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ZW Data Action Technologies Inc.

ZW Data Action Technologies Inc.CNETEarnings & Financial Report

Nasdaq · Information Technology · Services-Computer Programming, Data Processing, Etc.

ZW Data Action Technologies Inc., trading under the symbol CNET, is a China-based technology enterprise focused on delivering integrated digital marketing solutions, big data analysis services, and intelligent operation tools for enterprise clients across sectors including e-commerce, consumer goods, and internet services. Its offerings help clients optimize user acquisition efficiency, boost operational performance, and advance digital transformation, primarily serving the Chinese domestic market and select Asia-Pacific clients.

What changed in ZW Data Action Technologies Inc.'s 10-K — 2023 vs 2024

Top changes in ZW Data Action Technologies Inc.'s 2024 10-K

209 paragraphs added · 214 removed · 160 edited across 3 sections

Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

75 edited+17 added−26 removed276 unchanged
If we are unable to maintain appropriate internal financial reporting controls and procedures, it could cause us to fail to meet our reporting obligations, result in the restatement of our financial statements, harm our operating results, subject us to regulatory scrutiny and sanction, cause investors to lose confidence in our reported financial information and have a negative effect on the market price for shares of our Common Stock.
If we are unable to maintain appropriate internal financial reporting controls and procedures, it could cause us to fail to meet our reporting obligations, result in the restatement of our financial statements, harm our operating results, subject us to regulatory scrutiny and sanction, cause investors to lose confidence in our reported financial information and have a negative effect on the market price for shares of our Common Stock.
U.S. public companies that have substantially all of their operations in China have been the subject of intense scrutiny by investors, financial commentators and regulatory agencies. Much of the scrutiny has centered around financial and accounting irregularities and mistakes, a lack of effective internal controls over financial reporting and, in many cases, allegations of fraud.
U.S. public companies that have substantially all of their operations in China have been the subject of intense scrutiny by investors, financial commentators and regulatory agencies. Much of the scrutiny has centered around financial and accounting irregularities and mistakes, a lack of effective internal controls over financial reporting and, in many cases, allegations of fraud.
As a result of the scrutiny, the publicly traded stock of many U.S. listed China-based companies that have been the subject of such scrutiny has sharply decreased in value. Many of these companies are now subject to shareholder lawsuits and/or SEC enforcement actions that are conducting internal and/or external investigations into the allegations.
As a result of the scrutiny, the publicly traded stock of many U.S. listed China-based companies that have been the subject of such scrutiny has sharply decreased in value. Many of these companies are now subject to shareholder lawsuits and/or SEC enforcement actions that are conducting internal and/or external investigations into the allegations.
If we become the subject of any such scrutiny, whether any allegations are true or not, we may have to expend significant resources to investigate such allegations and/or defend our company.
If we become the subject of any such scrutiny, whether any allegations are true or not, we may have to expend significant resources to investigate such allegations and/or defend our company.
If Nasdaq delists our Common Stock from trading on its exchange, we could face significant material adverse consequences including: ● a limited availability of market quotations for our securities; ● a determination that our Common Stock is a “penny stock” which will require brokers trading in our Common Stock to adhere to more stringent rules and possibly resulting in a reduced level of trading activity in the secondary trading market for our Common Stock; ● a limited amount of news and analyst coverage for our company; and ● a decreased ability to issue additional securities or obtain additional financing in the future.
If Nasdaq delists our Common Stock from trading on its exchange, we could face significant material adverse consequences including: ● a limited availability of market quotations for our securities; ● a determination that our Common Stock is a “penny stock” which will require brokers trading in our Common Stock to adhere to more stringent rules and possibly resulting in a reduced level of trading activity in the secondary trading market for our Common Stock; 44 ● a limited amount of news and analyst coverage for our company; and ● a decreased ability to issue additional securities or obtain additional financing in the future.
Our ability to obtain additional capital on acceptable terms is subject to a variety of uncertainties, including: ● investors’ perception of, and demand for, securities of alternative advertising media companies; ● conditions of the U.S. and other capital markets in which we may seek to raise funds; ● our future results of operations, financial condition and cash flow; ● PRC governmental regulation of foreign investment in advertising service companies in China; ● economic, political and other conditions in China; and ● PRC governmental policies relating to foreign currency borrowings.
Our ability to obtain additional capital on acceptable terms is subject to a variety of uncertainties, including: ● investors’ perception of, and demand for, securities of alternative advertising media companies; ● conditions of the U.S. and other capital markets in which we may seek to raise funds; ● our future results of operations, financial condition and cash flow; ● PRC governmental regulation of foreign investment in advertising service companies in China; 19 ● economic, political and other conditions in China; and ● PRC governmental policies relating to foreign currency borrowings.
While detailed interpretation of or implementation rules under Article 177 have yet to be promulgated, the inability for an overseas securities regulator to directly conduct investigation or evidence collection activities within China may further increase difficulties faced by you in protecting your interests. PRC enterprise income tax law could adversely affect our business and our net income.
While detailed interpretation of or implementation rules under Article 177 have yet to be promulgated, the inability for an overseas securities regulator to directly conduct investigation or evidence collection activities within China may further increase difficulties faced by you in protecting your interests. 41 PRC enterprise income tax law could adversely affect our business and our net income.
High inflation may in the future cause Chinese government to impose controls on credit and/or prices, or to take other action, which could inhibit economic activity in China, and thereby harm the market for our services. The enforcement of the PRC Labor Contract Law and other labor-related regulations in the PRC may adversely affect our business and results of operations.
High inflation may in the future cause Chinese government to impose controls on credit and/or prices, or to take other action, which could inhibit economic activity in China, and thereby harm the market for our services. 40 The enforcement of the PRC Labor Contract Law and other labor-related regulations in the PRC may adversely affect our business and results of operations.
Any increase in our tax rate in the future could have a material adverse effect on our financial conditions and results of operations. 40 Under the EIT Law, we may be classified as a “ resident enterprise ” of China. Such classification will likely result in unfavorable tax consequences to us and holders of our securities.
Any increase in our tax rate in the future could have a material adverse effect on our financial conditions and results of operations. Under the EIT Law, we may be classified as a “ resident enterprise ” of China. Such classification will likely result in unfavorable tax consequences to us and holders of our securities.
In the event of a catastrophic event with respect to one or more of these systems or facilities, we may experience an extended period of system unavailability, which could negatively impact our relationship with our customers. Privacy and data security concerns, laws, or other regulations could expose us to liability or impair our operations.
In the event of a catastrophic event with respect to one or more of these systems or facilities, we may experience an extended period of system unavailability, which could negatively impact our relationship with our customers. 20 Privacy and data security concerns, laws, or other regulations could expose us to liability or impair our operations.
If we are required to take any rectifying or remedial measures or are subject to any penalties, our reputation and business operations may be materially and adversely affected. 32 Substantial uncertainties exist with respect to the interpretation and implementation of cybersecurity related regulations and cybersecurity review as well as any impact these may have on our business operations.
