[10-K] DATASEA INC. Files Annual Report

Filing Impact

(Moderate)

Filing Sentiment

(Neutral)

Form Type

10-K

Rhea-AI Filing Summary

DATASEA Inc. (DTSS) is a holding company that conducts most operations through PRC subsidiaries and a VIE structure. The company reported 8,256,816 shares outstanding and an accumulated deficit of approximately $44.53 million as of June 30, 2025. Operating cash flow was negative about $2.37 million in fiscal 2025 (and $6.40 million in 2024), and management states recurring losses raise substantial doubt about the company’s ability to continue as a going concern.

The filing highlights large market opportunities in acoustic and smart-voice services: China acoustic components projected CAGR of 15.6% to over RMB46 billion by 2025, and smart voice services reached RMB28.5 billion in 2021 with 44% year-on-year growth. The company disclosed manufacturing and sales cooperation agreements, multiple credit lines and loans (many repaid during FY2025), capital raises including a $4.0 million registered offering closed September 2024, and a 1-for-15 reverse stock split effective January 19, 2024.

Positive

Market opportunity: China acoustic components market projected CAGR of 15.6% to >RMB46 billion by 2025 and smart voice services reached RMB28.5 billion in 2021 (44% YoY growth).
Commercial agreements: Signed sales channel cooperation and manufacturing cooperation agreements to expand into smart wearables, health footwear and enhance manufacturing precision.
Capital raise: Completed a registered subscription that generated approximately $4.0 million gross proceeds in 2024; Pre-Funded Warrants were exercised in full by December 31, 2024.

Negative

Accumulated deficit: Approximately $44.53 million as of June 30, 2025.
Negative operating cash flows: ~$2.37 million (FY2025) and ~$6.40 million (FY2024).
Going concern: Management states recurring losses raise substantial doubt about the company’s ability to continue as a going concern.
Related-party and insider support: CEO and family members provided loan forgiveness recorded as shareholder capital contributions and multiple leases/transactions with insiders.
Deferred tax assets fully reserved: Management recorded a 100% valuation allowance against deferred tax assets, indicating uncertainty of future taxable profits.

Insights

TL;DR: Material liquidity and cumulative loss issues create high financial risk despite market opportunity.

The company shows a significant accumulated deficit of $44.53 million and consecutive negative operating cash flows ($2.37 million in FY2025 and $6.40 million in FY2024). Management explicitly discloses substantial doubt about going concern, which is a material adverse indicator for investors. While the company completed equity financings (approximately $4.0 million gross proceeds from the September 2024 subscription) and repaid multiple loans during FY2025, operating losses, full valuation allowance on deferred tax assets, and reliance on credit lines and related-party support indicate ongoing liquidity and solvency risk. The market growth statistics for acoustic technologies are encouraging but do not mitigate the near-term funding and profitability gaps.

TL;DR: Related-party transactions and concentrated insider ownership raise governance and minority-holder concerns.

Founder-level shareholders (Zhixin Liu and Fu Liu) materially increased control, owning about 51.29% after a transaction described in the filing. The CEO and family provided loan forgiveness that was recorded as shareholder capital contribution. The company has multiple related-party leases and forgiven loans, and issues sizable stock-based compensation to executives and directors. These arrangements—while disclosed—create potential conflicts of interest and heighten governance scrutiny, particularly given the company’s reliance on insiders for capital and rent concessions.

09/26/2025 - 01:01 PM

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-K

☒ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the fiscal year ended June 30, 2025

☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from _____________ to ____________________

Commission file number 001-38767

DATASEA INC.

(Exact name of registrant as specified in its charter)

Nevada		45-2019013
(State or other jurisdiction of incorporation or organization)		(I.R.S. Employer Identification No.)

Room 302-5，Building C, Gemdale Viseen

International Center, No.5 Shengfang Road,

Daxing District, Beijing,

People’s Republic of China

102628

(Address of principal executive offices)

(Zip Code)

+86 10-56145240

(Registrant’s telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act:

Title of each class		Trading Symbol		Name of each exchange on which registered
Common Stock, $0.001 par value		DTSS		The NASDAQ Capital Market LLC

Securities registered pursuant to Section 12(g) of the Act: None.

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes ☐ No ☒

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes ☐ No ☒

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer	☐	Accelerated filer	☐
Non-accelerated filer	☒	Smaller reporting company	☒
		Emerging growth company	☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant has filed a report on and attestation to its management’s assessment of the effectiveness of its internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public accounting firm that prepared or issued its audit report. ☐

If securities are registered pursuant to Section 12(b) of the Act, indicate by check mark whether the financial statements of the registrant included in the filing reflect the correction of an error to previously issued financial statements. ☐

Indicate by check mark whether any of those error corrections are restatements that required a recovery analysis of incentive-based compensation received by any of the registrant’s executive officers during the relevant recovery period pursuant to §240.10D-1(b). ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒

The aggregate market value of the voting and non-voting common equity held by non-affiliates of the Registrant as of December 31, 2024, based on the price at which the common equity was last sold, as reported on Nasdaq Capital Market on such day, was approximately $16,406,480.58.

As of September 24, 2025, 8,256,816 shares of common stock, $0.001 par value per share, were issued and outstanding.

DATASEA INC.

Annual Report on Form 10-K

For the Fiscal Year Ended June 30, 2025

TABLE OF CONTENTS

Cautionary Note Regarding Forward-Looking Statements		iii

PART I
Item 1.	Description of Business	1
Item 1A.	Risk Factors	43
Item 1B.	Unresolved Staff Comments	65
Item 1C.	Cybersecurity	65
Item 2.	Description of Property	65
Item 3.	Legal Proceedings	66
Item 4.	Mine Safety Disclosure	66

PART II
Item 5.	Market for Common Equity and Related Stockholder Matters	67
Item 6.	[Reserved]	69
Item 7.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	69
Item 7A.	Quantitative and Qualitative Disclosures About Market Risk	95
Item 8.	Financial Statements	95
Item 9.	Changes In and Disagreements with Accountants on Accounting and Financial Disclosure	95
Item 9A.	Controls and Procedures	95
Item 9B.	Other Information	98
Item 9C.	Disclosure Regarding Foreign Jurisdictions that Prevent Inspections	98

PART III
Item 10.	Directors, Executive Officers and Corporate Governance	99
Item 11.	Executive Compensation	103
Item 12.	Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters	105
Item 13.	Certain Relationships and Related Transactions, and Director Independence	106
Item 14.	Principal Accountant Fees and Services	106

PART IV
Item 15.	Exhibits, Financial Statement Schedules	107
Item 16.	Form 10–K Summary	108
Signatures		109

All references to “Company,” “we,” or “us” in this report refer to Datasea Inc., a Nevada corporation, its consolidated subsidiaries, and the variable interest entity (“VIE”), unless the context otherwise indicates.

All references to “Datasea” in this report refer to Datasea Inc., a Nevada corporation, not including its consolidated subsidiaries and VIE, unless the context otherwise indicates.

“VIE” or “consolidated VIE” refers to Shuhai Information Technology Co., Ltd. (“Shuhai Beijing”), a variable interest entity.

“WFOE” or “PRC Subsidiary,” which is a wholly foreign owned entity and is a corporation organized under the laws of the PRC and wholly owned by us, through our subsidiary. The WFOE is Tianjin Information Sea Information Technology Co., Ltd. (“Tianjin Information” or “WFOE”).

“PRC” or “China” refers to the People’s Republic of China, excluding, for the purpose of this report only, Taiwan. “RMB” or “Renminbi” refers to the legal currency of China and “$”, “US$”, “USD” or “U.S. Dollars” refers to the legal currency of the United States.

Our reporting currency is US$. The functional currency of the entities located in China is the RMB. For the entities whose functional currency is the RMB, results of operations and cash flows are translated at average exchange rates during the period, assets and liabilities are translated at the exchange rate at the end of the period, and equity is translated at historical exchange rates. As a result, amounts relating to assets and liabilities reported on the statements of cash flows may not necessarily agree with the changes in the corresponding balances on the balance sheets. Translation adjustments resulting from the process of translating the local currency financial statements into US$ are included in determining comprehensive income/loss. Transactions denominated in foreign currencies are translated into the functional currency at the exchange rates prevailing on the transaction dates. Assets and liabilities denominated in foreign currencies are translated into the functional currencies at the exchange rates prevailing at the balance sheet date with any transaction gains and losses that arise from exchange rate fluctuations on transactions denominated in a currency other than the functional currency are included in the results of operations as incurred.

On January 19, 2024, the Company effected a 1-for-15 reverse stock split (the “Reverse Stock Split”) of its authorized and issued and outstanding shares of common stock, par value $0.001 per share (the “Common Stock”). Unless expressly stated otherwise, all issued and outstanding shares of Common Stock, stock option and per share information in this annual report on Form 10-K (the “Annual Report”), including consolidated financial statements, have been restated to reflect the Reverse Stock Split on a retroactive basis.

CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS

This report contains forward-looking statements within the meaning of Section 27A of the Securities Act and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). All statements other than statements of historical fact are “forward-looking statements” for purposes of federal and state securities laws, including, but not limited to, any projections of earnings, revenue or other financial items; any statements of the plans, strategies and objectives of management for future operations; any statements concerning proposed new services or developments; any statements regarding future economic conditions of performance; and statements of belief; and any statements of assumptions underlying any of the foregoing. Such forward-looking statements involve known and unknown risks, uncertainties and other factors that may cause our actual results, performance or achievements to be materially different from any future results, performance or achievements expressed or implied by such 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 Annual Report are based upon management’s current expectations and beliefs, which management believes are reasonable. However, we cannot assess the impact of each factor on our business or the extent to which any factor or combination of factors, or factors we are aware of, may cause actual results to differ materially from those contained in any forward-looking statements. You are cautioned not to place undue reliance on any forward-looking statements. These statements represent our estimates and assumptions only as of the date of this Annual 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.

Our business operations are primarily based in China, and the VIE and its subsidiaries are subject to certain legal and operational risks associated with being based in China. On December 28, 2021, the Cyberspace Administration of China (“CAC”), and 12 other relevant PRC government authorities published the amended Cybersecurity Review Measures, which came into effect on February 15, 2022. The final Cybersecurity Review Measures provide that a “network platform operator” that possesses personal information of more than one million users and seeks a listing in a foreign country must apply for a cybersecurity review. Further, the relevant PRC governmental authorities may initiate a cybersecurity review against any company if they determine certain network products, services, or data processing activities of such company affect or may affect national security. As of the latest practicable date, our Company, the VIE and its subsidiaries have not been involved in any investigations on cybersecurity review initiated by any PRC regulatory authority, nor has any of them received any inquiry, notice or sanction. We do not believe that we are subject to: (a) the cybersecurity review with the CAC, as we do not possess a large amount of personal information in our business operations, and our business does not involve the collection of data that affects or may affect national security, implicates cybersecurity, or involves any type of restricted industry; or (b) merger control review by China’s anti-monopoly enforcement agency due to the fact that we do not engage in monopolistic behaviors that are subject to these statements or regulatory actions. On February 17, 2023, the China Securities Regulatory Commission (“CSRC”), issued the Trial Administrative Measures of Overseas Securities Offering and Listing by Domestic Companies, or the Trial Measures, which became effective on March 31, 2023. Pursuant to the Trial Measures, domestic companies that seek to offer or list securities overseas, both directly and indirectly, should fulfill the filing procedure and report relevant information to the CSRC. We are required by the Trial Measures to submit a filing to the CSRC and complete the filing procedures of any overseas public offering, but there is no certainty that we will be able to complete such filings in a timely manner. Any failure or perceived failure by us to comply with such filing requirements under the Trial Measures may result in forced corrections, warnings and fines against us and could materially hinder our ability to offer or continue to offer our securities. It remains highly uncertain the impact of such modified or new laws and regulations will have on our daily business operation, our ability to accept foreign investments and our compliance with continued listing requirements of The Nasdaq Capital Market(“Nasdaq”) or other foreign exchange. As a result of the legal and operational risks associated with us being based in and having the majority of our operations in China, such risks could result in a material change in our operations and/or the value of our securities and could significantly limit or completely hinder our ability to offer or continue to offer securities to investors and cause the value of such securities to significantly decline or be worthless. Please see “Risks Associated With Doing Business in China” and the associated risk factor on page 49.

iii

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 (some of which may be beyond our control), including:

●

uncertainties relating to our ability to establish and operate our business in China; uncertainties regarding the enforcement of laws and the fact that rules and regulations in China can change quickly with little advance notice, along with the risk that the Chinese government may intervene or influence our operations at any time, or may exert more control over offerings conducted overseas and/or foreign investment in China-based issuers could result in a material change in our operations, financial performance and/or the value of our common stock or impair our ability to raise money.

●

We depend upon the VIE Agreements in conducting our business in the PRC, which may not be as effective as a direct ownership structure.

●

We may not be able to consolidate the financial results of some of our affiliated companies through the VIE Agreements or such consolidation could materially adversely affect our operating results and financial condition.

●

our ability to operate our company as a U.S. publicly-reporting and listed enterprise;

●

uncertainties relating to general economic and business conditions in China and worldwide;

●

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 pricing policies or that of our competitors;

●

unanticipated delays in the development, commercialization or market acceptance of our products and services;

●

changes in Chinese government regulations;

●

availability, terms and deployment of capital; relationships with third-party equipment suppliers; and

●

political stability and economic growth in China.

PART I

Item 1. Description of Business

Overview

Company Structure

Datasea continuously integrates its self-developed acoustic technologies with artificial intelligence algorithms to create industry applications in various fields. Through “acoustics + application scenarios,” the Company is expanding cross-industry applications. During the last two fiscal years, as the high-margin solutions of the two core segments—Acoustic High-Tech and AI Multimodal Digitalization—gradually scale up, Datasea has transitioned from “scale growth” to “quality improvement.” This transition lays a solid foundation for achieving long-term goals and maximizing shareholder value by the Company.

The Company actively participates in and contributes to the industrial development of the ‘acoustic effect’ concept. Leveraging acoustic technology, the Company establishes unique technological barriers in five key fields: 1) healthcare, 2) medical, 3) industrial, 4) agricultural, and 5) IoT, focusing on “Acoustic High-Tech + AI Multimodal Digitalization” as its dual-business engines, achieving full-chain value conversion from technological R&D to industry application.

The Company operates in the two business segments:

1)	Acoustic High-Tech and

2)	AI Multimodal Digitalization

In the Acoustic High-Tech field, the Company focuses on the innovation of acoustic technology in multiple scenarios, with “non-hearable mechanical wave effects” as the R&D core. In the environmental domain, the Company has launched a series of acoustic environmental products to meet the purification needs of public and household settings; in the health domain, it has launched a series of acoustic medical and healthcare products, breaking through in areas such as neuro-regulation and acupoint stimulation, extending acoustic applications from environmental assistance to precise health management and clinical intervention. In the industrial domain, the Company explores the application of ultrasound in fields such as industrial precision processing, agricultural pest control, and agricultural product preservation, forming a cross-industry empowerment model of “acoustics + AI + vertical scenarios.”

In the AI Multimodal Digitalization field, the Company continues to invest in the research and application of AI multimodal digital technology, aiming to provide customers with cutting-edge intelligent solutions. As a pioneer in China’s AI multimodal digital field, Datasea deeply integrates the high-speed, low-latency capabilities of 5G networks with AI and big data processing technologies to create a comprehensive AI multimodal digital platform spanning multiple industries. With its self-developed multimodal data processing platform, it achieves real-time collection, analysis, and generation of text, voice, image, video, and other data types. The Company focuses on the efficient and accurate matching of community services and consumer needs, offering full-spectrum services from standardized platform services (such as intelligent marketing, business process automation) to customized system solutions (such as full-process digital management for beauty salons, rural revitalization agricultural management platforms), helping customers optimize costs and improve efficiency.

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. 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. Shuhai Beijing possesses cutting-edge products and solutions in acoustics high tech and AI multimodal digital applications to support commercial enterprises, households and individuals in China.

Our business operations are primarily based in China. The Company also has business operations in the United States and is continuing to expand its operations in other countries. In China, the Company has established a research, production, and sales network through entities such as Shuhai Tianjin and Shuhai Beijing, focusing on application of Acoustic markets in healthcare, medical aesthetics, industrial, and agricultural sectors. In the United States, through its wholly owned subsidiary, Datasea Acoustics LLC, the Company is promoting the distribution of acoustic products and patent deployment and is working with U.S. partners to expand local channels. Together, these initiatives support the development of a global operational framework characterized by technical collaboration and complementary market access.

For the fiscal year ended June 30, 2025, the Company recorded revenue of $71,616,820, representing a 198.70% increase compared to the same period in 2024. This revenue growth is primarily due to the ongoing advancement of the Company’s “dual-engine” business structure: (i) its acoustic high-tech business, where the Company expanded its product sales and technology solution services, and (ii) its AI digital business, where the Company is maintaining a leading position in the industry. Our growing customer base continues to support substantial business growth.

Our common stock listed on the Nasdaq Capital Market is the common stock 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 our corporate group under U.S. GAAP, making Datasea the primary beneficiary of the VIE for accounting purposes. For a description of our corporate structure and contractual arrangements, see “Our Organizational Structure” on page 24 and “VIE Agreements” on page 3.

Our Mission and Business Strategy

The Company aims to become a global leader in new generation of technology enterprises based on acoustic technology and driven by AI, and to establish a unique competitive advantage in the global wave of acoustic intelligence and digitalization.

To implement this goal, the Company is using the following business strategy:

Technological Leadership:

The Company will continue to promote interdisciplinary research between acoustic science and artificial intelligence, striving to maintain a global leading position in areas such as non-hearable mechanical wave effects, acoustic coupling, and AI multimodal algorithms. The Company has partnered with top research institutions, such as the Chinese Academy of Sciences and Tsinghua University, to establish joint laboratories and industrial research projects, continuously pushing scientific breakthroughs to be applied in industries.

Cross-Industry Empowerment and Application Expansion:

Datasea is committed to broadening the application of acoustic technologies such as ultrasound, infrasound, and Schumann resonance in various industries. Combining acoustic technology with artificial intelligence as a technological foundation, it integrates into different industries’ products and services, enhancing existing solutions and extending them into high-value applications, realizing the cross-industry empowerment model of “acoustics + AI + application scenarios.”

Acoustic Healthcare and Medical Fields:

The Company aims to implement “acoustics + neuro-regulation” to intervene precisely in the brain (brain-computer interface), heart, and foot acupoints (foot-computer interface), constructing a closed-loop system for “detection — analysis — diagnosis — real-time intervention” to meet the growing global demand for non-pharmacological, precise health interventions.

VIE STructure and Agreements

Due to regulatory restrictions on foreign ownership in certain sectors in China, such as the internet and information technology industries, the Company conducts its business through a Variable Interest Entity (VIE) structure, which allows it to achieve operational compliance and business expansion balance.

Datasea Information Technology Co., Ltd. (“Shuhai Beijing” or the “VIE”) is the VIE entity of our corporate group, under the contractual control of Datasea. Through contractual arrangements (the “VIE Agreements”) with Shuhai Beijing and its shareholders—Zhixin Liu (a shareholder, President, and CEO of Datasea) and Fu Liu (a shareholder and Director of Datasea)—the Company is entitled to the economic benefits from Shuhai Beijing’s business operations and has control over its day-to-day operations. The financial and operational results of Shuhai Beijing are fully consolidated into Datasea’s financial reports, and this structure enables the company to comply with Chinese regulations while maintaining control over its Chinese operations. 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-1 to F-34 of this Annual Report.

Operation and Intellectual Property Service Agreement.

Pursuant to the Operation and Intellectual Property Service Agreement, Tianjin Information Sea Information Technology Co., Ltd. (“WFOE”) is granted operational management rights over Shuhai Beijing under this agreement, including day-to-day business management, asset and financial control, and the provision of intellectual property services (such as technology licensing), procurement management, marketing management, and inventory management. The service fee collected monthly by WFOE equals Shuhai Beijing’s pre-tax profit for that period; if Shuhai Beijing incurs a loss, such loss will be carried forward to offset potential service fees in the following month. In addition, if Shuhai Beijing is unable to repay its debts, WFOE is obligated to make repayment on its behalf; if Shuhai Beijing’s net assets fall below its registered capital, WFOE must provide funding to make up the shortfall. Without WFOE’s consent, Shuhai Beijing and its shareholders are prohibited from independently making or leading any business decisions.

Shareholder Voting Rights Proxy Agreement

Tianjin Information has entered into a stockholders’ voting rights entrustment agreement (the “Entrustment Agreement”) under which Zhixin Liu and Fu Liu (collectively the “Shuhai Beijing Stockholders”) have vested their voting power in Shuhai Beijing to Tianjin Information or its designee(s). 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).

Equity Option Agreement

The Shuhai Beijing Stockholders granted WFOE or its designee an irrevocable option under which WFOE may, at any time, purchase all or part of the equity interests held by Shuhai Beijing’s shareholders at a price of RMB 0.001 per RMB 1 of capital contribution. To maintain this option right, WFOE must pay RMB 1 annually to Shuhai Beijing’s shareholders. The agreement is valid for 10 years from the effective date, after which WFOE has the right to renew. The agreement also includes restrictive covenants protecting WFOE’s rights during the exercise of the option, such as prohibiting Shuhai Beijing’s shareholders from transferring equity to third parties.

Equity Pledge Agreement

To secure the performance of the above-referenced Operation and Intellectual Property Service Agreement and Equity Option Agreement, Shuhai Beijing’s Stockholders pledged all of their equity interests in Shuhai Beijing to WFOE as collateral. During the pledge period, WFOE is entitled to receive all dividends, bonuses, and other investment returns derived from the pledged equity. If Shuhai Beijing or its shareholders breach any provisions of the agreements, WFOE may legally enforce the pledge and satisfy its claims by discounting, auctioning, or selling the pledged equity.

Summary Consolidated Financial Data

The following historical statements of operations and statements of cash flows for the fiscal years ended June 30, 2024 and June 30, 2025, and balance sheet data as of June 30, 2024 and June 30, 2025, which have been derived from our audited financial statements for those periods. Our historical results are not necessarily indicative of the results that may be expected in the future.

Condensed Consolidated Statements of Operations Information

	Year Ended June 30, 2025
	PARENT			SUBSIDIARY			WOFE			VIE			Elimination			Consolidated
Revenue - third parties	$	-		$	-		$	-		$	71,616,820					$	71,616,820
Revenue-Parent provide service to WOFE		99,200												(99,200	)		-
Revenue-Parent provide service to VIE		154,200												(154,200	)		-
Revenue - WOFE’s provide service to VIE								1,350,560						(1,350,560	)		-
Revenue - VIE purchase materials from WOFE								121,072						(121,072	)		-
Revenue - from VIE’s label that is used by WOFE											926,286			(926,286	)		-
Revenue - WOFE purchase materials from VIE											400			(400	)
																	-
Cost of Revenue - third parties								90,763			69,082,109						69,172,872
COST - VIE purchase materials from WOFE								400						(400	)		-
COST - WOFE purchase materials from VIE								-			121,072			(121,072	)		-
														-			-
Gross profit		253,400			-			1,380,469			3,340,325			(2,530,246	)		2,443,948

Operating expenses		2,391,610			130,465			2,410,541			2,666,047						7,598,663
Operating expenses-VIE cost that was purchased from WOFE											1,350,560			(1,350,560	)		-
Operating expenses-WOFE cost that was purchased from VIE								926,286						(926,286	)		-
Operating expenses-WOFE cost that service provided by Parent								100,641						(100,641	)		-
Operating expenses-VIE cost that service provided by Parent											155,799			(155,799	)		-
Loss from operations		(2,138,210	)		(130,465	)		(2,056,999	)		(832,081	)		3,040			(5,154,715	)
Other income (expenses), net		2,533			(5	)		119,757			(47,100	)					75,185
Income tax expense											6,596						6,596
Loss before noncontrolling interest		(2,135,677	)		(130,470	)		(1,937,242	)		(885,777	)		3,040			(5,086,126	)
Less: loss attributable to noncontrolling interest											(432	)					(432	)
Net loss to the Company from continuing operation		(2,135,677	)		(130,470	)		(1,937,242	)		(885,345	)		3,040			(5,085,694	)

	Year Ended June 30, 2024
	PARENT			SUBSIDIARIES			WOFE			VIE			Elimination			Consolidated
Revenue - third parties	$	-		$	-		$	69,541		$	23,906,326					$	23,975,867
Revenue - Parent provided service to WOFE		275,100												(275,100	)		-
Revenue-Parent provided service to VIE		143,600												(143,600	)		-
Revenue - WOFE provided service to VIE								489,386						(489,386	)		-
Revenue - VIE purchased materials from WOFE								57,082						(57,082	)
Revenue - from VIE’s label that was used by WOFE											264,533			(264,533	)		-
Revenue - WOFE purchased materials from VIE											57,082			(57,082	)
																	-
Cost of Revenue - third parties								69,156			23,432,606						23,501,762
COST - VIE purchased materials from WOFE								57,082						(57,082	)
COST - WOFE purchased materials from VIE								-			57,082			(57,082	)
														-			-
Gross profit		418,700			-			489,771			738,253			(1,172,619	)		474,105

Operating expenses		6,996,227			324,954			3,535,554			1,742,757						12,599,492
Operating expenses - VIE expenses, corresponding to services provided by WOFE											489,386			(489,386	)		-
Operating expenses - WOFE expenses for using VIE’s label								264,533						(264,533	)
Operating expenses – WOFE expenses, corresponding to services provided by Parent								278,862						(278,862	)
Operating expenses - VIE expenses, corresponding to services provided by Parent											146,150			(146,150	)		-
Loss from operations		(6,577,527	)		(324,954	)		(3,589,178	)		(1,640,040	)		6,312			(12,125,387	)
Other income (expenses), net		(1,665	)		(61	)		3,108			(97,300	)					(95,918	)
Income tax expense																	-
Loss before noncontrolling interest		(6,579,192	)		(325,015	)		(3,586,070	)		(1,737,340	)		6,312			(12,221,305	)
Less: loss attributable to noncontrolling interest											(10,695	)					(10,695	)
Net loss to the Company		(6,579,192	)		(325,015	)		(3,586,070	)		(1,726,645	)		6,312			(12,210,610	)

Condensed Consolidated Balance Sheets Information

	As of June 30, 2025
	PARENT			SUBSIDIARY			WOFE			VIE			Elimination			Consolidated

Cash	$	24,488		$	1,598		$	14,481		$	580,240					$	620,807
Accounts receivable								789,095			585,085						1,374,180
Accounts receivable - VIE														-			-
Accounts receivable - WOFE											31,766			(31,766	)
Inventory											206,610						206,610
Inventory - VIE																	-
Inventory - WOFE											47,738			(47,738	)		-
Value-added tax prepayment								22,088			114,937						137,025
Other receivables-Subsidiaries		32,515						2,666			2,417			(37,598	)		-
Other receivables - VIE		993,088						14,187,221						(15,180,309	)		-
Other receivables - WOFE		10,249,731									1,423,840			(11,673,571	)		-
Other receivables - Parent					5,000									(5,000	)
Other current assets								336,120			247,530			-			583,650

Total current assets		11,299,822			6,598			15,351,671			3,240,163			(26,975,982	)		2,922,272

Property and equipment, net								6,920			18,640						25,560
Intangible assets, net								3,045,369			503,000			(52,385	)		3,495,984
Right of use asset, net								7,720			284,345						292,065
Investment into subsidiaries		15,820,480												(15,820,480	)		-
Investment into WOFE					13,949,894									(13,949,894	)		-
Other non-current assets		-						-			-						-

Total non-current assets		15,820,480			13,949,894			3,060,009			805,985			(29,822,759	)		3,813,609

Total Assets	$	27,120,302		$	13,956,492		$	18,411,680		$	4,046,148			(56,798,741	)	$	6,735,881

Accounts payable	$	260,700			2,500		$	41,066		$	115,772					$	420,038
Accounts payable - VIE								31,766			-			(31,766	)
Accounts payable - WOFE														-			-
Short term loan																	-
Advance from customer								461			149,627						150,088
Accrued expense and other payable		750						1,117			804,862			(259,023	)		547,706
Due to ralated parties								4,961			1,165						6,126
Lease liability								5,764			122,761						128,525
Loan payable								-			2,374,767						2,374,767
Other payables - Datasea					32,514			10,031,174			726,742			(10,790,430	)		-
Other payables - Subsidiaries		5,000												(5,000	)
Other payables - VIE					2,536			1,423,840						(1,426,376	)		-
Other payables - WOFE					2,677						14,187,221			(14,189,898	)		-
Other current liabilities																	-

Total current liabilities		266,450			40,227			11,540,149			18,482,917			(26,702,493	)		3,627,250

Lease liability - noncurrent											166,436						166,436
Long term loan								-									-

Total non-current liabilities		-			-			-			166,436			-			166,436

Total liabilities		266,450			40,227			11,540,149			18,649,353			(26,702,493	)		3,793,686

Accumulated deficit		(15,519,912	)		(1,904,215	)		(11,652,066	)		(15,363,739	)		(86,084	)		(44,526,016	)
Other equity		42,373,764			15,820,480			18,523,597			760,534			(30,010,164	)		47,468,211

Total equity		26,853,852			13,916,265			6,871,531			(14,603,205	)		(30,096,248	)		2,942,195

Total liabilities and stockholders’ equity	$	27,120,302		$	13,956,492		$	18,411,680		$	4,046,148			(56,798,741	)	$	6,735,881

	As of June 30, 2024
	PARENT			SUBSIDIARIES			WOFE			VIE			Elimination			Consolidated

Cash	$	79,225		$	1,249		$	7,634		$	93,154					$	181,262
Accounts receivable											718,546						718,546
Accounts receivable - VIE								760,708						(760,708	)		-
Accounts receivable - WOFE														-
Inventory								34,530			119,053						153,583
Inventory - VIE								-									-
Inventory - WOFE											41,147			(41,147	)		-
Other receivables-Subsidiaries		5,015						832			2,427			(8,274	)		-
Other receivables - VIE		475,223						12,971,457						(13,446,680	)		-
Other receivables - WOFE		6,304,226									1,412,607			(7,716,833	)		-
Other receivables - Parent					5,000									(5,000	)
Other current assets		5,000			-			1,292,945			295,305			1,251			1,594,501

Total current assets		6,868,689			6,249			15,068,106			2,682,239			(21,977,391	)		2,647,892

Property and equipment, net								17,532			30,934						48,466
Intangible assets, net					101,042			62,406			441,485			(58,932	)		546,001
Right of use asset, net								38,300			11,045						49,345
Investment into subsidiaries		14,320,480												(14,320,480	)		-
Investment into WOFE					12,450,340									(12,450,340	)		-
Other non-current assets		-						-			-						-

Total non-current assets		14,320,480			12,551,382			118,238			483,464			(26,829,752	)		643,812

Total Assets	$	21,189,169		$	12,557,631		$	15,186,344		$	3,165,703			(48,807,143	)	$	3,291,704

Accounts payable	$	262,385			2,500		$	44,758		$	765,998					$	1,075,641
Accounts payable - VIE								-			-			-
Accounts payable - WOFE											760,708			(760,708	)		-
Short term loan											1,170,298						1,170,298
Advance from customers								463			48,776						49,239
Accrued expenses and other payables		23,254						109,121			713,827			(249,488	)		596,714
Lease liability								41,549			11,981						53,530
Loan payable								-									-
Other payables - Datasea					5,015			6,182,249			468,998			(6,656,262	)		-
Other payables - Subsidiaries		5,000												(5,000	)
Other payables - VIE					2,536			1,412,607						(1,415,143	)		-
Other payables - WOFE					845						12,971,457			(12,972,302	)		-
Other current liabilities		32,000						520,501			102,059						654,560

Total current liabilities		322,639			10,896			8,311,248			17,014,102			(22,058,903	)		3,599,982

Accumulated deficit		(13,649,331	)		(1,773,745	)		(9,705,672	)		(14,479,788	)		168,214			(39,440,322	)
Other equity		34,515,861			14,320,480			16,580,768			631,389			(26,916,454	)		39,132,044

Total equity		20,866,530			12,546,735			6,875,096			(13,848,399	)		(26,748,240	)		(308,278	)

Total liabilities and stockholders’ equity	$	21,189,169		$	12,557,631		$	15,186,344		$	3,165,703			(48,807,143	)	$	3,291,704

Condensed Consolidated Statements of Cash Flows Information

	Year Ended June 30, 2025
	PARENT			SUBSIDIARIES - HK entity			WOFE			VIE			Elimination			Consolidated

Net cash provided by/(used in) operating activities	$	(258,984	)	$	(29,428	)	$	(186,960	)	$	(1,899,308	)				$	(2,374,680	)
Net cash provided by/(used in) operating activities (WOFE to VIE)																	-
																	-
Net cash provided by/(used in) investing activities								(3,847,448	)		(237,749	)					(4,085,197	)
Net cash provided by/(used in) investing activities (Parent to subsidiaries)		(1,500,000	)											1,500,000			-
Net cash provided by/(used in) investing activities (Parent to WOFE)														-
Net cash provided by/(used in) investing activities (Subsidiaries to WOFE)					(1,499,554	)		1,524,032						(24,478	)		-
Net cash provided by/(used in) investing activities (WOFE to VIE)								(1,255,657	)					1,255,657			-
Net cash provided by/(used in) investing activities (Parent to VIE)														-			-

Net cash provided by/(used in) financing activities		5,939,133						(102,795	)		1,109,032						6,945,370
Net cash provided by/(used in) financing activities ( Parent to VIE )		(258,842	)					3,875,709			259,782			(3,876,649	)		-
Net cash provided by/(used in) financing activities ( Parent to subsidiaries)		(27,500	)		1,527,500									(1,500,000	)		-
Net cash provided by/(used in) financing activities ( VIE to subsidiaries )														-			-
Net cash provided by/(used in) financing activities WOFE to parent)		(3,945,505	)											3,945,505			-
Net cash provided by/(used in) financing activities (WOFE to subsidiaries )					1,830									(1,830	)		-
Net cash provided by/(used in) financing activities (WOFE to VIE)											1,255,657			(1,255,657	)		-
Net increase (decrease) in cash and cash equivalents	$	(51,698	)	$	(2,691	)	$	6,848		$	487,086			-		$	439,545

	Year Ended June 30, 2024
	PARENT			SUBSIDIARIES			WOFE			VIE			Elimination			Consolidated

Net cash provided by/(used in) operating activities	$	134,284		$	(5,849	)	$	(5,076,644	)	$	(1,450,675	)				$	(6,398,884	)
Net cash provided by/(used in) operating activities (WOFE to VIE)								(1,992,684	)		1,992,684						-
																	-
Net cash provided by/(used in) investing activities								-			(167,957	)					(167,957	)
Net cash provided by/(used in) investing activities (Parent to subsidiaries)		(1,405,015	)											1,405,015			-
Net cash provided by/(used in) investing activities (Parent to WOFE)		(6,231,281	)											6,231,281
Net cash provided by/(used in) investing activities (Subsidiaries to WOFE)					(1,399,449	)								1,399,449			-
Net cash provided by/(used in) investing activities (WOFE to VIE)								(2,859,142	)					2,859,142			-
Net cash provided by/(used in) investing activities (Parent to VIE)		(475,223	)											475,223			-
Net cash provided by/(used in) investing activities (VIE to subsidiaries)											2,536			(2,536	)		-

Net cash provided by/(used in) financing activities		8,061,286						418,608			(1,640,317	)					6,839,577
Net cash provided by/(used in) financing activities (Parent to VIE)											483,698			(483,698	)		-
Net cash provided by/(used in) financing activities (Parent to Subsidiaries)					1,405,015									(1,405,015	)		-
Net cash provided by/(used in) financing activities (VIE to subsidiaries)					(2,536	)								2,536			-
Net cash provided by/(used in) financing activities (parent to WOFE)								6,097,306						(6,097,306	)		-
Net cash provided by/(used in) financing activities (subsidiaries to WOFE)								1,424,455						(1,424,455	)		-
Net cash provided by/(used in) financing activities (WOFE to VIE)											2,859,142			(2,859,142	)		-
Net increase (decrease) in cash and cash equivalents	$	77,738		$	(2,819	)	$	(1,988,041	)	$	2,074,656			-		$	161,534

cash transfers and Dividend Distribution

The revenue of Shuhai Beijing (the VIE entity) is primarily denominated in RMB, and its fund transfers must comply with China’s foreign exchange management regulations. According to the VIE agreements, Shuhai Beijing pays service fees, intellectual property licensing fees, and other payments to the WFOE (Shuhai Tianjin). After completing the registration with the State Administration of Foreign Exchange (SAFE) (according to the “Notice on Issues Related to Foreign Exchange Management for Domestic Residents’ Foreign Investment and Return Investments by Special Purpose Companies” issued by SAFE), the WFOE transfers the funds to Shuhai Information Skill (HK) Limited. This Hong Kong company then distributes the funds as dividends to the parent company, Datasea Inc.

Current PRC regulations permit WFOE to pay/distribute dividends to Shuhai Information Skill (HK) Limited only out of its accumulated after-tax profits, if any, determined in accordance with Chinese accounting standards and regulations. Additionally, at least 10% of the after-tax profits must be allocated to the statutory reserve fund each year (which can be stopped once the accumulated amount reaches 50% of the registered capital). The WFOE may also choose to allocate discretionary reserves, but statutory and discretionary reserves cannot be distributed as dividends before the company’s liquidation. As of June 30, 2025, neither Shuhai Beijing nor its Chinses subsidiaries have distributed cash dividends or transferred profits to the US parent company or any foreign entities; the U.S. parent company has not distributed dividends to its shareholders, including U.S. investors.

We intend to keep any future earnings to re-invest in and finance the expansion of our business in China. We do not have the intentions to distribute earnings or settle amounts owed under the VIE Agreements in the near future nor do we anticipate that any cash dividends will be paid or Shuhai Beijing’s earnings will be distributed and transferred to the holding company in the foreseeable future. See “Summary Consolidated Financial Data”.

Foreign Exchange Risk

We prepare our financial statements in U.S. dollars, while we conduct a significant portion of our operations in China where the only legitimate currency for use within is RMB. The value of RMB against the U.S. dollar and other currencies may fluctuate and is affected by, among other things, changes in China’s monetary or fiscal policies and political and economic conditions and supply and demand in local markets.

For current account items (such as trade or service-related transactions), foreign exchange payments only require filing procedures and do not need prior approval. However, for capital account items (such as the repayment of overseas loans), foreign exchange outflows require approval from the foreign exchange authority. The Chinese government may restrict Shuhai Beijing’s access to foreign exchange without prior notice, which could affect the company’s cross-border fund transfers. Additionally, if the parent company provides loans to domestic subsidiaries or VIE entities, the loan must be registered with the foreign exchange authority, and the use of the funds is strictly limited (it cannot be used for securities investment, non-business real estate purchases, etc.).

According to the current regulations issued by SAFE (Document No. [2023]28), foreign-invested enterprises must adhere to the principles of authenticity and self-use when utilizing capital within the business scope. The capital must not be used for payments beyond the business scope, securities investment, or investment in wealth management products other than those that are bank principal-protected (unless otherwise specified by laws and regulations), issuing loans to non-affiliated enterprises (unless explicitly permitted within the business scope or in specific pilot areas), or paying for non-business-related real estate purchases (except for foreign-invested real estate enterprises).

Our Business Summary

The Company is implementing a dual-core business structure: (i) high-tech acoustics and (ii) AI multimodal digital technology business. In the field of high-tech acoustics, the Company is one of the global initiators of the “acoustic effects” concept, providing advanced acoustic products and solutions worldwide. Simultaneously, in the AI multimodal digital domain, Datasea leverages its AI-driven services and solutions to offer digital and intelligent services to both businesses and individual users. Through the deep integration of acoustics and artificial intelligence, the Company completed a strategic transition from product-driven growth to solution-driven development. The Acoustic High-Tech segment is shifting from “hardware sales” to “solution-driven” revenue, gradually moving toward a high-margin model; while the AI Multimodal Digitalization segment has achieved scaled growth through the combination of standardized platform services and customized solutions, with a significant improvement in profitability quality. Together, these two segments form dual engines that are driving the Company’s transition from “scale expansion” to “high-quality growth.”

Acoustic Business Segment:

The Company focuses on acoustic business with an emphasis on ultrasound, infrasound, and Schumann resonance technology. We deeply understand the market’s demand for new application areas, technologies, and requirements. Therefore, through the relentless efforts of our team, we have achieved leading-edge advancements in acoustic understanding and algorithms. Our Company’s acoustic technologies and products are widely applied across various industries and fields, including acoustic industrial applications, acoustic agriculture, acoustic medicine, acoustic health, and acoustic IoT technologies.

Acoustic High-Tech is a new field that integrates fundamental acoustic theory with artificial intelligence to collect and process acoustic data and address various challenges. Datasea utilizes advanced technologies in this domain, combining basic acoustic theories with AI to create a robust technology system centered around the effects of non-audible mechanical waves. This includes leveraging ultrasonic technology for sterilization, which effectively combats viruses and prevents infections. Thid technology exploits the mechanical, thermal, and cavitation effects of ultrasound. When microorganisms, including viruses like the coronavirus, are exposed to ultrasound, they experience intense vibrational strains that disrupt their outer shells and internal RNA. The rapid movement of protons caused by the ultrasound ultimately destroys microbial structures, eliminating harmful pathogens.

In the field of ultrasonic technology, we utilize the cavitation, thermal, and mechanical effects of ultrasound to address various application needs, including disinfection, sterilization, crop drying, safety monitoring, skincare, and medical wellness. For example, in the field of ultrasonic disinfection, when ultrasound stimulates microorganisms (including coronaviruses), it causes significant vibrational strain, disrupting the virus’s outer shell and internal RNA. Ultimately, through a combination of mechanical destruction, cavitation effects, and advanced oxidative processes, pathogenic microorganisms are eliminated. This method provides a broad-spectrum, non-selective disinfection alternative to antibiotics.

Leveraging Datasea’s cutting-edge acoustic high-tech combined with AI technology, we have successfully developed a series of ultrasonic disinfection products. These include the acoustic health series ultrasonic disinfectors, ultrasonic sterilizers and purifiers for restrooms, bedrooms, living rooms, kitchens, and pets, as well as innovative non-contact ultrasonic skin repair devices. These products are suitable for environments such as hospitals, airports, hotels, transportation, and residential settings. Leading laboratories, including the Wuhan Institute of Virology, have proven that this ultrasonic disinfection technology achieves 99.83% efficacy against Covid-19 within nine seconds and 99.99% efficacy against Staphylococcus Albus and E. coli. This strategic shift aims to offer more effective environmental purification solutions and healthier lifestyles, serving China, the United States, and globally, particularly in the post-pandemic era when there is a higher demand for protection and quality of life.

Additionally, the Company makes innovations in Schumann resonance, directional sound and others, launching ultrasonic Skin Repair with AI diagnosis and Schumann frequency sleep monitors and further creating a higher quality living environment for customers in application fields such as acoustic antivirus, acoustic health, and acoustic agriculture. With a diverse product lineup, we strive to achieve a global leading position in this field within three years.

In addition to hardware products, the Company also provides technology and solution outputs. By integrating core acoustic technologies with AI algorithms, Datasea delivers technology designs and embedded modules to third-party partners for commercialization, securing revenue sharing without bearing large-scale production costs. At the same time, the Company offers comprehensive end-to-end solutions that combine acoustic products, AI platform functions, and supporting services, such as sleep-assistance devices and health data analysis platforms in the healthcare sector. This dual model of technology licensing and solution delivery enables high-margin, scalable growth across industries.

To illustrate the Company’s technology and products on the global market, Datasea, through its wholly-owned Delaware subsidiary, Datasea Acoustics LLC, operates as the primary entity to offer advanced acoustic precision manufacturing products and solutions in fields including acoustic industry, acoustic agriculture, acoustic medicine, and acoustic health, and more. After obtaining certification from internationally renowned testing organizations for our sound disinfection products, we will launch large-scale sales of these products in the U.S. market. This strategy aims to tap into the continuously growing consumer audience worldwide. The company has already established contractual relationships with various online and offline channels in the United States, laying out the market plan for acoustic-related products. Additionally, measures such as collaborations with universities and research institutions in the United States, obtaining patents through multiple channels, production assembly planning, and potential acquisitions contribute to the sustainable development of Datasea Acoustics LLC.

AI multimodal digital technology business segment

Datasea also continues to invest in the research and application of AI multimodal digital technology, committed to providing customers with leading intelligent solutions. As a pioneer in China’s AI multimodal digital field, Datasea deeply integrates the high-speed and low-latency characteristics of 5G networks with AI and big data processing technologies to create a comprehensive AI multimodal digital platform that spans multiple industries. This platform integrates various data forms, such as text, audio, and video, enabling efficient information generation, precise transmission, and automation. It provides enterprise clients with high-quality services, including data packages and new media marketing. Powered by AI, Datasea’s 5G platform enhances customer acquisition, marketing, and brand building efficiency while creating new opportunities for digital transformation and business models. Datasea’s AI multimodal digital products and solutions are widely applied in rural revitalization, healthcare, and logistics, and have capability to provide digital and intelligent services to over 48.42 million enterprises and households in China (with more than 99% being small and medium-sized enterprises), driving industrial upgrades and innovative development.

Acoustics Business

Industry overview

Acoustics is the science of studying sound, encompassing the generation, propagation, reception, conversion, and various effects of sound waves. It covers all forms of linear and nonlinear mechanical wave phenomena, from infrasound to ultrasound, and from microscopic to macroscopic scales. Acoustics is highly interdisciplinary and expansive, intersecting with numerous fields to form a vibrant, multidisciplinary science that has given rise to a vast number of branches.

Modern acoustics is a broadly applicable discipline that plays a critical role in various fields, holding a pivotal position in contemporary science and technology. It is indispensable to the development of modern science and technology, the progress of the social economy and modernization, and the improvement of both the material and spiritual aspects of people’s lives. Specifically, based on the frequency of sound waves, they can be categorized into audible sound and non-audible sound (such as ultrasound and infrasound). The function of sound waves is to transmit vibration energy and information. A sound wave is a wave that travels through a medium in the form of vibration. The vibrating object causes the air layer particles around it to compress and expand alternately. This change is from near to far, so that the vibration of the excited object spreads at a certain speed. The transmission of this vibration energy is the nature of the propagation of sound waves.

The acoustic intelligence industry, as a cutting-edge interdisciplinary field, is entering a period of rapid growth, driven by the integration of new-generation information technologies such as AI, IoT, and big data. From an industry perspective, acoustics is a fundamental science that studies sound wave generation, propagation, reception, and effects. It has branched into areas such as language acoustics, ultrasound, and environmental acoustics. The maturity of AI, big data, and cloud computing technologies has driven traditional acoustics to upgrade into “acoustic intelligence,” forming a new industrial model with “basic acoustic theory + AI algorithms + scenario-based applications.” Its commercial value and development potential continue to be realized across industries such as healthcare, consumer electronics, industrial manufacturing, and agriculture.

In the acoustic high-tech industry, research has evolved from traditional speech and environmental acoustics to emerging frontiers such as ultrasound, neuro-regulation, and brain-computer interfaces. With the continued maturity of artificial intelligence, big data, and cloud computing technologies, the deep integration of acoustics and AI has not only expanded application boundaries but also enhanced technological value-added and commercialization potential. Acoustics is transitioning from a single branch of physics into an interdisciplinary and cross-industry innovation engine.

From a policy environment perspective, global organizations such as the International Organization for Standardization (ISO) and the World Health Organization (WHO) have shown strong attention to acoustics and environmental health, providing regulatory frameworks and momentum for industry development. In China, the acoustic intelligence industry has received substantial government support, with white papers and industry development plans issued to promote applications in healthcare, agriculture, industry, and smart cities. For AI, the implementation of the Data Security Law and the Personal Information Protection Law has created compliance thresholds while also promoting safer, more transparent, and more efficient data processing and intelligent algorithms.

Datasea’s acoustic high-tech business focuses on key applications of sound waves, integrating basic acoustic theory with artificial intelligence. This involves studying and applying non-audible mechanical wave effects, utilizing sound wave technology and acoustic effects as a technical system for collecting and processing acoustic data and solving problems.

Industry Application and Market Scale

We believe that there is and continues to be significant demand and diverse opportunities for the integration of acoustics with fields such as life and health, natural resources, and agriculture. For example, ultrasound technology has promising application prospects in various sectors, including healthcare, industrial, environmental protection, beauty, and agriculture. Additionally, Schumann resonance has shown effectiveness in sleep health and directional audio plays a crucial role in specific content delivery and personal privacy protection, among other applications. Among these, ultrasound technology, particularly in the areas of air purification, beauty, and agricultural pest control, holds immense market potential.

Ultrasound, or ultrasonics, is the science and technology of sound at frequencies beyond what we can hear. It has a wide range of applications, from medical and health, industrials/inspections, and agriculture. According to Kaiyuan Securities Research Institute, the market for acoustic components in China is projected to grow at a compound annual growth rate (CAGR) of 15.6% from 2021 to 2025, with a projected market size exceeding 46 billion RMB by 2025. On the technology services side, smart voice services, which serve as the core interface for human-computer interaction, reached a market size of 28.5 billion RMB in 2021, growing at 44% year-on-year. With the development of AI multimodal technologies, the application of voice recognition, voiceprint identification, and other technologies is expanding across various fields. Additionally, global subfields such as acoustic medicine and neuro-regulation are experiencing significant growth, providing vast space for acoustic intelligence technologies to penetrate high-value applications.

Infrasound is a wave phenomenon of the same physical nature as sound but with frequencies below the range of human hearing, specifically below a frequency of 20 Hz. Infrasound is also a powerful weapon in medical and health, such as cancer therapy. Schumann resonance, often referred to as the “earth’s heartbeat,” can stimulate the Alpha brainwave state in humans, aiding in relaxation, faster recovery, and improved performance in daily life. It is measured at 7.83 Hz, which corresponds to the Earth’s electromagnetic frequency. One significant application of Schumann resonance is in treating insomnia, helping people enhance their sleep quality. The scope of Schumann resonance can also be extended to include Schumann Hertz audio and Schumann Hertz mechanical vibrations, offering even broader application prospects.

We anticipate that multiple sub-sectors will experience rapid growth. For example, intelligent voice, as a key gateway for human-computer interaction, has maintained an annual growth rate of over 40% in recent years; acoustic devices driven by demand for smart homes and wearables have achieved a compound annual growth rate of over 15%; acoustic healthcare and neuro-regulation markets, propelled by clinical and health management needs, show enormous growth potential.

In the industrial sector, acoustic intelligence has become an important tool for equipment maintenance and production optimization. By collecting and analyzing operational sound profiles of motors, bearings, and other equipment, combined with AI-based vibration and noise recognition, potential faults can be identified in advance, significantly reducing downtime and maintenance costs. This “acoustic stethoscope” model is helping manufacturers achieve greater production line stability and efficiency.

In agriculture, acoustic intelligence assists farmers with pest and disease monitoring by identifying subtle signals such as crop friction and pest sounds. Specific sound waves can stimulate seed germination, increase yields, and extend shelf life of agricultural products. AI-enabled intelligent acoustic agriculture systems are emerging as a new path for modern green agriculture.

