# EDGAR Filing Document

**Accession Number:** 0001631282
**File Stem:** 0001213900-26-015257
**Filing Date:** 2026-2
**Character Count:** 277808
**Document Hash:** 31e70ee7af378ddc91e2e687f14d07d3
**Contains OCR:** False
**Source Format:** 

## Filing Content

## Filing Summary
**0001213900-26-015257.hdr.sgml**: 20260212

**ACCESSION NUMBER**: 0001213900-26-015257

**CONFORMED SUBMISSION TYPE**: 10-Q

**PUBLIC DOCUMENT COUNT**: 77

**CONFORMED PERIOD OF REPORT**: 20251231

**FILED AS OF DATE**: 20260212

**DATE AS OF CHANGE**: 20260212

**FILER**: 

**COMPANY DATA:**
- **COMPANY CONFORMED NAME:** DATASEA INC.
- **CENTRAL INDEX KEY:** 0001631282
- **STANDARD INDUSTRIAL CLASSIFICATION:** SERVICES-PREPACKAGED SOFTWARE [7372]
- **ORGANIZATION NAME:** 06 Technology
- **EIN:** 472019013
- **STATE OF INCORPORATION:** NV
- **FISCAL YEAR END:** 0630

**FILING VALUES:**
- **FORM TYPE:** 10-Q
- **SEC ACT:** 1934 Act
- **SEC FILE NUMBER:** 001-38767
- **FILM NUMBER:** 26623799

**BUSINESS ADDRESS:**
- **ADDRESS IS A NON US LOCATION:** YES
- **STREET 1:** 1 XINGHUO RD, CHANGNING BLDG, STE.11D2E
- **STREET 2:** FENGTAI DISTRICT
- **CITY:** BEIJING
- **PROVINCE COUNTRY:** F4
- **BUSINESS PHONE:** (86)10-58401996

**MAIL ADDRESS:**
- **ADDRESS IS A NON US LOCATION:** YES
- **STREET 1:** 1 XINGHUO RD, CHANGNING BLDG, STE.11D2E
- **STREET 2:** FENGTAI DISTRICT
- **CITY:** BEIJING
- **PROVINCE COUNTRY:** F4

**FORMER COMPANY:**
- **FORMER CONFORMED NAME:** ROSE ROCK INC.
- **DATE OF NAME CHANGE:** 20150121

?xml version='1.0' encoding='ASCII'?

**UNITED STATES**

**SECURITIES AND EXCHANGE COMMISSION**

**WASHINGTON, D.C. 20549**

**FORM 10-Q**

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

**For the quarterly period ended <u>December 31, 2025</u>**

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

**Commission file number <u>001-38767</u>**

**<u>DATASEA INC.</u>**

(Exact name of registrant as specified in its charter)

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

---

---

| | |
|:---|:---|
| **Room 302-5, Building C, Gemdale Viseen <br> International Center, <br> No. 5 Shengfang Road, Daxing District, Beijing** | **102600** |
| (Address of principal executive offices) | (Zip Code) |

---

---

| |
|:---|
| **+86 10-56145240** |
| (Registrant's telephone number, including area code) |

---

<u> 20th Floor, Tower B, Guorui Plaza 1 Ronghua South Road, Technological Development Zone Beijing, People's Republic of China 100176</u> <br> (Former name, former address and former fiscal year, if changed since last report)

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** | **NASDAQ Capital Market** |

---

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, a 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 <br> ☒ Non-accelerated filer ☒ Smaller reporting company <br> ☐ 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 is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒

As of February 12, 2026, 10,447,153 shares of common stock, $0.001par value per share, were outstanding.

**DATASEA INC.**

**TABLE OF CONTENTS**

---

| | | |
|:---|:---|:---|
|  |  | **Page No.** |
|  | [**Part I - Financial Information**](#a_001) | 1 |
| Item 1 | [Financial Statements](#a_002) | 1 |
| Item 2 | [Management's Discussion and Analysis of Financial Condition and Results of Operations](#a_003) | 33 |
| Item 3 | [Quantitative and Qualitative Disclosures about Market Risk](#a_004) | 66 |
| Item 4 | [Controls and Procedures](#a_005) | 66 |
|  | [**Part II - Other Information**](#a_006) | 70 |
| Item 1 | [Legal Proceedings](#a_007) | 70 |
| Item 1A | [Risk Factors](#a_008) | 70 |
| Item 2 | [Unregistered Sales of Equity Securities and Use of Proceeds](#a_009) | 70 |
| Item 3 | [Defaults Upon Senior Securities](#a_010) | 70 |
| Item 4 | [Mine Safety Disclosures](#a_011) | 70 |
| Item 5 | [Other Information](#a_012) | 70 |
| Item 6 | [Exhibits](#a_013) | 71 |

---

i

**PART I - FINANCIAL INFORMATION**

**ITEM 1. FINANCIAL STATEMENTS**

**DATASEA INC.**

**CONSOLIDATED BALANCE SHEETS**

---

| | | |
|:---|:---|:---|
|  | **DECEMBER 31, <br> 2025<br> (UNAUDITED)** | **JUNE 30,<br> 2025** |
| **ASSETS** | | |
| CURRENT ASSETS |  |  |
| &nbsp;&nbsp;&nbsp;Cash | $671785 | $620807 |
| &nbsp;&nbsp;&nbsp;Accounts receivable | 1288297 | 1374180 |
| &nbsp;&nbsp;&nbsp;Inventory, net | 151513 | 206610 |
| &nbsp;&nbsp;&nbsp;Value-added tax prepayment | 65334 | 137025 |
| &nbsp;&nbsp;&nbsp;Prepaid expenses and other current assets | 847241 | 583650 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Total current assets | 3024170 | 2922272 |
| NONCURRENT ASSETS |  |  |
| &nbsp;&nbsp;&nbsp;Property and equipment, net | 23335 | 25560 |
| &nbsp;&nbsp;&nbsp;Intangible assets, net | 5297992 | 3495984 |
| &nbsp;&nbsp;&nbsp;Right-of-use assets, net | 297243 | 292065 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Total noncurrent assets | 5618570 | 3813609 |
| **TOTAL ASSETS** | $8642740 | $6735881 |
| **LIABILITIES AND STOCKHOLDERS' EQUITY** |  |  |
| CURRENT LIABILITIES |  |  |
| &nbsp;&nbsp;&nbsp;Accounts payable | $335631 | $420038 |
| &nbsp;&nbsp;&nbsp;Unearned revenue | 90082 | 150088 |
| &nbsp;&nbsp;&nbsp;Accrued expenses and other payables | 675930 | 547706 |
| &nbsp;&nbsp;&nbsp;Due to related parties | 74171 | 6126 |
| &nbsp;&nbsp;&nbsp;Operating lease liabilities | 166662 | 128525 |
| &nbsp;&nbsp;&nbsp;Bank loan payables | 3699067 | 2374767 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Total current liabilities | 5041543 | 3627250 |
| NONCURRENT LIABILITIES |  |  |
| &nbsp;&nbsp;&nbsp;Operating lease liabilities | 129654 | 166436 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Total noncurrent liabilities | 129654 | 166436 |
| TOTAL LIABILITIES | 5171197 | 3793686 |
| COMMITMENTS AND CONTINGENCIES |  |  |
| STOCKHOLDERS' EQUITY |  |  |
| &nbsp;&nbsp;&nbsp;Common stock, $0.001 par value, 25,000,000 shares authorized,10,147,153 and 8,128,127 shares issued and outstanding as of December 31, 2025 and June 30, 2025, respectively | 10147 | 8128 |
| &nbsp;&nbsp;&nbsp;Additional paid-in capital | 48545615 | 47331510 |
| &nbsp;&nbsp;&nbsp;Accumulated comprehensive income | 191822 | 138586 |
| &nbsp;&nbsp;&nbsp;Accumulated deficit | (45265801) | (44526016) |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;TOTAL COMPANY STOCKHOLDERS' EQUITY | 3481783 | 2952208 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Noncontrolling interest | (10240) | (10013) |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;TOTAL STOCKHOLDERS' EQUITY | 3471543 | 2942195 |
| **TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY** | $8642740 | $6735881 |

---

The accompanying notes are an integral part of these consolidated financial statements.

**DATASEA INC.**

**CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS**

**(UNAUDITED)**

---

| | | | | |
|:---|:---|:---|:---|:---|
|  | **THREE MONTHS ENDED<br> DECEMBER 31,** | **THREE MONTHS ENDED<br> DECEMBER 31,** | **SIX MONTHS ENDED<br> DECEMBER 31,** | **SIX MONTHS ENDED<br> DECEMBER 31,** |
|  | **2025** | **2024** | **2025** | **2024** |
| Revenues | $12995014 | $20456404 | $26808565 | $41537498 |
| Cost of revenues | 11802056 | 20038952 | 24446515 | 40923065 |
| Gross profit | 1192958 | 417452 | 2362050 | 614433 |
| Operating expenses |  |  |  |  |
| &nbsp;&nbsp;&nbsp;Selling | 328974 | 407669 | 722791 | 1403718 |
| &nbsp;&nbsp;&nbsp;General and administrative | 647317 | 1173733 | 1198291 | 2302136 |
| &nbsp;&nbsp;&nbsp;Research and development | 733243 | 74402 | 1246167 | 177481 |
| Total operating expenses | 1709534 | 1655804 | 3167249 | 3883335 |
| Loss from operations | (516576) | (1238352) | (805199) | (3268902) |
| Non-operating income (expenses) |  |  |  |  |
| &nbsp;&nbsp;&nbsp;Other income (expenses), net | (22145) | 109761 | 65297 | 165587 |
| &nbsp;&nbsp;&nbsp;Interest income | 54 | 875 | 76 | 4930 |
| Total non-operating income (expenses), net | (22091) | 110636 | 65373 | 170517 |
| Loss before income tax | (538667) | (1127716) | (739826) | (3098385) |
| Income tax | - | - | - | - |
| Loss before noncontrolling interest from continuing operations | (538667) | (1127716) | (739826) | (3098385) |
| Less: loss attributable to noncontrolling interest | 92 | 8562 | (41) | (118) |
| Net loss to the Company | (538759) | (1136278) | (739785) | (3098267) |
| Other comprehensive item |  |  |  |  |
| Foreign currency translation gain (loss) attributable to the Company | 31852 | (94752) | 53236 | (107906) |
| Foreign currency translation gain (loss) attributable to noncontrolling interest | (111) | 19296 | (186) | 60602 |
| Comprehensive loss attributable to the Company | $(506907) | $(1231030) | $(686549) | $(3206173) |
| Comprehensive income (loss) attributable to noncontrolling interest | $(19) | $27858 | $(227) | $60484 |
| Basic and diluted net loss per share | $(0.06) | $(0.16) | $(0.09) | $(0.56) |
| Weighted average shares used for computing basic and diluted loss per share \* | 9153057 | 7170852 | 8671365 | 5582115 |

---

The accompanying notes are an integral part of these consolidated financial statements.

**DATASEA INC.**

**CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY**

**THREE AND SIX MONTHS ENDED DECEMBER 31, 2025 AND 2024**

**(UNAUDITED)**

---

| | | | | | | | |
|:---|:---|:---|:---|:---|:---|:---|:---|
|  | **Common Stock** | **Common Stock** | | | | | |
|  | **Shares** | **Amount** | **Additional paid-in**<br>**capital** | **Accumulated**<br>**deficit** | **Accumulated other comprehensive**<br>**income** | **Total Company's stockholders'**<br>**equity** | **Noncontrolling**<br>**interest** |
| Balance at July 1, 2025 | 8128127 | $8128 | $47331510 | $(44526016) | $138586 | $2952208 | $(10013) |
| Net loss |  | - | - | (201026) | - | (201026) | (133) |
| Shares issued for stock compensation expense | 95377 | 96 | 186054 | - | - | 186150 | - |
| Shares issued for paying officers' accrued salary and bonus | 33312 | 33 | 64924 | - | - | 64957 | - |
| Foreign currency translation gain (loss) | - | - | - | - | 21384 | 21384 | (75) |
| Balance at September 30, 2025 | 8256816 | 8257 | 47582488 | (44727042) | 159970 | 3023673 | (10221) |
| Net loss |  | - | - | (538759) | - | (538759) | 92 |
| Shares issued for stock compensation expense | 481818 | 482 | 899092 | - | - | 899574 | - |
| Shares issued for paying officers' accrued salary and bonus | 32079 | 32 | 65411 | - | - | 65443 | - |
| Shares issued for purchase of intangible assets from the Company's major shareholders | 1376440 | 1376 | (1376) | - | - | - | - |
| Foreign currency translation gain (loss) | - | - | - | - | 31852 | 31852 | (111) |
| Balance at December 31, 2025 | 10147153 | $10147 | $48545615 | $(45265801) | $191822 | $3481783 | $(10240) |

---

---

| | | | | | | | |
|:---|:---|:---|:---|:---|:---|:---|:---|
|  | **Common Stock** | **Common Stock** | | | | | |
|  | **Shares** | **Amount** | **Additional paid-in**<br>**capital** | **Accumulated**<br>**deficit** | **Accumulated other comprehensive**<br>**income** | **Total Company's stockholders**'<br>**equity** | **Noncontrolling**<br>**interest** |
| Balance at July 1, 2024 | 3589620 | $3590 | $38957780 | $(39440322) | $242208 | $(236745) | $(71533) |
| Net loss |  | - | - | (1961989) | - | (1961989) | (8680) |
| Noncontrolling interest disposal at closure of the entity |  | - | - | - | - | - | 1391 |
| Issuance of common stock for equity financing | 692308 | 692 | 1958059 | - | - | 1958751 | - |
| Issuance of common stock for equity financing - related parties | 1932224 | 1932 | 3978449 | - | - | 3980381 | - |
| Shares issued for stock compensation expense | 75000 | 75 | 374925 | - | - | 375000 | - |
| Shares issued for purchase of intangible assets from the Company's major shareholders | 797850 | 798 | (798) | - | - | - | - |
| Foreign currency translation gain (loss) | - | - | - | - | (13154) | (13154) | 41306 |
| Balance at September 30, 2024 | 7087002 | 7087 | 45268415 | (41402311) | 229054 | 4102244 | (37516) |
| Net loss |  | - | - | (1136278) | - | (1136278) | 8562 |
| Forgiveness of debt by shareholder |  | - | 183351 | - | - | 183351 | - |
| Shares issued for stock compensation expense | 77400 | 77 | 181423 | - | - | 181500 | - |
| Foreign currency translation gain (loss) | - | - | - | - | (94752) | (94752) | 19296 |
| Balance at December 31, 2024 | 7164402 | $7164 | $45633189 | $(42538589) | $134302 | $3236065 | $(9658) |

---

The accompanying notes are an integral part of these consolidated financial statements.

**DATASEA INC.**

**CONSOLIDATED STATEMENTS OF CASH FLOWS**

**(UNAUDITED)**

---

| | | |
|:---|:---|:---|
|  | **SIX MONTHS ENDED<br> DECEMBER 31,** | **SIX MONTHS ENDED<br> DECEMBER 31,** |
|  | **2025** | **2024** |
| **Cash flows from operating activities:** |  |  |
| &nbsp;&nbsp;&nbsp;Loss including noncontrolling interest | $(739826) | $(3098385) |
| &nbsp;&nbsp;&nbsp;Adjustments to reconcile loss including noncontrolling interest to net cash provided by (used in) operating activities: |  |  |
| &nbsp;&nbsp;&nbsp;Bad debt expense (reversal) | 28150 | (7005) |
| &nbsp;&nbsp;&nbsp;Depreciation and amortization | 1117737 | 395741 |
| &nbsp;&nbsp;&nbsp;Loss on disposal of fixed assets | 63 | 3155 |
| &nbsp;&nbsp;&nbsp;Operating lease expense | 84207 | 77320 |
| &nbsp;&nbsp;&nbsp;Loan forgiveness by shareholder | - | 184663 |
| &nbsp;&nbsp;&nbsp;Stock compensation expense | 1216124 | 556500 |
| &nbsp;&nbsp;&nbsp;Changes in assets and liabilities: |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Accounts receivable | 110070 | 504995 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Inventory | 58284 | (168864) |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Value-added tax prepayment | 73427 | (4710) |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Prepaid expenses and other current assets | (282869) | 802142 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Accounts payable | (86921) | (759065) |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Unearned revenue | (62107) | 87317 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Accrued expenses and other payables | 112696 | (90587) |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Payment on operating lease liabilities | (88041) | (70789) |
| Net cash provided by (used in) operating activities | 1540994 | (1587572) |
| **Cash flows from investing activities:** |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Acquisition of property and equipment | (340) | (7255) |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Acquisition of intangible assets | (2833662) | (3950272) |
| Net cash used in investing activities | (2834002) | (3957527) |
| **Cash flows from financing activities:** |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Proceeds from (repayment to) related parties | 67206 | (239307) |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Proceeds from loan payables | 1266754 | - |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Repayment of loan payables | - | (40698) |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Net proceeds from issuance of common stock | - | 5939133 |
| Net cash provided by financing activities | 1333960 | 5659128 |
| **Effect of exchange rate changes on cash** | 10026 | (27190) |
| **Net increase in cash** | 50978 | 86839 |
| **Cash, beginning of period** | 620807 | 181262 |
| **Cash, end of period** | $671785 | $268101 |
| **Supplemental disclosures of cash flow information:** |  |  |
| Cash paid for interest | $37416 | $17973 |
| Cash paid for income tax | $- | $- |
| Supplemental disclosures of non-cash financing activities: |  |  |
| Right-of-use assets obtained in exchange for operating lease liabilities | $78234 | $196783 |
| Shares issued for paying officers' accrued salary and bonus | $130400 | $- |

---

The accompanying notes are an integral part of these consolidated financial statements.

