause our actual future results and financial condition to differ materially from those projected. The trading price of our common stock could decline due to any of these risks, should they materialize, and you may lose part or all of your investment.
Added
We have generated revenue of $7,045,311 from our business during the year ended June 30, 2023, and our expenses will be accrued until sufficient financing is obtained or our shareholders loan us the necessary funds to pay for these expenses.
Removed
Our independent registered public accounting firm’s auditors’ report includes an explanatory paragraph stating that there is substantial doubt about our ability to continue as a going concern, although it is noted that such liquidity concern was mitigated by the Company’s sale of shares of its 2,436,904 shares of common stock at $3.48 per share on July 20, 2021, raising approximately $7,636,796, after deducting offering costs.
Added
On August 1, 2023, the “Company entered into two separate subscription agreements with a certain non-U.S. investor (“Investor A”), pursuant to which the Company agreed to sell and Investor A agreed to purchase an aggregate of 4,760,000 shares of common stock price at a $1.2 per share purchase price. Such shares must be held for a period of 365 days.
Removed
These changes could have a material adverse effect on our business and results of operations. 51 Changes to existing regulations may present technical, regulatory and economic barriers to the provision of our products and services, which may significantly increase our costs and adversely affect the results of our operations .
Added
In accordance with such two agreements and a subsequent supplementary agreement, Investor A shall pay a total purchase price of $5,712,000 in RMB, at an amount of RMB 40,000,000, no later than September 30, 2023. On September 21, the Company has received all of the payment of RMB 40,000,000. On August 15, 2023, Datasea Inc.
Removed
The smart security industry in China is highly regulated by the PRC Ministry of Public Security and Ministry of Industry and Information Technology. The PRC Ministry of Public Security and the Ministry of Industry and Information Technology might change the regulatory framework or impose higher technical standards in the future.
Added
(the “Company”) entered into a subscription agreement with a non-U.S. investor (the “Investor B”), pursuant to which the Company agreed to sell and Investor B agreed to purchase an aggregate of 2,962,963 shares of common stock at a $1.35 per share purchase price, with a total subscription price of $4,000,000.

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Item 2. Properties

Properties — owned and leased real estate

7 edited+11 added−0 removed4 unchanged
Biggest changeThe house is located at Room 902-910, No.2 West Building, Xixi Yintai Commercial Center, Xihu District, Hangzhou, with a construction area of 1149 square meters. The lease term starts from September 11, 2020 to October 5, 2022, with a 25-day rent-free period.
Biggest changeTianjin Information Sea Information Technology Co., Ltd. signed a house lease contract with Hangzhou Zhexin Information Technology Co., Ltd. on August 26, 2020. The house is located at Room 902-910, No.2 West Building, Xixi Yintai Commercial Center, Xihu District, Hangzhou, with a construction area of 1149 square meters.
On Jan 14, 2021,Tianjin Information Sea Information Technology Co., Ltd./Hangzhou Zhexin Information Technology Co., Ltd. And Hangzhou Zhangxun Information Technology Co., LTD signed a tripartite agreement and agreed that all rights and obligations of Tianjin Information Sea Information Technology Co., Ltd under original contract was assigned to Hangzhou Zhangxun Information Technology Co., LTD.
And Hangzhou Zhangxun Information Technology Co., LTD signed a tripartite agreement and agreed that all rights and obligations of Tianjin Information Sea Information Technology Co., Ltd under original contract was assigned to Hangzhou Zhangxun Information Technology Co., LTD.
Then the agreement was renewed again from May 1, 2022 to April 30, 2023, the monthly rental is RMB19,642.5 (US $3,042) and the annual rental is RMB235,710 (US $36,504).We believe the rented space is sufficient for our current operations.
Then the agreement was renewed again from May 1, 2022 to April 30, 2023, the monthly rental is RMB19,642.5 (US $3,042) and the annual rental is RMB235,710 (US $36,504).
The lease agreement expired on October 7, 2022, we received a six-month rent free (two months for each year) discount. We also lease a small office in Harbin for Harbin Information’s operation under a lease that expires on April 30, 2020, as amended on May 1, 2019. We pay an annual rent of approximately $2,930 for this space.
We also lease a small office in Harbin for Harbin Information’s operation under a lease that expires on April 30, 2020, as amended on May 1, 2019. We pay an annual rent of approximately $2,930 for this space.
The monthly rent is approximately $29,851.22 (RMB 20,9910.80). The rental will be increased by 3% per year from the second year on the basis of the previous year’s rental standard. Tianjin Information Sea Information Technology Co., Ltd. signed a house lease contract with Hangzhou Zhexin Information Technology Co., Ltd. on August 26, 2020.
The monthly rent is approximately $29,851.22 (RMB 20,9910.80). The rental will be increased by 3% per year from the second year on the basis of the previous year’s rental standard. On August 7, 2023, Tianjin Information Sea Information Technology Co., Ltd. and Shenzhen Lvjing Real Estate Development Co., Ltd. terminated the lease agreement.
The rental for the first year rental is RMB 3.3/m 2 / day, and the total rental is RMB 13,83970.50, equivalent to $19,813.17. The rental for the second year is RMB 3.4 yuan/m 2 / day, with a total rental of RMB1,425,909, equivalent to $202,777.20. The house security deposit is RMB 115,311.
The rental for the second year is RMB 3.4 yuan/m 2 / day, with a total rental of RMB1,425,909, equivalent to $202,777.20. The house security deposit is RMB 115,311. 59 On January 14, 2021, Tianjin Information Sea Information Technology Co., Ltd./Hangzhou Zhexin Information Technology Co., Ltd.
The cost of the rental place to produce it, Including but not limited to rent, water, electricity, property fees, etc. are all paid by Hangzhou Zhangxun Information Technology Co., LTD In August 2019, we moved our headquarters from 1 Xinghuo Rd. Changning Building, Suite 11D2E, Fengtai District, Beijing, China, to the current address.