In healthcare and health management, the value of acoustic applications is particularly prominent. Ultrasound is not only a key imaging tool but is increasingly applied in functional interventions. Technologies such as low-intensity focused ultrasound (LIFU) show breakthrough potential in neuro-regulation and tumor treatment. Combined with AI algorithms, real-time analysis of EEG, heart rate, and blood flow data enables the creation of a “detection–analysis–diagnosis–real-time intervention” closed-loop system, providing viable solutions for precise, non-pharmaceutical health management. This aligns closely with growing demands related to aging populations, chronic disease management, and mental health.

Business & Revenue Model

Datasea’s Acoustic High-Tech business forms a multi-tiered, sustainable revenue model through hardware sales expansion, technology output collaboration, and customized overall solution delivery. We believe that these multiple income streams will result in a multi-tiered and sustainable profit system.

Hardware Sales

The Company independently develops and markets its own acoustic hardware products, which include air purifiers, health assistance products, and medical beauty devices. Specific products include the “Datasea Tian Ear” series ultrasonic air purifiers, ultrasonic cleaning devices, the “Star Dream” brand non-contact sleep aid devices, and medical beauty devices such as ultrasonic wrinkle removal and fat reduction machines. The commercialization approach follows a “channel cooperation + online and offline linkage” model. Offline, the company collaborates with partners in cities like Tianjin and Beijing to establish a sales network covering 463 beauty and health stores, driving the products into professional service scenarios. Online, the company relies on platforms such as Douyin (TikTok) and Xiaohongshu (Little Red Book), utilizing its own live-streaming team and external partners to conduct live-streaming e-commerce, achieving large-scale sales of acoustic disinfection products and the “Sleep Treasure” product, which enhances consumer penetration.

Technology Output:

This model focuses on the integration of core acoustic technologies and AI algorithms, commercializing them through partnerships with third-party developers. For example, a collaboration with a well-known smart footwear company in China involved embedding acoustic sensing and regulation technologies into their product lines, providing complete acoustic algorithms and module design. Revenue is generated through agreed-upon profit-sharing arrangements. This model allows the company to avoid large-scale production costs while obtaining long-term stable returns, rapidly expanding the technological application scenarios.

Solution Delivery:

Based on customer-specific needs, the Company integrates acoustic products, AI platform functions, and supporting services to provide comprehensive solutions across the full product chain, including R&D, product delivery, and application. For example, in the healthcare field, Datasea provides systematic acoustic application solutions that include sleep aid devices and health data analysis platforms. In the beauty industry, it offers integrated services combining acoustic care equipment with health management systems for users. For the fiscal year ended June 30, 2025, the Company generated revenue in this business segment of RMB 3,773,584.91 (approximately $527,110) from delivering complete acoustic technology solutions.

Products & Services

The Company’s acoustic high-tech products and services are built upon its proprietary non-audible mechanical wave effects core technology, integrated with AI algorithms to deliver innovative applications across health, medical, industrial, and agricultural sectors. Through this technological foundation, Datasea has developed a diversified product portfolio ranging from commercialized ultrasonic disinfection devices and sleep-assistance systems to medical beauty equipment, while actively advancing an “Acoustic +” multi-scenario strategy that extends into healthcare, medical neuro-regulation, industrial manufacturing, and smart agriculture.

Commercialized Products:

Datasea develops ultrasonic-based disinfection and purification devices that leverage cavitation effects to eliminate microorganisms and improve environmental hygiene. These products are designed for both commercial and household settings, providing chemical-free sterilization with enhanced safety. The “Datasea Tian Ear” ultrasonic air purifiers and ultrasonic cleaning devices are widely applicable in hospitals, airports, hotels, schools, and homes. Certain models integrate UV light and plasma functions to further strengthen disinfection effectiveness.

In the health and wellness category, Datasea applies acoustic and resonance principles to improve sleep quality and promote relaxation. Its “Star Dream” non-contact sleep aid devices, based on Schumann resonance, are designed to adjust the sleep environment and help users achieve restorative rest. In addition, the “Oxygen Sleep Star” (OEM product) provides a portable sleep-assistance solution for individual consumers, extending accessibility and convenience.

Datasea’s medical beauty products apply precise sound wave technology to support professional cosmetic care and personal use. These devices are intended to assist with skincare, body shaping, and aesthetic enhancement, representing potential new approaches in photoelectric medical beauty and health care. The portfolio includes ultrasonic wrinkle removal machines, fat reduction devices, and acoustic spot removal devices, which are designed for use in beauty centers as well as at home.

Product Plans (“Acoustic +” Multi-Scenario Layout):

In the health domain, the Company is advancing foot regulation solutions that combine AI and multi-source sensing to stimulate key foot acupoints and improve microcirculation. It is also developing ultrasonic cortisol level regulation devices designed to adjust brain cortisol levels and improve learning efficiency, together with household food and water disinfection cleaning devices that apply ultrasonic cleaning and sterilization in a simplified and user-friendly way.

In the medical domain, the Company is developing neuro-regulation devices in both home-use and rehabilitation types. The home-use version monitors brain electrical signals in real time for memory, sleep, and mood regulation, while the rehabilitation version is intended to support recovery of neural functions in patients suffering from strokes, brain injuries, and similar conditions. Integrated diagnostic and treatment robots powered by AI are also under development to assist doctors in performing intelligent medical operations.

In the industrial field, Datasea is working on rapid liquid-phase separation machines that use ultrasound to reduce reagent consumption and shorten separation times, ultrasonic-assisted nano-material preparation devices where atomization creates favorable conditions for nano-material production, ultrasonic 3D metal printing devices applying non-contact focused ultrasound for welding and printing, and semiconductor slurry and nano-material preparation devices that regulate atomized particle reactions for the production of copper oxide nanopowder.

In the agricultural field, the Company is developing ultrasonic agricultural preservation and pest control machines that eliminate insect eggs and microorganisms to extend shelf life, as well as agricultural and forestry pest control devices that use ultrasonic repellent to reduce pesticide usage. Acoustic plant growth promoters, also referred to as “sound fertilizer,” are being designed to enhance photosynthesis and nutrient absorption, while zero-gravity plant factories for space stations are exploring the use of acoustic waves to simulate a space-like environment for soil-free cultivation.

Sales and Distribution

As of the date of this Annual Report, our acoustic products are primarily developed and produced in China, and we sell these products primarily through multi-channels, extensively cooperating with new media. We have established new marketing channels both in China and internationally.

In the domestic market, Datasea adopts a direct sales approach in Beijing, Northern China, the Yangtze River Delta, and the Guangdong-Hong Kong-Macao Greater Bay Area by entering into agreements with industry clients, health management companies, and beauty salons to introduce acoustic products into medical, beauty, and public service scenarios. The Company also utilizes online distribution and live-streaming e-commerce through a “self-built + cooperative” dual-track model. Its in-house live streaming team provides product demonstrations and sales, while collaborations with external teams on platforms such as Douyin (TikTok) and Xiaohongshu (Little Red Book) help expand brand visibility and improve product conversion rates, particularly for disinfection products and consumer products such as “Sleep Treasure.”

In the overseas market, Datasea operates through its U.S. subsidiary, Datasea Acoustics LLC, which has established distribution partnerships with iPower Inc. and Meglio Interiors LLC to introduce acoustic disinfection products and health assistance devices into the U.S. market. These products are currently in the introduction phase, and the Company anticipates that the scale of cooperation will gradually expand in the future.

The Company’s major clients include:

Industry clients that are operators of public places such as hospitals, airports, hotels, and schools (who purchase disinfection and sterilization equipment), beauty chain organizations, health management companies (purchasing medical beauty equipment, sleep aid products), industrial manufacturing enterprises, and agricultural production bases (who pilot ultrasound industrial/agriculture application equipment).

End customers, such as sales network, including 463 beauty and health salons located in Northern China (Tianjin, Hebei, and other areas). These salons serve as the core display and service venues for acoustic products, directly offering acoustic care services to individual consumers.

Individual consumers that purchase household disinfection equipment, sleep aid devices, and other products directly through these channels.

During the fiscal year ended June 30, 2025 and up to the date of this Annual Report, the Company and its subsidiaries signed material agreements with the following major customers:

In December 2024, the VIE subsidiary, Guozhonghaoze, signed an agreement with 14 beauty industry service companies in cities such as Tianjin and Beijing to deploy its acoustic high-tech products (including disinfection devices and sleep aid products) in 263 beauty and body care stores in Northern China, covering key regions like Tianjin and Hebei. In January 2025, the company signed additional agreements with 9 health management companies in Tianjin, expanding its product range to 200 more beauty salons in Northern China. This expands the Company’s market presence and strengthens its position in health management and beauty fields, creating more growth opportunities.

On December 25, 2024, the Company’s wholly owned subsidiary Datasea Jingwei (Shenzhen) Information Technology Co., Ltd. signed a sales agreement with Tianjin Qianli Cultural Media Co., Ltd. for air purifiers. As of June 30, 2025, Qianli Cultural Media’s income amounted to RMB 267,936 (approximately $37,422 USD). This contract marks a strong start for entering the consumer market with acoustic environmental disinfection products, laying the foundation for future business expansion and brand impact.

On May 20, 2025, the Company signed two technology service contracts with Yuxiang Zhiyang (Tianjin) Innovation Technology Co., Ltd. The first contract involves designing the core technology solution for the “Ultrasonic Cavitation and Ozone Oxidation Bathroom Sterilizer” product based on the product concept and usage scenarios proposed by Yuxiang Zhiyang, with a contract amount of RMB 1.8 million (approximately $251,431.76 USD). By June 30, 2025, the revenue from this contract (excluding taxes) reached RMB 1,698,113.21 (approximately $237,199.78 USD). The second contract, valued at RMB 2.2 million (approximately $307,305.49 USD), focuses on the “Sleep Treasure” product core technology and system integration design based on Schumann wave resonance principles, with the revenue (excluding taxes) reaching RMB 2,075,471.70 (approximately $289,910.84 USD) as of June 30, 2025.

On July 18, 2025, the VIE subsidiary Guozhonghaoze (Beijing) Technology Co., Ltd. signed a “Market Cooperation Agreement” with Hainan Zhixingjian Intelligent Technology Co., Ltd.. Under the agreement, both parties will integrate their respective online sales channels, creating a special sales area for mutual products. This cooperation marks the formal entry of the company’s acoustic technology services and products into the smart wearable and health footwear sales channels, further expanding the application market and consumer coverage.

On July 18, 2025, Datasea’s VIE subsidiary, Guozhonghaoze (Beijing) Technology Co., Ltd., signed a cooperation agreement with Hainan Zhixingjian Intelligent Technology Co., Ltd. Under the agreement, Datasea will provide proprietary acoustic hardware and software solutions for adult and children’s smart insoles, featuring functions such as heating, weight monitoring, ultrasonic sterilization, sleep improvement, fatigue relief, and assistance in chronic disease management. Technology service fees will be charged based on product output, and the Company expects to generate up to RMB 7 million (approximately USD 0.98 million) in service revenue during the contract period. This cooperation marks the formal entry of Datasea’s acoustic technology services and products into the smart health consumer market.

Our Suppliers

The core suppliers for the Company’s “Datasea Tian Ear” air disinfection and sterilization product line include:

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Guangdong Hakebao Environmental Technology Co., Ltd.

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Shenzhen Aijing Sen Environmental Protection Technology Co., Ltd.

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Shenzhen Antop Technology Co., Ltd.

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Komi Intelligent Manufacturing (Shenzhen) Co., Ltd.

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Baihui Precision Plastics Molding (Shenzhen) Co., Ltd.

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Shenzhen Fubon New Technology Co., Ltd.

These suppliers are located in the Guangdong-Hong Kong-Macao Greater Bay Area, benefiting from a mature industrial supply chain. In March 2024, the company signed a Manufacturing Cooperation Agreement with Bailuwei Precision Technology Co., Ltd., a wholly owned subsidiary of Shanghai Yongli Belt Industry, which serves international brands such as Philips, Sony, and Samsung. This agreement is aimed at enhancing product manufacturing precision and scalability for upgraded acoustic intelligent deodorizing and sterilizing products.

The core raw materials for the “Datasea Tian Ear” series products include 40kHz ultrasonic sterilization modules, Seepo DC brushless motors, temperature and humidity sensors, dust sensors, UV lamps, and HEPA13 grade multi-layer filters. Core components like ultrasonic sterilization modules and sensors are custom-produced by designated suppliers according to technical specifications, ensuring product stability. Standard electronic components and filters are sourced through multi-supplier bidding to control costs and mitigate supply chain risks.

The Company set up sales channels though 463 beauty and health stores in the northern region of China, becoming the core display and sales nodes for acoustic products in professional service scenarios. In addition to its offline expansion, the Company increased its sales through live-streaming e-commerce, significantly increasing user coverage for acoustic disinfection products and “Sleep Treasure.” Company is focusing on advancing its patent applications and acquisitions in the U.S and will gradually scale up product sales in the international market.

AI Multimodal Digitalization Business Segment

Industry overview

Multimodal artificial intelligence (“Multimodal AI”) refers to models capable of simultaneously processing and integrating multiple forms of data—such as text, speech, images, and video—to produce a more comprehensive understanding and output. Compared to traditional single-modality AI, multimodal systems are better suited for complex business scenarios and real-time decision-making. The underlying technologies typically involve Transformer architectures, attention mechanisms, distributed training, and mixed-precision computing, which are increasingly being adopted across industries. Independent research indicates that by 2028, approximately 80% of enterprise-grade foundation models will incorporate multimodal capabilities, underscoring their strategic importance to platform providers.

In China, the AI industry has already reached a market scale of nearly RMB 600 billion and is projected to maintain double-digit compound growth over the next decade. Adoption rates among enterprises continue to accelerate, with generative and multimodal applications driving industry-wide digital transformation. The rapid deployment of 5G infrastructure provides the necessary connectivity and computing power, enabling low-latency data collection, transmission, and analysis. As of early 2025, China had deployed more than 430 million 5G base stations, supporting a high penetration rate of connected devices and services.

On the regulatory front, China’s cybersecurity, data security, and personal information protection laws establish a comprehensive framework for data collection, cross-border transfer, and algorithmic governance. These regulatory requirements are shaping industry practices and compelling platform providers to embed compliance features—such as data minimization, access control, and privacy audits—into their solutions. In this environment, multimodal AI has evolved from “feasibility” to “scalability,” offering enterprises not only technical tools but also compliance-ready platforms for digital transformation.

Industry Application and Market Scale

Multimodal platforms combine “data acquisition – semantic integration – workflow automation – intelligent decision-making” to deliver value across diverse sectors. In finance, multimodal data is applied to fraud detection and compliance monitoring; in logistics, it enables route optimization and anomaly alerts through the fusion of speech, video, and geospatial data; in healthcare, it supports remote consultations and quality control by combining textual records, physiological indicators, and imaging data; and in retail and new media, it enhances customer engagement by integrating text, voice, and video into seamless marketing campaigns. These applications highlight the shift from single-point automation toward full end-to-end intelligent processes.

The market scale is expanding rapidly. Globally, enterprise adoption of AI increased sharply in 2024, with budgets prioritizing generative and multimodal technologies. In China, the rollout of 5G and cloud computing has fueled explosive growth in scenarios such as live-streaming e-commerce, real-time logistics, and smart agriculture. Digital rural revitalization initiatives, supported by government policy, are driving adoption of multimodal platforms for crop monitoring, product traceability, telemedicine, and education. These developments create broad opportunities for solution providers offering “platform + vertical application” models.

Customer demand shows two structural patterns: small and medium enterprises (SMEs) favor lightweight, subscription-based multimodal services to enhance marketing and operations, while large industry clients sign multi-year framework agreements to secure stable computing and data resources. Together with the ongoing investment in digital public services, this dual demand structure is expected to sustain robust growth. Overall, the alignment of technological maturity, infrastructure rollout, and regulatory support forms three critical pillars underpinning the rapid expansion of AI multimodal.

Business Model and Revenue Model

The Company offers end-to-end digital solutions for industry-specific customer needs, integrating multimodal platform functions, customized data interfaces, and AI algorithms. During the fiscal year ended June 30, 2025, the Company launched the following directions for solution delivery:

AI Multimodal Services for Small and Medium Enterprises (SMEs): Providing integrated solutions that include membership management, data analysis, and intelligent marketing, helping SMEs optimize their customer operations and reduce management costs.

Digital Rural Services: Developing a digital platform covering smart agriculture (crop growth monitoring, precision irrigation), rural logistics (order tracking, route optimization), remote healthcare, and education, supporting rural industry upgrades and public service improvements.

New Media Marketing Services: Customizing digital marketing management systems for partners, supporting content publishing across multiple platforms, user interaction analysis, and tracking marketing effectiveness to improve online conversion rates.

We believe that this model has high margins and strong customer stickiness. In the fiscal year 2025 we generated RMB 8.9 million (approximately $1.24 million USD) in revenue from using the solution delivery method. It became a new profit growth point for the AI business segment and significantly optimized the overall profit structure.

The Company’s AI multimodal digitalization business is based on the self-developed multimodal intelligence platform. This platform utilizes the Transformer model architecture, DeepSeek distributed training, and mixed-precision computing technologies to simultaneously process text, voice, images, video, and other data types, enabling real-time data collection, analysis, generation, and transmission. The platform serves multiple industries such as finance, logistics, healthcare, entertainment, and beauty. During the fiscal year 2025, the Company generated revenue of $70.68 million in this business segment, an increase of $46.71 million compared to the previous year (2024: $23.97 million), reflecting a growth rate of 194.86%. The growth is primarily attributed to the rapid expansion of the Chinese AI multimodal digital business market and the continuous expansion of the customer base, with stable execution of long-term contracts.

Products and Services

The core product of the AI multimodal digitalization business is the Multimodal Intelligence Service Platform that leverages cross-modal data processing technology and has four key capabilities:

Multi-type Data Processing supports text (semantic analysis, multilingual translation, content generation), voice (real-time recognition, speech synthesis, voiceprint identification), image (object detection, image segmentation, style transfer), and video (behavior analysis, content summarization, anomaly detection) across various data scenarios.

Cross-modal Semantic Calibration: Using self-attention mechanisms to assign weights to different types of data, it ensures precise association and integration of cross-modal information, improving the accuracy of analysis results.

Business Process Automation: The platform features standardized API interfaces, enabling seamless integration with existing ERP, CRM, and OA systems of clients, achieving automatic data flow and business operations (e.g., order approval, customer responses).

Intelligent Recommendations and Predictions: Based on historical customer data and industry characteristics, AI algorithms generate personalized content recommendations, user demand predictions, and risk alerts (e.g., financial fraud detection, logistics anomaly warning).

Sales Channels and Customer Categories

The Company adopts a “2B2C” model to expand its market coverage through direct industry client outreach, cooperative partnerships and end-user penetration. In terms of direct outreach, the sales team engages with major industry players such as financial institutions, logistics companies, healthcare organizations, and beauty chains, offering customized solutions and platform services; for example, the Company has collaborated with leading logistics firms to deploy intelligent scheduling platforms. Cooperative partnerships are established with local government departments such as the Rural Revitalization Bureau, industry associations including the SME Association and Beauty Industry Association, as well as digital service providers, enabling the Company to quickly access small and medium-sized customers and promote standardized platform services. At the end-user level, Datasea deploys multimodal services in beauty salons, rural service centers, and other scenarios. These services include functions such as online appointment systems in beauty salons and agricultural product traceability platforms in rural areas, which indirectly reach individual consumers and create a “B-end service supporting C-end experience” model.

Sales and Distribution

Datasea categorizes its customers based on size and usage scenarios, continuously optimizing its customer structure.

Large industry clients include key players in logistics, retail, healthcare, and beauty chains, who typically sign long-term cooperation agreements and contribute a significant share of revenue through stable purchasing volumes. Small and medium enterprises in sectors such as retail, catering, and agriculture primarily purchase standardized platform services, including intelligent marketing and business automation tools, and the Company has added over 200 new SME clients in fiscal year 2025. End-user clients include 463 beauty and health salons in Northern China that have adopted Datasea’s AI multimodal digital system, such as online appointment scheduling and membership management modules. Through these clients, the Company indirectly reaches individual consumers, increasing platform usage frequency and strengthening its overall market footprint.

During the fiscal year ended June 30, 2025, the Company has continuously grown its customer base, which further supported the expansion of its AI multimodal digitalization business. Stable cooperation with core clients contributed to significant revenue growth. The Company generated revenue of $69.44 million in its AI multimodal digitalization business, an increase of $49.89 million compared to $19.55 million in the same period of 2024, reflecting a growth rate of 255.20%.

The Company entered into the following material agreements with respect to its AI multimodal digital system:

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Qingdao Ruizhi Yixing Information Technology Co., Ltd.:

Cooperation Period: Signed an agreement on August 12, 2024, valid for 12 months and renewed to December 31 2026 before expiration.

Cooperation Content: The company, along with its subsidiaries and affiliates, provides AI multimodal data services to the client. The agreement includes purchasing AI multimodal data recharge cards valued at RMB 10–500 (approximately $1.40–69.83 USD).

Revenue Contribution: From July 1, 2024, to June 30, 2025, this client contributed RMB 392,182,085.13 (approximately $54,775,147 USD), making it the company’s largest AI business client.

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Wuhan Xiaoming Technology Co., Ltd.:

Cooperation Period: Signed on August 9, 2024, valid for 12 months and renewed to December 31 2026 before expiration.

Cooperation Content: Purchases AI multimodal data recharge cards for its digital platform’s data processing services.

Revenue Contribution: From July 1, 2024, to June 30, 2025, this client contributed RMB 25,000,429.43 (approximately $3,491,751 USD).

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Xinyi Xinfanfa Information Technology Co., Ltd.:

Cooperation Period: Signed on October 1 valid for 12 months.

Cooperation Content: Purchases AI multimodal data recharge cards for logistics industry intelligent scheduling and information push services.

Revenue Contribution: From July 1, 2024, to June 30, 2025, this client contributed RMB 41,736,607.01 (approximately $5,829,253 USD).

On February 20, May 15, and May 16, 2025 the Company signed an agreement with Beijing Meimei Cooperative Network Technology Co., Ltd. that provides AI multimodal solutions for small and medium enterprises (30-day delivery), digital rural services (35-day delivery), and new media marketing platform custom solutions (35-day delivery). As of June 30, 2025, we generated RMB 5,377,358.49 (approximately $751,132 USD) from the sales of services based on these agreements.

On May 22, 2025, we signed an agreement with Tianjin Qianli Cultural Media Co., Ltd. with respect to custom technology solutions for our new media marketing platform, including user profile analysis, content auto-generation, and marketing effectiveness tracking. As of June 30, 2025, we generated RMB 2,075,471.70 (approximately $289,910 USD) from the sales based on this agreement.

Our Suppliers

The core product of the AI multimodal digitalization business is software systems and platform services, which are mainly developed by the Company’s internal R&D team. There is no procurement of traditional hardware raw materials, with only a small amount of supporting services and resource procurement involved During the R&D process, the server resources and cloud computing services required are primarily sourced from leading domestic cloud service providers such as Alibaba Cloud and Tencent Cloud, with payments based on actual usage such as storage capacity and computing time. This ensures the stable operation of the platform and data security.

To guarantee that data collection and processing comply with regulations such as the Data Security Law and the Personal Information Protection Law, the Company engages third-party data compliance consulting agencies, including service teams from the China Academy of Information and Communications Technology. These services cover data compliance assessments and the design of privacy protection schemes. In addition, some basic algorithm modules, such as foundational speech recognition models, are licensed from compliant third-party technology providers. The Company pays annual licensing fees for these technologies in order to reduce R&D costs and enhance the functional maturity of its platform.

Overall, the supplier concentration for this business segment is low, and procurement costs account for less than 5% of the revenue. The reliance on external suppliers is minimal, and the core competitive advantage stems from the company’s self-developed multimodal algorithms and scenario-based solution capabilities.

For the fiscal year 2025, the Company AI multimodal digitalization business delivered notable progress, with advancements in customer scale, revenue volume, and profitability quality. Management believes these results demonstrate the segment’s growing market relevance and provide a strong foundation for continued expansion:

Revenue from this business segment reached $70.68 million, representing an increase of 199.49% compared to $23.60 million in fiscal year 2024. The number of core customers grew from 8 in fiscal year 2024 to 15 in fiscal year 2025, with three customers—Qingdao Ruizhi Yixing, Xinyi Xinfanfa, and Wuhan Xiaoming Technology—each generating annual cooperation amounts exceeding $10 million USD, reflecting stronger customer stickiness.

The Company also achieved meaningful progress toward the large-scale implementation of its AI multimodal system solutions. Key offerings, including services for small and medium-sized enterprises, digital rural services, and new media marketing solutions, generated total revenue of RMB 8.9 million (approximately $1.24 million USD). These solutions delivered a gross margin of over 60%, significantly higher than the 45% margin for standardized platform services, thereby improving the overall profitability of the segment.

In addition, the Company made further advances in the beauty and health industry by deploying digital systems in 463 beauty salons in Northern China. These deployments established a closed-loop service chain that integrates online appointments, personalized recommendations, membership management, and service feedback. Management believes that this model will increase consumer usage frequency over time, creating a “B-end service + C-end experience” growth pathway and further expanding the Company’s market boundaries.

Products and Supply Chain

Datasea Inc.’s product system consists of two parts: software and hardware.

In the Acoustic High-Tech business segment, the Company mainly focuses on hardware devices, covering disinfection and health-related smart hardware products, while also integrating some software functions to enable device control and data collection. In the AI Multimodal Digitalization business segment, the core products are software systems and platform services, relying on artificial intelligence algorithms and multimodal processing capabilities to provide intelligent cloud-based services for both enterprise and individual clients. The Company combines independent R&D with external collaborations, outsourcing certain stages to maintain production flexibility and cost control. The R&D focuses on independent innovation in acoustic technologies and multimodal algorithms, forming a “R&D-driven, manufacturing-collaborative, hardware-software integrated” capability system that supports the implementation of the two core business segments.

Software R&D Capabilities

The Company’s software development focuses on the AI multimodal digitalization business. Its core achievement is the self-developed multimodal intelligence platform, with specific R&D capabilities reflected in the following areas:

Technical Architecture: The platform is built based on the Transformer model architecture, DeepSeek distributed training, and mixed-precision computing technologies. It has the ability to simultaneously process text, speech, image, and video data, using a self-attention mechanism to achieve cross-modal semantic calibration, thereby improving the accuracy of data fusion and analysis.

Core Function Development: The R&D covers functions such as data collection and transmission, multimodal analysis and generation, business process automation, intelligent recommendations and marketing, and risk control and management. These functionalities meet the digital needs of industries including finance, logistics, healthcare, entertainment, and beauty.

Scenario-Based R&D: The Company focuses its R&D efforts on AI multimodal services for small and medium-sized enterprises (SMEs), digital rural services, and new media marketing services. These efforts result in both standardized platform services and customized solutions. For example, the company develops integrated features for membership management, data analysis, and intelligent marketing for SMEs, and develops agricultural management, remote healthcare, and education modules for rural revitalization.

Supply Chain and Supplier Management

Supply Chain System: The supply chain includes the manufacturing of electronic components, mold processing, plastic shell injection molding, and metal structural parts production. The system is primarily built around the production needs of acoustic hardware products. The Company adopts a multi-supplier strategy for core components (e.g., ultrasonic sterilization modules, sensors), selecting 2-3 suppliers for each core component, and sourcing generic parts through multi-channel bidding to reduce dependency on single suppliers.

Supplier Management:

Supplier Selection: The company prioritizes suppliers located in the Guangdong-Hong Kong-Macao Greater Bay Area (Dongguan, Shenzhen, Foshan), leveraging regional industrial chain advantages to ensure supply efficiency. Core suppliers must have independent production facilities, advanced manufacturing equipment, intelligent production lines, and good industry reputations, and they must pass certifications such as ISO 9001:2008, ISO 14001:2004, OHSAS 18001:2007, and CCC.

Core Supplier Cooperation: Key suppliers for the “Datasea Tian Ear” air disinfection and sterilization product series include Guangdong Hakebao Environmental Technology Co., Ltd., Shenzhen Aijing Sen Environmental Protection Technology Co., Ltd., Shenzhen Antop Technology Co., Ltd., Komi Intelligent Manufacturing (Shenzhen) Co., Ltd., Baihui Precision Plastics Molding (Shenzhen) Co., Ltd., and Shenzhen Fubon New Technology Co., Ltd.. In March 2024, the company signed a Manufacturing Cooperation Agreement with Bailuwei Precision Technology Co., Ltd., a wholly owned subsidiary of Shanghai Yongli Belt Industry, which serves international brands such as Philips, Sony, and Samsung. This agreement aims to enhance the manufacturing precision and scalability of upgraded acoustic intelligent deodorizing and sterilizing products.

Outsourcing Management:

Outsourcing Collaboration Scale: As of June 30, 2025, the Company has established collaborations with approximately 5 outsourced manufacturing partners, building a supply system with around 40 suppliers to provide various components and services for the acoustic high-tech products. The company continues to expand its outsourcing partnerships to optimize supply chain resources.

Outsourcing Quality Control: The Company requires outsourcing partners to establish independent quality management departments and implement a three-tier control system, including SQA (Supplier Quality Assurance), IPQC (In-Process Quality Control), and QC (Finished Product Inspection). The company supervises outsourced manufacturing quality through on-site sampling inspections and customer feedback to ensure compliance with company standards.

This overall framework supports the collaboration and growth of the Acoustic High-Tech and AI Multimodal Digitalization business segments, while providing capability support for future product iterations and market expansion.

Technology & Innovation

Research Cooperation and Industry Standards

The Company established collaborations with several top domestic and international research institutions in the two core areas of acoustic technology and AI multimodal digitalization, building a “industry-university-research-application” collaborative innovation system, including:

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Institute of Acoustics, Chinese Academy of Sciences (focusing on fundamental acoustic theory and applied research),

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Cloud Computing and Big Data Research Institute, China Academy of Information and Communications Technology (advancing AI multimodal technology and digital standards integration),

●

Internet Industry Research Institute, Tsinghua University (exploring the integration of acoustics and AI in industrial applications),

●

Institute of Artificial Intelligence, Harbin Institute of Technology (developing multimodal algorithms and models),

●

Beijing Union University and Jilin University Remote Sensing Institute (expanding the application of acoustic technology in environmental monitoring, agriculture, and other fields).

Through joint laboratories and industrial research projects, the Company facilitates the exchange of cutting-edge technologies and external intellectual support for advances in core technologies.

The Company actively participates in the formulation of industry standards and industrial research. In cooperation with the Ministry of Industry and Information Technology and the China Academy of Information and Communications Technology, the company jointly published China’s first “Acoustic High-Tech Industry White Paper,” which systematically elaborates on the principles of acoustic technology, commercial application paths, and industry development prospects. This white paper defines the industry positioning of “acoustic effects” and provides theoretical references and practical guidance for the development of the acoustic high-tech industry, while enhancing the company’s technical authority and influence in the industry.

Acoustic Technology R&D and Innovation

The Company has long focused on the fields of ultrasound, infrasound, and strong sound waves as core acoustic technologies. With “non-audible mechanical wave effects” as the core of its R&D, the company integrates artificial intelligence, vibration dynamics, and mechanical transducer technologies to build a unique technical system. By studying the cavitation effect, thermal effect, and mechanical vibration effect in different media (air, liquid, biological tissue), the company has extended acoustic technology from environmental assistance to high-value fields such as healthcare, medical treatment, and industrial agriculture, forming a “basic acoustic theory + AI algorithms + scenario applications” technology innovation path.

AI Multimodal Innovation

The Company has made notable improvements in enhancing data processing capabilities and adapting to industry scenarios, which management believes position the platform for continued innovation and commercial scalability.

In terms of technology, the Company develops multimodal parallel processing algorithms based on the Transformer model architecture, distributing weights to text, speech, image, and video data through the self-attention mechanism to address cross-modal semantic inconsistency. By integrating DeepSeek’s distributed training methods and mixed-precision computing technologies, the Company improves model training efficiency and data processing speed, enabling support for high-frequency demands such as millisecond-level lesion detection in medical scenarios and real-time voice interactions in customer service scenarios.

The platform also expands its functional coverage across a wide range of applications, including text generation, sentiment analysis, multilingual translation, code generation, and logical reasoning, with innovative deployments in multiple industries. For example, in the rural revitalization sector, it combines agricultural image recognition for crop growth monitoring with voice broadcasting for agricultural guidance. In the beauty and health sector, it incorporates user profile analysis for skin types and consumer preferences together with intelligent service recommendation modules. In the SME sector, it provides business process automation tools such as order processing and financial report generation. These functions and applications further strengthen the high-margin characteristics of the business and enhance its overall market competitiveness.

CORPORATE HISTORY AND STRUCTURE

Corporate History

As part of its business expansion process, the Company has gradually expanded its business footprint through subsidiaries and cooperation entities, achieving market coverage in both the U.S. and China. In July 2023, Datasea formed its wholly owned subsidiary Datasea Acoustics LLC under the laws of the State of Delaware. This subsidiary serves as the core platform for international business, focusing on driving the operation and distribution of acoustic high-tech products in the U.S. and overseas markets, while also handling patent layout for the international market, providing the foundational support for the global deployment of technology and products. This has helped complete the company’s operational structure in the U.S.

In the Chinese market, the company operates using the “Wholly Foreign-Owned Enterprise (WFOE) + Variable Interest Entity (VIE)” structure. The operational activities, including R&D, manufacturing, and market sales, are carried out through core entities such as Tianjin Information Sea and Shuhai Beijing, ensuring local business compliance and efficient execution.

Our Organizational Structure

The Company’s organizational chart as of June 30, 2025 is as follows:

Please refer to the discussion in NOTE 1 - ORGANIZATION AND PRINCIPAL ACTIVITIES of the Notes to the Consolidated Financial Statements under Item 8 of this Annual Report for a narrative of our organization structure and operating subsidiaries, including their dates of incorporation and history.

Our parent company is Datasea Inc., a Nevada corporation. It is a holding company whose common stock is listed on Nasdaq. As a holding company, it oversees the Company’s overall strategic formulation, capital operations (such as financing and equity management), and the consolidation of financial information. It is also responsible for international compliance and risk management, ensuring the alignment of the Company’s operations with shareholder interests.

Our US subsidiary is Datasea Acoustics LLC, incorporated in 2023 in the State of Delaware. This entity plays a crucial role in supporting the localization of technology and products in the US and in other global international markets and for building a distribution network for acoustic high-tech products.

Tianjin Information Sea Information Technology Co., Ltd. (referred to as “Shuhai Tianjin”) is our Chinese wholly foreign-owned enterprise (WFOE). As the wholly owned subsidiary of the parent company, this Chinese company serves as a key link between the parent company and Chinese VIE entities. This operating company is a party to material contracts with VIE entities, intellectual property (IP) licensing, financial settlement, and other supporting functions.

VIE Entities: Datasea Information Technology Co., Ltd. (referred to as “Shuhai Beijing”) and its subsidiaries. There are our core operational entities in China, through which we develop our acoustic technology and its production and also implement AI multimodal digitalization business scenarios (such as rural revitalization and logistics industry solutions).

Development Strategy

Overall Strategic Direction

The Company’s development strategy is based on “Acoustic High-Tech” and “AI Multimodal Digitalization” as its dual core engines. With the five major acoustic application areas (Acoustic Industry, Acoustic Agriculture, Acoustic Healthcare, Acoustic Medical and Elderly Care, Acoustic IoT) as the technological foundation, and four major product clusters (Acoustic Environmental Products, Acoustic Intelligent Manufacturing Products, Acoustic Wellness Products, Acoustic Medical Products) as business pillars, the Company is constructing a vertically integrated strategy system from technology R&D to industrial implementation. The Company relies on the dual operational platforms in the U.S. and China (the U.S. parent company oversees capital and strategy, while the China WFOE+VIE structure handles R&D and production), and through continuous high-intensity R&D investment, clear product roadmap planning, diversified market channel expansion, and proactive global intellectual property layout, the company is driving its business from “scale expansion” to “high-quality growth.” The ultimate goal is to become a globally influential leader in the field of acoustic intelligence and digital solutions, creating sustainable value for shareholders, customers, and society through innovative “Acoustic + AI” technology product combinations.

Acoustic High-Tech Strategy

The acoustic high-tech strategy focuses on the “non-hearable mechanical wave effect,” deeply engaging in the R&D and commercialization of ultrasound, infrasound, and Schumann resonance technologies. The strategy aims to achieve multidimensional market expansion through the “four major product clusters.” The implementation path is as follows:

Core Technology Focus and Productization Path:

Environmental Product Cluster Scaling: Based on the “Datasea Tian Ear” disinfection series, the Company uses both offline beauty salons (463 locations) and online live-streaming e-commerce channels to drive market penetration as well as develops smart environmental monitoring and purification systems based on Acoustic IoT technology, strengthening its core revenue base.

Intelligent Manufacturing Product Breakthrough: The Company is focusing on advancing ultrasonic precision machining equipment (e.g., 3D metal printing) in the acoustic industry and ultrasonic pest control and crop growth promotion devices in the acoustic agriculture sector. The Company is forming industry alliances with industrial groups and agricultural research institutions to create benchmark industry cases.

Wellness Product Ecosystem: Focusing on neuro-regulation (brain-computer interfaces) and foot health interventions, the Company is building a “hardware + AI algorithm + health platform” closed-loop system. Through a B2B2C model, the Company is cooperating with health management organizations and insurance companies to provide personalized health management services.

Acoustic Medical Product Frontier Layout: The Company is continually investing in the R&D of advanced technologies like Low-Intensity Focused Ultrasound (LIFU) and establishing clinical collaborations, reserving technologies and patents for future entry into the high-end medical device field.

AI Digital Platform Strategy

The AI digital platform strategy is built on multimodal intelligent technologies as the foundation, with industry deep empowerment at its core. The company is developing a “platform + solutions + ecosystem cooperation” three-in-one business model to provide strong digital support and collaborative value for the acoustic high-tech strategy.

Platform Service Strategy:

Based on the self-developed Transformer-based multimodal platform, the Company continues to enhance its capabilities in integrating and generating text, speech, image, and video data. By offering standardized API interfaces and modular services, the company provides rapidly integrable AI capabilities to clients in industries such as finance, logistics, healthcare, and entertainment. The platform uses a subscription-based (SaaS) and pay-per-use model to ensure continuous revenue and scalability.

Industry Deep Solutions Strategy:

Focusing on three high-growth scenarios, the Company offers customized solutions:

SME Digital Solutions: Integrating membership management, intelligent marketing, and other functions to lower the digitalization threshold for SMEs.

Digital Rural Solutions: Providing smart agriculture management, rural logistics dispatch, and remote public services, supporting national rural revitalization policies.

Beauty and Health Industry Digital Solutions: Offering full-process digital management systems for offline beauty salons, creating synergies with the acoustic hardware business.

Ecosystem Cooperation Strategy:

Through the 2B2C model, the Company expands its ecosystem. On one hand, it builds long-term relationships with industry leaders (e.g., Qingdao Ruizhi Yixing) to ensure base revenue scale; on the other hand, it partners with industry associations, local governments, and digital service providers to explore the SME market. At the same time, through beauty salons and other end-user scenarios, the Company indirectly reaches C-end users, forming a multi-layered customer structure.

Technology R&D Strategy

The Company’s technology R&D strategy adheres to the principle of “balancing independent R&D and open cooperation,” driving forward through both frontier technology exploration and industrial application. The goal is to build an R&D system with continuous innovation capabilities.

R&D Focus Areas:

Acoustic Technology R&D: Focus on non-hearable sound applications, including acoustic neuro-regulation technology (low-intensity focused ultrasound + functional ultrasound imaging), brain-computer interface integration, and the application of acoustics in precision industrial processing and agricultural pest control. The company is establishing a complete R&D chain of “fundamental theoretical research — core technology breakthroughs — product development.”

AI Multimodal R&D: Continuously optimize cross-modal semantic calibration algorithms and develop scenario-specific modules for particular industries (e.g., beauty salon digital systems, rural agriculture management modules). Strengthen the data interactivity between AI multimodal platforms and acoustic hardware to achieve intelligent analysis and feedback adjustment of data collected by acoustic devices.

R&D System Construction:

The Company has established a three-tier R&D system:

Frontier Technology Research Institute: Focused on 3-5 years of long-term technology development.

Product R&D Center: Responsible for 1-2 years of product development.

Customer Solutions Department: Focused on quick responses and customized development for customer needs.

Through an R&D management process of “project initiation — milestone monitoring — evaluation,” the company ensures effective resource allocation and project progress.

Industry-University-Research Collaborative Innovation: The Company has established joint laboratories with institutions such as Institute of Acoustics, Chinese Academy of Sciences, Internet Industry Research Institute, Tsinghua University, and Artificial Intelligence Research Institute, Harbin Institute of Technology, driving the rapid transformation of cutting-edge technologies through industrial research projects. The company actively participates in industry standard formulation and co-published the Acoustic High-Tech Industry White Paper, enhancing its influence in the industry.

M&A Strategy

The company’s M&A strategy focuses on “technology enhancement, market synergy, and ecosystem improvement,” aiming to accelerate technological breakthroughs and market expansion through strategic acquisitions, achieving exterior growth.

Acquisitions:

The Company focuses on three major directions with high synergy to its core business:

Acoustic Technology Companies: The Company prioritizes acquiring innovative companies that possess core acoustic modules, sensor technologies, or patent portfolios to enhance its technological capabilities in the acoustic hardware field.

Artificial Intelligence and Big Data Companies: The Company targets teams with algorithm advantages or industry-specific data resources, strengthening the professional capabilities of its AI multimodal platform.

Industry Application Companies: The Company focuses on companies with mature customer resources and experience in industries such as smart agriculture and precision manufacturing, accelerating the commercialization of products in the acoustic industry and acoustic agriculture segments.

M&A standards emphasize technological synergy and the feasibility of team integration. The company adopts a “cooperation first, acquisition later” strategy, deepening relationships through project collaboration and equity investment before proceeding with acquisitions, ensuring smooth integration of technologies and team stability post-acquisition.

International Acquisitions:

Focusing on the North American market, the Company conducts acquisitions along two main lines:

Technology-Oriented Acquisitions: The Company targets innovative enterprises with patents and technologies related to ultrasound neuro-regulation and brain-computer interfaces, rapidly acquiring cutting-edge technologies and intellectual property assets.

Market-Oriented Cooperation and Acquisitions: The Company forms deep partnerships with local distributors and manufacturers in the U.S., establishing localized sales networks and production capabilities through equity investment or acquisitions, thereby reducing cross-border operational costs.

International acquisitions emphasize compliance risk assessments and cross-cultural integration. The Company works with professional institutions to conduct due diligence, develops detailed post-merger integration plans, and ensures alignment with the company’s global strategy.

International Strategy

The international strategy follows a path of “gradual progress, key breakthroughs, and localized operations”, starting with the North American market and gradually building a global business presence and market influence.

Phased Market Expansion Strategy:

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Phase 1: Focus on breaking into the U.S. market by establishing a localized operational system through its subsidiary Datasea Acoustics LLC. The company will initially introduce acoustic environmental products (disinfection and purification devices) and acoustic medical and elderly care products (sleep aid devices) as its flagship products. Partnering with local distributors like iPower Inc., the company aims to rapidly establish its market presence.

●

Phase 2: Expand into the European market, focusing on promoting acoustic medical and intelligent manufacturing products. Through collaborations with local research institutions and channel partners, the company will achieve product localization certification and market access.

●

Phase 3: Gradually expand to Asia-Pacific and other emerging markets, forming a global sales network and service system.

Localized Operational System Construction:

The company will establish localized teams in key overseas markets responsible for market promotion, customer service, and channel management. It will actively explore cooperation opportunities with local manufacturers, achieving product localization through technology licensing or cooperative manufacturing, thereby reducing tariffs and logistics costs, and enhancing market responsiveness. Additionally, the company will establish product customization and capability output mechanisms to ensure its products and services meet local regulations and cultural preferences.

Global Resource Integration:

The company will establish a global R&D collaboration network, building relationships with top overseas research institutions and attracting international talent to achieve global distribution of technological resources. At the same time, the company will participate in international industry exhibitions and standard-setting activities to enhance its brand influence and voice in the global acoustic intelligence sector.

Intellectual property rights

The Company places great emphasis on intellectual property management, considering it a core safeguard for technological R&D and commercialization. The company has established a protection network covering patents, trademarks, copyrights, and trade secrets. In the patent area, the focus is on core technology fields such as acoustic neuro-regulation, ultrasound brain-computer interfaces, and AI multimodal algorithms, forming a comprehensive technical protection network. Research and development have always been the core and driving force behind the Company’s growth. The Company is enhancing the application and industrialization of its unique acoustic high-tech services, implementing a comprehensive industrial technology layout in fields such as acoustic industrial applications, acoustic agriculture applications, acoustic medical care, acoustic health, and acoustic IoT technologies. In the post-pandemic era, the Company continues to introduce a broader range of acoustic health products by leveraging non-audible sound (especially ultrasound and infrasound) and its interaction with biological systems, maintaining a leading position in the acoustic high-tech industry.

The Company has built a comprehensive intellectual property system covering patents and software copyrights around its two main business segments: Acoustic High-Tech and AI Multimodal Digitalization. As of the fiscal year 2025, the Company, through its VIE and subsidiaries in China, has obtained a total of 26 patents (including inventions, utility models, and design patents) and 177 software copyrights, with 5 core technology patents under substantive examination. At the same time, through its wholly owned U.S. subsidiary, Datasea Acoustics LLC, the Company is advancing patent applications and acquisitions in the U.S., gradually forming an international intellectual property layout centered on China, with coverage in the U.S., to support technology protection, market competition, and business globalization.

As of June 2025, the Company has made the following achievements in patent applications from the State Intellectual Property Bureau:

Publication and Granted Patents:

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
5	CN2024100443501	The invention discloses an information interaction method and system based on 5G messages	Granted

		Patents Owned by Tianjin Information
6	CN108961661B	Three-dimensional smart security alarm linkage system	Granted

		Patents owned by Xunrui Technology
7	CN110374479B	A type of intelligent security equipment	Granted

8	CN112964372B	The invention relates to a new infrared temperature measuring device and a temperature measuring method.	Granted

		Patents owned by ShenzhenJingwei Technology
9	CN107036218B	A novel ultrasonic atomizer device	Granted
10	CN218853183U	The handle used for sterilizing the device	Granted
11	CN218247901U	Ultraviolet ultrasonic plasma disinfection equipment	Granted

		Patents owned by Acoustic Effect Technology
12	CN307831947S	Acoustic effect disinfection instrument type I (universal)	Granted

Patents under Substantive Examination:

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

		Xunrui Technology:
3	202110162293.3	Facial expression recognition method, device and electronic equipment based on complex scene	Substantive examination
4	CN202311307735.4	A fast retracing method of global surface water range based on early Landsat images	Substantive examination
5	CN202211404673.4	Method and system of water missing data reconstruction for optical remote sensing images

		Shuhai Jingwei:
6	202210811431.0	A high frequency acoustic effect air coupled microbial elimination method and device	Accepted
7	202430090085.1	Smart Sound wave Sterilization and Deodorization(01)	Substantive examination
8	202430090093.6	Smart Sound wave Sterilization and Deodorization (02)	Substantive examination
9	202430253514.2	Sleep comforter (non-contact)	Substantive examination

Major products

The Company mainly focuses on developing the following two categories of products: software and smart hardware devices. Software system - mainly refers to software systems and solutions related to 5G messaging cloud platforms/5G digital platforms and smart cities, to ensure legal protection for the Company’s software assets. As a result of the Company’s increased investment in R&D and the training of technical talents, as of the date of this Annual Report, the Company and its subsidiaries in China have obtained a total of 177 software copyrights, all of which are self-developed software systems or platforms. They cover AI multimodal digitalization, acoustic device management, intelligent security, smart campus, and digital rural services, providing core software support for business operations and customer services.