**DATASEA INC.**

**NOTES TO CONSOLIDATED FINANCIAL STATEMENTS**

**DECEMBER 31, 2025 (UNAUDITED) AND JUNE 30, 2025**

**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).

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.

**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 three months ended December 31, 2025 and 2024, the Company had a net loss of approximately $0.54 million and $1.14 million, respectively. For the six months ended December 31, 2025 and 2024, the Company had a net loss of approximately $0.74 million and $3.10 million, respectively. The Company had an accumulated deficit of approximately $45.27 million as of December 31, 2025, and cash flow from operating activities of approximately $1.54 million and $(1.59) million for the six months ended December 31, 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 December 31, 2025.

![](image_001.jpg)

**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.

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 December 31, 2025 and June 30, 2025, and for the three and six months ended December 31, 2025 and 2024, respectively.

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| | | |
|:---|:---|:---|
|  | **December 31,<br> 2025** | **June 30,<br> 2025** |
| Cash | $608515 | $580240 |
| Accounts receivable | 1320650 | 585085 |
| Inventory | 151668 | 206610 |
| Other current assets | 453410 | 362467 |
| Total current assets | 2534243 | 1734402 |
| Property and equipment, net | 16648 | 18640 |
| Intangible asset, net | 2759230 | 503000 |
| Right-of-use asset, net | 295260 | 284345 |
| Total non-current assets | 3071138 | 805985 |
| Total assets | $5605381 | $2540387 |
| Accounts payable | $85200 | $115772 |
| Accrued liabilities and other payables | 879876 | 804862 |
| Lease liability | 166671 | 122761 |
| Loans payable | 3699067 | 2374767 |
| Other current liabilities | 94355 | 150792 |
| Total current liabilities | 4925169 | 3568954 |
| Lease liability - noncurrent | 129654 | 166436 |
| Total non-current liabilities | 129654 | 166436 |
| Total liabilities | $5054823 | $3735390 |

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| | | |
|:---|:---|:---|
|  | **For the<br> Three Months<br> Ended<br> December 31,<br> 2025** | **For the<br> Three Months<br> Ended<br> December 31,<br> 2024** |
| Revenues | $12995014 | $20456553 |
| Gross profit | $1193221 | $467329 |
| Net loss | $262330 | $10091 |

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| | | |
|:---|:---|:---|
|  | **For the<br> Six Months<br> Ended<br> December 31,<br> 2025** | **For the<br> Six Months<br> Ended<br> December 31,<br> 2024** |
| Revenues | $26808565 | $41537647 |
| Gross profit | $2362398 | $705463 |
| Net loss | $675719 | $442099 |

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**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 December 31, 2025 and June 30, 2025, 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 December 31, 2025 and June 30, 2025, the Company had a $0 bad debt allowance for credit losses.

**INVENTORY**

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 $155,731 and $152,907 allowances for slow-moving and obsolete inventory (mainly for Smart-Student Identification cards) as of December 31, 2025 and June 30, 2025, respectively.

**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 <br> Office equipment 3-5 years <br> Vehicles 5 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.

**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 December 31, 2025 and June 30, 2025, 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 three and six months ended December 31, 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.

**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 December 31, 2025 and June 30, 2025.

**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 obligations is satisfied. Revenue is recognized net of returns and value-added tax charged to customers

The following table shows the Company's revenue by revenue sources:

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| | | |
|:---|:---|:---|
|  | **For the<br> Three Months<br> Ended<br> December 31,<br> 2025** | **For the<br> Three Months<br> Ended<br> December 31,<br> 2024** |
| **5G AI Multimodal communication** | $12988682 | $20085988 |
| &nbsp;&nbsp;&nbsp;5G AI Multimodal communication | 11784010 | 19887721 |
| &nbsp;&nbsp;&nbsp;5G AI Multimodal new media marketing | 627225 | - |
| &nbsp;&nbsp;&nbsp;5G AI digital technical service | 577447 | 198267 |
| **Acoustic Intelligence Business** | 6330 | 43304 |
| &nbsp;&nbsp;&nbsp;Ultrasonic Sound Air Disinfection Equipment | 1495 | 35076 |
| &nbsp;&nbsp;&nbsp;Upgraded Sonic Sterilization and Purification Guardian | 2388 | 5167 |
| &nbsp;&nbsp;&nbsp;Sleep Monitor | 2447 | 3061 |
| **Software licensing** | - | 326936 |
| **Other** | 2 | 176 |
| **Total revenue** | $12995014 | $20456404 |

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| | | |
|:---|:---|:---|
|  | **For the<br> Six Months<br> Ended<br> December 31,<br> 2025** | **For the<br> Six Months<br> Ended<br> December 31,<br> 2024** |
| **5G AI Multimodal communication** | $26313993 | $41161572 |
| &nbsp;&nbsp;&nbsp;5G AI Multimodal communication | 24191665 | 40963305 |
| &nbsp;&nbsp;&nbsp;5G AI Multimodal new media marketing | 1540288 | - |
| &nbsp;&nbsp;&nbsp;5G AI digital technical service | 582040 | 198267 |
| **Acoustic Intelligence Business** | 494279 | 45768 |
| &nbsp;&nbsp;&nbsp;Ultrasonic Sound Air Disinfection Equipment | 480902 | 37540 |
| &nbsp;&nbsp;&nbsp;Upgraded Sonic Sterilization and Purification Guardian | 4874 | 5167 |
| &nbsp;&nbsp;&nbsp;Sleep Monitor | 8503 | 3061 |
| **Software licensing** | - | 326936 |
| **Smart City business** | - | 3046 |
| &nbsp;&nbsp;&nbsp;Smart community | - | 3046 |
| **Other** | 293 | 176 |
| **Total revenue** | $26808565 | $41537498 |

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**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 three and six months ended December 31, 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.

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 December 31, 2025 and June 30, 2025, the Company had no unrecognized tax positions and no charges during the three and six months ended December 31, 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, 2022 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, 2020 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 three months ended December 31, 2025 and 2024, the Company had net income of $92 and $8,562 attributable to the noncontrolling interest from continuing operations, respectively. During the six months ended December 31, 2025 and 2024, the Company had net loss of $41 and $118 attributable to the noncontrolling interest from continuing operations, respectively.

**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 $614,010 and $594,722 as of December 31, 2025 and June 30, 2025, 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 December 31, 2025 and June 30, 2025, cash of $56,281 and $24,487 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 December 31, 2025 and June 30, 2025, the cash balance of $1,494 and $1,598 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:

---

| | | | | | | |
|:---|:---|:---|:---|:---|:---|:---|
|  | **December 31,** | **December 31,** | **December 31,** | **December 31,** | **June 30,** | **June 30,** |
|  | **2025** | **2025** | **2024** | **2024** | **2025** | **2025** |
| Period-end date USD: RMB exchange rate |  | 7.0288 |  | 7.13733 |  | 7.1586 |
| Average USD for the reporting period: RMB exchange rate |  | 7.1048 |  | 7.18840 |  | 7.1599 |

---

**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.

**RECENT 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.

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.

In May 2025, the FASB issued ASU 2025-03, Business Combinations (Topic 805) and Consolidation (Topic 810): Determining the Accounting Acquirer in the Acquirer in the Acquisition of a Variable Interest Entity. The amendments provide guidance on identifying the accounting acquirer in transactions involving a variable interest entity. The amendments are effective for annual reporting periods beginning after December 15, 2026, and interim reporting period within those annual periods. Early adoption is permitted as of the beginning of an interim or annual reporting period. The Company is currently evaluating the impact of this amendment and does not expect that the adoption of this guidance will have a material impact on its financial position, results of operations, or cash flows.

In May 2025, the FASB issued ASU 2025-04, Compensation - Stock Compensation (Topic 18) and Revenue from contracts with Customers (Topic 606): Clarifications to Share-Based Consideration Payable to a Customer. The amendments provide guidance on identifying the accounting acquirer in transactions involving a variable interest entity. The amendments clarify the accounting for share-based consideration payable to a customer under Topic 718 and Topic 606. The amendments are effective for annual reporting periods, including interim reporting period within those annual periods, beginning after December 15, 2026. Early adoption is permitted. The Company is currently evaluating the impact of this amendment and does not expect that the adoption of this guidance will have a material impact on its financial position, results of operations, or cash flows.

In July 2025, the FASB issued ASU 2025-05, Financial Instruments – Credit Losses (Topic 326): Measurement of Credit Losses for Accounts Receivable and Contract Assets. The amendments provide a practical expedient and, if applicable, an accounting policy election to simplify the measurement of credit losses for certain receivables and contract assets. The amendments are effective for annual reporting periods beginning after December 15, 2025, and interim reporting periods within those annual reporting periods. Early adoption is permitted in any interim or annual period in which financial statements have not been issued or made available for issuance. The Company is currently evaluating the impact of this amendment and does not expect that the adoption of this guidance will have a material impact on its financial position, results of operations, or cash flows.

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.

**NOTE 3 – PROPERTY AND EQUIPMENT**

Property and equipment are summarized as follows:

---

| | | |
|:---|:---|:---|
|  | **December 31,<br> 2025** | **June 30,<br> 2025** |
| Furniture and fixtures | $48879 | $47655 |
| Vehicle | 498 | 489 |
| Office equipment | 236933 | 232700 |
| &nbsp;&nbsp;&nbsp;Subtotal | 286310 | 280844 |
| Less: accumulated depreciation | 262975 | 255284 |
| &nbsp;&nbsp;&nbsp;Total | $23335 | $25560 |

---

Depreciation for the three months ended December 31, 2025 and 2024 was $1,252 and $5,336, respectively. Depreciation for the six months ended December 31, 2025 and 2024 was $2,944 and $10,799, respectively.

**NOTE 4 – INTANGIBLE ASSETS**

Intangible assets are summarized as follows:

---

| | | |
|:---|:---|:---|
|  | **December 31,<br> 2025** | **June 30,<br> 2025** |
| Software registration or using right | $3560965 | $1963705 |
| Patents | 5216176 | 3862786 |
| Software and technology development costs | 85847 | 84291 |
| Value-added telecommunications business license | 15805 | 15518 |
| &nbsp;&nbsp;&nbsp;Subtotal | 8878793 | 5926300 |
| Less: Accumulated amortization | 3580801 | 2430316 |
| &nbsp;&nbsp;&nbsp;Total | $5297992 | $3495984 |

---

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.

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. transferred ownership of four software copyrights to Shuhai Information as follows:

1) Ruan Zhu Deng Ji No. 16295142, an AI multimodal order analysis system 1.0, with a transfer price of RMB 2.9 million (approximately $0.41 million).

2) Ruan Zhu Deng Ji No.16295118, a multimodal marketing program management system 1.0, with a transfer price of RMB 3.0 million (approximately $0.42 million).

3) Ruan Zhu Deng Ji No.16295075, a service provider's marketing service system, with a transfer price of RMB 2.8 million (approximately $0.39 million).

4) Ruan Zhu Deng Ji No.16295048, a consumer comprehensive labeling system, with a transfer price of RMB 2.7 million (approximately $0.38 million).

The total purchase price is RMB 11.4 million ($1.6 million), inclusive of a 6% VAT, and will be amortized over three years.

On October 10, 2025, Shuhai Information, as the purchaser, entered into a patent purchase agreement with Tianjin Qianli Culture Media Co., Ltd, as the seller, for the acquisition of a brainwave intelligent driving system. The total purchase price is RMB 7,800,000 ($1.1 million), inclusive of a 6% VAT, and will be amortized over the three years.

Amortization for the three months ended December 31, 2025 and 2024 was $651,734 and $304,770, respectively. Amortization for the six months ended December 31, 2025 and 2024 was $1,114,793 and $384,942, respectively. The amortization expense for the next five years as of December 31, 2025 will be $2,421,316, $2,257,080, $619,596, $0 and $0.

**NOTE 5 – PREPAID EXPENSES AND OTHER CURRENT ASSETS**

Prepaid expenses and other current assets consisted of the following:

---

| | | |
|:---|:---|:---|
|  | **December 31,<br> 2025** | **June 30,<br> 2025** |
| Security deposit | $65284 | $57395 |
| Prepaid expenses | 770492 | 489365 |
| Other receivables – Heqin | 466651 | 458190 |
| Advance to third party individuals, no interest, payable upon demand | 33391 | 32860 |
| Others | 32849 | 29873 |
| Total | 1368667 | 1067683 |
| Less: allowance for other receivables | 521426 | 484033 |
| &nbsp;&nbsp;&nbsp;Total | $847241 | $583650 |

---

As of December 31, 2025, prepaid expenses mainly consisted of input VAT for purchasing patents of $133,923 prepaid telecommunication service fee (mainly including SMS and MMS services) of $4,419, prepaid rent and property management fees of $3,517, prepaid service fee of $431,735 and other prepayments of $196,898.

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.

<u>Other receivables – Heqin</u>

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). As of December 31, 2025 and June 30, 2025, Heqin made $56,909 (through Yuetianyun) and $55,877 repayment to the Company, and the Company made a bad debt allowance of $466,651 and $458,190 as of December 31, 2025 and June 30, 2025, respectively.

**NOTE 6 – Unearned revennue**

The balance of unearned revenue was $90,082 and $150,088 as of December 31, 2025 and June 30, 2025, respectively.

The following presents the roll-forward schedule of unearned revenue for the six months ended December 31, 2025 and 2024:

---

| | | |
|:---|:---|:---|
|  | **Six Months Ended<br> December 31,** | **Six Months Ended<br> December 31,** |
|  | **2025** | **2024** |
| Balance, beginning of period | $150088 | $49239 |
| Received during the period, amount excluding VAT | 25409844 | 41583005 |
| Transferred to revenue | (25471951) | (41500393) |
| Effect of foreign currency translation | 2101 | 3663 |
| Balance, end of period | $90082 | $135514 |

---

**NOTE 7 – ACCRUED EXPENSES AND OTHER PAYABLES**

Accrued expenses and other payables consisted of the following:

---

| | | |
|:---|:---|:---|
|  | **December 31,<br> 2025** | **June 30,<br> 2025** |
| Other payables | $135047 | $50201 |
| Due to third parties | 39 | 178 |
| Security deposit | 10813 | 10617 |
| Social security payable | 465365 | 431262 |
| Salary payable – employees | 64666 | 55448 |
| Total | $675930 | $547706 |

---

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**

<u>Loan from banks</u>

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<sup>th</sup> of each month. For the three months ended December 31, 2025 and 2024, the Company made a repayment of nil and nil to this loan. For the six months ended December 31, 2025 and 2024, the Company made a repayment of nil and $36,131 to this loan. For the three months ended December 31, 2025 and 2024, the Company recorded and paid nil and nil interest expense for this loan. For the six months ended December 31, 2025 and 2024, the Company recorded and paid nil and $269 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 three months ended December 31, 2025 and 2024, the Company made a repayment of nil and nil to this loan. For the six months ended December 31, 2025 and 2024, the Company made a repayment of nil and $4,684 to this loan. For the three months ended December 31, 2025 and 2024, the Company recorded and paid nil and nil interest expense for this loan. For the six months ended December 31, 2025 and 2024, the Company recorded and paid nil and $37 interest expense for this loan. On July 16, 2024, the loan was paid in full.

