DATASEA INC. SEC 10-K Report

Datasea Inc., a leading innovator in acoustic technology and AI multimodal digitalization, has released its annual Form 10-K report, showcasing substantial financial growth, strategic business expansions, and a clear focus on future technological advancements. The report highlights the company's impressive revenue increase, operational achievements, and strategic initiatives aimed at solidifying its market position both domestically and internationally.

Financial Highlights

Revenues: Datasea Inc. reported revenues of $71.62 million, marking an impressive increase of $47.64 million or 198.7% compared to the previous year. This growth was primarily driven by the rapid expansion of the 5G AI multimodal digital business in China.

Gross Profit: The company achieved a gross profit of $2.44 million, an increase of $1.97 million or 415.49% from the previous year. The gross margin improved to 3.4% from 2.0%, attributed to high-margin customized solution projects and increased market share.

Loss from Operations: Datasea reported a loss from operations of $(5.15) million, a decrease in loss by $6.97 million or 58.4% compared to the previous year. This improvement was due to increased gross profit and decreased operating expenses.

Net Loss to the Company: The net loss was $(5.09) million, a reduction in net loss by $6.29 million or 55.3% from the previous year, reflecting improved financial performance and cost management.

Business Highlights

Acoustic High-Tech Segment: Datasea focuses on the innovation of acoustic technology, particularly in non-hearable mechanical wave effects. Applications include environmental purification, health management, and industrial precision processing. The company has launched products like ultrasonic air purifiers and non-contact ultrasonic skin repair devices.

AI Multimodal Digitalization Segment: The company invests in AI multimodal digital technology, integrating 5G networks with AI and big data to create a comprehensive platform. This platform supports industries such as healthcare, logistics, and rural revitalization, offering services like intelligent marketing and business process automation.

Geographical Performance: Datasea operates primarily in China, with expanding operations in the United States through its subsidiary, Datasea Acoustics LLC. The company is promoting acoustic products and patent deployment in the U.S. market.

Sales and Distribution: The company has established a sales network in China, covering 463 beauty and health stores, and utilizes online platforms like Douyin and Xiaohongshu for live-streaming e-commerce. In the U.S., distribution partnerships with companies like iPower Inc. and Meglio Interiors LLC are in place.

New Product Launches: Datasea has introduced several new products, including ultrasonic disinfection devices, Schumann frequency sleep monitors, and ultrasonic skin repair devices. These products are designed for various settings, such as hospitals, airports, and residential areas.

Future Outlook: The company aims to become a global leader in acoustic technology and AI-driven enterprises, focusing on expanding the application of acoustic technologies across industries. Datasea plans to enhance its product offerings and market reach through continuous R&D and strategic partnerships.

Strategic Initiatives

Datasea Inc. is focusing on expanding its 5G AI multimodal digital business and acoustic intelligence business, with continuous product innovation and development. The company is also pursuing international market expansion, particularly in the U.S. and Europe, through partnerships and localized product introductions. Additionally, Datasea is actively seeking M&A opportunities to enhance its technological capabilities and market presence, particularly in the acoustics and AI sectors.

Capital Management: The company has been funding its operations primarily through the sale of common stock and shareholder loans. In October 2024, Datasea entered into subscription agreements with non-U.S. investors, raising approximately $4.0 million to support investments in acoustic high-tech products, working capital for mass production, and the promotion of AI multimodal digital business products. The company also secured several bank loans to enhance financial liquidity and support operational needs.

Future Outlook: Datasea plans to continue increasing R&D investment, particularly in the integration of acoustic technologies with AI, and to accelerate market expansion both domestically and internationally. The company aims to optimize its product mix by increasing the proportion of high-margin offerings and transitioning its acoustic high-tech business to integrated 'hardware + AI platform' solutions. Datasea is also focused on achieving high-quality growth and enhancing profitability through customized solutions and high-value-added services.

Challenges and Risks

The company faces significant risks related to its limited operating history in the highly competitive fields of acoustics high-tech and AI multimodal digital products. Despite revenue growth, the company continues to incur recurring losses, raising concerns about its ability to sustain operations without additional capital. The auditors have expressed substantial doubt about the company's ability to continue as a going concern due to its financial condition, including a net loss of $5.09 million in fiscal year 2025 and an accumulated deficit of $44.53 million.

The company anticipates needing additional capital to fund future growth, which may involve incurring debt or issuing new equity, potentially diluting existing shareholders. The ability to secure additional funding is uncertain and subject to various factors, including investor perceptions and regulatory conditions in China and the U.S.

Operational risks include reliance on third-party contract manufacturers, which could lead to increased costs or delays in fulfilling orders. Supply chain issues, such as financial problems of manufacturers or component suppliers, could adversely impact the company's business.

The company is also exposed to risks related to rapid technological changes and evolving industry standards, which require continuous investment in R&D and adaptation to maintain competitiveness. Failure to anticipate these changes could result in obsolete inventory and reduced profitability.

Regulatory risks are significant, particularly concerning the company's corporate structure involving Variable Interest Entities (VIEs) in China. Changes in PRC laws or their interpretation could force the company to alter its structure, potentially losing control over its operations and affecting its financial results.

Management acknowledges the challenges posed by the company's financial condition and the need for additional capital. Strategies to address these challenges include focusing on cost management and investing in key growth areas such as acoustics high-tech and AI multimodal digital products. However, the return on these investments may be lower or slower than expected, impacting operating results.

The company is exposed to market risks, including fluctuations in foreign currency exchange rates, which could adversely affect financial results. Additionally, international tariffs, particularly between the U.S. and China, could increase costs and impact supply chain stability, affecting profitability and operational efficiency.

SEC Filing: DATASEA INC. [ DTSS ] - 10-K - Sep. 26, 2025