Software Copyright Owned by Shuhai Beijing
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
36	Big data accurate analysis of sales promotion system	Softcopy Registration No.11933115
37	Multimodal customer relationship management system	Softcopy Registration No.11938599
38	5G message data exchange center system	Softcopy Registration No.11893684
39	Enterprise digital employee management system	Softcopy Registration No.11548880
40	Shuhai Information Beauty Industry Multimodal Assistant User End	Softcopy Registration No.13940802
41	Multimodal data management System for Customer Relations in the park	Softcopy Registration No.13935684
42	Digital Marketing Cloud Document Comprehensive Management System	Softcopy Registration No.13934629
43	5G intelligent multimodal ERP management system	Softcopy Registration No.13941972
44	Acoustic intelligent life terminal equipment management system	Softcopy Registration No.14412403
45	Interactive intelligent service management system for stores	Softcopy Registration No.14280647

Software Copyright owned by Xunrui Technology
No.	Certification	Certificate No.
46	Xunrui smart security integrated management platform v1.0	Ruan Zhu Deng Zi No.5201855
47	Xunrui big data visual analytics platform v1.0	Ruan Zhu Deng Zi No.5201772
48	Xunrui visual recognition algorithm platform v1.0	Ruan Zhu Deng Zi No.5201824
49	Xunrui non-visual recognition algorithm platform v1.0	Ruan Zhu Deng Zi No.5201861
50	Xunrui epidemic prevention and control linkage early warning system v1.0	Ruan Zhu Deng Zi No.5201704
51	Xunrui smart campus security management system v1.0	Ruan Zhu Deng Zi No.5201776
52	Xunrui smart scenic area security management system v1.0	Ruan Zhu Deng Zi No.5201574
53	Xunrui smart community security management system v1.0	Ruan Zhu Deng Zi No.5201869
54	Xunrui smart one-key alarm management system v1.0	Ruan Zhu Deng Zi No.5201784
55	Xunrui smart guest management system v1.0	Ruan Zhu Deng Zi No.5201780
56	Xunrui O2O community group Shopping Mall system V1.0	Ruan Zhu Deng Zi No.9940999
57	Xunrui Smart Campus Security cloud platform system V1.0	Ruan Zhu Deng Zi No.9941054
58	Xunrui Wisdom canteen arrangement system V1.0	Ruan Zhu Deng Zi No.9941000
59	Xunrui aggregation message cloud platform V1.0	Ruan Zhu Deng Zi No.9941047
60	Xunrui B2B2C online mall system V1.0	Ruan Zhu Deng Zi No.9941055
61	Xunrui Wisdom Canteen Food traceability system V1.0	Ruan Zhu Deng Zi No.9995289
62	Xunrui 5G message cloud platform V1.0	Ruan Zhu Deng Zi No.9995307
63	Xunruirong media information marketing platform	RuanZhuDeng Zi No.10318231
64	Xunrui comprehensive online Office OA System	RuanZhuDeng Zi No.10318229
65	Xunrui integrated security cloud platform	RuanZhuDeng Zi No.10318227
66	Xunrui Smart Apartment management system	RuanZhuDeng Zi No.10318271
67	Xunrui Aggregate payment and settlement system	RuanZhuDeng Zi No.10318221
68	Xunrui AI intelligent algorithm analysis platform	RuanZhuDeng Zi No.10318230
69	Xunrui intelligent acoustic recognition system	RuanZhuDeng Zi No.10318269
70	Xunrui Intelligent Park management system	RuanZhuDeng Zi No.10318270
71	Xunrui Wisdom Catering System	RuanZhuDeng Zi No.10318268
72	Xunrui satellite remote sensing - Agricultural Management System	RuanZhuDeng Zi No.10318228
73	Xungrui iot terminal service gateway platform V1.0	RuanZhu Deng Zi No10357761
74	Xungrui intelligent community integrated management platform V2.0	RuanZhu Deng Zi No10357535
75	Xungrui smart community integrated management client platform V1.0	RuanZhu Deng Zi No10312678
76	“CoAI CPaaS” interactive artificial intelligence precision reach analysis platform v1.0	RuanZhu Deng Zi No11659754
77	Cloud Customer Resource Management system v1.0	RuanZhu Deng Zi No11652683
78	Big data attribute label analysis marketing push system	RuanZhu Deng Zi No11877356
79	Micro, small and medium-sized enterprises 5G messaging application platform v1.0	RuanZhu Deng Zi No12233860
80	Xungrui iot cloud platform V1.0	RuanZhu Deng Zi No12450190
81	Xungrui smart canteen security system V1.0	Ruan Zhu Deng ZiNo12576381
82	5G Messaging Integrated Order Management System	Ruan Zhu Deng ZiNo14292596
83	Beauty industry store operation management system	Ruan Zhu Deng ZiNo14301728
84	Smart agriculture Plant growth analysis system	Ruan Zhu Deng ZiNo14292600
85	Intelligent Internet of Things Health and Wellness Management System	Ruan Zhu Deng ZiNo13927009
86	Intelligent Emergency Comprehensive Management System	Ruan Zhu Deng ZiNo14292610

Software Copyrights owned by Tianjin Information

No.	Certification	Certificate No.
87	Campus danger alarm system V1.0	Ruan Zhu Deng Zi No.7177594
88	Community prevention and control personnel information registration system V1.0	Ruan Zhu Deng Zi n No.7140470
89	Intelligent Community Management System V1.0	Ruan Zhu Deng Zi No.7125871
90	Community prevention and control health information Management system V1.0	Ruan Zhu Deng Zi No.7131600
91	Campus epidemic prevention and control personnel access management system based on face recognition	Ruan Zhu Deng Zi No.7263518
92	Campus epidemic prevention and control temperature measurement data management system	Ruan Zhu Deng Zi No.7242759
93	Intelligent community intelligent monitoring and management system V1.0	Ruan Zhu Deng Zi No.7558127
94	Campus information Management System V1.0	Ruan Zhu Deng Zi No.7561345
95	Intelligent community access control management system	Ruan Zhu Deng Zi No.7568924
96	Community prevention and control temperature measurement data management system	Ruan Zhu Deng Zi No.7565701
97	Campus monitoring system V1.0	Ruan Zhu Deng Zi No.7570612
98	Community prevention and control personnel information Management system V1.0	Ruan Zhu Deng Zi No.7570807
99	Campus Intelligent acoustic Warning System V2.0	Ruan Zhu Deng Zi No. 8580724
100	Intelligent acoustic Early warning System V2.0 for medical and nursing environment	Ruan Zhu Deng Zi No. 8580553
101	Intelligent acoustic Early warning system V2.0 for public places	Ruan Zhu Deng Zi No. 8580552
102	Swimming pool intelligent acoustic warning system V2.0	Ruan Zhu Deng Zi No. 8580686
103	Home Intelligent Acoustic Warning System V2.0	Ruan Zhu Deng Zi No. 8580685
104	Hotel Intelligent acoustic warning system V2.0	Ruan Zhu Deng Zi No. 8580725
105	5G message data acquisition System 1.0	Ruan Zhu Deng Zi No.11109956
106	5G message aggregation cloud platform	Ruan Zhu Deng Zi No.11109703
107	Cockpit management platform	Ruan Zhu Deng Zi No.11109957
108	Data Asset Management Platform 1.0	Ruan Zhu Deng Zi No.11109896
109	Digital Employee Management System 1.0	Ruan Zhu Deng Zi No.11109704
110	5G aggregate user order data tracking system	Ruan Zhu Deng Zi No12967877
111	5G communication channel payment gateway system	Ruan Zhu Deng Zi No12971369
112	5G messaging e-commerce marketing network platform 1.0	Ruan Zhu Deng Zi No12971576
113	Multi-modal payment integrated management system	Ruan Zhu Deng Zi No12970902
114	Integrated satellite remote sensing intelligent observation system	Ruan Zhu Deng Zi No12971398
115	Iot edge computing gateway platform	Ruan Zhu Deng Zi No12967198
116	Iot interoperable data service platform	Ruan Zhu Deng Zi No12970896
117	Customer information security protection management platform	Ruan Zhu Deng Zi No13073979
118	Multi-customer interactive marketing management system	Ruan Zhu Deng Zi No13266249
119	Interactive comprehensive Service procurement management system	Ruan Zhu Deng Zi No13935831
120	Decompression acoustic brainwave software	Ruan Zhu Deng Zi No114129289
121	Acoustic equipment performance testing management platform	Ruan Zhu Deng Zi No14129243
122	Acoustic sleep aid environmental noise control management system	Ruan Zhu Deng Zi No14129261
123	Intelligent acoustic health sleep aid management software	Ruan Zhu Deng Zi No14129276
124	An automated voice interaction detection system	Ruan Zhu Deng Zi No13559047
125	Acoustic sleep Aid Equipment Performance Monitoring and Management System	Ruan Zhu Deng Zi No15478625
126	Noise online detection data analysis system	Ruan Zhu Deng Zi No15478640

Software Copyrights owned by Acoustic Effect Technology

127	High frequency acoustic effect air coupling algorithm software V1.0	Ruan Zhu Deng Zi No.9854777
128	High frequency acoustic effect air coupling and collaborative ultraviolet control algorithm software V1.0	Ruan Zhu Deng Zi No. 9877299
129	Variable frequency acoustic effect coronavirus feature elimination algorithm software V1.0	Ruan Zhu Deng Zi No.9864534

Soft Copyrights owned by Shuhai Jingwei
130	Square intelligent acoustic early warning and recognition system 1.0	Ruan Zhu Deng Zi No.10322358
131	Community medical center intelligent acoustic early warning recognition system 1.0	Ruan Zhu Deng Zi No.10322366
132	Stadium intelligent acoustic early warning and identification system 1.0	Ruan Zhu Deng Zi No.10319630
133	Home intelligent acoustic early warning recognition system 1.0	Ruan Zhu Deng Zi No.10322359
134	College intelligent acoustic Early warning and recognition system 1.0	Ruan Zhu Deng Zi No.10322365
135	Apartment intelligent acoustic Early warning and recognition system 1.0	Ruan Zhu Deng Zi No.10319699
136	Shuhai Jingwei 5G message aggregation cloud platform	Ruan Zhu Deng Zi No.10688735
137	Shuhai Jingwei Data collection system V1.0	Ruan Zhu Deng Zi No.10688734
138	Shuhai Jingwei digital team management system	Ruan Zhu Deng Zi No.10688737
139	Shuhai Jingwei messaging platform 1.0	Ruan Zhu Deng Zi No.10688736
140	Shuhai Jingwei message marketing cloud platform 1.0	Ruan Zhu Deng Zi No.10688734
141	Shuhai Jingwei data asset management platform V1.0	Ruan Zhu Deng Zi No.11022539
142	Shuhai Jingwei SOP management system	Ruan Zhu Deng Zi No.10688732
143	Shuhai Jingwei smart community integrated management client platform	Ruan Zhu Deng Zi No.10688733
144	Shuhai Jingwei Intelligent Park security cloud platform	Ruan Zhu Deng Zi No.10688731
145	High frequency acoustic effect air coupling algorithm software V1.0	Ruan Zhu Deng Zi No.10688740
146	High frequency acoustic effect air coupling and collaborative ultraviolet control algorithm software V1.0	Ruan Zhu Deng Zi No.10688739
147	Variable frequency acoustic effect coronavirus feature elimination algorithm software V1.0	Ruan Zhu Deng Zi No.10688738
148	Iot terminal edge service gateway platform	Ruan Zhu Deng Zi No.12821324
149	5G message comprehensive traceability analysis data display system	Ruan Zhu Deng Zi No.12782739
150	AI semantic copy generation system	Ruan Zhu Deng Zi No.12664881
151	Multi-channel integrated payment management system	Ruan Zhu Deng Zi No.12779467
152	Voice interaction inspection system based on customer robot	Ruan Zhu Deng Zi No.12777940
153	Interactive precision reach analysis platform	Ruan Zhu Deng Zi No.12817101
154	Customer information security management system	Ruan Zhu Deng Zi No.12782733
155	Customer marketing management system	Ruan Zhu Deng Zi No.12780563
156	Digital Sea Jingwei 5G message fee aggregation channel business platform	Ruan Zhu Deng Zi No.12779116
157	Satellite remote sensing integrated intelligent observation system	Ruan Zhu Deng Zi No.12778719
158	Internet of Things interlink service system	Ruan Zhu Deng Zi No.12785025
159	Integrated marketing e-commerce platform	Ruan Zhu Deng Zi No.12782647
160	Iot terminal edge service-oriented gateway platform	Ruan Zhu Deng Zi No.12821324
GuozhongTimes

161	Enterprise digital procurement service platform	Ruan Zhu Deng Zi No.14422388
162	Online transaction centralized procurement digital system	Ruan Zhu Deng Zi No.14246469
163	Online transaction intelligent service robot management platform	Ruan Zhu Deng Zi No.14247983

Intellectual Property Planning

Datasea is dedicated to cultivating a core product portfolio within the realm of acoustic High-Tech, with a primary focus on the integration of acoustics and artificial intelligence. The Company is actively pursuing patent applications to establish a robust technological barrier. Over the course of the next three years, Datasea has outlined its strategic goals, centering its efforts on promising domains such as ultrasound, Schumann resonance technology, and directional sound. The intended achievements include:

Shuhai Beijing, serving as the Company’s flagship operating entity in China, aims to secure a total of 20 new invention patents and 10 international patents within the field of acoustics.

Our overseas subsidiary, primarily based in Delaware, intends to obtain 5 U.S. invention patents and 5 international invention patents in the domain of acoustics.

These strategic endeavors underscore Datasea’s commitment to innovation and its ambition to solidify its position as a leading player at the intersection of acoustics and artificial intelligence.

R&D Investment

During the fiscal year ended June 30, 2024 and 2025, we spent $359,342&$914,996 on research and development, respectively. 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.	Item	% in budget
1	Salary of R&D personnel (incl. the introduction of high-end talents)		50	%
2	Procurement of scientific research facilities		20	%
3	Joint laboratories with universities, research institutes		8	%
4	Procurement of testing devices		6	%
5	Intermediate testing and tooling		5	%
6	Establishment of new technical schedule		4	%
7	Appointment of external technical experts		5	%
8	Others		2	%

Research and Development Outlook for Acoustic Applications

Management believes these areas represent potential future applications of the Company’s “Acoustic+” core technology system. The acoustic intelligence industry is entering a period of rapid development, with its integration with next-generation information technologies such as artificial intelligence (AI) and the Internet of Things (IoT) continuously deepening, and its potential application scenarios expanding. Building upon these trends, the Company’s R&D planning focuses on five major segments—Acoustic Industry, Acoustic Agriculture, Acoustic Healthcare, Acoustic Medical and Elderly Care, and Acoustic IoT—and has outlined four product clusters designed to capture future opportunities and strengthen long-term competitiveness.

Acoustic Industrial Applications: The New Engine for Smart Manufacturing and Digital Twins

The Company is exploring potential applications of acoustic technology in industrial settings. Under the background of Industry 4.0, smart sensing and predictive maintenance have become central. By deeply integrating acoustic sensors with intelligent algorithms into industrial IoT systems, the real-time monitoring and analysis of equipment operating noise and vibration spectra can achieve early fault warnings, production process optimization, and improvements in manufacturing precision. Acoustic intelligent technologies are driving the deep integration of smart manufacturing, and by creating “acoustic digital twin” models of industrial equipment, the company is providing efficient and precise solutions for smart manufacturing.

The Company has included acoustic industry in its acoustic intelligent manufacturing product cluster, focusing on high-end equipment fields such as ultrasonic-assisted precision machining, ultrasonic 3D metal printing, and semiconductor nanomaterial preparation. Through acoustic data-driven technology, the company provides industrial clients with intelligent products that cover the entire process from status monitoring to process optimization, tapping into the high-value industrial smart manufacturing market.

Acoustic Agriculture Applications: An Innovative Path for Green Agriculture and Precision Planting

The Company is assessing opportunities to apply acoustic technology in modern agriculture. Management believes specific sound waves may support seed germination, crop growth, and pest control, thereby reducing reliance on chemical pesticides and improving yield and quality. These research directions are intended to position the Company for potential contributions to green and intelligent agriculture.

The Company has included acoustic agriculture in its acoustic intelligent manufacturing product cluster and is planning to develop products such as ultrasonic agricultural product preservation and pest control devices and acoustic plant growth promoters, while integrating AI algorithms to build an intelligent acoustic agricultural system. This move targets the urgent need for green production technology and intelligent management tools in modern agriculture, with significant market potential.

Acoustic Medical Applications: A Frontier in Non-Invasive Precision Medicine

The Company is developing and evaluating acoustic technologies for future medical applications. Management believes ultrasound-based neuro-regulation and tissue repair could offer significant potential in precision medicine, particularly in non-invasive or minimally invasive treatment scenarios

The company has planned acoustic medical products as part of its long-term strategic direction and intends to gradually enter high-end medical fields such as non-invasive, semi-invasive, and invasive neuro-regulation. Currently, the company is focusing on non-invasive applications, with its core technologies laying a solid foundation for future high-end home healthcare product development.

Acoustic Medical and Elderly Care Applications: A New Model for Intelligent Health Management

The Company is investigating how acoustic health technologies may address the rising demand for intelligent healthcare and elderly care. Management expects that acoustic sensors combined with AI platforms could enable new models of preventive health monitoring, intervention, and rehabilitation.

Acoustic medical and elderly care is one of the core strategic focuses for the company and has been included in the acoustic wellness product cluster. Products such as the “Star Dream” sleep aid devices and Oxygen Sleep Star have already been commercialized. In the future, the company will use acoustic IoT technology combined with an AI platform to build an evaluation engine based on foot physiological data and heart-brain health, developing more rehabilitation training devices to meet the growing demand for preventive health and personalized wellness services.

Acoustic IoT Applications: The Next-Generation IoT Infrastructure for Full-Field Sensing

The Company is researching the integration of acoustic sensing and communication technologies into IoT infrastructure. Management believes that acoustic IoT has unique advantages in complex environments and may become an enabling technology for future intelligent ecosystems spanning healthcare, wellness, and environmental management.

The Company’s acoustic IoT technology serves as the infrastructure that supports other segments, and its value spans all product clusters. In the acoustic environmental products cluster, it is used for smart disinfection device control; in the acoustic wellness products cluster, it is used for health data collection and transmission. Through the acoustic sensor network, the company aims to build a new intelligent health and environmental management ecosystem.

Government Regulation and Licenses

Our operations are subject to and affected by PRC laws and regulations. The primary governmental regulation regulating the Internet security equipment industry in the PRC is the Cybersecurity Law, effective June 1, 2017, which governs entities providing “critical information infrastructure.” This statute provides basic protections for Internet users, such as not selling individual’s data to other companies without the user’s permission and not knowingly distributing malware. China’s new Data Security Law took effect in September 2021. The Data Security Law provides that data processing activities must be conducted based on “data classification and hierarchical protection system” for the purpose of data protection and prohibits entities in China from transferring data stored in China to foreign law enforcement agencies or judicial authorities without prior approval by the Chinese government.

On December 28, 2021, thirteen governmental departments of the PRC, including the Cyberspace Administration of China (the “CAC”), issued the Cybersecurity Review Measures, which became effective on February 15, 2022. The Cybersecurity Review Measures provide that an online platform operator, which possesses personal information of at least one million users, must apply for a cybersecurity review by the CAC if it intends to be listed in foreign countries. Because the VIE’s current operations do not possess personal information from more than one million users at this moment, the Company does not believe that the Company is subject to the cybersecurity review by the CAC. In addition, as of the date of this report, the Company has not been involved in any investigations on cybersecurity review initiated by any PRC regulatory authority, nor has the Company received any inquiry, notice, or sanction related to cybersecurity review under the Cybersecurity Review Measures.

The wholly owned subsidiaries and the VIE and its subsidiaries are required to have, and each has, a business license issued by the PRC State Administration for Market Regulation and its local counterparts. In addition, major PRC regulations applicable to our products and services and the Internet security industry include Internet Security Protection Technology Measures Provision (Ministry of Public Security Order No. 82) (“Order 82”). Order 82 specifies certain security measures Internet service providers shall take to ensure Internet security. Providers of ISP connecting service and Internet-based data processing service are within the scope of Order 82. It does not call for any license or permission to any entities.

The Regulations on Mergers and Acquisitions of Domestic Companies by Foreign Investors, or the M&A Rules, adopted by six PRC regulatory agencies in 2006 and amended in 2009, requires an overseas special purpose vehicle formed for listing purposes through acquisitions of PRC domestic companies and controlled by PRC companies or individuals to obtain the approval of the China Securities Regulatory Commission, or CSRC prior to the listing and trading of such special purpose vehicle’s securities on an overseas stock exchange. Substantial uncertainty remains regarding the scope and applicability of the M&A Rules to offshore special purpose vehicles. 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.

Shuhai Beijing currently holds the following licenses issued by the PRC government, which are material to its operations:

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Business License issued by the Beijing Municipal Industry and Commerce Administration;

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Beijing Statistics Registration Certificate issued by the Beijing Municipal Bureau of Statistics;

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Value-Added Telecommunications Business Operating License issued by the Ministry of Industry and Information Technology;

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Security Engineering Qualification Certificate issued by the China Security Technology Prevention Industry Association;

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Information Security Management System Certification Certificate issued by New Century Inspection and Certification Co., Ltd;

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Environmental Management System Certification Certificate issued by Beijing Xinjiyuan Certification Co., Ltd;

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Occupational Health and Safety Management System Certification Certificate issued by Beijing Xinjiyuan Certification Co., Ltd;

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Quality Management System Certification Certificate issued by Zhengbiao Lianxin (Beijing) Certification Service Co., Ltd.

In addition to the core licenses, Shuhai Beijing also holds several business-related certificates that demonstrate the company’s technical strength, industry position, and compliance with operational standards, as follows:

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National High-Tech Enterprises Certificate, jointly issued by the Beijing Municipal Science & Technology Commission, Beijing Municipal Finance Bureau, and the Beijing Municipal Tax Service, State Taxation Administration. This certificate recognizes Shuhai Beijing as a National High-Tech Enterprise, marking the company’s R&D capabilities and technological innovation in fields such as acoustic technology and AI multimodal algorithms, which have been acknowledged by the state. The company is entitled to enjoy tax incentives and policy support for high-tech enterprises, helping to boost R&D investment and technological breakthroughs.

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Zhongguancun High-Tech Enterprises Certificate issued by the Zhongguancun Science Park Administrative Committee, recognizing the company as a high-tech enterprise in Zhongguancun. This allows the company to leverage the policy advantages and industrial resources of the Zhongguancun Science Park, deepen collaboration with research institutions, accelerate the industrialization of technologies, and expand its business network.

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Membership Certificate issued by the China Security Technology Prevention Industry Association, indicating the company is an official member of the association. As a member, the company can participate in industry exchanges, policy discussions, and standard-setting activities, gain timely access to the latest industry trends and resources in the communications field, and enhance its influence in AI multimodal digitalization, 5G messaging applications, and other communication-related areas.

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China Acoustics Society Institutional Member Certificate issued by the China Acoustics Society, confirming the company as a member of the society. This membership enables the company to engage deeply in academic exchanges, technical discussions, and industry cooperation in the field of acoustics, connect with top research resources, and drive innovation in both acoustic technology R&D and industry applications.

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Beijing “Innovative” Small and Medium-Sized Enterprise Certificate issued by the Beijing Municipal Bureau of Economy and Information Technology, recognizing Shuhai Beijing as an “Innovative” SME in Beijing. This demonstrates the company’s innovation and growth in technology, product development, and business models, allowing it to access local government policies and resources that support the innovation of small and medium-sized enterprises.

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“Specialized, Refined, and New” Small and Medium-Sized Enterprise Certificate issued by the Beijing Municipal Bureau of Economy and Information Technology, recognizing Shuhai Beijing as a “Specialized, Refined, and New” SME. This certificate highlights the company’s advantages in specialization, precision, distinctiveness, and novelty in the acoustic high-tech segment. It reflects the company’s core competitiveness in technology R&D and market expansion, providing solid support for sustained business growth and consolidation of its industry position.

Employees

As of June 30, 2025, we had 39 full-time employees and no part-time employees. The following table sets forth the number of our employees categorized by function as of that date:

Function		Total Number of Employees
Management	Oversee the company’s strategy, organizational structure, major decisions, and U.S.-China business coordination and compliance.		5
Human Resources Administrative Management	Manage recruitment, compensation, administration, and process optimization to ensure smooth operations		5
Internal Controls	Establish and monitor internal controls, risk assessments, and audits to ensure compliance and mitigate risks.		1
Capital Operation	Handle capital planning, investment coordination, IR		2
Purchase	Manage procurement of materials for acoustic hardware and software development, and oversee supplier relationships		1
Marketing and Sales	Develop marketing strategies for acoustic products and AI services, expand offline channels, and manage online live-streaming sales.		2
Research & Development	Lead teams in acoustic R&D (ultrasound, neuro-regulation) and AI R&D (algorithms, platform development) to drive innovation and deployment.		19
Finance & Accounting	Oversee financial accounting, reports, tax filing, and fund management, ensuring compliance and supporting business decisions.		4
Total			39

Item 1A. Risk Factors

An investment in our common stock is very speculative and involves a high degree of risk. You should carefully consider the following risk factors in evaluating our business before purchasing any shares of our common stock. 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. Our business and operations could be seriously harmed as a result of any of these risks.

Risks Relating to and financial condition and Capital Requirements

We have a limited operating history as a developer of acoustics high tech, AI multimodal digital and other products and services. Our limited operating history may not provide an adequate basis to evaluate our future prospects, financial performance, and results of operations.

We have a limited operating history, Our operating entity, Shuhai Beijing, was formed in February 2015. We have limited experience and operating history in developing and marketing our products and services and particularly as a developer of acoustics high-tech AI multimodal digital products and services, which are highly competitive business areas. Our limited history may not provide a meaningful basis for investors to evaluate our business, financial performance, and prospects. Although our revenues have grown significantly in fiscal years 2024 and 2025 — in particular, in fiscal year 2025 we generated revenue of $71,616,820, representing an increase of $47,640,953, or 198.70%, compared to the same period of the prior year, and our gross profit increased by $1,969,843, or 415.49%, compared to the same period of the prior year, we continue to incur recurring losses from operations. . If we fail to continue to develop new products to meet customer demand in an increasingly competitive environment, we may lose business opportunities and may be unable to recover our research and development and marketing costs, which could adversely affect our future operating results and growth strategies.

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.

For the fiscal years ended June 30, 2025 and 2024, the Company had a net loss of approximately $5.09 million and $11.38 million, respectively. The Company had an accumulated deficit of approximately $44.53 million as of June 30, 2025, and negative cash flow from operating activities of approximately $2.37 million and $6.40 million for the years ended June 30, 2025 and 2024, respectively. The consolidated financial statements do not include any adjustments that might result from the outcome of these uncertainties.

Our resources and source of funds have primarily consisted of loans and capital contributions from shareholders and funds raised from equity financing. While the Company believes in the viability of its strategy and in its ability to raise additional funds, there can be no assurances to that effect. Although for the fiscal year 2025, the Company’s revenue significantly increased, and the recurring operating losses has narrowed, there can be no assurance the Company will become profitable or obtain necessary financing for its business and investments or that it will be able to continue in business and investments. As a result of these factors, there is substantial doubt about our ability to continue as a going concern.

We anticipate to incur indebtedness or issue new equity securities to fund future growth. If we cannot obtain additional capital, our ability to operate or expand our business may be impaired and our results of operations could be adversely affected.

Our business requires significant levels of capital to finance the research and development of new products and service platforms that meet the constantly evolving industry standards and consumer demands. As such, we expect that we will need additional capital to fund our future growth. For the time being, we are primarily dependent on contribution from shareholders, equity financing and cash income. If cash from such sources is insufficient or unavailable, or if cash is used for unanticipated needs, we may require additional capital sooner than anticipated. Our ability to obtain additional capital on acceptable terms or at all is subject to a variety of uncertainties, including:

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investors’ perceptions of, and demand for, companies operating in China;

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conditions of the U.S. and other capital markets in which we may seek to raise funds;

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our future results of operations, financial condition and cash flows

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governmental regulation of foreign investment in China;

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economic, political and other conditions in the United States, China and other countries; and

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governmental policies relating to foreign currency borrowings.

The sale of additional equity securities would result in dilution of our existing shareholders. In addition, the incurrence of indebtedness would result in increased debt service obligations and could result in operating and financial covenants that would restrict our operations. It is highly uncertain whether financing will be available in amounts or on terms acceptable to us, if at all. If we are not able to obtain additional capital, our ability to operate or expand our business may be impaired and our results of operations could be adversely affected.

Risks Related to Our Business, Industry and Business Operations

Supply chain issues that increase our costs or cause a delay in our ability to fulfill orders, could have an adverse impact on our business and operating results, and our failure to estimate customer demand properly may result in excess or obsolete component supply, which could adversely affect our gross margins.

We do not own or operate our own manufacturing facilities and instead rely on third-party contract manufacturers to produce our products. Under current conditions, this cooperative model is the best option for the Company to save costs and reduce investment risks. However, such reliance may result in increased costs or delays in fulfilling orders, which could adversely affect our business and operating results.

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Any financial problems of our contract manufacturers or component suppliers could limit supply or increase costs;

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Reservation of manufacturing capacity at our contract manufacturers by other companies, inside or outside of our industry, could limit supply or increase costs; and

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Industry consolidation occurring within one or more component supplier markets could limit supply or increase costs.

In addition, the following supply-chain-related issues could adversely affect our customer relationships, operating results and financial condition:

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a reduction or interruption in supply of one or more components;

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a significant increase in the price of one or more components；

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a failure to adequately authorize procurement of inventory by our contract manufacturers; and

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a failure to appropriately cancel, reschedule or adjust our requirements based on our business needs.

We intend to invest in R&D, sales, marketing activities and M&As, however, these investments could be deleyed, or achieve lower than expected benefits, which could harm our operating results.

We intend to focus on managing our costs and expenses, over the long term, as well as to invest in personnel and other resources related to our R&D, sales, marketing and M&A functions as we realign and dedicate resources to key growth areas, such as acoustics high tech, AI multimodal digital and other products and services. We are likely to recognize the costs and expenses associated with these investments earlier than some of the anticipated benefits, and the return on these investments may be lower, or may develop more slowly than we expect. 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.

Our business operations substantially depend upon the continued growth of acoustics high tech, AI multimodal digital and other products and services, the decrease of which could have a negative impact on our business.

A substantial portion of our business operations and revenue depends on the growth of acoustics high tech, 5G communication in the PRC and globally, including the continued development and expansion of the Internet. To the extent that an economic slowdown or economic uncertainty and any related reductions in capital spending adversely affect spending on Internet infrastructure, we could experience material harm to our business, operating results and financial condition.

Because of the rapid introduction of new products and changing customer requirements related, we believe that we could receive a high degree of publicity and visibility. Because smart security systems are our major products and resources, our business, operating results and financial condition may be materially adversely affected, regardless of whether or not these problems are due to the performance of our own products or services. 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. 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. 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. There can be no assurance that such remediation, depending on the product involved, would not have a material adverse impact on our business. An inability to cure a product defect could result in the failure of a product line, temporary or permanent withdrawal from a product or market, damage to our reputation, additional inventory costs, or product reengineering expenses, any of which could have a material adverse impact on our revenue, margins and net income.

Our success depends on retaining key personnel who would be difficult to replace.

Our success depends largely on the continued services of our key management and technical staff. In particular, our success depends on the continued efforts of Ms. Zhixin Liu, our Chairman of the Board of Directors, Chief Executive Officer, President and Corporate Secretary, and Mr. Fu Liu, one of our directors and Ms. Liu’s father. Ms. Liu and Mr. Liu have been instrumental in developing our business model and are crucial to our business development. There can be no assurance that they will continue in their present capacities for any particular period of time. The loss of the services of Ms. Liu and/or Mr. Liu could materially and adversely affect our business development.

The various industries we are in are characterized by constant and rapid technological change and evolving 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 acoustics high tech, AI multimodal digital industries with frequent new products and service developments and evolving industry standards. Companies operating within these industries are continuously developing new products and services with heightened performance and functionality, putting pricing pressure on existing products. Accordingly, we believe that our future success will depend on our ability to continue to anticipate technological changes and to offer additional product and service opportunities that meet evolving standards on a timely and cost-effective basis. Our failure to accurately anticipate the introduction of new technologies or adapt to fluctuations in the industry could lead to our having significant amounts of obsolete inventory that can only be sold at substantially lower prices and profit margins than anticipated. In addition, if we are unable to develop planned new technologies, we may be unable to compete effectively due to our failure to offer products or services most demanded by the marketplace. Products and services that our competitors develop or introduce may also render our products and services noncompetitive or obsolete. If any of these failures occur, our business and results of operations would be adversely affected.

We depend on contract manufacturers, and our production and products could be harmed if they are unable to meet our volume and quality requirements and alternative sources are not available.

We rely on third party contract manufacturers to provide manufacturing services for our products. Although such manufacturers are widely available in China and engage in significant price competition, allowing us to select among them to meet our requirements, if these services were to become unavailable, we would have to seek new contract manufacturers or bring manufacturing in-house. Such circumstances could severely disrupt production and increase costs, which could have a material adverse effect on our business and results of operations.

Our financial controls and procedures may not be sufficient to ensure timely and reliable reporting of financial information, which, as a public company, could materially harm our stock price. While we have improved our internal control over financial reporting, we may not be able to accurately or timely report our financial condition or results of operations, which may adversely affect investor confidence in us and, as a result, the value of our common stock.

We require significant financial resources to maintain our public reporting status. Our internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles in the United States of America. Our management has assessed the effectiveness of our internal control over financial reporting with an assessment report as of June 30, 2025, and has determined that our internal control over financial reporting was not effective because of the following weaknesses, which are indicative of many small companies with a small staff: (i) the segregation of duties in several departments is not clear enough; (ii) the testing cycle for the effectiveness of internal control measures should be shortened and the frequency be increased; (iii) lack of accounting personal trained in the Generally Accepted Accounting Principle of United States.

The Company 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.

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. 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.

By the end of the fiscal year ended June 30, 2025, we 1) established a Risk Control Department led by the internal control director and external legal counsels to ensure the Company’s compliance with relevant regulations and risk management requirements; 2) 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; 3) set up bookkeeping under U.S. GAAP and we provided training for our employees, such as the Finance Department, Marketing Department, and senior executives, and 4) set up the International Affair Department to strengthen our compliance and financing management in the international capital market.

Despite these controls, because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Therefore, even those systems determined to be effective, they can provide only reasonable assurance of achieving their control objectives. Furthermore, smaller reporting companies like us face additional limitations (they employ fewer individuals and can find it difficult to employ resources for complicated transactions and effective risk management and tend to utilize general accounting software packages that lack a rigorous set of software controls).

If we fail to have effective controls and procedures for financial reporting in place, we may not be able to accurately or timely report our financial condition or results of operations, which may adversely affect investor confidence in us and, as a result, the value of our common stock. We also may be subject to investigation by the SEC and civil or criminal sanctions.

Our compliance with complicated U.S. regulations concerning corporate governance and public disclosure will result in additional expenses. Moreover, our ability to comply with all applicable laws, rules and regulations is uncertain given our management’s relative inexperience with operating U.S. public companies.

As a public company, our directors and senior management have been learning and adapting to disclosure, corporate governance, and other compliance-related laws and regulations, including but not limited to the Sarbanes–Oxley Act (SOX) and the Dodd–Frank Wall Street Reform and Consumer Protection Act. However, due to language barriers, cultural differences, and practical application challenges, there remain areas of ambiguity in our understanding of these regulations. In addition, we are not always able to promptly track new guidance issued by regulatory authorities, which results in continued uncertainty in interpreting regulatory requirements, higher communication costs, and increased compliance expenses. Consequently, our efforts to comply with the evolving legal and regulatory framework applicable to U.S. public companies are expected to continue to increase our general and administrative expenses and divert management’s time and attention away from revenue-generating activities toward compliance-related matters.

Moreover, our executive officers have little experience in operating a U.S. public company, which makes our ability to comply with applicable laws, rules and regulations uncertain. Our failure to comply with all laws, rules and regulations applicable to U.S. public companies could subject us or our management to regulatory scrutiny or sanction, which could harm our reputation and stock price.

Failure to comply with the Foreign Corrupt Practices Act could adversely affect our business.

We are required to comply with the United States Foreign Corrupt Practices Act (or FCPA), which prohibits U.S. companies from engaging in bribery or other prohibited payments to foreign officials for the purpose of obtaining or retaining business. Foreign companies, including some of our competitors, are not subject to these prohibitions. Corruption, extortion, bribery, pay-offs, theft and other fraudulent practices occur from time-to-time in mainland China. If our competitors engage in these practices, they may receive preferential treatment from personnel of other companies or government agencies, giving our competitors an advantage in securing business or from government officials who might give them priority in obtaining new licenses, which would put us at a disadvantage.

We have operations, agreements with third parties, and make sales in China. Companies with operations in China have been accused and found guilty of sales practices that involve unlawful activity, including violations of the FCPA. We believe to date we have complied in all material respects with the provisions of the FCPA. However, our existing safeguards and any future improvements may prove to be less than effective, and the employees, consultants and/or distributors of our Company may engage in conduct for which we might be held responsible. Violations of the FCPA may result in severe criminal or civil sanctions, and we may be subject to other liabilities, which could negatively affect our business, operating results and financial condition. 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.

We may be subject to liability if private information that we receive is not secure or if we violate privacy laws and regulations.

Because we store, process and use data, some of which contain personal information, we are subject to complex and evolving federal, state and foreign laws and regulations regarding privacy, data protection and other matters. Many of these laws and regulations are subject to constant change and uncertain interpretation. Any violation of these laws could result in investigations, claims, changes to our business practices, increased cost of operations and declines in user growth, retention or engagement, any of which could materially adversely affect our business, results of operations and financial condition.

In November 2016, the Standing Committee of the National People’s Congress passed China’s first cybersecurity law, or CSL, which took effect in June 2017. The CSL systematically lays out cybersecurity and data protection regulatory requirements and subjects many previously under-regulated or unregulated activities in cyberspace and data management to government scrutiny. Compliance costs and other burdens related to CSL as well as China’s regulatory measures on the collection, storage, use and provision of network data may affect users’ use and acceptance of our products and services, and may have a significant adverse impact on our business, directly affecting our market development channels and financial revenue capacity.

The European Union General Data Protection Regulation 2016/679 (“GDPR”), which came into effect on May 25, 2018, includes operational requirements for companies that receive or process personal data of residents of the European Economic Area. The GDPR establishes new requirements applicable to the processing of personal data (i.e., data which identifies an individual or from which an individual is identifiable), affords new data protection rights to individuals (e.g., the right to erasure of personal data) and imposes penalties for serious data breaches. Individuals also have a right to compensation under the GDPR for financial or non-financial losses. Although we do not conduct any business in the European Economic Area, in the event that residents of the European Economic Area access our website and input protected information, we may become subject to provisions of the GDPR. Compliance with the GDPR will impose additional responsibilities and liabilities in relation to our processing of personal data. The GDPR may require us to change our policies and procedures and, if we are not compliant, could materially adversely affect our business, results of operations and financial condition.

We are also subject to laws restricting disclosure of information relating to our employees. We strive to comply with all applicable laws, policies, legal obligations, and industry codes of conduct relating to privacy, data security, cybersecurity and data protection. However, given that the scope, interpretation, and application of these laws and regulations are often uncertain and may be conflicting, it is possible that these obligations may be interpreted and applied in a manner that is inconsistent from one jurisdiction to another and may conflict with other rules or our practices. 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.

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.

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 our variable interest entity (the “VIE”) and its subsidiaries. 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 control and receive the economic benefits of the VIE’s business operations through certain contractual arrangements. 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. For a description of our corporate structure and contractual arrangements, see “Our Organizational Structure” on page 24 and “VIE Agreements” on page 3.

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, 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. Thus, the PRC governmental authorities may take a view contrary to the opinion of our PRC legal counsel. 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.

If these regulations change or are interpreted differently in the future and our corporate structure and contractual arrangements are deemed by the relevant regulators that have competent authority, to be illegal, either in whole or in part, we may lose control of the consolidated VIE, which conducts our manufacturing operations, holds significant assets and accounts for significant revenue, and have to modify such structure to comply with regulatory requirements. However, there can be no assurance that we can achieve this without material disruption to our business. Further, if our corporate structure and contractual arrangements are found to be in violation of any existing or future PRC laws or regulations, the relevant regulatory authorities would have broad discretion in dealing with such violations, including:

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revoking our business and operating licenses;

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levying fines on us;

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confiscating any of our income that they deem to be obtained through illegal operations;

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shutting down our services;

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discontinuing or restricting our operations in China;

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imposing conditions or requirements with which we may not be able to comply;

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requiring us to change our corporate structure and contractual arrangements;

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restricting or prohibiting our use of the proceeds from overseas offering to finance the consolidated VIE’s business and operations; and

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taking other regulatory or enforcement actions that could be harmful to our business.

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. 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.

We depend upon the VIE Agreements in conducting our business in the PRC, which may not be as effective as equity ownership.

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. The affiliation with Shuhai Beijing is managed through the VIE Agreements, which agreements may not be as effective in providing us with control over Shuhai Beijing as equity ownership. These contractual arrangements may not be as effective as equity ownership in providing us with control over the consolidated VIE. If the consolidated VIE or its shareholders fail to perform their respective obligations under these contractual arrangements, our recourse to the assets held by the consolidated VIE is indirect and we may have to incur substantial costs and expend significant resources to enforce such arrangements in reliance on legal remedies under PRC law. These remedies may not always be effective, particularly in light of uncertainties in the PRC legal system. Furthermore, in connection with litigation, arbitration or other judicial or dispute resolution proceedings, assets under the name of any of record holder of equity interest in the consolidated VIE, including such equity interest, may be put under court custody. 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.

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. The legal environment in the PRC is not as developed as in other jurisdictions, such as the U.S. As a result, uncertainties in the PRC legal system could limit our ability to enforce these contractual arrangements. In the event that we are unable to enforce these contractual arrangements, or if we suffer significant time delays or other obstacles in the process of enforcing these contractual arrangements, it would be very difficult to exert effective control over the consolidated VIE, and our ability to conduct our business and our financial condition and results of operations may be materially and adversely affected.

We may not be able to consolidate the financial results of some of the affiliated companies or such consolidation could materially adversely affect our operating results and financial condition.

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. In the event that in the future a company we hold as a VIE no longer meets the definition of a VIE under applicable accounting rules, or we are deemed not to be the primary beneficiary, we would not be able to consolidate line by line that entity’s financial results in our consolidated financial statements for reporting purposes. Also, if in the future an affiliate company becomes a VIE and we become the primary beneficiary, we would be required to consolidate that entity’s financial results in our consolidated financial statements for accounting purposes. If such entity’s financial results were negative, this would have a corresponding negative impact on our operating results for reporting purposes.

Because we rely on the Operation and Intellectual Property Service Agreement with Shuhai Beijing for our revenue, the termination of this agreement Or be forcibly discharged would severely and detrimentally affect our continuing business viability under our current corporate structure.

We are a holding company and all of our business operations are conducted through the VIE Agreements. As a result, our revenues mainly rely on dividend payments from Tianjin Information after it receives payments from Shuhai Beijing pursuant to the Operation and Intellectual Property Service Agreement. Shuhai Beijing may terminate the Operation and Intellectual Property Service Agreement for any or no reason by Chinese government at all. Because neither we, nor the subsidiaries, own equity interests of Shuhai Beijing, the termination of the Operation and Intellectual Property Service Agreement would sever our ability to continue receiving payments from Shuhai Beijing under our current holding company structure. While we are currently not aware of any event or reason that may cause the Operation and Intellectual Property Service Agreement to terminate, we cannot assure you that such an event or reason will not occur in the future. 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.

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.

Under PRC law, arrangements and transactions among related parties may be subject to audit or challenge by the PRC tax authorities. 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.

The shareholders of the VIE may have potential conflicts of interest with us, which may materially and adversely affect our business and financial condition.

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. These shareholders may breach, or cause the VIE to breach, or refuse to renew, the existing contractual arrangements we have with them and the VIE, which would have a material and adverse effect on our ability to effectively control the VIE and receive substantially all the economic benefits from it. For example, the shareholders may be able to cause our agreements with Shuhai Beijing to be performed in a manner adverse to us by, among other things, failing to remit payments due under the contractual arrangements to us on a timely basis. We cannot assure you that when conflicts of interest arise, any or all of these shareholders will act in the best interests of our company or such conflicts will be resolved in our favor.

Currently, we do not have any arrangements to address potential conflicts of interest between these shareholders and our company. We rely on Ms. Liu and Mr. Liu to abide by the laws of the State of Nevada and China, which provide that directors owe a fiduciary duty to the Company that requires them to act in good faith and in what they believe to be the best interests of the Company and not to use their position for personal gains. If we cannot resolve any conflict of interest or dispute between us and the shareholders of Shuhai Beijing, we would have to rely on legal proceedings, which could result in disruption of our business and subject us to substantial uncertainty as to the outcome of any such legal proceedings.

If any of the affiliated entities becomes the subject of bankruptcy or liquidation proceeding, we may lose the ability to use and enjoy assets held by such entity, which could materially and adversely affect our business, financial condition and results of operations.

We currently conduct our operations in China through contractual arrangements with the affiliated entities. As part of these arrangements, substantially all of our assets that are important to the operation of our business are held by the affiliated entities. If any of these entities goes bankrupt and all or part of their assets become subject to liens or rights of third-party creditors, we may be unable to continue some or all of our business activities, which could materially and adversely affect our business, financial condition and results of operations. If any of the affiliated entities undergoes a voluntary or involuntary liquidation proceeding, its equity owner or unrelated third-party creditors may claim rights relating to some or all of these assets, which would hinder our ability to operate our business and could materially and adversely affect our business, our ability to generate revenue and the market price of our common stock.

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.

China is currently prioritizing the development of high-tech enterprises, particularly promoting the advancement of new quality productive forces. The significant revenue growth of our company in the past two years has also benefited from strong national support for high-tech enterprises, which has driven the development of artificial intelligence and related industries. If such policies were to change, it could affect the further expansion of our business.

In addition, policy uncertainty remains a risk: the speed and intensity of policy changes often exceed market expectations, making it difficult for investors to prepare in advance, which may result in significant stock price volatility.

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.

The Regulations on Mergers and Acquisitions of Domestic Enterprises by Foreign Investors, or the M&A Rules, purport to require offshore special purpose vehicles that are controlled by mainland China companies or individuals and that have been formed for the purpose of seeking a public listing on an overseas stock exchange through acquisitions of mainland China domestic companies or assets to obtain CSRC approval prior to publicly listing their securities on an overseas stock exchange. The interpretation and application of the regulations remain unclear. If CSRC approval is required, it is uncertain how long it will take for us to obtain such approval, and, even if we obtain such CSRC approval, the approval could be rescinded. Any failure to obtain or a delay in obtaining CSRC approval for our future issuance of securities overseas may subject us to sanctions imposed by the CSRC and other mainland China regulatory agencies, which could include fines and penalties on our operations in mainland China, restrictions or limitations on our ability to pay dividends outside of mainland China, and other forms of sanctions that may materially and adversely affect our business, financial condition, and results of operations.

Furthermore, on July 6, 2021, the PRC government promulgated the Opinions on Strictly Cracking Down on Illegal Securities Activities, or the July 6 Opinions, which, among other things, called for enhanced administration and supervision of overseas-listed mainland China-based companies, proposed to strengthen the supervision of the overseas issuance and listing of shares by mainland China-based companies and clarified the responsibilities of competent domestic industry regulators and government authorities. On December 28, 2021, the CAC, together with other relevant administrative departments, jointly released the Cybersecurity Review Measures, which took effect on February 15, 2022. Pursuant to the Cybersecurity Review Measures, network platform operators with personal information of over one million users shall apply with the Cybersecurity Review Office for a cybersecurity review before going to list abroad.

The new rules for the filing-based administration of overseas securities offerings and listings by Chinese domestic companies released on February 17, 2023, or New Filing Rules, establish a new filing-based regime to regulate overseas offerings and listings by domestic companies. According to the New Filing Rules, (i) an overseas offering and listing by a domestic company, whether directly or indirectly, shall be filed with the CSRC; and (ii) the issuer or its affiliated domestic company, as the case may be, shall file with the CSRC for its initial public offering, follow-on offering, issuance of convertible bonds, offshore relisting after go-private transactions and other equivalent offing activities. In addition, after a domestic company has offered and listed securities in an overseas markets, it is required to file a report to the CSRC after the occurrence and public disclosure of certain material corporate events, including but not limited to, change of control and voluntary or mandatory delisting. From March 31, 2023, enterprises that have been listed overseas shall constitute existing enterprises and are not required to conduct the overseas listing filing procedure immediately, but shall carry out filing procedures as required if they conduct future offshore offerings or capital raising activities or are involved in other circumstances that require filing with the CSRC.

On February 24, 2023, the CSRC, together with other relevant government authorities, issued the Provisions on Strengthening Confidentiality and Archives Administration of Overseas Securities Offering and Listing by Domestic Companies, or the Archives Rules, which became effective on March 31, 2023. According to the Archives Rules, domestic mainland China companies, whether offering and listing securities overseas directly or indirectly, must strictly abide the applicable laws and regulations when providing or publicly disclosing, either directly or through their overseas listed entities, documents and materials to securities companies, securities services providers such as accounting firms, or overseas regulators in the process of their overseas offering and listing. If such documents or materials contain any state secrets or government authorities work secrets, domestic companies must obtain the approval from competent governmental authorities according to the applicable laws, and file with the secrecy administrative department at the same level with the approving governmental authority. Furthermore, the Archives Rules also provides that securities companies and securities service providers shall also fulfill the applicable legal procedures when providing overseas regulatory institutions and other relevant institutions and individuals with documents or materials containing any state secrets or government authorities work secrets or other documents or materials that, if divulged, will jeopardize national security or public interest.

International tariff and rising threats of international tariffs, including tariffs applied to goods between the U.S. and China, may materially and adversely affect our business and financial results. 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.

International tariffs and rising threats of international tariffs, particularly between the U.S. and China, could materially and adversely affect our business and results of operations. While some of our business operations are in U.S., substantially all of our business operations are in China, and we are developing our business in other countries. As such, we face risks from U.S. tariff policies and trade uncertainties. As of April 2025, U.S. tariff measures, including a 10% customs duty on all imported goods effective April 5, 2025, as per an Executive Order issued by President Trump on April 2, 2025, with potentially higher duties on imports from specific countries, could significantly increase costs for our supply chain. For China, tariffs have been particularly aggressive. Such increases could lead to higher production costs, potentially reducing our profit margins or requiring price adjustments that may affect customer demand.

Furthermore, tariff-related disruptions could cause supply chain delays, impacting our ability to meet customer delivery schedules and increasing operational expenses. Retaliatory tariffs or trade barriers imposed by other nations in response to U.S. policies could also limit our competitiveness in export markets, potentially reducing sales volumes or necessitating costly shifts to alternative suppliers or markets. Additionally, trade-driven volatility in commodity prices and foreign exchange rates could further complicate cost forecasting and financial stability. There is no assurance that we can fully mitigate these adverse effects. The evolving landscape of global trade policies, including the potential for further tariff escalations or broader economic impacts, could materially adversely affect our business, financial condition, and growth prospects.

Additionally, changes in political conditions in China and China-U.S. relations, particularly concerning tensions around Taiwan, are difficult to predict and could adversely affect our operations and financial condition. A deterioration in political or trade relations could also harm our business’s public perception and revenue generation.

A slowdown or other adverse developments in the PRC economy, including future inflation, may harm our customers and the demand for our services and our products, and negatively affect profitability of our business in PRC.

Substantially 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.

In recent years, the Chinese economy has experienced periods of rapid expansion and high rates of inflation. 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. These factors have led to the adoption by Chinese government, from time to time, of various corrective measures designed to restrict the availability of credit or regulate growth and contain inflation. High inflation may in the future cause the Chinese government to impose controls on credit and/or prices, or to take other action, which could inhibit economic activity in China, and thereby harm the market for our services and products.

The fluctuation of the Renminbi may have a material adverse effect on your investment.

The change in value of the Renminbi against the U.S. dollar and other currencies is affected by, various factors, such as changes in China’s political and economic conditions and China’s foreign exchange controls. On July 21, 2005, the PRC government changed its decade-old policy of pegging the value of the Renminbi to the U.S. dollar. Under such policy, the Renminbi was permitted to fluctuate within a narrow and managed band against a basket of certain foreign currencies. Later on, the People’s Bank of China has decided to further implement the reform of the RMB exchange regime and to enhance the flexibility of RMB exchange rates. Such changes in policy have resulted in a significant appreciation of the Renminbi against the U.S. dollar since 2005. There remains significant international pressure on the PRC government to adopt a more flexible currency policy, which could result in a further and more significant adjustment of the Renminbi against the U.S. dollar. Any significant appreciation or revaluation of the Renminbi may have a material adverse effect on the value of, and any dividends payable on, shares of our common stock in foreign currency terms. More specifically, if we decide to convert our Renminbi into U.S. dollars, appreciation of the U.S. dollar against the Renminbi would have a negative effect on the U.S. dollar amount available to us. To the extent that we need to convert U.S. dollars we receive from our 2018 offering into Renminbi for our operations, appreciation of the Renminbi against the U.S. dollar would have an adverse effect on the Renminbi amount we would receive from the conversion. 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.

Restrictions on currency exchange may limit our ability to receive and use our revenue effectively.

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. Under current PRC laws and regulations, Renminbi is freely convertible for current account items, such as trade and service-related foreign exchange transactions and dividend distributions. However, Renminbi is not freely convertible for direct investment or loans or investments in securities outside China, unless such use is approved by SAFE. For example, foreign exchange transactions under the subsidiary’s capital account, including principal payments in respect of foreign currency-denominated obligations, remain subject to significant foreign exchange controls and the approval requirement of SAFE. These limitations could affect our ability to convert Renminbi into foreign currency for capital expenditures. And the Chinese government is further strengthening the control of foreign exchange, we will not be able to change the Chinese government’s decision in our own power.

The subsidiaries and affiliated entities in China are subject to restrictions on making dividends and other payments to us.

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. 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. Under the applicable requirements of PRC law, Tianjin Information may only distribute dividends after it has made allowances to fund certain statutory reserves. These reserves are not distributable as cash dividends. In addition, if the subsidiaries or affiliated entities in China incur debt on their own behalf in the future, the instruments governing the debt may restrict their ability to pay dividends or make other payments to us. 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.

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. 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. However, since these laws and regulations are relatively new and the PRC legal system continues to evolve rapidly, the interpretations of such laws and regulations may not always be consistent, and enforcement of these laws. In different administrative areas and regulations involves significant uncertainties, any of which could limit the available legal protections. In addition, the PRC administrative and judicial authorities have significant discretion in interpreting, implementing or enforcing statutory rules and contractual terms, and it may be more difficult to predict the outcome of administrative and judicial proceedings and the level of legal protection we may enjoy in the PRC than under some more developed legal systems. These uncertainties may affect our decisions on the policies and actions to be taken to comply with PRC laws and regulations, and may affect our ability to enforce our contractual or tort rights. In addition, the regulatory uncertainties may be exploited through unmerited legal actions or threats in an attempt to extract payments or benefits from us. Such uncertainties may therefore increase our operating expenses and costs, and materially and adversely affect our business and results of operations.