The cost of the rental place to produce it, Including but not limited to rent, water, electricity, and property fees are all paid by Hangzhou Zhangxun Information Technology Co., LTD. On September 12, 2022, Hangzhou Zhangxun Information Technology Co., LTD and Hangzhou Zhexin Information Technology Co., Ltd. changed the house lease contract. The lease area is 1,066 square meters.
Added
The lease agreement expired on October 7, 2022, we received a six-month rent free (two months for each year) discount. On October 8, 2022, Tianjin Information Sea Information Technology Co.Ltd. signed a lease contract with Beijing Kaipeng Technology Development Co., LTD.
Added
The lease area is 566.04 square meters, and the lease period is from October 8, 2022 to November 07, 2023. The monthly rent is RMB 63,703 (US $9,179).
Added
On February 8, 2023, Shuhai Information Technology Co.Ltd. signed a lease contract with Beijing Kaipeng Technology Development Co., Ltd. for a leased area of 391.06 square meters at a monthly rent of RMB 44,011.00 (US $6,342). The lease period is from 8 February 2023 to 7 November 2023.
Added
Heilongjiang Xungrui renewed the lease agreement, the lease term is one year, the lease area is 218.25 square meters.the agreement was renewed from May 1, 2023 to April 30, 2024, the monthly rental is RMB23,571 (US $3,396) and the annual rental is RMB282,852 (US $40,756).We believe the rented space is sufficient for our current operations.
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Shuhai Jingwei (Shenzhen) Information Technology Co., Ltd. signed a lease contract with Shenzhen Hongfa real estate development Co., LTD. on August 15, 2023. The building covers an area of 321.87 square meters and will be leased from August 15, 2023 to August14, 2024 with a one months rent-free period. The monthly rent is approximately $6,493.05 (RMB 45,061.80).
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The lease term starts from September 11, 2020 to October 5, 2022, with a 25-day rent-free period. The rental for the first year rental is RMB 3.3/m 2 / day, and the total rental is RMB 1,383,970.50, equivalent to $207,000.
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The lease term is from October 6, 2022 to October 5, 2023, and the monthly rent is RMB 98,205.25 (US $14,150). The annual rent is RMB1,178,463 (US $169,807.35).
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On December 2, 2022, Hangzhou Zhangxun Information Technology Co., LTD and Hangzhou Zhexin Information Technology Co., Ltd. changed the house lease contract again, the lease area is 83 square meters, the lease term is from January 1, 2023 to October 5, 2023, a total of 278 days, the rent is 3.3 yuan/square meter/day.
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The total rental cost is RMB 76,144.20 (US $10,971.78). Due to changes in office requirements, the above two lease agreements were terminated with Hangzhou Zhexin Information Technology Co., LTD on May 5, 2023. On April 29, 2023, Guohao Century (Beijing) Technology Co., Ltd.signed a lease contract with Hangzhou Lanxin Real Estate Co., LTD.
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The lease area is 279.43 square meters, the lease period is from May 10, 2023 to May 9, 2025, and the monthly rent is RMB 15,908.88 (US $2,292). In August 2019, we moved our headquarters from 1 Xinghuo Rd.
Added
Changning Building, Suite 11D2E, Fengtai District, Beijing, China, to 20th Floor, Tower B, Guorui Plaza, 1 Ronghua South Road, Technological Development Zone, Beijing, PRC.

Item 3. Legal Proceedings

Legal Proceedings — active lawsuits and investigations

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Biggest changeNo director, officer or affiliate of the Company, and no owner of record or beneficial owner of more than 5.0% of the securities of the Company, or any associate of any such director, officer or security holder is a party adverse to the Company or has a material interest adverse to the Company in reference to pending litigation.
Biggest changeNo director, officer or affiliate of the Company, and no owner of record or beneficial owner of more than 5.0% of the securities of the Company, or any associate of any such director, officer or security holder is a party adverse to the Company or has a material interest adverse to the Company with reference to pending litigation.

Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

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Biggest changePursuant to the Amendment, the number of shares of the Company’s common stock reserved for issuance under the 2018 Equity Incentive Plan was increased from 4,000,000 shares of common stock to 14,000,000 shares of common stock. 73 The following table provides certain information with respect to all of our compensation plans in effect as of June 30, 2022: Plan Category (A) Number of Securities to be Issued Upon Exercise of Outstanding Options, Warrants and Rights (B) Weighted Average Exercise Price of Outing Options, Warrants and Rights (C) Number of Securities Remaining Available for Future Issuance Under Equity Compensation Plans (excluding securities reflected in column(A)) Equity Compensation Plans approved by stockholders 292,464 $ 4.55 1,319,953 Equity Compensation Plans not approved by stockholders None— None— None— Total 292,464 $ 4.55 1,319,953 Item 6. [Reserved]
Biggest changeThe following table provides certain information with respect to all of our compensation plans in effect as of June 30, 2023: Plan Category (A) Number of Securities to be Issued Upon Exercise of Outstanding Options, Warrants and Rights (B) Weighted Average Exercise Price of Outstanding Options, Warrants and Rights (C) Number of Securities Remaining Available for Future Issuance Under Equity Compensation Plans (excluding securities reflected in column(A)) Equity Compensation Plans approved by stockholders $ 6.00 101,500 Equity Compensation Plans not approved by stockholders — — — Total $ 61
Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities. Market Information Our common stock started trading on the NASDAQ Capital Market under the symbol “DTSS” on December 18, 2018. Based on the records of our transfer agent, we have 24,374,633 shares of common stock issued and outstanding as of September 27,2022.
Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities. Market Information Our common stock started trading on the NASDAQ Capital Market under the symbol “DTSS” in 2018. Based on the records of our transfer agent, we had 32,784,133 shares of common stock issued and outstanding as of September 20, 2023.