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<sup>st</sup> of each month. For the three months ended December 31, 2025 and 2024, the Company recorded and paid nil and $619 interest expense for this loan. For the six months ended December 31, 2025 and 2024, the Company recorded and paid nil and $1,229 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<sup>st</sup> of each month. For the three months ended December 31, 2025 and 2024, the Company recorded and paid nil and $961 interest expense for this loan. For the six months ended December 31, 2025 and 2024, the Company recorded and paid nil and $1,939 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 three months ended December 31, 2025 and 2024, the Company recorded and paid nil and $2,741 interest expense for this loan. For the six months ended December 31, 2025 and 2024, the Company recorded and paid nil and $5,527 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<sup>st</sup> of each month. For the three months ended December 31, 2025 and 2024, the Company recorded and paid nil and $1,201 interest expense for this loan. For the six months ended December 31, 2025 and 2024, the Company recorded and paid nil and $2,422 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. For the three months ended December 31, 2025 and 2024, the Company recorded and paid nil and $3,518 interest expense for this loan. For the six months ended December 31, 2025 and 2024, the Company recorded and paid nil and $6,552 interest expense for this loan. On June 19, 2025, the loan was paid in full.

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 three months ended December 31, 2025 and 2024, the Company recorded and paid $4,927 and nil interest expense for this loan. For the six months ended December 31, 2025 and 2024, the Company recorded and paid $9,874 and nil interest expense for this loan. As of December 31, 2025, $853,631 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 three months ended December 31, 2025 and 2024, the Company recorded and paid $3,207 and nil interest expense for this loan. For the six months ended December 31, 2025 and 2024, the Company recorded and paid $6,433 and nil interest expense for this loan. As of December 31, 2025, $426,815 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 three months ended December 31, 2025 and 2024, the Company recorded and paid $1,748 and nil interest expense for this loan. For the six months ended December 31, 2025 and 2024, the Company recorded and paid $3,484 and nil interest expense for this loan. As of December 31, 2025, $142,272 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. For the three months ended December 31, 2025 and 2024, the Company recorded and paid $3,285 and nil interest expense for this loan. For the six months ended December 31, 2025 and 2024, the Company recorded and paid $6,582 and nil interest expense for this loan. As of December 31, 2025, $569,087 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 three months ended December 31, 2025 and 2024, the Company recorded and paid $2,892 and nil interest expense for this loan. For the six months ended December 31, 2025 and 2024, the Company recorded and paid $5,795 and nil interest expense for this loan. As of December 31, 2025, $426,815 was recorded as current liabilities. Liu Fu is the guarantor of this loan credit line.

On September 23, 2025, Shuhai Beijing entered a credit line agreement with China Construction Bank for the amount of RMB 5,000,000 ($711,359) with a term of 36 months from the first withdrawing date, the credit line has a preferential annual interest rate of 2.55% to be paid every 20th of each Month. For the three months ended December 31, 2025 and 2024, the Company recorded and paid $2,632 and nil interest expense for this loan. For the six months ended December 31, 2025 and 2024, the Company recorded and paid $2,632 and nil interest expense for this loan. As of December 31, 2025, $711,359 was recorded as current liabilities. Liu zhixin is the guarantor of this loan credit line.

On September 30, 2025, Guozhong Times entered a loan agreement with Bank of China for the amount of RMB 2,000,000 ($281,472) with a term of 12 months with an annual interest rate of 2.35% to be paid every 21st of the third months of each quarter. For the three months ended December 31, 2025 and 2024, the Company recorded and paid $1,507 and nil interest expense for this loan. For the six months ended December 31, 2025 and 2024, the Company recorded and paid $1,507 and nil interest expense for this loan. As of December 31, 2025, $284,544 was recorded as current liabilities. Liu zhixin is the guarantor of this loan agreement.

On October 10, 2025, Shuhai Beijing entered a credit line agreement with Bank of Communications Beijing Free Trade Zone Branchfor the amount of RMB 2,000,000 ($284,544) with a term of 24 months, the credit line has a fixed annual interest rate of 2.65% to be paid every 21st of each month. For the three months ended December 31, 2025 and 2024, the Company recorded and paid $1,103 and nil interest expense for this loan. For the six months ended December 31, 2025 and 2024, the Company recorded and paid $1,103 and nil interest expense for this loan. As of December 31, 2025, $284,544 was recorded as current liabilities. Liu Fu is the guarantor of this loan credit line.

The following table summarizes the loan balance as of December 31, 2025:

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| | | | | | |
|:---|:---|:---|:---|:---|:---|
| **Lendor** | **Loan amount** | **Borrowing date** | **Loan term in month** | **Interest rate** | **Outstanding balance** |
| Bank of China | $853631 | &nbsp;&nbsp;3/31/2025 | 12 | 2.30% | $853631 |
| Bank of Beijing | 426815 | &nbsp;&nbsp;5/20/2025 | 12 | 3.00% | 426815 |
| Beijing Rural Commercial Bank Economic and Technological Development Zone Branch | 142272 | &nbsp;&nbsp;5/21/2025 | 12 | 4.95% | 142272 |
| Bank of China | 213408 | &nbsp;&nbsp;6/6/2025 | 12 | 2.30% | 213408 |
| Bank of Beijing | 426815 | &nbsp;&nbsp;6/6/2025 | 12 | 2.70% | 426815 |
| Bank of China | 355679 | &nbsp;&nbsp;6/11/2025 | 12 | 2.30% | 355679 |
| China Construction Bank | 711359 | &nbsp;&nbsp;9/23/2025 | 36 | 2.55% | 711359 |
| Bank of China | 284544 | &nbsp;&nbsp;9/30/2025 | 12 | 2.35% | 284544 |
| Bank of Communications Beijing Free Trade Zone Branch | 284544 | &nbsp;&nbsp;10/10/2025 | 12 | 2.65% | 284544 |
| Total | $3699067 |  |  |  | $3699067 |

---

**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 $1,766 and $1,747, respectively, for the three months ended December 31, 2025 and 2024. The rental expense for this office location was $3,519 and $3,503, respectively, for the six months ended December 31, 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. 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 July 1, 2025, the Company entered a new one-year lease of one car with the Company's CEO for monthly rent of RMB 18,000 ($2,525). The rental expense for those agreements was $7,627 and $15,927, respectively, for the three months ended December 31, 2025 and 2024. The rental expense for those agreements was $15,201 and $31,945, respectively, for the six months ended December 31, 2025 and 2024.

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 $3,488 and $8,757 for the three and six months ended December 31, 2024, respectively.

From July 23, 2025, to September 19, 2025, the Company entered into three loan agreements with its CEO for a total amount of RMB 930,000 ($130,885), with repayment due by December 31, 2025. These loan bore no interest. During the three and six months ended December 31, 2025, the Company repaid $28,154 and $77,412 of these loans. On December 31, 2025, two of the loan agreements were repaid in full, and the remaining one was renewed to December 31, 2026.

*<u>Due to related parties</u>*

As of December 31, 2025 and June 30, 2025, the Company had amounts due to related parties of $74,171 and $6,126, respectively. These balances primarily represent expenses paid on behalf of the Company by the Chief Executive Officer. The amounts are non-interest bearing and payable on demand.

***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, with a purchase price of RMB 6,000,000 (US $837,743). The Compensation Committee of The Board of Directors 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, with a purchase price of RMB 6,000,000 (US $837,743). The Compensation Committee of The Board of Directors has decided to grant Fu Liu 398,925 restricted shares for the purchase of this software.

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, with a purchase price of RMB 6,000,000 (US $834,852). The Compensation Committee of The Board of Directors has decided to grant Fu Liu 369,403 restricted shares for the purchase of this software.

On November 20, 2025, the Company entered into an intellectual property purchase agreement with Mr. Fu Liu, the Company's director, pursuant to which Mr. Fu Liu transferred to the Company intangible assets (software copyrights) owned by himself, with a purchase price of RMB 5,000,000 (US $704,225). The Compensation Committee of The Board of Directors decided to grant Fu Liu 533,504 restricted shares for the purchase of the software.

On November 20, 2025, the Company entered into an intellectual property purchase agreement with Ms. Zhixin Liu, the Company's director and CEO, pursuant to which Ms. Zhixin Liu transferred to the Company intangible assets (software copyrights) owned by herself, with a purchase price of RMB 7,900,000 (US $1,112,676). The Compensation Committee of The Board of Directors decided to grant Zhixin Liu 842,936 restricted shares for the purchase of the software.

The Company accounts for these transactions in accordance with SEC Staff Accounting Bulletin (SAB) Topic 5-G, Acquisition of Assets from Promoters and Shareholders in Exchange for Common Stock. The transfers of nonmonetary assets to a company by its promoters or major shareholders in exchange for stock was recorded at the transferor's historical cost basis. In addition, the transferor's historical cost of the patents they contributed is not determinable as there are no books or records maintained for the costs of developing these patents. Accordingly, the Company recorded the transaction at a nominal value, with credit to common stock at par value and the excess credited to additional paid-in capital.

**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, with a purchase price of RMB 6,000,000 (US $837,743). The Compensation Committee of The Board of Directors 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, with a purchase price of RMB 6,000,000 (US $837,743). The Compensation Committee of The Board of Directors has decided to grant Fu Liu 398,925 restricted shares for the purchase of this software.

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, with a purchase price of RMB 6,000,000 (US $834,852). The Compensation Committee of The Board of Directors has decided to grant Fu Liu 369,403 restricted shares for the purchase of this software.

On November 20, 2025, the Company entered into an intellectual property purchase agreement with Mr. Fu Liu, the Company's director, pursuant to which Mr. Fu Liu transferred to the Company intangible assets (software copyrights) owned by himself, with a purchase price of RMB 5,000,000 (US $704,225). The Compensation Committee of The Board of Directors decided to grant Fu Liu 533,504 restricted shares for the purchase of the software.

On November 20, 2025, the Company entered into an intellectual property purchase agreement with Ms. Zhixin Liu, the Company's director and CEO, pursuant to which Ms. Zhixin Liu transferred to the Company intangible assets (software copyrights) owned by herself, with a purchase price of RMB 7,900,000 (US $1,112,676). The Compensation Committee of The Board of Directors decided to grant Zhixin Liu 842,936 restricted shares for the purchase of the software.

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 58.50% of the Company's common stock.

***Shares to Independent Directors as Compensation***

During the three months ended December 31, 2025 and 2024, the Company recorded $39,900 and $4,500 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. During the six months ended December 31, 2025 and 2024, the Company recorded $43,800 and $9,000 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 three months ended December 31, 2025 and 2024, the Company recorded $153,000 and $177,000 stock compensation expense to the Company's CEO and one of the board members. During the six months ended December 31, 2025 and 2024, the Company recorded $299,250 and $547,500 stock compensation expense to the Company's CEO and one of the board members.

***Shares to third-party professionals and consultants***

During the three months ended December 31, 2025, the Company issued 404,886 shares of the Company's common stock to its third-party professionals and 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 404,886 shares at issuance date was $706,674 and was recorded as the Company's stock compensation expense.

During the six months ended December 31, 2025, the Company issued 423,253 shares of the Company's common stock to its third-party professionals and 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 423,253 shares at issuance date was $742,674 and was recorded as the Company's stock compensation expense.

***Shares to Officers in Lieu of Salary Payable***

On August 18, 2025, the Board of Directors approved to issue 33,312 shares to the Company's CEO and one of the board members in lieu of payment for salary payable of $64,957. On October 17, 2025, the Board of Directors approved to issue 32,079 shares to the Company's CEO and one of the board members in lieu of payment for salary payable of $65,443.

 ****

**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 December 31, 2025 and June 30, 2025, the U.S. entity had net operating loss ("NOL") carry forwards for income tax purposes of $10.01 million and $9.35 million, respectively. 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.

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 December 31, 2025 and June 30, 2025, the Company has approximately $16.47 million and $18.08 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 December 31, 2025 and June 30, 2025.

The following table reconciles the U.S. statutory rates to the Company's effective tax rate for the three months ended December 31, 2025 and 2024:

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| | | |
|:---|:---|:---|
|  | **2025** | **2024** |
| US federal statutory rates | (21.0)% | (21.0)% |
| Tax rate difference – current provision | (0.4)% | (2.4)% |
| Permanent difference | 36.7% | 3.3% |
| Effect of PRC tax holiday | (5.4)% | 2.9% |
| Valuation allowance | (9.9)% | 17.2% |
| Effective tax rate | -% | -% |

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The following table reconciles the U.S. statutory rates to the Company's effective tax rate for the six months ended December 31, 2025 and 2024:

---

| | | |
|:---|:---|:---|
|  | **2025** | **2024** |
| US federal statutory rates | (21.0)% | (21.0)% |
| Tax rate difference – current provision | (0.3)% | (2.7)% |
| Permanent difference | 32.7% | 3.7% |
| Effect of PRC tax holiday | (3.7)% | (0.4)% |
| Valuation allowance | (7.7)% | 20.4% |
| Effective tax rate | -% | -% |

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The Company's net deferred tax assets as of December 31, 2025 and June 30, 2025 is as follows:

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| | | |
|:---|:---|:---|
|  | **December 31,<br> 2025** | **June 30,<br> 2025** |
| Deferred tax asset |  |  |
| &nbsp;&nbsp;&nbsp;Net operating loss | $5356582 | $5408433 |
| &nbsp;&nbsp;&nbsp;Depreciation and amortization | 224866 | 236991 |
| &nbsp;&nbsp;&nbsp;Bad debt expense | 121925 | 120987 |
| &nbsp;&nbsp;&nbsp;Social security and insurance accrual | 86129 | 66298 |
| &nbsp;&nbsp;&nbsp;Inventory impairment | 38478 | 38220 |
| &nbsp;&nbsp;&nbsp;ROU, net of lease liabilities | (317) | (941) |
| Total | 5827663 | 5869988 |
| Less: valuation allowance | (5827663) | (5869988) |
| Net deferred tax asset | $- | $- |

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**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:

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| | | | |
|:---|:---|:---|:---|
| **Start Date** | **End Date** | **Rent expense** | **Rent expense** |
|  |  | **RMB** | **USD** |
| 5/10/2023 | 8/9/2023 | 43786 | $6060 |
| 8/10/2023 | 11/9/2023 | 66038 | 9139 |
| 11/10/2023 | 2/9/2024 | 66038 | 9139 |
| 2/10/2024 | 5/9/2024 | 64602 | 8940 |
| 5/10/2024 | 8/9/2024 | 66038 | 9139 |
| 8/10/2024 | 11/9/2024 | 66038 | 9139 |
| 11/10/2024 | 2/9/2025 | 66038 | 9139 |
| 2/10/2025 | 5/9/2025 | 63884 | $8841 |

---

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).

On August 18, 2025, the Company entered into a lease agreement for an office in Shenzhen City, China for 24 months from August 18, 2025 to August 17, 2027, with a monthly rent of RMB 24,000 ($3,366), payable one day immediately preceding to the due date of each rent payment period. The security deposit is RMB 48,000 ($6,732).

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:

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| | | |
|:---|:---|:---|
|  | **Three Months<br> Ended<br> December 31,<br> 2025** | **Three Months<br> Ended<br> December 31<br> 2024** |
| Operating lease expense | $44607 | $38388 |

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---

| | | |
|:---|:---|:---|
|  | **Six Months<br> Ended<br> December 31,<br> 2025** | **Six Months<br> Ended<br> December 31,<br> 2024** |
| Operating lease expense | $84207 | $77320 |

---

---

| | | |
|:---|:---|:---|
|  | **December 31,<br> 2025** | **June 30,<br> 2025** |
| Right-of-use assets | $297243 | $292065 |
| Lease liabilities - current | 166662 | 128525 |
| Lease liabilities - noncurrent | 129654 | 166436 |
| Weighted average remaining lease term | 1.80 years | 2.31 years |
| Weighted average discount rate | 3.60% - 3.85 | 3.60% - 6.75 |

---

The following is a schedule, by years, of maturities of the operating lease liabilities as of December 31, 2025:

---

| | |
|:---|:---|
| **12 Months Ending December 31,** | **Minimum<br> Lease<br> Payment** |
| 2026 | $175071 |
| 2027 | 131984 |
| Total undiscounted cash flows | 307055 |
| Less: imputed interest | 10739 |
| Present value of lease liabilities | $296316 |

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**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 January 4, 2026, Guozhong Times, as the purchaser, entered into a patent purchase agreement with Yuxiang Zhiyang (Tianjin) Innovation Technology Co., Ltd., as the seller, for the acquisition of a Resource Allocation Method for Non-overlapping Interference in 6G Dense Networking Based on Deep Reinforcement Learning. The total purchase price is RMB 8,600,000 ($1.2 million), inclusive of a 6% VAT, and will be amortized over the three years.

On January 8, 2026, Datasea established a wholly owned subsidiary Datasea Intelligent Technology Ltd. in the British Virgin Islands ("BVI") for relocating its registered office from the United States to the BVI.

On January 26, 2026, Guozhong Times and Shenzhen Yizhi Technology Co., Ltd. entered into a loan agreement under which Guozhong Times, as the lender, agreed to provide a total principal amount of RMB 10,000,000. The loan will be disbursed in three installments. The first installment is RMB 2,000,000, and the timing of the remaining disbursements will be arranged based on business development needs and the borrower's funding requirements. The repayment term for each of the three loans will not exceed 36 months.

**ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS**

**<u>Cautionary Note Regarding Forward-Looking Statements</u>**

This 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:

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

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

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

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

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

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

● changes in Chinese government regulations; and

● 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. Datasea's business focuses on two main segments: Acoustic High-Tech and 5G+ AI Multimodal Digitalization. Through continuous research and development("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 high-tech Company with a technology foundation centered on the integration of acoustics and artificial intelligence, Datasea continues to advance its dual-business engines of "Acoustic High-Tech + 5G+AI Multimodal Digitalization," promoting the expansion of related technologies across multiple industry sectors. The Company focuses on acoustic technologies as a core technical direction and continues to conduct research and application exploration across key areas including industrial, agricultural, healthcare, medical, and IoT applications. Through ongoing development efforts, the Company is steadily accumulating differentiated technical capabilities and facilitating the transition of research into practical industry applications.

**Overall Quarter Performance**

For the six months ended December 31, 2025, revenue was $26,808,565, compared with $41,537,498 in the same period last year. Revenue decreased by $14,728,933, or 35.46%. For the six months ended December 31, 2025 and 2024, the Company's gross profit was $2,362,050 and $614,433, respectively. Gross profit increased by $1,747,617 from the same period last year, an increase of 284.43% from the same period last year. For the six months ended December 31, 2025 and 2024, the gross profit margins were 8.81% and 1.48% respectively. The overall gross profit margin of the Company has significantly improved.

Management believes that the substantial improvement in gross profit and gross margin reflects the continued execution of the Company's strategic transition toward technology-driven, high-value-added business models. During the six-month period, the Company deliberately moderated revenue growth by reducing standardized, low-margin services, while increasing the contribution from higher-margin, solution-oriented and technology-driven offerings.

During the six-month period, and particularly in the second quarter, Datasea further strengthened the technical foundation and application boundaries of its acoustic high-tech segment. Building upon its established "Acoustic + AI" platform, the Company achieved phased engineering progress in several emerging application directions, including acoustic-driven brain–computer interface technologies, industrial precision acoustics, and system-level acoustic solutions for healthcare and intelligent equipment scenarios. These developments reflect the Company's continued shift from single-device innovation toward system-level integration and application-oriented technology frameworks.

These engineering initiatives were pursued alongside the Company's revenue mix optimization and did not rely on near-term revenue contribution. In particular, the Company continued to advance its acoustic research, at the engineering and system validation level, in areas including non-invasive acoustic neuromodulation, closed-loop acoustic control, and acoustic signal enhancement technologies. These efforts are intended to support future applications in healthcare, rehabilitation, intelligent interaction, and other professional scenarios, while laying the technical groundwork for subsequent product validation and potential commercialization, subject to further development, regulatory considerations, and market conditions.

In parallel, Datasea continued to refine its 5G+AI multimodal digitalization business by further shifting its revenue mix toward customized, solution-oriented, and platform-based services with higher technical value and improved profitability characteristics. Through these combined strategic and operational initiatives, management believes the Company has achieved a meaningful improvement in profit quality and has taken important steps toward establishing a more sustainable foundation for long-term growth.

During the second quarter, as part of its ongoing technology development initiatives, the Company continued to strengthen its intellectual property portfolio through the acquisition and filing of patents primarily related to acoustic signal enhancement, brain–computer interface ("BCI") technologies, multimodal human–computer interaction, and advanced network resource optimization. Management believes these intellectual property assets support the Company's technology platform at a cross-segment level, aligning with both its acoustic technology initiatives and 5G+AI multimodal digitalization business.

While acoustic technologies represent a key strategic and long-term development focus, the Company's near-term revenue continues to be primarily supported by its 5G+AI multimodal digitalization business.

***Our Business Summary***

*Segment I-Acoustics high tech Segment:*

We understand the market's demand for new application areas, technologies, and requirements. Therefore, through the relentless efforts of our team, we have achieved advancements in acoustic understanding and algorithms.

**I. Overview of the Company's Acoustic high-tech Business**

The Company's acoustic high-tech business is centered on the application of advanced acoustic technologies, including ultrasound, infrasound, directional sound, and acoustic coupling techniques. These technologies are integrated with artificial intelligence algorithms, sensing hardware, and system-level engineering capabilities to support differentiated application scenarios across multiple industries.

At present, the Company's acoustic technology platform has formed a **layered application structure**. In the health-related segment, the Company has developed and commercialized acoustic-based products for environmental disinfection and sleep assistance, utilizing ultrasonic sterilization, directional acoustic control, and frequency-based modulation technologies. These products represent the Company's established acoustic applications and provide an initial commercialization base for the broader technology platform.

Beyond these existing applications, the Company's acoustic platform has expanded into **more complex medical and industrial application domains**, where system-level integration, operational stability, and engineering coordination are essential. During the reporting period, the Company's acoustic business development was characterized by increasing emphasis on system-level solutions rather than standalone devices, reflecting the growing role of acoustics as an enabling technology across application scenarios.

Within this framework, the Company's acoustic business currently encompasses two principal strategic application directions:

&nbsp;&nbsp;&nbsp;&nbsp;(i) healthcare-oriented acoustic technologies, including brain–computer
interface and neuromodulation systems; and

&nbsp;&nbsp;&nbsp;&nbsp;(ii) industrial precision acoustic technologies for advanced manufacturing
applications.

In healthcare-related applications, the Company applies its acoustic technology foundation to non-invasive systems designed for integration with intelligent health devices and healthcare-related robotic platforms. In industrial applications, the Company applies ultrasonic technologies in combination with AI-assisted control and optimization frameworks to address precision processing requirements in advanced manufacturing environments.

Management believes that this layered, platform-based structure—ranging from commercially deployed health-related applications to engineering-stage medical and industrial system-level solutions—accurately reflects the current stage of the Company's acoustic business. This structure provides a coherent and scalable foundation for the continued expansion of acoustic technologies across application domains and supports subsequent execution-focused research and development while maintaining engineering discipline.

**II. Acoustic Technologies and Collaboration in Health and Brain–Computer Interface Applications**

In the healthcare domain, the Company continued to advance acoustic-driven technologies applicable to non-invasive health management and brain–computer interface ("BCI") systems. Building on previously disclosed research related to acoustic coupling and neuromodulation, the Company progressed multiple initiatives toward engineering-level system integration.

During December 2025, the Company announced progress in two acoustic-driven BCI core systems:

&nbsp;&nbsp;&nbsp;&nbsp;(i) an **Acoustic-Coupled Electroencephalogram ("EEG") Signal Enhancement System**, designed to improve signal-to-noise ratio and data completeness
during non-invasive EEG acquisition through acoustic field coupling; and

&nbsp;&nbsp;&nbsp;&nbsp;(ii) a **Real-Time Closed-Loop Vibration-Enhanced BCI System**,
intended to support dynamic signal decoding and feedback modulation through real-time acoustic stimulation mechanisms.

Subsequently, in January 2026, the Company disclosed further engineering-level advancements extending these core technologies toward application-oriented system frameworks. These initiatives included:

&nbsp;&nbsp;&nbsp;&nbsp;(i) a **BCI-based communication and care assistance system**,
focused on interpreting neural signals and mapping user intent into control instructions for assisted communication and caregiving scenarios;
and

&nbsp;&nbsp;&nbsp;&nbsp;(ii) a **BCI-based upper-limb rehabilitation robot control system**,
exploring the translation of decoded neural signals into structured control logic for rehabilitation training devices.

During the reporting period, certain system components reached engineering-stage development, and application-oriented testing was initiated with an emphasis on system stability, responsiveness, and adaptability across different usage scenarios.

To support application-level validation of its acoustic-driven healthcare technologies, the Company entered into strategic collaborations with domestic partners specializing in brain–computer interface systems and healthcare robotics.

In particular, in January 2026, the Company established a strategic collaboration with **Nanjing Linghang Intelligent Aviation Technology Co., Ltd.**, a China-based enterprise with experience in non-invasive BCI systems and rehabilitation robot applications. The collaboration focuses on joint technical testing, system integration evaluation, and application feasibility assessment of acoustic-enhanced BCI technologies within healthcare robot system architectures, including rehabilitation and assisted-care environments.

In parallel, the Company has engaged with healthcare-oriented partner, Shenzhen YiZhiMei Technology Co., Ltd., focusing on application exploration and validation of acoustic technologies in medical and wellness-related device scenarios. Management believes that collaboration-based validation with industry partners is a critical step in assessing practical deployment pathways, identifying system constraints, and informing future productization decisions.

**III. Acoustic Technologies for Industrial Precision Processing**

In parallel with healthcare-related initiatives, the Company continued to develop acoustic technologies for industrial precision processing. These efforts are based on the integration of **ultrasonic-assisted processing**, **AI-driven parameter optimization**, and **multi-physics coupling simulation**, with the objective of enhancing manufacturing precision, surface quality, and process consistency.

As described in the Company's industrial acoustic technology framework, target application areas include semiconductor substrate processing, aerospace material machining, and biomedical micro- and nano-fabrication. During the reporting period, development activities focused on prototype module validation, parameter stability, transducer reliability, and compatibility with existing industrial control systems.

**IV. Integration of Acoustic Technology and AI Systems**

A central element of the Company's strategy is the integration of acoustic technologies with artificial intelligence systems to form differentiated, system-level solutions. The Company believes that combining physical acoustic effects with data-driven intelligence enables application pathways that are difficult to replicate using software-only or hardware-only approaches.

During the reporting period, the Company continued refining its acoustic-AI integration framework, emphasizing system architecture design, algorithm-hardware coordination, and real-time feedback mechanisms. These efforts support both healthcare-oriented and industrial application scenarios and are intended to enhance scalability while maintaining system reliability.

The Company believes that this system-level integration differentiates its approach from software-only AI solutions and standalone hardware implementations.

**V. Recent Developments**

***During the six months ended December 31, 2025, the Company and its subsidiaries entered into the following material agreements with its key customers:***

From May 15, 2025 to July 25, 2025, the Company's wholly owned subsidiary, **Shenzhen Shuhai Jingwei Information Technology Co., Ltd.** ("Shuhai Jingwei"), entered into multiple entrusted processing agreements with **Yuxiang Zhiyang (Tianjin) Innovation Technology Co., Ltd.** ("Yuxiang Zhiyang") for the manufacture of AP450A air purifiers. The total contract amount was **RMB 4.74 million**, with an aggregate contract quantity of **6,460 units**. From July 1 to December 31, 2025, a total of **4,852 units** were sold. During this period, **Yuxiang Zhiyang's revenue** reached **RMB 3,144,230.09** (approximately **USD 442,551**). The execution of these contracts marked a solid initial entry of acoustic environmental disinfection products into the consumer market, laying a foundation for future business expansion and brand development.

In September 2025, Shuhai Jingwei and Yuxiang Zhiyang separately entered into renovation cost agreements, covering a total of **3,240 units**, with total revenue of **RMB 214,327.76** (approximately **USD 30,166.73**).

On October 9, 2025, Shuhai Jingwei entered into an entrusted processing agreement with Yuxiang Zhiyang for the negative ion sleep device Z5. The contract amount was **RMB 19.995 million**, with a contract quantity of **2,500 units**.

In addition to the above acoustic intelligent product sales, from July 1 to December 31, 2025, Shuhai Jingwei sold **261 acoustic high-tech products** to individual customers, generating total revenue of **RMB 171,179.88** (approximately **USD 24,093**).

***Operating Performance Overview — Acoustic High-tech Business***

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During the reporting period, revenue generated from the Company's **acoustic business** represented a relatively small portion of the Company's overall revenue structure. Revenue from the acoustic business was primarily derived from **entrusted manufacturing activities**, **direct sales of acoustic intelligent and high-tech products**, and a limited number of **renovation and ancillary service agreements**.

Although the revenue scale of the acoustic business remained limited during the reporting period, management believes that the execution of the relevant contracts, together with the delivery and sale of the associated products, **validated the technical feasibility, manufacturability, and initial market acceptance** of the Company's acoustic environmental disinfection and health-related products. These execution results provided practical evidence supporting the application of the Company's acoustic technologies in consumer-oriented scenarios and established an operational foundation for subsequent product standardization and broader market deployment.

During the reporting period, the Company's focus in the acoustic business was not on pursuing rapid short-term revenue growth, but rather on **technical validation and capability development across core application areas**, including, without limitation, **acoustic medical and brain-computer interface-related neuromodulation applications; acoustic robots and intelligent devices for health management; and precision manufacturing and system integration applications within the acoustic industrial sector**. In connection with these focus areas, the Company concentrated on **product performance verification, production process optimization, and multi-scenario application testing**.

Management believes that this gradual, phased approach helps effectively control research and development and commercialization execution risks during the early stages, while laying a solid foundation for the subsequent scale-up and commercialization of the Company's acoustic technologies. As technological maturity and application validation continue to advance, the Company's acoustic business is progressively developing replicable and scalable product and solution capabilities, supporting a steady transition toward commercialization.

Centered on acoustic technology as a core underlying capability, the Company has conducted scenario-based validation across multiple application areas, including medical and health applications, brain-computer interface and neuromodulation technologies, intelligent health devices and robots, industrial precision manufacturing, and environmental and public-safety-related applications, and maintains the technical foundation to extend such applications into additional domains.

**VI. Future Outlook for the Acoustic Business**

Looking forward, the Company views its acoustic high-tech business as a core and long-term strategic pillar, positioned to support **multiple application scenarios** across healthcare, industrial manufacturing, and intelligent systems. Rather than being limited to a single product category, the Company's acoustic technologies are **applied across diverse application scenarios**, with the ability to continuously enhance system performance and functional outcomes in different industry contexts through system-level integration and engineering validation.

In the healthcare domain, the Company intends to continue advancing acoustic-driven health and brain–computer interface technologies, with a focus on non-invasive neuromodulation, signal enhancement, and closed-loop system architectures. These efforts are aimed at supporting applications in health management, rehabilitation, and assisted-care scenarios, while progressively clarifying feasible pathways for system deployment and potential productization through ongoing validation and collaboration.

In parallel, the Company plans to further develop its acoustic technologies for industrial precision processing, leveraging ultrasonic-assisted processing and AI-driven control frameworks to address high-precision manufacturing requirements. Target application areas include semiconductor substrates, aerospace materials, and biomedical micro- and nano-fabrication, where acoustic technologies may enhance processing accuracy, consistency, and system stability through continued engineering validation.

More broadly, management believes that the Company's acoustic technologies represent a **core acoustic technology platform applied across multiple application scenarios**, capable of being integrated with artificial intelligence, sensing systems, and control systems to address complex application requirements. As additional application scenarios are validated, the Company expects the scope of acoustic-based solutions to expand accordingly, without being confined to a fixed set of industries or product forms.

Management believes that positioning acoustic high-tech as a core business pillar, rather than a standalone product line, allows the Company to **continuously apply its acoustic technologies to new and evolving application scenarios**, thereby supporting long-term value creation.

***Segment II-5G+ AI multimodal digital***

**I. Our Business Performance and Ongoing Services of AI Multimodal Digitalization**

During the period, the Company continued to deliver its multimodal digital services through solution-based projects, including AI-driven new media and content operations solutions, digital rural development platform solutions, enterprise digital management solutions for small and micro businesses, and data analysis support services for financial-related institutions. These solutions are designed to address concrete operational needs of clients by integrating multimodal data processing with AI-driven analysis and decision support.

The Company's multimodal digitalization business is primarily delivered through project-based and solution-oriented service arrangements, with implementation cycles, service scopes, and pricing structures customized based on specific client requirements. Depending on the nature of the application scenario, projects may involve phased deployment, iterative optimization, and ongoing service delivery. Certain solutions are provided on a continuous basis with repeat engagements, reflecting the platform's suitability for supporting clients' recurring operational and management needs.

The Company's multimodal platform supports the coordinated processing of text, voice, image, video, and structured data, and enables real-time analysis and intelligent decision support under 5G network conditions. These capabilities allow the Company to deliver AI-driven digital services to customers with high responsiveness, system reliability, and scalability, providing technical support for sustained commercialization across multiple application scenarios.

Management believes that the continued delivery, operational stability, and repeat engagement of these solutions reflect the maturity of the Company's multimodal platform. The AI multimodal digitalization segment has evolved into a stable service-oriented business component, contributing to the Company's overall revenue structure while **maintaining flexibility to adapt to changing client requirements and application conditions.**

**II. Technology Framework of 5G+AI Multimodal Digitalization**

Datasea's 5G+AI multimodal digitalization platform is an integrated system designed to process and analyze different types of data—such as text, images, audio, and video—in a coordinated manner. In simple terms, the system enables businesses to collect, understand, and respond to multiple forms of digital information in real time or near real time.