If we are required to take any rectifying or remedial measures or are subject to any penalties, our reputation and business operations may be materially and adversely affected. Substantial uncertainties exist with respect to the interpretation and implementation of cybersecurity related regulations and cybersecurity review as well as any impact these may have on our business operations.
The Foreign Investment Law also stipulates that foreign investment includes “foreign investors invest in China through any other methods under laws, administrative regulations, or provisions prescribed by the State Council.” 23 Since the Foreign Investment Law is relatively new, uncertainties still exist in relation to its interpretation and implementation.
The Foreign Investment Law also stipulates that foreign investment includes “foreign investors invest in China through any other methods under laws, administrative regulations, or provisions prescribed by the State Council.” Since the Foreign Investment Law is relatively new, uncertainties still exist in relation to its interpretation and implementation.
Such investigations or allegations will be costly and time-consuming and distract our management from our business plan and could result in our reputation being harmed and our stock price could decline as a result of such allegations, regardless of the truthfulness of the allegations. 38 Future inflation in China may inhibit our activity to conduct business in China.
Such investigations or allegations will be costly and time-consuming and distract our management from our business plan and could result in our reputation being harmed and our stock price could decline as a result of such allegations, regardless of the truthfulness of the allegations. Future inflation in China may inhibit our activity to conduct business in China.
In circumstances involving serious violations, the PRC government may revoke a violator’s license for its advertising business operations. We operate in the advertising and data service industry, which is particularly sensitive to changes in economic conditions and advertising trends. Advertising and data service spending by our clients is particularly sensitive to changes in general economic conditions.
In circumstances involving serious violations, the PRC government may revoke a violator’s license for its advertising business operations. 18 We operate in the advertising and data service industry, which is particularly sensitive to changes in economic conditions and advertising trends. Advertising and data service spending by our clients is particularly sensitive to changes in general economic conditions.
We may have difficulty establishing adequate management, legal and financial controls in the PRC. 39 You may experience difficulties in effecting service of legal process, enforcing foreign judgments or bringing original actions in China based on United States or other foreign laws against us and our management.
We may have difficulty establishing adequate management, legal and financial controls in the PRC. You may experience difficulties in effecting service of legal process, enforcing foreign judgments or bringing original actions in China based on United States or other foreign laws against us and our management.
Finally, a 10% withholding tax will be imposed on dividends we pay to our non-PRC shareholders. Our Chinese operating companies are obligated to withhold and pay PRC individual income tax in respect of the salaries and other income received by their employees who are subject to PRC individual income tax.
Finally, a 10% withholding tax will be imposed on dividends we pay to our non-PRC shareholders. 42 Our Chinese operating companies are obligated to withhold and pay PRC individual income tax in respect of the salaries and other income received by their employees who are subject to PRC individual income tax.
Such investigations or allegations will be costly and time-consuming and distract our management from our business plan and could result in our reputation being harmed and our stock price could decline as a result of such allegations, regardless of the truthfulness of the allegations. ITEM 1B. UNRESOLVED STAFF COMMENTS None.
Such investigations or allegations will be costly and time-consuming and distract our management from our business plan and could result in our reputation being harmed and our stock price could decline as a result of such allegations, regardless of the truthfulness of the allegations. ITEM 1B. UNRESOLVED STAFF COMMENTS None. 46
In addition, our information and operational systems, which have not been patented or otherwise registered as our property, are a key component of our competitive advantage and our growth strategy. 19 Monitoring and preventing the unauthorized use of our intellectual property is difficult.
In addition, our information and operational systems, which have not been patented or otherwise registered as our property, are a key component of our competitive advantage and our growth strategy. Monitoring and preventing the unauthorized use of our intellectual property is difficult.
The Company received a delinquency notification letter (the “Notice”) from the Nasdaq on May 17, 2024 due to the Company’s non-compliance with the Rule as a result of the Company’s failure to timely file its Quarterly Report on Form 10-Q for the fiscal quarter ended March 31, 2024 (the “Form 10-Q”).
The Company received a delinquency notification letter (the “May Notice”) from the Nasdaq on May 17, 2024 due to the Company’s non-compliance with the Rule as a result of the Company’s failure to timely file its Quarterly Report on Form 10-Q for the fiscal quarter ended March 31, 2024 (the “Form 10-Q”).
Insiders have substantial control over us, and they could delay or prevent a change in our corporate control even if our other stockholders wanted it to occur. Our executive officers, directors, and principal stockholders hold approximately 17% of our outstanding Common Stock.
Insiders have substantial control over us, and they could delay or prevent a change in our corporate control even if our other stockholders wanted it to occur. Our executive officers, directors, and principal stockholders hold approximately 13.6% of our outstanding Common Stock.
On April 17, 2024, we received a notice (the “Initial Notice”) from the Listing Qualifications Department of The Nasdaq Stock Market LLC (“Nasdaq”) notifying us that due to our failure (the “Initial Delinquent Filing”) to timely file its Annual Report on Form 10-K for the fiscal year ended December 31, 2023 (the “2023 Form 10-K”), with the Securities and Exchange Commission (the “SEC”), we are not in compliance with Nasdaq’s continued listing requirements under Nasdaq Listing Rule 5250(c)(1) (the “Rule”), which requires the timely filing of all required periodic reports with the SEC.
Our Common Stock is traded on the Nasdaq Stock Market LLC (“Nasdaq”), a national securities exchange. 43 On April 17, 2024, we received a notice (the “Initial Notice”) from the Listing Qualifications Department of The Nasdaq Stock Market LLC (“Nasdaq”) notifying us that due to our failure (the “Initial Delinquent Filing”) to timely file its Annual Report on Form 10-K for the fiscal year ended December 31, 2023 (the “2023 Form 10-K”), with the Securities and Exchange Commission (the “SEC”), we are not in compliance with Nasdaq’s continued listing requirements under Nasdaq Listing Rule 5250(c)(1) (the “Listing Rule 5250(c)(1) Rule”), which requires the timely filing of all required periodic reports with the SEC.
We maintain a system of internal control over financial reporting, which is defined as a process designed by, or under the supervision of, our principal executive officer and principal financial officer, or persons performing similar functions, and effected by our board of directors, management and other personnel, 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.
We maintain a system of internal control over financial reporting, which is defined as a process designed by, or under the supervision of, our principal executive officer and principal financial officer, or persons performing similar functions, and effected by our board of directors, management and other personnel, 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. 22 As a public company, we have significant additional requirements for enhanced financial reporting and internal controls.
We have never paid any cash dividends on our Common Stock and do not anticipate paying any cash dividends on our Common Stock in the foreseeable future and any return on investment may be limited to the value of our stock. We plan to retain any future earning to finance growth.
We have never paid any cash dividends on our Common Stock and do not anticipate paying any cash dividends on our Common Stock in the foreseeable future and any return on investment may be limited to the value of our stock.