Subsequently, the Company filed a registration statement on Form S-8 to register the shares underlying the 2018 Plan. On April 28, 2022, the shareholders of the Company approved an amendment (the “Amendment”) to the Company’s 2018 Equity Incentive Plan at the Company’s annual shareholder meeting.
Subsequently, the Company filed a registration statement on Form S-8 to register the shares underlying the 2018 Plan.
Holder We have140 holders of record of our common stock as of September 27, 2022. Dividends We do not anticipate paying dividends on our common stock at any time in the foreseeable future. We currently plan to retain earnings for the development and expansion of our business.
We have not made any repurchases of the equity securities of Datasea for the period covered by this report. Holder We had 102 holders of record of our common stock as of September 20, 2023. Dividends We do not anticipate paying dividends on our common stock at any time in the foreseeable future.
Removed
No awards have been granted under the 2018 Plan as of the date of this report, but our Board or a Board committee will determine, in its discretion, from time to time to make awards under the 2018 Plan, including to our officers and directors.
Added
We currently plan to retain earnings, if any, for the development and expansion of our business.
Added
On April 28, 2022, the stockholders of the Company approved an amendment to the Company’s 2018 Plan at to increase the number of shares of the Company’s common stock reserved for issuance under the 2018 Equity Incentive Plan from 14,000,000 shares of common stock to 24,000,000 shares of common stock.
Added
On June 20, 2023, the stockholders of the Company approved a further amendment to the 2018 Plan to increase the number of shares of the Company’s common stock reserved for issuance under the 2018 Equity Incentive Plan from 14,000,000 shares of common stock to 24,000,000 shares of common stock.

Item 7. Management's Discussion & Analysis

Management's Discussion & Analysis (MD&A) — revenue / margin commentary

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Biggest changeTo achieve this objective, management of the Company plans to: ● Increasing the size of our addressable clients and market by offering acoustic intelligence product selection and growing our product catalog across (Represented by ultrasonic air sterilizer and actively deploy acoustic intelligence innovative applications in medical beauty, medical care and other fields); ● Strengthen the acoustic intelligence business operation in the U.S for design, innovation, supply chain management, sales, and capitalization in order to reinforce the leadership position globally; ● Develop new products for wider range of application layers, upgrade current service on 5G messaging business, and promote aggressively for seizing up market share; ● Improving margins through operational discipline and accelerated growth in higher margin hardware, services and solutions while building critical mass in new business initiatives; and ensuring cost structure is sustainable relative to our revenue performance by aligning expenses to the size and growth of our business; ● Continue to team up with domestic and international top tier technology institutions for research & development to adhere in the growth stage of industry life cycle persistently through driving up demand by supply side innovation; ● Sales will be expanded globally and core products will be localized for the purpose of better meet customers’ demand; 82 ● Vertical integration through establishing production lines to take advantage of economic scale & scope for cost advantages; ● According to the dynamic economic condition, take advantage of different monetary policy around the world, optimize capital structure for lowering cost of financing; ● Create strategic alliance with potential partners to create mutual synergy in form of merger & acquisition or joint venture; ● Enhance brand awareness by marketing and obtain PCT international patents to boost up the value of intangible assets; ● Maintain clients’ loyalty by providing outstanding customer service, exclusive service experience, and appropriate transparency and publicity.
Biggest changeTo achieve this objective, the management of the Company plans to: ● Strengthen the acoustic intelligence business operation in the U.S. for design, innovation, supply chain management, sales, and capitalization in order to reinforce the leadership position globally; ● Develop new acoustic intelligence product lines for a wider range of application layers, including Acoustic Industrial, Acoustic Agriculture, Acoustic Medicine, Acoustic Beauty and Acoustic Health; ● Upgrade current service on 5G messaging business, and promote aggressively for seizing up market share; ● Continue to team up with domestic and international top-tier technical institutions for research & development in acoustic intelligence, drive up demand through supply-side innovation, and persevere in the growth stage of industry life cycle; ● Expand sales globally and localize core products to better meet customers’ demand; ● Create strategic alliance with potential acoustic intelligence partners, both in US and China, to create mutual synergy in the form of merger & acquisition or joint venture; ● Gain greater control over the supply chain in the acoustic intelligence industry through sustained and beneficial vertical integration; ● Enhance the Company’s brand awareness by omni-channel marketing and obtain PCT international patents to boost up the value of intangible assets; ● Maintain clients’ loyalty by providing outstanding customer service, exclusive service experience, and appropriate transparency and publicity; ● Leverage different monetary policies around the world, optimize capital structure and lower the cost of financing. 79 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.
Future financings through equity investments are likely to be dilutive to existing stockholders. Also, the terms of securities we may issue in 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.
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.
Cash Flow from Financing Activities Net cash provided by financing activities was $6,379,304 during the year ended June 30, 2022, which was the net proceeds from sale of our common stock through an equity financing of $7,681,796, proceeds from capital contribution from a major shareholder of $62,802, and increase in due to related parties of $37,042, but offset by repayment of loans payable of $1,402,336.
Net cash provided by financing activities was $6,379,304 during the year ended June 30, 2022, which was the net proceeds from sale of our common stock through an equity financing of $7,681,796, proceeds from capital contribution from a major shareholder of $62,802, and increase in due to related parties of $37,042, but offset by repayment of loans payable of $1,402,336.
We will reach the domestic first-class and international leading level in technological innovation, talent training, ecological construction, etc., and provide cutting-edge artificial intelligence globally especially for acoustic intelligence to better build the digital world.
We will reach the domestic first-class and international leading level in technological innovation, talent training, ecological construction, and provide cutting-edge artificial intelligence globally especially for acoustic intelligence to better build the digital world.
We expect to generate revenues through expanding our current smart city, 5G messaging and acoustic intelligence business, and through continuous product innovation and development as well as various types of value-added services.
We expect to generate revenues through expanding our current 5G messaging and acoustic intelligence business, and through continuous product innovation and development as well as various types of value-added services.