The platform utilizes artificial intelligence models, including Transformer-based architectures. A Transformer model is a widely used AI structure that allows a system to analyze relationships within and across different types of data simultaneously. This enables the platform to perform tasks such as semantic understanding, content generation, and decision support across multiple data formats.Supported by distributed computing and 5G network infrastructure, the system processes multimodal inputs efficiently and converts them into actionable outputs tailored to specific application scenarios.

**III. 5G+AI Solutions and Application Projects**

During the reporting period, the Company continued to focus on solution-oriented delivery by applying its 5G+AI multimodal capabilities to client projects designed around practical operational and management needs. Rather than deploying standardized software products, the Company structures its solutions based on specific business workflows, data environments, and performance objectives of each project.

Key solution areas include:

● **Digital Solutions for Small and Micro Enterprises**, which support customer relationship management, intelligent marketing, and operational analytics to improve efficiency and reduce digitalization costs;

● **New Media and Content Operations Solutions**, utilizing AI-generated content and digital human technologies to support automated content production, distribution optimization, and performance monitoring across digital channels;

● **Digital Rural Development Solutions**, providing data-driven tools for agricultural management, rural services coordination, and remote operations in support of intelligent rural governance initiatives; and

● **Beauty and Healthcare Digital Management Solutions**, offering integrated digital platforms for offline service providers and enabling coordination with the Company's acoustic hardware products, where applicable, to enhance service efficiency and user experience.

These solutions are primarily delivered to enterprise clients, local service operators, and institutional customers. Project scopes are typically structured to support day-to-day operations, digital management processes, and data-driven decision-making, with implementation approaches adjusted according to client scale and application complexity. Management believes that continued emphasis on solution-based delivery allows the Company to effectively align its technology capabilities with real-world business requirements and supports the sustainable development of the 5G+AI multimodal digitalization segment.

**IV. Recent Developments in the 5G+AI Business**

***Key Customers and Agreements***

For the six months ended December 31, 2025, our revenues were $26,808,565. During the reporting period, the Company optimized its product mix by increasing sales of higher-margin offerings, including acoustic intelligent products and 5G+AI multimodal technology solutions, while implementing revenue optimization measures for the 5G+AI multimodal business, which had relatively lower gross margins during its market expansion phase.

On September 12, 2025, Shuhai Beijing signed an agreement with Anhui Gukai Business Co., LTD. (hereinafter referred to as "Anhui Gukai"). Relying on its AI multi-modal technology capabilities, Shuhai Beijing will focus on the e-commerce scenario and create a full-chain module covering "product display - payment service - order service - customer relationship management".

The objective of the platform development plan is to support the customization of localized content for product display according to the target market. The payment module integrates multiple payment interfaces and synchronously optimizes the regional payment conversion rate. Customer management integrates regional user behavior data to generate precise profiles.

In addition, the AI engine can intelligently recommend the time and channel for product placement, and the data monitoring module can track the product placement effect in real time, helping the client achieve precise placement in multi-channel e-commerce marketing, reduce costs and improve conversion rates. As of December 31, 2025, revenue of RMB 2,075,471.70 (approximately US$292,123.54) was obtained from Anhui Gukai.

On September 12, 2025, Shuhai Beijing signed an agreement with Yuxiang Zhiyang (Tianjin) Innovation Technology Co., LTD. (hereinafter referred to as "Yuxiang Zhiyang"). Shuhai Beijing has its own independently developed 5G-AI multimodal new media marketing service platform, providing Yuxiang with specialized services for mature system solutions based on cutting-edge technology architectures.

The customized new media marketing service platform solution will focus on supporting the Douyin live-streaming sales and smart home appliance marketing scenarios of Yuxiang Oxygen Production, covering product promotion, user interaction, and live-streaming e-commerce conversion. It will help Yuxiang Oxygen Production build a precise marketing and brand communication system in the Douyin live-streaming sales and smart home appliance marketing scenarios. As of December 31, 2025, revenue of RMB 2,169,811.32 (approximately US$305,401.89) was obtained from Yuxiang Smart Oxygen.

On September 13, 2025, Shuhai Beijing signed an agreement with Beijing Shuhai Culture Media Co., LTD. (hereinafter referred to as "Culture Media"). Shuhai Beijing has its own independently developed 5K-AI multimodal new media marketing service platform, providing Culture Media with mature system solution specialized services based on cutting-edge technology architecture.

The new media marketing service platform helps the entire industry with marketing services. Relying on the 5G multi-modal form, the platform can form AI intelligent marketing based on the core technology of the group. With content creation and management, data monitoring and analysis, user operation and interaction as marketing themes, it can send advertisements, manage advertisements, and mark the placement areas and attributes, achieving the precise placement function of new media marketing. As of December 31, 2025, revenue from culture and media was RMB 2,264,150.94 (approximately US$318,680.23).

Datasea's 5G+AI multimodal digital platform offers comprehensive and intelligent digital solutions to a wide spectrum of industry clients, spanning from small and micro enterprises to large-scale corporations. By deeply integrating advanced AI technologies with the high-efficiency connectivity capabilities of 5G networks, Datasea not only significantly optimized clients' business processes but also continuously innovated digital service models, business models, ofering robust technological support for sustainable growth.

On November 19, 2025, Beijing Shuhai signed an agreement with Hainan Taihe Ruixiang Technology Development Co., Ltd. (hereinafter referred to as "Hainan Taihe Ruixiang"). Beijing Shuhai possesses an independently developed 5G-AI multi-mode new media marketing service platform, providing Hainan Taihe Ruixiang with a mature system solution service based on the cutting-edge technology architecture.The customized new media marketing platform solution will focus on supporting the live-streaming e-commerce product marketing scenarios of Hainan Taihe Ruixiang, covering product promotion, user interaction, and live-streaming e-commerce conversion, helping Hainan Taihe Ruixiang build a precise marketing and brand communication system in the live-streaming e-commerce product marketing scenarios. As of December 31, 2025, Hainan Taihe Ruixiang's revenue was RMB 2,169,811.32 (approximately USD 305,401.89).

On November 24, 2025, Beijing Shuhai signed a supplementary agreement with Beijing Meimei Partner Network Technology Co., Ltd. (hereinafter referred to as "Beijing Meimei"). Due to the business upgrade of Beijing Meimei, it needs to carry out technical iteration and functional expansion on the original 5G-AI multi-modal small and medium-sized enterprise service platform. Beijing Shuhai has mature upgrade technical solutions and implementation capabilities in this field and will provide technical solution services to Beijing Meimei. As of December 31, 2025, the revenue of Beijing Meimei was RMB 943,396.23 (approximately USD 132,783.43).

On December 1, 2025, Beijing Shuhai signed an agreement with Hainan Taihe Ruixiang Technology Development Co., Ltd. (hereinafter referred to as "Hainan Taihe Ruixiang"). Beijing Shuhai possesses an independently developed 5G-AI multi-modal small and medium-sized enterprise service platform, providing Hainan Taihe Ruixiang with a specialized service solution based on a mature system architecture with cutting-edge technology.Key scenarios such as enterprise management digitalization, efficient business collaboration, data value mining, and compliance security guarantee are supported throughout the entire chain from infrastructure setup, core functional module deployment to business process adaptation. This provides precise service matching and efficient business connection for the small and medium-sized enterprise customers served by Hainan Taihe Ruixiang, ultimately helping Hainan Taihe Ruixiang build a standardized and scalable small and medium-sized enterprise service system, improving service efficiency and customer retention rate, and achieving the scale growth and sustainable operation of the platform business.As of December 31, 2025, Hainan Taihe Ruixiang's revenue was RMB 2,169,811.32 (approximately USD 305,401.89).

On December 8, 2025, Beijing Shuhai and He Yue (Tianjin) Cultural Media Co., Ltd. (hereinafter referred to as "He Yue") signed an agreement. Beijing Shuhai possesses an independently developed 5G-AI multi-mode new media marketing service platform, which provides He Yue with a mature system solution service based on the cutting-edge technology architecture.

The new media marketing service platform assists the marketing services of all industries. Relying on the 5G multi-modal form, the platform can form AI intelligent marketing based on the group's core technology, including content creation and management, data monitoring and analysis, user operation and interaction. It sends, manages and labels advertisements, as well as marks the placement area and attributes for the placement, to achieve the precise placement function of new media marketing.

As of December 31, 2025, He Yue's revenue was RMB 2,264,150.94 (approximately USD 318,680.23).

On December 4, 2023, Heilongjiang Xunrui signed an agreement with Harbin Yusheng Intelligent Engineering Co., Ltd. (hereinafter referred to as "Yusheng"). Yusheng entrusted Heilongjiang Xunrui to be responsible for the supply and construction, as well as data connection of the high-standard farmland project for smart agriculture in Tielishi - a project of Heilongjiang Xunrui. By December 31, 2025, Yusheng's revenue was RMB 977,641 (approximately USD 137.603).

***Operating Performance Overview***

During the reporting period, the Company's primary revenue was derived from service fees related to its **5G+AI multimodal digital business**. From July 1 to December 31, 2025, this segment generated revenue of **USD 26.31 million**. During this period, based on its long-term development strategy, the Company proactively advanced adjustments to its business direction and revenue structure, focusing on **5G+AI multimodal digital technology solutions** with higher gross margins and stronger sustainability, while correspondingly reducing exposure to business segments that were in an expansion phase and characterized by relatively lower gross margins. Against this backdrop, the Company experienced a temporary decline in overall revenue during the reporting period, while achieving a substantial improvement in gross profit and gross margin.

Notwithstanding the above, as the Company's **core revenue source**, the **5G+AI multimodal digital business** continued to demonstrate strong stability and long-term development potential. Such stability was primarily attributable to the Company's **executed and continuously performed technical service and system solution contracts**, under which relevant projects continued to be delivered and revenue was recognized during the reporting period. At the same time, the Company continued to optimize its business structure by increasing the revenue contribution from higher-margin technology solution offerings and reducing the proportion of lower-margin expansion-oriented businesses, which effectively supported the sustained operation of its core business and contributed to ongoing improvements in earnings quality.

From a business composition perspective, multiple technical solutions—including **5G+AI multimodal services for small and micro enterprises, 5G+AI multimodal rural digital services, and 5G+AI multimodal new media marketing services**—have achieved commercial revenue realization, generating total revenue of **RMB 15.06 million** (approximately **USD 2.12 million**). This indicates that the Company's **5G+AI multimodal digital business has been fully implemented and has entered a stage of rapid expansion**. These solutions are characterized by relatively high gross margins and, through technological innovation and structural optimization, have effectively enhanced the Company's overall profitability and continuously improved earnings quality.

**ESG and Corporate Governance – Quarterly Update**

During this quarter, Datasea continued to advance its Environmental, Social, and Governance (ESG) framework, with a primary focus on governance execution, internal process refinement, and ongoing transparency in operations. The Company's ESG-related efforts during the period emphasized continuity and practical implementation, rather than the introduction of new standalone initiatives.

Compared with the previous quarter, management's focus shifted toward consolidating governance practices already established, enhancing internal coordination across business units, and reinforcing compliance awareness throughout day-to-day operations.

**Corporate Governance and Internal Control Progress**

During the quarter, the Company continued to strengthen its corporate governance framework through incremental improvements and ongoing oversight activities, including:

● **Board Oversight and Governance Engagement:** The Board, including independent directors, continued to review governance, compliance, and risk management matters on a regular basis, with an emphasis on internal control effectiveness and disclosure discipline.

● **Internal Control and Compliance Execution:** The Company continued implementing its internal control and compliance processes across subsidiaries and affiliated operating entities, including periodic internal reviews and compliance checks designed to support consistency with applicable SEC and Nasdaq requirements.

● **Disclosure Review and Coordination:** Management maintained its internal review procedures for public disclosures and governance-related information, with continued involvement from relevant functional teams to support accuracy, consistency, and timely reporting.

● **Ethics and Reporting Mechanisms:** Existing employee reporting and internal review mechanisms remained in place during the quarter, supporting ethical conduct, issue escalation, and internal accountability as part of the Company's governance framework.

Management believes that these ongoing governance practices contribute to a stable and disciplined operating environment and support transparent engagement with investors and regulators.

**Environmental and Operational Practices**

During the quarter, Datasea continued to promote environmentally responsible practices within its operations, particularly at its Shenzhen-based subsidiary. These efforts focused on maintaining previously implemented green office initiatives, including waste classification, paperless workflows, and energy usage management.

The Company believes that maintaining operational discipline in environmental practices, even without the introduction of new programs during the quarter, supports long-term sustainability objectives and responsible resource utilization.

**Employee Engagement and ESG Awareness**

The Company continued to promote ESG awareness among employees through internal communication, training, and participation-oriented initiatives. Employee engagement activities related to environmental responsibility and ethical conduct were maintained during the quarter, reinforcing ESG-related awareness as part of the Company's organizational culture.

Management believes that sustained employee participation is an important component of effective ESG execution and supports the practical implementation of governance and sustainability principles.

**Outlook**

Looking ahead, Datasea intends to continue advancing its ESG framework in a measured and governance-centered manner. The Company plans to further refine internal governance processes, enhance risk and compliance oversight, and progressively improve ESG-related data organization and reporting practices.

Management believes that a disciplined, execution-focused ESG approach supports long-term operational stability, regulatory compliance, and sustainable value creation, while remaining aligned with the Company's current stage of development and business priorities.

**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 three months ending December 31, 2025 and 2024, the Company had a net loss of approximately $0.54 million and $1.14 million, respectively. For the six months ending December 31, 2025 and 2024, the Company had a net loss of approximately $0.74 million and $3.10 million, respectively. The Company had an accumulated deficit of approximately $45.27 million as of December 31, 2025, and cash flow from operating activities of approximately $1.54 million and $(1.59) million for the six months ended December 31, 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 December 31, 2025, the Company had cash of $671,785.

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.

**New Software Copyright Acquired from July 1, 2025 to December 31, 2025**

**Software Copyright Owned by Shuhai Beijing**

---

| | | |
|:---|:---|:---|
| **No.** | **Certification** | **Certificate No.** |
| 1 | Multi-modal Data Intelligent Fusion Analysis System | Ruan Zhu Deng Zi<br> No.16017456 |
| 2 | Visual-linguistic joint emotion recognition system | Ruan Zhu Deng Zi <br> No. 16019239 |
| 3 | Sleep aid device user effectiveness analysis system | Ruan Zhu Deng Zi <br> No. 16017039 |
| 4 | Multi-modal Data Asset Precise Analysis System | Ruan Zhu Deng Zi<br> No.16110664 |
| 5 | Consumer Comprehensive Annotation System | Ruan Zhu Deng Zi <br> No. 16295048 |
| 6 | Service Provider Marketing Service System | Ruan Zhu Deng Zi <br> No. 16295075 |
| 7 | Multi-modal Marketing Plan Management System | Ruan Zhu Deng Zi <br> No. 16295118 |
| 8 | AI Multimodal Order Analysis System | Ruan Zhu Deng Zi <br> No. 16295142 |

---

**Software Copyright owned by Xunrui Technology**

---

| | | |
|:---|:---|:---|
| **No.** | **Certification** | **Certificate No.** |
| 1 | 5G-AI Multi-modal Big Health Management Platform V1.0 | Ruan Zhu Deng Zi<br> No.16289179 |
| 2 | 5G-AI Multi-modal Digital Rural Service Platform V1.0 | Ruan Zhu Deng Zi <br> No. 16289834 |
| 3 | 5G-AI Multi-modal Email Reading and Management Platform V1.0 | Ruan Zhu Deng Zi<br> No.16281116 |
| 4 | AI Intelligent Marketing Management Platform V1.0 | Ruan Zhu Deng Zi <br> No. 16278887 |
| 5 | 5G-AI SMS Delivery Platform V1.0 | Ruan Zhu Deng Zi<br> No.16289816 |

---

**Software Copyright owned by Tianjin Information**

---

| | | |
|:---|:---|:---|
| **No.** | **Certification** | **Certificate No.** |
| 1 | Intelligent acoustic environment adaptive noise reduction platform | Ruan Zhu Deng Zi<br> No.16185992 |
| 2 | AI enterprise aggregated user cloud platform | Ruan Zhu Deng Zi <br> No. 15844106 |
| 3 | Multimodal acoustic fusion analysis software | Ruan Zhu Deng Zi<br> No.16029826 |
| 4 | Supply Chain Management System | Ruan Zhu Deng Zi <br> No. 15472698 |
| 5 | Multimodal intelligent content generation and synthesis system | Ruan Zhu Deng Zi<br> No.16328796 |

---

**Patents that are currently under application from July 1, 2025 to December 31, 2025**

**Patent owned by Shuhai Beijing**

---

| | | |
|:---|:---|:---|
| **No.** | **Certification** | **Request No.** |
| 1. | A brain-computer interface method and system based on real-time closed-loop vibration enhancement | ZL 2025111467773 |
| 2. | A human-computer interaction method based on multi-modal data | ZL 202510900234X |
| 3. | A signal enhancement method and system for brain-computer interface based on acoustic wave coupling | ZL 2025111905621 |
| 4. | A brainwave intelligent driving system | ZL 2021104654635 |

---

**Patent owned by GuozhongTimes**

---

| | | |
|:---|:---|:---|
| **No.** | **Certification** | **Request No.** |
| 1. | A resource allocation method for 6G dense networking without overlapping interference based on deep reinforcement learning | ZL2023101483037 |

---

**Results of Operations**

***Comparison of the three months ended December 31, 2025, and 2024***

The following table sets forth the results of our operations for the three months ended December 31, 2025, and 2024, respectively, indicated as a percentage of net sales. Certain columns may not add up due to rounding.