Risks Relating to Regulation of Our Business and to Our Structure If the PRC government finds that the agreements that establish the structure for operating our businesses in China do not comply with PRC governmental restrictions on foreign investment in industries in which we operate, or if these regulations or their interpretation change in the future, we could be subject to severe penalties.
It may be difficult for you to evaluate its performance and prospects. 23 Risks Relating to Regulation of Our Business and to Our Structure If the PRC government finds that the agreements that establish the structure for operating our businesses in China do not comply with PRC governmental restrictions on foreign investment in industries in which we operate, or if these regulations or their interpretation change in the future, we could be subject to severe penalties.
Any of these actions may disrupt our operations and adversely affect our business, results of operations and financial condition. 33 On November 14, 2021, the CAC published a discussion draft of the Administrative Measures for Internet Data Security, or the Draft Measures for Internet Data Security, which provides that data processors conducting the following activities shall apply for cybersecurity review: (i) merger, reorganization or division of Internet platform operators that have acquired a large number of data resources related to national security, economic development or public interests affects or may affect national security; (ii) listing abroad of data processors processing over one million users’ personal information; (iii) listing in Hong Kong which affects or may affect national security; or (iv) other data processing activities that affect or may affect national security.
On November 14, 2021, the CAC published a discussion draft of the Administrative Measures for Internet Data Security, or the Draft Measures for Internet Data Security, which provides that data processors conducting the following activities shall apply for cybersecurity review: (i) merger, reorganization or division of Internet platform operators that have acquired a large number of data resources related to national security, economic development or public interests affects or may affect national security; (ii) listing abroad of data processors processing over one million users’ personal information; (iii) listing in Hong Kong which affects or may affect national security; or (iv) other data processing activities that affect or may affect national security.
On October 23, 2021, the Standing Committee of the National People’s Congress issued a discussion draft of the amended Anti-Monopoly Law, which proposes to increase the fines for illegal concentration of business operators to “no more than ten percent of its last year’s sales revenue if the concentration of business operator has or may have an effect of excluding or limiting competition; or a fine of up to RMB5 million if the concentration of business operator does not have an effect of excluding or limiting competition.” The draft also proposes for the relevant authority to investigate transaction where there is evidence that the concentration has or may have the effect of eliminating or restricting competition, even if such concentration does not reach the filing threshold.
On March 12, 2021, the SAMR published several administrative penalty cases about concentration of business operators that violated PRC Anti-Monopoly Law in the internet sector. 33 On October 23, 2021, the Standing Committee of the National People’s Congress issued a discussion draft of the amended Anti-Monopoly Law, which proposes to increase the fines for illegal concentration of business operators to “no more than ten percent of its last year’s sales revenue if the concentration of business operator has or may have an effect of excluding or limiting competition; or a fine of up to RMB5 million if the concentration of business operator does not have an effect of excluding or limiting competition.” The draft also proposes for the relevant authority to investigate transaction where there is evidence that the concentration has or may have the effect of eliminating or restricting competition, even if such concentration does not reach the filing threshold.
The Internet Finance Association of China also issued a series of notices to remind the potential risks of ICO and the cryptocurrency trading to the PRC residents, including the Risk Warning on Guarding against the "Virtual Currency" such as Bitcoin on September 13, 2017, Risk Warning on Guarding against the Disguised Initial Coin Offering Activities on January 12, 2018 and Risk Warning on Guarding against the Offshore Initial Coin Offering Activities and the Cryptocurrency Trading on January 26, 2018. 22 We do not plan to initiate any ICO in China or any other jurisdictions.
The Internet Finance Association of China also issued a series of notices to remind the potential risks of ICO and the cryptocurrency trading to the PRC residents, including the Risk Warning on Guarding against the "Virtual Currency" such as Bitcoin on September 13, 2017, Risk Warning on Guarding against the Disguised Initial Coin Offering Activities on January 12, 2018 and Risk Warning on Guarding against the Offshore Initial Coin Offering Activities and the Cryptocurrency Trading on January 26, 2018.
Since PRC administrative and court authorities have significant discretion in interpreting and implementing statutory and contractual terms, it may be difficult to evaluate the outcome of administrative and court proceedings and the level of legal protection available to you and us.
In particular, the interpretation and enforcement of these laws and regulations involve uncertainties. Since PRC administrative and court authorities have significant discretion in interpreting and implementing statutory and contractual terms, it may be difficult to evaluate the outcome of administrative and court proceedings and the level of legal protection available to you and us.
On December 29, 2022, the Accelerating Holding Foreign Companies Accountable Act was signed into law. 37 On December 16, 2021, the PCAOB issued a HFCAA Determination Report (the “2021 PCAOB Determinations”) to notify the SEC of its determination that the PCAOB was unable to inspect or investigate completely registered public accounting firms headquartered in China mainland and Hong Kong because of positions taken by the Chinese authorities, and our auditor was subject to this determination.
On December 16, 2021, the PCAOB issued a HFCAA Determination Report (the “2021 PCAOB Determinations”) to notify the SEC of its determination that the PCAOB was unable to inspect or investigate completely registered public accounting firms headquartered in China mainland and Hong Kong because of positions taken by the Chinese authorities, and our auditor was subject to this determination.
As a public company, we have significant additional requirements for enhanced financial reporting and internal controls. We are required to document and test our internal control procedures in order to satisfy the requirements of Section 404 of the Sarbanes-Oxley Act of 2002, which requires annual management assessments of the effectiveness of our internal controls over financial reporting.
We are required to document and test our internal control procedures in order to satisfy the requirements of Section 404 of the Sarbanes-Oxley Act of 2002, which requires annual management assessments of the effectiveness of our internal controls over financial reporting.
We rely on contractual arrangements with the PRC Operating Entities and their shareholders for our China operations, which may not be as effective in providing operational control as direct ownership. We rely on contractual arrangements with our PRC Operating Entities and their shareholders to operate our ICP and advertising business.
We rely on contractual arrangements with our PRC Operating Entities and their shareholders to operate our ICP and advertising business. These contractual arrangements may not be as effective in providing us with control over the PRC Operating Entities as direct ownership.
In addition, during the past two fiscal years our Common Stock has had a trading range with a low price of $0.70 per share and a high price of $5.65 per share. The market price of our Common Stock may be volatile.
In addition, during the past two fiscal years our Common Stock has had a trading range with a low price of $1.55 per share and a high price of $11.38 per share. The market price of our Common Stock may be volatile.
Because a significant amount of our future revenue may be in the form of Chinese Renminbi, our inability to obtain the requisite approvals or any future restrictions on currency exchanges could limit our ability to utilize revenue generated in Chinese Renminbi to fund our business activities outside of China, or to repay foreign currency obligations, including our debt obligations, which would have a material adverse effect on our financial condition and results of operations.
Because a significant amount of our future revenue may be in the form of Chinese Renminbi, our inability to obtain the requisite approvals or any future restrictions on currency exchanges could limit our ability to utilize revenue generated in Chinese Renminbi to fund our business activities outside of China, or to repay foreign currency obligations, including our debt obligations, which would have a material adverse effect on our financial condition and results of operations. 36 We may have limited legal recourse under PRC laws if disputes arise under our contracts with third parties.