The PRC’s legal and judicial system under special circumstances may not adequately protect our business and operations and the rights of foreign investors.

The legal and judicial systems in the PRC are still rudimentary, and enforcement of existing laws is uncertain. As a result, it may be impossible to obtain swift and equitable enforcement of laws that do exist, Different administrative regions have different legal and judicial interpretations or to obtain enforcement of the judgment of one court by a court of another jurisdiction. The PRC’s legal system is based on the civil law regime, that is, it is based on written statutes. A decision by one judge does not set a legal precedent that is required to be followed by judges in other cases. In addition, the interpretation of Chinese laws may be varied to reflect domestic political changes.

The promulgation of new laws, changes to existing laws and the pre-emption of local regulations by national laws may adversely affect foreign investors. 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.

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 M&A Rules established additional procedures and requirements that could make merger and acquisition activities in China by foreign investors more time-consuming and complex. For example, the MOFCOM must be notified in the event a foreign investor takes control of a PRC domestic enterprise. In addition, certain acquisitions of domestic companies by offshore companies that are related to or affiliated with the same entities or individuals of the domestic companies, are subject to approval by the MOFCOM. In addition, the Implementing Rules Concerning Security Review on Mergers and Acquisitions by Foreign Investors of Domestic Enterprises, issued by the MOFCOM in August 2011, require that mergers and acquisitions by foreign investors in “any industry with national security concerns” be subject to national security review by the MOFCOM. In addition, any activities attempting to circumvent such review process, including structuring the transaction through a proxy or contractual control arrangement, are strictly prohibited. There is significant uncertainty regarding the interpretation and implementation of these regulations relating to merger and acquisition activities in China. In addition, complying with these requirements could be time-consuming, and the required notification, review or approval process may materially delay or affect our ability to complete merger and acquisition transactions in China. As a result, our ability to seek growth through acquisitions may be materially and adversely affected. In addition, if the MOFCOM determines that we should have obtained its approval for our entry into contractual arrangements with the affiliated entities, we may be required to file for remedial approvals. There is no assurance that we would be able to obtain such approval from the MOFCOM. We may also be subject to administrative fines or penalties by the MOFCOM that may require us to limit our business operations in the PRC, delay or restrict the conversion and remittance of our funds in foreign currencies into the PRC or take other actions that could have material and adverse effect on our business, financial condition and results of operations.

PRC regulation of loans and direct investment by offshore holding companies to PRC entities may delay or prevent us from making loans or additional capital contributions to the PRC subsidiary and affiliated entities, which could harm our liquidity and our ability to fund and expand our business.

Datasea is a Nevada corporation conducting substantially all of its operations in China through its PRC subsidiaries, the VIE and its subsidiaries established in China. Datasea may make loans to the PRC subsidiaries and VIE entities subject to the approval from governmental authorities and limitation of amount, or may make additional capital contributions to subsidiaries and VIE entities in China.

Any loans to the subsidiaries or VIE entities in China are subject to foreign investment and are under PRC regulations and foreign exchange loan registrations. For example, loans by us to the wholly foreign-owned subsidiaries or VIE entities in China to finance their activities must be registered with the local counterpart of SAFE. In addition, a foreign invested enterprise shall use its capital pursuant to the principle of authenticity and self-use within its business scope. The capital of a foreign invested enterprise shall not be used for the following purposes: (i) directly or indirectly used for payment beyond the business scope of the enterprises or the payment prohibited by relevant laws and regulations; (ii) directly or indirectly use for investment in securities or investments other than banks’ principal-secured products unless otherwise provided by relevant laws and regulations; (iii) the granting of loans to non-affiliated enterprises, except where it is expressly permitted in the business license; and (iv) paying the expenses related to the purchase of real estate that is not for self-use (except for the foreign-invested real estate enterprises).

On October 23, 2019, the SAFE PRC regulation of loans and direct investment by offshore holding companies to PRC entities may delay or prevent us from making loans or additional capital contributions to the PRC subsidiary and affiliated entities, which could harm our liquidity and our ability to fund and expand our business.

On October 23, 2019, the State Administration of Foreign Exchange (“SAFE”) promulgated the Notice on Further Promoting the Facilitation of Cross-border Trade and Investment (“Circular 28”), which allows all foreign-invested enterprises to convert foreign currency-denominated capital into Renminbi for use in domestic equity investments, provided that such investments are genuine, compliant with applicable laws, and do not fall within the prohibited categories of the negative list for foreign investment. Since then, the PRC government has continued to promote cross-border financing and investment facilitation. In 2025, it introduced the “Foreign Investment Action Plan,” which further encourages foreign-invested enterprises to reinvest capital or retained earnings in China and, under certain conditions, permits the use of domestic loans for equity investments. While these policies signal a trend toward greater flexibility, in practice, local branches of SAFE and relevant banks may still impose stringent reviews on registrations, approvals, and fund usage, with variations across different regions. As a result, we cannot assure you that we will be able to complete the necessary government registrations or obtain the required approvals in a timely manner. Such regulatory requirements may continue to delay or restrict our ability to provide funding to our PRC subsidiaries and affiliated entities, which could adversely affect our liquidity and our ability to expand our business.

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.

The proceeds of a future offering may be remitted back to the PRC, and the process for wiring such proceeds back to the PRC may be time-consuming after the closing of a future offering. We may be unable to use these proceeds to grow our business until the PRC subsidiaries receive such proceeds in the PRC. Any transfer of funds by us to the PRC subsidiaries, either as a shareholder loan or as an increase in registered capital, are subject to approval by or registration or filing with relevant governmental authorities in China. Any foreign loans procured by the PRC subsidiaries is required to be registered with China’s State Administration of Foreign Exchange (“SAFE”) or its local branches or satisfy relevant requirements, and the PRC subsidiaries may not procure loans which exceed the difference between their respective total project investment amount and registered capital or 2 times (which may be varied year by year due to the change of PRC’s national macro-control policy) of the net worth of the PRC subsidiary. According to the relevant PRC regulations on foreign-invested enterprises in China, capital contributions to the PRC subsidiaries are subject to the approval of or filing with State Administration for Market Regulation in its local branches, the Ministry of Commerce in its local branches and registration with a local bank authorized by SAFE.

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, if at all, with respect to future loans by us to the PRC subsidiary or with respect to future capital contributions by us to the PRC subsidiary. If we fail to complete such registrations or obtain such approvals, our ability to capitalize or otherwise fund the PRC operations may be negatively affected, which could materially and adversely affect our liquidity, our ability to fund and expand our business and our securities.

A failure by our PRC beneficial owners to comply with certain PRC foreign exchange regulations could restrict our ability to distribute profits, restrict our overseas and cross-border investment activities and subject us to liability under PRC law.

SAFE has promulgated regulations, including the Notice on Relevant Issues Relating to Domestic Residents’ Investment and Financing and Round-Trip Investment through Special Purpose Vehicles (or SAFE Circular No. 37), effective on July 4, 2014, and its appendices, that require PRC residents, including PRC institutions and individuals, to register with local branches of SAFE in connection with their direct establishment or indirect control of an offshore entity, for the purpose of overseas investment and financing, with such PRC residents’ legally owned assets or equity interests in domestic enterprises or offshore assets or interests, referred to in SAFE Circular No. 37 as a “special purpose vehicle.” SAFE Circular No. 37 further requires amendment to the registration in the event of any significant changes with respect to the special purpose vehicle, such as increase or decrease of capital contributed by PRC individuals, share transfer or exchange, merger, division or other material event. In the event that a PRC shareholder holding interests in a special purpose vehicle fails to fulfill the required SAFE registration, the PRC subsidiaries of that special purpose vehicle may be prohibited from making profit distributions to the offshore parent and from carrying out subsequent cross-border foreign exchange activities, and the special purpose vehicle may be restricted in its ability to contribute additional capital into its PRC subsidiary. Further, failure to comply with the various SAFE registration requirements described above could result in liability under PRC law for foreign exchange evasion.

These regulations apply to our direct and indirect shareholders who are PRC residents and may apply to any offshore acquisitions or share transfers that we make in the future if our shares are issued to PRC residents. However, in practice, different local SAFE branches may have different views and procedures on the application and implementation of SAFE regulations, and since SAFE Circular No. 37 was relatively new, there remains uncertainty with respect to its implementation. As of the date of this report, all PRC residents known to us that currently hold direct or indirect interests in our company have completed the necessary registrations with SAFE as required by SAFE Circular 37. However, we may not be informed of the identities of all the PRC residents or entities holding direct or indirect interest in our company, nor can we compel our beneficial owners to comply with the requirements of SAFE Circular 37. However, we cannot assure you that these individuals or any other direct or indirect shareholders or beneficial owners of our company who are PRC residents will be able to successfully complete the registration or update the registration of their direct and indirect equity interest as required in the future. If they fail to make or update the registration, our shareholders could be subject to fines and legal penalties, and SAFE could restrict our cross-border investment activities and our foreign exchange activities, including restricting the PRC subsidiary’s ability to distribute dividends to, or obtain loans denominated in foreign currencies from, our company, or prevent us from paying dividends. As a result, our business operations and our ability to make distributions to you could be materially and adversely affected.

We may be subject to fine due to our insufficient payment of the social insurance and housing fund of the employees.

Pursuant to the Social Insurance Law of the PRC, as amended on December 29, 2018,and the Regulation on the Administration of Housing Accumulation Funds, as amended on March 24, 2019, employers in China shall register with relevant social insurance agency and relevant housing provident fund management center and open special housing provident fund accounts for each of their employees, and pay contributions to the social insurance plan and the housing provident fund for their employees, such contribution amount payable shall be calculated based on the employee’s actual salary in accordance with the relevant regulations. In case the employer failed to make sufficient payment of the social insurance, it may be subject to fine up to 3 times of the insufficient amount and pay late fees. If the employer failed to register with relevant housing provident fund management center or failed to open special housing provident fund accounts for the employees within the ordered time limit, a fine of not less than RMB10,000 nor more than RMB50,000 may be imposed. In addition, if the employer fails to pay sufficient contributions to housing provident fund as required, the housing provident fund management center shall order it to make the payment and deposit within a prescribed time limit; where the payment has not been made after the expiration of the time limit, the housing provident fund management center may request the people’s court for compulsory enforcement. On July 20, 2018, the General Office of the Communist Party of China and the General Office of the State Council jointly issued the Reform Plan on Tax Collection and Administration Systems for Local Offices of the State Administration of Taxation and Local Taxation Bureaus, according to which the collection and administration of social insurance will be transferred from the social insurance departments to competent tax authorities, and the supervision over the payment of social insurance will be significantly strengthened in the way that an enterprise must pay social insurance for its employees based on their overall salary at certain legally required rates. If we are fined due to insufficient payment of the social insurance and housing fund of the employees, our business operations could be materially and adversely affected.

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. 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. As a result, our public stockholders may have more difficulty in protecting their interests through actions against our management, directors or major stockholders than would stockholders of a corporation doing business entirely or predominantly within the United States.

You may experience difficulties in protecting your rights through the United States courts.

Currently, substantially all of our operations are conducted in China and substantially all of our assets are located in China. All of our officers are nationals or residents of the PRC and a substantial portion of their assets are located outside the United States. As a result, it may be difficult for a stockholder to effect service of process within the United States upon these persons, or to enforce judgments against us which are obtained in United States courts, including judgments predicated upon the civil liability provisions of the securities laws of the United States or any state in the United States.

In addition, it may be difficult or impossible for you to effect service of process within the United States upon us our directors and officers in the event that you believe that your rights have been violated under United States securities laws or otherwise. Even if you are successful in effecting service of process and bringing an action of this kind, the laws of China may render you unable to enforce a judgment against our assets or the assets of our directors and officers. There is no statutory recognition in the PRC of judgments obtained in the United States.

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. China’s overall economy and the average wage in the PRC are expected to continue to grow. Future increases in China’s inflation and material increases in the cost of labor may materially and adversely affect our profitability and results of operations.

Our auditor is headquartered in the United States and is subject to inspection by the PCAOB on a regular basis. To the extent that our independent registered public accounting firm’s audit documentation related to their audit reports for our company become located in China, the PCAOB may not be able inspect such audit documentation and, as such, you may be deprived of the benefits of such inspection and our common stock could be delisted from the stock exchange pursuant to the Holding Foreign Companies Accountable Act and Accelerating Holding Foreign Companies Accountable Act.

Our independent registered public accounting firm issued an audit opinion on the financial statements included in this report filed with the SEC and will issue audit reports related to our company in the future. As auditors of companies that are traded publicly in the United States and a firm registered with the PCAOB, our auditor is required by the laws of the United States to undergo regular inspections by the PCAOB. However, to the extent that our auditor’s work papers become located in China, such work papers will not be subject to inspection by the PCAOB because the PCAOB is currently unable to conduct inspections without the approval of the Chinese authorities. Inspections of certain other firms that the PCAOB has conducted outside of China have identified deficiencies in those firms’ audit procedures and quality control procedures, which may be addressed as part of the inspection process to improve future audit quality. On December 2, 2021, the Securities and Exchange Commission adopted amendments to finalize rules implementing the submission and disclosure requirements in the HFCAA. We are required by the HFCAA to have an auditor that is subject to the inspection by the PCAOB. Pursuant to the HFCAA, the PCAOB issued a Determination Report on December 16, 2021, which found that the PCAOB was unable to inspect or investigate completely certain named registered public accounting firms headquartered in mainland China and Hong Kong. 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. To the extent this status changes in the future and our auditor’s audit documentation related to their audit reports for our company becomes outside of the inspection by the PCAOB, our common stock could be delisted from the stock exchange pursuant to the Holding Foreign Companies Accountable Act.

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.

In light of recent events indicating greater oversight by the CAC over data security, we may be subject to a variety of PRC laws and other obligations regarding cybersecurity and data protection, and any failure to comply with applicable laws and obligations could have a material adverse effect on our business and our securities.

Since 2021, the Chinese government has strengthened its anti-monopoly supervision, mainly in three aspects: (1) establishing the National Anti-Monopoly Bureau; (2) revising and promulgating anti-monopoly laws and regulations, including: the Anti-Monopoly Law (draft Amendment published on October 23, 2021 for public opinions), the anti-monopoly guidelines for various industries, and the detailed Rules for the Implementation of the Fair Competition Review System; and (3) expanding the anti-monopoly law enforcement targeting Internet companies and large enterprises. As of the date of this report, the Chinese government’s recent statements and regulatory actions related to anti-monopoly concerns have not impacted our ability to conduct business, accept foreign investments, or list on a U.S. or other foreign exchange because neither the Company nor its PRC operating entities engage in monopolistic behaviors that are subject to these statements or regulatory actions.

On November 14, 2021, the Cyberspace Administration of China (“CAC”) released the Regulations on the Network Data Security Management (Draft for Comments), or the Data Security Management Regulations Draft, to solicit public opinion and comments till December 13, 2021, which has not been promulgated as of the date of this report. 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. 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.

As of the date of this Annual 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. Given that Datasea, its subsidiaries, the VIE and VIE’s subsidiaries do not possess personal data of at least one million individual clients and do not collect data that affects or may affect national security in their business operations as of the date of this report and do not anticipate that they will be collecting over one million users’ personal information or data that affects or may affect national security in the near future. 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. 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.

Compliance with China’s new Data Security Law, Measures on Cybersecurity Review (revised draft for public consultation), Personal Information Protection Law (second draft for consultation), regulations and guidelines relating to the multi-level protection scheme and any other future laws and regulations may entail significant expenses and could materially affect our business.

China has implemented or will implement rules and is considering a number of additional proposals relating to data protection. China’s new Data Security Law promulgated by the Standing Committee of the National People’s Congress of China in June 2021, or the Data Security Law, will take effect in September 2021. The Data Security Law provides that the data processing activities must be conducted based on “data classification and hierarchical protection system” for the purpose of data protection and prohibits entities in China from transferring data stored in China to foreign law enforcement agencies or judicial authorities without prior approval by the Chinese government. As the Data Security Law has not yet come into effect, we may need to make adjustments to our data processing practices to comply with this law.

Additionally, China’s Cyber Security Law, requires companies to take certain organizational, technical and administrative measures and other necessary measures to ensure the security of their networks and data stored on their networks. Specifically, the Cyber Security Law provides that China adopt a multi-level protection scheme (MLPS), under which network operators are required to perform obligations of security protection to ensure that the network is free from interference, disruption or unauthorized access, and prevent network data from being disclosed, stolen or tampered. Under the MLPS, entities operating information systems must have a thorough assessment of the risks and the conditions of their information and network systems to determine the level to which the entity’s information and network systems belong-from the lowest Level 1 to the highest Level 5 pursuant to the Measures for the Graded Protection and the Guidelines for Grading of Classified Protection of Cyber Security. The grading result will determine the set of security protection obligations that entities must comply with. Entities classified as Level 2 or above should report the grade to the relevant government authority for examination and approval.

Recently, the Cyberspace Administration of China has taken action against several Chinese internet companies in connection with their initial public offerings on U.S. securities exchanges, for alleged national security risks and improper collection and use of the personal information of Chinese data subjects. According to the official announcement, the action was initiated based on the National Security Law, the Cyber Security Law and the Measures on Cybersecurity Review, which are aimed at “preventing national data security risks, maintaining national security and safeguarding public interests.” On July 10, 2021, the Cyberspace Administration of China published a revised draft of the Measures on Cybersecurity Review, expanding the cybersecurity review to data processing operators in possession of personal information of over 1 million users if the operators intend to list their securities in a foreign country.

It is unclear at the present time how widespread the cybersecurity review requirement and the enforcement action will be and what effect they will have on the life sciences sector generally and the Company in particular. China’s regulators may impose penalties for non-compliance ranging from fines or suspension of operations, and this could lead to us delisting from the U.S. stock market.

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.

Also, on August 20, 2021, the National People’s Congress passed the Personal Information Protection Law, which will be implemented on November 1, 2021. The law creates a comprehensive set of data privacy and protection requirements that apply to the processing of personal information and expands data protection compliance obligations to cover the processing of personal information of persons by organizations and individuals in China, and the processing of personal information of persons in China outside of China if such processing is for purposes of providing products and services to, or analyzing and evaluating the behavior of, persons in China. The law also proposes that critical information infrastructure operators and personal information processing entities who process personal information meeting a volume threshold to-be-set by Chinese cyberspace regulators are also required to store in China personal information generated or collected in China, and to pass a security assessment administered by Chinese cyberspace regulators for any export of such personal information. 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.

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 the Cyber Security Law and the Data Security Law could significantly increase the cost to us of providing our service offerings, require significant changes to our operations or even prevent us from providing certain service offerings in jurisdictions in which we currently operate or in which we may operate in the future. Despite our efforts to comply with applicable laws, regulations and other obligations relating to privacy, data protection and information security, it is possible that our practices, offerings or platform could fail to meet all of the requirements imposed on us by the Cyber Security Law, the Data Security Law and/or related implementing regulations. Any failure on our part to comply with such law or regulations or any other obligations relating to privacy, data protection or information security, or any compromise of security that results in unauthorized access, use or release of personally identifiable information or other data, or the perception or allegation that any of the foregoing types of failure or compromise has occurred, could damage our reputation, discourage new and existing counterparties from contracting with us or result in investigations, fines, suspension or other penalties by Chinese government authorities and private claims or litigation, any of which could materially adversely affect our business, financial condition and results of operations. Even if our practices are not subject to legal challenge, the perception of privacy concerns, whether or not valid, may harm our reputation and brand and adversely affect our business, financial condition and results of operations. 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.

On November 14, 2021, the Cyberspace Administration of China released the Regulations on the Network Data Security Management (Draft for Comments), or the Data Security Management Regulations Draft, to solicit public opinion and comments till December 13, 2021, which has not been promulgated as of the date of this report. 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. 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.

As of the date of this report, Datasea, its subsidiaries and VIE entities 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. Given that the PRC subsidiaries do not possess personal data of at least one million individual clients and do not collect data that affects or may affect national security in their business operations as of the date of this report and do not anticipate that they will be collecting over one million users’ personal information or data that affects or may affect national security in the near future. 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. 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 may be subject to intellectual property infringement claims, which may force us to incur substantial legal expenses and, if determined adversely to us, materially disrupt our business.

Internet and technology companies are frequently involved in litigation based on allegations of infringement of intellectual property rights, unfair competition, invasion of privacy, defamation and other violations of third-party rights. The validity, enforceability and scope of protection of intellectual property in Internet-related industries, particularly in China, are uncertain and still evolving. In addition, many parties are actively developing and seeking protection for Internet-related technologies, including seeking patent protection. There may be patents issued or pending that are held by others that cover significant aspects of our technologies, products, business methods or services. As we face increasing competition and as litigation becomes more common in China in resolving commercial disputes, we face a higher risk of being the subject of intellectual property infringement claims.

In particular, if we are found to have violated the intellectual property rights of others, we may be enjoined from using such intellectual property, may be ordered to pay damages or fines, and may incur licensing fees or be forced to develop alternatives. We may incur substantial expense in defending against third party infringement claims, regardless of their merit. Successful infringement claims against us may result in substantial monetary liability or may materially disrupt the conduct of our business by restricting or prohibiting our use of the intellectual property in question. Any intellectual property litigation could have a material adverse effect on our business, financial condition or results of operations.

Risks Relating to Investment in Our Common Stock

We incur additional increased costs as a publicly traded company listed on Nasdaq, and our management is required to devote substantial time to new compliance initiatives and reporting requirements.

As a public company, we incur significant accounting, legal and other expenses as a result of the listing of our common stock on Nasdaq. These include costs associated with corporate governance requirements of the SEC, and the Marketplace Rules of Nasdaq, as well as requirements under Section 404 and other provisions of the Sarbanes-Oxley Act of 2002, or the Sarbanes-Oxley Act. These rules and regulations increase our legal and financial compliance costs, introduce costs such as investor relations, stock exchange listing fees and stockholder reporting, and make some activities more time-consuming and costly. Any future changes in the laws and regulations affecting public companies in the United States, including Section 404 and other provisions of the Sarbanes-Oxley Act, the rules and regulations adopted by the SEC and the rules of the Nasdaq Stock Market may result in increased costs to our company as we respond to such changes. These laws, rules and regulations could make it more difficult or more costly for us to obtain certain types of insurance, including director and officer liability insurance, and we may be forced to accept reduced policy limits and coverage or incur substantially higher costs to obtain the same or similar coverage. The impact of these requirements could also make it more difficult for us to attract and retain qualified persons to serve on our board of directors, our board committees or as executive officers.

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.

We have been not in compliance with Nasdaq continued listing rules, particularly in May 2024 when we received a letter from Nasdaq that we were not in compliance with Nasdaq Listing Rule 5550(b)(1), because (i) the stockholders’ equity of the Company for the quarter ended March 31, 2024 was below the minimum stockholders’ equity requirement of $2,500,000 and (ii) the Company did not meet the alternatives standards of market value of listed securities or net income from continuing operations for compliance with Nasdaq Listing Rule 5550(b)(1).

While we regained compliance with these Nasdaq listing rules and also effected the Reverse Stock Split of our common stock on January 19, 2024, to continue our compliance with a minimum price requirement set forth in Nasdaq Listing Rule 5550(a)(2) of $1.00 per share, we cannot ensure that we will be able to comply with all continued Nasdaq listing rules.

Furthermore, we are aware that recently, U.S. public companies that have substantially all of their operations in China have been the subject of intense scrutiny, criticism and negative publicity by investors, financial commentators and regulatory agencies. Much of the scrutiny, criticism and negative publicity has centered around financial and accounting irregularities, a lack of effective internal controls over financial accounting, inadequate corporate governance policies or a lack of adherence thereto and, in some cases, allegations of fraud. As a result of the scrutiny, criticism and negative publicity, the publicly traded stock of many of these companies has decreased in value and, in some cases, has become virtually worthless. Many of these companies are now subject to shareholder lawsuits and SEC enforcement actions and are conducting internal and external investigations into the allegations. It is not clear what effect this sector-wide scrutiny, criticism and negative publicity will have on us, our business and this Offering. If we become the subject of any unfavorable allegations, whether such allegations are proven to be true or untrue, we will have to expend significant resources to investigate such allegations and/or defend our company. This situation may be a major distraction to our management. If such allegations are not proven to be groundless, our business operations will be severely hindered and your investment in our common stock could be rendered worthless.

If we are delisted from Nasdaq, trading in our securities may be conducted, if available, on the OTC Markets or, if available, via another market. In the event of such delisting, our stockholders would likely find it significantly more difficult to dispose of, or to obtain accurate quotations as to the value of our securities, and our ability to raise future capital through the sale of our securities could be materially and adversely affected if our common stock is not traded on a national securities exchange.

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 57.4% beneficial ownership of our Company. Two directors are members of the same family. As a result, such individuals will have the ability, acting together, to control the election of our directors and the outcome of corporate actions requiring shareholder approval, such as: (i) a merger or a sale of our Company, (ii) a sale of all or substantially all of our assets, and (iii) amendments to our articles of incorporation and bylaws. This concentration of voting power and control could have a significant effect in delaying, deferring or preventing an action that might otherwise be beneficial to our other shareholders and be disadvantageous to our shareholders with interests different from those individuals. These individuals also have significant control over our business, policies and affairs as officers and directors of our Company. Therefore, you should not invest in reliance on your ability to have any control over our Company.

An active and visible trading market for our common stock may not develop.

We cannot predict whether an active market for our common stock will develop in the future. In the absence of an active trading market:

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Investors may have difficulty buying and selling or obtaining market quotations;

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Market visibility for our common stock may be limited; and

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A lack of visibility for our common stock may have a depressive effect on the market price for our common stock.

The trading price of our common stock is subject to significant fluctuations in response to variations in quarterly operating results, changes in analysts’ earnings estimates, announcements of innovations by us or our competitors, general conditions in the industry in which we operate and other factors. These fluctuations, as well as general economic and market conditions, may have a material or adverse effect on the market price of our common stock.

The market price for our common stock may be volatile.

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;

	●	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.

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 common stock is thinly traded and you may be unable to sell at or near ask prices or at all if you need to sell your shares to raise money or otherwise desire to liquidate your shares.

Our common stock is “thinly-traded,” meaning that the number of persons interested in purchasing our common stock at or near bid prices at any given time may be relatively small or non-existent. This situation may be attributable to a number of factors, including the fact that we are relatively unknown to stock analysts, stock brokers, institutional investors and others in the investment community that generate or influence sales volume, and that even if we came to the attention of such persons, they tend to be risk-averse and might be reluctant to follow an unproven company such as ours or purchase or recommend the purchase of our shares until such time as we became more seasoned. As a consequence, there may be periods of several days or more when trading activity in our shares is minimal or non-existent, as compared to a seasoned issuer which has a large and steady volume of trading activity that will generally support continuous sales without an adverse effect on share price. Broad or active public trading market for our common stock may not develop or be sustained.

Our common stock may be considered a “penny stock,” and thereby be subject to additional sale and trading regulations that may make it more difficult to sell.

Our common stock may be considered to be a “penny stock” if it does not qualify for one of the exemptions from the definition of “penny stock” under Section 3a51-1 of the Exchange Act, as amended. Our common stock may be a “penny stock” if it meets one or more of the following conditions: (i) the stock trades at a price less than $5.00 per share; (ii) it is NOT traded on a “recognized” national exchange; (iii) it is not quoted on the NASDAQ Capital Market, or even if so, has a price less than $5.00 per share; or (iv) is issued by a company that has been in business less than three years with net tangible assets less than $5 million. The principal result or effect of being designated a “penny stock” is that securities broker-dealers participating in sales of our common stock will be subject to the “penny stock” regulations set forth in Rules 15-2 through 15g-9 promulgated under the Exchange Act. For example, Rule 15g-2 requires broker-dealers dealing in penny stocks to provide potential investors with a document disclosing the risks of penny stocks and to obtain a manually signed and dated written receipt of the document at least two business days before effecting any transaction in a penny stock for the investor’s account. Moreover, Rule 15g-9 requires broker-dealers in penny stocks to approve the account of any investor for transactions in such stocks before selling any penny stock to that investor. This procedure requires the broker-dealer to: (i) obtain from the investor information concerning his or her financial situation, investment experience and investment objectives; (ii) reasonably determine, based on that information, that transactions in penny stocks are suitable for the investor and that the investor has sufficient knowledge and experience as to be reasonably capable of evaluating the risks of penny stock transactions; (iii) provide the investor with a written statement setting forth the basis on which the broker-dealer made the determination in (ii) above; and (iv) receive a signed and dated copy of such statement from the investor, confirming that it accurately reflects the investor’s financial situation, investment experience and investment objectives. 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.

We are a “controlled company” within the meaning of the NASDAQ Stock Market Rules and, as a result, may rely on exemptions from certain corporate governance requirements that provide protection to shareholders of other companies.

We are a “controlled company” as defined under the NASDAQ Stock Market Rules because Mr. Liu and Ms. Liu hold more than 50% of our voting power. For so long as we remain a controlled company under that definition, we are permitted to elect to rely, and will rely, on certain exemptions from the obligation to comply with certain corporate governance requirements, including:

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the requirement that our director nominees must be selected or recommended solely by independent directors; and

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the requirement that we have a corporate governance and nominating committee that is composed entirely of independent directors with a written charter addressing the committee’s purpose and responsibilities.

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.

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.

FINRA rules require broker-dealers to have reasonable grounds for believing that an investment is suitable for a customer before recommending that investment to the customer. Prior to recommending speculative low-priced securities to their non-institutional customers, broker-dealers must make reasonable efforts to obtain information about the customer’s financial status, tax status and investment objectives, among other things. Under interpretations of these rules, FINRA believes that there is a high probability such speculative low-priced securities will not be suitable for at least some customers. Thus, FINRA requirements make it more difficult for broker-dealers to recommend that their customers buy our common stock, which may limit your ability to buy and sell shares of our common stock, have an adverse effect on the market for shares of our common stock, and thereby depress price of our common stock.

Potential future sales under Rule 144 may depress the market price for our common stock.

In general, under Rule 144, a person who has satisfied a minimum holding period of between six months to one-year, as well as meeting any other applicable requirements of Rule 144, may thereafter sell such shares publicly. Therefore, the possible sale of unregistered shares may, in the future, have a depressive effect on the price of our common stock in the over-the-counter market.

Volatility in our common stock price may subject us to securities litigation.

The market for our common stock may have, when compared to seasoned issuers, significant price volatility and we expect that our share price may continue to be more volatile than that of a seasoned issuer for the indefinite future. In the past, plaintiffs have often initiated securities class action litigation against a company following periods of volatility in the market price of its securities. We may, in the future, be the target of similar litigation. Securities litigation could result in substantial costs and liabilities and could divert management’s attention and resources.

We are not likely to pay cash dividends in the foreseeable future.

We currently intend to retain any future earnings for use in the operation and expansion of our business. Accordingly, we do not expect to pay any cash dividends in the foreseeable future, but will review this policy as circumstances dictate. Should we determine to pay dividends in the future, our ability to do so will depend upon the receipt of dividends or other payments from Shuhai Beijing. 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.

Nevada law and provisions in our articles of incorporation and bylaws could make a merger, tender offer or proxy contest difficult, thereby depressing the market price of our common stock.

Our status as a Nevada corporation and the anti-takeover provisions of the Nevada Revised Statutes may discourage, delay or prevent a change in control by prohibiting us from engaging in a business combination with an interested stockholder for a period of three years after the date of the transaction in which the person became an interested stockholder, even if a change of control would be beneficial to our existing stockholders. In addition, our articles of incorporation and bylaws contain provisions that may make the acquisition of our Company more difficult, including the following:

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our stockholders will only be able to take action at a meeting of stockholders and will not be able to take action by written consent for any matter;

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a special meeting of our stockholders may only be called by a majority of our board of directors;

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advance notice procedures apply for stockholders to nominate candidates for election as directors or to bring matters before an annual meeting of stockholders; and

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certain litigation against us can only be brought in Nevada.

These provisions, alone or together, could discourage, delay or prevent a transaction involving a change in control of our company. These provisions could also discourage proxy contests and make it more difficult for stockholders to elect directors of their choosing and to cause us to take other corporate actions they desire, any of which, under certain circumstances, could limit the opportunity for our stockholders to receive a premium for their shares of our common stock, and could also affect the price that some investors are willing to pay for our common stock..

Item 1B. Unresolved Staff Comments.

Not applicable.

Item 1C. Cybersecurity.

Our cybersecurity measure is primarily focused on ensuring the security and protection of computer systems and networks. All pertinent Chinese operating entities of the Company shall adhere to a standardized Company Confidentiality System, which shall be centrally overseen and enforced by Shuhai Beijing, subject to oversight by our management and Board of Directors. This Company Confidentiality System shall include specific provisions for information pertaining to network security, data security, and information that, if disclosed, could have detrimental effects on the public interest and the Company. We plan to establish an appropriate confidentiality framework and adhere to relevant document management regulations. The Company and its employees are also required to sign confidentiality agreements for purposes including ensuring cybersecurity. As of the date of this Annual Report, we are not aware of any material risks from cybersecurity threats, that have materially affected or are reasonably likely to materially affect the Company, including our business strategy, results of operations, or financial condition.

Item 2. Description of Property.

We currently do not own any real estate or land use rights. In March 2025, we moved our headquarters from 20th Floor, Tower B, Guorui Plaza, 1 Ronghua South Road, Technological Development Zone, Beijing to Room 302-5, Building C, Gemdale Viseen International Center, No. 5 Shengfang Road, Daxing District, Beijing, China,

On November 29, 2024, Shuhai Beijing signed an office lease agreement with Beijing Gemdale Viseen Commercial Management Co., LTD. This office located at Room 302-5, Building C, Gemdale Viseen International Center, No. 5 Shengfang Road, Daxing District, Beijing, with a construction area of 503.92 square meters. The lease term is from March 1, 2025 to February 29, 2028, totaling three years. The monthly rental is RMB 81 yuan per square meter, and the monthly rent is RMB 40,817.52 yuan. During the lease term, the rent discounts are as follows:From March 1, 2025 to May 31, 2025, the rent that Shuhai Beijing should pay during this period is RMB 40,817.52 yuan. From March 1, 2026 to May 31, 2026, the rent that Shuhai Beijing should pay during this period is RMB 81,635.04 yuan. From March 1, 2027 to May 31, 2027, the rent that Shuhai Beijng should pay during this period is RMB 81,635.04 yuan.

On August 16 2024, Shuhai Jingwei (Shenzhen) Information Technology Co., Ltd. signed a leasing agreement with Shenzhen Xunmei Technology Co., LTD. The house is located in Unit 1102, 11th floor, Building 2, Xunmei Technology Plaza, No.8 Keyuan Road, Yuehai Street, Nanshan District, Shenzhen, with a construction area of 1013 square meters. The lease period is from August 16, 2024 to August 15, 2027, for a total of three years, with a rent-free period of 5 months. The rent for the first and second years is 47.62 yuan/m2 / month, and the total rent is RMB1,920,420.00, equivalent to USD269,464.55. The rent for the third year is RMB 47.62 / m2 / month, and the total rental is RMB 1,108,789.00, equivalent to US $155,580.20, the house deposit is RMB202,600.00, equivalent to USD28,427.90.

On September 10, 2024, the Company signed a rent reduction agreement with the Company’s CEO, reducing the annual rent for the period from May 1, 2022, to April 30, 2025, to RMB 50,000 ($7,026), The Company is required to pay the rent before April 30, 2025. On June 24, 2025, the Company paid all the outstanding rents up to April 30, 2025 to the CEO. On May 1, 2025, Xunrui entered a new one-year lease agreement for this office location with the Company’s CEO for an annual rent of RMB 50,000 ($6,983), the Company is required to pay the rent before April 30, 2026. The rental expense for this office location was $6,983 and $39,657 (without rent reduction occurred on September 10, 2024), respectively, for the years ended June 30, 2025 and 2024.

We lease office space of approximately 2,007.46 square meters from Beijing Kaipeng Technology Co., Ltd. for our headquarters in Beijing under a lease agreement. Our monthly rent is approximately $33,100 (RMB225,922.89). 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. 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). After that the agreement was renewed again from November 8, 2023 to December 7, 2024, the annual rental is RMB 722,341.30 (USD 101,355.63), which include rental free from Nov 8, 2024 to December 7, 2024. The lease space is 553.11 square meters,

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 February 8, 2023 to November 7, 2023. This agreement was renewed again from November 8, 2023 to December 7, 2024, the annual rental is RMB 208,301.15 (USD 29,227.86), which include rental free from November 8, 2024 to December 7, 2024. The lease Space is 159.50 square meters.

Item 3. Legal Proceedings.

There are no pending legal proceedings to which the Company is a party or in which any director, officer or affiliate of the Company, any owner of record or beneficially of more than 5% of any class of voting securities of the Company, or security holder is a party adverse to the Company or has a material interest adverse to the Company. The Company’s property is not the subject of any pending legal proceedings.

Item 4. Mine Safety Disclosures.

Not applicable.

PART II

Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities.

Market Information

Our common stock began trading on the NASDAQ Capital Market under the symbol “DTSS” on Dec 18 2018. The last reported sales price of our common stock on Nasdaq on September 23, 2025, was $ 2.30 per share.

We have not made any repurchases of the equity securities of Datasea for the period covered by this report.

Holders

We had 105 holders of record of our common stock as of September 24, 2025.

Dividends

We do not anticipate paying dividends on our common stock at any time in the foreseeable future. We currently plan to retain earnings, if any, for the development and expansion of our business. Any future determination as to the payment of dividends will be at the discretion of our Board of Directors and will depend on a number of factors including future earnings, capital requirements, financial conditions and such other factors as our Board of Directors may deem relevant.

In addition, due to various restrictions under PRC laws on the distribution of dividends by WFOE, we may not be able to pay dividends to our shareholders. The Wholly-Foreign Owned Enterprise Law (1986), as amended, and the Wholly-Foreign Owned Enterprise Law Implementing Rules (1990), as amended, and the Company Law of the PRC (2006), contain the principal regulations governing dividend distributions by wholly foreign owned enterprises. Under these regulations, wholly foreign owned enterprises may pay dividends only out of their accumulated profits, if any, determined in accordance with PRC accounting standards and regulations. Additionally, such companies are required to set aside a certain amount of their accumulated profits each year, if any, to fund certain reserve funds until such time as the accumulated reserve funds reach and remain above 50% of the registered capital amount. These reserves are not distributable as cash dividends except in the event of liquidation and cannot be used for working capital purposes. Furthermore, if our subsidiaries and affiliates in China incur debt on their own in the future, the instruments governing the debt may restrict its ability to pay dividends or make other payments. If we or our subsidiaries and affiliates are unable to receive all of the revenues from our operations through the current contractual arrangements, we may be unable to pay dividends on our common stock.

Securities Authorized for Issuance under Equity Compensation Plans.

The Company has one (1) equity compensation plan – the 2018 Equity Incentive Plan (the “2018 Plan”).

The 2018 Plan was initially adopted by our Board of Directors and stockholders on August 22, 2018 to attract and retain the best available personnel, provide additional incentives to employees, directors and consultants and promote the success of our business. Initially, the 2018 Plan authorized for issuance a maximum of 4,000,000 (pre-split) or 266,667 (post-split) shares of our common stock, subject to adjustments in the event of certain reorganizations, mergers, combinations, recapitalizations, share splits, share dividends, or other similar events which change the number or kind of shares outstanding.

On April 28, 2022 and June 20 2023, the stockholders of the Company approved amendments to the 2018 Plan, to increase the number of shares of the Company’s common stock reserved for issuance under the 2018 Plan to 933,333 and 1,600,000, respectively.

On June 7, 2024, the stockholders of the Company approved an amendment (the “Amendment No.3”) to the 2018 Plan at the Company’s annual shareholder meeting, which increased the number of a maximum shares authorized for issuance under the 2018 Plan by an additional 1,000,000 shares, from 1,600,000 shares to 2,600,000 shares of common stock.

On May 3, 2024, the Company filed a Registration Statement on Form S-8 to register the offer and sale of 1,000,000 remaining shares of common stock available for issuance under the 2018 Plan as a result of the amendments thereto,

On May 7, 2025, the stockholders of the Company approved a further amendment to the 2018 Plan, which increased the maximum number of shares of common stock authorized for issuance under the plan from 2,600,000 shares to 7,600,000 shares.

As of the date of this Annual Report, approximately 5,944,150 shares of our common stock is reserved for issuance under the 2018 Plan.

Below is the summary of the key provisions of the 2018 Plan:

Types of Awards. The 2018 Plan permits the awards of options, stock appreciation rights, restricted stock, restricted stock units, stock bonus awards and/or performance compensation awards.

Plan Administration. Our Board of Directors or a committee appointed by our Board of Directors will administer the 2018 Plan. Such plan administrator will determine the participants to receive awards, the type and number of awards to be granted to each participant, and the terms and conditions of each grant.

Award Agreement. Awards granted under the 2018 Plan are evidenced by an award agreement that sets forth the terms, conditions and limitations for each award, which may include the term of the award, the provisions applicable in the event of the grantee’s employment or service terminates, and our authority to unilaterally or bilaterally amend, modify, suspend, cancel or rescind the award.

Eligibility. We may grant awards to our employees, directors and consultants or prospective employees, directors, officers, consultants or advisors who have accepted offers of employment or consultancy from our company or our affiliates.

Exercise of Options. The plan administrator determines the expiration date of each award. However, the term of any award may not exceed ten years from the date of a grant. If any such award is not exercised prior to expiration, the award will be deemed forfeited.

Transfer Restrictions. Awards may not be transferred in any manner by the recipient other than by will or the laws of descent and distribution, except as otherwise provided by the plan administrator.

Amendment and Termination of the 2018 Plan. Our Board of Directors has the authority to amend, alter, suspend, discontinue, or terminate the plan. However, no such action may adversely affect in any material way any awards previously granted unless agreed by the recipient.

Recent Sales of Unregistered Securities

Except as set forth below, there were no sales of common stock equity securities during the period covered by this Report that were not registered under the Securities Act and were not previously reported in a Quarterly Report on Form 10-Q or a Current Report on Form 8-K filed by us.

In June 2025, we issued an aggregate of 59,445 shares of common stock to Zhixin Liu and 45,408 shares of common stock to Fu Liu as compensation for unpaid salaries.

In addition, in June 2025, we issued an aggregate of issued 369,403 shares of common stock to Fu Liu

In August 2025, we issued an aggregate of 61,119 shares of common stock to Zhixin Liu and 47,193 shares of common stock to Fu Liu as stock compensation for unpaid salaries.

Also, in August 2025, we issued an aggregate of 2,010 shares of common stock to Ms. Chen, a director, as compensation for the months of May through July, and 18,367 shares were issued as stock compensation to Mr. Chenyang Nie.

Item 6. [Reserved]

Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations.

Cautionary Note Regarding Forward-Looking Statements

This Annual Report contains forward-looking statements within the meaning of Section 27A of the Securities Act and Section 21E of the Exchange Act. All statements other than statements of historical fact are “forward-looking statements” for purposes of federal and state securities laws, including, but not limited to, any projections of earnings, revenue, or other financial items; any statements of the plans, strategies, and objectives of management for future operations; any statements concerning proposed new services or developments; any statements regarding future economic conditions of performance; and statements of belief; and any statements of assumptions underlying any of the foregoing. Such forward-looking statements involve known and unknown risks, uncertainties, and other factors that may cause our actual results, performance, or achievements to be materially different from any future results, performance, or achievements expressed or implied by such 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. However, we cannot assess the impact of each factor on our business or the extent to which any factor or combination of factors, or factors we are aware of, may cause actual results to differ materially from those contained in any forward-looking statements. You are cautioned not to place undue reliance on any forward-looking statements. 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.

You should be aware that our actual results could differ materially from those contained in the forward-looking statements due to several factors, including:

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uncertainties relating to our ability to establish and operate our business and generate revenue;

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uncertainties relating to general economic, political, and business conditions in China;

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industry trends and changes in demand for our products and service；

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uncertainties relating to customer plans and commitments and the timing of orders received from customers;

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announcements or changes in our advertising model and related pricing policies or that of our competitors;

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unanticipated delays in the development, market acceptance, or installation of our products and services;

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changes in Chinese government regulations; and

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availability, terms and deployment of capital, relationships with third-party equipment suppliers

Overview and Recent Developments

Datasea Inc. (“Datasea” or the “Company”, NASDAQ: DTSS) is a technology company incorporated under the laws of the State of Nevada on September 26, 2014, with subsidiaries and operating entities located in Delaware, USA, and China. Since its incorporation in 2014, Datasea has been committed to the exploration, application, and commercialization of cutting-edge technologies. As a global high-tech company spanning both the Chinese and U.S. markets, Datasea’s business focuses on two main segments: Acoustic High-Tech and AI Multimodal Digitalization. Through continuous R&D investment, product innovation, and industrial collaboration, the company has gradually built a complete “technology – product – market” closed-loop system, achieving large-scale application and rapid growth in several industries. As a global high-tech company with deep integration of acoustics and artificial intelligence as the technological foundation, Datasea advances its dual-business engines of “Acoustic High-Tech + AI Multimodal Digitalization” to drive cross-industry applications. As one of the global proponents and industrial promoters of the “acoustic effect” concept, the Company leverages acoustic technology to establish unique technological barriers in five key fields—industrial, agricultural, healthcare, medical, and IoT—achieving full-chain value conversion from technological R&D to industry applications. In the past fiscal years, as high-margin solutions from both segments have gradually scaled, Datasea has transitioned from “scale growth” to “quality improvement,” laying a solid foundation for long-term objectives and maximizing shareholder value.

The Company operates in two core business segments: Acoustic High-Tech and AI Multimodal Digitalization

In the Acoustic High-Tech field, the company focuses on the innovation of acoustic technology in multiple scenarios, with “non-hearable mechanical wave effects” as the R&D core. In the environmental domain, the company has launched a series of acoustic environmental products to meet the purification needs of public and household settings; in the health domain, it has launched a series of acoustic medical and healthcare products, breaking through in areas such as neuro-regulation and acupoint stimulation, extending acoustic applications from environmental assistance to precise health management and clinical intervention. In the industrial domain, the company explores the application of ultrasound in fields such as industrial precision processing, agricultural pest control, and agricultural product preservation, forming a cross-industry empowerment model of “acoustics + AI + vertical scenarios.”

In the AI Multimodal Digitalization field, the company positions itself as a core service provider for the digitalization of the Chinese industry. With its self-developed multimodal data processing platform, it achieves real-time collection, analysis, and generation of text, voice, image, video, and other data types. The company focuses on the efficient and accurate matching of community services and consumer needs, offering full-spectrum services from standardized platform services (such as intelligent marketing, business process automation) to customized system solutions (such as full-process digital management for beauty salons, rural revitalization agricultural management platforms), helping customers optimize costs and improve efficiency.

Substantially all business operations of the Company are in China and the United States, and the Company also continuing to expand its business operations in other countries. In China, the Company has established a research, production, and sales network through entities such as Shuhai Tianjin and Shuhai Beijing, focusing on application of Acoustic markets in healthcare, medical aesthetics, industrial, and agricultural sectors. In the United States, through its wholly owned subsidiary, Datasea Acoustics LLC, the Company is planning to promote the distribution of acoustic products and patent deployment and is working with U.S. partners to expand local channels. Together, these initiatives support the development of a global operational framework characterized by technical collaboration and complementary market access.

Datasea, through the collaboration of its “product-based business (acoustic hardware + solutions)” and “platform-based business (AI multimodal services),” not only strengthens its commercialization achievements in fields like environmental disinfection and health assistance but also makes breakthroughs in high-value fields such as neuro-regulation, brain-computer interfaces, and industrial digitalization. The company aims to become a new generation of technology enterprises based on acoustic technology and driven by AI, establishing a unique competitive advantage in the global wave of acoustic intelligence and digitalization.

Business Strategy

The Company will continue to promote interdisciplinary research between acoustic science and artificial intelligence, striving to maintain a global leading position in areas such as non-hearable mechanical wave effects, acoustic coupling, and AI multimodal algorithms. The company has partnered with top research institutions such as the Chinese Academy of Sciences and Tsinghua University to establish joint laboratories and industrial research projects, continuously pushing scientific breakthroughs to be applied in industries.

Beyond the existing applications such as acoustic sterilization and sleep assistance, the Company aims to implement “acoustics + neuro-regulation” to intervene precisely in the brain (brain-computer interface), heart, and foot acupoints (foot-computer interface), constructing a closed-loop system for “detection — analysis — diagnosis — real-time intervention” to meet the growing global demand for non-pharmacological, precise health interventions.

In Acoustic Agriculture, the Company will leverage ultrasound to extend the shelf life of agricultural products, reduce pesticide use, and improve crop yield and quality.

In Acoustic Industrial Applications, the Company is developing ultrasound-assisted separation devices and 3D printing technologies to upgrade manufacturing processes.

In the IoT (Internet of Things) field, based on both acoustic high-tech and AI multimodal technologies, Datasea will tap into smart cities and consumer scenarios.

Overall Fiscal Year Performance

For the fiscal year ended June 30, 2025, the Company had revenue of $71,616,820, compared to $23,975,867 in fiscal year 2024, representing an increase of $47,640,953, or 198.70% compared to the same period in 2024.

This revenue growth is primarily due to the rapid expansion of our 5G AI multimodal communication business in China, with the company’s 5G AI digital business maintaining a leading position in the industry. Our growing customer base continues to support substantial business growth.

As of June 30, 2025, the Company recorded $2,443,948 in gross profit, an increase of $1,969,843, or 415.49%, compared to the same period of the prior year.

In the AI Multimodal Digitalization Business segment, the Company generated revenue of $70.68 million, compared to $23.60 million last year, an increase of 199.49%, which was due to rapid expansion of core clients. During fiscal year ended June 30, 2025, the 5G+AI multimodal digitalization business demonstrated robust growth momentum., by advancing both platform-based and customized services, which increased the Company’s revenue in this business segments, as well as its customer base.

In the acoustic technology business segment, the Company generated revenue of RMB 3,773,584.91 (approximately $527,110) from comprehensive acoustic technology solutions due to increase in deployment of beauty and health salons, by increasing the number of core clients, and establishing an offline network for showcasing and selling acoustic products.

During the fiscal year 2025, the Company significantly optimized its customer structure:

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The number of AI multimodal clients increased from 8 to 15, with leading clients such as Qingdao Ruizhi Yixing, Wuhan Xiaoming Technology, and Xinyi Xinfanfa each contributing revenue exceeding $10 million, demonstrating strong customer stickiness and deepened cooperation.

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More than 200 new SME clients were added, building a foundation for scalable growth.

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In the acoustic business, deployment across 463 beauty and health salons enabled deep offline scenario penetration, while online live-streaming e-commerce channels complemented distribution, creating a B2B + B2C integrated sales network.

The multi-layered structure (leading clients driving growth, SME expansion, and end-user channel empowerment) enables the Company to achieve breakthroughs across different market levels simultaneously.

During the fiscal year 2025, Datasea expanded its acoustic business through both online and offline channels while optimizing its customer base across B2B and B2C markets:

The Company signed agreements with 14 beauty service companies in Tianjin, Beijing, and other cities, deploying products into 463 beauty and personal care salons across Northern China. This strengthened market penetration and solidified leadership in beauty and health management. As of June 2025, the Company’s network in Northern China covered 463 beauty and health salons, serving as product display and sales hubs, while also preparing the ground for future deployment of AI multimodal systems such as store management solutions. Through e-commerce platforms such as Douyin and Xiaohongshu, Datasea’s products began reaching personal consumers. The “Star Dream” sleep aid device, in particular, received strong consumer feedback and gained rapid traction through online live-streaming sales.