From July, 2021 to June 30, 2022, the Company generated $17,080,911 for revenue which consisted by 5G message business with an amount of $17,024,695, including $11,937,189 from 5G SMS and $1,825,547 from 5G IMMCP and $3,261,959 from aggregate message cloud as value-added service; and $56,216 from smart city projects.
From July 1, 2021 to June 30, 2022, the Company generated $17,080,911 revenue, which consisted of 5G message business with an amount of $17,024,695, including $11,937,189 from 5G SMS and $1,825,547 from 5G IMMCP and $3,261,959 from aggregate message cloud as value-added service; and $56,216 from other projects.
The Company had an accumulated deficit of approximately $18.58 million as of June 30, 2022, and negative cash flow from operating activities of approximately $5.14 million and $3.95 million for the years ended June 30, 2022 and 2021, respectively.
The Company had an accumulated deficit of approximately $28.06 million as of June 30, 2023, and negative cash flow from operating activities of approximately $3.14 million and $5.14 million for the years ended June 30, 2023 and 2022, respectively.
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.
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.
Datasea’s acoustic intelligence sets have passed the certification of the third party authoritative institutions that has proven to achieve a 99.83% efficacy in nine seconds against Covid-19. At present, a complete set of acoustic intelligent product system has been formed: a.
Datasea’s acoustic intelligence sets have passed the certification of the third-party authoritative institutions that has proven to achieve a 99.83% efficacy in nine seconds against Covid-19.
However, such additional cash resources may not be available to us on desirable terms, or at all, if and when needed by us. As of June 30, 2022, we had working capital deficit of $867,774 or a current ratio of 0.59:1. Our current assets were $1,256,801.
However, such additional cash resources may not be available to us on desirable terms, or at all, if and when needed by us. As of June 30, 2023, we had working capital deficit of $3,617,058 or a current ratio of 0.26:1. Our current assets were $1,289,517.
Significant Accounting Policies Please refer to our significant accounting policies in Note 2 to our CFS. Results of Operations Comparison of the years ended June 30, 2022 and 2021 The following table sets forth the results of our operations for the years ended June 30, 2022 and 2021, respectively, indicated as a percentage of net sales.
Results of Operations Comparison of the years ended June 30, 2023 and 2022 The following table sets forth the results of our operations for the years ended June 30, 2023 and 2022, respectively, indicated as a percentage of net sales.
If deemed necessary, management could seek to raise additional funds by way of private or public offerings, or by obtaining loans from banks or others, to support the Company’s research and development (“R&D”), procurement, marketing and daily operation.
We believe these fundings demonstrate our investors’ confidence on our strategy and business. 73 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.
As of June 30, 2021, we had a working capital deficit of $2,372,682 or a current ratio of 0.27:1. Our current assets were $885,985. We expect the Company to continue to support its ongoing operations and financing through revenue growth and increased financing activities in business areas such as 5G messaging.
As of June 30, 2022, we had a working capital deficit of $867,774 or a current ratio of 0.59:1, and our current assets were $1,256,801. We expect the Company to continue to support its ongoing operations and financing through revenue growth and increased financing activities.
Gross Profit Gross profit for the year ended June 30, 2022 was $955,673 compared to $94,003 for the year ended June 30, 2021, respectively, which shows a $861,670 or 917% increase by comparing with the same period of last fiscal year.
Gross Profit Gross profit for the year ended June 30, 2023 was $340,931 compared to $955,673 for the year ended June 30, 2022, which shows a $614,742 or 64% decrease by comparing with the same period of last fiscal year.
To enhance our ability to continue to operate as a going concern, we are dedicating resources to generate recurring revenues and sustainable operating cash flows.
Liquidity and Capital Resources Historically, we have funded our operations primarily through the sale of our common stock and shareholder loans. To enhance our ability to continue to operate as a going concern, we are dedicating resources to generate recurring revenues and sustainable operating cash flows.
Certain columns may not add up due to rounding. 2022 % of Revenues 2021 % of Revenues Revenues $ 17,080,911 $ 175,138 Cost of revenues 16,125,238 94 % 81,135 46 % Gross profit 955,673 6 % 94,003 54 % Selling expenses 1,358,203 8 % 568,034 324 % Research and development 1,259,739 7 % 851,839 486 % General and administrative expenses 5,574,985 33 % 3,535,416 2,019 % Total operating expenses 8,192,927 48 % 4,955,289 2,829 % Loss from operations (7,237,254 ) (42 )% (4,861,286 ) (2,776 )% Non-operating income (expense), net 125,572 1 % (23,030 ) (13 )% Loss before income taxes (7,111,682 ) (42 )% (4,884,316 ) (2,789 )% Income tax expense - - % - - % Loss before noncontrolling interest (7,111,682 ) (42 )% (4,884,316 ) (2,789 )% Less: income (loss) attributable to noncontrolling interest (589,974 ) (3 )% (235,839 ) (135 )% Net loss to the Company $ (6,521,708 ) (38 )% (4,648,477 ) (2,654 )% 78 Revenues We had revenues of $17,080,911 and $175,138 for the years ended June 30, 2022 and 2021, respectively, which shows a $16,905,773 or 9,653% increase by comparing with the same period of last fiscal year.
Certain columns may not add up due to rounding. 2023 % of Revenues 2022 % of Revenues Revenues $ 7,045,311 $ 17,080,911 Cost of revenues 6,704,380 95 % 16,125,238 94 % Gross profit 340,931 5 % 955,673 6 % Selling expenses 690,731 10 % 1,358,203 8 % Research and development 921,020 13 % 1,259,739 7 % General and administrative expenses 8,414,400 119 % 5,574,985 33 % Total operating expenses 10,026,151 142 % 8,192,927 48 % Loss from operations (9,685,220 ) (138 )% (7,237,254 ) (42 )% Non-operating income (expense), net (12,795 ) (0.2 )% 125,572 1 % Loss before income taxes (9,698,015 ) (138 )% (7,111,682 ) (42 )% Income tax expense - - % - - % Loss before noncontrolling interest (9,702,334 ) (138 )% (7,111,682 ) (42 )% Less: income (loss) attributable to noncontrolling interest (218,323 ) (3 )% (589,974 ) (3 )% Net loss to the Company $ (9,479,692 ) (135 )% (6,521,708 ) (38 )% 74 Revenues We had revenues of $7,045,311 and $17,080,911 for the years ended June 30, 2023 and 2022, respectively, which shows a $10,035,600 or 59% decrease by comparing with the same period of 2022.