---

| | | | | |
|:---|:---|:---|:---|:---|
|  | **2025** | **% of<br> Revenues** | **2024** | **% of<br> Revenues** |
| Revenues | $12995014 |  | $20456404 |  |
| &nbsp;&nbsp;&nbsp;Cost of revenues | 11802056 | 90.8% | 20038952 | 98.0% |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Gross profit | 1192958 | 9.2% | 417452 | 2.0% |
| &nbsp;&nbsp;&nbsp;Selling expenses | 328974 | 2.5% | 407669 | 2.0% |
| &nbsp;&nbsp;&nbsp;Research and development | 733243 | 5.6% | 74402 | 0.4% |
| &nbsp;&nbsp;&nbsp;General and administrative expenses | 647317 | 5.0% | 1173733 | 5.7% |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Total operating expenses | 1709534 | 13.2% | 1655804 | 8.1% |
| &nbsp;&nbsp;&nbsp;Loss from operations | (516576) | (4.0)% | (1238352) | (6.1)% |
| Non-operating income(expenses), net | (22091) | (0.2)% | 110636 | 0.5% |
| Loss before income taxes | (538667) | (4.1)% | (1127716) | (5.5)% |
| Income tax expense |  | -% | -% |  |
| &nbsp;&nbsp;&nbsp;Loss before noncontrolling interest | (538667) | (4.1)% | (1127716) | (5.5)% |
| Less: loss attributable to noncontrolling interest | 92 | (0.001)% | 8562 | 0.04% |
| Net loss to the Company | (538759) | (4.1)% | (1136278) | (5.6)% |

---

 ****

***Revenues***

For the three months ended December 31, 2025, revenue was $12,995,014, compared with $20,456,404 in the same period last year. Revenue decreased by $7,461,390, or 36.5%. The main reason for the decline in revenue lies in the Company's proactive contraction of its low-margin 5G AI multimodal traffic business and its continuous optimization of the overall business structure, focusing on high-value-added sectors. Despite a decline in revenue, the Company's gross profit margin significantly increased from 2.0% in the same period of the previous year to 9.2%, demonstrating the effectiveness of the Company's business transformation oriented towards profit quality.

From October 1, 2025 to December 31, 2025, the Company generated revenue of $12,995,014, including $12,988,682 from the 5G AI multimodal digital business, $6,330 from acoustic intelligence business and $2 from other. From October 1, 2024 to December 31, 2024, the Company generated revenue of $20,456,404, including $20,085,988 from the 5G AI multimodal digital business, $326,936 from software licensing, 43,304 from acoustic intelligence business and $176 from other.

Management believes that the substantial improvement in gross profit and gross margin reflects the continued execution of the Company's strategic transition toward technology-driven, high-value-added business models. During the six-month period, the Company deliberately moderated revenue growth by reducing standardized, low-margin services, while increasing the contribution from higher-margin, solution-oriented and technology-driven offerings.

Although the Company's overall revenue experienced a temporary decline during the reporting period, the **5G+AI multimodal digital business**, as the core revenue driver, continued to demonstrate strong resilience and long-term growth potential. Its stable performance was primarily supported by two key factors:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(1) the rapid development of China's 5G+AI multimodal digital industry, which provides broad market opportunities and favorable policy support for the Company; and

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(2) the continuous expansion of the customer base and deeper technological penetration, which further reinforced this segment's position as a crucial pillar in the Company's overall revenue structure.

In terms of business composition, several of the Company's technical solutions— such as 5G+ AI multi-modal services for small, medium and micro enterprises, 5G+ AI multi-modal digital rural services, and 5G +AI multi-modal new media marketing services— have achieved commercial revenue realization, generating a total of RMB 8.52million (approximately USD1.20 million). This signifies that the Company's 5G+AI multimodal digital business has been fully implemented and entered a stage of rapid expansion. Meanwhile, these solutions are characterized by **high gross margins**, which have effectively elevated the Company's overall profitability and demonstrated continuous improvement in profit quality through technological innovation and structural optimization.

Overall, the temporary decline in revenue is an active choice made by the Company during the process of optimizing its business structure, while the significant increase in gross profit margin marks a phased achievement of the Company's shift from pursuing scale expansion to focusing on profit quality and sustainable growth. We believe this transformation can effectively lay a solid foundation for the Company's future profit growth and long-term competitiveness.

**Cost of Revenues**

For the three months ended December 31, 2025, we recorded a cost of revenues of $11,802,056, compared to $20,038,952 for the same period in 2024, reflecting a decrease of $8,236,896 or 41.1%. The cost of revenues for the three months ended December 31, 2025, was primarily driven by 5G AI multimodal digital platform fees and cloud platform construction costs paid to suppliers. The decrease in the cost of revenues was mainly due to the less revenue generated from the 5G AI multimodal digital segment.

For the three months ended December 31, 2025, the costs were as follows: $11.76 million for 5G AI multimodal digital, $39,875 for the acoustic intelligence business, and the cost of other was $354. For the three months ended December 31, 2024, the cost of 5G AI multimodal digital was $19.71 million, the cost of software licensing was $317,414 and the cost of acoustic intelligence business was $16,184.

**Gross Profit**

Gross profit for the three months ended December 31, 2025, was $1,192,958 compared to $417,452 for the three months ended December 31, 2024, representing an increase of $775,506. This increase in gross profit was primarily driven by increased sales of high-margin products during the three months ended December 31, 2025 as a result of the Company's adjusting of its revenue focus on high margin products and services.

Gross margin was 9.2% for the three months ended December 31, 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. The growth in gross profit indicates that the Company has substantial development potential in its operations, including:

● **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.

● **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.

● **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:**

● **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.

● **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.

● **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.

● **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.

● 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 three months ended December 31, 2025 were $328,974, compared to $407,669 for the same period in 2024, reflecting a decrease of $78,695, or 19.3%. The decrease was mainly due to the decrease of advertising and marketing expenses by $460,467 and decreased payroll expense and benefits by $26,526, which was partly offset by increased service fee by $70,015, and increased consulting fee by $338,500.

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 $733,243 and $74,402 during the three months ended December 31, 2025 and 2024, respectively, representing an increase of $658,841 or 885.5% as compared to the same period of 2024.

Research and development expenses for the three months ended December 31, 2025, totaled $733,243. 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:

● 5G AI multimodal new media marketing service platform

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

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

● 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.

● 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.

● 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.

● 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 $526,416, or 44.9% from $1,173,733 during the three months ended December 31, 2024, to $647,317 during the three months ended December 31, 2025. The decrease was mainly due to decreased professional service fee by $264,846, decreased rent expense by 20,624, decreased amortization expense of intangible asset by $246,571, and decreased auto expense by $40,523, which was partly offset by increased meal and entertainment expense by $23,551.

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 expense was $22,091 for the three months ended December 31, 2025, consisting mainly of interest income of $54 and other expenses of $22,145. Non-operating income were $110,636 for the three months ended December 31, 2024, consisting mainly of interest income of $875 and other income of $109,761.

***Net Loss***

We generated net loss of $538,759 and $1,136,278 for the three months ended December 31, 2025 and 2024, respectively, a $597,519 or 52.6% decrease by comparing with the same period of 2024. The decrease in net loss was mainly due to increase in gross profit and decrease in operating expenses as explained above.

***Comparison of the six months ended December 31, 2025, and 2024***

The following table sets forth the results of our operations for the six months ended December 31, 2025, and 2024, respectively, indicated as a percentage of net sales. Certain columns may not add up due to rounding.

---

| | | | | |
|:---|:---|:---|:---|:---|
|  | **2025** | **% of<br> Revenues** | **2024** | **% of<br> Revenues** |
| Revenues | $26808565 |  | $41537498 |  |
| &nbsp;&nbsp;&nbsp;Cost of revenues | 24446515 | 91.2% | 40923065 | 98.5% |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Gross profit | 2362050 | 8.8% | 614433 | 1.5% |
| &nbsp;&nbsp;&nbsp;Selling expenses | 722791 | 2.7% | 1403718 | 3.4% |
| &nbsp;&nbsp;&nbsp;Research and development | 1246167 | 4.6% | 177481 | 0.4% |
| &nbsp;&nbsp;&nbsp;General and administrative expenses | 1198291 | 4.5% | 2302136 | 5.5% |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Total operating expenses | 3167249 | 11.8% | 3883335 | 9.3% |
| &nbsp;&nbsp;&nbsp;Loss from operations | (805199) | (3.0)% | (3268902) | (7.9)% |
| Non-operating income, net | 65373 | 0.2% | 170517 | 0.4% |
| Loss before income taxes | (739826) | (2.8)% | (3098385) | (7.5)% |
| Income tax expense |  | -% |  | -% |
| &nbsp;&nbsp;&nbsp;Loss before noncontrolling interest | (739826) | (2.8)% | (3098385) | (7.5)% |
| Less: loss attributable to noncontrolling interest | (41) | (0.0002)% | (118) | (0.0003)% |
| Net loss to the Company | (739785) | (2.8)% | (3098267) | (7.5)% |

---

***Revenues***

For the six months ended December 31, 2025, revenue was $26,808,565, compared with $41,537,498 in the same period last year. Revenue decreased by $14,728,933, or 35.5%. The main reason for the decline in revenue lies in the Company's proactive contraction of its low-margin 5G AI multimodal traffic business and its continuous optimization of the overall business structure, focusing on high-value-added sectors. Despite a decline in revenue, the Company's gross profit margin significantly increased from 1.5% in the same period of the previous year to 8.8%, demonstrating the effectiveness of the Company's business transformation oriented towards profit quality.

From July 1, 2025 to December 31, 2025, the Company generated revenue of $26,808,565, including $26,313,993 from the 5G AI multimodal digital business, $494,279 from acoustic intelligence business and $293 from other. From July 1, 2024 to December 31, 2024, the Company generated revenue of $41,537,498, including $41,161,572 from the 5G AI multimodal digital business, $3,046 from Smart City Business, $45,768 from acoustic intelligence business and $326,936 from software licensing.

Management believes that the substantial improvement in gross profit and gross margin reflects the continued execution of the Company's strategic transition toward technology-driven, high-value-added business models. During the six-month period, the Company deliberately moderated revenue growth by reducing standardized, low-margin services, while increasing the contribution from higher-margin, solution-oriented and technology-driven offerings.

In terms of business composition, several of the Company's technical solutions— such as 5G+ AI multi-modal services for small, medium and micro enterprises, 5G+ AI multi-modal digital rural services, and 5G +AI multi-modal new media marketing services— have achieved commercial revenue realization, generating a total of RMB 15.06million (approximately USD2.12 million). This signifies that the Company's 5G+AI multimodal digital business has been fully implemented and entered a stage of rapid expansion. Meanwhile, these solutions are characterized by **high gross margins**, which have effectively elevated the Company's overall profitability and demonstrated continuous improvement in profit quality through technological innovation and structural optimization.

The increase in gross profit margin is mainly attributed to multiple factors such as the optimization of product structure, the adjustment of pricing strategy and the strengthening of cost control.

Firstly, the Company has made strategic adjustments to its business structure. The data from the 2025 annual report has already shown that the proportion of high-margin products and solutions has significantly increased. Acoustic intelligent products and 5G AI multimodal digital solutions have become the main growth engines. This quarter, the sales proportion of acoustic health sleep products, air disinfection products and other series of products has increased, driving the overall gross profit margin to grow. Meanwhile, the Company has proactively reduced its standardized 5G multimodal traffic business with relatively low gross profit margins and shifted to a high value-added revenue structure characterized by technology-driven and customized features, achieving a transformation from "scale growth" to "value growth".

Secondly, in terms of pricing strategy, the Company gradually reduces promotional and discount activities oriented towards market expansion, and increases the average selling price through rational pricing. Although the order volume slightly declined in the short term, the profitability of individual items and the efficiency of cash recovery have significantly improved, thereby enhancing the overall gross profit margin.

Thirdly, the Company continuously reduces the costs of hardware manufacturing and system deployment through technological progress and supply chain optimization. The Company focuses on the direction of "high-end + lightweight", targeting high-value-added customers while also taking into account the demands of the lower-tier markets, achieving a balance between cost and performance in product design. By deepening cooperation with core suppliers, strengthening component integration and optimizing procurement strategies, the Company has significantly reduced hardware costs.

Overall, the above-mentioned structural optimization has enabled the Company to proactively reduce the scale of low-margin businesses while replacing some low-price orders with high-tech and high-margin products and services. This has led to a short-term decline in revenue, but has significantly enhanced the overall profit level. In line with the differentiated product positioning, the Company has implemented a combined pricing strategy, consolidating the achievements of gross profit margin improvement through a multi-level product structure and further optimizing the profit structure.

Overall, the temporary decline in revenue is an active choice made by the Company during the process of optimizing its business structure, while the significant increase in gross profit margin marks a phased achievement of the Company's shift from pursuing scale expansion to focusing on profit quality and sustainable growth. We believe this transformation can effectively lay a solid foundation for the Company's future profit growth and long-term competitiveness.

**Cost of Revenues**

For the six months ended December 31, 2025, we recorded a cost of revenues of $24,446,515, compared to $40,923,065 for the same period in 2024, reflecting a decrease of $16,476,550 or 40.3%. The cost of revenues for the six months ended December 31, 2025, was primarily driven by 5G AI multimodal digital platform fees and cloud platform construction costs paid to suppliers. The decrease in the cost of revenues was mainly due to the less revenue generated from the 5G AI multimodal digital segment.

For the six months ended December 31, 2025, the costs were as follows: $24.1 million for 5G AI multimodal digital, $384,230 for the acoustic intelligence business, and the cost of other was $1,643. For the six months ended December 31, 2024, the costs were as follows: $40.6 million for 5G AI multimodal digital, $1,716 for smart city, $317,414 for software licensing, and $16,593 for the acoustic intelligence business.

**Gross Profit**

Gross profit for the six months ended December 31, 2025, was $2,362,050 compared to $614,433 for the six months ended December 31, 2024, representing an increase of $1,747,617. This increase in gross profit was primarily driven by increased sales of high-margin products during the six months ended December 31, 2025 as a result of the Company's adjusting of its revenue focus on high margin products and services.

Gross margin was 8.8% for the six months ended December 31, 2025, compared to 1.5% 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. The growth in gross profit indicates that the Company has substantial development potential in its operations, including:

● **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.

● **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.

● **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:**

● **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.

● **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.

● **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.

● **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.

● 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 six months ended December 31, 2025 were $722,791, compared to $1,403,718 for the same period in 2024, reflecting a decrease of $680,927, or 48.5%. The decrease was mainly due to the decrease of advertising and marketing expenses by $1,066,539 and decreased payroll expense and benefits by $24,047, which was partly offset by increased service fee by $53,404, increased consulting fee by $338,500, and increased rent expense and property management fee by $22,855.

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 $1,246,167 and $177,481 during the six months ended December 31, 2025 and 2024, respectively, representing an increase of $1,068,686 or 602.1% as compared to the same period of 2024.

Research and development expenses for the six months ended December 31, 2025, totaled $1,246,167. 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:

● 5G AI multimodal new media marketing service platform

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

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

● 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.

● 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.

● 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.

● 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 $1,103,845, or 48.0% from $2,302,136 during the six months ended December 31, 2024, to $1,198,291 during the six months ended December 31, 2025. The decrease was mainly due to decreased professional service fee by $765,134, decreased rent expense by 53,339, decreased welfare expense by $17,093, and decreased amortization expense of intangible asset by $277,647, which was partly offset by increased other expenses by $5,566.

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 $65,373 for the six months ended December 31, 2025, consisting mainly of interest income of $76 and other income of $65,297. Non-operating income was $170,517 for the six months ended December 31, 2024, consisting mainly of interest income of $4,930 and other income of $165,587.