This diversified customer structure enables strong business momentum across industries and market segments, enhancing resilience and sustaining competitiveness.

Datasea leverages its dual business engines of Acoustic High-Tech and AI Multimodal Digitalization to continuously enhance its core technological strengths and adaptability across industries. In the acoustic field, the Company advances research and application of non-audible mechanical wave effects, exploring commercialization in areas such as healthcare and medical neuro-regulation, acupoint stimulation, industrial precision processing and liquid-phase separation, and agricultural preservation and pest control. In the AI multimodal field, the Company optimizes algorithm architectures and expands platform functions to process multimodal data across speech, image, text, and video, enabling applications in healthcare, enterprise services, and consumer markets.

By combining the cross-scenario expansion of acoustic technologies with the industry-specific applications of its AI platform, Datasea delivers a mix of standardized tools and customized solutions, balancing scalability with differentiation and ensuring stable, efficient performance across complex business environments.

Market Expansion and Future Potential

Growth in the domestic market has provided a strong foundation of technology validation and customer adoption, supporting further expansion. Looking ahead, Datasea intends to leverage its dual operational bases in China and the United States to pursue international opportunities. In China, the Company will continue to strengthen its presence in acoustic applications across healthcare, beauty, agriculture, and industrial sectors, while expanding AI multimodal services to support the digital transformation of SMEs. In the United States, through its wholly owned subsidiary Datasea Acoustics LLC, the Company is advancing the commercialization of acoustic products and patent cooperation, supported by partnerships with local distributors and technology collaborators.

The Company’s strategic objective is to establish differentiated advantages in both acoustic and digitalization technologies through continuous innovation and high-efficiency solutions, and in the medium to long term, to achieve cross-industry, multi-scenario global applications, building a sustainable path of steady growth.

Development Strategy

Datasea Inc.’s overall development strategy is based on “Acoustic High-Tech” and “AI Multimodal Digitalization” as its dual core engines. With the five major acoustic application areas (Acoustic Industry, Acoustic Agriculture, Acoustic Healthcare, Acoustic Medical and Elderly Care, Acoustic IoT) as the technological foundation, and four major product clusters (Acoustic Environmental Products, Acoustic Intelligent Manufacturing Products, Acoustic Wellness Products, Acoustic Medical Products) as business pillars, the Company is constructing a vertically integrated strategy system from technology R&D to industrial implementation. The Company relies on the dual operational platforms in the U.S. and China (the U.S. parent company oversees capital and strategy, while the China WFOE+VIE structure handles R&D and production), and through continuous high-intensity R&D investment, clear product roadmap planning, diversified market channel expansion, and proactive global intellectual property layout, the company is driving its business from “scale expansion” to “high-quality growth.” Our ultimate goal is to become a globally influential leader in the field of acoustic intelligence and digital solutions, creating sustainable value for shareholders, customers, and society through innovative “Acoustic + AI” technology product combinations.

Acoustic High-Tech Strategy

Core Technology Focus and Productization Path:

Environmental Product Cluster Scaling: Based on the “Datasea Tian Ear” disinfection series, the company uses both offline beauty salons (463 locations) and online live-streaming e-commerce channels to drive market penetration. The company also develops smart environmental monitoring and purification systems based on Acoustic IoT technology, strengthening its core revenue base.

Intelligent Manufacturing Product Breakthrough: The Company is focusing on advancing ultrasonic precision machining equipment (e.g., 3D metal printing) in the acoustic industry and ultrasonic pest control and crop growth promotion devices in the acoustic agriculture sector. The company is forming industry alliances with industrial groups and agricultural research institutions to create benchmark industry cases.

Wellness Product Ecosystem: Focusing on neuro-regulation (brain-computer interfaces) and foot health interventions, the company is building a “hardware + AI algorithm + health platform” closed-loop system. Through a B2B2C model, the company is cooperating with health management organizations and insurance companies to provide personalized health management services.

Acoustic Medical Product Frontier Layout: The Company is continually investing in the R&D of advanced technologies like Low-Intensity Focused Ultrasound (LIFU) and establishing clinical collaborations, reserving technologies and patents for future entry into the high-end medical device field.

AI Digital Platform Strategy

Platform Service Strategy:

Based on the self-developed Transformer-based multimodal platform, the company continues to enhance its capabilities in integrating and generating text, speech, image, and video data. By offering standardized API interfaces and modular services, the company provides rapidly integrable AI capabilities to clients in industries such as finance, logistics, healthcare, and entertainment. The platform uses a subscription-based (SaaS) and pay-per-use model to ensure continuous revenue and scalability.

Industry Deep Solutions Strategy:

Focusing on high-growth scenarios, the company offers customized solutions:

SME Digital Solutions: Integrating membership management, intelligent marketing, and other functions to lower the digitalization threshold for SMEs.

Digital Rural Solutions: Providing smart agriculture management, rural logistics dispatch, and remote public services, supporting national rural revitalization policies.

Beauty and Health Industry Digital Solutions: Offering full-process digital management systems for offline beauty salons, creating synergies with the acoustic hardware business.

New Media Marketing Solution: Provides functions such as content generation and management, advertising placement and monitoring, and user engagement and interaction. This solution helps clients achieve precise marketing campaigns and brand promotion, empowering enterprises to digitally transform their presence on emerging platforms such as Douyin and Xiaohongshu.

Technology R&D Strategy

The company’s technology R&D strategy adheres to the principle of “balancing independent R&D and open cooperation,” driving forward through both frontier technology exploration and industrial application. The goal is to build an R&D system with continuous innovation capabilities.

R&D Focus Areas:

AI Multimodal R&D: Continuously optimize cross-modal semantic calibration algorithms and develop scenario-specific modules for particular industries (e.g., beauty salon digital systems, new media marketing solution). Strengthen the data interactivity between AI multimodal platforms and acoustic hardware to achieve intelligent analysis and feedback adjustment of data collected by acoustic devices.

R&D System Construction:

The company has established a three-tier R&D system:

Frontier Technology Research Institute: Focused on 3-5 years of long-term technology development.

Product R&D Center: Responsible for 1-2 years of product development.

Customer Solutions Department: Focused on quick responses and customized development for customer needs.

Through an R&D management process of “project initiation — milestone monitoring — evaluation,” the company ensures effective resource allocation and project progress.

Industry-University-Research Collaborative Innovation: The Company has established joint laboratories with institutions such as Institute of Acoustics, Chinese Academy of Sciences, Internet Industry Research Institute, Tsinghua University, and Artificial Intelligence Research Institute, Harbin Institute of Technology, driving the rapid transformation of cutting-edge technologies through industrial research projects. The company actively participates in industry standard formulation and co-published the Acoustic High-Tech Industry White Paper,

M&A Strategy

Domestic Acquisitions:

The Company focuses on three major directions with high synergy to its core business:

Industry Application Companies: The Company focuses on companies with mature customer resources and experience in industries such as smart agriculture and precision manufacturing, accelerating the commercialization of products in the acoustic industry and acoustic agriculture segments.

M&A standards emphasize technological synergy and the feasibility of team integration. The Company adopts a “cooperation first, acquisition later” strategy, deepening relationships through project collaboration and equity investment before proceeding with acquisitions, ensuring smooth integration of technologies and team stability post-acquisition.

International Acquisitions:

Focusing on the North American market, the Company conducts acquisitions along two main lines:

International Strategy

Phased Market Expansion Strategy:

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Phase 1: Focus on developing the U.S. market by establishing a localized operational system through its US subsidiary, Datasea Acoustics LLC. The Company will initially introduce acoustic environmental products (disinfection and purification devices) and acoustic medical and elderly care products (sleep aid devices) as its flagship products and to partner with local distributors like iPower Inc.

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Phase 3: Gradually expand to Asia-Pacific and other emerging markets, forming a global sales network and service system.

Localized Operational System Construction:

The Company will establish localized teams in key overseas markets responsible for market promotion, customer service, and channel management. It will actively explore cooperation opportunities with local manufacturers, achieving product localization through technology licensing or cooperative manufacturing, thereby reducing tariffs and logistics costs, and enhancing market responsiveness. Additionally, the Company will establish product customization and capability output mechanisms to ensure its products and services meet local regulations and cultural preferences.

Global Resource Integration:

The Company will establish a global R&D collaboration network, building relationships with top overseas research institutions and attracting international talent to achieve global distribution of technological resources. At the same time, the company will participate in international industry exhibitions and standard-setting activities to enhance its brand influence and voice in the global acoustic intelligence sector.

Recent Developments

During the fiscal year ended June 30, 2025, the Company and its subsidiaries entered into the following material agreements with its key customers:

On August 12, 2024, Datasea Information Technology Co., Ltd. (“Shuhai Beijing”), Heilongjiang Xunrui Technology Co., Ltd. (“Xunrui Technology”), Datasea Jingwei (Shenzhen) Information Technology Co., Ltd. (“Datasea Jingwei”), Guozhong Haoze (Beijing) Technology Co., Ltd. (“Guozhong Haoze”), and Guozhong Times (Beijing) Technology Co., Ltd. (“Guozhong Times”) entered into an agreement with Qingdao Ruizhi Yixing Information Technology Co., Ltd. (“Ruizhi Yixing”). The agreement stipulates the purchase of 5G+AI multimodal data recharge cards with face values ranging from RMB 10 to RMB 500 (approximately USD 1.40 to USD 69.83) over a 12-month period from the effective date of the agreement. From July 1, 2024, to June 30, 2025, revenue from Ruizhi Yixing reached RMB 392,182,085.13 (equivalent USD 54,775,147).

On August 9, 2024, Shuhai Beijing signed an agreement with Shanghai Shixun Network Technology Co., Ltd. (“Shixun Network”), under which, for a 12-month period from the effective date, Shixun Network will purchase 5G+AI multimodal data cards with face values ranging from RMB 10 to RMB 500 (approximately USD 1.40 to USD 69.83). Between July 1, 2024, and June 30, 2025, revenue from Shixun Network reached RMB 10,981,054.18 (equivalent USD 1,533,698).

From August 9, 2024, to October 18, 2024, Shuhai Beijing, Heilongjiang Xunrui, and Guozhong Times signed an agreement with Wuhan Xiaoming Technology Co., Ltd. (“Xiaoming Technology”). Under these agreement, over a 12-month period from its effective date, Xiaoming Technology will purchase 5G+AI multimodal data recharge cards with face values ranging from RMB 10 to RMB 500 (approximately USD 1.40 to USD 69.83). From July 1, 2024 to June 30, 2025, revenue from Xiaoming Technology reached RMB 25,000,429.43 ( equivalent USD 3,491,751).

From August 8, 2024, to February 13, 2025, Guozhong Times , Guozhong Haoze and Shuhai Beijing entered into an agreement with Xinyi Xinfanfa Information Technology Co., Ltd. (“Xinfanfa Technology”), under which, over a 12-month period from the effective date, Xinfanfa Technology will purchase 5G+AI multimodal data recharge cards with face values ranging from RMB 10 to RMB 500 (approximately USD 1.40 to USD 69.83). From July 1, 2024, to June 30, 2025, revenue from Xinfanfa Technology reached RMB 41,736,607.01 (equivalent USD 5,829,253).

From October 8, 2024, to November 11, 2024, Shuhai Beijing, Guozhong Haoze, and Guozhong Times signed an agreement with Jiajie Technology Co., Ltd. (“Jiajie”), under which, over a 12-month period from the effective date, Jiajie will purchase 5G+AI multimodal data recharge cards with face values ranging from RMB 10 to RMB 500 (approximately USD 1.40 to USD 69.83). From July 1, 2024, to June 30, 2025, revenue from Jiajie reached RMB 23,843,624.39 (equivalent USD 3,330,183).

On Septembert 18, 2024, Guozhong Haoze signed an agreement with Wuhan Xinze Shixiang Technology Co., Ltd. (“Xinze Shixiang”), under which, for a 12-month period from the effective date, Xinze Shixiang will purchase 5G+AI multimodal data cards with face values ranging from RMB 10 to RMB 500 (approximately USD 1.40 to USD 69.83). From July 1, 2024 to June 30, 2025, revenue from Xinze Shixiang reached RMB 2,810,454.20 (equivalent USD392,530).

On August 12, 2024, Datasea Information Technology Co., Ltd. (“Shuhai Beijing”), Heilongjiang Xunrui Technology Co., Ltd. (“Xunrui Technology”), Datasea Jingwei (Shenzhen) Information Technology Co., Ltd. (“Datasea Jingwei”), Guozhong Haoze (Beijing) Technology Co., Ltd. (“Guozhong Haoze”), and Guozhong Times (Beijing) Technology Co., Ltd. (“Guozhong Times”) entered into an agreement with Qingdao Dong’an Information Technology Co., Ltd. (“Qingdao Dong’an”). The agreement stipulates the purchase of 5G+AI multimodal data recharge cards with face values ranging from RMB 10 to RMB 500 (approximately USD 1.40 to USD 69.83) over a 12-month period from the effective date of the agreement. From July 1, 2024, to June 30, 2025, revenue from Qingdao Dong’an reached RMB 614,663.73 (equivalent USD 85,849).

On November 1, 2024, Guozhong Haoze signed an agreement with Nanjing Linghui Information Engineering Co., Ltd. (“Linghui Information”), under which, upon the agreement’s effective date, two software copyrights were purchased for a total price of RMB 2,333,451.32. As of June 30, 2025, revenue from Linghui Information reached RMB 2,333,451 (equivalent USD 325,908).

On October 8, 2024, Shuhai Beijing signed an agreement with Anhui Gu Kai Business Co., Ltd.(“Anhui Gu Kai”), The agreement stipulates that within 50 days after the agreement takes effect, Shuhai Beijing will provide Anhui Gu Kai with a 5G-AI multi-modal small and medium-sized enterprise service platform technology solution. As of June 30, 2025, revenue from Anhui Gu Kai reached RMB 1,415,094.34 (equivalent USD197,666).

On December 25, 2024, the Company’s wholly owned subsidiary, Shuhai Jingwei (Shenzhen) Information Technology Co., Ltd. (“Shuhai Jingwei”), signed an agreement with Tianjin Qianli Cultural Media Co., Ltd. (“Qianli Cultural Media”) to sale air purifiers (Hailijia). As of June 30, 2025, the revenue from Qianli Cultural Media reached RMB 267,936 (approximately USD 37,422). The signing and execution of this contract marks a strong start for the entry of acoustic environmental disinfection products into the end-consumer market, laying a solid foundation for the future expansion of the business and the brand’s influence.

In December 2024, the Company’s VIE entity subsidiary, Guozhong Haoze, signed an agreement with 14 beauty industry service companies in Tianjin, Beijing, and other cities in China, to deploy its acoustic high-tech products to 263 beauty and body care stores in northern China, including Tianjin and Hebei Province. According to the agreement, the Company plans to sell approximately 140,000 units of acoustic air purifiers, sleep products, and 5G AI digital service systems specifically developed for the beauty industry by the end of 2025, with expected revenue of USD 11 million (approximately RMB 77 million). This agreement not only expands Datasea’s market share in the beauty industry but also strengthens its penetration in northern China, further driving the industrial application of the Company’s products and technologies.

In January 2025, an additional agreement was signed with 9 health management companies in Tianjin, further expanding its business coverage in northern China. According to these agreements, Datasea’s acoustic high-tech products will be introduced into 200 beauty stores in key northern markets such as Tianjin and Hebei Province. By the end of 2025, approximately 90,000 units are expected to be sold, generating additional revenue of around USD 6.8 million. The signing of these new agreement further consolidates Datasea’s market leadership in health management and beauty sectors, creating more opportunities for long-term growth and market expansion in the future.

On February 20, 2025, Shuhai Beijing signed an agreement with Beijing Meimei Partnership Network Technology Co., Ltd.(“Beijing Meimei”), The agreement stipulates that within 30 days after the agreement takes effect, Shuhai Beijing will provide Beijing Meimei with a 5G-AI multi-modal small and medium-sized enterprise service platform technology solution. As of March 31, 2025, revenue from Beijing Meimei reached RMB 1,509,433.96 (equivalent USD 210,844).

On March 4, 2025, the Company’s wholly owned subsidiary, Shuhai Jingwei (Shenzhen) Information Technology Co., Ltd. (“Shuhai Jingwei”), signed an agreement with Tianjin Zhongzhi Times Technology Development Co., Ltd. (“Zhongzhi Times”) to acoustic high-tech products.

On May 15, 2025, Shuhai Beijing signed an agreement with Beijing Meimei Partnership Network Technology Co., Ltd.(“Beijing Meimei”), The agreement stipulates that within 35 days after the agreement takes effect, Shuhai Beijing will provide 5G-AI multi-modal digital rural service platform technology solutions for Beijing Meimei. As of June 30, 2025, revenue from Beijing Meimei reached RMB 1,886,792.45 (equivalent USD263,555).

On May 16, 2025, Shuhai Beijing signed an agreement with Beijing Meimei Partnership Network Technology Co., Ltd.(“Beijing Meimei”), The agreement stipulates that Shuhai Beijing will provide specialized services for Beijing Meimei, including customized technical solutions for a new media marketing platform. As of June 30, 2025, revenue from Beijing Meime reached RMB 1,981,132.08 (equivalent USD276,733).

On May 20, 2025, Shuhai Jingwei (Shenzhen) Technology Co., Ltd. signed a contract with Yuxiang Zhiyang (Tianjin) Innovation Technology Co., Ltd.（“Yuxiang Zhiyang”, based on the product concept and application scenarios proposed by Yuxiang Zhiyang, focusing on the combined principle of ultrasonic cavitation and ozone oxidation. Design a complete core technical solution for the “Bathroom Ultrasonic Sterilization and Odor Removal Treasure” product and issue a report. The contract amount (including tax) is RMB 1,800,000.00 (equivalent to US $251,431.76). As of June 30, 2025, Shuhai Jingwei has achieved revenue (excluding tax) of RMB 1,698,113.21 (equivalent to US $237,199.78).

On May 20, 2025, Shuhai Jingwei (Shenzhen) Technology Co., Ltd. signed a contract with Yuxiang Zhiyang (Tianjin) Innovation Technology Co., Ltd.（“Yuxiang Zhiyang”), based on the product demand concept proposed by Yuxiang Zhiyang, focusing on the principle of sound wave and Schumann wave resonance for sleep assistance. Provide a complete set of technical solutions for the core technical architecture, key module design, functional logic description, system integration logic, and software and hardware interface definition of the “Sleep Treasure” product, and issue a report. The contract amount (including tax) is RMB 2,200,000.00 (equivalent to US $307,305.49). As of June 30, 2025, Shuhai Jingwei achieved revenue (excluding tax) of RMB 2,075,471.70 (equivalent to US $289,910.84).

On May 22, 2025, Shuhai Beijing signed an agreement with Tianjin Qianli Culture Media Co., Ltd.(“Qianli Cultural Media”), The agreement stipulates that Shuhai Beijing will provide specialized services for Qianli Cultural Media, including customized technical solutions for a new media marketing platform. As of June 30, 2025, revenue from Qianli Cultural Media reached RMB 2,075,471.70 (equivalent USD 289,910).

During the reporting period, the Company’s primary revenue was derived from service fees associated with 5G+AI multimodal digital business services. From July 1, 2024 to June 30, 2025, the revenue reached USD69.44 million, an increase of USD49.89 million compared with USD19.55 million in the same period of 2024, with a growth rate of 255.20%. This revenue growth is mainly attributable to the rapid expansion of China’s 5G+AI multimodal digital business, which has maintained a leading position within the industry. The continuously growing customer base has further supported the Company’s significant business expansion.

The technical solutions such as AI multi-modal services for small, medium and micro enterprises, AI multi-modal digital rural services, and AI multi-modal new media marketing services have all achieved revenue realization, totaling RMB8.9 million (Approximately USD1.24 million) indicating the full implementation and blooming of the company’s 5G AI multi-modal digital business. At the same time, the high-margin attribute of the technical solutions has lifted and improved the overall gross profit margin level.

ESG Management (2025)

Datasea remains committed to integrating ESG (Environmental, Social, and Governance) principles into its operations and long-term strategy, positioning ESG as a key engine for sustainable development. We recognize that ESG is not only an important tool for risk management and opportunity identification but also a pathway to strengthening resilience, enhancing competitiveness, and building long-term, positive relationships with stakeholders.

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Green Supply Chain Management: In 2025, the Company worked closely with core suppliers to establish green production standards. By introducing energy-saving equipment across supplier networks, energy consumption per production line decreased by more than 10%, saving tens of thousands of kWh annually. A full lifecycle management system was also established, increasing the compliant disposal rate of waste by 20%.

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Green Office and Energy-Saving Practices: The Shenzhen subsidiary continued upgrading its green office initiatives, adding a smart waste-sorting system. With special recycling for biodegradable waste, sorting accuracy for recyclables improved to over 90%. Paperless workflows reduced quarterly paper usage by 50% year-over-year, while office energy consumption per unit area fell by 15%.

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ESG Data Transparency: The Company launched an ESG data transparency platform with a new supply chain carbon footprint tracking module. Most Tier-1 suppliers have achieved real-time data integration, laying the foundation for building supplier carbon accounts in the future.

Social

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Employee Development and Diversity: ESG training coverage rose to 85% in fiscal year 2025, up 10 percentage points from the previous quarter. Adoption of internal green proposals increased by 35%. The Company launched an internal “ESG Action Points Program”, with over 90% employee participation, collectively logging more than 12,000 kilometers of green commuting.

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Public Welfare and Community Engagement: The Company continued initiatives such as “Love Education” and the “Sunshine Volunteer Charity Club.” CEO Ms. Zhixin Liu, serving as a council member of the National Association of Women Entrepreneurs, actively promoted female entrepreneurship and philanthropic collaboration.

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International Talent and Inclusion: The proportion of female employees continued to rise, with women holding 40% of management positions, reflecting the Company’s strong commitment to diversity, equality, and inclusion.

Going Concern

The accompanying 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 ending June 30, 2025 and 2024, the Company had a net loss of approximately $5.09 million and $11.38 million, respectively. The Company had an accumulated deficit of approximately $44.53 million as of June 30, 2025, and negative cash flow from operating activities of approximately $2.37 million and $6.40 million for the years ended June 30, 2025 and 2024, respectively.

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. There can be no assurance the Company will become profitable or obtain necessary financing for its business and investments or that it will be able to continue in business and investments. The consolidated financial statements do not include any adjustments that might result from the outcome of these uncertainties. As of June 30, 2025, the Company had cash of $620,807.

We will continue to bring in additional investors to support the Company’s research and development, marketing and operations.

Use multiple marketing channels to attract customers, enhance brand awareness and increase sales. By optimizing and integrating multiple marketing channels, it can cover a wider range of target customer groups, improve efficiency and effectiveness, meet customer needs, reduce risks, achieve multi-channel comprehensive coverage, and achieve success in market competition.

Strengthen brand image building, design a unique brand identity, unify the brand image, strengthen word-of-mouth marketing, use social media and word-of-mouth network, increase the authority and visibility of the brand, and continue to follow up and maintain the brand image, improve product strength and creativity.

Maintain enterprise competitiveness and achieve sustainable development. Strengthen research and development investment and in-depth understanding of market needs, establish an innovation culture, encourage employees to propose new ideas and creativity, and create an open innovation atmosphere. Reward and recognize the innovation results to stimulate the innovation enthusiasm of employees. Strengthen cooperation and exchanges, establish cooperative relations with universities and scientific research institutions, and jointly carry out research and development projects.

Participate in industry exhibitions, seminars and other activities to exchange experience with peers and obtain the latest technology and information. Optimize product development process, adopt agile development, lean production and other methods to improve product development efficiency and quality. We will pay attention to the protection of intellectual property rights, apply for patents, trademarks and other intellectual property rights in a timely manner, and protect innovation achievements.

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. However, there can be no assurance that additional funds will be available when needed from any source or, if available, will be available on terms that are acceptable to us. We may be required to pursue sources of additional capital through various means, including debt or equity financings.

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. Our ability to obtain needed financing may be impaired by such factors as the capital markets and our history of losses, which could impact the availability or cost of future financings. If the amount of capital we are able to raise from financing activities, together with our revenues from operations, is not sufficient to satisfy our capital needs, even to the extent that we reduce our operations accordingly, we may be required to cease operations.

Sustainable operation can help enterprises improve operating efficiency, enhance the competitiveness of enterprises, and enhance the market share of enterprises.

Sustainable operation can help enterprises better control risks, reduce operating costs, and ensure the safety of enterprises.

Sustainable operation can help enterprises better grasp market opportunities, grasp market trends, and achieve a win-win situation between enterprises and society.

Significant Accounting Policies

Please refer to our significant accounting policies in Note 2 to our consolidated financial statements included in this report.

Results of Operations

Comparison of the years ended June 30, 2025, and 2024

The following table sets forth the results of our operations for the years ended June 30, 2025, and 2024, respectively, indicated as a percentage of net sales. Certain columns may not add up due to rounding.

	2025			% of Revenues			2024			% of Revenues
Revenues	$	71,616,820					$	23,975,867
Cost of revenues		69,172,872			96.6	%		23,501,762			98.0	%
Gross profit		2,443,948			3.4	%		474,105			2.0	%
Selling expenses		1,980,224			2.8	%		3,279,627			13.7	%
Research and development		914,996			1.3	%		359,342			1.5	%
General and administrative expenses		4,703,443			6.6	%		8,960,523			37.4	%
Total operating expenses		7,598,663			10.6	%		12,599,492			52.6	%
Loss from operations		(5,154,715	)		(7.2	)%		(12,125,387	)		(50.6	)%
Non-operating income (expenses), net		75,185			0.1	%		(95,918	)		(0.4	)%
Loss before income taxes		(5,079,530	)		(7.1	)%		(12,221,305	)		(51.0	)%
Income tax expense		6,596			0.01	%		-				%
Loss before noncontrolling interest from continuing operation		(5,086,126	)		(7.1	)%		(12,221,305	)		(51.0	)%
Income before noncontrolling interest from discontinued operation		-			-	%		833,546			3.5	%
Less: loss attributable to noncontrolling interest from continuing operation		(432	)		(0.001	)%		(10,695	)		(0.04	)%
Net loss to the Company from continuing operation		(5,085,694	)		(7.1	)%		(12,210,610	)		(50.9	)%
Net income (loss) to the Company from discontinued operation		-			-	%		833,546			3.5	%
Net loss to the Company	$	(5,085,694	)		(7.1	)%		(11,377,064	)		(47.5	)%

Revenues

We had revenues of $71,616,820 and $23,975,867 for the years ended June 30, 2025, and 2024, respectively, which shows a $47,640,953 or 198.7% increase as compared with the same period of 2024. The increase in revenues was mainly due to the rapid increase of 5G AI multimodal digital business in China. For the year ended June 30, 2025, revenues mainly consisted of service fees from our 5G AI Multimodal digital. The Company’s 5G AI multimodal digital business is an industry leader, and the continued expansion of the Company’s customer base supports the continued significant improvement of the business.

From July 1, 2024 to June 30, 2025, the Company generated revenue of $71,616,820, including $70,682,408 from the 5G AI multimodal digital business, $584,788 from acoustic intelligence business, $325,908 from software sales and $23,716 from others. From July 1, 2023 to June 30, 2024, the Company generated revenue of $23,975,867, including $23,971,879 from the 5G AI multimodal digital business, $3,988 from Acoustic Intelligence Business..

This is inseparable from the Company’s research and development support and personnel support over the years, the Company’s upstream and downstream chain maintenance and experience accumulation and precipitation eventually formed a huge loyal customer base, but also closely related to the thriving vitality of the 5G market.

Through its own sales team, the Company vigorously promotes and publicizes its research and development results and technology display in 5G sales, actively participates in important seminars and business fairs around the country and deeply explores the target customers related to 5G news. Through painstaking efforts and keen business acumen, we have actually obtained a stable customer flow.

The Company’s top five customers for 5G AI multimodal digital business at this stage are Qingdao Ruizhi Yixing Information Technology Co., LTD., Shanghai Shixun Network Technology Co., LTD., Wuhan Xiaoming Technology Co., LTD., Xinyi Xinfanfa Information Technology Co., LTD., Nanjing Linghui Information Engineering Co., LTD. Through close business cooperation, the above customers have become stable and loyal partners of the Company and will work together in the future.

Since Q4 2023, the 5G Multimodal Communication business has demonstrated explosive growth, with Q2 2024 sales achieving a substantial improvement compared to the same period last year.

Cost of Revenues

For the year ended June 30, 2025, we recorded a cost of revenues of $69,172,872, compared to $23,501,762 for the same period in 2024, reflecting an increase of $45,671,110 or 194.3%. The cost of revenues for the year ended June 30, 2025, was primarily driven by 5G AI multimodal digital platform fees and cloud platform construction costs paid to suppliers. The increase in the cost of revenues was mainly due to the higher revenue generated from the 5G AI multimodal digital segment.

For the year ended June 30, 2025, the costs were as follows: $68.82 million for 5G AI multimodal digital, $316,415 for software sales, and $41,007 for the acoustic intelligence business. For the year ended June 30, 2024, the cost of 5G AI multimodal digital was $23.40 million, the cost of other services was $68,391, the cost of smart city was $30,928 and the cost of Acoustic Intelligence business was $2,345.

Gross Profit

Gross profit for the year ended June 30, 2025, was $2,443,948 compared to $474,105 for the year ended June 30, 2024, representing an increase of $1,969,843. This increase in gross profit was primarily driven by higher sales during the year ended June 30, 2025.

Gross margin was 3.4% for the year ended June 30, 2025, compared to 2.0% for the same period in 2024. The improvement in gross margin was primarily driven by the rapid growth of high-margin customized solution projects, along with the Company’s significant increase in market share and operating income. The growth in gross profit indicates that the Company has substantial development potential in its operations, including:

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Improved Shareholder Returns: An increase in gross profit typically leads to higher net profit, which boosts dividend distribution and stock value for shareholders. This, in turn, enhances shareholder confidence and attracts more investors.

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Consolidation of Market Position: A higher gross profit makes the Company more competitive, enabling it to attract more customers through price advantages, superior product quality, or service differentiation. This allows the Company to expand its market share and further strengthen its position in the market.

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Innovation and R&D Investment: The increase in gross profit provides the Company with more resources for innovation and R&D. This supports the development of new products, improvements to existing offerings, and the ability to adapt to changing market demands, all of which contribute to maintaining technological leadership and sustainable growth.

Improving Business Model Integration and Market Channels:

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Use Multiple Marketing Channels: By optimizing and integrating various marketing channels, the Company can reach a broader range of target customers, improve efficiency, meet customer needs, and reduce risks. This multi-channel strategy enhances the effectiveness of market coverage, positioning the Company for success in the competitive landscape.

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Enhance Product Brand: Strengthening brand image is key to building customer loyalty and recognition. The Company should focus on designing a unique brand identity, unifying its image, and leveraging word-of-mouth marketing through social media to increase brand visibility and authority. Continuous maintenance of the brand’s image will improve product strength and creativity.

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Improve Sales Personnel Effectiveness: Salespeople should be focused on achieving results, ensuring that every sales activity addresses customer pain points and drives conversions. A deep understanding of customer needs allows for tailored solutions, fostering trust and recognition. Salespeople should continuously enhance their communication and negotiation skills, undergo professional development, and adapt to market changes in order to provide the best possible customer service.

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Foster Innovative Product Development and Production: To maintain competitiveness and achieve sustainable development, the Company should increase investment in R&D and deepen its understanding of market needs. Building a culture of innovation, encouraging employee creativity, and collaborating with universities and research institutions will drive progress.

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By focusing on these areas, the Company can strengthen its position in the market, enhance its growth potential, and continue to deliver value to shareholders and customers alike.

Selling, General and Administrative, and Research and Development Expenses

Selling expenses for the year ended June 30, 2025 were $1,980,224, compared to $3,279,627 for the same period in 2024, reflecting a decrease of $1,299,403, or 39.6%. The decrease was mainly due to the decrease of advertising and marketing expenses by $1,431,505, which was partly offset by increased service fee by $37,037, increased payroll expense by $7,148, increased rent expense and property management fee by $43,255 and increased other selling expenses by $36,620.

Currently, we are focusing on expanding the Company’s leading acoustics high-tech technologies and products, while continuing to develop 5G-related applications. We incurred R&D expenses of $914,996 and $359,342 during the years ended June 30, 2025 and 2024, respectively, representing an increase of $555,654 or 154.6% as compared to the same period of 2024.

Research and development expenses for the year ended June 30, 2025, totaled $914,996. The Company’s research and development efforts have yielded several significant outcomes, including:

As one of the leading service providers in China’s 5G AI multimodal digital field, Datasea has developed a range of primary products and services targeting different customer needs. These include:

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5G AI multimodal new media marketing service platform

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5G AI multimodal Smart Agriculture (Digital Rural) Service Platform

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5G AI multimodal platform for small and micro-enterprise services

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5G AI multimodal traffic top-up platform These 5G AI multimodal digital business applications are designed for various industries in China, incorporating AI-driven payment system applications, big data analytics, and predictive models.

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Datasea has completed a revolutionary upgrade of its core 5G multimodal communication business with AI processing technology. This upgrade enables the AI creation and generation of diverse forms of information, including sound, text, images, and videos. Additionally, it supports efficient transmission and AI-powered digital human marketing functions. This capability empowers numerous industries and clients by enhancing brand recognition, acquiring customers, promoting markets, and boosting revenue.

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In the field of acoustic high-tech business, Datasea is one of the pioneers in introducing the concept of “acoustic effect” globally. The Company exports cutting-edge acoustic high-tech products and solutions worldwide. Combining basic acoustic theory with artificial intelligence, Datasea applies acoustic technology and the acoustic effect technical system to collect and process acoustic data. The Company utilizes non-audible mechanical wave effects to address various challenges. With world-leading acoustic equipment and algorithm models, Datasea’s acoustic technologies and products are widely used in sectors such as agriculture, industry, healthcare, and IoT technology. Notably, in the field of ultrasonic technology, the Company applies the effects of ultrasonic cavitation, thermal, and mechanical forces to meet diverse needs, including disinfection and sterilization, crop drying, safety monitoring, beauty and skincare, as well as medical health applications.

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Datasea’s Acoustics and 5G intelligent products and solutions serve over 52 million businesses and households across China (with more than 99% being SMEs) by providing digital and intelligent services.

Market Promotion Team

The Company has collaborated with three influential Chinese market promotion enterprises, which leverage extensive market resources to recommend new clients for the Company and facilitate the signing of contracts with these new clients.

General and administration expenses decreased $4,257,080, or 47.5% from $8,960,523 during the year ended June 30, 2024, to $4,703,443 during the year ended June 30, 2025. The decrease was mainly due to decreased stock compensation expense by $5,050,544, decreased payroll expense by $203,752, decreased rent expense and property management fee by 121,817, decreased auto expense by $17,156, which was partly offset by increased professional service fee by $820,159, and increased trademark registration fee by $316,229.

We are treating human capital as a key indicator to drive business growth and technical innovation, also pursuing better integrated channels with related industries.

Non-Operating Income (Expenses), net

Non-operating income was $75,185 for the year ended June 30, 2025, consisting mainly of interest income of $5,016 and other income of $70,169. Non-operating expenses were $95,918 for the year ended June 30, 2024, consisting mainly of interest income of $1,975 and other expenses of $97,893.

Net (Income) Loss from Discontinued Operation

We generated net income from discontinued operation of $833,546 (which was the gain on disposal of Zhangxun) for the year ended June 30, 2024.

Net Loss from continuing operation

We generated net loss from continuing operation of $5,085,694 and $12,210,610 for the years ended June 30, 2025, and 2024, respectively, a $7,124,916 or 58.4% decrease by comparing with the same period of 2024. The decrease in net loss was mainly due to increase in gross profit and decrease of operating expenses as explained above.

Accounts receivable

The operating revenue of the year ended June 30, 2025, was $71,616,820, the balance of accounts receivable was $1,374,180 at June 30, 2025. In the same period last year, the operating revenue was $23,975,867, and the accounts receivable balance was $718,546 at June 30, 2024. This quarter, the Company further segmented the market, planned eight regional headquarters, strengthened the collection control, and promoted the fund collection of contracted delivery projects, which led to the benign return of funds and had a far-reaching impact on the future.

Liquidity and Capital Resources

Historically, we have funded our operations primarily through the sale of our common stock and shareholder loans. To strengthen our ability to continue operating as a going concern, we are focusing on generating recurring revenues and sustainable operating cash flows.

We expect to generate revenue through expanding our current 5G AI multimodal digital business and acoustic intelligence business, along with continuous product innovation and development as well as various types of value-added services. To maintain sufficient working capital to support our operations and finance the future growth, we anticipate addressing any cash flow shortfall through financial support from our majority stockholders (who are also our board members or officers) and issuing securities public or private issuance of securities. However, such additional financial resources may not be available to us on favorable terms, or at all, if and when needed.

As of June 30, 2025, we had a working capital deficit of $704,978 or a current ratio of 0.81:1, and current assets in the amount of $2,922,272. As of June 30, 2024, our working capital deficit was $952,090, with a current ratio of 0.74:1, and current assets were $2,647,892.

We expect the Company to continue supporting its ongoing operations and financing through revenue growth and increased financing activities.

On October 3, 2024, Datasea entered into subscription agreements, with three non-U.S. investors, including Zhixin Liu, the Company’s Chairwoman of the Board, Chief Executive Officer, President and Secretary, and Fu Liu, a Director of the Company, pursuant to which the Company sold to investors an aggregate of 1,932,224 shares (of the Company’s Common Stock at the purchase price of approximately $4.0 million. The Company’s used net proceeds from the sale of these shares for investments in acoustic high-tech related products design upgrade, working capital for mass production and on-line sales, acquiring intellectual property, and working capital for the promotion and sales of AI multimodal digital business products.

However, there is no assurance that the Company will be able to secure additional working capital on commercially viable terms, or at all.

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, 2025 and 2024, respectively.

	2025			2024
Net cash used in operating activities	$	(2,374,680	)	$	(6,398,883	)
Net cash used in investing activities	$	(4,085,197	)	$	(167,957	)
Net cash provided by financing activities	$	6,945,370		$	6,839,577

Cash Flow from Operating Activities

Net cash used in operating activities was $2,374,680 during the year ended June 30, 2025, compared to net cash used in operating activities of $6,398,883 during the year ended June 30, 2024, a decrease in cash outflow of $4,024,203.

The decrease in cash outflow was mainly due to (1) decreased cash outflow on prepaid expenses and other current assets by $1.69 million, (2) increased payment received from customers for unearned revenue by $573,635, and (3) decreased net loss by $6.30 million, with non-cash adjustments to net loss including gain on disposal of subsidiary by $833,546, depreciation and amortization by $644,784, loan forgiveness by shareholder by $105,356, and decreased stock compensation expense by $4,856,484, despite we had increased cash outflow on accounts payable by $1.25 million.

Cash Flow from Investing Activities

Net cash used in investing activities totaled $4.09 million for the year ended June 30, 2025, which consisted of cash paid for the acquisition of office furniture and equipment of $8,129 and cash paid for acquisition of intangible assets by $4.08 million. Net cash used in investing activities totaled $167,957 for the year ended June 30, 2024, which consisted of cash paid for the acquisition of office furniture and equipment of $6,868, cash paid for acquisition of intangible assets by $161,054, and cash loss due to disposal of subsidiary of $35.

Cash Flow from Financing Activities

Net cash provided by financing activities was $6,945,370 during the year ended June 30, 2025, which was net proceeds from sale of our common stock through an equity financing of $5,939,133, and proceeds from loan payables of $2,374,350, which was partly offset by repayment of loan payables of $1,164,895, and repayment to related parties of $203,218. Net cash provided by financing activities was $6,839,577 during the year ended June 30, 2024, which was the net proceeds from due to related parties of $360,804 and net proceeds from sale of our common stock through an equity financing of $8,061,286, which was partly offset by repayment of loan payables of $1,582,513.

Loan from banks

On April 10, 2024, Guozhong Times entered a loan agreement with Bank of Beijing for the amount of RMB 500,000 ($70,158) with a term of 12 months with a preferential annual interest rate of 3.45% to be paid every 21^st of each month. For the years ended June 30, 2025 and 2024, the Company recorded and paid $1,954 and $396 interest expense for this loan. On April 9, 2025, the loan was paid in full.

On April 23, 2024, Guozhong Times entered a loan agreement with Beijing Rural Commercial Bank Economic and Technological Development Zone Branch for the amount of RMB 550,000 ($77,173) with a term of 12 months with the annual interest rate of 4.95% to be paid every 21^st of each month. For the years ended June 30, 2025 and 2024, the Company recorded and paid $3,808 and $626 interest expense for this loan. On April 23, 2025, the loan was paid in full.

On April 25, 2024, Shuhai Beijing entered a loan agreement with Industrial Bank Co., Ltd for the amount of RMB 2,000,000 ($280,631) with a term of 12 months with a preferential annual interest rate of 3.88% to be paid every 21st of each month. For the years ended June 30, 2025 and 2024, the Company recorded and paid $9,243 and $1,722 interest expense for this loan. On April 24, 2025, the loan was paid in full.

On May 28, 2024, Guozhong Times entered a loan agreement with China Everbright Bank for the amount of RMB 1,000,000 ($140,315) with a term of 12 months with the annual interest rate of 3.4% to be paid every 21^st of each month. For the years ended June 30, 2025 and 2024, the Company recorded and paid $3,909 and $318 interest expense for this loan. On May 27, 2025, the loan was paid in full.

On June 20, 2024, Shuhai Beijing entered a loan agreement with Bank of China for the amount of RMB 4,000,000 ($561,262) with a term of 12 months with a preferential annual interest rate of 2.30% to be paid every 21st of the third months of each quarter. On June 19, 2025, the loan was paid in full. For the year ended June 30, 2025, the Company recorded and paid $9,744 and $nil interest expense for these two credit lines.

On March 31, 2025, Shuhai Beijing entered a credit line agreement with Bank of China for the amount of RMB 6,000,000 ($835,864) with a term of 12 months from the first withdrawing date, the credit line has a preferential annual interest rate of 2.30% to be paid every 21st of the third months of each quarter. For the year ended June 30, 2025, the Company recorded and paid $7,558 interest expense for this loan. As of June 30, 2025, $838,155 was recorded as current liabilities. Liu Fu is the guarantor of this loan agreement.

On May 20, 2025, Guozhong Times entered a credit line agreement with Beijing Bank for the amount of RMB 3,000,000 ($419,076) with a term of 12 months, the credit line has a fixed annual interest rate of 3.00% to be paid every 21st of each month. For the year ended June 30, 2025, the Company recorded and paid $803 interest expense for this loan. As of June 30, 2025, $419,076 was recorded as current liabilities.

On May 21, 2025, Guozhong Times entered a loan agreement with Beijing Rural Commercial Bank Economic and Technological Development Zone Branch for the amount of RMB 1,000,000 ($139,692) with a term of 12 months with a fixed annual interest rate of 4.95% to be paid every 21st of each month. For the year ended June 30, 2025, the Company recorded and paid $576 interest expense for this loan. As of June 30, 2025, $139,692 was recorded as current liabilities. Liu Zhixin is the guarantor of this loan agreement.

On June 6, 2025, Shuhai Beijing entered a credit line agreement with Bank of China for the amount of RMB 1,500,000 ($210,500) with a term of 12 months from the first withdrawing date, the credit line has a preferential annual interest rate of 2.30% to be paid every 21st of the third months of each quarter. On June 11, 2025, Shuhai Beijing entered another credit line agreement with Bank of China for the amount of RMB 2,500,000 ($350,800) with a term of 12 months from the first withdrawing date, the credit line has a preferential annual interest rate of 2.30% to be paid every 21st of the third months of each quarter. As of June 30, 2025, $558,768 was recorded as current liabilities. Liu Fu is the guarantor of these two credit lines.

On June 6, 2025, Shuhai Beijing entered a credit line agreement with Beijing Bank for the amount of RMB 3,000,000 ($419,076) with a term of 12 months, the credit line has a fixed annual interest rate of 2.70% to be paid every 21st of each month. For the year ended June 30, 2025, the Company recorded and paid $314 interest expense for this loan. As of June 30, 2025, $419,076 was recorded as current liabilities. Liu Fu is the guarantor of this loan agreement.

Financial index analysis

Analysis of financial index

For the years ended June 30, 2025, and 2024, revenue was $71,616,820 and $23,975,867, respectively. Operating income increased by $47,640,953 over the same period of last year, an increase of 198.70% over the same period of last year, the main reason for the substantial growth is that the company locates currently in the 5G AI multi-model R&D technology which belongs to the industry leader, after long-term expansion of customer groups, the company has formed a stable customer group. This is closely related to the company’s technological research and development achievements over the years, personnel support, market promotion, the company’s upstream and downstream chain opening up, customer maintenance and technical experience accumulation, and eventually form a huge loyal customer base, but also closely related to the thriving vitality of the 5G AI multi-model business market.The company’s acoustic high-tech business segment has made significant progress and breakthroughs compared to the last fiscal year. Including the sales of acoustic high-tech products and the provision of acoustic high-tech solution services.

For the years ended June 30, 2025 and 2024, the Company’s gross profit was $2,443,948 and $ 474,105, respectively. Gross profit increased by $1,969,843 from the same period last year, an increase of 415.49% from the same period last year, and the current period increased market share and revenue significantly, so the gross margin increased simultaneously. The increase in gross profit margin means that the company’s development and operation has great potential ability. The reasons for the increase in gross profit are analyzed as follows:

The business structure has been optimized, and the proportion of high-margin businesses has increased. For instance, the revenue of high-margin acoustic intelligent products has seen a significant rise compared to the previous year. The execution of 5G AI multimodal technology solution contracts has also provided support for the increase in gross profit margin.

Effective cost control leads to product differentiation. Continuous research and development innovation can launch products with unique functions and advantages, thereby supporting higher pricing and increasing gross profit.

Due to market factors, the market share of 5G AI multimodal traffic business has expanded. The company has gained an advantage in market competition. With an expanded market share, it will have stronger pricing power and thereby increase gross profit.

For the years ending June 30, 2025 and June 30, 2024, the operating expenses were $7,598,663 and $12,599,492 respectively. The operating expenses decreased by $5,000,829, representing a 39.69% reduction compared to the same period last year.

Research and development investment has continued to increase, but overall operating expenses have shown a downward trend. The reduction in operating expenses reflects the overall effect of an enterprise in improving input-output efficiency and streamlining and compressing management expenses. This is not only an optimization of financial data, but also a concentrated manifestation of the enterprise’s outstanding operational level, profound management ability and forward-looking strategic vision. This move will drive enterprises into a new development pattern with stronger risk resistance, higher business agility and more aggressive market competitiveness, thus laying a solid foundation for sustained growth and long-term success.

As of June 30, 2025 and 2024, the Company’s cash balance was $$620,807 and $181,262, respectively, an increase of $ 439,545, or 242.49%, from the beginning of the period. The main reason is that the company successfully obtained financing during this period, absorbed social funds, expanded the scale of the company, enhanced the visibility of the company, enhanced the competitiveness of the company, provided strong financial support for the company’s business expansion and projects, and used for technology research and development, market expansion, corporate brand building, etc., laying a solid foundation for the sustainable development of the company.

The increased demand for products and services brought about by the company’s increased sales revenue and the expansion of financing channels brought about by a number of capital inflows, the company to optimize the asset structure, enhance the corporate capital capacity and liquidity.

For the years ending June 30, 2025 and June 30, 2024, the inventories were $206,610 and $153,583 respectively. The inventory increased by $53,027, representing a 34.53% increase compared to the same period last year.

The two major innovative projects of the company, “Hygiene-Busting Deodorizing Powder for the Bathroom” and “Sleeping Aid”, have successfully completed their research and development and have been officially transformed into mass-produced products - “Sound Wave Deodorizing and Cleaning Guardian SHTR-T01” and “Non-contact Sleep Aid XM-S01”. This increase in inventory is a strategic stock preparation carried out to seize the market opportunity, marking the establishment of a new growth channel for the company and laying a solid foundation for the strong growth of future performance.

For the years ending June 30, 2025 and June 30, 2024, the intangible assets were $3,495,984 and $546,001 respectively. The intangible assets increased by $2,949,983, representing a 540.29% increase compared to the same period last year.

Increasing the proportion of intangible assets indicates that the company is undergoing a strategic transformation towards a “light-asset, high-value” model. Through external acquisition, enterprises can quickly obtain mature technologies and resources, respond promptly to market changes, seize the initiative, and efficiently expand new fields, new markets or new product lines with such assets. While actively laying out external resources, the company still insists on internal research and development, maintaining a continuous and organic innovation capability, which lays a solid foundation for its long-term stable development.

As of June 30, 2025 and 2024, the capital reserve balance was $47,331,510 and $38,957,780, respectively, an increase of $ 8,373,730 from the beginning of the period or 21.49% from the beginning of the period, primarily due to an increase in the Company’s share issuance. The increase of capital reserve means that the enterprise has obtained additional capital, which can improve the overall capital strength of the enterprise, so that the enterprise has more funds at its disposal in the operation process. With the increase of capital reserve, the capital adequacy ratio of enterprises has been improved, thus enhancing the financial stability of enterprises and the ability to resist risks. In the face of market fluctuations and uncertainties, enterprises can be more confident to deal with challenges. An increase in capital reserves also increases net asset value per share and is a positive financial indicator for shareholders. This helps to enhance the investment confidence of shareholders and the market value of enterprises.

For the years ending June 30, 2025 and June 30, 2024, the outstanding bank loans were $2,374,767 and $1,170,298 respectively. The amount increased by $1,204,469.00, representing a 102.92% increase compared to the same period last year. The increase in the bank’s short-term loan directly reflects the company’s excellent credit standing, healthy financial performance, and stable debt repayment capacity. This move not only enhances our financial liquidity, providing a solid guarantee for seizing market opportunities, but also indicates that the bank holds a highly optimistic attitude towards our future development prospects, heralding a more stable bank-enterprise partnership.

For the years ending June 30, 2025 and June 30, 2024, the gross profit margins were 3.41% and 1.98% respectively. The overall gross profit margin of the company has significantly improved. This positive change is mainly attributed to the company’s proactive and successful product structure optimization strategy, which strategically increased the sales proportion of high-margin products. The core driving factors come from two innovative product lines: acoustic intelligent products and 5G-AI multi-modal technology solutions. This financial result not only proves the correctness of the company’s strategic decisions, but also clearly reflects that our product innovation has been recognized by the market, and the enterprise is steadily developing in the direction of high quality and high efficiency.

For the years ending June 30, 2025 and June 30, 2024, the company’s losses were $5,085,694 and $11,377,064 respectively. The company’s losses have significantly decreased, and its business situation has shown a stable and recovering trend. This indicates that the strategic adjustments, cost control, and business optimization measures implemented by the company have begun to yield results, and they have started to achieve substantial revenue generation. This positive change marks that the company’s operations have gradually returned to normal, laying a solid foundation for our anticipation of future profit prospects. The company’s future development is promising.