Non-operating expense was $23,030 for the year ended June 30, 2021, mainly consisting of interest income $2,517 and other expenses $25,547. Net Loss We generated net losses of $6,521,708 and $4,648,477 for the years ended June 30, 2022 and 2021, respectively, which shows a $1,873,231 or 40% increase by comparing with the same period of last fiscal year.
Non-operating income was $125,572 for the year ended June 30, 2022, consisting mainly of interest income of $50,497 and other income of $75,075. Net Loss We generated net losses of $ 9,479,692and $6,521,708 for the years ended June 30, 2023 and 2022, respectively, which shows a $2,957,984 or 45% increase by comparing with the same period of 2022.
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. 74 You should be aware that our actual results could differ materially from those contained in the forward-looking statements due to a number of 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 services; ● 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 that of our competitors; ● unanticipated delays in the development, market acceptance or installation of our products and services; ● changes in Chinese government regulations; ● availability, terms and deployment of capital, relationships with third-party equipment suppliers; and ● influences of COVID-19 on China’s economy and society.
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 services; ● 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 that of our competitors; ● unanticipated delays in the development, market acceptance, or installation of our products and services; ● changes in Chinese government regulations; ● availability, terms and deployment of capital, relationships with third-party equipment suppliers; and Overview Company Structure Datasea Inc. is a global technology company incorporated in Nevada USA on September 26, 2014, with subsidiaries and operating entities located in Delaware and China, that provides intelligent acoustics (including ultrasound, infrasound, directional sound, and Schumann resonance), 5G messaging and other products and services to various corporate and individual customers.
The increase in revenues was mainly due to the expansion of the Company’s business towards 5G messaging. For the year ended June 30, 2022, revenues mainly consisted of service fees from our 5G SMS service platform.
For the year ended June 30, 2023 and 2022, cost of revenues was mainly the 5G SMS service platform fees and Cloud Platform construction to suppliers. The decrease in cost of revenues was due mainly to the decrease sales of 5G SMS.
The following is a summary of cash provided by or used in each of the indicated types of activities during the years ended June 30, 2022 and 2021, respectively. 2022 2021 Net cash used in operating activities $ (5,139,712 ) $ (3,948,349 ) Net cash used in investing activities $ (1,133,424 ) $ (168,685 ) Net cash provided by financing activities $ 6,379,304 $ 2,448,847 Cash Flow from Operating Activities Net cash used in operating activities was $5,139,712 during the year ended June 30, 2022, compared to net cash used in operating activities of $3,948,349 during the year ended June 30, 2021, an increase in cash outflow of $1,191,363.
However, there is no assurance that the Company will be able to secure such additional working capital on commercially viable terms or at all. 77 The following is a summary of cash provided by or used in each of the indicated types of activities during the years ended June 30, 2023 and 2022, respectively. 2023 2022 Net cash used in operating activities $ (3,136,081 ) $ (5,139,712 ) Net cash used in investing activities $ (113,131 ) $ (1,133,424 ) Net cash provided by financing activities $ 3,109,207 $ 6,379,304 Cash Flow from Operating Activities Net cash used in operating activities was $3,136,081 during the year ended June 30, 2023, compared to net cash used in operating activities of $5,139,712 during the year ended June 30, 2022, a decrease in cash outflow of $2,003,631.
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. There can be no assurance the Company will become profitable or obtain necessary financing for its business or that it will be able to continue in business.
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.
The increase in gross profit was mainly due to the delivery of services related to the 5G SMS service platform in 2022. 79 Gross margin is 5.6% for the 12 months ended June 30,2022.As the Company proceeds into the later stage of the 5G messaging business, three factors will help equip the Company with more flexibility in pricing and improving the gross margin: 1) costs will be reduced by economic of scale over a larger number of customers basis and the increase of production 2)By adopting differentiation strategy, growing brand recognition and customer loyalty will strengthen the Company’s pricing power; 3) after the commercialization of 5G messaging in the Chinese market (expected in the fourth quarter of 2022), the target customers and product forms will be expanded.
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) after the commercialization of 5G messaging in the Chinese market (expected in the fourth quarter of 2022), the targeted customers and product will be expanded.
We are treating the human capital as key indicator to drive the business growth and technical innovation, also pursuing better integration channel with related industries, i.e. human capital investment on application of quantum technology, joint venture establishment with experienced entrepreneurs in Acoustic Effect Technology, and investment to 5G messaging technology area by establishing joint venture etc. 80 Non-operating Income (Expenses), net Non-operating income was $125,572 for the year ended June 30, 2022, consisting mainly of interest income of $50,497 and other income of $75,075.
We are treating the human capital as a key indicator to drive the business growth and technical innovation, also pursuing better integrated channels with related industries. Non-operating Income (Expenses), net Non-operating expense was $12,795 for the year ended June 30, 2023, consisting mainly of interest income of $219 and other expense of $13,014.
Cost of Revenues We recorded $16,125,238 and $81,135 cost of revenues for the years ended June 30, 2022 and 2021, respectively, which shows a $16,044,103 or 19,775% increase by comparing with the same period of last fiscal year. For the year ended June 30, 2022, cost of revenues was mainly the 5G SMS service platform fees to suppliers.
Cost of Revenues We recorded $6,704,380 and $16,125,238 cost of revenues for the years ended June 30, 2023 and 2022, respectively, which shows a $9,420,858 or 58% decrease by comparing with the same period of 2022.