***Net Loss***

We generated net loss of $739,785 and $3,098,267 for the six months ended December 31, 2025 and 2024, respectively, a $2,358,482 or 76.1% decrease by comparing with the same period of 2024. The decrease in net loss was mainly due to increase in gross profit and decrease in operating expenses as explained above.

***Accounts receivable***

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The operating revenue of the six months ended December 31, 2025, was $26,808,565, the balance of accounts receivable was $1,288,297 at December 31, 2025. In the same period last year, the operating revenue was $41,537,498, and the accounts receivable balance was $210,980 at December 31, 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 December 31, 2025, we had a working capital deficit of $2,017,373 or a current ratio of 0.6:1, and current assets in the amount of $3,024,170. As of June 30, 2025, our working capital deficit was $704,978, with a current ratio of 0.8:1, and current assets were $2,922,272.

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 six months ended December 31, 2025 and 2024, respectively.

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| | | |
|:---|:---|:---|
|  | **2025** | **2024** |
| Net cash provided by (used in) operating activities | $1540994 | $(1587575) |
| Net cash used in investing activities | $(2834002) | $(3957527) |
| Net cash provided by financing activities | $1333960 | $5659128 |

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***Cash Flow from Operating Activities***

Net cash provided by operating activities was $1,540,994 during the six months ended December 31, 2025, compared to net cash used in operating activities of $1,587,575 during the six months ended December 31, 2024, a decrease in cash outflow of $3,128,566.

The decrease in cash outflow was mainly due to (1) decreased cash outflow on accounts payable by $672,144, (2) decreased cash outflow on inventory by $227,148, (3) decreased cash outflow on accrued expense and other payables by $203,283, (4) decreased cash outflow on value-added tax prepayment by $78,137, and (5) decreased net loss with non-cash adjustment by $3.6 million, which was partly offset by (1) decreased cash inflow on prepaid expenses and other current assets by $1.1 million, 2) decreased cash inflow on unearned revenue by $149,424, and (3) decreased cash inflow on accounts receivable by $394,925.

***Cash Flow from Investing Activities***

Net cash used in investing activities totaled $2.83 million for the six months ended December 31, 2025, which consisted of cash paid for the acquisition of office furniture and equipment of $340 and cash paid for acquisition of intangible assets by $2.83 million. Net cash used in investing activities totaled $3.96 million for the six months ended December 30, 2024, which consisted of cash paid for the acquisition of office furniture and equipment of $7,255, and cash paid for acquisition of intangible assets by $3.95 million.

***Cash Flow from Financing Activities***

Net cash provided by financing activities was $1,333,960 during the six months ended December 31, 2025, which was from net proceeds from related parties of $67,206, and proceeds from loans of $1,226,754. Net cash provided by financing activities was $5,659,128 during the six months ended December 31, 2024, which was from the net proceeds from sale of our common stock through an equity financing of 5,939,133, which was partly offset by repayment of loan payables of $40,698 and repayment to related parties of $239,307.

***Loan from banks***

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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 21st of each month. For the three months ended September 30, 2025 and 2024, the Company recorded and paid $nil and $619 interest expense for this loan. On April 9, 2025, the loan was paid in full.

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 21st of each month. For the three months ended December 31, 2025 and 2024, the Company recorded and paid nil and $619 interest expense for this loan. For the six months ended December 31, 2025 and 2024, the Company recorded and paid nil and $1,229 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 21st of each month. For the three months ended December 31, 2025 and 2024, the Company recorded and paid nil and $961 interest expense for this loan. For the six months ended December 31, 2025 and 2024, the Company recorded and paid nil and $1,939 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 three months ended December 31, 2025 and 2024, the Company recorded and paid nil and $2,741 interest expense for this loan. For the six months ended December 31, 2025 and 2024, the Company recorded and paid nil and $5,527 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 21st of each month. For the three months ended December 31, 2025 and 2024, the Company recorded and paid nil and $1,201 interest expense for this loan. For the six months ended December 31, 2025 and 2024, the Company recorded and paid nil and $2,422 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. For the three months ended December 31, 2025 and 2024, the Company recorded and paid nil and $3,518 interest expense for this loan. For the six months ended December 31, 2025 and 2024, the Company recorded and paid nil and $6,552 interest expense for this loan. On June 19, 2025, the loan was paid in full.

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 three months ended December 31, 2025 and 2024, the Company recorded and paid $4,927 and nil interest expense for this loan. For the six months ended December 31, 2025 and 2024, the Company recorded and paid $9,874 and nil interest expense for this loan. As of December 31, 2025, $853,631 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 three months ended December 31, 2025 and 2024, the Company recorded and paid $3,207 and nil interest expense for this loan. For the six months ended December 31, 2025 and 2024, the Company recorded and paid $6,433 and nil interest expense for this loan. As of December 31, 2025, $426,815 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 three months ended December 31, 2025 and 2024, the Company recorded and paid $1,748 and nil interest expense for this loan. For the six months ended December 31, 2025 and 2024, the Company recorded and paid $3,484 and nil interest expense for this loan. As of December 31, 2025, $142,272 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. For the three months ended December 31, 2025 and 2024, the Company recorded and paid $3,285 and nil interest expense for this loan. For the six months ended December 31, 2025 and 2024, the Company recorded and paid $6,582 and nil interest expense for this loan. As of December 31, 2025, $569,087 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 three months ended December 31, 2025 and 2024, the Company recorded and paid $2,892 and nil interest expense for this loan. For the six months ended December 31, 2025 and 2024, the Company recorded and paid $5,795 and nil interest expense for this loan. As of December 31, 2025, $426,815 was recorded as current liabilities. Liu Fu is the guarantor of this loan credit line.

On September 23, 2025, Shuhai Beijing entered a credit line agreement with China Construction Bank for the amount of RMB 5,000,000 ($711,359) with a term of 36 months from the first withdrawing date, the credit line has a preferential annual interest rate of 2.55% to be paid every 20th of each Month. For the three months ended December 31, 2025 and 2024, the Company recorded and paid $2,632 and nil interest expense for this loan. For the six months ended December 31, 2025 and 2024, the Company recorded and paid $2,632 and nil interest expense for this loan. As of December 31, 2025, $711,359 was recorded as current liabilities. Liu zhixin is the guarantor of this loan agreement.

On September 30, 2025, Guozhong Times entered a loan agreement with Bank of China for the amount of RMB 2,000,000 ($281,472) with a term of 12 months with an annual interest rate of 2.35% to be paid every 21st of the third months of each quarter. For the three months ended December 31, 2025 and 2024, the Company recorded and paid $1,507 and nil interest expense for this loan. For the six months ended December 31, 2025 and 2024, the Company recorded and paid $1,507 and nil interest expense for this loan. As of December 31, 2025, $284,544 was recorded as current liabilities. Liu zhixin is the guarantor of this loan agreement.

On October 10, 2025, Shuhai Beijing entered a credit line agreement with Bank of Communications Beijing Free Trade Zone Branchfor the amount of RMB 2,000,000 ($284,544) with a term of 24 months, the credit line has a fixed annual interest rate of 2.65% to be paid every 21st of each month. For the three months ended December 31, 2025 and 2024, the Company recorded and paid $1,103 and nil interest expense for this loan. For the six months ended December 31, 2025 and 2024, the Company recorded and paid $1,103 and nil interest expense for this loan. As of December 31, 2025, $284,544 was recorded as current liabilities. Liu Fu is the guarantor of this loan credit line.

***Financial index analysis***

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For the six months ended December 31, 2025 and December 31, 2024, the Company's gross profit was $2,362,050 and $614,433, respectively. Gross profit increased by $1,747,617 from the same period last year, an increase of 284.4% 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:

&nbsp;&nbsp;&nbsp;&nbsp;1. 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.

&nbsp;&nbsp;&nbsp;&nbsp;2. 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.

&nbsp;&nbsp;&nbsp;&nbsp;3. 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 six months ended December 31, 2025 and 2024, the research and development expenses were $1,246,167 and $177,481 respectively. The investment in research and development increased by $1,068,686, representing a 602.1% growth compared to the same period last year. Through increasing research and development investment, we are actively laying out new product tracks. This strategic investment reflects that the Company is accumulating strength and injecting strong momentum for future performance growth. This forward-looking layout will not only help us seize the technological high ground in emerging markets, but also build a product matrix advantage for the future. We firmly believe that the current continuous investment in innovation will surely translate into tomorrow's market leadership and sustained growth in value returns.

For the six months ended December 31, 2025 and 2024, the operating expenses were $3,167,249 and $3,883,335 respectively. The operating expenses decreased by $716,086, representing a 18.4% 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 December 31, 2025 and June 30 2025, the Company's cash balance was $671,785 and $620,807, respectively, an increase of $50,978, or 8.21%, from the beginning of the period. The main reason is that the Company successfully obtained bank loans and an increase in gross profit during this period 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.

As of December 31, 2025 and June 30, 2025, the intangible assets were $5,297,992 and $3,495,984 respectively. The intangible assets increased by $1,802,008, representing a 51.55% increase compared to the beginning of the period .

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 patents related to AI multi-modal digital business, 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 December 31, 2025 and June 30, 2025, the outstanding bank loans were $3,699,067 and $2,374,767 respectively. The amount increased by $1,324,300 , representing a 55.77% increase compared to the beginning of the period. The increase in the bank's short-term loan all come from well-known Chinese banks, such as China Construction Bank and Bank of China, 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 six months ended December 31, 2025 and 2024, the gross profit margins were 8.8% and 1.5% 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 six months ended December 31, 2025 and 2024, the Company's net losses were $739,785 and $3,098,267 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.

As of December 31, 2025 and June 30, 2025, the shareholders' equity was $3,481,783 and $2,952,208 respectively, increasing by $529,575, representing a 17.9% increase compared to the beginning of the period. The increase in the total shareholder equity of the Company is a core indicator of the enhancement of the enterprise's capital strength. It not only directly boosts the intrinsic value of the enterprise but also significantly enhances its financial stability and resilience in resisting internal and external risks, laying a solid foundation for the enterprise's sustainable operation and long-term development.

As of December 31, 2025 and June 30, 2025, accounts receivable were $1,288,297 and $1,374,180 respectively, a decrease of $85,883, representing a reduction of 6.25% compared to the beginning of the period. A decline in accounts receivable indicates that the company's ability to collect payments has been enhanced, and sales have been converted into cash more quickly, directly improving the efficiency of cash flow. This not only reduces the risk of bad debts and ensures the quality of profits, but also indicates that the company can achieve growth in a healthier way.

***Outlook and Strategic Priorities***

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Overview

Building on the structural adjustments and operational progress achieved during the six months ended December 31, 2025, Datasea Inc. enters the first quarter of fiscal year 2026 with a clearer execution focus and a more refined business structure. The Company's dual business segments—Acoustic High-Tech and 5G+AI Multimodal Digitalization—have each advanced from initial scale expansion toward more application-oriented and value-focused development.

Management views fiscal year 2026 as a period of **execution, validation, and continuously expansion**, during which previously established technology platforms and solution frameworks are expected to translate into more stable revenue contribution, improved margin quality, and clearer commercialization pathways.

Strengthened R&D Execution and Technology Advancement

Going forward, the Company will continue to advance its research and development activities; however, the focus of R&D will further shift from forward-looking and exploratory research toward **engineering validation, system optimization, and application readiness enhancement**. Management believes that the primary objective of R&D at this stage is to enable acoustic-related technologies with an established technical foundation to achieve **stable operation and deployable capability within specific application scenarios**.

Acoustic Medical and Health-Related Applications

In the area of acoustic medical and health-related applications, including brain–computer interface and neuromodulation use cases, the Company's R&D efforts will concentrate on **engineering-level system validation and scenario-based application deployment**. Relevant activities primarily focus on evaluating the system-level performance of non-invasive acoustic modulation technologies in application environments such as health-related robots and intelligent devices.

R&D efforts will emphasize:

● the stability and consistency of acoustic neuromodulation systems under continuous operating conditions;

● the coordination and integration performance among acoustic signal enhancement and modulation modules, sensing systems, control frameworks, and intelligent algorithms;

● the adaptability and repeatability of system performance across different application environments.

These R&D initiatives are intended to progressively translate previously completed forward-looking or exploratory research outcomes into **system solutions with engineering feasibility and application readiness**, thereby laying the foundation for further validation and potential productization.

Precision Acoustics and Industrial Applications

In the area of precision acoustics and industrial applications, the Company will continue advancing the **engineering application of ultrasonic technologies integrated with artificial intelligence**, with R&D efforts focused on building modular and system-level integration capabilities for industrial use cases.

Key R&D activities will include:

● developing general-purpose functional modules for industrial machine tool upgrades based on "ultrasonics + AI" integrated technologies, designed to be compatible with mainstream numerical control systems and to address precision processing requirements in sectors such as aerospace and automotive manufacturing;

● in the field of ultra-precision processing, continuing to advance system-level integration solutions for high-end manufacturing scenarios, with a focus on ultra-precision processing requirements for semiconductor substrates and biomedical micro- and nano-scale devices, while enhancing precision control, system coordination, and long-term operational stability.

Management believes that these precision acoustics R&D initiatives support the practical deployment of acoustic technologies in advanced manufacturing and provide a **replicable engineering pathway** for the Company's expansion into industrial application scenarios.

5G+AI Multimodal Digitalization R&D Focus

In the 5G+AI multimodal digitalization segment, R&D activities will primarily focus on the **operational performance, scalability, and system reliability** of existing solutions, supporting the continued delivery and optimization of ongoing project-based and solution-oriented services, rather than introducing new foundational model architectures.

Related technical work will emphasize improving system stability and delivery efficiency in real-world business environments to better support current commercialization efforts.

Management Assessment

Management believes that this execution- and deployment-oriented R&D strategy enhances the capital efficiency of research investment, aligns technological advancement more closely with near- to mid-term business needs, and supports the Company's continued development across its healthcare-related and industrial application focus areas.

Market Expansion and Commercial Execution

For fiscal year 2026, the Company's market strategy emphasizes **deepening commercialization within existing markets** while selectively expanding international exposure.

● In the United States, the Company plans to continue advancing market entry for acoustic-related products through regulatory preparation, channel development, and localized partnerships, building on initial progress achieved in prior periods.

● In China, commercial efforts will remain focused on solution-based delivery across healthcare, beauty, environmental, and enterprise digitalization sectors, leveraging existing customer relationships and channel infrastructure.

● Rather than broad geographic expansion, management's priority is to **validate repeatability and scalability** within current target markets before committing additional resources to new regions.

Strategic Partnerships, M&A, and Ecosystem Development

Following earlier ecosystem-building initiatives, the Company's approach to partnerships and potential acquisitions in fiscal year 2026 will be **selective and execution-driven**.

● Collaboration with research institutions and industry partners will continue to emphasize application validation, system integration testing, and commercialization feasibility, particularly in healthcare-related acoustic systems and industrial precision applications.

● Any potential M&A activities will be evaluated primarily on their ability to enhance system integration capability, application deployment efficiency, or intellectual property depth, rather than scale expansion alone.

Management believes this disciplined approach reduces integration risk and supports sustainable long-term value creation.

Product Portfolio Optimization and Margin Focus

With product structure optimization already underway, the Company's near-term priority is to **reinforce high-value product and solution lines** while maintaining operational discipline.

● Acoustic health-related products, system-level acoustic solutions, and customized AI-driven digital services are expected to remain central to the Company's value proposition.

● The Company will continue transitioning from transaction-based revenue toward solution-oriented and service-supported delivery models, supporting more predictable revenue characteristics.

● Standardization efforts will focus on internal modularization and operational efficiency, rather than rapid external product line expansion.

Financial and Operational Outlook

Management remains focused on **profit quality, cost discipline, and sustainable growth** in fiscal year 2026.

● Revenue contribution is expected to continue from existing solution-based contracts in the AI multimodal segment, alongside gradual contribution from acoustic product commercialization.

● Operating and R&D expenditures will remain closely aligned with identifiable business objectives and validation milestones.

● The Company anticipates that continued refinement of product mix and solution delivery will support further improvement in gross margin profile over time.

Market Trends and Industry Positioning

Management continues to believe that the convergence of acoustic technologies and AI-enabled systems presents long-term structural opportunities across multiple industries. However, the Company's near-term focus remains on **practical application validation rather than broad market claims**.

Key areas of continued relevance include:

● Healthcare and wellness applications emphasizing non-invasive, system-based solutions;

● Industrial and manufacturing scenarios requiring precision, stability, and repeatability;

● Enterprise digitalization services requiring integrated data processing and decision support.

Corporate Governance and Operational Discipline

The Company will continue to prioritize corporate governance, regulatory compliance, and internal control as core operational foundations during fiscal year 2026.