Management’s Expectations and Strategic Priorities for the Next Fiscal Year

Building on the significant achievements of fiscal year 2025, Datasea is at a pivotal stage of transformation. Going forward, the Company will continue to deepen its presence in acoustic high-tech and AI multimodal digitalization, leveraging ongoing innovation and market expansion to further strengthen its leadership position globally. The strategic priorities for the next fiscal year will focus on the following areas:

Increased R&D Investment and Technological Innovation

Datasea will continue to increase investment in R&D, particularly in the integration of acoustic technologies with AI. Breakthroughs in ultrasound, infrasound, and neuro-regulation technologies will be core drivers of future development. The Company aims to accelerate the deep integration of low-intensity focused ultrasound (tFUS) with AI algorithms, expanding its applications in healthcare, smart industry, and agriculture.

At the same time, the AI multimodal digital platform will further enhance cross-industry capabilities, particularly in data processing, speech recognition, image analysis, and intelligent prediction. Datasea plans to optimize existing algorithms while exploring emerging technologies such as deep learning and big data analytics to improve intelligence levels and provide highly customized solutions across industries.

Accelerated Market Expansion and Internationalization

The Company will continue to strengthen its penetration in the domestic market while accelerating international expansion. In overseas markets, particularly in the U.S. and Europe, Datasea will pursue partnerships with local enterprises and introduce localized products to increase market share. The Company has already achieved initial success in the U.S., where through Datasea Acoustics LLC and local partners.

In China, Datasea will further expand its presence in healthcare, beauty, and environmental protection through a dual approach combining e-commerce platforms and offline stores. Meanwhile, solution-based services will help consolidate its B2B client base.

M&A and Strategic Partnerships to Enhance the Industrial Chain

Datasea will actively pursue international M&A opportunities, particularly in the acoustics sector, to strengthen capabilities in core technology modules, sensor technologies, and patent portfolios. The Company also plans to acquire businesses with advantages in AI and big data processing to reinforce its multimodal platform’s algorithm and industry data resources. Furthermore, acquisitions in smart manufacturing and precision agriculture will support cross-industry integration of acoustic technologies.

To expand its technological and market advantages, the Company will deepen cooperation with global research institutions, accelerate industrialization of new technologies, and pursue strategic investments to secure both technological leadership and market growth.

Product Mix Optimization and Margin Enhancement

Datasea will continue to optimize its product mix by increasing the proportion of high-margin offerings, such as acoustic health devices and customized AI solutions. In fiscal year 2025, the Company achieved a notable improvement in gross margin, and further expansion is expected in fiscal year 2026 as integrated solutions scale and technological barriers strengthen.

At the same time, the Company is transitioning its acoustic high-tech business from stand-alone hardware sales to integrated “hardware + AI platform” solutions, providing end-to-end services from R&D to implementation. This approach is expected to expand market share and enhance profitability through differentiated technologies and value-added services.

Company Outlook and Market Trends

Global and Regional Market Trends

With rapid global advances in technology and the economy, particularly the acceleration of digital transformation and intelligent upgrades, the coming years are expected to see sustained leadership by acoustic and AI technologies. Widespread adoption of digital and intelligent solutions will drive innovation and upgrades across industries. Based on industry research and market feedback, the fusion of acoustics and AI will create opportunities in the following areas:

Healthcare: With rising demand for health management, particularly due to aging populations, minimally invasive and precision healthcare solutions will become mainstream. The non-invasive advantages of acoustic technologies, combined with AI-driven analytics, will drive adoption of acoustic medical devices such as tFUS in neuro-regulation, tumor treatment, and rehabilitation medicine.

Smart Manufacturing: As Industry 4.0 continues to reshape production processes, applications of acoustic devices and AI in equipment monitoring, fault prediction, and process optimization will expand. Datasea plans to further combine acoustics with ultrasonics and nanomaterials to meet demands for high-precision, high-efficiency manufacturing.

Smart Agriculture: With accelerated modernization, precision and green agriculture are becoming global trends. Acoustic technologies applied to pest detection, crop growth stimulation, and product preservation will offer more intelligent and environmentally friendly solutions for agriculture.

Consumer Upgrading: Rising consumer demand for health, environmental protection, and personalization will increase the share of acoustic products such as sleep aids and air purifiers in households. The dual approach of e-commerce and offline retail—especially the growth of live-streaming sales—will accelerate the expansion of consumer markets.

Global Market Integration: With growing global emphasis on digitalization and green technologies, international demand for intelligent products will expand. Datasea will continue to scale its overseas presence, particularly in Europe and Asia-Pacific, to support global market integration.

Industry Development and Technological Evolution

Over the next few years, acoustic and AI technologies will continue to merge, driving breakthrough developments across industries. Key directions include:

Cross-Disciplinary Integration: Deep fusion of acoustics and AI will drive innovation in healthcare, industry, and agriculture. Datasea will focus on R&D in areas such as neuro-regulation, brain-computer interfaces, and ultrasonic precision machining, promoting commercialization of new technologies.

Intelligent Upgrades: With advances in big data and cloud computing, acoustic and AI platforms will evolve toward intelligent management and services. Multimodal data fusion and real-time processing will enable full-process automation and industry-wide applications.

Green and Sustainable Technologies: Global emphasis on sustainability will drive acoustic applications in environmental governance and green agriculture. Datasea will continue to expand in areas such as ultrasonic sterilization, pesticide reduction, and energy savings, offering environmentally friendly solutions.

Key objectives for the coming years include:

Continuous Technological Innovation: Strengthen R&D to deepen integration of acoustics and AI, targeting breakthroughs in minimally invasive healthcare, smart manufacturing, and smart agriculture.

Global Expansion: Scale international markets in the next three to five years, focusing on North America, Europe, and Asia-Pacific. Growth will be supported through acquisitions, channel partnerships, and localized market strategies.

High-Quality Growth: Optimize product mix to increase the proportion of high-margin products, enhance profitability through customized solutions and high-value-added services, and complete the transition from “scale expansion” to high-quality growth.

Social Responsibility and Sustainability: Continue adhering to the principle of “innovation-driven, green development,” actively promoting environmentally friendly technologies and products, and contributing to global sustainability.

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.

Critical Accounting Policies and Estimates

Our discussion and analysis of our financial condition and results of operations are based upon our consolidated financial statements. These financial statements are prepared in accordance with U.S. GAAP, which requires us to make estimates and assumptions that affect the reported amounts of our assets and liabilities and revenue and expenses, to disclose contingent assets and liabilities on the date of the consolidated financial statements, and to disclose the reported amounts of revenue and expenses incurred during the financial reporting period. We continue to evaluate these estimates and assumptions that we believe to be reasonable under the circumstances. We rely on these evaluations as the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Since the use of estimates is an integral component of the financial reporting process, actual results could differ from those estimates. Some of our accounting policies require higher degrees of judgment than others in their application. We believe that the critical accounting policies as disclosed in this report reflect the more significant judgments and estimates used in preparation of our consolidated financial statements.

The following critical accounting policies rely upon assumptions and estimates and were used in the preparation of our consolidated financial statements:

Critical Accounting Estimates

The preparation of the Consolidated Financial Statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities as of the dates of the consolidated financial statements, as well as the reported amounts of revenues and expenses during the reporting period. These estimates and judgments include, but are not limited to, revenue recognition, sales return allowance, the allowance for bad debt, valuation allowance of deferred tax assets, income taxes, the useful lives of long-lived assets and assumptions used in assessing impairment of long-lived assets. Management bases its estimates on historical experience and on various other assumptions believed to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities. Although actual amounts may differ from the estimated amounts, such differences are not likely to be material.

Critical Accounting Policies

Accounts Receivable, Net

On May 1, 2023, the Company adopted Accounting Standards Update (“ASU”) 2016-13 Financial Instruments — Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments (Accounting Standards Codification (“ASC”) 326). This standard replaced the incurred loss methodology with an expected loss methodology that is referred to as the current expected credit loss (“CECL”) methodology. CECL requires an estimate of credit losses for the remaining estimated life of the financial asset using historical experience, current conditions, and reasonable and supportable forecasts and generally applies to financial assets measured at amortized cost, including loan receivables and held-to-maturity debt securities, and some off-balance sheet credit exposures such as unfunded commitments to extend credit. Financial assets measured at amortized cost will be presented at the net amount expected to be collected by using an allowance for credit losses. In addition, CECL made changes to the accounting for available-for-sale debt securities. One such change is to require credit losses to be presented as an allowance rather than as a write-down on available-for-sale debt securities if management does not intend to sell and does not believe that it is more likely than not they will be required to sell.

The Company adopted ASC 326 and all related subsequent amendments thereto effective July 1, 2023, using the modified retrospective approach for all financial assets measured at amortized cost and off-balance sheet credit exposures. The was no transition adjustment of the adoption of CECL.

Accounts receivable represent the amounts that the Company has an unconditional right to consideration, which are stated at the historical carrying amount net of allowance for doubtful accounts. The Company maintains allowances for doubtful accounts for estimated losses. The Company reviews the accounts receivable on a periodic basis and makes allowances when there is doubt as to the collectability of individual balances. In evaluating the collectability of individual receivable balances, the Company considers many factors, including historical losses, the age of the receivable balance, the customer’s historical payment patterns, its current credit-worthiness and financial condition, and current market conditions and economic trends. Accounts are written off against the allowance after all means of collection have been exhausted and the potential for recovery is considered remote. As of June 30, 2025 and 2024, the Company had a $0 bad debt allowance for credit losses.

Inventories, Net

Inventory is comprised principally of intelligent temperature measurement face recognition terminal and identity information recognition products, and is valued at the lower of cost or net realizable value. The value of inventory is determined using the first-in, first-out method. The Company periodically estimates an inventory allowance for estimated unmarketable inventories when necessary. Inventory amounts are reported net of such allowances. There were $152,907 and $53,650 allowances for slow-moving and obsolete inventory (mainly for Smart-Student Identification cards) as of June 30, 2025 and 2024, respectively.

Revenue Recognition

The Company follows Accounting Standards Codification Topic 606, Revenue from Contracts with Customers (ASC 606).

The core principle underlying FASB ASC 606 is that the Company will recognize revenue to represent the transfer of goods and services to customers in an amount that reflects the consideration to which the Company expects to be entitled in such exchange. This will require the Company to identify contractual performance obligations and determine whether revenue should be recognized at a point in time or over time, based on when control of goods and services transfers to a customer. The Company’s revenue streams are identified when possession of goods and services is transferred to a customer.

FASB ASC Topic 606 requires the use of a five-step model to recognize revenue from customer contracts. The five-step model requires the Company (i) identify the contract with the customer, (ii) identify the performance obligations in the contract, (iii) determine the transaction price, including variable consideration to the extent that it is probable that a significant future reversal will not occur, (iv) allocate the transaction price to the respective performance obligations in the contract, and (v) recognize revenue when (or as) the Company satisfies each performance obligation.

The Company derives its revenues from product sales, software sales, and 5G messaging service contracts with its customers, with revenues recognized upon delivery of services and products. Persuasive evidence of an arrangement is demonstrated via product sale contracts and professional service contracts, with performance obligations identified. The transaction price, such as product selling price, and the service price to the customer with corresponding performance obligations are fixed upon acceptance of the agreement. The Company recognizes revenue when it satisfies each performance obligation, the customer receives the products and passes the inspection and when professional service is rendered to the customer, collectability of payment is probable. These revenues are recognized at a point in time after each performance obligation is satisfied. Revenue is recognized net of returns and value-added tax charged to customers

Recently Issued Accounting Pronouncements

In October 2023, the FASB issued ASU No. 2023-06, “Disclosure Improvements — Codification Amendments in Response to the SEC’s Disclosure Update and Simplification Initiative.” The ASU amends the disclosure or presentation requirements related to various subtopics in the FASB ASC. The ASU was issued in response to the SEC’s August 2018 final amendments in Release No. 33-10532, Disclosure Update and Simplification that updated and simplified disclosure requirements that the SEC believed were duplicative, overlapping, or outdated. The guidance in ASU 2023-06 is intended to align GAAP requirements with those of the SEC and to facilitate the application of GAAP for all entities. The amendments introduced by ASU 2023-06 are effective if the SEC removes the related disclosure or presentation requirement from its existing regulations by June 30, 2027. If, by June 30, 2027, the SEC has not removed the applicable requirements from its existing regulations, the pending content of the associated amendment will be removed from the ASC and will not become effective for any entities. Early adoption is permitted. The adoption of ASU 2023-06 is not expected to have a material impact on the Company’s consolidated financial statements or related disclosures.

In December 2023, the FASB issued ASU 2023-09, Income Taxes (Topic 740): Improvements to Income Tax Disclosures (ASU 2023-09), which requires disclosure of incremental income tax information within the rate reconciliation and expanded disclosures of income taxes paid, among other disclosure requirements. ASU 2023-09 is effective for fiscal years beginning after December 15, 2024. Early adoption is permitted. The Company’s management does not believe the adoption of ASU 2023-09 will have a material impact on its financial statements and disclosures.

On November 4, 2024, the FASB issued an ASU No. 2024-03, Disaggregation of Income Statement Expenses (“ASU 2024 03”) to improve the disclosures about a public business entity’s expenses and address requests from investors for more detailed information about the types of expenses in commonly presented expense captions (such as cost of sales; selling, general, and administrative expenses; and research and development). The amendments in the ASU require disclosure in the notes to financial statements of specified information about certain costs and expenses. The amendments require that at each interim and annual reporting period an entity: 1.Disclose the amounts of (a) purchases of inventory, (b) employee compensation, (c) depreciation, (d) intangible asset amortization, and (e) depreciation, depletion, and amortization recognized as part of oil- and gas-producing activities (or other amounts of depletion expense) included in each relevant expense caption. A relevant expense caption is an expense caption presented on the face of the income statement within continuing operations that contains any of the expense categories listed in (a)–(e). 2. Include certain amounts that are already required to be disclosed under current generally accepted accounting principles in the same tabular disclosure as the other disaggregation requirements. 3. Disclose a qualitative description of the amounts remaining in relevant expense captions that are not separately disaggregated quantitatively. 4) Disclose the total amount of selling expenses and, in annual reporting periods, an entity’s definition of selling expenses. In January 2025, the FASB issued ASU No. 2025-01, Clarifying the Effective Date (“ASU 2025-01”). The amendments, as clarified by ASU 2025-01, are effective for annual reporting periods beginning after December 15, 2026, and interim reporting periods within annual reporting periods beginning after December 15, 2027. Early adoption is permitted. The amendments in this ASU should be applied either (1) prospectively to financial statements issued for reporting periods after the effective date of the ASU or (2) retrospectively to any or all prior periods presented in the financial statements. The Company is evaluating the impact that ASU 2024-03 will have on its consolidated financial statements and related disclosures.

In January 2025, the FASB issued ASU 2025-01 Income Statement-Reporting Comprehensive Income – Expense Disaggregation Disclosures (Subtopic 220-40). The FASB issued ASU 2024-03 on November 4, 2024-03 states that the amendments are effective for public business entities for annual reporting periods beginning after December 15, 2026, and interim reporting periods beginning after December 15, 2027. Following the issuance of ASU 2024-03, the FASB was asked to clarify the initial effective date for entities that do not have an annual reporting period that ends on December 31 (referred to as non-calendar year-end entities). Because of how the effective date guidance was written, a non-calendar year-end entity may have concluded that it would be required to initially adopt the disclosure requirements in ASU 2024-03 in an interim reporting period, rather than in annual reporting period. The FASB’s intent in the basis for conclusions of ASU 2024-03 is clear that all public business entities should initially adopt the disclosure requirements in the first annual reporting period beginning after December 15, 2026, and interim reporting periods within annual reporting periods beginning after December 15, 2027. The Company is currently evaluating the impact that the adoption of ASU 2025-01 will have on its consolidated financial statement presentation or disclosures.

The Company does not believe other recently issued but not yet effective accounting standards, if currently adopted, would have a material effect on the Company’s consolidated financial position, statements of comprehensive income and cash flows.

Item 7A. Quantitative and Qualitative Disclosures About Market Risk.

Not applicable.

Item 8. Financial Statements and Supplementary Data.

Our consolidated financial statements and notes thereto are set forth on pages F-1 through F-34 of this report.

Item 9. Changes In and Disagreements With Accountants on Accounting and Financial Disclosure.

Item 9A. Controls and Procedures.

Evaluation of Disclosure Controls and Procedures

Our management, with the participation of our Chief Executive Officer and Chief Financial Officer, our principal executive officer and acting principal financial officer, respectively, evaluated the effectiveness of our disclosure controls and procedures as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act as of the end of the period covered by this report. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed by us in the reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms, and that such information is accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosure.

Based on this evaluation, our Chief Executive Officer and Chief Financial Officer concluded that, as of June 30, 2025, our disclosure controls and procedures were not effective as of such date because of the material weaknesses identified in our internal control over financial reporting as described below.

Management’s Annual Report on Internal Control Over Financial Reporting

Our management, including our principal executive officer and principal financial officer, is collectively responsibility for establishing and maintaining adequate internal control over financial reporting for Datasea, and has assessed the effectiveness of our internal control over financial reporting as of June 30, 2025 In making this assessment, management used the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission (COSO) in Internal Control-Integrated Framework. Because of the weaknesses described in the following paragraphs, management believes that, as of June 30, 2025, our internal control over financial reporting was not effective due to the presence of the following weaknesses in internal control over financial reporting which are indicative of many small companies with a small staff: (i) the segregation of duties in several departments is not clear enough; (ii) the testing cycle for the effectiveness of internal control measures should be shortened and the frequency be increased; (iii) lack of accounting personal trained in the Generally Accepted Accounting Principle of United States.

Management’s Assessment of Internal Control over Financial Reporting

Our management, including our principal executive officer and principal financial officer, is responsible for establishing and maintaining adequate internal control over financial reporting of Datasea. Management has evaluated the effectiveness of the Company’s internal control over financial reporting as of June 2025. In making this assessment, management used the criteria set forth in the Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO).

Due to the deficiencies described below, management concluded that, as of June 2025, our internal control over financial reporting was not effective. These deficiencies are common in many smaller companies with fewer employees and are as follows:

Although an internal audit department was established, due to insufficient staffing, no internal audit activities were conducted (control deficiency);

Although the Company has established a reasonably complete internal control system to ensure effective execution of management decisions and smooth communication of information, the effectiveness of control implementation was not tracked in a timely manner; the cycle of testing internal control effectiveness should be shortened, and the frequency of testing increased;

The Company lacks accounting personnel trained in U.S. Generally Accepted Accounting Principles (U.S. GAAP).

I. Control Environment

(1) Governance Structure

The Company has established a four-tier governance structure: Shareholders’ Meeting – Board of Directors – Independent Directors – Executive Management. The Board has an Audit Committee, Compensation Committee, Strategy Committee, and Nominating Committee. The Board consists of five directors, three of whom are independent, ensuring independence in board decisions.

(2) Organizational Structure and Responsibilities

The Company’s organization is structured by business lines + functional support, with clearly defined responsibilities for the Finance Department, International Department, Risk Control Department, Operations Department, and Legal Department. The Risk Control Department leads the internal control system and risk assessment. Each business department designates one “Internal Control Liaison” to coordinate daily risk control matters.

(3) Internal Audit

Although the Company has established an internal audit department headed by an Internal Audit Director, as well as a legal team, rapid business expansion and staffing challenges prevented the commencement of internal audit activities during the reporting period.

(4) Human Resources Policy

The Company has implemented a Human Resources Management System covering recruitment, training, evaluation, and disciplinary measures. Personnel are strictly managed from probation to confirmation as full-time employees. After passing comprehensive assessments, employees are included in the formal staff pool and sign job responsibility and performance commitment letters. Monthly performance evaluations are conducted by HR, forming the basis of payroll. Under the Performance Evaluation Measures, employees are rewarded or penalized accordingly.

For key positions (e.g., CFO, Vice Presidents), the Company implements background checks + qualification review. During the reporting period, turnover for key positions was below 5%. Five internal control training sessions were conducted, covering middle and senior management and key staff.

(5) Corporate Culture

The Company adheres to the core values of “Compliance in Operations and Integrity First.” Management has signed Compliance Commitment Letters. The internal office system has an “Internal Control Column” for regular compliance case studies and policy interpretation.

Over its ten years of development, the Company has deeply embedded compliance and integrity into management and all staff. As of this reporting period, there were no violations or illegal acts by management. The Board of Directors consists of five directors, three of whom are independent, basically satisfying independence requirements. The Company has also established Commission Management Rules and HR Management Rules to clarify employment standards and reward/punishment mechanisms, incentivizing outstanding employees.

II. Risk Response

International Risk Control Strategy

Risk control begins with identification and assessment. Using SWOT analysis combined with a risk checklist, we assess political, economic, legal, cultural, and foreign exchange risks in international business. By collecting internal and external information, we identify risk sources and evaluate impact and likelihood using quantitative and qualitative tools. This forms the basis for differentiated risk control strategies aligned with our global footprint, including cross-border transaction monitoring, FX risk management, international legal compliance review, and anti-money laundering mechanisms. Data-driven models are reinforced for timely identification and mitigation of risks. A phased implementation with clear accountability and real-time monitoring ensures effectiveness and adaptability to changing global environments.

Market Positioning Control

The Marketing Department submits a Market Research Report every quarter for management review to adjust market positioning and product strategies. The report covers consumer preferences, competitor product strategies, and industry technology trends, strengthening market research to reduce competitive risks.

Product Iteration Control

The Company has established a Product Lifecycle Management Mechanism. Products with sales declines ≥10% for two consecutive years undergo iteration evaluation led jointly by R&D, Marketing, and Sales. Iteration plans are defined with development cycles, budgets, and target markets. New products must pass a pilot sales period of three months with ≥80% customer satisfaction before mass production, ensuring alignment with market demand.

Investment Decision Control

Major projects (M&A, restructuring, investments) require a Feasibility Study by a dedicated M&A team, Finance, and Legal. This includes market analysis, ROI assessment (≥8% to proceed), risk evaluation, and legal compliance review. Only after management approval can projects proceed.

○

M&A Tracking: Monthly project progress monitoring (funding, milestones). Finance assesses investment returns monthly. If delays exceed 20% or ROI falls below 50% of expectations, a project review is triggered. If no improvement follows corrective actions, the project will be terminated or divested to minimize losses.

Human Resources Risk Control

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Retention of Key Technical Staff: Competitive compensation and equity incentives, career development opportunities, training, and stronger corporate culture reduce turnover risk.

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Employee Skills Enhancement: Ongoing training and employee handbooks ensure skills remain aligned with business needs.

Control Activities. Control activities cover all business processes, including procurement, inventory, cash management, sales, and cost control. Controls ensure consistency among physical goods, invoices, and cash flows. Authorization, verification, review, performance evaluation, asset security, and segregation of duties are enforced, ensuring management directives are properly implemented.

The Company continues to improve its internal control system, covering budgeting, procurement, asset management, credit control, internal audits, and cost accounting. Comprehensive internal control policies have been prepared, including procurement controls, inventory management, and anti-fraud guidelines.

The Internal Control Department organizes all departments to participate in budget preparation and execution. Annual budgets cover funding, assets, projects, revenues, and costs, subject to strict approval by the Finance Department, CEO, and Board Chair. Monthly rolling budgets are applied, and execution results analyzed by the Financial Control Center. Each quarter, trial balance reviews are conducted with U.S. Certified Public Accountants (CPAs) after their review or audit.

The Company provides quarterly summaries of internal control and audit reports to the Audit Committee and focused on the

closer collaboration between internal and external legal teams that, the management believers, proactively reduces risk.

IV. Monitoring and Supervision

According to COSO’s Internal Control—Integrated Framework, monitoring is the ongoing evaluation of control effectiveness, timely identification and correction of deficiencies, and ensuring controls adapt to organizational goals and changing environments.

During the reporting period, the Company established coordination between the Internal Control Department and Legal Department. Mechanisms included interviews with department heads, addressing identified risk areas, and ensuring corrective measures. However, due to limited staffing, continuous monitoring of daily operations was not performed, preventing timely identification and correction of deficiencies.

V. Remediation Measures

Independent Internal Audit: Conduct at least one internal audit-led independent evaluation annually, covering high-risk areas and follow-up on prior issues.

Tracking Register: Maintain a log of issues, corrective measures, responsible persons, timelines, and validation results, with periodic reporting to the Audit Committee.

Senior Management Involvement: Establish quarterly Internal Control Remediation Meetings led by the Chairman or CEO to review progress, reinforcing top-level oversight.

Enhancing Internal Audit Capacity: Increase internal audit staffing and provide specialized training (COSO framework, data analytics, fraud detection) to strengthen supervision.

Link to Performance Evaluation: Incorporate “Internal Control Monitoring Results” into performance evaluations of departments and employees, making compliance execution a key performance indicator.

Changes in Internal Control over Financial Reporting

There were no changes in our internal control over financial reporting during the year ended June 30, 2025, that have materially affected or are reasonably likely to materially affect our internal control over financial reporting.

Item 9B. Other Information.

None.

Item 9C. Disclosure Regarding Foreign Jurisdictions that Prevent Inspections.

Not applicable.

PART III

Item 10. Directors, Executive Officers and Corporate Governance.

The following tables set forth the respective positions and ages of the directors and executive officer of the Company as of the date of this report. Each director of the Company has been elected to hold office until the next annual meeting of shareholders and thereafter until his successor is elected and has qualified.

Name	Age	Position
Zhixin Liu	39	Chairman of the Board, CEO, President & Secretary
Mingzhou Sun	56	Chief Financial Officer
Fu Liu	60	Director
Yijin Chen	56	Independent Director
Stephen (Chun Kwok) Wong	43	Independent Director
Yan Yang	55	Independent Director

Biographical Information

Ms. Zhixin Liu. Ms. Liu has served as our director, Chairman of the Board, Chief Executive Officer since 2015. Prior to founding Shuhai Beijing in February of 2015, from February 2012 to January 2015, Ms. Liu also worked as the General Manager of Harbin Jinfenglvyuan Bio-Technology Co., Ltd. where she was responsible for implementing the Company’s annual work plan, financial budget report, profit distribution, utilization plan, conducting the daily management of the Company, and signing agreements on behalf of the Company. From January 2011 to February 2012, Ms. Liu worked as a board director in Beijing Jinyajianguo Refrigeration Plants Manufacturing Co., Ltd., a private company. Ms. Liu had business administration courses at China Agricultural University. Ms. Liu obtained MBA of Universidad Rovira i Virgili Instituto de Gestión Empresarial y Management (IGEMA) in 2023. As our President and Chief Executive Officer, Ms. Liu brings to the Board an intimate understanding of the industry and our operations. We believe Ms. Liu’s experience qualifies her to serve on our Board of Directors.

Ms. Mingzhou Sun. Ms. Sun was appointed as our Chief Financial Officer of the Company on August 1, 2021. She signed a Rehire after retirement agreement with the company on April 1 2024, and term of the agreement is three years, from April 1 2024 to March 31 2027. She has over 20 years of experience in the accounting and auditing industry. Since September 2019, Ms. Sun has been serving as the accounting director of the Company, being responsible for preparing the Company’s accounting documents in connection with the Company’s registration statements and periodic reports filed with the U.S. Securities and Exchange Commission in the past. From March 2018 to September 2019, Ms. Sun was a partner at Beijing Mingye Accounting Firm, where she helped her clients establish the internal financial control system, analyze national tax policies and issue various tax related reports. From July 2012 to January 2018, Ms. Sun served as Vice President and Chief Financial Officer at Sun Seven Star Investment Group. From March 2008 to June 2011, she served as Chief Financial Officer at Golden State Holding Group (USA). Prior to that, Ms. Sun also served as the financial director and manager at various companies. Ms. Sun is a registered CPA and Certified Public Valuer in China. She also holds a level 2 certificate of the Association of Chartered Certified Accountants. Ms. Sun received her Bachelor degree in Accounting from Renmin University of China in 1991.

Mr. Fu Liu. Mr. Liu has served as a member of our Board of Directors and our Corporate Secretary since 2015. Mr. Liu has served as the Chairman of the Board of Directors of Shuhai Beijing since February 2015. Prior to his service on the board of Shuhai Beijing, from February 2012 to January 2015, Mr. Liu served as the Chairman of Board of Directors of Harbin Jinfenglvyuan Bio-Technology Co. Ltd. From January 2011 to January 2015, he served as a director of Beijing Jinyajianguo Refrigeration Equipment Co., Ltd. Prior to that, Mr. Liu was the director of Kedong County Rural Economic Management Office in Qiqihar City in Heilongjiang Province from January 2005 to January 2012. Mr. Liu studied accounting at Heilongjiang Institute of Finance and Economics in June 1987 and completed legal studies at the CPC Party School Heilongjiang Provincial Committee in 1989. Among other qualifications, Mr. Liu brings to the Board extensive knowledge of our business, relevant executive officer experience as well as governmental and political expertise. We believe Mr. Liu’s experience qualifies him to serve on our Board of Directors.

Ms. Yijin Chen. Ms. Chen has served as a member of our Board of Directors since May 2025. She has over 20 years of professional experience in investment banking, particularly in equity financing and mergers and acquisitions of listed companies. From 2008 to 2023, Ms. Chen held several senior management positions at Great Wall Securities Co., Ltd., including Head of Internal Review, Deputy General Manager of Quality Control in the Investment Banking Division, and Deputy General Manager of the Investment Banking Business Management Department. From 2006 to 2007, she worked at Guosheng Securities Co., Ltd. as Manager of the Quality Control and Marketing Department in the Investment Banking Division. From 1996 to 2006, she served at China Sci-Tech Securities Co., Ltd. in the Investment Banking Division, where she held positions including Project Manager, Assistant General Manager, and Deputy General Manager. Earlier, from 1991 to 1996, she worked in the Planning and Finance Department at Shenyang Photosensitive Chemical Research Institute. Ms. Chen earned her Bachelor’s degree in Industrial Engineering Management from Shenyang University of Technology in 1991, and subsequently pursued advanced studies in legal foundations and accounting at China University of Political Science and Law and Renmin University of China. We believe that Ms. Chen’s extensive professional experience qualifies her to serve as our director. We also believe that her accumulated expertise in the capital markets will provide valuable contributions to the Board and its committees.

Mr. Stephen (Chun Kwok) Wong. Mr. Wong has served as a member of our Board of Directors since December 21, 2018. Mr. Wong currently serves as the chief executive officer of Splendid Holding Limited, an interior design company incorporated in Hong Kong. Mr. Wong served as the group financial controller for Fitness World (Group) Limited and MJ Medical Beauty Limited from February 2017 to August 2018. He was a senior associate at PricewaterhouseCoopers Limited (PwC) from January 2016 to January 2017. He worked at Moore Stephens Associates Limited (Hong Kong) as a senior associate from October 2010 to December 2015. He was a supervisor at KLC Kennic Lui & Co. from July 2009 to August 2010 and an auditor at KLC CPA Limited from October 2005 to June 2008. Mr. Wong studied accounting and received his Bachelor of Commerce degree in Accounting from Macquarie University in Sydney, Australia in 2005. We believe Mr. Wong’s experience qualifies him to serve on our Board of Directors.

Ms. Yan Yang. Ms. Yang has served as Secretary General of the Dragon Merchants International Alliance, since 2018. From 2005 to 2018, she served as general manager of Beijing Mingsheng Kaitai Books Co., Ltd. From 2003 to 2005, she served as the deputy general manager of China Sunrise Enterprise Group Import and export company. From 1998 to 2003, she served as the general manager of the Distribution Department of Modern Book Distribution company. Over the course of Ms. Yang’s career, she has abundant experience specially in various business sectors, such as marketing, import and export, which we believe would be a valuable contribution to the Board and its committees.

Family Relationships

Except for Mr. Liu, our director, who is the father of Ms. Liu, our Chairman, Chief Executive Officer, there are no family relationships among any of our directors or executive officers

The Board and Committees

Our board of directors consists of five directors. When considering whether directors have the experience, qualifications, attributes or skills, taken as a whole, to enable our board of directors to satisfy its oversight responsibilities effectively in light of our business and structure, the board of directors focuses primarily on each person’s background and experience as reflected in the information discussed in each of the directors’ individual biographies set forth above. We believe that our directors provide an appropriate mix of experience and skills relevant to the size and nature of our business.

Our board of directors directs the management of our business and affairs, as provided by Nevada law, and conducts its business through meetings of the board of directors and standing committees. We have established three committees under the board of directors: an Audit Committee, Compensation Committee, and Nomination and Corporate Governance Committee. We have adopted a charter for each of the three committees.

100

Our Audit Committee, Compensation Committee, and Nomination and Corporate Governance Committee compliy with the listing requirements of the Nasdaq Marketplace Rules. At least one member of the Audit Committee is an “audit committee financial expert,” as that term is defined in Item 407(d)(5)(ii) of Regulation S-K, and each member is “independent” as that term is defined in Rule 5605(a) of the Nasdaq Marketplace Rules. Our board has determined that Stephen Wong meets those requirements.

Audit Committee

Stephen Wong, Yijin Chen and Yan Yang are the members of our Audit Committee and Stephen Wong serves as the chairperson. All members of our Audit Committee meet the independence standards promulgated by the SEC and by NASDAQ as such standards apply specifically to members of audit committees.

We adopted and approved a charter for the Audit Committee, which can be accessed at http://www.dataseainc.com/. In accordance with our Audit Committee Charter, our Audit Committee shall perform several functions, including:

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evaluate the independence and performance of, and assesses the qualifications of, our independent auditor, and engages such independent auditor;

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approve the plan and fees for the annual audit, quarterly reviews, tax and other audit-related services, and approves in advance any non-audit service to be provided by the independent auditor;

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monitor the independence of the independent auditor and the rotation of partners of the independent auditor on our engagement team as required by law;

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review the financial statements to be included in our Annual Report on Form 10-K and Quarterly Reports on Form 10-Q and reviews with management and the independent auditors the results of the annual audit and reviews of our quarterly financial statements;

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oversee all aspects our systems of internal accounting control and corporate governance functions on behalf of the board;

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review and approves in advance any proposed related-party transactions and report to the full Board of Directors on any approved transactions; and

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provide oversight assistance in connection with legal, ethical and risk management compliance programs established by management and the Board of Directors, including Sarbanes-Oxley Act implementation, and makes recommendations to the Board of Directors regarding corporate governance issues and policy decisions.

It is determined that Stephen Wong possesses accounting or related financial management experience that qualifies him as an “audit committee financial expert” as defined by the rules and regulations of the SEC.

Compensation Committee

Yan Yang, Stephen Wong and Yijin Chen are the members of our Compensation Committee and Yan Yang is the chairperson. All members of our Compensation Committee are qualified as independent under the current definition promulgated by NASDAQ. The board adopted and approved a charter for the Compensation Committee. In accordance with the Compensation Committee’s Charter, the Compensation Committee shall be responsible for overseeing and making recommendations to the Board of Directors regarding the salaries and other compensation of our executive officers and general employees and providing assistance and recommendations with respect to our compensation policies and practices. The Compensation Committee’s Charter can be accessed at http://www.dataseainc.com/.

101

Nomination and Corporate Governance Committee

Yijin Chen, Yan Yang and Stephen Wong are the members of our Nomination and Corporate Governance Committee and Yijin Chen serves as the chairperson. All members of our Nomination and Corporate Governance Committee are qualified as independent under the current definition promulgated by NASDAQ. The board adopted and approved a charter for the Nomination and Corporate Governance Committee prior to consummation of our initial listing on Nasdaq, which can be accessed at http://www.dataseainc.com/. In accordance with the Nomination and Corporate Governance Committee’s Charter, the Nomination and Corporate Governance Committee shall be responsible to identity and propose new potential director nominees to the Board of Directors for consideration and review our corporate governance policies.

Independence of the Board

As required under the Nasdaq Stock Market listing standards, a majority of the members of a listed company’s Board of Directors must qualify as “independent,” as affirmatively determined by the Board of Directors. Our Board has undertaken a review of the independence of each director. Based on information provided by each director concerning her or his background, employment, and affiliations, our board has determined that Stephen Wong, Yijin Chen, and Yang Yan do not have relationships that would interfere with the exercise of independent judgment in carrying out the responsibilities of a director and that each of these directors is “independent” as that term is defined under the listing requirements and rules of Nasdaq.

Involvement in Certain Legal Proceedings

No director, person nominated to become a director, executive officer, promoter or control person of the Company has, during the last ten years: (i) been convicted in or is currently subject to a pending criminal proceeding (excluding traffic violations and other minor offenses); (ii) been a party to a civil proceeding of a judicial or administrative body of competent jurisdiction and as a result of such proceeding was or is subject to a judgment, decree or final order enjoining future violations of, or prohibiting or mandating activities subject to any Federal or state securities or banking or commodities laws including, without limitation, in any way limiting involvement in any business activity, or finding any violation with respect to such law; (iii) has any bankruptcy petition been filed by or against the business of which such person was an executive officer or a general partner, whether at the time of the bankruptcy or for the two years prior thereto; (iv) been the subject of, or a party to, any Federal or State judicial or administrative order, judgment, decree, or finding, not subsequently reversed, suspended or vacated, relating to an alleged violation of: (a) Any Federal or State securities or commodities law or regulation; or (b) any law or regulation respecting financial institutions or insurance companies including, but not limited to, a temporary or permanent injunction, order of disgorgement or restitution, civil money penalty or temporary or permanent cease-and-desist order, or removal or prohibition order; or (c) any law or regulation prohibiting mail or wire fraud or fraud in connection with any business entity; nor (v) been the subject of, or a party to, any sanction or order, not subsequently reversed, suspended or vacated, of any self-regulatory organization (as defined in Section 3(a)(26) of the Exchange Act (15 U.S.C. 78c(a)(26))), any registered entity (as defined in Section 1(a)(29) of the Commodity Exchange Act (7 U.S.C. 1(a)(29))), or any equivalent exchange, association, entity or organization that has disciplinary authority over its members or persons associated with a member (covering stock, commodities or derivatives exchanges, or other SROs).

Code of Conduct and Ethics

We have adopted a written code of ethics that applies to all of our directors, officers and employees in accordance with Nasdaq listing rules and the SEC. A copy of the code is posted on our website, www.dataseainc.com and will be provided without charge upon request to us at our principal executive office. In addition, we post on our website all disclosures that are required by law or Nasdaq listing standards concerning any amendments to, or waivers from, any provision of the code.

Insider Trading Policy

Our insider trading policy, which is filed as exhibit to this Annual Report governs the purchase, sale, trade, and other dispositions of our securities by our officers, directors, related parties, and employees, to promote compliance with the insider trading laws, rules and regulations, and applicable Nasdaq listing standards.

Delinquent Section 16(a) Reports

Section 16(a) of the Securities Exchange Act of 1934 requires our officers, directors and persons who own more than ten percent of a registered class of our equity securities to file reports of ownership and changes in ownership with the Securities and Exchange Commission. Officers, directors and ten percent shareholders (“Reporting Persons”) are required by regulation to furnish us with copies of all Section 16(a) forms they file. Based solely upon a review of copies of such reports and representations received from the Reporting Persons, we believe that during the year ended June 30, 2025, all Reporting Persons filed all such reports timely, except for Zhixin Liu and Fu Liu who filed their Forms 4 late.

Compensation Committee Interlocks and Insider Participation

None of our executive officers currently or in the past year served as a member of the compensation committee of our Board.

Material Changes to the Procedures by which Security Holders May Recommend Nominees to the Board

There have been no material changes to the procedures by which our shareholders may recommend nominees to the Board.

102

Item 11. Executive Compensation.

Clawback Policy

Following the SEC’s approval of Nasdaq’s proposed clawback listing standards, under Rule 10D-1, which directed companies to adopt and comply with a written clawback policy, to disclose and file the policy as an exhibit to its annual report, we adopted a clawback policy on November 30, 2023.

Summary Compensation Table

The following table provides disclosure concerning all compensation paid for services to the executive officers of the Company in all capacities for our fiscal years ended June 30, 2025 and 2024, respectively, for (i) each person serving as our principal executive officer (“PEO”), (ii) each person serving as our principal financial officer (“PFO”) and (iii) our two most highly compensated executive officers other than our PEO and PFO whose total compensation exceeded $100,000 (collectively with the PEO, referred to as the “named executive officers” in this Executive Compensation section).

Name and Principal	Fiscal		Salary		Bonus		Stock Awards		Option Awards		Other Compensation		Total
Position	Year		($)		($)		($)		($)		($)		($)
Ms. Zhixin Liu (1)		2025	$	41,900				653,996.00					$	695,896.00
Chairman, CEO		2024	$	42,061		—		944,738.50		—		—	$	986,799.50
Mingzhou Sun		2025	$	33,324									$	33,324
CFO		2024	$	33,452									$	33,452

(1)	Starting from January 1, 2023, Ms.Liu’s monthly salary was adjusted to RMB100,000 (about $14,406).

Ms. Zhixin Liu receives fifteen thousand (15,000) shares of the Company’s common stock each month, starting from February 1, 2024, payable quarterly with the aggregate number of shares for each quarter being issuable on the first day of the quarter at a per share price of the closing price of the day prior to the issuance and being vested immediately with the undertaking from the grantee not to divest in the six (6) months after the issuance.

Option Grants in Last Fiscal Year

There were no options granted to our executive officers in the fiscal year ended June 30, 2025. The Company has no material policies and practices on the timing of awards of options in relation to the disclosure of material nonpublic information by the Company.

Employment Agreements

The Company does not have any written employment agreements with its officers other than the agreement described below.

Employment Contract – Zhixin Liu

We entered into an employment agreement with Ms. Zhixin Liu on February 11, 2021, pursuant to which she serves as our Chief Executive Officer until February 10, 2024, After the expiration of this agreement, it has been renewed until February 10, 2027 and receives a base monthly salary of RMB 20,000 (approximately $3,011), Ms. Liu is also eligible to receive bonuses, transport allowances and housing allowances. From January 1, 2023, the basic monthly salary of RMB 25,000 (approximately $3,601). Ms Liu is also eligible for bonuses, transport allowances and housing subsidies. Ms. Liu’s for annual compensation of RMB 1,200,000 (approximately $172,873) The employment agreement and its amendment may be terminated in accordance with the provisions of PRC Labor Law. The employment agreement also contains other customary terms under PRC law.

According to resolution of compensation committee dated on June 12 2024, the Company grants to Ms. Zhixin Liu fifteen thousand (15,000) shares of the Company’s common stock each month, starting from February 1, 2024, payable quarterly with the aggregate number of shares for each quarter being issuable on the first day of the quarter at a per share price of the closing price of the day prior to the issuance and being vested immediately with the undertaking from the grantee not to divest in the six (6) months after the issuance.

103

Employment Contract – Mingzhou Sun

In connection with Ms. Sun’s appointment, on August 1, 2021, the Company and Ms. Sun entered into an employment agreement (the “Employment Agreement”), pursuant to which Ms. Sun shall receive a monthly compensation of RMB20,000 (approximately $3,091). The term of the Employment Agreement is three years, with the first six months to be the probationary period. Ms. Sun’s employment can be terminated upon both parties mutual consent.

On April 1, 2024, Ms. Sun signed a new employment agreement with the Company that has the term of three years, from April 1 2024 to March 31 2027.

Compensation Clawback Disclosures

None.

Director Compensation

The following table shows for the fiscal year ended June 30, 2025, certain information with respect to the compensation of our directors.

Fiscal Year 2025 Director Compensation Table

Name	Fees Earned or Paid in Cash ($)		Stock Awards ($)		Option Awards ($)		Total ($)
Zhixin Liu*		—		—		—		—
Fu Liu		33,520		486,096		—		519,616
Yijin Chen		1,400		2,600				4,000
Stephen (Chun Kwok) Wong		8,380		—		—		8,380
YanYang		—		—		—		—

*	Ms. Liu, our Chief Executive Officer, is also the chair of our Board but does not receive any additional compensation for her service as a director. See the section titled “Executive Compensation” for more information regarding the compensation of Ms. Liu.

Mr. Liu Fu, our Director and CO-Founder, is also the chairman of Shuhai Beijing, $33,520 is the total salary in cash which is received for his work and position of year 2025. The annual package is RMB 1,200,000 ($167,600). According to the agreement between Fu Liu and Datasea Inc., the Company grants to Mr. Liu ten thousand (10,000) shares of the Company’s common stock each month, starting from July 1, 2021, payable quarterly with the aggregate number of shares for each quarter being issuable on the first day of the next quarter at a per share price of the closing price of the day prior to the issuance and being vested immediately with the undertaking from the grantee not to divest in the six (6) months after the issuance.

On June 12, 2024 the Compensation Committee adopted resolutions, pursuant to which the Company grants Mr. Fu Liu10,000 shares of the Company’s common stock each month, starting from February 1, 2024, payable quarterly with the aggregate number of shares for each quarter being issuable on the first day of the quarter at a per share price of the closing price of the day prior to the issuance and being vested immediately with the undertaking from the grantee not to divest in the six (6) months after the issuance.

104

Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters.

The following table sets forth information regarding the beneficial ownership of our common stock as of September 24, 2025 by our officers, directors and 5% or greater beneficial owners of common stock.

The beneficial ownership of our Common Stock is determined in accordance with the rules of the SEC. Under these rules, a person is deemed to be a beneficial owner of a security if that person directly or indirectly has or shares voting power, which includes the power to vote or to direct the voting of the security, or investment power, which includes the power to dispose of or to direct the disposition of the security. The person is also deemed to be a beneficial owner of any security of which that person has a right to acquire beneficial ownership within 60 days. Under the SEC rules, more than one person may be deemed to be a beneficial owner of the same securities, and a person may be deemed to be a beneficial owner of securities as to which he or she may not have any pecuniary interest.

Unless otherwise indicated, the person identified in this table has sole voting and investment power with respect to all shares shown as beneficially owned by him, subject to applicable community property laws.

Name and Address of Beneficial Owner (2)	Number of Common Stock Beneficially Owned		Percent of Class Beneficially Owned (1)

Directors and Executive Officers:
Zhixin Liu (4)		2,229,816		27.01	%
Fu Liu (3)		2,222,634		26.92	%
Mingzhou Sun		1		0.00	%
Yijin Chen		2,010		0.02	%
Stephen (Chun Kwok) Wong		667		0.01	%
Yan Yang		667		0.01	%

All officers and directors as a group (six persons)		4,455,795		53.97	%

(1)	The percentage of shares of common stock beneficially owned is based on 8,256,816 shares of common stock outstanding as of September 24, 2025.

(2)	Unless otherwise indicated, the address of our directors, officers and other shareholders disclosed above is Room 302-5，Building C, Gemdale Viseen International Center, No.5 Shengfang Road, Daxing District, Beijing, People’s Republic of China, 102628.

105

Item 13. Certain Relationships and Related Transactions, and Director Independence.

In May 2023, our CEO, Liu Zhixin, signed an office lease agreement with Heilongjiang Xunrui Technology Co., Ltd., a subsidiary of the VIE, for a period of one year from May 1, 2023 to April 30, 2024, at an annual rent of RMB 282,852.00 (USD 40,756). Then the agreement was renewed from May 1, 2024 to April 30, 2025, with the annual rental of RMB 282,852.00 (USD 39,688.50).

In July 2023, our CEO, Liu Zhixin, entered into two car rental agreements with Tianjin Information Sea Information Technology Co., LTD., one of which was for 12 months from July 1, 2023 to June 30, 2024, with a monthly rental of RMB 18,000 (USD 2,593) and an annual rental of RMB 216,000 (USD 31,123). The Car Rental Agreement was renewed on July 1, 2024 for the period from July 1, 2024 to June 30, 2025, with a monthly rent of RMB18,000 ($2,787) and a total amount of RMB216,000 ($33,451).The other agreement is for 12 months from July 01, 2023 to June 30, 2024, with a monthly rent of RMB20,000 (US $2,881) and an annual rent of RMB240,000 ($34,582).This Car Rental Agreement was also renewed on July 1, 2024 for the period from July 1, 2024 to June 30, 2025, with a monthly rent of RMB20,000 ($2,806.31) and a total amount of RMB240,000 ($33,675.70).

On December 10, 2024, the company and CEO, Liu Zhixin, signed a supplementary agreement for vehicle rental. Both parties decided to waive the rental fees totaling RMB 1,584,000 ($221,232.14) which was stipulated in the 8 vehicle rental agreements signed between January 1, 2020 and July 1, 2024.

On September 10, 2024, , the Company and CEO, Liu Zhixin, signed a communication letter regarding rent reduction, adjusting the rent from May 1, 2022, to April 30, 2025, to RMB 50,000 per year. Subsequently, a total of RMB 150,000 for this rent was paid on June 24, 2025.

In April 30,2025, our CEO, Liu Zhixin, signed an office lease agreement with Heilongjiang Xunrui Technology Co., Ltd. for a period of one year from May 1, 2025 to April 30, 2026, at an annual rent of RMB 50,000.00 (USD 6,983.34).

As of June 30, 2025, the Company had balances due to related parties of $1,163.89 for lease house fee.

Item 14. Principal Accountant Fees and Services.

The following table sets forth fees billed to us by our previous independent registered public accounting firm, Kreit & Chiu CPA LLP (formerly Paris Kreit & Chiu CPA’s LLC) for the fiscal years ended June 30, 2025 and 2024, respectively, for: (i) services rendered for the audit of our annual financial statements and the review of our quarterly financial statements; (ii) services by our independent registered public accounting firms that are reasonably related to the performance of the audit or review of our financial statements and that are not reported as audit fees; (iii) services rendered in connection with tax compliance, tax advice and tax planning; and (iv) all other fees for services rendered.

	2025		2024
Audit Fees	$	179,875	$	151,200
Audit-Related Fees		—		—
Tax Fees		—		—
All Other Fees		—		—
TOTAL	$	179,875	$	151,200

Pre-Approval Policies and Procedures

Our Board reviewed and approved all audit and non-audit services provided by our independent registered public accounting firms and has determined that their provision of such services to us during fiscal years ended June 30, 2024, and 2025 did not impair their independence.

106

PART IV

Item 15. Exhibits, Financial Statement Schedules.

(1) Financial Statements

Financial Statements and Report of Independent Registered Public Accounting Firms are set forth on pages F-1 through F-34 of this report.

(2) Financial Statement Schedules

Schedules are omitted because the required information is not present or is not present in amounts sufficient to require submission of the schedule or because the information required is given in the consolidated financial statements or the notes thereto.