For the year ended June 30, 2021, the cost of goods sold was mainly the inventory purchase cost for the products sold. The increase in cost of revenues was due mainly to the expansion into the 5G messaging business and the delivery of services related to the 5G SMS service platform in 2022.
The decrease in gross profit was mainly due to the decrease in delivery of services related to the 5G SMS service platform in 2023. Gross margin is 4.8% for the year ended June 30, 2023 compared to 5.6% for the year ended June 30, 2022.
For example, the Company will provide the 5G IMMCP as SaaS software, customization and value-added services to improve profit margin. Selling, General and Administrative, and Research and Development Expenses Selling expenses were $1,358,203 and $568,034 for the years ended June 30, 2022 and 2021, respectively, representing an increase of $790,169 or 139%.
Selling, General and Administrative, and Research and Development Expenses Selling expenses were $690,731 and $1,358,203 for the years ended June 30, 2023 and 2022, respectively, representing an decrease of $667,472 or 49%.
SCB Operating Entities will help the construction of China’s digital smart city and continue to provide a digital smart city application platform that meets the needs of residential communities, schools and commercial enterprises in the Chinese market. 77 Going Concern The accompanying unaudited condensed 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.
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 years ended June 30, 2023 and 2022, the Company had a net loss of approximately $9.48 million and $6.52 million, respectively.
The increase in cash outflow was mainly due to increased net loss by $2,227,366, increased accounts receivable outstanding of $267,158, increased cash outflow on inventory of $58,492, increased cash outflow on prepaid expenses of $157,303, increased cash outflow on accounts payable of $96,405, increased cash outflow on unearned revenue and deferred revenue of $142,402, which was partly offset by increased cash inflow from VAT prepayment of $216,022, increased cash inflow from accrued expenses and other payables by $518,520, and noncash adjustments to net loss of $378,590 depreciation and amortization expenses, and stock compensation expense of $621,000. 81 Cash Flow from Investing Activities Net cash used in investing activities totaled $1,133,424 for the year ended June 30, 2022, which consists of cash paid for the acquisition of office furniture and equipment of $51,340, cash paid for acquisition and development of software systems of $1,051,111, and long-term investment into high-tech companies of $30,973.
Net cash used in investing activities totaled $1,133,424 for the year ended June 30, 2022, which consisted of cash paid for the acquisition of office furniture and equipment of $51,340, cash paid for acquisition and development of software systems of $1,051,111, and long-term investment into high-tech companies of $30,973.
We incurred R&D expenses of $1,259,739 and $851,839 during the years ended June 30, 2022 and 2021, respectively, which shows a $407,900 or 48% increase by comparing with the same period of last fiscal year. We intend to invest approximately $10 million in technological product development over the next three years.
Currently, we are focusing on expanding the Company’s leading intelligent acoustics technologies and products and continuing to develop 5G-related applications. We incurred R&D expenses of $921,020 and $1,259,739 during the years ended June 30, 2023 and 2022, respectively, which shows a $338,719 or 27% decrease by comparing with the same period of 2022.
(“Shuhai Beijing”), the VIE that holds its seven subsidiaries, possesses cutting-edge products and solutions in three industries: 5G messaging, acoustic intelligence and smart city. Up to date, Shuhai Beijing and its subsidiaries own 27 Patents and 77 Software Copyrights, including 20 patents applications pending in core technologies to empower and grow our business.
As of the date of this report, Shuhai Beijing and its subsidiaries own 27 Patents and 106 Software Copyrights in the PRC, which include 10 pending patent applications in core technologies, to empower and grow the business.
Net cash used in investing activities totaled $168,685 for the year ended June 30, 2021, which primarily was for cash paid for the acquisition of office furniture and equipment and leasehold improvements of $142,537, and for intangible assets of $26,148.
Cash Flow from Investing Activities Net cash used in investing activities totaled $113,131 for the year ended June 30, 2023, which consisted of cash paid for the acquisition of office furniture and equipment of $3,881, cash paid for acquisition and development of software systems of $80,438, and long-term investment into high-tech companies of $28,812.
Research and development expenses of $1,259,739 and intangible assets increased by $649,644 in fiscal year 2022.
Research and development expenses of $921,020and intangible assets increased by $80,438 for year ended June 30, 2023.
These statements represent our estimates and assumptions only as of the date of this report.
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.
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The forward-looking statements in this report are based upon management’s current expectations and belief, which management believes are reasonable.
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The acoustic business offers a wide range of cutting-edge products including high-quality sonic air disinfection solutions, skin repair and beauty solutions, as well as sleep-aid devices. Our products find extensive applications across various industries and sectors, including sonic antivirus, sonic beauty, sonic medical treatments, and sonic agriculture.
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Overview Datasea is a leading provider of products, services, and solutions in three converging and innovative industries: 5G messaging, acoustic intelligence and smart city to enterprise and retail customers. Datasea Inc. (the “Company” or “Datasea”) common stock trades on the Nasdaq Capital Market under the symbol DTSS on the Nasdaq Capital Market.
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Datasea’s common stock currently listed on the Nasdaq Capital Market are shares of our Nevada holding company that maintains service agreements with the associated operating companies which instead enable us to consolidate the financial results of the VIE and its subsidiaries with Datasea’s corporate group under U.S. GAAP, making Datasea the primary beneficiary of the VIE for accounting purposes.
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We were incorporated in Nevada on September 26, 2014. As a holding company with no material operations, the Company conducts a majority of business through the organizations established in the People’s Republic of China, or the PRC, primarily by variable interest entity (the “VIE”).
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For a description of our corporate structure and contractual arrangements, see “Our Organizational Structure” on page 22 and “VIE Agreements” on page 4. 62 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.
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The Company does not have any equity ownership of its VIE, instead it controls the VIE’s business operations through certain contractual arrangements and receives economic benefits from the VIE.