● Existing governance structures, internal control procedures, and disclosure processes will remain in place, with continued emphasis on execution consistency across operating entities.

● Management believes that maintaining governance discipline is essential to supporting the Company's ongoing transformation and international business activities.

**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 December 31, 2025 and June 30, 2025, 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 $155,731 and $152,907 allowances for slow-moving and obsolete inventory (mainly for Smart-Student Identification cards) as of December 31, 2025 and June 30, 2025, 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.

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 as of December 31, 2025.

**ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK**

As a "smaller reporting company", we are not required to provide the information required by this Item.

**ITEM 4. CONTROLS AND PROCEDURES**

**Disclosure Controls and Procedures**

The management of this Company, including the Chief Executive Officer and the Chief Financial Officer, is responsible for establishing and maintaining adequate internal controls regarding the Company's financial reporting. The management has evaluated the effectiveness of the Company's internal controls in terms of financial reporting during the reporting period. When conducting this assessment, the management used the standards stipulated in the "Internal Control - Integration Framework" issued by the Redway Commission Sponsorship Organization Committee (COSO).

Due to the deficiencies described below, the management concluded that during the reporting period from July to December 2025, the internal controls of the Company regarding financial reporting were not effective. These defects are more common in many small companies with fewer employees, as follows:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;1. Although an internal audit department has been established, due to insufficient staffing, no internal audit activities have been carried out (control deficiencies).

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;2. Although the Company has established a relatively complete internal control system to ensure the effective implementation of management decisions and smooth communication of information, it has failed to track the effectiveness of control implementation in a timely manner. The testing cycle for the effectiveness of internal control should be shortened and the testing frequency increased.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;3. The Company lacks accounting personnel who have received training in Generally Accepted Accounting Principles (GAAP) of the United States.

I. Control the environment

(1) Governance structure

The Company has established a four-level governance structure: shareholders' meeting - board of directors - independent directors - executive management. The board of directors has established an Audit committee, a remuneration committee, a Strategy committee and a Nomination Committee. The board of directors consists of five directors, three of whom are independent directors, ensuring the independence of the board's decision-making.

(2) Organizational Structure and Responsibilities

The Company's organizational structure is set up based on business lines and functional support, clearly defining the responsibilities of the finance department, international department, risk control department, Operations Department and legal Department. The Risk Control Department takes the lead in the internal control system and risk assessment work. Each business department shall appoint an "internal control contact person" to be responsible for coordinating daily risk control matters.

(3) Internal audit

Although the Company has established an internal audit department led by the director of internal audit and a legal team, due to the rapid business expansion and challenges in personnel allocation, internal audit activities were not carried out during the reporting period.

(4) Incentive policies

The Company has established a human resources management system, covering recruitment, training, assessment and reward and punishment measures. Personnel are subject to strict management from the probation period to being converted to regular employees. After passing the comprehensive assessment, employees will be included in the regular staff team and sign the job responsibility and performance commitment letter. The human resources department conducts performance appraisals every month, and the results serve as the basis for salary distribution. According to the "Performance Appraisal Measures", employees will be rewarded or punished accordingly. For key positions (such as Chief Financial Officer, Vice president, etc.), the Company implements background checks and qualification reviews. During the reporting period, the staff turnover rate of key positions was less than 5%.

(5) Company culture

The Company adheres to the core values of "compliant operation and integrity as the foundation". The management has signed the compliance commitment letter. The internal office system has an "Internal Control Column" and regularly conducts compliance case analyses and policy interpretations. During the reporting period, in order to better implement the Company's acquisition and merger plans, the Company sorted out and studied the merger and acquisition laws and regulations of the Nasdaq market for the key management team, laying a compliance foundation for future merger and acquisition and reorganization operations.

During the Company's ten-year development, compliance and integrity have been deeply integrated into management and the daily work of all employees. As of the reporting period, the management has not committed any violations or illegal acts. The board of directors consists of five directors, three of whom are independent directors, basically meeting the requirements for independence. The Company has also formulated committee management rules and human resource management rules to clarify employment standards and reward and punishment mechanisms, and to motivate outstanding employees.

II. Risk Management

(1). International risk control

Risk control begins with identification and assessment. We assess the political, economic, legal, cultural and foreign exchange risks in international business by combining SWOT analysis and risk checklists. By collecting internal and external information, identify the sources of risks, and use quantitative and qualitative tools to assess the extent of their impact and the possibility of occurrence. This lays the foundation for formulating differentiated risk control strategies that match the global business layout, including cross-border transaction monitoring, foreign exchange risk management, international legal compliance review, and anti-money laundering mechanisms. The data-driven model has been strengthened to achieve timely identification and mitigation of risks. Phased implementation, clear responsibility division and real-time monitoring ensure effectiveness and adaptability to the constantly changing global environment.

(2). Market competition risk

The operation department of the Company submits a market research report to the management every quarter. This report covers consumer preferences, competitors' product strategies, and industry technology trends. Through the research report, the Company has gained an understanding of the development opportunities of brain-computer interfaces and related technologies. Especially the integration of 6G communication services with the Company's acoustic business.

(3). Product iteration risk

The Company has established a product life cycle management mechanism. For products with a sales decline of ≥10% for two consecutive years, the R&D, marketing and sales departments will jointly lead an iterative assessment. The iteration plan will clearly define the development cycle, budget and target market. New products must go through a three-month pilot sales period and have a customer satisfaction rate of no less than 80% before entering mass production to ensure consistency with market demand.

(4). Investment decision-making risks

Major projects (mergers and acquisitions, reorganizations, and investments) need to have feasibility studies conducted by dedicated M&A teams, finance departments, and legal departments. This includes market analysis, return on investment assessment (≥8% to proceed), risk assessment, and legal compliance review. The project can only proceed with the approval of the management.

Merger and Acquisition tracking: Monthly project progress monitoring (funds, milestones). The finance department assesses the return on investment every month. If the delay exceeds 20% or the return on investment is lower than the expected 50%, a project review will be triggered. If there is no improvement after corrective measures are taken, the project will be terminated or divested to minimize losses.

(5). Risk of staff turnover

- Core technical personnel retention: Competitive compensation and equity incentives, career development opportunities, training, and a stronger corporate culture can reduce the risk of staff turnover.

- Employee skills enhancement: Continuous training and employee handbooks ensure that skills are in line with business needs.

&nbsp;&nbsp;&nbsp;&nbsp;III. Control activities.

Control activities cover all business processes, including procurement, inventory, cash management, sales and cost control. Control measures ensure consistency among physical goods, invoices and cash flows. Authorization, verification, auditing, performance evaluation, asset security and separation of duties are carried out to ensure that management instructions are properly implemented.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(1) The Company continues to improve its internal control system, covering aspects such as budgeting, procurement, asset management, credit control, internal auditing and cost accounting. Comprehensive internal control policies have been established, including procurement control, inventory management and anti-fraud guidelines.

The internal control department organizes all departments to participate in the budget preparation and execution. The annual budget covers funds, assets, projects, revenues and costs, and must be strictly approved by the finance department, the Chief Executive Officer (CEO) and the Chairman of the board. A monthly rolling budget is adopted, and the financial control center analyzes the implementation results. Every quarter, after a review or audit is completed by a Certified Public Accountant (CPA) in the United States, a trial balance sheet review will be conducted.

(2). The Company provides the Audit committee with quarterly summaries of internal control and audit reports

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| | |
|:---|:---|
| (3). | The management believes that closer cooperation between internal and external legal teams can proactively reduce risks. During the reporting period, in the process of conducting external cooperation (the confidentiality agreement in the United States and Yizhimei), the management team has closely collaborated with lawyers and the internal control department to jointly discuss the methods of external cooperation and the contents of the agreements, thereby reducing the Company's operational risks. |

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&nbsp;&nbsp;&nbsp;&nbsp;IV. Monitor execution

According to COSO's "Internal Control - Integrated Framework", monitoring refers to the continuous assessment of the effectiveness of control, timely identification and correction of deficiencies, and ensuring that control measures can adapt to organizational goals and the constantly changing environment.

During the reporting period, the Company established a coordination mechanism between the internal control department and the legal department. This mechanism includes interviews with department heads, handling of identified risk areas, and ensuring the implementation of corrective measures. However, due to the limited staffing, continuous monitoring of daily operations has not been carried out, thus making it impossible to promptly identify and correct existing deficiencies.

&nbsp;&nbsp;&nbsp;&nbsp;V. Implementation of remedial measures

In the annual report, the Company has formulated the following four remedial measures for the implementation of internal control. The following is the implementation status of the remedial measures this quarter

(1). Independent internal audit: Conduct at least one independent assessment led by internal audit each year, covering high-risk areas, and track and handle previous issues.

(2). Tracking register: Maintain logs of problem records, corrective actions, responsible persons, schedules and verification results, and report to the Audit Committee on a regular basis.

During the reporting period, the Company has established a risk supervision ledger, conducting ledger statistics on the problems that emerged in supervision and operation, and recording the responsible persons, rectification measures, and tracking the subsequent results. In the future work, the Company will implement the risk ledger management system more strictly to gradually reduce the occurrence of risk events.

(3). Participation of senior management: The chairman or CEO takes the lead in establishing quarterly internal control rectification meetings to review the progress and strengthen senior supervision.

During the reporting period, the Company has held the internal risk control meeting for this quarter. All key management personnel, including the chairman and the president, have studied the regulations on information disclosure and delisting risks to better meet the compliance requirements of the Nasdaq market. In the future, the Company will continue to hold internal control meetings in a timely manner based on the occurrence of risks.

(4). Enhance internal audit capabilities: Increase the number of internal audit personnel and provide professional training (such as COSO framework, data analysis, fraud detection, etc.) to strengthen the supervisory function. The Company is actively seeking relevant matching personnel.

(5). Link to performance evaluation: Incorporate "internal control monitoring results" into the performance evaluation of departments and employees, making compliance execution a key performance indicator.

This quarter, no violations occurred in the Company. Therefore, the assessment results have been incorporated into the employee performance evaluation system for this quarter. In the following quarters, this system will be implemented more seriously and effectively.

**Changes in Internal Control over Financial Reporting**

Other than as described above, there have been no material changes in the Company's **internal control over financial reporting** during the most recent fiscal period that have materially affected, or are reasonably likely to materially affect, the Company's internal controls. The Company remains committed to continuously enhancing its internal control framework to ensure **operational efficiency, regulatory compliance, and financial transparency**.

**PART II OTHER INFORMATION**

**ITEM 1. LEGAL PROCEEDINGS**

We are not a party to any pending legal proceedings and no such proceedings are known to be contemplated.

**ITEM 1A. RISK FACTORS**

As a "smaller reporting company", we are not required to provide the information required by this Item.

**ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS**

**Shares to Independent Directors as Compensation**

None

**ITEM 3. DEFAULTS UPON SENIOR SECURITIES**

None.

**ITEM 4. MINE SAFETY DISCLOSURES**

Not applicable.

**ITEM 5. OTHER INFORMATION**

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;*(a)* *Not applicable.* 

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;*(b)* Item 407(c)(3) of Regulation S-K: During the quarter covered by this Report, there have not been any material changes to the procedures by which security holders may recommend nominees to the Board of Directors.

 

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;*(c)* *Item 408(a) of Regulation S-K – Rule 10b5-1 Trading Arrangements and Non-Rule 10b5-1 Trading Arrangements -* During the three months ended December 31, 2024, no director or officer of the Company adopted, modified or terminated a "Rule 10b5-1 trading arrangement" or "non-Rule 10b5-1 trading arrangement," as each term is defined in Item 408(a) of Regulation S-K.

**ITEM 6. EXHIBITS.**

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| | |
|:---|:---|
| **Exhibit** | **Description** |
| 31.1 | [Certification by Chief Executive Officer pursuant to Sarbanes Oxley Section 302](ea027593601ex31-1_datasea.htm) |
| 31.2 | [Certification by Chief Financial Officer pursuant to Sarbanes Oxley Section 302](ea027593601ex31-2_datasea.htm) |
| 32.1\* | [Certification by Chief Executive Officer pursuant to 18 U.S.C. Section 1350](ea027593601ex32-1_datasea.htm) |
| 32.2\* | [Certification by Chief Financial Officer pursuant to 18 U.S.C. Section 1350](ea027593601ex32-2_datasea.htm) |
| 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). |

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\* The certifications attached as Exhibits 32.1 and 32.2 accompany this quarterly report on Form 10-Q pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 and shall not be deemed "filed" by the Registrant for purposes of Section 18 of the Securities Exchange Act of 1934, as amended.

**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.

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| | | |
|:---|:---|:---|
|  | **DATASEA INC.** | **DATASEA INC.** |
| Date: February 12, 2026 | By: | /s/ Zhixin Liu |
|  | Name: | Zhixin Liu |
|  | Title: | President |
|  |  | Chief Executive Officer |
|  |  | *(principal executive officer)* |

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| | | |
|:---|:---|:---|
| Date: February 12, 2026 | By: | /s/ Mingzhou Sun |
|  | Name: | Mingzhou Sun |
|  | Title: | Chief Financial Officer |
|  |  | *(principal financial officer and <br> principal accounting officer)* |

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## Exhibit 31.1

**Exhibit 31.1**

**CERTIFICATION OF CHIEF EXECUTIVE OFFICER**

**PURSUANT TO RULE 13A-14(A) UNDER THE SECURITIES EXCHANGE ACT OF 1934, AS ADOPTED PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002**

I, Zhixin Liu, certify that:

1. I have reviewed this quarterly report on Form 10-Q of Datasea Inc.;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant's other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the registrant and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

&nbsp;&nbsp;&nbsp;&nbsp;a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under my supervision, to ensure that material information relating to the registrant, is made known to us by others within those entities, particularly during the period in which this report is being prepared; and

b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under my supervision, 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; and

c) Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report my conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d) Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and

5. The registrant's other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions):

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| | |
|:---|:---|
| a) | All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and |
| b) | Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting. |
|  | Date: February 12, 2026 |

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| |
|:---|
| /s/ Zhixin Liu |
| Zhixin Liu |
| Chief Executive Officer<br> (Principal Executive Officer) |

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## Exhibit 31.2

**Exhibit 31.2**

**CERTIFICATION OF CHIEF FINANCIAL OFFICER**

**PURSUANT TO RULE 13A-14(A) UNDER THE SECURITIES EXCHANGE ACT OF 1934, AS ADOPTED PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002**

I, Mingzhou Sun, certify that:

1. I have reviewed this quarterly report on Form 10-Q of Datasea Inc.;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant's other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the registrant and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

&nbsp;&nbsp;&nbsp;&nbsp;a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under my supervision, to ensure that material information relating to the registrant, is made known to us by others within those entities, particularly during the period in which this report is being prepared; and

b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under my supervision, 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; and

c) Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report my conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d) Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and

5. The registrant's other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions):

---

| | |
|:---|:---|
| a) | All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and |
| b) | Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting. |
|  | Date: February 12, 2026 |

---

---

| |
|:---|
| /s/ Mingzhou Sun |
| Mingzhou Sun |
| Chief Financial Officer<br> (Principal Financial Officer and Principal Accounting Officer) |

---

## Exhibit 32.1

**Exhibit 32.1**

**CERTIFICATION PURSUANT TO**

**18 U.S.C. SECTION 1350, AS ADOPTED PURSUANT TO**

**SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002**

In connection with the Quarterly Report of Datasea Inc. (the "Company") on Form 10-Q for the quarter ended December 31, 2025 as filed with the Securities and Exchange Commission (the "Report"), each of the undersigned, in the capacities and on the dates indicated below, hereby certifies pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:

&nbsp;&nbsp;&nbsp;&nbsp;1. The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

2. The information contained in the Report fairly presents, in all material respects, the financial condition and results of operation of the Company.

Date: February 12, 2026

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| |
|:---|
| */s/ Zhixin Liu* |
| Zhixin Liu |
| Chief Executive Officer and Chairman <br> (Principal Executive Officer) |

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## Exhibit 32.2

**Exhibit 32.2**

**CERTIFICATION PURSUANT TO**

**18 U.S.C. SECTION 1350, AS ADOPTED PURSUANT TO**

**SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002**

In connection with the Quarterly Report of Datasea Inc. (the "Company") on Form 10-Q for the quarter ended December 31, 2025 as filed with the Securities and Exchange Commission (the "Report"), each of the undersigned, in the capacities and on the dates indicated below, hereby certifies pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:

&nbsp;&nbsp;&nbsp;&nbsp;1. The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

2. The information contained in the Report fairly presents, in all material respects, the financial condition and results of operation of the Company.

Date: February 12, 2026

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| |
|:---|
| /s/ Mingzhou Sun |
| Mingzhou Sun |
| Chief Financial Officer (Principal Financial and <br> Principal Accounting Officer) |

---