(3) Exhibits

Exhibit		Description
2.1		Share Exchange Agreement, dated October 29, 2015, by and among Datasea Inc., Shuhai Information Skill (HK) Limited, Zhixin Liu and Fu Liu, incorporated herein by reference to Exhibit 10.1 of the Post-Effective Amendment No. 1 to Form S-1 filed on February 10, 2016.
3.1		Articles of Incorporation, incorporated herein by reference to Exhibit 3.1 of the Registration Statement on Form S-1 filed on February 13, 2015.
3.2		First Amendment to Articles of Incorporation, dated May 27, 2015, incorporated herein by reference to Exhibit 3.1(ii) of the Post-Effective Amendment No. 1 to Form S-1 filed on February 10, 2016.
3.3		Certificate of Change, dated November 12, 2015, incorporated herein by reference to Exhibit 3.1 of Form 8-K filed on November 19, 2015.
3.4		Amended and Restated Bylaws, adopted on August 20, 2015, incorporated herein by reference to Exhibit 3.2(ii) of the Post-Effective Amendment No. 1 to Form S-1 filed on February 10, 2016.
3.5		Certificate of Amendment to Articles of Incorporation of Datasea Inc., incorporated herein by reference to Exhibit 3.1 of the Form 8-K filed on April 20, 2018.
4.1		Form of Underwriter’s Warrant, incorporated herein by reference to Exhibit 4.1 of the S-1/A filed on October 16, 2018.
4.2		Description of Our Common Stock, incorporated herein by reference to our Registration Statement on Form 8-A, dated and filed with the SEC on December 18, 2018.
10.1		Operation and Intellectual Property Service Agreement, dated October 20, 2015, by and among Tianjin Information Sea Information Technology Co., Ltd. and Shuhai Information Technology Co. Ltd., Fu Liu and Zhixin Liu, incorporated herein by reference to Exhibit 10.2 of the Post-Effective Amendment No. 1 to Form S-1 filed on February 10, 2016.
10.2		Shareholder’s Voting Rights Entrustment Agreement, dated October 27, 2015, by and among Tianjin Information Sea Information Technology Co., Ltd. and Shuhai Information Technology Co. Ltd., Fu Liu and Zhixin Liu, incorporated herein by reference to Exhibit 10.3 of the Post-Effective Amendment No. 1 to Form S-1 filed on February 10, 2016.
10.3		Option Agreement, dated October 27, 2015, by and between Tianjin Information Sea Information Technology Co., Ltd. and Fu Liu and Zhixin Liu, incorporated herein by reference to Exhibit 10.4 of the Post-Effective Amendment No. 1 to Form S-1 filed on February 10, 2016.
10.4		Equity Pledge Agreement, dated October 27, 2015 by and between Tianjin Information Sea Information Technology Co., Ltd. and Fu Liu and Zhixin Liu, incorporated herein by reference to Exhibit 10.5 of the Post-Effective Amendment No. 1 to Form S-1 filed on February 10, 2016.
10.5		Employment Agreement, dated February 11, 2015 by and between Shuhai Information Technology Co., Ltd. and Ms. Zhixin Liu, incorporated herein by reference to Exhibit 10.6 of the Post-Effective Amendment No. 1 to Form S-1 filed on February 10, 2016.
10.6		Translation of the Amendment to the Employment Agreement by and between Shuhai Information Technology Co., Ltd. and Ms. Zhixin Liu dated January 1, 2017, incorporated herein by reference to Exhibit 10.6 of the S-1/A filed on January 31, 2018.
10.7		Wireless Internet Access In Public Places Security Management and Control Systems Feature Collection Equipment Purchase Contract, dated January 8, 2016, by and between Shuhai Information Technology Co., Ltd. and Daqing City Public Security Bureau, incorporated herein by reference to Exhibit 10.7 of the Post-Effective Amendment No. 1 to Form S-1 filed on February 10, 2016.
10.8		The 2018 Equity Incentive Plan of Datasea Inc., incorporated herein by reference to Exhibit 10.14 of the Form 10-K for the year ended June 30, 2018 filed on September 13, 2018.
10.9		Form of Indemnification Escrow Agreement, incorporated herein by reference to Exhibit 10.9 of the S-1/A filed on October 16, 2018.
10.10		Translation of the Lease Agreement by and between Shuhai Information Technology Co., Ltd. and Beijing Chang Ning Machinery Electric Science and Technology Co., Ltd. dated December 29, 2017, incorporated herein by reference to Exhibit 10.10 of the S-1/A filed on January 31, 2018.
10.11		Translation of the Building Property Management Contract by and between Shuhai Information Technology Co., Ltd. and Zhuozhou City Changning Property Service Co., Ltd. dated December 29, 2017, incorporated herein by reference to Exhibit 10.11 of the S-1/A filed on January 31, 2018.
10.12		Translation of the Lease Agreement by and between Shuhai Information Technology Co., Ltd. and Beijing Chang Ning Machinery Electric Science and Technology Co., Ltd. dated December 8, 2016, incorporated herein by reference to Exhibit 10.12 of the S-1/A filed on January 31, 2018.
10.13		Translation of the Building Property Management Contract by and between Shuhai Information Technology Co., Ltd. and Beijing Changning Property Service Co., Ltd. dated December 8, 2016, incorporated herein by reference to Exhibit 10.13 of the S-1/A filed on January 31, 2018.
10.14		Employment Agreement, dated February 11, 2018, by and between Shuhai Information Technology Co., Ltd. and Ms. Zhixin Liu., incorporated herein by reference to Exhibit 10.14 of the S-1/A filed on April 5, 2018.

107

10.15		Translation of the Banking Service Direct Sales Cooperation Agreement Between China Minsheng Bank Co. and Shuhai Information Technology Co., Ltd. dated March 15, 2018, incorporated herein by reference to Exhibit 10.15 of the S-1/A filed on April 5, 2018.
10.16		Form of Director Offer Letter, incorporated herein by reference to Exhibit 10.18 of the S-1/A filed on October 16, 2018.
10.17		Translation of the Lease Agreement, dated July 30, 2019, by and between Shuhai Information Technology Co., Ltd. and Beijing Kaipeng Technology Co., Ltd., incorporated herein by reference to Exhibit 10.18 of the 10-K filed on October 15, 2019.
10.18		English Translation of the Lease Agreement, dated August 11, 2020, by and between Tianjin Information Sea Information Technology Co., Ltd. and Shenzhen Lvjing Real Estate Development Co., Ltd. incorporated herein by reference to Exhibit 10.18 of the Form 10-K filed on September 28, 2021.
10.19		English Translation of the Lease Agreement, dated August 26, 2020, by and between Tianjin Information Sea Information Technology Co., Ltd. and Hangzhou Zhexin Information Technology Co., LTD incorporated herein by reference to Exhibit 10.19 of the Form 10-K filed on September 28, 2021.
10.20		English Translation of the Supplementary Lease Agreement, dated January 14, 2021, by and among Tianjin Information Sea Information Technology Co., Ltd., Hangzhou Zhexin Information Technology Co., LTD and Hangzhou Shuhai Zhangxun Information Technology Co., Ltd. incorporated herein by reference to Exhibit 10.20 of the Form 10-K filed on September 28, 2021.
10.21		Common Stock Purchase Agreement, dated October 22, 2020, by and between Datasea, Inc. and Triton Funds LP, incorporated herein by reference to Exhibit 10.1 of the 8-K filed on October 23, 2020.
10.22		Form of Securities Purchase Agreement in connection with the registered direct offering closed on July 22, 2021, incorporated herein by reference to Exhibit 10.1 of the 8-K filed on July 22, 2021.
10.23		Placement Agency Agreement, dated July 20, 2021, by and between Datasea, Inc. and FT Global Capital, Inc., incorporated herein by reference to Exhibit 10.2 of the 8-K filed on July 22, 2021
10.24		English Translation of the Employment Agreement, dated August 1, 2021, by and between Datasea, Inc. and Mingzhou Sun, incorporated herein by reference to Exhibit 10.1 of the 8-K filed on August 4, 2021.
10.25		Amendment No. 1 to Datasea Inc. 2018 Equity Incentive Plan dated March 18, 2022 incorporated herein by reference to Exhibit 10.1 of the 8-K filed on May 2, 2022.
10.26		English Translation of the Office Purchase Agreement dated May 16, 2023, incorporated herein by reference to Exhibit 10.1 of the Form 8-K filed on May 22, 2023.
10.27		Amendment No. 2 to Datasea Inc.’s 2018 Equity Incentive Plan dated March 18, 2022 incorporated herein by reference to Exhibit 10.1 of the Form 8-K filed on June 20, 2023.
10.28		Securities Purchase Agreement, dated August 1, 2023, incorporated herein by reference to Exhibit 10.1 of the Form 8-K filed on August 7, 2023.
10.29		Securities Purchase Agreement, dated August 1, 2023, incorporated herein by reference to Exhibit 10.2 of the Form 8-K filed on August 7, 2023.
10.30		Securities Purchase Agreement, dated August 15, 2023, incorporated herein by reference to Exhibit 10.1 of the Form 8-K filed on August 16, 2023.
10.31		Underwriting Agreement, dated September 11, 2023, by and between the Company and EF Hutton, incorporated herein by reference to Exhibit 1.1 of the Form 8-K filed on September 12, 2023.
10.32		English translation of the Supplementary Agreement to the Subscription Agreement dated September 10, 2023, incorporated herein by reference to Exhibit 99.1 of the Form 8-K filed on September 14, 2023.
10.33		Form of Securities Purchase Agreement dated as of July 2, 2024, incorporated herein by reference to Exhibit 10.33 to the Form 8-K filed on July 2, 2024.
10.34		Form of Pre-Funded Warrant, incorporated herein by reference to Exhibit 10.34 to the Form 8-K filed on July 2, 2024.
10.35		Placement Agency Agreement dated July 2024 between Datasea Inc. and EF Hutton LLC, incorporated herein by reference to Exhibit 10.35 to the Form 8-K filed on July 2, 2024.
10.36		Form of Subscription Agreement dated as of September 27, 2024, incorporated herein by reference to Exhibit 10.1 to the Form 8-K filed on September 27, 2024.
14.1		Code of Ethics, incorporated herein by reference to Exhibit 14.1 of the S-1/A filed on October 16, 2018.
21.1		Subsidiaries of the Company, incorporated by reference to Exhibit 21.1 on Form 10-K for 2024, filed on September 26, 2024.
31.1*		Certification by Chief Executive Officer pursuant to Sarbanes Oxley Section 302
31.2*		Certification by Chief Financial Officer pursuant to Sarbanes Oxley Section 302
32.1*		Certification by Chief Executive Officer and Chief Financial Officer pursuant to 18 U.S.C. Section 1350
97		Incentive Compensation Recovery Policy, incorporated by reference to exhibit 97 to the annual report on form 10-K, filed on September 26, 2024.
101.INS*		Inline XBRL Instance Document
101.SCH*		Inline XBRL Taxonomy Extension Schema Document
101.CAL*		Inline XBRL Taxonomy Extension Calculation Linkbase Document
101.DEF*		Inline XBRL Taxonomy Extension Definition Linkbase Document
101.LAB*		Inline XBRL Taxonomy Extension Label Linkbase Document XBRL
101.PRE*		Inline XBRL Taxonomy Extension Presentation Linkbase Document
104*		Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101)

*	Filed herewith.

Item 16. Form 10–K Summary.

None.

108

SIGNATURES

In accordance with Section 13 or 15(d) of the Exchange Act, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

	DATASEA INC.

Date: September 26, 2025	By:	/s/ Zhixin Liu
	Name:	Zhixin Liu
	Title:	Chief Executive Officer (principal executive officer)

	By:	/s/ Mingzhou Sun
	Name:	Mingzhou Sun
	Title:	Chief Financial Officer
		(principal financial and accounting officer)

In accordance with the Exchange Act, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.

Signature	Title	Date

/s/ Zhixin Liu	Chief Executive Officer,	September 26, 2025
Zhixin Liu	President, Corporate Secretary and Chair of the Board

/s/ Mingzhou Sun	Chief Financial Officer	September 26, 2025
Mingzhou Sun	(Principal Accounting and Financial Officer)

/s/ Fu Liu	Director	September 26, 2025
Fu Liu

/s/ Yijin Chen	Independent Director	September 26, 2025
Yijin Chen

/s/ Yan Yang	Independent Director	September 26, 2025
Yan Yang

/s/ Stephen (Chun Kwok) Wong	Independent Director	September 26, 2025
Stephen (Chun Kwok) Wong

109

Report of Independent Registered Public Accounting Firm

To the Board of Directors and Shareholders of

Datasea Inc.

Opinion on the Financial Statements

We have audited the accompanying consolidated balance sheets of Datasea Inc. and its subsidiaries (the “Company”) as of June 30, 2025, and 2024 and the related consolidated statements of operations and comprehensive loss, changes in stockholders’ equity, and cash flows for each of the two years in the period ended June 30, 2025, and the related notes (collectively referred to as the “financial statements”). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of June 30, 2025, and 2024 and the results of its operations and its cash flows for each of the two years ended June 30, 2025 in conformity with accounting principles generally accepted in the United States of America.

Going Concern Uncertainty – See Also Critical Audit Matters Section Below

The accompanying consolidated financial statements have been prepared assuming that the Company will continue as a going concern. As discussed in Note 2 to the consolidated financial statements, the Company has suffered recurring losses from operations, negative working capital, and accumulated deficit, which raise substantial doubt about its ability to continue as a going concern. Management’s plans in regard to these matters are also described in Note 2. The consolidated financial statements do not include any adjustments that might result from the outcome of this uncertainty.

Basis for Opinion

These financial statements are the responsibility of the entity’s management. Our responsibility is to express an opinion on these financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) ("PCAOB") and are required to be independent with respect to Datasea Inc. and its subsidiaries in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits, we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the entity’s internal control over financial reporting. Accordingly, we express no such opinion.

Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.

Critical Audit Matters

The critical audit matters communicated below are matters arising from the current period audit of the financial statements that were communicated to the audit committee and that: (1) relate to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective, or complex judgments. The communication of critical audit matters does not alter in any way our opinion on the financial statements, taken as a whole, and we are not, by communicating the critical audit matters below, providing separate opinions on the critical audit matters or on the accounts or disclosures to which they relate.

F-1

Critical Audit Matter Description

For the years ended June 30, 2025, and 2024, the Company had a net loss of approximately $5.09 million and $11.38 million, respectively. The Company had an accumulated deficit of approximately $44.53 million as of June 30, 2025, and negative cash flow from operating activities of approximately $2.37 million and $6.40 million for the years ended June 30, 2025, and 2024, respectively. The historical operating results including recurring losses from operations raise substantial doubt about the Company’s ability to continue as a going concern.

How the Critical Audit Matter was Addressed in the Audit

Our principal procedures to address this matter were to obtain cash flow forecast from the Company, evaluate the reasonableness of the forecast, and test the receipt of cash subsequent to June 30, 2025. Based on the above procedures, we concluded substantial doubt remains about the entity’s ability to continue as a going concern.

Impairment of Intangible Assets- Refer to Note 2 to the financial statements

Critical Audit Matter Description

As discussed in Notes 2 and 4 to the consolidated financial statements, the Company’s intangible assets include patents of approximately $2.99 million as of June 30, 2025. Management’s evaluation of impairment of intangible assets involves significant judgment, including assumptions about future cash flows, discount rates, and commercialization timelines.

We identified the impairment of intangible assets as a critical audit matter due to the subjectivity of management’s judgments and the high degree of estimation uncertainty.

How the Critical Audit Matter was Addressed in the Audit

Our principal procedures included evaluating the reasonableness of management’s cashflow forecast including key assumptions used by comparing to subsequent sales of related products. We also tested management’s application of capitalization criteria through inspection of supporting documentation.

/s/ Kreit & Chiu CPA LLP

We have served as the Company's auditor since 2021.

Los Angeles, California

September 26, 2025

PCAOB Firm ID: 6651

F-2

DATASEA INC.

CONSOLIDATED BALANCE SHEETS

	June 30, 2025			JUNE 30, 2024

ASSETS
CURRENT ASSETS
Cash	$	620,807		$	181,262
Accounts receivable		1,374,180			718,546
Inventory, net		206,610			153,583
Value-added tax prepayment		137,025			107,545
Prepaid expenses and other current assets		583,650			1,486,956
Total current assets		2,922,272			2,647,892

NONCURRENT ASSETS
Property and equipment, net		25,560			48,466
Intangible assets, net		3,495,984			546,001
Right-of-use assets, net		292,065			49,345
Total noncurrent assets		3,813,609			643,812

TOTAL ASSETS	$	6,735,881		$	3,291,704

LIABILITIES AND STOCKHOLDERS’ EQUITY
CURRENT LIABILITIES
Accounts payable	$	420,038		$	1,075,641
Unearned revenue		150,088			49,239
Accrued expenses and other payables		547,706			596,714
Due to related parties		6,126			654,560
Operating lease liabilities		128,525			53,530
Bank loan payable		2,374,767			1,170,298
Total current liabilities		3,627,250			3,599,982

NONCURRENT LIABILITIES
Operating lease liabilities		166,436			-
Total noncurrent liabilities		166,436			-

TOTAL LIABILITIES		3,793,686			3,599,982

COMMITMENTS AND CONTINGENCIES

STOCKHOLDERS’ EQUITY (DEFICIT)
Common stock, $0.001 par value, 25,000,000 shares authorized, 8,128,127 and 3,589,620 shares issued and outstanding as of June 30, 2025 and 2024 , respectively		8,128			3,589
Additional paid-in capital		47,331,510			38,957,780
Accumulated comprehensive income		138,586			242,208
Accumulated deficit		(44,526,016	)		(39,440,322	)
TOTAL COMPANY STOCKHOLDERS’ EQUITY (DEFICIT)		2,952,208			(236,745	)

Noncontrolling interest		(10,013	)		(71,533	)

TOTAL STOCKHOLDERS’ EQUITY (DEFICIT)		2,942,195			(308,278	)

TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY (DEFICIT)	$	6,735,881		$	3,291,704

The accompanying notes are an integral part of these consolidated financial statements.

F-3

DATASEA INC.

CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS

	YEARS ENDED JUNE 30,
	2025			2024

Revenues	$	71,616,820		$	23,975,867
Cost of revenues		69,172,872			23,501,762

Gross profit		2,443,948			474,105

Operating expenses
Selling		1,980,224			3,279,627
General and administrative		4,703,443			8,960,523
Research and development		914,996			359,342

Total operating expenses		7,598,663			12,599,492

Loss from operations		(5,154,715	)		(12,125,387	)

Non-operating income (expenses)
Other income (expenses), net		70,169			(97,893	)
Interest income		5,016			1,975

Total non-operating income (expenses), net		75,185			(95,918	)

Loss before income tax		(5,079,530	)		(12,221,305	)

Income tax		6,596			-

Loss before noncontrolling interest from continuing operations		(5,086,126	)		(12,221,305	)
Income before noncontrolling interest from discontinued operations		-			833,546

Less: loss attributable to noncontrolling interest from continuing operations		(432	)		(10,695	)
Less: loss attributable to noncontrolling interest from discontinued operations					-

Net loss attribute to noncontrolling interest		(432	)		(10,695	)

Net loss to the Company from continuing operations		(5,085,694	)		(12,210,610	)
Net income to the Company from discontinued operations		-			833,546

Net loss to the Company		(5,085,694	)		(11,377,064	)

Other comprehensive item
Foreign currency translation gain (loss) attributable to the Company		(103,622	)		(151,044	)
Foreign currency translation gain attributable to noncontrolling interest		60,588			10

Comprehensive loss attributable to the Company	$	(5,189,316	)	$	(11,528,108	)

Comprehensive income attributable to noncontrolling interest	$	60,156		$	(10,685	)

Basic and diluted net loss per share	$	(0.77	)	$	(4.38	)

Weighted average shares used for computing basic and diluted loss per share *		6,610,842			2,597,077

*	retroactively reflect 1-for-15 reverse stock split effective on January 19, 2024

The accompanying notes are an integral part of these consolidated financial statements.

F-4

DATASEA INC.

CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY

YEARS ENDED JUNE 30, 2025 AND 2024

	Common Stock				Additional paid-in			Accumulated			Accumulated other comprehensive						Noncontrolling
	Shares		Amount		capital			deficit			income			Total			interest

Balance at July 1, 2023		1,889,315	$	1,889	$	24,148,868		$	(28,063,258	)	$	393,252		$	(3,519,249	)	$	(60,848	)

Net loss		-		-		-			(11,377,064	)		-			(11,377,064	)		(10,695	)

Issuance of common stock for equity financing		685,940		686		8,060,600			-			-			8,061,286			-

Shares issued for stock compensation expense		912,221		912		6,388,816			-			-			6,389,728			-

Shares issued for paying officers’ accrued salary and bonus		102,144		102		359,496									359,598

Foreign currency translation loss		-		-		-			-			(151,044	)		(151,044	)		10

Balance at June 30, 2024		3,589,620		3,589		38,957,780			(39,440,322	)		242,208			(236,745	)		(71,533	)

Net loss		-		-		-			(5,085,694	)		-			(5,085,694	)		(432	)

Noncontrolling interest disposal at closure of the entity		-		-		-			-			-			-			1,391

Issuance of common stock for equity financing		692,308		693		1,958,059			-			-			1,958,752			-

Issuance of common stock for equity financing - related parties		1,932,224		1,932		3,978,449			-			-			3,980,381			-

Shares issued for stock compensation expense		661,978		662		1,698,119			-			-			1,698,781			-

Shares issued for purchase of intangible assets from the Company’s major shareholders		1,167,253		1,167		(1,167	)		-			-			-			-

Forgiveness of debt by shareholders						546,293			-			-			546,293			-

Shares issued for paying officers’ accrued salary and bonus		84,744		85		193,977			-			-			194,062			-

Foreign currency translation gain		-		-		-			-			(103,622	)		(103,622	)		60,561

Balance at June 30, 2025		8,128,127	$	8,128	$	47,331,510		$	(44,526,016	)	$	138,586		$	2,952,208		$	(10,013	)

The accompanying notes are an integral part of these consolidated financial statements.

F-5

DATASEA INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

	YEARS ENDED JUNE 30,
	2025			2024

Cash flows from operating activities:
Loss including noncontrolling interest	$	(5,086,126	)	$	(11,387,759	)
Adjustments to reconcile loss including noncontrolling interest to net cash used in operating activities:
Gain on disposal of subsidiary		-			(833,546	)
Bad debt expense		18,855			-
Inventory impairment		99,478			-
Depreciation and amortization		1,139,264			494,480
Loss on disposal of fixed assets		17,196			2,979
Operating lease expense		136,506			167,969
Investment loss					56,081
Loan forgiveness by shareholder		105,356			-
Stock compensation expense		1,892,842			6,749,326
Changes in assets and liabilities:
Accounts receivable		(658,711	)		(717,220	)
Inventory		(153,179	)		91,076
Value-added tax prepayment		(29,953	)		(51,078	)
Prepaid expenses and other current assets		877,711			(810,421	)
Accounts payable		(651,887	)		597,744
Unearned revenue		101,051			(472,584	)
Accrued expenses and other payables		(45,306	)		(108,736	)
Payment on operating lease liabilities		(137,777	)		(177,194	)

Net cash used in operating activities		(2,374,680	)		(6,398,883	)

Cash flows from investing activities:
Acquisition of property and equipment		(8,129	)		(6,868	)
Acquisition of intangible assets		(4,077,068	)		(161,054	)
Cash disposed due to disposal of subsidiary		-			(35	)

Net cash used in investing activities		(4,085,197	)		(167,957	)

Cash flows from financing activities:
Proceeds from (repayment to) related parties		(203,218	)		360,804
Proceeds from loan payables		2,374,350			-
Repayment of loan payables		(1,164,895	)		(1,582,513	)
Net proceeds from issuance of common stock		5,939,133			8,061,286

Net cash provided by financing activities		6,945,370			6,839,577

Effect of exchange rate changes on cash		(45,948	)		(111,203	)

Net increase in cash		439,545			161,534

Cash, beginning of period		181,262			19,728

Cash, end of period	$	620,807		$	181,262

Supplemental disclosures of cash flow information:
Cash paid for interest	$	38,213		$	20,516
Cash paid for income tax	$	-		$	-

Supplemental disclosures of non-cash financing activities:
Right-of-use assets obtained in exchange for operating lease liabilities	$	356,046		$	125,280
Transfer of debt owing to the Company’s’ CEO to Mr. Wanli Kuai	$	-		$	730,163
Shares issued for paying officers’ accrued salary and bonus	$	194,062		$	359,496
Loan forgiveness by shareholder	$	546,293		$	-

The accompanying notes are an integral part of these consolidated financial statements.

F-6

DATASEA INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

JUNE 30, 2025 AND 2024

NOTE 1 – ORGANIZATION AND DESCRIPTION OF BUSINESS

Datasea Inc. (the “Company,” “Datasea,” or “we,” “us,” “our”) was incorporated in the State of Nevada on September 26, 2014 under the name Rose Rock Inc. and changed its name to Datasea Inc. on May 27, 2015. On May 26, 2015, the Company’s founder, Xingzhong Sun, sold 6,666,667 shares of common stock, par value $0.001 per share, of the Company (the “Common Stock”) to Zhixin Liu (“Ms. Liu”), an owner of Shuhai Skill (HK) as defined below. On October 27, 2016, Mr. Sun sold his remaining 1,666,667 shares of Common Stock of the Company to Ms. Liu. As a holding company with no material operations, the Company conducts a majority of its business activities through organizations established in the People’s Republic of China (“PRC), primarily by variable interest entity (the “VIE”). The Company does not have any equity ownership of its VIE, instead it controls and receives economic benefits of the VIE’s business operations through certain contractual arrangements.

On October 29, 2015, the Company entered into a share exchange agreement (the “Exchange Agreement”) with the shareholders (the “Shareholders”) of Shuhai Information Skill (HK) Limited (“Shuhai Skill (HK)”), a limited liability company (“LLC”) incorporated on May 15, 2015 under the laws of the Hong Kong Special Administrative Region of the People’s Republic of China (the “PRC”). Pursuant to the terms of the Exchange Agreement, the Shareholders, who own 100% of Shuhai Skill (HK), transferred all of the issued and outstanding ordinary shares of Shuhai Skill (HK) to the Company for 6,666,667 shares of Common Stock, causing Shuhai Skill (HK) and its wholly owned subsidiaries, Tianjin Information Sea Information Technology Co., Ltd. (“Tianjin Information” or “WOFE”), an LLC incorporated under the laws of the PRC, and Harbin Information Sea Information Technology Co., Ltd., an LLC incorporated under the laws of the PRC, to become wholly-owned subsidiaries of the Company; and Shuhai Information Technology Co., Ltd., also an LLC incorporated under the laws of the PRC (“Shuhai Beijing”), to become a VIE of the Company through a series of contractual agreements between Shuhai Beijing and Tianjin Information. The transaction was accounted for as a reverse merger, with Shuhai Skill (HK) and its subsidiaries being the accounting survivor. Accordingly, the historical financial statements presented are those of Shuhai Skill (HK) and its consolidated subsidiaries and VIE.

Following the Share Exchange, the Shareholders, Zhixin Liu and her father, Fu Liu, owned approximately 82% of the Company’s outstanding shares of Common Stock. As of October 29, 2015, there were 18,333,333 shares of Common Stock issued and outstanding, 15,000,000 of which were beneficially owned by Zhixin Liu and Fu Liu.

After the Share Exchange, the Company, through its consolidated subsidiaries and VIE provide smart security solutions primarily to schools, tourist or scenic attractions and public communities in China.

On October 16, 2019, Shuhai Beijing incorporated a wholly owned subsidiary, Heilongjiang Xunrui Technology Co. Ltd. (“Xunrui”), which develops and markets the Company’s smart security system products.

On December 3, 2019, Shuhai Beijing formed Nanjing Shuhai Equity Investment Fund Management Co. Ltd. (“Shuhai Nanjing”), a joint venture in PRC, in which Shuhai Beijing holds a 99% ownership interest with the remaining 1% held by Nanjing Fanhan Zhineng Technology Institute Co. Ltd, an unrelated party that was supported by both Nanjing Municipal Government and Beijing University of Posts and Telecommunications. Shuhai Nanjing was formed for gaining the easy access to government funding and private financing for the Company’s new technology development and new project initiation.

In January 2020, the Company acquired ownership in three entities for no consideration from the Company’s management, which set up such entities on the Company’s behalf (described below).

F-7

On January 3, 2020, Shuhai Beijing entered into two equity transfer agreements (the “Transfer Agreements”) with the President, and a Director of the Company. Pursuant to the Transfer Agreements, the Director and the President, each agreed, for no consideration, to (i) transfer his 51% and 49% respective ownership interests, in Guozhong Times (Beijing) Technology Ltd. (“Guozhong Times”) to Shuhai Beijing; and (ii) transfer his 51% and 49% respective ownership interests, in Guohao Century (Beijing) Technology Ltd. (“Guohao Century”) to Shuhai Beijing. Guozhong Times and Guohao Century were established to develop technology for electronic products, intelligence equipment and accessories, and provide software and information system consulting, installation and maintenance services.

On January 7, 2020, Shuhai Beijing entered into another equity transfer agreement with the President, the Director described above and an unrelated individual. Pursuant to this equity transfer agreement, the Director, the President and the unrelated individual each agreed to transfer his 51%, 16%, 33% ownership interests, in Guozhong Haoze (Beijing) Technology Ltd. (“Guozhong Haoze”) to Shuhai Beijing for no consideration. Guozhong Haoze was formed to develop and market the smart security system products.

On August 17, 2020, Beijing Shuhai formed a new wholly-owned subsidiary Shuhai Jingwei to expand the security oriented systems developing, consulting and marketing business overseas.

On November 16, 2020, Guohao Century formed Hangzhou Zhangqi Business Management Limited Partnership (“Zhangqi”) with ownership of 99% as an ordinary partner. In November 2023, the Company dissolved Zhangqi as a result of disposal of Zhuangxun in July 2023, Zhangqi had no operations but only serves as a holding company of Zhagnxun. In November 2023, the Company dissolved Zhangqi.

On November 19, 2020, Guohao Century formed a 51% owned subsidiary Hangzhou Shuhai Zhangxun Information Technology Co., Ltd (“Zhangxun”) for research and development of 5G Multimodal communication technology. Zhangqi owns 19% of Zhangxun; accordingly, Guohao Century ultimately owns 69.81% of Zhangxun. On December 20, 2022, Guohao Century acquired a 30% ownership interests of Zhangxun from Zhengmao Zhang at the price of $0.15 (RMB 1.00). After the transaction, Guohao Century owns 81% of Zhangxun, and Zhangqi owns 19% of Zhangxun; On February 15, 2023, Guohao Century acquired a 9% ownership interests of Zhangxun from the Zhangqi at the price of $130,434 (RMB 900,000). After the transaction, Guohao Century owns 90% of Zhangxun, and Zhangqi owns 10% of Zhangxun; as a result, Guohao Century ultimately owns 99.9 % of Zhangxun. On July 20, 2023, the Company sold Zhangxun to a third party for RMB 2 ($0.28).

On February 16, 2022, Shuhai Jingwei formed Shenzhen Acoustic Effect Management Limited Partnership (“Shenzhen Acoustic MP”) with 99% ownership interest, the remaining 1% ownership interest is held by a third party.

On February 16, 2022, Shuhai Jingwei formed Shuhai (Shenzhen) Acoustic Effect Technology Co., Ltd (“Shuhai Shenzhen Acoustic Effect”), a PRC company, in which Shuhai Jingwei holds 60% ownership interest, 10% ownership interest is held by Shenzhen Acoustic MP, and remaining 30% ownership interest is held by a third party. On October 18, 2022, Shuhai Jingwei acquired 30% ownership interest of Shuhai Acoustic Effect, a PRC company from the third party at the price of approximately $0.15 (RMB 1.00). After the transaction, Shuhai Jingwei owns 90% of Shuhai Shenzhen Effect, and Shenzhen Acoustic MP still owns 10% of Shuhai Shenzhen Effect; accordingly, Shuhai Jingwei ultimately owns 100% of Shuhai Acoustic Effect. The book value of 30% interest acquired from the third party was $(26,993) due to its accumulated deficit.

On March 4, 2022, Shuhai Beijing formed Beijing Yirui Business Management Development Center (“Yirui”) with 99% ownership interest as an ordinary partner, the remaining 1% ownership interest is held by Zhixin Liu.

On March 4, 2022, Shuhai Beijing formed Beijing Yiying Business Management Development Center (“Yiying”) with 99% ownership interest as an ordinary partner, the remaining 1% ownership interest is held by Zhixin Liu.

On July 31, 2023, Datasea established a wholly owned subsidiary Datasea Acoustic, LLC (“Datasea Acoustic”) in the state of Delaware for expanding the products to the market in North America.

On October 24, 2023, Guozhong Times formed Shuhai Yiyun (Shenzhen) digital technology Co, Ltd (“Yiyun”) with 66% ownership interest, the remaining 34% ownership interest is held by a third party. As of the report date, Yiyun did not have any operations.

On January 10, 2024, the Company’s Board of Directors approved a reverse stock split of its authorized and issued and outstanding shares of common stock, par value $0.001 per share (the “Common Stock”), at a ratio of 1-for-15, which become legal effective on January 19, 2024. After the reverse stock split, every 15 issued and outstanding shares of the Company’s Common Stock was converted automatically into one share of the Company’s Common Stock without any change in the par value per share. The total number of shares of Common Stock authorized for issuance was then reduced by a corresponding proportion from 375,000,000 shares to 25,000,000 shares of Common Stock. All share amounts have been retroactively restated to reflect the reverse stock split for all periods presented.

F-8

NOTE 2 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

GOING CONCERN

The accompanying consolidated financial statements (“CFS”) 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, 2025 and 2024, the Company had a net loss of approximately $5.09 million and $11.38 million, respectively. The Company had an accumulated deficit of approximately $44.53 million as of June 30, 2025, and negative cash flow from operating activities of approximately $2.37 million and $6.40 million for the years ended June 30, 2025 and 2024, respectively. The historical operating results including recurring losses from operations raise substantial doubt about the Company’s ability to continue as a going concern.

If deemed necessary, management could seek to raise additional funds by way of admitting strategic investors, or private or public offerings, or by seeking to obtain loans from banks or others, to support the Company’s research and development (“R&D”), procurement, marketing and daily operation. While management of the Company believes in the viability of its strategy to generate sufficient revenues and its ability to raise additional funds on reasonable terms and conditions, there can be no assurances to that effect. The ability of the Company to continue as a going concern depends upon the Company’s ability to further implement its business plan and generate sufficient revenue and its ability to raise additional funds by way of a public or private offering. There is no assurance that the Company will be able to obtain funds on commercially acceptable terms, if at all. There is also no assurance that the amount of funds the Company might raise will enable the Company to complete its initiatives or attain profitable operations. If the Company is unable to raise additional funding to meet its working capital needs in the future, it may be forced to delay, reduce or cease its operations.

BASIS OF PRESENTATION AND CONSOLIDATION

The CFS were prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”) and applicable rules and regulations of the SEC regarding CFS. The accompanying CFS include the financial statements of the Company and its 100% owned subsidiaries Shuhai Information Skill (HK) Limited (“Shuhai Skill (HK)”), and Tianjin Information Sea Information Technology Co., Ltd. (“Tianjin Information”), and its VIE, Shuhai Beijing, and Shuhai Beijing’s 100% owned subsidiaries – Heilongjiang Xunrui Technology Co. Ltd. (“Xunrui”), Guozhong Times (Beijing) Technology Ltd. (“Guozhong Times”), Guohao Century (Beijing) Technology Ltd. (“Guohao Century”), Guozhong Haoze, and Shuhai Jingwei (Shenzhen) Information Technology Co., Ltd. (“Jingwei”), and Shuhai Beijing’s 99% owned subsidiary Nanjing Shuhai Equity Investment Fund Management Co. Ltd. (“Shuhai Nanjing”). During the year ended June 30, 2022, the Company incorporated two new subsidiaries Shuhai (Shenzhen) Acoustic Effect Technology Co., Ltd (“Shuhai Acoustic”) and Shenzhen Acoustic Effect Management Partnership (“Shenzhen Acoustic MP”). All significant inter-company transactions and balances were eliminated in consolidation. The chart below depicts the corporate structure of the Company as of June 30, 2025.

F-9

VARIABLE INTEREST ENTITY

Pursuant to the Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) Section 810, “Consolidation” (“ASC 810”), the Company is required to include in its CFS, the financial statements of Shuhai Beijing, its VIE. ASC 810 requires a VIE to be consolidated if the Company is subject to a majority of the risk of loss for the VIE or is entitled to receive a majority of the VIE’s residual returns. A VIE is an entity in which a company, through contractual arrangements, bears the risk of, and enjoys the rewards of such entity, and therefore the Company is the primary beneficiary of such entity.

Under ASC 810, a reporting entity has a controlling financial interest in a VIE, and must consolidate that VIE, if the reporting entity has both of the following characteristics: (a) the power to direct the activities of the VIE that most significantly affect the VIE’s economic performance; and (b) the obligation to absorb losses, or the right to receive benefits, that could potentially be significant to the VIE. The reporting entity’s determination of whether it has this power is not affected by the existence of kick-out rights or participating rights, unless a single enterprise, including its related parties and de - facto agents, have the unilateral ability to exercise those rights. Shuhai Beijing’s actual stockholders do not hold any kick-out rights that affect the consolidation determination.

Through the VIE agreements, Tianjin Information, an indirect subsidiary of Datasea is deemed the primary beneficiary of Shuhai Beijing and its subsidiaries. Accordingly, the results of Shuhai Beijing and its subsidiaries were included in the accompanying CFS. Shuhai Beijing has no assets that are collateral for or restricted solely to settle their obligations. The creditors of Shuhai Beijing do not have recourse to the Company’s general credit.

VIE Agreements

Operation and Intellectual Property Service Agreement – The Operation and Intellectual Property Service Agreement allows Tianjin Information Sea Information Technology Co., Ltd (“WFOE”) to manage and operate Shuhai Beijing and collect an operating fee equal to Shuhai Beijing’s pre-tax income, per month. If Shuhai Beijing suffers a loss and as a result does not have pre-tax income, such loss shall be carried forward to the following month to offset the operating fee to be paid to WFOE if there is pre-tax income of Shuhai Beijing the following month.

F-10

Furthermore, if Shuhai Beijing cannot pay off its debts, WFOE shall pay off the debt on Shuhai Beijing’s behalf. If Shuhai Beijing’s net assets fall lower than its registered capital balance, WFOE shall provide capital for Shuhai Beijing to make up for the deficit.

Under the terms of the Operation and Intellectual Property Service Agreement, Shuhai Beijing entrusts Tianjin Information to manage its operations, manage and control its assets and financial matters, and provide intellectual property services, purchasing management services, marketing management services and inventory management services to Shuhai Beijing. Shuhai Beijing and its stockholders shall not make any decisions nor direct the activities of Shuhai Beijing without Tianjin Information’s consent.

Stockholders’ Voting Rights Entrustment Agreement – Tianjin Information has entered into a stockholders’ voting rights entrustment agreement (the “Entrustment Agreement”) under which Zhixin Liu and Fu Liu (collectively the “Shuhai Beijing Stockholders”) have vested their voting power in Shuhai Beijing to Tianjin Information or its designee(s). 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 DataSea (Fu Liu is the father of Zhixin Liu).

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. Pursuant to the terms of the Option Agreement, Tianjin Information and the Shuhai Beijing Stockholders have agreed to certain restrictive covenants to safeguard the rights of Tianjin Information under the Option Agreement. Tianjin Information agreed to pay RMB1.00 annually to Shuhai Beijing Stockholders to maintain the option rights. Tianjin Information may terminate the Option Agreement upon prior written notice. The Option Agreement is valid for a period of 10 years from the effective date and renewable at Tianjin Information’s option.

Equity Pledge Agreement – Tianjin Information and the Shuhai Beijing Stockholders entered into an equity pledge agreement on October 27, 2015 (the “Equity Pledge Agreement”). The Equity Pledge Agreement serves to guarantee the performance by Shuhai Beijing of its obligations under the Operation and Intellectual Property Service Agreement and the Option Agreement. Pursuant to the Equity Pledge Agreement, Shuhai Beijing Stockholders have agreed to pledge all of their equity interests in Shuhai Beijing to Tianjin Information. Tianjin Information has the right to collect any and all dividends, bonuses and other forms of investment returns paid on the pledged equity interests during the pledge period. Pursuant to the terms of the Equity Pledge Agreement, the Shuhai Beijing Stockholders have agreed to certain restrictive covenants to safeguard the rights of Tianjin Information. 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.

As of this report date, there were no dividends paid from the VIE to the U.S. parent company or the shareholders of the Company. There has been no change in facts and circumstances to consolidate the VIE. The following financial statement amounts and balances of the VIE were included in the accompanying CFS as of June 30, 2025 and 2024, and for the years ended June 30, 2025 and 2024, respectively.

F-11

Condensed Consolidating Statements of Operation Information:

	Year Ended June 30, 2025
	Parent			Subsidiaries			WOFE			VIE			Elimination			Consolidated
Revenue - third parties	$	-		$	-		$	-		$	71,616,820					$	71,616,820
Revenue-Parent provide service to WOFE		99,200												(99,200	)		-
Revenue-Parent provide service to VIE		154,200												(154,200	)		-
Revenue - WOFE’s provide service to VIE								1,350,560						(1,350,560	)		-
Revenue - VIE purchase materials from WOFE								121,072						(121,072	)		-
Revenue - from VIE’s label that is used by WOFE											926,286			(926,286	)		-
Revenue - WOFE purchase materials from VIE											400			(400	)
																	-
Cost of Revenue - third parties								90,763			69,082,109						69,172,872
COST - VIE purchase materials from WOFE								400						(400	)		-
COST - WOFE purchase materials from VIE								-			121,072			(121,072	)		-
														-			-
Gross profit		253,400			-			1,380,469			3,340,325			(2,530,246	)		2,443,948

Operating expenses		2,391,610			130,465			2,410,541			2,666,047						7,598,663
Operating expenses-VIE cost that was purchased from WOFE											1,350,560			(1,350,560	)		-
Operating expenses-WOFE cost that was purchased from VIE								926,286						(926,286	)		-
Operating expenses-WOFE cost that service provided by Parent								100,641						(100,641	)		-
Operating expenses-VIE cost that service provided by Parent											155,799			(155,799	)		-
Loss from operations		(2,138,210	)		(130,465	)		(2,056,999	)		(832,081	)		3,040			(5,154,715	)
Other income (expenses), net		2,533			(5	)		119,757			(47,100	)					75,185
Income tax expense											6,596						6,596
Loss before noncontrolling interest		(2,135,677	)		(130,470	)		(1,937,242	)		(885,777	)		3,040			(5,086,126	)
Less: loss attributable to noncontrolling interest											(432	)					(432	)
Net loss to the Company from continuing operation		(2,135,677	)		(130,470	)		(1,937,242	)		(885,345	)		3,040			(5,085,694	)

F-12

	Year Ended June 30, 2024
	Parent			Subsidiaries			WOFE			VIE			Elimination			Consolidated
Revenue - third parties	$	-		$	-		$	69,541		$	23,906,326					$	23,975,867
Revenue-Parent provided service to WOFE		275,100												(275,100	)		-
Revenue-Parent provided service to VIE		143,600												(143,600	)		-
Revenue - WOFE provided service to VIE								489,386						(489,386	)		-
Revenue - VIE purchased materials from WOFE								57,082						(57,082	)
Revenue - from VIE’s label that was used by WOFE											264,533			(264,533	)		-
Revenue - WOFE purchased materials from VIE											57,082			(57,082	)
																	-
Cost of Revenue - third parties								69,156			23,432,606						23,501,762
COST - VIE purchased materials from WOFE								57,082						(57,082	)
COST - WOFE purchased materials from VIE								-			57,082			(57,082	)
														-			-
Gross profit		418,700			-			489,771			738,253			(1,172,619	)		474,105

Operating expenses		6,996,227			324,954			3,535,554			1,742,757						12,599,492
Operating expenses - VIE expenses, corresponding to services provided by WOFE											489,386			(489,386	)		-
Operating expenses - WOFE expenses for using VIE’s label								264,533						(264,533	)
Operating expenses – WOFE expenses, corresponding to services provided by Parent								278,862						(278,862	)
Operating expenses - VIE expenses, corresponding to services provided by Parent											146,150			(146,150	)		-
Loss from operations		(6,577,527	)		(324,954	)		(3,589,178	)		(1,640,040	)		6,312			(12,125,387	)
Other income (expenses), net		(1,665	)		(61	)		3,108			(97,300	)					(95,918	)
Income tax expense																	-
Loss before noncontrolling interest		(6,579,192	)		(325,015	)		(3,586,070	)		(1,737,340	)		6,312			(12,221,305	)
Less: loss attributable to noncontrolling interest											(10,695	)					(10,695	)
Net loss to the Company		(6,579,192	)		(325,015	)		(3,586,070	)		(1,726,645	)		6,312			(12,210,610	)

F-13

Condensed Consolidating Balance Sheets Information:

	As of June 30, 2025
	Parent			Subsidiaries			WOFE			VIE			Elimination			Consolidated

Cash	$	24,488		$	1,598		$	14,481		$	580,240					$	620,807
Accounts receivable								789,095			585,085						1,374,180
Accounts receivable - VIE														-			-
Accounts receivable - WOFE											31,766			(31,766	)
Inventory											206,610						206,610
Inventory - VIE																	-
Inventory - WOFE											47,738			(47,738	)		-
Value-added tax prepayment								22,088			114,937						137,025
Other receivables-Subsidiaries		32,515						2,666			2,417			(37,598	)		-
Other receivables - VIE		993,088						14,187,221						(15,180,309	)		-
Other receivables - WOFE		10,249,731									1,423,840			(11,673,571	)		-
Other receivables - Parent					5,000									(5,000	)
Other current assets								336,120			247,530			-			583,650

Total current assets		11,299,822			6,598			15,351,671			3,240,163			(26,975,982	)		2,922,272

Property and equipment, net								6,920			18,640						25,560
Intangible assets, net								3,045,369			503,000			(52,385	)		3,495,984
Right of use asset, net								7,720			284,345						292,065
Investment into subsidiaries		15,820,480												(15,820,480	)		-
Investment into WOFE					13,949,894									(13,949,894	)		-
Other non-current assets		-						-			-						-

Total non-current assets		15,820,480			13,949,894			3,060,009			805,985			(29,822,759	)		3,813,609

Total Assets	$	27,120,302		$	13,956,492		$	18,411,680			4,046,148			(56,798,741	)	$	6,735,881

Accounts payable	$	260,700			2,500		$	41,066		$	115,772					$	420,038
Accounts payable - VIE								31,766			-			(31,766	)
Accounts payable - WOFE														-			-
Short term loan																	-
Advance from customer								461			149,627						150,088
Accrued expense and other payable		750						1,117			804,862			(259,023	)		547,706
Due to ralated parties								4,961			1,165						6,126
Lease liability								5,764			122,761						128,525
Loan payable								-			2,374,767						2,374,767
Other payables - Datasea					32,514			10,031,174			726,742			(10,790,430	)		-
Other payables - Subsidiaries		5,000												(5,000	)
Other payables - VIE					2,536			1,423,840						(1,426,376	)		-
Other payables - WOFE					2,677						14,187,221			(14,189,898	)		-
Other current liabilities																	-

Total current liabilities		266,450			40,227			11,540,149			18,482,917			(26,702,493	)		3,627,250
Lease liability - noncurrent											166,436						166,436
Long term loan								-									-

Total non-current liabilities		-			-			-			166,436			-			166,436

Total liabilities		266,450			40,227			11,540,149			18,649,353			(26,702,493	)		3,793,686

Accumulated deficit		(15,519,912	)		(1,904,215	)		(11,652,066	)		(15,363,739	)		(86,084	)		(44,526,016	)
Other equity		42,373,764			15,820,480			18,523,597			760,534			(30,010,164	)		47,468,211

Total equity		26,853,852			13,916,265			6,871,531			(14,603,205	)		(30,096,248	)		2,942,195

Total liabilities and stockholders’ equity	$	27,120,302		$	13,956,492		$	18,411,680		$	4,046,148			(56,798,741	)	$	6,735,881

F-14

	As of June 30, 2024
	Parent			Subsidiaries			WOFE			VIE			Elimination			Consolidated

Cash	$	79,225		$	1,249		$	7,634		$	93,154					$	181,262
Accounts receivable											718,546						718,546
Accounts receivable - VIE								760,708						(760,708	)		-
Accounts receivable - WOFE														-
Inventory								34,530			119,053						153,583
Inventory - VIE								-									-
Inventory - WOFE											41,147			(41,147	)		-
Other receivables-Subsidiaries		5,015						832			2,427			(8,274	)		-
Other receivables - VIE		475,223						12,971,457						(13,446,680	)		-
Other receivables - WOFE		6,304,226									1,412,607			(7,716,833	)		-
Other receivables - Parent					5,000									(5,000	)
Other current assets		5,000			-			1,292,945			295,305			1,251			1,594,501

Total current assets		6,868,689			6,249			15,068,106			2,682,239			(21,977,391	)		2,647,892

Property and equipment, net								17,532			30,934						48,466
Intangible assets, net					101,042			62,406			441,485			(58,932	)		546,001
Right of use asset, net								38,300			11,045						49,345
Investment into subsidiaries		14,320,480												(14,320,480	)		-
Investment into WOFE					12,450,340									(12,450,340	)		-
Other non-current assets		-						-			-						-

Total non-current assets		14,320,480			12,551,382			118,238			483,464			(26,829,752	)		643,812

Total Assets	$	21,189,169		$	12,557,631		$	15,186,344		$	3,165,703			(48,807,143	)	$	3,291,704

Accounts payable	$	262,385			2,500		$	44,758		$	765,998					$	1,075,641
Accounts payable - VIE								-			-			-
Accounts payable - WOFE											760,708			(760,708	)		-
Short term loan											1,170,298						1,170,298
Advance from customers								463			48,776						49,239
Accrued expenses and other payables		23,254						109,121			713,827			(249,488	)		596,714
Lease liability								41,549			11,981						53,530
Loan payable								-									-
Other payables - Datasea					5,015			6,182,249			468,998			(6,656,262	)		-
Other payables - Subsidiaries		5,000												(5,000	)
Other payables - VIE					2,536			1,412,607						(1,415,143	)		-
Other payables - WOFE					845						12,971,457			(12,972,302	)		-
Other current liabilities		32,000						520,501			102,059						654,560

Total current liabilities		322,639			10,896			8,311,248			17,014,102			(22,058,903	)		3,599,982


Accumulated deficit		(13,649,331	)		(1,773,745	)		(9,705,672	)		(14,479,788	)		168,214			(39,440,322	)
Other equity		34,515,861			14,320,480			16,580,768			631,389			(26,916,454	)		39,132,044

Total equity		20,866,530			12,546,735			6,875,096			(13,848,399	)		(26,748,240	)		(308,278	)

Total liabilities and stockholders’ equity	$	21,189,169		$	12,557,631		$	15,186,344		$	3,165,703			(48,807,143	)	$	3,291,704

F-15

Condensed Consolidating Cash Flows Information:

	Year Ended June 30, 2025
	Parent			Subsidiaries			WOFE			VIE			Elimination			Consolidated

Net cash provided by/(used in) operating activities	$	(258,984	)	$	(29,428	)	$	(186,960	)	$	(1,899,308	)				$	(2,374,680	)
Net cash provided by/(used in) operating activities (WOFE to VIE)																	-
																	-
Net cash provided by/(used in) investing activities								(3,847,448	)		(237,749	)					(4,085,197	)
Net cash provided by/(used in) investing activities (Parent to subsidiaries)		(1,500,000	)											1,500,000			-
Net cash provided by/(used in) investing activities (Parent to WOFE)														-
Net cash provided by/(used in) investing activities (Subsidiaries to WOFE)					(1,499,554	)		1,524,032						(24,478	)		-
Net cash provided by/(used in) investing activities (WOFE to VIE)								(1,255,657	)					1,255,657			-
Net cash provided by/(used in) investing activities (Parent to VIE)														-			-

Net cash provided by/(used in) financing activities		5,939,133						(102,795	)		1,109,032						6,945,370
Net cash provided by/(used in) financing activities ( Parent to VIE )		(258,842	)					3,875,709			259,782			(3,876,649	)		-
Net cash provided by/(used in) financing activities ( Parent to subsidiaries)		(27,500	)		1,527,500									(1,500,000	)		-
Net cash provided by/(used in) financing activities ( VIE to subsidiaries )														-			-
Net cash provided by/(used in) financing activities WOFE to parent)		(3,945,505	)											3,945,505			-
Net cash provided by/(used in) financing activities (WOFE to subsidiaries )					1,830									(1,830	)		-
Net cash provided by/(used in) financing activities (WOFE to VIE)											1,255,657			(1,255,657	)		-
Net increase (decrease) in cash and cash equivalents	$	(51,698	)	$	(2,691	)	$	6,848			487,086			-		$	439,545

F-16

	Year Ended June 30, 2024
	Parent			Subsidiaries			WOFE			VIE			Elimination			Consolidated

Net cash provided by/(used in) operating activities	$	134,284		$	(5,849	)	$	(5,076,644	)	$	(1,450,675	)				$	(6,398,884	)
Net cash provided by/(used in) operating activities (WOFE to VIE)								(1,992,684	)		1,992,684						-
																	-
Net cash provided by/(used in) investing activities								-			(167,957	)					(167,957	)
Net cash provided by/(used in) investing activities (Parent to subsidiaries)		(1,405,015	)											1,405,015			-
Net cash provided by/(used in) investing activities (Parent to WOFE)		(6,231,281	)											6,231,281
Net cash provided by/(used in) investing activities (Subsidiaries to WOFE)					(1,399,449	)								1,399,449			-
Net cash provided by/(used in) investing activities (WOFE to VIE)								(2,859,142	)					2,859,142			-
Net cash provided by/(used in) investing activities (Parent to VIE)		(475,223	)											475,223			-
Net cash provided by/(used in) investing activities (VIE to subsidiaries)											2,536			(2,536	)		-

Net cash provided by/(used in) financing activities		8,061,286						418,608			(1,640,317	)					6,839,577
Net cash provided by/(used in) financing activities (Parent to VIE)											483,698			(483,698	)		-
Net cash provided by/(used in) financing activities (Parent to Subsidiaries)					1,405,015									(1,405,015	)		-
Net cash provided by/(used in) financing activities (VIE to subsidiaries)					(2,536	)								2,536			-
Net cash provided by/(used in) financing activities (parent to WOFE)								6,097,306						(6,097,306	)		-
Net cash provided by/(used in) financing activities (subsidiaries to WOFE)								1,424,455						(1,424,455	)		-
Net cash provided by/(used in) financing activities (WOFE to VIE)											2,859,142			(2,859,142	)		-
Net increase (decrease) in cash and cash equivalents	$	77,738		$	(2,819	)	$	(1,988,041	)	$	2,074,656			-		$	161,534

F-17

USE OF ESTIMATES

The preparation of CFS in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting periods. Actual results could differ from those estimates. The significant areas requiring the use of management estimates include, but are not limited to, the estimated useful life and residual value of property, plant and equipment, provision for staff benefits, recognition and measurement of deferred income taxes and the valuation allowance for deferred tax assets. Although these estimates are based on management’s knowledge of current events and actions management may undertake in the future, actual results may ultimately differ from those estimates and such differences may be material to the CFS.