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Additionally, through the Company’s subsidiary in China, Tianjin Information Sea Information Technology Co., Ltd (“Shuhai Tianjin”) and the VIE, Shuhai Information Technology Co., Ltd. (“Shuhai Beijing”), we carry out business activities in China, along with its subsidiary entities.
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The vision of Datasea is to create connections that make the impossible possible, empower businesses and improve the quality of life with a sustainability focus, and aim to become a multinational company in a decade with a US operation entity as the core of its business operations. Shuhai Information Technology Co., Ltd.
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Shuhai Beijing possesses cutting-edge products and solutions in intelligent acoustics and 5G messaging applications to support a wide range of commercial enterprises, households and individuals in China. Internationalization has always been a crucial strategy for the Company. Datasea incorporated a wholly-owned subsidiary, Datasea Acoustics LLC, based in the State of Delaware, USA.
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The primary operational goals are to: (i) Provide best-in-class products and solutions in 5G messaging, acoustic intelligence and smart city; (ii) maximize long-term sustainable growth of earnings and operating funds; (iii) generate cash flows and returns to the shareholders.
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Datasea Acoustics LLC, established on July 31, 2023, represents our strategy of targeting the global market, including the U.S. market, and provides “intelligent acoustics” technology and products, which is a transformative blend of acoustics and artificial intelligence.
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Such objectives will be accomplished by diversifying product portfolio, improving operating efficiency, achieving superior risk-adjusted returns, prudently allocating capital, accelerating market reach and client acquisition. We believe that in order to sustainable growth and remain comparative we need to : (i) leverage innovation to provide convenience and choice to customers and commit to staying ahead of the emerging market trends.
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The launch of Datasea Acoustics LLC in the U.S. serves a dual purpose: it solidifies Datasea’s commitment to the field of Intelligent Acoustics and emphasizes the Company’s plan to introduce cutting-edge antivirus acoustic solutions to the U.S. market.
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The Company will invest in R&D and will work with the best-in-class research institutes to match the innovative drive with the highest standards of product research and quality.
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Datasea Acoustics LLC will begin to provide leading and high-quality ultrasonic air sterilizers, bathroom and cloakroom sterilizers and odor removal products, as well as continuous new products including ultrasonic Skin Repair Robots and Schumann frequency sleep monitors to the global market, mainly the U.S. market, catering to a broad and growing global consumer base.
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These efforts have are evidenced in our new launches and upgrades of products in 5G messaging, acoustic intelligence and smart city;(ii) being fast market-movers with great execution, Datasea’s strategic business expansion to 5G messaging and acoustic intelligence all prove the Company is able to identify great opportunities in the market and grasp them with execution;(iii) generating diversified revenue resources and continuous business model improvements.
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Technology and Innovation Datasea is the global initiator, promoter and practitioner of the concept of acoustic intelligence. Our commitment to technological advancement and global reach positions us at the forefront of delivering cutting-edge intelligent acoustics solutions, especially focusing on ultrasound, infrasound, directional sound and Schumann resonance technology, to meet the evolving needs of our customers and communities worldwide.
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Similar to the importance of diversification to investors, having a diversified product solution can also offset risks and make the company more resilient. Datasea tapped into three different business areas but with great synergies among them.
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The research and development of intelligent acoustics technology plays a vital role for the Company and is what makes us different. The Company has non-visual intelligent algorithms and techniques, intelligent acoustics technologies such as ultrasound and directional sound, and 5G messaging related technology.
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Meanwhile, the Company provides a combination of software and hardware products and solutions which have the flexibility to meet with clients of different needs, but also have the abilities to serve customers at scale.
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Combined with artificial intelligence (AI), machine learning and data analytics, our Acoustics and 5G intelligent products and solutions are able to serve more than 48.42 million enterprises of all types (over 99% are SMEs) and households in China.
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Datasea also keeps improving the business model for having more resources to generate recurring revenues and improve profit margin. 75 5G messaging : As a leading service provider in China’s 5G communication field, our VIE entities, Shuhai Beijing’s subsidiary,Guohao Century (Beijing) Technology Ltd. (“Guohao Century”), along with its control-owned subsidiaries, Hangzhou Shuhai Zhangxun Information Technology Co., Ltd.
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In addition, the U.S. subsidiary, Datasea Acoustics, is actively acquiring U.S. patents, as well as international patents, and collaborating with U.S. universities and world-renowned research institutions. The Company holds an outstanding position in the field of acoustics, particularly in the areas such as ultrasound, infrasound, and directional sound.
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(“Zhangxun”) increases and improves the ways in which people and businesses communicate, while delivering brands the opportunity to engage, convert and nurture buying relationships efficiently.
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To promote research and innovation in these areas, the Company actively collaborates with several prominent research institutions and universities, including Chinese Academy of Sciences Institute of Acoustics, China Academy of Information and Communications Technology Cloud Computing and Big Data Research Institute, Tsinghua University Internet Industry Research Institute, Harbin Institute of Technology Artificial Intelligence Research Institute, Beijing Union University, and Jilin University Remote Sensing Research Institute.
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Meanwhile, Datasea creates a new messaging ecosystem through the integration of modern communication technologies, based on the telecom ecological network, and directly connects with enterprises through the SMS portal on mobile terminals. mainly include: Acoustic intelligence : Compared with the wide recognition of 5G messaging market potential, Shuhai Beijing and its wholly-owned subsidiary, Shuhai Jingwei (Shenzhen) Information Technology Co., Ltd.
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The Company, together with these partners, is dedicated to conducting research on new topics and developing novel technology applications to drive advancements in the field of acoustics. To better achieve this goal, the Company collaborated for seven joint laboratories to enhance the integration and collaboration of research resources.
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(“Shuhai Jingwei”), and Shuhai Jingwei’s subsidiary Shuhai Acoustic Effect Technology Co., Ltd. (“Shuhai Acoustic Effect”) demonstrates its vision and ability to stay ahead of the emerging market trends in acoustic intelligence. In the field of acoustic intelligence, Datasea is a acoustic intelligence trailblazer and aims to introduce this cutting edge technology and its applications to China and the world.
