DATASEA INC.

Datasea Intelligent Technology Ltd. operates in the acoustic intelligence and AI multimodal communication industries, with a strategic focus on the development and commercialization of ultrasonic sound technology and AI-driven digital solutions. The company's business is conducted primarily in China through its consolidated variable interest entity, Shuhai Information Technology Co., Ltd., and its subsidiaries, with a wholly owned subsidiary, Datasea Acoustics LLC, focused on the operation and distribution of acoustic high-tech products in the U.S. and overseas markets. The industry is characterized by rapid technological advancement, evolving customer demands, and significant competition, with the company positioning itself as a provider of intelligent acoustic products and AI multimodal communication services.

The company faces competition in its acoustic intelligence and AI multimodal communication businesses, with competitors including both established technology companies and emerging startups. The company's competitive advantages include its proprietary ultrasonic sound technology, its AI-driven multimodal communication platform, and its ability to integrate hardware and software solutions. Management believes that its focus on innovation, its intellectual property portfolio, and its strategic partnerships provide a competitive edge in the market.

The company generates revenue through two primary business segments: Acoustic Intelligence and AI Multimodal Communication. The Acoustic Intelligence segment includes the sale of ultrasonic sound air disinfection equipment, upgraded sonic sterilization and purification guardians, sleep monitors, and software licensing. The AI Multimodal Communication segment provides AI multimodal communication services, AI digital technical services, AI agent services, and AI multimodal digital solutions. Revenue is derived from both product sales and service contracts, with a mix of transactional and recurring revenue streams. The company's customer segments include enterprises, government entities, and individual consumers, with a focus on the Chinese market and expansion into the U.S. and other overseas markets.

The Acoustic Intelligence business segment focuses on the development and sale of ultrasonic sound-based products, including ultrasonic sound air disinfection equipment, upgraded sonic sterilization and purification guardians, and sleep monitors. In fiscal year 2026, the segment generated revenue of $3,505,000, compared to $2,531,000 in fiscal year 2025. The segment also includes software licensing revenue, which contributed $1,000,000 in fiscal year 2026. The company's ultrasonic technology is designed for air disinfection and purification, with applications in various settings, and the company has developed a sleep monitor product that leverages its acoustic technology.

The AI Multimodal Communication business segment provides AI-driven communication services, including AI multimodal communication services, AI digital technical services, AI agent services, and AI multimodal digital solutions. In fiscal year 2026, the segment generated revenue of $37,193,799, compared to $29,514,000 in fiscal year 2025. The segment includes a project for China Unicom and China Mobile, which contributed $1,000,000 in fiscal year 2026. The company's AI multimodal communication platform integrates text, voice, and visual modalities to provide enhanced communication solutions for its clients.

During fiscal year 2026, the company completed a redomicile merger, with Predecessor Datasea merging into Datasea Intelligent Technology Ltd. on April 15, 2026. The company also entered into several intellectual property purchase agreements with related parties, including agreements with Ms. Zhixin Liu, Mr. Fu Liu, and other individuals, for the purchase of intellectual property. Additionally, the company entered into lease agreements for office and operational spaces, and secured multiple loan agreements with various banks, including Bank of China, Bank of Beijing, and China Construction Bank, to support its working capital needs.

In fiscal year 2026, the company reported total revenue of $40,698,799, compared to $32,045,000 in fiscal year 2025, representing an increase of 27.0%. Net loss for fiscal year 2026 was $7,500,000, compared to a net loss of $6,000,000 in fiscal year 2025. The company's gross profit for fiscal year 2026 was $4,156,806, compared to $3,500,000 in fiscal year 2025. The company's operating expenses increased due to higher research and development, sales and marketing, and general and administrative costs, reflecting the company's investment in growth initiatives.

The company's growth strategy focuses on expanding its Acoustic Intelligence business through the development of new ultrasonic sound products and the enhancement of existing products, such as the upgraded sonic sterilization and purification guardian and sleep monitor. The company also plans to expand its AI Multimodal Communication business by developing new AI-driven services and solutions, including AI agent services and AI multimodal digital solutions. The company is targeting growth in both the Chinese market and international markets, with a particular focus on the U.S. market through its subsidiary Datasea Acoustics LLC.

The company is investing in research and development to advance its acoustic intelligence technology and AI multimodal communication platform. The company has developed several software systems, including a consumer comprehensive labeling system, a service providers marketing service system, a multimodal marketing program management system, and an AI multimodal order analysis system. These systems are designed to enhance the company's product offerings and operational efficiency, supporting its growth in the AI and acoustic technology sectors.

The company's margin and cost outlook is influenced by its investment in research and development and sales and marketing activities. The company's cost of revenue for fiscal year 2026 was $36,541,993, resulting in a gross margin of 10.2%. The company expects to continue investing in its technology and product development, which may impact its operating margins in the near term. The company is focused on managing its operating expenses while scaling its business.

The company's operational outlook includes plans to expand its manufacturing capacity and technology infrastructure to support its growth. The company has entered into lease agreements for office and operational spaces, including a lease agreement with Shenzhen Jingwei for a property in Beijing, and a lease agreement with Shuhai Information for additional office space. The company is also investing in its technology infrastructure, including the development of software systems and the acquisition of intellectual property.

The company's capital allocation strategy includes investments in research and development, capital expenditures for property and equipment, and the acquisition of intellectual property. The company's research and development expenses for fiscal year 2026 were $2,500,000. The company has also entered into intellectual property purchase agreements with related parties, including agreements with Ms. Zhixin Liu, Mr. Fu Liu, and other individuals, for the purchase of intellectual property. The company does not have a dividend policy and has not declared any dividends.

The company faces several headwinds and constraints, including the uncertainty of PRC regulations regarding its VIE structure, which could impact its ability to control its Chinese operations. The company also faces risks related to its reliance on related party transactions, including intellectual property purchases from its CEO and other related parties. Additionally, the company's operations are subject to fluctuations in foreign currency exchange rates, particularly between the RMB and the U.S. dollar.

The company's growth is also constrained by the competitive landscape in the acoustic intelligence and AI communication industries, with competitors potentially having greater financial resources and technological capabilities. The company's ability to grow its business depends on its ability to maintain and enhance its intellectual property portfolio, develop new products and services, and expand its customer base. The company's operations are also subject to regulatory changes in China and the U.S., which could impact its business.

The company's VIE structure is subject to substantial uncertainty under PRC law, and if the structure is disallowed, the company could lose control of its consolidated VIE, which conducts its manufacturing operations, holds significant assets, and accounts for significant revenue, potentially causing the value of its securities to decline or become worthless. The company relies on related party transactions, including intellectual property purchase agreements with its CEO and other related parties, which could present conflicts of interest and may not be on terms as favorable as those with unrelated parties. The company's operations are subject to fluctuations in foreign currency exchange rates, particularly between the RMB and the U.S. dollar, which could impact its financial results. The company faces intense competition in the acoustic intelligence and AI communication industries, and competitors with greater financial resources and technological capabilities could adversely affect its market position. The company's growth depends on its ability to protect its intellectual property, and any failure to do so could harm its competitive position.

Management's message to shareholders emphasizes the company's commitment to innovation and growth in the acoustic intelligence and AI multimodal communication sectors. The company's strategic priorities include expanding its product portfolio, enhancing its technology platform, and pursuing international expansion. Management has highlighted the completion of the redomicile merger as a significant milestone, which is expected to streamline the company's corporate structure and support its future growth. The company's leadership, including President and CEO Zhixin Liu, remains focused on executing the company's strategic plan and delivering value to shareholders.