The approval of and the filing with the CSRC or other PRC government authorities may be required in connection with our future offshore offerings under PRC law, and, if required, we cannot predict whether or for how long we will be able to obtain such approval or complete such filing.
Such uncertainties may restrict our ability to implement our acquisition strategy and adversely affect our business and prospects. 31 The approval of and the filing with the CSRC or other PRC government authorities may be required in connection with our future offshore offerings under PRC law, and, if required, we cannot predict whether or for how long we will be able to obtain such approval or complete such filing.
A security breach could damage our reputation, resulting in loss of customers or reluctance of potential customers to try our platform, or civil or criminal liability. 20 The PRC Cyber Security Law, effective on June 1, 2017, stipulates that a network operator must adopt technical measures and other necessary measures in accordance with applicable laws and regulations as well as compulsory national and industrial standards to safeguard the safety and stability of network operations, effectively respond to network security incidents, prevent illegal and criminal activities, maintain the integrity, confidentiality and availability of network data.
The PRC Cyber Security Law, effective on June 1, 2017, stipulates that a network operator must adopt technical measures and other necessary measures in accordance with applicable laws and regulations as well as compulsory national and industrial standards to safeguard the safety and stability of network operations, effectively respond to network security incidents, prevent illegal and criminal activities, maintain the integrity, confidentiality and availability of network data.
Although we inform our personnel that such practices are illegal, we cannot assure you that our employees or other agents will not engage in such conduct for which we might be held responsible.
Although we inform our personnel that such practices are illegal, we cannot assure you that our employees or other agents will not engage in such conduct for which we might be held responsible. If our employees or other agents are found to have engaged in such practices, we could suffer severe penalties.
This volatility has significantly affected the market prices of securities of many companies for reasons frequently unrelated to the operating performance of the specific companies. These broad market fluctuations may adversely affect the market price of our Common Stock. The outstanding warrants may adversely affect us in the future and cause dilution to existing stockholders.
This volatility has significantly affected the market prices of securities of many companies for reasons frequently unrelated to the operating performance of the specific companies. These broad market fluctuations may adversely affect the market price of our Common Stock.
On February 3, 2023, we received a letter from the Nasdaq notifying us that Nasdaq had determined that for 10 consecutive business days, from January 20, 2023 to February 2, 2023, the closing bid price of our Common Stock had been at $1.00 per share or greater. Accordingly, we regained compliance with the Listing Rule and this matter was closed.
On October 15, 2024, we received a letter from Nasdaq notifying us that Nasdaq had determined that for 10 consecutive business days, from September 30, 2024 to October 14, 2024, the closing bid price of our Common Stock had been at $1.00 per share or greater. Accordingly, we regained compliance with the Bid Price Requirement and this matter was closed.
Any uncertainties or negative publicity regarding such approval requirement could materially and adversely affect our business, prospects, financial condition, reputation, and the trading price of our listed securities. 31 Any failure or perceived failure by us to comply with the Anti-Monopoly Guidelines for Internet Platforms Economy Sector and other PRC anti-monopoly laws and regulations may result in governmental investigations or enforcement actions, litigation or claims against us and could have an adverse effect on our business, financial condition and results of operations.
Any failure or perceived failure by us to comply with the Anti-Monopoly Guidelines for Internet Platforms Economy Sector and other PRC anti-monopoly laws and regulations may result in governmental investigations or enforcement actions, litigation or claims against us and could have an adverse effect on our business, financial condition and results of operations.
We filed a Certificate of Amendment to our Articles of Incorporation with the Secretary of State of the State of Nevada to effect a one-for-five (1 for 5) reverse stock split of our common stock (the “Common Stock”) pursuant to NRS Section 78.209, which became effective on January 18, 2023.
We filed a Certificate of Amendment to our Articles of Incorporation with the Secretary of State of the State of Nevada to effect a one-for-four (1 for 4) reverse stock split of our common stock pursuant to NRS Section 78.209, which became effective on September 30, 2024.
We may be adversely affected by the complexity, uncertainties and changes in PRC licensing and regulation of internet businesses. The PRC government extensively regulates the internet industry, including the licensing and permit requirements pertaining to companies in this industry. Internet-related laws and regulations in China are relatively new and evolving, and their interpretation and enforcement involve significant uncertainty.
The PRC government extensively regulates the internet industry, including the licensing and permit requirements pertaining to companies in this industry. Internet-related laws and regulations in China are relatively new and evolving, and their interpretation and enforcement involve significant uncertainty.
Advertisers may reduce the amount of money they spend to advertise and obtain precision marketing data and data analysis on/from our advertising and data service platforms for a number of reasons, including: ● a general decline in economic conditions; ● a decline in economic conditions in the particular cities where we conduct business; ● a decision to shift advertising and marketing expenditures to other available less expensive advertising media; and ● a decline in advertising and marketing spending in general. 18 A decrease in the demand for advertising media in general, and for our advertising and marketing services in particular, would materially and adversely affect our ability to generate revenues, and have a material adverse effect on our financial condition and results of operations.
Advertisers may reduce the amount of money they spend to advertise and obtain precision marketing data and data analysis on/from our advertising and data service platforms for a number of reasons, including: ● a general decline in economic conditions; ● a decline in economic conditions in the particular cities where we conduct business; ● a decision to shift advertising and marketing expenditures to other available less expensive advertising media; and ● a decline in advertising and marketing spending in general.
In accordance with the PRC regulations on Enterprises with Foreign Investment, a WFOE established in the PRC is required to provide certain statutory reserves, namely general reserve fund, the enterprise expansion fund and staff welfare and bonus fund which are appropriated from net profit as reported in the enterprise’s PRC statutory accounts.
Paid in capital of the PRC subsidiaries and VIEs included in our consolidated net assets are also not distributable for dividend purposes. 37 In accordance with the PRC regulations on Enterprises with Foreign Investment, a WFOE established in the PRC is required to provide certain statutory reserves, namely general reserve fund, the enterprise expansion fund and staff welfare and bonus fund which are appropriated from net profit as reported in the enterprise’s PRC statutory accounts.
The Filing Rules also sets forth certain regulatory red lines for overseas offerings and listings by domestic enterprises and additional reporting obligations for listed companies in the case of material changes. 30 In a Q&A released on the CSRC’s official website, the respondent CSRC official stated that the domestic companies which have listed their securities in the overseas market as of March 31, 2023 will be regarded as the existing overseas listed companies, which will not be required to file with the CSRC until they conduct any new offerings subject to the filing requirements under the Filing Rules.
In a Q&A released on the CSRC’s official website, the respondent CSRC official stated that the domestic companies which have listed their securities in the overseas market as of March 31, 2023 will be regarded as the existing overseas listed companies, which will not be required to file with the CSRC until they conduct any new offerings subject to the filing requirements under the Filing Rules.