CONTINGENCIES

Certain conditions may exist as of the date the CFS are issued, which may result in a loss to the Company but which will only be resolved when one or more future events occur or fail to occur. The Company’s management and legal counsel assess such contingent liabilities, and such assessment inherently involves an exercise of judgment. In assessing loss contingencies related to legal proceedings that are pending against the Company or unasserted claims that may result in such proceedings, the Company’s legal counsel evaluates the perceived merits of any legal proceedings or unasserted claims as well as the perceived merits of the amount of relief sought or expected to be sought. If the assessment of a contingency indicates that it is probable that a material loss has been incurred and the amount of the liability can be estimated, the estimated liability would be accrued in the Company’s CFS.

If the assessment indicates that a potential material loss contingency is not probable but is reasonably possible, or is probable but cannot be estimated, the nature of the contingent liability, together with an estimate of the range of possible loss if determinable and material, would be disclosed. As of June 30, 2025 and 2024, the Company has no such contingencies.

CASH

Cash includes cash on hand and demand deposits that are highly liquid in nature and have original maturities when purchased of three months or less.

ACCOUNTS RECEIVABLE

The Company’s policy is to maintain an allowance for potential credit losses on accounts receivable. The Company adopted Accounting Standards Update (“ASU”) 2016-13, Financial Instruments – Credit Losses (Topic 326): Measurement of Credit losses on financial instruments later codified as Accounting Standard codification (“ASC”) 326 (“ASC 326”), on July 1, 2023. The guidance introduces a revised approach to the recognition and measurement of credit losses, emphasizing an updated model based on expected losses rather than incurred losses. There was no significant impact on the date of adoption of ASC 326.

Under ASC 326, accounts receivable are recorded at the invoiced amount, net of allowance for expected credit losses. The Company’s primary allowance for credit losses is the allowance for doubtful accounts. The allowance for doubtful accounts reduces the accounts receivable balance to the estimated net realizable value. The Company used a combination of method Aging schedule and Roll-rate method to assess the reasonability and adequacy of current allowance.

In establishing any required allowance, management considers historical losses adjusted for current market conditions, the Company’s customers’ financial condition, the amount of any receivables in dispute, the current receivables aging, current payment terms and expectations of forward-looking loss estimates.

All provisions for the allowance for doubtful accounts are included as a component of general and administrative expenses on the accompanying consolidated statements of operations and comprehensive loss. Accounts receivable deemed uncollectible are charged against the allowance for credit losses when identified. Subsequent recoveries of amounts previously written off are credited to earnings in the period recovered. As of June 30, 2025 and 2024, the Company had a $0 bad debt allowance for credit losses.

F-18

INVENTORY

PROPERTY AND EQUIPMENT

Property and equipment are stated at cost, less accumulated depreciation. Major repairs and improvements that significantly extend original useful lives or improve productivity are capitalized and depreciated over the period benefited. Maintenance and repairs are expensed as incurred. When property and equipment are retired or otherwise disposed of, the related cost and accumulated depreciation are removed from the respective accounts, and any gain or loss is included in operations. Depreciation of property and equipment is provided using the straight-line method over estimated useful lives as follows:

Furniture and fixtures		3-5 years
Office equipment		3-5 years
Vehicles		5 years
Leasehold improvement		3 years

Leasehold improvements are depreciated utilizing the straight-line method over the shorter of their estimated useful lives or remaining lease term.

INTANGIBLE ASSETS

Intangible assets with finite lives are amortized using the straight-line method over their estimated period of benefit. Evaluation of the recoverability of intangible assets is made to take into account events or circumstances that warrant revised estimates of useful lives or that indicate that impairment exists. All of the Company’s intangible assets are subject to amortization. In accordance with the Generally Accepted Accounting Principles (ASC) 360-10-35-21 of the United States, no impairment of intangible assets has been identified as of the balance sheet date.

Intangible assets include licenses, certificates, patents and other technology and are amortized over their useful life of three years.

FAIR VALUE (“FV”) OF FINANCIAL INSTRUMENTS

The carrying value of the Company’s short-term financial instruments, such as cash, accounts receivable, prepaid expenses, accounts payable, unearned revenue, accrued expenses and other payables approximates their FV due to their short maturities. FASB ASC Topic 825, “Financial Instruments,” requires disclosure of the FV of financial instruments held by the Company. The carrying amounts reported in the balance sheets for current liabilities qualify as financial instruments and are a reasonable estimate of their FV because of the short period of time between the origination of such instruments and their expected realization and the current market rate of interest.

F-19

FAIR VALUE MEASUREMENTS AND DISCLOSURES

FASB ASC Topic 820, “Fair Value Measurements,” defines FV, and establishes a three-level valuation hierarchy for disclosures that enhances disclosure requirements for FV measures. The three levels are defined as follows:

●

Level 1 inputs to the valuation methodology are quoted prices (unadjusted) for identical assets or liabilities in active markets.

●

Level 2 inputs to the valuation methodology include other than those in level 1 quoted prices for similar assets and liabilities in active markets, and inputs that are observable for the asset or liability, either directly or indirectly, for substantially the full term of the financial instrument.

●

Level 3 inputs to the valuation methodology are unobservable and significant to the FV measurement.

As of June 30, 2025 and 2024, the Company did not identify any assets or liabilities required to be presented on the balance sheet at FV on a recurring basis.

IMPAIRMENT OF LONG-LIVED ASSETS

In accordance with FASB ASC 360-10, “Accounting for the Impairment or Disposal of Long-Lived Assets”, long-lived assets such as property and equipment are reviewed for impairment whenever events or changes in circumstances indicate that the carrying value of an asset may not be recoverable, or it is reasonably possible that these assets could become impaired as a result of technological or other changes. The determination of recoverability of assets to be held and used is made by comparing the carrying amount of an asset to future undiscounted cash flows expected to be generated by the asset.

If such assets are considered impaired, the impairment to be recognized is measured as the amount by which the carrying amount of the asset exceeds its FV. FV generally is determined using the asset’s expected future undiscounted cash flows or market value, if readily determinable. Assets to be disposed of are reported at the lower of the carrying amount or FV less cost to sell. For the years ended June 30, 2025 and 2024, there was no impairment loss recognized on long-lived assets.

UNEARNED REVENUE

The Company records payments received in advance from its customers or sales agents for the Company’s products as unearned revenue, mainly consisting of deposits or prepayment for 5G products from the Company’s sales agencies. These orders normally are delivered based upon contract terms and customer demand, and the Company will recognize it as revenue when the products are delivered to the end customers.

F-20

LEASES

The Company determines if an arrangement is a lease at inception under FASB ASC Topic 842. Right of Use Assets (“ROU”) and lease liabilities are recognized at commencement date based on the present value of remaining lease payments over the lease term. For this purpose, the Company considers only payments that are fixed and determinable at the time of commencement. As most of its leases do not provide an implicit rate, it uses its incremental borrowing rate based on the information available at commencement date in determining the present value of lease payments. The Company’s incremental borrowing rate is a hypothetical rate based on its understanding of what its credit rating would be. The ROU assets include adjustments for prepayments and accrued lease payments. The ROU asset also includes any lease payments made prior to commencement and is recorded net of any lease incentives received. The Company’s lease terms may include options to extend or terminate the lease when it is reasonably certain that it will exercise such options.

ROU assets are reviewed for impairment when indicators of impairment are present. ROU assets from operating and finance leases are subject to the impairment guidance in ASC 360, Property, Plant, and Equipment, as ROU assets are long-lived nonfinancial assets.

ROU assets are tested for impairment individually or as part of an asset group if the cash flows related to the ROU asset are not independent from the cash flows of other assets and liabilities. An asset group is the unit of accounting for long-lived assets to be held and used, which represents the lowest level for which identifiable cash flows are largely independent of the cash flows of other groups of assets and liabilities. The Company recognized no impairment of ROU assets as of June 30, 2025 and 2024.

REVENUE RECOGNITION

The Company follows Accounting Standards Codification Topic 606, Revenue from Contracts with Customers (ASC 606).

The Company derives its revenues from product sales, software sales, and 5G messaging service contracts with its customers, with revenues recognized upon delivery of services and products. Persuasive evidence of an arrangement is demonstrated via product sale contracts and professional service contracts, with performance obligations identified. The transaction price, such as product selling price, and the service price to the customer with corresponding performance obligations are fixed upon acceptance of the agreement. The Company recognizes revenue when it satisfies each performance obligation, the customer receives the products and passes the inspection and when professional service is rendered to the customer, collectability of payment is probable. These revenues are recognized at a point in time after each performance obligations is satisfied. Revenue is recognized net of returns and value-added tax charged to customers

F-21

The following table shows the Company’s revenue by revenue sources:

	For the Year Ended June 30, 2025		For the Year Ended June 30, 2024
5G AI Multimodal communication	$	70,682,408	$	23,600,693
5G AI Multimodal communication		69,438,410		23,600,693
5G AI digital technical service		1,243,998		-
Acoustic Intelligence Business		584,788		3,988
Ultrasonic Sound Air Disinfection Equipment		40,109		3,988
Upgraded Sonic Sterilization and Purification Guardian		246,616		-
Sleep Monitor		298,063		-
Sell of Software		325,908		-
Smart City business		-		-
Smart community		-		37,113

Other		23,716		334,073
Total revenue	$	71,616,820	$	23,975,867

SEGMENT INFORMATION

FASB ASC Topic 280, “Segment Reporting,” requires use of the “management approach” model for segment reporting. The management approach model is based on the method a company’s management organizes segments within the company for making operating decisions and assessing performance. Reportable segments are based on products and services, geography, legal structure, management structure, or any other manner in which management disaggregates a company. Management determined the Company’s current operations constitutes a single reportable segment in accordance with ASC 280. The Company’s only business and industry segment is high technology and advanced information systems (“TAIS”). TAIS includes smart city solutions that meet the security needs of residential communities, schools and commercial enterprises, and 5G messaging services including 5G SMS, 5G MMCP and 5G multi-media video messaging.

All of the Company’s customers are in the PRC and all revenues for the years ended June 30, 2025 and 2024 were generated from the PRC. All identifiable assets of the Company are located in the PRC. Accordingly, no geographical segments are presented.

INCOME TAXES

The Company uses the asset and liability method of accounting for income taxes in accordance with FASB ASC Topic 740, “Income Taxes.” Under this method, income tax expense is recognized for the amount of: (i) taxes payable or refundable for the current period and (ii) deferred tax consequences of temporary differences resulting from matters that have been recognized in an entity’s financial statements or tax returns. Deferred tax assets also include the prior years’ net operating losses carried forward. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in the results of operations in the period that includes the enactment date. A valuation allowance is provided to reduce the deferred tax assets reported if based on the weight of the available positive and negative evidence, it is more likely than not some portion or all of the deferred tax assets will not be realized.

The Company follows FASB ASC Topic 740, which prescribes a more-likely-than-not threshold for financial statement recognition and measurement of a tax position taken or expected to be taken in a tax return. FASB ASC Topic 740 also provides guidance on recognition of income tax assets and liabilities, classification of current and deferred income tax assets and liabilities, accounting for interest and penalties associated with tax positions, accounting for income taxes in interim periods, and income tax disclosures.

F-22

Under the provisions of FASB ASC Topic 740, when tax returns are filed, it is likely some positions taken would be sustained upon examination by the taxing authorities, while others are subject to uncertainty about the merits of the position taken or the amount of the position that would be ultimately sustained. The benefit of a tax position is recognized in the financial statements in the period during which, based on all available evidence, management believes it is more likely than not that the position will be sustained upon examination, including the resolution of appeals or litigation processes, if any. Tax positions taken are not offset or aggregated with other positions. Tax positions that meet the more-likely-than-not recognition threshold are measured as the largest amount of tax benefit that is more than 50 percent likely of being realized upon settlement with the applicable taxing authority. The portion of the benefits associated with tax positions taken that exceeds the amount measured as described above is reflected as a liability for unrecognized tax benefits in the accompanying balance sheets along with any associated interest and penalties that would be payable to the taxing authorities upon examination. Interest associated with unrecognized tax benefits is classified as interest expense and penalties are classified in selling, general and administrative expenses in the statement of income. As of June 30, 2025 and 2024, the Company had no unrecognized tax positions and no charges during the years ended June 30, 2025 and 2024, and accordingly, the Company did not recognize any interest or penalties related to unrecognized tax benefits. The Company files a U.S. and PRC income tax return. With few exceptions, the Company’s U.S. income tax returns filed for the years ending on June 30, 2018 and thereafter are subject to examination by the relevant taxing authorities; the Company uses calendar year-end for its PRC income tax return filing, PRC income tax returns filed for the years ending on December 31, 2019 and thereafter are subject to examination by the relevant taxing authorities.

RESEARCH AND DEVELOPMENT EXPENSES

Research and development expenses are expensed in the period when incurred. These costs primarily consist of cost of materials used, salaries paid for the Company’s development department, and fees paid to third parties.

NONCONTROLLING INTERESTS

The Company follows FASB ASC Topic 810, “Consolidation,” governing the accounting for and reporting of noncontrolling interests (“NCIs”) in partially owned consolidated subsidiaries and the loss of control of subsidiaries. Certain provisions of this standard indicate, among other things, that NCI (previously referred to as minority interests) be treated as a separate component of equity, not as a liability, that increases and decreases in the parent’s ownership interest that leave control intact be treated as equity transactions rather than as step acquisitions or dilution gains or losses, and that losses of a partially-owned consolidated subsidiary be allocated to non-controlling interests even when such allocation might result in a deficit balance.

The net income (loss) attributed to NCI was separately designated in the accompanying statements of operations and comprehensive income (loss). Losses attributable to NCI in a subsidiary may exceed a non-controlling interest’s interests in the subsidiary’s equity. The excess attributable to NCIs is attributed to those interests. NCIs shall continue to be attributed their share of losses even if that attribution results in a deficit NCI balance. On December 20, 2022, Guohao Century acquired a 30% ownership noncontrolling interests of Zhangxun from Zhengmao Zhang at the price of $0.15 (RMB 1.00). The Company recognized a paid in capital deficit of $982,014 from this purchase due to continued loss of Zhangxun. Subsequent to this purchase, the Company ultimately holds a 99.9% ownership of Zhangxun. On July 20, 2023, the Company sold Zhangxun to a third party for RMB 2 ($0.28).

Zhangqi was 1% owned by noncontrolling interest, in November 2023, the Company dissolved Zhangqi. As of December 31, 2023, Shuhai Nanjing was 1% owned by noncontrolling interest, Shenzhen Acoustic MP was 1% owned by noncontrolling interest, Shuhai Shenzhen Acoustic was 0.1% owned by noncontrolling interest, Guozhong Times was 0.091% owned by noncontrolling interest, and Guozhong Haoze was 0.091% owned by noncontrolling interest. During the years ended June 30, 2025 and 2024, the Company had net loss of $432 and $10,695 attributable to the noncontrolling interest from continuing operations, respectively.

F-23

CONCENTRATION OF CREDIT RISK

The Company maintains cash in accounts with state-owned banks within the PRC. Cash in state-owned banks less than RMB500,000 ($76,000) is covered by insurance. Should any institution holding the Company’s cash become insolvent, or if the Company is unable to withdraw funds for any reason, the Company could lose the cash on deposit with that institution. The Company has not experienced any losses in such accounts and believes it is not exposed to any risks on its cash in these bank accounts. Cash denominated in RMB with a U.S. dollar equivalent of $594,722 and $100,788 as of June 30, 2025 and 2024, respectively, was held in accounts at financial institutions located in the PRC‚ which is not freely convertible into foreign currencies.

Cash held in accounts at U.S. financial institutions is insured by the Federal Deposit Insurance Corporation or other programs subject to certain limitations up to $250,000 per depositor. As of June 30, 2025 and 2024, cash of $24,487 and $79,225 was maintained at U.S. financial institutions. Cash was maintained at financial institutions in Hong Kong, and was insured by the Hong Kong Deposit Protection Board up to a limit of HK $500,000 ($64,000). As of June 30, 2025 and 2024, the cash balance of $1,598 and $1,249 was maintained at financial institutions in Hong Kong. The Company, its subsidiaries and VIE have not experienced any losses in such accounts and do not believe the cash is exposed to any significant risk.

FOREIGN CURRENCY TRANSLATION AND COMPREHENSIVE INCOME (LOSS)

The accounts of the Company’s Chinese entities are maintained in RMB and the accounts of the U.S. parent company are maintained in United States dollar (“USD”). The financial statements of the Chinese entities were translated into USD in accordance with FASB ASC Topic 830 “Foreign Currency Matters.” All assets and liabilities were translated at the exchange rate on the balance sheet date; stockholders’ equity is translated at historical rates and the statements of operations and cash flows are translated at the weighted average exchange rate for the period. The resulting translation adjustments are reported under other comprehensive income (loss) in accordance with FASB ASC Topic 220, “Comprehensive Income.” Gains and losses resulting from foreign currency transactions are reflected in the statements of operations.

The Company follows FASB ASC Topic”220-10, “Comprehensive Income (loss).” Comprehensive income (loss) comprises net income (loss) and all changes to the statements of changes in stockholders’ equity, except those due to investments by stockholders, changes in additional paid-in capital and distributions to stockholders.

The exchange rates used to translate amounts in RMB to USD for the purposes of preparing the CFS were as follows:

	June 30,		June 30,
	2025		2024
Period-end date USD: RMB exchange rate		7.1586		7.1268
Average USD for the reporting period: RMB exchange rate		7.1599		7.1326

BASIC AND DILUTED EARNINGS (LOSS) PER SHARE (EPS)

Basic EPS is computed by dividing income available to common shareholders by the weighted average number of common shares outstanding for the period. Diluted EPS is computed similarly, except that the denominator is increased to include the number of additional common shares that would have been outstanding if the potential common shares had been issued and if the additional common shares were dilutive. Diluted EPS is based on the assumption that all dilutive convertible shares and stock options were converted or exercised. Dilution is computed by applying the treasury stock method. Under this method, options and warrants are assumed to have been exercised at the beginning of the period (or at the time of issuance, if later), and as if funds obtained thereby were used to purchase common stock at the average market price during the period.

STATEMENT OF CASH FLOWS

In accordance with FASB ASC Topic 230, “Statement of Cash Flows,” cash flows from the Company’s operations are calculated based upon the local currencies. As a result, amounts shown on the statement of cash flows may not necessarily agree with changes in the corresponding asset and liability on the balance sheet.

F-24

RECENT ACCOUNTING PRONOUNCEMENTS

F-25

NOTE 3 – PROPERTY AND EQUIPMENT

Property and equipment are summarized as follows:

	June 30, 2025		June 30, 2024
Furniture and fixtures	$	47,655	$	77,281
Vehicle		489		491
Leasehold improvement		-		219,945
Office equipment		232,700		241,543
Subtotal		280,844		539,260
Less: accumulated depreciation		255,284		490,794
Total	$	25,560	$	48,466

Depreciation for the years ended June 30, 2025 and 2024 was $13,620 and $32,373, respectively.

NOTE 4 – INTANGIBLE ASSETS

Intangible assets are summarized as follows:

	June 30, 2025		June 30, 2024
Software registration or using right	$	1,963,705	$	1,809,548
Patent		3,862,786		14,729
Software and technology development costs		84,291		11,770
Value-added telecommunications business license		15,518		15,587
Subtotal		5,926,300		1,851,634
Less: Accumulated amortization		2,430,316		1,305,633
Total	$	3,495,984	$	546,001

Software registration or using right represented the purchase cost of customized software with its source code from third party software developer.

Software and technology development cost represented development costs incurred internally after the technological feasibility was established and a working model was produced and was recorded as intangible asset.

On October 14, 2024, Tianjin Information, as the purchaser, entered into a patent purchase agreement with Hangzhou Liuhuan Technology Limited Company (“Liuhuan”), as the seller, for the acquisition of an audio playback system based on voltage following. The total purchase price is RMB 14,900,000 ($2.1 million), inclusive of a 6% VAT, and will be amortized over the three years.

On October 14, 2024, Tianjin Information, as the purchaser, entered into another patent purchase agreement with Hangzhou Liuhuan Technology Limited Company (“Liuhuan”), as the seller, for the acquisition of a B-ultrasound image target detection method and B-ultrasound scanner. The total purchase price is RMB 14,300,000 ($2.0 million), inclusive of a 6% VAT, and will be amortized over the three years.

Amortization for the years ended June 30, 2025 and 2024 was $1,125,644 and $462,107, respectively. The amortization expense for the next five years as of June 30, 2025 will be $1,528,937, $1,463,138, $503,909, $0 and $0.

F-26

NOTE 5 – PREPAID EXPENSES AND OTHER CURRENT ASSETS

Prepaid expenses and other current assets consisted of the following:

	June 30, 2025		June 30, 2024
Security deposit	$	57,395	$	64,041
Prepaid expenses		489,365		1,225,612
Other receivables – Heqin		458,190		467,250
Advance to third party individuals, no interest, payable upon demand		32,860		154,345
Others		29,873		42,958
Total		1,067,683		1,954,206
Less: allowance for other receivables		484,033		467,250
Total	$	583,650	$	1,486,956

As of June 30, 2025, prepaid expenses mainly consisted of input VAT for purchasing patents of $230,887, prepayment of 5G messaging service fee recharge of $9,633, prepaid professional fee of $2,225, prepayment for inventory purchase of $145,868, prepaid rent and property management fee of $5,841, prepaid promotion service fee of $58,671 and other prepayments of $36,240.

As of June 30, 2024, prepaid expenses mainly consisted of prepaid marketing expense of $946,954 (see below), prepaid telecommunication service fee (mainly including SMS and MMS services) of $198,559, prepaid rent and property management fees of $3,508 and other prepayments of $76,591.

Prepaid marketing expense

On September 16, 2023, Tianjin Information entered an Operation Cooperation Agreement with an unrelated company, Beijing Jincheng Haoda Construction Engineering Co., Ltd (“Jincheng Haoda”), for marketing and promoting the sale of 5G messaging and acoustic intelligence series products in oversea market. The cooperation term is from September 16, 2023 through September 15, 2026. Jincheng Haoda is committed to complete RMB 200 million sales performance in the first year, RMB 300 million sales performance in the second year, and RMB 400 million sales performance in the third year. The Company will pay 25% of the sales amount to Jincheng Haoda as marketing fee upon receipt of the sales amount, on monthly basis. As of June 30, 2024, the Company made a prepayment of RMB 14,997,000 ($2,088,777) to Jincheng Haoda for facilitating the quick capture of the market for the Company’s products, the prepayment was the 30% of marketing service fee of first year’s target sales to be completed by Jincheng Haoda. During the service term, the Company will perform the annual assessment, if Jincheng Haoda was not able to achieve the target annual sales, and did not reach 30% of target annual sales amount, Jincheng Haoda shall return the Company’s prepayment after deducting the marketing service fee of the actual sales. In addition, under the circumstance Jincheng Haoda did not complete the 30% of the annual target sales, Jincheng Haoda will indemnify the Company 20% of marketing service fee of unachieved sales amount from the 30% of the annual target sales. For the year ended June 30, 2025, the Company recorded an amortization of prepaid expense of $0.53 million in the selling expense; this prepaid marketing expense was fully amortized as of September 30, 2024.

On September 18, 2023, Tianjin Information entered an Operation Cooperation Agreement with an unrelated company, Beijing Jiajia Shengshi Trading Co., Ltd (‘Jiajia Shengshi”), for marketing and promoting the sale of 5G messaging and acoustic intelligence series products in domestic market. The cooperation term is from September 18, 2023 through September 17, 2026. Jiajia Shengshi is committed to complete RMB 200 million sales performance in the first year, RMB 300 million sales performance in the second year, and RMB 500 million sales performance in the third year. The Company will pay 20% of the sales amount to Jiajia Shengshi as marketing fee upon receipt of the sales amount, on a monthly basis. As of June 30, 2024, the Company made a prepayment of RMB 11,998,000 ($1,671,077) to Jiajia Shengshi for facilitating the quick capture of the market for the Company’s products, the prepayment was the 30% of marketing service fee of first year’s target sales to be completed by Jiajia Shengshi. During the service term, the Company will perform the annual assessment, if Jiajia Shengshi was not able to achieve the target annual sales, and did not reach 30% of target annual sales amount, Jiajia Shengshi shall return the Company’s prepayment after deducting the marketing service fee of the actual sales. In addition, under the circumstance Jiajia Shengshi did not complete the 30% of the annual target sales, Jiajia Shengshi will indemnify the Company 20% of marketing service fee of unachieved sales amount from the 30% of the annual target sales. For the year ended June 30, 2025, the Company recorded an amortization of prepaid expense of $0.42 million in the selling expense; this prepaid marketing expense was fully amortized as of September 30, 2024.

F-27

Other receivables – Heqin

On February 20, 2020, Guozhong Times entered an Operation Cooperation Agreement with an unrelated company, Heqin (Beijing) Technology Co, Ltd. (“Heqin”), for marketing and promoting the sale of Face Recognition Payment Processing equipment and related technical support, and other products of the Company including Epidemic Prevention and Control Systems. Heqin has a sales team which used to work with Fortune 500 companies and specializes in business marketing and sales channel establishment and expansion, especially in education industry and public area.

The cooperation term is from February 20, 2020 through March 1, 2023; however, Heqin is the exclusive distributor of the Company’s face Recognition Payment Processing products for the period to July 30, 2020. During March and April 2020, Guozhong Times provided operating funds to Heqin, together with a credit line provided by Guozhong Times to Heqin from May 2020 through August 2020, for a total borrowing of RMB 10 million ($1.41 million) for Heqin’s operating needs. As of March 31, 2023, Guozhong Times had an outstanding receivable of RMB 3.53 million ($513,701) from Heqin and was recorded as other receivables. The Company would not charge Heqin any interest, except for two loans of RMB 200,000 ($28,250) each, due on June 30, 2020 and August 15, 2020, respectively, for which the Company charges 15% interest if Heqin did not repay by the due date.

No profits will be allocated and distributed before full repayment of the borrowing. After Heqin pays in full the borrowing, Guozhong Times and Heqin will distribute profits of sale of Face Recognition Payment Processing equipment and related technical support at 30% and 70% of the net income, respectively. The profit allocation for the sale of other products of the Company are to be negotiated. Heqin will receive certain stock reward when it reaches the preset sales target under the performance compensation mechanism.

In November 2022, Hangzhou Yuetianyun Data Technology Company Ltd (“Yuetianyun”) agreed and acknowledged a Debt Transfer Agreement, wherein Heqin transferred its debt from Yuetianyun to Guozhong Times in the amount of RMB 1,543,400 ($213,596). For the years ended June 30, 2025 and 2024, repayment of $6,983 (through Yuetianyun) and $nil was received. As of June 30, 2025 and 2024, Heqin made $55,877 (through Yuetianyun) and $48,438 repayment to the Company, and the Company made a bad debt allowance of $458,190 and $467,250 as of June 30, 2025 and 2024, respectively.

NOTE 6 – Unearned revennue

The balance of unearned revenue was $150,088 and $49,239 as of June 30, 2025 and 2024, respectively.

The following presents the roll-forward schedule of unearned revenue for the years ended June 30, 2025 and 2024:

	Years Ended June 30,
	2025			2024
Balance, beginning of period	$	49,239		$	609,175
Received during the period, amount excluding VAT		70,360,822			23,503,024
Transferred to revenue		(70,259,771	)		(23,975,867	)
Effect of foreign currency translation		(202	)		(87,093	)
Balance, end of period	$	150,088		$	49,239

F-28

NOTE 7 – ACCRUED EXPENSES AND OTHER PAYABLES

Accrued expenses and other payables consisted of the following:

	June 30, 2025		June 30, 2024
Other payables	$	50,201	$	174,668
Due to third parties		178		59,126
Security deposit		10,617		15,456
Social security payable		431,262		288,578
Salary payable – employees		55,448		58,886
Total	$	547,706	$	596,714

Due to third parties were the short-term advance from third party individual or companies, bear no interest and payable upon demand.

NOTE 8 – LOANS PAYABLE

Loan from banks

On December 12, 2022, Beijing Shuhai entered a loan agreement with Shenzhen Qianhai WeBank Co., Ltd for the amount of RMB 900,000 ($129,225) with a term of 24 months, the interest rate was 10.728% to be paid every 20^th of each month. For the years ended June 30, 2025 and 2024, the Company made a repayment of $36,081 and $72,104 to this loan. For the years ended June 30, 2025 and 2024, the Company recorded and paid $269 and $8,194 interest expense for this loan. On July 15, 2024, the loan was paid in full.

On January 13, 2023, Shenzhen Jingwei entered a loan agreement with Shenzhen Qianhai WeBank Co., Ltd for the amount of RMB 100,000 ($14,552) with a term of 24 months, the interest rate was 8.6832%. For the years ended June 30, 2025 and 2024, the Company made a repayment of $4,677 and $8,012 to this loan. For the years ended June 30, 2025 and 2024, the Company recorded and paid $37 and $796 interest expense for this loan. On July 16, 2024, the loan was paid in full.

F-29

The following table summarizes the loan balance as of June 30, 2025:

Lendor	Loan amount		Borrowing date	Loan term: Months	Interest rate			Outstanding balance
Bank of China	$	838,155	3/31/2025	12		2.30	%	$	838,155
Bank of Beijing		419,076	5/20/2025	12		3.00	%		419,076
Beijing Rural Commercial Bank Economic and Technological Development Zone Branch (4.95%)		139,692	5/21/2025	12		4.95	%		139,692
Bank of Beijing		419,076	6/6/2025	12		2.70	%		419,076
Bank of China		558,768	6/10/2025 and 6/13/2025	12		2.30	%		558,768
Total	$	2,374,767						$	2,374,767

F-30

NOTE 9 – RELATED PARTY TRANSACTIONS

On October 1, 2020, the Company’s CEO (also the president) entered into an office rental agreement with Xunrui. Pursuant to the agreement, the Company rents an office in Harbin city with a total payment of RMB 163,800 ($24,050) from October 1, 2020 through September 30, 2021. On October 1, 2021, Xunrui entered a new seven-month lease for this location with the Company’s CEO for total rent of RMB 94,500 ($14,690). The lease expired on April 30, 2022. On May 1, 2022, Xunrui entered a new one-year lease agreement for this office with the Company’s CEO for an annual rent of RMB 235,710 ($35,120), the Company was required to pay the rent before April 30, 2023. On May 1, 2023, Xunrui entered a new one-year lease agreement for this office location with the Company’s CEO for an annual rent of RMB 282,852 ($39,144), the Company is required to pay the rent before April 30, 2024. On May 1, 2024, Xunrui entered a new one-year lease agreement for this office location with the Company’s CEO for an annual rent of RMB 282,852 ($39,657), the Company is required to pay the rent before April 30, 2025. On September 10, 2024, the Company signed a rent reduction agreement with the Company’s CEO, reducing the annual rent for the period from May 1, 2022, to April 30, 2025, to RMB 50,000 ($7,026), The Company is required to pay the rent before April 30, 2025. On June 24, 2025, the Company paid all the outstanding rents up to April 30, 2025 to the CEO. On May 1, 2025, Xunrui entered a new one-year lease agreement for this office location with the Company’s CEO for an annual rent of RMB 50,000 ($6,983), the Company is required to pay the rent before April 30, 2026. The rental expense for this office location was $6,983 and $39,657 (without rent reduction occurred on September 10, 2024), respectively, for the years ended June 30, 2025 and 2024.

On July 1, 2022, the Company entered a one-year lease for two cars with the Company’s CEO for each car’s monthly rent of RMB 18,000 ($2,636) and RMB 20,000 ($2,876), respectively. On July 1, 2023, the Company entered a new one-year lease for two cars with the Company’s CEO for each car’s monthly rent of RMB 18,000 ($2,491) and RMB 20,000 ($2,768), respectively. On July 1, 2024, the Company entered a new one-year lease for two cars with the Company’s CEO for each car’s monthly rent of RMB 18,000 ($2,524) and RMB 20,000 ($2,804), respectively. The rental expense for those agreements was $63,688 and $63,932, respectively, for the years ended June 30, 2025 and 2024. On December 10, 2024, the Company’s CEO entered into an agreement with the Company to waive the payment of rental expenses of both vehicles for the outstanding balance up to June 30, 2025. The Company recorded such waive as shareholder’s capital contribution to the Company because the CEO is also the major shareholder of the Company.

On September 1, 2022, the Company entered a six-month lease for senior officers’ dormitory in Beijing for a total rent of RMB 91,200 ($13,355), payable every three months in advance. On March 1, 2023, the Company entered a new six-month lease for a total rent of RMB 91,200 ($12,621), payable every three months in advance. On September 1, 2023, the Company entered a new one-year lease for a monthly rent of RMB 12,500 ($1,743), payable every three months in advance. On September 1, 2024, the Company entered a three-month lease for a monthly rent of RMB 12,500 ($1,756), payable in advance. The lease was not renewed at maturity. The rental expense for this lease was $10,475 and $21,787 for the years ended June 30, 2025 and 2024, respectively.

Due to related parties

As of June 30, 2025 and 2024, the Company had due to related parties of $6,126 and $654,560, respectively. Due to related parties of $6,126 at June 30, 2025, mainly consisted of 1) $6,126 certain expenses of the Company that were paid by the CEO, which was bore no interest and payable upon demand.

F-31

Due to related parties of $654,560 at June 30, 2024, mainly consisted of $500,213 payable of an office lease from the Company’s CEO, accrued salary payable, and certain expenses of the Company that were paid by the CEO and her father (one of the Company’s directors), bore no interest and payable upon demand, and 2) $154,347 loan payable to a related party (who is the shareholder of the Company), with no interest, and can be repaid any time before December 31, 2024. As of June 30, 2025, the Company’s CEO forgave a loan of $246,857 (RMB 1,620,000) that was previously provided to the Company. In addition, her father, a director of the Company (also the shareholder of the Company), forgave a separate loan of $32,000. The Company recorded the loan forgiveness as shareholders’ capital contribution to the Company.

NOTE 10 – COMMON STOCK AND WARRANTS

Shares Issued for Equity Financing

On July 2, 2024, the Company entered into a securities purchase agreement, pursuant to which the Company agreed to issue and sell to an investor in a registered direct offering 179,400 shares of the Company’s common stock, at a price of $3.25 per share and pre-funded warrants to purchase up to 512,908 shares of Common Stock at a price of $3.24 per share with an exercise price of $0.01 per share (the “Pre-Funded Warrants”). The Pre-Funded Warrants are exercisable upon issuance and will remain exercisable until all the Pre-Funded Warrants are exercised in full. In connection with the Offering, on July 2, 2024, the Company entered into a placement agency agreement with EF Hutton LLC (the “Placement Agent”). Pursuant to the terms of the placement agency agreement, the Company will pay the placement agent a cash fee of 6.5% of the gross proceeds the Company receives in the offering at closing. The Company also agreed to reimburse the Placement Agent at the closing of the Offering, for expenses incurred, including disbursements of its legal counsel, in an amount not to exceed an aggregate of $75,000. The closing of the offering occurred on July 3, 2024. The Pre-Funded Warrants were exercised in full as of December 31, 2024.

On September 27, 2024, the Company entered into subscription agreements with three non-U.S. investors, including Zhixin Liu, the Company’s Chairman of the Board, Chief Executive Officer, President and Secretary, and Fu Liu, a Director of the Company, pursuant to which the Company agreed to sell and the investors agreed to purchase an aggregate of 1,932,224 shares of the Company’s common stock, at a purchase price of $2.06 per share, which was equal to the closing price of the Common Stock on The Nasdaq Capital Market on September 26, 2024. Pursuant to the terms of the subscription agreements, each Investor must pay the purchase price for the number of shares such Investor purchased within 15 days of the effective date. As of September 30, 2024, the Company issued all the shares to three investors, and the purchase price was received in full from each investor as of October 15, 2024, representing gross proceeds in the aggregate amount of approximately $4.0 million.

Shares Issued for Acquiring Intangible Assets from Related Parties

On August 9, 2024, the Company entered into an intellectual property purchase agreement with Ms. Zhixin Liu, the Company’s Chairwoman and CEO, pursuant to which Ms. Zhixin Liu transferred to the Company two intangible assets (software copyrights) owned by her personally. The Committee has decided to grant Zhixin Liu 398,925 restricted shares for the purchase of this software.

On August 9, 2024, the Company entered into an intellectual property purchase agreement with Mr. Fu Liu, the Company’s director of board, pursuant to which Mr. Fu Liu transferred to the Company two intangible assets (software copyrights) owned by himself. The Committee has decided to grant Fu Liu 398,925 restricted shares for the purchase of this software.

F-32

The purchase was accounted for at the historical cost of the intangible assets which was $0. Fu Liu is the father of Zhixin Liu, together, they own approximately 43.75% of the Company’s common stock prior to this transaction; and they own 51.29% of the Company’s common stock after this transaction.

On April 1, 2025, the Company entered into an intellectual property purchase agreement with Mr. Fu Liu, the Company’s director of board, pursuant to which Mr. Fu Liu transferred to the Company two intangible assets (software copyrights) owned by himself. The Committee has decided to grant Fu Liu 369,403 restricted shares for the purchase of this software.

Shares to Independent Directors as Compensation

During the years ended June 30, 2025 and 2024, the Company recorded $15,000 and $18,000 stock compensation expense to independent directors through the issuance of shares of the Company’s common stock at the market price of the stock issuance date, pursuant to the 2018 Equity Incentive Plan.

Shares to Officers as Compensation

On September 24, 2021, under the 2018 Equity Inventive plan, the Company’s Board of Directors granted 1,000 shares of the Company’s common stock to its CEO each month and 667 shares to one of the board members each month starting from July 1, 2021, payable quarterly with the aggregate number of shares for each quarter being issued on the first day of the next quarter at a per share price of the closing price of the day prior to the issuance. On June 12, 2024, the Board of Directors approved that starting from February 1, 2024, the Company agreed to grant 15,000 shares of the Company’s common stock to its CEO each month and 10,000 shares to one of the board members each month, payable quarterly with the aggregate number of shares for each quarter being issued on the first day of the next quarter at a per share price of the closing price of the day prior to the issuance. During the years ended June 30, 2025 and 2024, the Company recorded $881,250 and $889,128 stock compensation expense to the Company’s CEO and one of the board members.

Shares to individual Consultants

During the year ended June 30, 2025, the Company issued 325,000 shares of the Company’s common stock to five non-affiliate individual consultants for the services they provided, the share issuance was fully vested and approved by Compensation Committee (the “Committee”) of the Board of Directors under the 2018 Equity Incentive Plan. The fair value of 325,000 shares at issuance date was $737,750 and was recorded as the Company’s stock compensation expense.

Shares to Officers in Lieu of Salary Payable

On February 28, 2025, the Board of Directors approved to issue 84,744 shares to the Company’s CEO and one of the board members in lieu of payment for salary payable of $258,841.

NOTE 11 – INCOME TAXES

The Company is subject to income taxes by entity on income arising in or derived from the tax jurisdiction in which each entity is domiciled. The Company’s PRC subsidiaries file their income tax returns online with PRC tax authorities. The Company conducts all of its businesses through its subsidiaries and affiliated entities, principally in the PRC.

The Company’s U.S. parent company is subject to U.S. income tax rate of 21% and files U.S. federal income tax return. As of June 30, 2025 and 2024, the U.S. entity had net operating loss (“NOL”) carry forwards for income tax purposes of $9.35 million and $5.60 million. The NOL arising in tax years beginning after 2017 may reduce 80% of a taxpayer’s taxable income, and be carried forward indefinitely. However, the Coronavirus Aid, Relief and Economic Security Act (“the CARES Act”) passed in March 2020, provides tax relief to both corporate and noncorporate taxpayers by adding a five-year carryback period and temporarily repealing the 80% limitation for NOLs arising in 2018, 2019 and 2020. Management believes the realization of benefits from these losses remains uncertain due to the parent Company’s limited operating history and continuing losses. Accordingly, a 100% deferred tax asset valuation allowance was provided.

F-33

The Company’s offshore subsidiary, Shuhai Skill (HK), a HK holding company is subject to 16.5% corporate income tax in HK. Shuhai Beijing received a tax holiday with a 15% corporate income tax rate since it qualified as a high-tech company. Tianjin Information, Xunrui, Guozhong Times, Guozhong Haoze, Guohao Century, Jingwei, Shuhai Nanjing are subject to the regular 25% PRC income tax rate.

As of June 30, 2025 and 2024, the Company has approximately $18.08 million and $17.86 million of NOL from its HK holding company, PRC subsidiaries and VIEs that expire in calendar years 2025 through 2029. In assessing the realization of deferred tax assets, management considers whether it is more likely than not that some portion or all of the deferred tax assets will not be realized. The ultimate realization of deferred tax assets depends upon the Company’s future generation of taxable income during the periods in which temporary differences representing net future deductible amounts become deductible. Management considers the scheduled reversal of deferred tax liabilities, projected future taxable income and tax planning strategies in making this assessment. After consideration of all the information available, management believes that significant uncertainty exists with respect to future realization of the deferred tax assets and has therefore established a full valuation allowance as of June 30, 2025 and 2024.

The following table reconciles the U.S. statutory rates to the Company’s effective tax rate for the years ended June 30, 2025 and 2024:

	2025			2024
US federal statutory rates		(21.0	)%		(21.0	)%
Tax rate difference – current provision		(2.1	)%		(1.4	)%
Permanent difference		7.9	%		6.8	%
Effect of PRC tax holiday		(1.9	)%		1.3	%
Valuation allowance		17.0	%		14.3	%
Effective tax rate		(0.1	)%		-	%

The Company’s net deferred tax assets as of June 30, 2025 and 2024 is as follows:

	June 30, 2025			June 30, 2024
Deferred tax asset
Net operating loss	$	5,408,433		$	4,777,372
R&D expense		-			123,750
Depreciation and amortization		236,991			81,079
Bad debt expense		120,987			116,718
Social security and insurance accrual		66,298			56,343
Inventory impairment		38,220			13,402
ROU, net of lease liabilities		(941	)		(951	)
Total		5,869,988			5,167,713
Less: valuation allowance		(5,869,988	)		(5,167,713	)
Net deferred tax asset	$	-		$	-

F-34

NOTE 12 – COMMITMENTS

Leases

On November 8, 2023, Shuhai Beijing entered into a new lease agreement for its office in Beijing. Pursuant to the agreement, the agreement commenced on November 8, 2023 and expired on December 7, 2024, and has a monthly rent of RMB 17,358 (or $2,425). The deposit was RMB 56,762 (or $7,929). The Company received a one-month rent abatement.

On November 8, 2023, Tianjin information entered into a lease agreement for its office in Beijing. Pursuant to the agreement, the agreement commenced on November 8, 2023 and expired on December 7, 2024, and has a monthly rent of RMB 60,195 (or $8,409). The deposit was RMB 196,838 (or $27,496). The Company received a one-month rent abatement.

In August 2020, the Company entered into a lease for an office in Shenzhen City, China for three years from August 8, 2020 through August 7, 2023, with a monthly rent of RMB 209,911 ($29,651) for the first year. The rent will increase by 3% each year starting from the second year. The lease expired at maturity without renewal.

On May 10, 2023, Guo Hao Century entered into a lease for the office in Hangzhou City, China from May 10, 2023 to May 9, 2025. The security deposit is RMB 115,311 ($7,670). The quarterly rent is as follows:

Start Date	End Date	Rent expense
		RMB		USD
5/10/2023	8/9/2023		43,786	$	6,060
8/10/2023	11/9/2023		66,038		9,139
11/10/2023	2/9/2024		66,038		9,139
2/10/2024	5/9/2024		64,602		8,940
5/10/2024	8/9/2024		66,038		9,139
8/10/2024	11/9/2024		66,038		9,139
11/10/2024	2/9/2025		66,038		9,139
2/10/2025	5/9/2025		63,884	$	8,841

On September 30, 2023, the lease was early terminated due to the management’s decision of transferring operations in Hangzhou to Beijing headquarter office for maximizing the efficiency and cost saving.

On August 16, 2024, Shenzhen Jingwei entered into a lease agreement for its office in Shenzhen. Pursuant to the agreement, the lease commenced on August 16, 2024 with expiration on August 15, 2027, and has a monthly rent of RMB 48,238 (or $6,778). The deposit was RMB 239,068 (or $33,592). The Company received a five-month rent abatement.

On November 29, 2024, Shuhai Information entered into a lease agreement for an office in Beijing City, China from March 1, 2025 to February 29, 2028, with a monthly rent of RMB 24,965 ($3,498), payable every three months in advance. For the first three months, the Company received a rent discount and only needs to pay RMB 37,447 ($3,498) rent expense. The security deposit is RMB 161,758 ($22,503).

On December 10, 2024, the Company entered into a lease agreement for an office in Beijing City, China for 15 months from December 10, 2024 through March 10, 2026, with a monthly rent of RMB 7,000 ($981), payable every three months in advance. The security deposit is RMB 7,000 ($981).

F-35

The Company adopted FASB ASC Topic 842 on July 1, 2019. The components of lease costs, lease term and discount rate with respect of the Company’s office lease and the senior officers’ dormitory lease with an initial term of more than 12 months are as follows:

		Year Ended June 30, 2025				Year Ended June 30, 2024
Operating lease expense		$	136,506			$	167,969

	June 30, 2025			June 30, 2024
Right-of-use assets	$	292,065		$	49,345
Lease liabilities - current		128,525			53,530
Lease liabilities - noncurrent		166,436			-
Weighted average remaining lease term		2.31 years			0.36 years
Weighted average discount rate		3.60% - 6.75	%		6.25	%

The following is a schedule, by years, of maturities of the operating lease liabilities as of June 30, 2025:

12 Months Ending June 30,	Minimum Lease Payment
2026	$	137,532
2027		133,078
2028		38,125
Total undiscounted cash flows		308,735
Less: imputed interest		13,774
Present value of lease liabilities	$	294,961

NOTE 13 – SUBSEQUENT EVENTS

The Company follows the guidance in FASB ASC 855-10 for the disclosure of subsequent events. The Company evaluated subsequent events through the date the financial statements were issued and determined the Company had the following subsequent events that need to be disclosed.

On July 1, 2025, Shuhai Information and Beijing Shuhai Culture Media Co., Ltd. entered into four Software Copyrights Transfer Agreements. According to the terms of the agreements, Beijing Shuhai Culture Media Co., Ltd. will transfer ownership of four software copyrights to Shuhai Information as follows:

Patent No. 2025SR0872529, an AI multimodal order analysis system 1.0, with a transfer price of RMB 2.9 million (approximately $0.41 million).

Patent No. 2025SR0873205, a multimodal marketing program management system 1.0, with a transfer price of RMB 3.0 million (approximately $0.42 million).

Patent No. 2025SR0873203, a service provider’s marketing service system, with a transfer price of RMB 2.8 million (approximately $0.39 million).

Patent No. 2025SR0872724, a consumer comprehensive labeling system, with a transfer price of RMB 2.7 million (approximately $0.38 million).

The Company paid purchase price in full for all the software copyrights in July 2025.

F-36

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Source: View Original Filing on SEC EDGAR

FAQ

What is DATASEA Inc.'s (DTSS) accumulated deficit as of June 30, 2025?

The company reported an accumulated deficit of approximately $44.53 million as of June 30, 2025.

Does DATASEA disclose any going concern issues in its 10-K?

Yes, the company states that historical recurring losses raise substantial doubt about its ability to continue as a going concern.

How did DATASEA finance operations in fiscal 2024–2025?

The company completed a registered offering that produced about $4.0 million gross proceeds in 2024 and used multiple credit lines and loans; several loans were paid in full during FY2025.

What market opportunities does DATASEA identify in the filing?

The filing cites the China acoustic components market projected to exceed RMB46 billion by 2025 (CAGR 15.6%) and smart voice services of RMB28.5 billion in 2021 with 44% year-on-year growth.

Are there significant related-party transactions disclosed?

Yes. The filing discloses leases, loan forgiveness by the CEO and her father recorded as shareholder capital contributions, and other related-party payables and guarantees.

[10-K] DATASEA INC. Files Annual Report

Insights

FAQ

What is DATASEA Inc.'s (DTSS) accumulated deficit as of June 30, 2025?

Does DATASEA disclose any going concern issues in its 10-K?

How did DATASEA finance operations in fiscal 2024–2025?

What market opportunities does DATASEA identify in the filing?

Are there significant related-party transactions disclosed?

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[10-K] DATASEA INC. Files Annual Report

Insights

Financial Analyst negative

Corporate Governance Expert neutral

FAQ

What is DATASEA Inc.'s (DTSS) accumulated deficit as of June 30, 2025?

Does DATASEA disclose any going concern issues in its 10-K?

How did DATASEA finance operations in fiscal 2024–2025?

What market opportunities does DATASEA identify in the filing?

Are there significant related-party transactions disclosed?

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