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These collaborations and the establishment of these laboratories further solidify the Company’s leading position in the field of acoustics, providing a strong foundation for future innovations and development.
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Compared with the wide recognition of 5G messaging market potential, Shuhai Beijing and Shuhai jingwei (Shenzhen) Technology, Co., Ltd. (“Shuhai Jingwei”) combine artificial intelligence technology and acoustic technology to offer dynamic instead of static products, and demonstrates our vision, ability and advantage to stay ahead of the emerging market trends in acoustic intelligence.
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Additionally, the Company, together with MIIT, Key Laboratory of Artificial Intelligence Key Technology and Application Evaluation and Informatization, CAICT Cloud Computing & Big Data Research Institute, released China’s inaugural white paper on the acoustic intelligence industry. The paper shares compelling analysis and fact findings on intelligent acoustics technology, the commercialization of the technology, and the industry outlook.
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Digital Smart City Datasea developed a digital city platform with smart campus, smart community, smart scenic area and smart security solutions.
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The white paper discussed the applications of the acoustic intelligence on an industry level, demonstrated the expectation for Datasea to lead the initiatives and highlighted the Company’s industry position in the field of acoustics. 63 Operational goals The primary operational goals are: (i) Revenue Growth: drive revenue growth through strategies such as expanding the sales team and distribution channels and network, exploring new domestic and U.S. markets, and providing value-added services; (ii) Technological Innovation: continuously improve the technological level of the ultrasonic antivirus series products and services, as well as prospectively introduce the ultrasonic skin repair and AI diagnosis, Schumann frequency sleep monitors and other acoustic technologies in multiple fields of health to meet global market demand and maintain competitive advantage; (iii) Customer Satisfaction: provide customers with high-quality acoustic products and excellent services to promote customer retention and positive reputation; (iv) International Expansion: continue international expansion with a focus on U.S. market based on U.S. subsidiary’s operation, M&A and cross-cultural management; (v) Partnerships and Collaborations: foster partnerships, including collaborations with suppliers, partners, and research institutions; (vi) Risk Management: vigilantly identify, assess, and manage various risks, including market, legal, and supply chain risks; (vii) Shareholder Returns: generate healthy cash flow and returns for shareholders.
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The digital smart city business of Datasea is based on the Internet of Things, big data, and AI algorithm platforms, and relies on the Datasea big data center, Internet of Things cloud platform and artificial intelligence cloud platform) to create various industries application clouds.
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CEO’s Review: Datasea achieved a number of new milestones in this fiscal year, while our net sales decreased to $7,045,311. The decline was partially due to the negative impact of the coronavirus pandemic.
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Through the application of various scenarios in the city, the in-depth integration of informatization, industrialization and urbanization can be realized, refined and dynamic management can be realized, and the effectiveness of urban management and the quality of life of citizens can be improved. The digital city platform includes smart campuses, smart communities, smart scenics and smart security, etc.
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T he COVID-19 pandemic has adversely disrupted the supply chain and negatively impacted the timing of the production and marketing of our ultrasonic products due to quarantines, facility closures, and travel and logistics restrictions related to the outbreak. During the epidemic, the demand for our 5G messaging business has also decreased due to the restrictions on the travel.
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Shuhai Beijing and its two subsidiaries, Guozhong Haoze (Beijing) Technology Ltd. (“Guozhong Haoze”) and Heilongjiang Xunrui Technology Co., Ltd (“Xunrui Technology,” Shuhai Beijing, collectively with Guozhong Haoze and Xunrui Technology, are hereafter referred as the “SCB Operating Entities”) mainly focus on the Smart City Business.
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The decline of our net sales was also partially due to our strategic restructuring of our business lines. Datasea initially also carried out businesses in the Smart City sector and developed underlying platforms based on Internet of Things and Artificial Intelligence algorithm to provide smart city solutions such as smart campus, smart community, smart scenic sites.
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Recent Developments 5G IMMCP We upgraded the 5G message marketing cloud platform (“5G MMCP”) to an Integrated 5G message marketing cloud platform (“5G IMMCP”), expanding connection with existing clients through accesses such as SMS, email, WeChat, applet, APP Push and third-party tools and manage users from different platforms all in one 5G IMMCP.
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However, in recent years, there has been vicious competition in this industry, such as fighting for market share through massive losses, serious homogeneous competition, and unhealthy and disorderly market development. This is contrary to the strategy and values of our company: we adopt the differentiation strategy as well as strive for healthy and sustainable growth.
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And optimizing the system and communication and enhancing the customer experiences by adding functions in 5G IMMCP including CRM iteration, configuration center, open center iteration, and message center iteration.
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We believe this strategic restructuring reflects our forward-looking vision and correct values. Despite these, I am pleased with our performance, including the continuous improvement of technology and research and development capabilities, a wide range of acoustic product portfolio, the establishment of multiple marketing and sales channels and the cooperation of domestic and international leading technology laboratories.
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“5G MMCP + 5G IMMCP ” and “Smart Push” are designed to satisfy businesses and retailers’ marketing needs and have formed a closed loop of the unique SAAS business model of channel consumption + subscription service, and services covering the whole market. ability to achieve dual business drivers. 76 In May 2022, Hangzhou Zhangxun and China Mobile Construction Co., LTD.
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A more important measure of our success than short-term revenue is the establishment of Acoustic Intelligence as the core of our company’s strategy. Datasea is the global initiator, promoter and practitioner of the concept of acoustic intelligence, which sits on the integration of the acoustics and artificial intelligence.
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Nanjing Branch signed a $1.043 million smart hotel private cloud platform construction and procurement contract. After the acceptance of the service was completed in August 2022, Hangzhou Zhangxun received a remittance of $1.043 million（ RMB6.735 million） from China Mobile Construction Co., LTD. ’s Jiangsu branch on September 16, 2022.

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