To the extent the U.S. dollar strengthens against foreign currencies, the translation of these foreign currencies denominated transactions results in reduced revenue, operating expenses and net income for our international operations.
The income statements of our operations are translated into U.S. dollars at the average exchange rates in each applicable period. To the extent the U.S. dollar strengthens against foreign currencies, the translation of these foreign currencies denominated transactions results in reduced revenue, operating expenses and net income for our international operations.
In addition, a PRC court or arbitration tribunal may refuse to enforce the contractual arrangements on the grounds that they are designed to circumvent PRC foreign investment restrictions and therefore are against PRC public policy. 24 Contractual arrangements we have entered into among the PRC Operating Entities may be subject to scrutiny by the PRC tax authorities and a finding that we owe additional taxes or are ineligible for our tax exemption, or both, could substantially increase our taxes owed, and reduce our net income and the value of your investment.
Contractual arrangements we have entered into among the PRC Operating Entities may be subject to scrutiny by the PRC tax authorities and a finding that we owe additional taxes or are ineligible for our tax exemption, or both, could substantially increase our taxes owed, and reduce our net income and the value of your investment.
On December 28, 2021, the CAC, the NDRC, the MIIT, and several other administrations jointly published the Measures for Cybersecurity Review, effective on February 15, 2022, which provides that certain operators of critical information infrastructure purchasing network products and services or network platform operators carrying out data processing activities, which affect or may affect national security, must apply with the Cybersecurity Review Office for a cybersecurity review.
On November 7, 2016, the Standing Committee of the National People’s Congress issued the Cyber Security Law, which imposes more stringent requirements on operators of “critical information infrastructure,” especially in data storage and cross-border data transfer. 34 On December 28, 2021, the CAC, the NDRC, the MIIT, and several other administrations jointly published the Measures for Cybersecurity Review, effective on February 15, 2022, which provides that certain operators of critical information infrastructure purchasing network products and services or network platform operators carrying out data processing activities, which affect or may affect national security, must apply with the Cybersecurity Review Office for a cybersecurity review.
You should be aware that in light of the relative freedom to operate that such persons enjoy – oftentimes blogging from outside the U.S. with little or no assets or identity requirements – should we be targeted for such an attack, our stock will likely suffer from a temporary, or possibly long term, decline in market price should the rumors created not be dismissed by market participants. 44 If we become directly subject to the scrutiny involving U.S. listed Chinese companies, we may have to expend significant resources to investigate and/or defend the matter, which could harm our business operations, stock price and reputation.
You should be aware that in light of the relative freedom to operate that such persons enjoy – oftentimes blogging from outside the U.S. with little or no assets or identity requirements – should we be targeted for such an attack, our stock will likely suffer from a temporary, or possibly long term, decline in market price should the rumors created not be dismissed by market participants.
Techniques employed by manipulative short sellers in Chinese small cap stocks may drive down the market price of our common stock.
We plan to retain any future earning to finance growth. 45 Techniques employed by manipulative short sellers in Chinese small cap stocks may drive down the market price of our common stock.
On November 14, 2021, the CAC released the draft Administrative Measures for Internet Data Security (the “Draft Measures for Internet Data Security”), for public comments, which requires, among others, that a prior cybersecurity review should be required for listing abroad of data processors which process over one million users’ personal information, and the listing of data processors in Hong Kong which affects or may affect national security. 28 Since the Draft Measures for Internet Data Security is in the process of being formulated, and the Opinions, the Filing Rules and the Measures for Cybersecurity Review are relevantly new and remain unclear on how it will be interpreted, amended and implemented by the relevant PRC governmental authorities, it remains uncertain whether we can obtain the specific regulatory approvals from, and complete the required filings with the CSRC, CAC or any other PRC government authorities for our future securities offering in a timely basis or at all.
Since the Draft Measures for Internet Data Security is in the process of being formulated, and the Opinions, the Filing Rules and the Measures for Cybersecurity Review are relevantly new and remain unclear on how it will be interpreted, amended and implemented by the relevant PRC governmental authorities, it remains uncertain whether we can obtain the specific regulatory approvals from, and complete the required filings with the CSRC, CAC or any other PRC government authorities for our future securities offering in a timely basis or at all.
It is possible that the Chinese government could adopt a more flexible currency policy, which could result in more significant fluctuation of Chinese Renminbi against the U.S. dollar.
It is possible that the Chinese government could adopt a more flexible currency policy, which could result in more significant fluctuation of Chinese Renminbi against the U.S. dollar. We can offer no assurance that Chinese Renminbi will be stable against the U.S. dollar or any other foreign currency.
As of June 27, 2024, the closing trade price of our Common Stock was $0.76 per share. As of June 28, 2024, we had approximately 607 shareholders of record of our Common Stock, not including shares held in street name.
As of April 11, 2025, the closing trade price of our Common Stock was $1.48 per share. As of April 15, 2025, we had approximately 607 shareholders of record of our Common Stock, not including shares held in street name.
On December 15, 2022, the PCAOB issued its 2022 HFCAA Determination Report to notify the SEC of its determination that the PCAOB was able to secure complete access to inspect and investigate PCAOB-registered public accounting firms headquartered in China mainland and Hong Kong completely in 2022.
This included sending a team of PCAOB staff to conduct on-site inspections and investigations in Hong Kong over a nine-week period from September to November 2022. 39 On December 15, 2022, the PCAOB issued its 2022 HFCAA Determination Report to notify the SEC of its determination that the PCAOB was able to secure complete access to inspect and investigate PCAOB-registered public accounting firms headquartered in China mainland and Hong Kong completely in 2022.
Such uncertainties, including uncertainty over the scope and effect of our contractual, property (including intellectual property) and procedural rights, and any failure to respond to changes in the regulatory environment in China could materially and adversely affect our business and impede our ability to continue our operations. 29 PRC regulations relating to mergers and acquisitions of domestic enterprises by foreign investors may increase the administrative burden we face and create regulatory uncertainties.
Such uncertainties, including uncertainty over the scope and effect of our contractual, property (including intellectual property) and procedural rights, and any failure to respond to changes in the regulatory environment in China could materially and adversely affect our business and impede our ability to continue our operations.
At that time, the Company may appeal Nasdaq’s determination to a Hearings Panel. 42 There can be no assurance that we will continue being able to comply with Nasdaq’s rule or will otherwise be in compliance with other Nasdaq continued listing criteria.
There can be no assurance that we will continue being able to comply with Nasdaq’s rules or will otherwise be in compliance with other Nasdaq continued listing criteria.
Hacking techniques change frequently and therefore can be difficult to prevent. In addition, service providers could suffer security breaches or data losses that affect our customers’ information.
Hacking techniques change frequently and therefore can be difficult to prevent. In addition, service providers could suffer security breaches or data losses that affect our customers’ information. A security breach could damage our reputation, resulting in loss of customers or reluctance of potential customers to try our platform, or civil or criminal liability.
The new GILTI tax would be imposed on us when our subsidiaries and VIEs that are CFCs generate income that is subject to Subpart F of the U.S.
The new GILTI tax would be imposed on us when our subsidiaries and VIEs that are CFCs generate income that is subject to Subpart F of the U.S. Internal Revenue Code beginning after December 31, 2017, and any such resulting U.S. corporate income tax imposed on us would reduce our consolidated net income.
We cannot assure you that financing will be available in amounts or on terms acceptable to us, if at all. We have not paid dividends in the past and do not expect to pay dividends in the future, and any return on investment may be limited to the value of our stock.
We have not paid dividends in the past and do not expect to pay dividends in the future, and any return on investment may be limited to the value of our stock.
Based on their needs, foreign-invested enterprises are permitted to open foreign exchange settlement accounts for current account receipts and payments of foreign exchange along with specialized accounts for capital account receipts and payments of foreign exchange at certain designated foreign exchange banks. 36 Although the current Exchange Rules allow converting Chinese Renminbi into foreign currency for current account items, conversion of Chinese Renminbi into foreign exchange for capital items, such as foreign direct investment, loans or securities, requires the approval of SAFE, which is under the authority of the People’s Bank of China.
Although the current Exchange Rules allow converting Chinese Renminbi into foreign currency for current account items, conversion of Chinese Renminbi into foreign exchange for capital items, such as foreign direct investment, loans or securities, requires the approval of SAFE, which is under the authority of the People’s Bank of China.
On February 24, 2023, the CSRC, jointly with other relevant governmental authorities, promulgated the revised Provisions on Strengthening Confidentiality and Archives Management of Overseas Securities Issuance and Listing by Domestic Enterprises (the “Confidentiality and Archives Management Provisions”), which took effect on March 31, 2023.
However, as the Filing Rules were recently promulgated, there remain substantial uncertainties as to their interpretation, application, and enforcement and how they will affect our operations and our future financing. 32 On February 24, 2023, the CSRC, jointly with other relevant governmental authorities, promulgated the revised Provisions on Strengthening Confidentiality and Archives Management of Overseas Securities Issuance and Listing by Domestic Enterprises (the “Confidentiality and Archives Management Provisions”), which took effect on March 31, 2023.
Internal Revenue Code beginning after December 31, 2017, and any such resulting U.S. corporate income tax imposed on us would reduce our consolidated net income. 41 Risks Related to our Securities The Nasdaq may delist our securities from quotation on its exchange which could limit investors ’ ability to make transactions in our securities and subject us to additional trading restrictions.
Risks Related to our Securities The Nasdaq may delist our securities from quotation on its exchange which could limit investors ’ ability to make transactions in our securities and subject us to additional trading restrictions.
However, their experience in implementing, interpreting and enforcing these laws and regulations is limited, and our ability to enforce commercial claims or to resolve commercial disputes is unpredictable.
The Chinese government has enacted laws and regulations dealing with matters such as corporate organization and governance, foreign investment, commerce, taxation and trade. However, their experience in implementing, interpreting and enforcing these laws and regulations is limited, and our ability to enforce commercial claims or to resolve commercial disputes is unpredictable.
The Public Company Accounting Oversight Board (the “ PCAOB ” ) had historically been unable to inspect our auditor in relation to their audit work performed for our financial statements and the inability of the PCAOB to conduct inspections over our auditor has deprived our investors with the benefits of such inspections.
Any future restrictions on currency exchanges may limit our ability to use retained earnings generated in Renminbi to make dividends or other payments in U.S. dollars or fund possible business activities outside China. 38 The Public Company Accounting Oversight Board (the “ PCAOB ” ) had historically been unable to inspect our auditor in relation to their audit work performed for our financial statements and the inability of the PCAOB to conduct inspections over our auditor has deprived our investors with the benefits of such inspections.
In addition, implementation of industry-wide regulations directly targeting our operations could cause the value of our securities to significantly decline. Therefore, investors of our company and our business face potential uncertainty from actions taken by the PRC government affecting our business.
In addition, implementation of industry-wide regulations directly targeting our operations could cause the value of our securities to significantly decline.
If our employees or other agents are found to have engaged in such practices, we could suffer severe penalties. 35 Changes in foreign exchange regulations in the PRC may affect our ability to pay dividends in foreign currency or conduct other foreign exchange business.
Changes in foreign exchange regulations in the PRC may affect our ability to pay dividends in foreign currency or conduct other foreign exchange business.
In 1979, the PRC government began to promulgate a comprehensive system of laws and regulations governing economic matters in general. The overall effect of legislation over the past four decades has significantly enhanced the protections afforded to various forms of foreign investments in China.
The overall effect of legislation over the past four decades has significantly enhanced the protections afforded to various forms of foreign investments in China. However, China has not developed a fully integrated legal system, and recently enacted laws and regulations may not sufficiently cover all aspects of economic activities in China.
The imposition of any of these penalties would result in a material and adverse effect on our ability to conduct our business and would have a material adverse impact on our cash flows, financial position and operating performance.
The imposition of any of these penalties would result in a material and adverse effect on our ability to conduct our business and would have a material adverse impact on our cash flows, financial position and operating performance. 24 We rely on contractual arrangements with the PRC Operating Entities and their shareholders for our China operations, which may not be as effective in providing operational control as direct ownership.
Condensed Consolidating Schedules The following tables presented the condensed consolidating schedules that depicted the financial position, cash flows and results of operations for our company, our consolidated subsidiaries, consolidated VIE, and any eliminating adjustments as of December 31, 2023 and 2022, and for the years ended December 31, 2023 and 2022, respectively.
Any limitation on the ability of the PRC Operating Entities to pay dividends to us could materially and adversely limit our ability to grow, make investments or acquisitions that could be beneficial to our businesses, pay dividends, or otherwise fund and conduct our business. 25 Condensed Consolidating Schedules The following tables presented the condensed consolidating schedules that depicted the financial position, cash flows and results of operations for our company, our consolidated subsidiaries, consolidated VIE, and any eliminating adjustments as of December 31, 2024 and 2023, and for the years ended December 31, 2024 and 2023, respectively.
As of December 31, 2023 The Company Consolidated Subsidiaries Consolidated VIE Elimination Consolidation US$ US$ US$ US$ US$ Assets Cash and cash equivalents - 450 367 - 817 Accounts receivable, net - - 844 - 844 Prepayment and deposit to suppliers - 2,763 2,005 (263 ) 4,505 Due from group companies 37,610 11,669 409 (49,688 ) - Other current assets - 2,791 3 - 2,794 Long-term investments - 794 - - 794 Operating lease right-of-use assets - 22 - - 22 Property and equipment, net - 76 139 - 215 Intangible assets, net - 841 - - 841 Long-term deposits and prepayments - - - - - Deferred tax assets, net - - 401 - 401 Total Assets $ 37,610 $ 19,406 $ 4,168 $ (49,951 ) $ 11,233 Liabilities and Equity Accounts payable - - 201 - 201 Advances from customers - - 1,106 (263 ) 843 Accrued payroll and other accruals 283 30 37 - 350 Taxes payable - 639 2,555 - 3,194 Operating lease liabilities - 24 - - 24 Lease payment liabilities related to short-term leases - - 99 - 99 Due to group companies 233 34,018 15,437 (49,688 ) - Other current liabilities 75 23 46 - 144 Warrant liabilities - - - - - Operating lease liabilities-Non current - - - - - Long-term borrowing from a related party - 124 - - 124 Total Liabilities 591 34,858 19,481 (49,951 ) 4,979 Total stockholders ’ equity 37,019 (15,452 ) (15,313 ) - 6,254 Total Liabilities and Equity $ 37,610 $ 19,406 $ 4,168 $ (49,951 ) $ 11,233 25 As of December 31, 2022 The Company Consolidated Subsidiaries Consolidated VIE Elimination Consolidation US$ US$ US$ US$ US$ Assets Cash and cash equivalents - 3,813 578 - 4,391 Accounts receivable, net - - 1,745 - 1,745 Prepayment and deposit to suppliers 66 2,825 2,020 (344 ) 4,567 Due from group companies 38,397 11,539 145 (50,081 ) - Other current assets - 1,608 2 - 1,610 Long-term investments - 1,431 165 - 1,596 Operating lease right-of-use assets - 1,616 145 - 1,761 Property and equipment, net - 136 113 - 249 Intangible assets, net - 3,264 - - 3,264 Long-term deposits and prepayments - 69 - - 69 Deferred tax assets, net - - 406 - 406 Total Assets $ 38,463 $ 26,301 $ 5,319 $ (50,425 ) $ 19,658 Liabilities and Equity Accounts payable - - 205 - 205 Advances from customers - 224 859 (344 ) 739 Accrued payroll and other accruals 337 38 63 - 438 Taxes payable - 646 2,602 - 3,248 Operating lease liabilities - 202 145 - 347 Lease payment liabilities related to short-term leases - - 101 - 101 Due to group companies 242 34,542 15,297 (50,081 ) - Other current liabilities 75 53 309 437 Warrant liabilities 185 - - - 185 Operating lease liabilities-Non current - 1,535 - - 1,535 Long-term borrowing from a related party - 126 - - 126 Total Liabilities 839 37,366 19,581 (50,425 ) 7,361 Total stockholders ’ equity 37,624 (11,065 ) (14,262 ) - 12,297 Total Liabilities and Equity $ 38,463 $ 26,301 $ 5,319 $ (50,425 ) $ 19,658 26 For the year ended December 31, 2023 The Company Consolidated Subsidiaries Consolidated VIE Elimination Consolidation US$ US$ US$ US$ US$ Revenues - 219 30,437 (71 ) 30,585 Cost of revenues - 1,005 30,087 (71 ) 31,021 Total operating expenses 849 3,390 1,361 (24 ) 5,576 Loss from operations (849 ) (4,176 ) (1,011 ) 24 (6,012 ) Other income/(expenses) 185 113 (238 ) (24 ) 36 Income/(loss) before income tax benefit and noncontrolling interests (664 ) (4,063 ) (1,249 ) - (5,976 ) Income tax benefit - - 2 - 2 Net income/(loss) (664 ) (4,063 ) (1,247 ) - (5,974 ) Net income attributable to noncontrolling interests - - - - - Net income/(loss) attributable to ZW Data Action Technologies Inc.
As of December 31, 2024 The Company Consolidated Subsidiaries Consolidated VIE Elimination Consolidation US$ US$ US$ US$ US$ Assets Cash and cash equivalents - 788 24 - 812 Accounts receivable, net - 1,580 34 - 1,614 Prepayment and deposit to suppliers 346 3,232 1,189 (259 ) 4,508 Due from group companies 38,087 11,557 448 (50,092 ) - Other current assets - 2,237 2 - 2,239 Long-term investments - 397 - - 397 Operating lease right-of-use assets - - - - - Property and equipment, net - 31 85 - 116 Intangible assets, net - - - - - Long-term deposits and prepayments - - - - - Deferred tax assets, net - - - - - Total Assets $ 38,433 $ 19,822 $ 1,782 $ (50,351 ) $ 9,686 Liabilities and Equity Accounts payable - - 93 - 93 Advance from investors 1,075 - - - 1,075 Advances from customers - - 748 (259 ) 489 Accrued payroll and other accruals 485 58 14 - 557 Taxes payable - 632 2,520 - 3,152 Operating lease liabilities - - - - - Lease payment liabilities related to short-term leases - - - - - Due to group companies 232 34,535 15,325 (50,092 ) - Other current liabilities 75 23 382 - 480 Warrant liabilities - - - - - Operating lease liabilities-Non current - - - - - Long-term borrowing from a related party - 122 - - 122 Total Liabilities 1,867 35,370 19,082 (50,351 ) 5,968 Total stockholders ’ equity 36,566 (15,548 ) (17,300 ) - 3,718 Total Liabilities and Equity $ 38,433 $ 19,822 $ 1,782 $ (50,351 ) $ 9,686 26 As of December 31, 2023 The Company Consolidated Subsidiaries Consolidated VIE Elimination Consolidation US$ US$ US$ US$ US$ Assets Cash and cash equivalents - 450 367 - 817 Accounts receivable, net - - 844 - 844 Prepayment and deposit to suppliers - 2,763 2,005 (263 ) 4,505 Due from group companies 37,610 11,669 409 (49,688 ) - Other current assets - 2,791 3 - 2,794 Long-term investments - 794 - - 794 Operating lease right-of-use assets - 22 - - 22 Property and equipment, net - 76 139 - 215 Intangible assets, net - 841 - - 841 Long-term deposits and prepayments - - - - - Deferred tax assets, net - - 401 - 401 Total Assets $ 37,610 $ 19,406 $ 4,168 $ (49,951 ) $ 11,233 Liabilities and Equity Accounts payable - - 201 - 201 Advances from customers - - 1,106 (263 ) 843 Accrued payroll and other accruals 283 30 37 - 350 Taxes payable - 639 2,555 - 3,194 Operating lease liabilities - 24 - - 24 Lease payment liabilities related to short-term leases - - 99 - 99 Due to group companies 233 34,018 15,437 (49,688 ) - Other current liabilities 75 23 46 - 144 Warrant liabilities - - - - - Operating lease liabilities-Non current - - - - - Long-term borrowing from a related party - 124 - - 124 Total Liabilities 591 34,858 19,481 (49,951 ) 4,979 Total stockholders ’ equity 37,019 (15,452 ) (15,313 ) - 6,254 Total Liabilities and Equity $ 37,610 $ 19,406 $ 4,168 $ (49,951 ) $ 11,233 27 For the year ended December 31, 2024 The Company Consolidated Subsidiaries Consolidated VIE Elimination Consolidation US$ US$ US$ US$ US$ Revenues - 5,530 9,909 - 15,439 Cost of revenues - 5,151 9,842 - 14,993 Total operating expenses 1,483 662 2,058 - 4,203 Loss from operations (1,483 ) (283 ) (1,991 ) - (3,757 ) Other income/(expenses) - 298 89 - 387 Income/(loss) before income tax benefit and noncontrolling interests (1,483 ) 15 (1,902 ) - (3,370 ) Income tax benefit/(expense) - - (399 ) - (399 ) Net income/(loss) (1,483 ) 15 (2,301 ) - (3,769 ) Net income attributable to noncontrolling interests - - 8 - 8 Net income/(loss) attributable to ZW Data Action Technologies Inc.
We may require additional cash resources due to changed business conditions or other future developments, including any investments or acquisitions we may decide to pursue. If our cash resources are insufficient to satisfy our cash requirements, we may seek to sell additional equity or debt securities or obtain a credit facility.
We may need additional capital and may sell additional securities or other equity securities or incur indebtedness, which could result in additional dilution to our shareholders or increase our debt service obligations. We may require additional cash resources due to changed business conditions or other future developments, including any investments or acquisitions we may decide to pursue.
The interpretation and application of these cybersecurity laws, regulations and standards are still uncertain and evolving, especially the Draft Measures for Internet Data Security. We cannot assure you that relevant governmental authorities will not interpret or implement these and other laws or regulations in ways that may negatively affect us.
The interpretation and application of these cybersecurity laws, regulations and standards are still uncertain and evolving, especially the Draft Measures for Internet Data Security.
Uncertainties in the interpretation and enforcement of PRC laws and regulations could limit the legal protections available to you and us. The PRC legal system is a civil law system based on written statutes. Unlike the common law system, prior court decisions may be cited for reference but have limited precedential value.
Unlike the common law system, prior court decisions may be cited for reference but have limited precedential value. In 1979, the PRC government began to promulgate a comprehensive system of laws and regulations governing economic matters in general.
The sale of additional equity securities or equity-linked debt securities could result in additional dilution to our shareholders. The incurrence of indebtedness would result in increased debt service obligations and could result in operating and financing covenants that would restrict our operations.
The incurrence of indebtedness would result in increased debt service obligations and could result in operating and financing covenants that would restrict our operations. We cannot assure you that financing will be available in amounts or on terms acceptable to us, if at all.
(664 ) (4,063 ) (1,247 ) - (5,974 ) For the year ended December 31, 2022 The Company Consolidated Subsidiaries Consolidated VIE Elimination Consolidation US$ US$ US$ US$ US$ Revenues - 2,048 25,454 (1,267 ) 26,235 Cost of revenues - 2,097 25,599 (1,267 ) 26,429 Total operating expenses 808 7,000 3,133 (16 ) 10,925 Loss from operations (808 ) (7,049 ) (3,278 ) 16 (11,119 ) Other income/(expenses) 1,854 (166 ) (347 ) (16 ) 1,325 Income/(loss) before income tax benefit and noncontrolling interests 1,046 (7,215 ) (3,625 ) - (9,794 ) Income tax benefit - - 3 - 3 Net income/(loss) 1,046 (7,215 ) (3,622 ) - (9,791 ) Net income attributable to noncontrolling interests - - - - - Net income/(loss) attributable to ZW Data Action Technologies Inc. $ 1,046 $ (7,215 ) $ (3,622 ) - $ (9,791 ) For the year ended December 31, 2023 The Company Consolidated Subsidiaries Consolidated VIE Elimination Consolidation US$ US$ US$ US$ US$ Net cash (used in)/provided by operating activities (787 ) (603 ) (622 ) - (2,012 ) Net cash provided by/(used in) investing activities 787 (1,956 ) (135 ) (233 ) (1,537 ) Net cash (used in)/provided by financing activities - (787 ) 554 233 - Effect of exchange rate fluctuation - (17 ) (8 ) - (25 ) Net (decrease)/increase in cash and cash equivalents - (3,363 ) (211 ) (3,574 ) Cash and cash equivalents, at beginning of the year - 3,813 578 - 4,391 Cash and cash equivalents, at end of the year $ - $ 450 $ 367 - $ 817 27 For the year ended December 31, 2022 The Company Consolidated Subsidiaries Consolidated VIE Elimination Consolidation US$ US$ US$ US$ US$ Net cash (used in)/provided by operating activities (481 ) (2,781 ) 73 - (3,189 ) Net cash provided by/(used in) investing activities 481 198 12 (139 ) 552 Net cash (used in)/provided by financing activities - (481 ) 342 139 - Effect of exchange rate fluctuation - (115 ) (30 ) (145 ) Net (decrease)/increase in cash and cash equivalents - (3,179 ) 397 (2,782 ) Cash and cash equivalents, at beginning of the year - 6,992 181 - 7,173 Cash and cash equivalents, at end of the year $ - $ 3,813 $ 578 - $ 4,391 Risks Associated With Doing Business In China There are substantial risks associated with doing business in China, as set forth in the following risk factors.
(664 ) (4,063 ) (1,247 ) - (5,974 ) 28 For the year ended December 31, 2024 The Company Consolidated Subsidiaries Consolidated VIE Elimination Consolidation US$ US$ US$ US$ US$ Net cash (used in)/provided by operating activities (598 ) (1,070 ) (390 ) - (2,058 ) Net cash provided by/(used in) investing activities (477 ) 916 (2 ) 458 895 Net cash (used in)/provided by financing activities 1,075 477 51 (458 ) 1,145 Effect of exchange rate fluctuation - 15 (2 ) - 13 Net (decrease)/increase in cash and cash equivalents - 338 (343 ) (5 ) Cash and cash equivalents, at beginning of the year - 450 367 - 817 Cash and cash equivalents, at end of the year $ - $ 788 $ 24 - $ 812 For the year ended December 31, 2023 The Company Consolidated Subsidiaries Consolidated VIE Elimination Consolidation US$ US$ US$ US$ US$ Net cash (used in)/provided by operating activities (787 ) (603 ) (622 ) - (2,012 ) Net cash provided by/(used in) investing activities 787 (1,956 ) (135 ) (233 ) (1,537 ) Net cash (used in)/provided by financing activities - (787 ) 554 233 - Effect of exchange rate fluctuation - (17 ) (8 ) - (25 ) Net (decrease)/increase in cash and cash equivalents - (3,363 ) (211 ) (3,574 ) Cash and cash equivalents, at beginning of the year - 3,813 578 - 4,391 Cash and cash equivalents, at end of the year $ - $ 450 $ 367 - $ 817 29 Risks Associated With Doing Business In China There are substantial risks associated with doing business in China, as set forth in the following risk factors.
In addition, one or more of our customers, partners, service providers or suppliers may experience financial distress, delayed or defaults on payment, file for bankruptcy protection, sharp diminishing of business, or suffer disruptions in their business due to the outbreak. 17 Although the COVID-19 outbreak had been largely under control within China, and the PRC government ended its three-year zero-COVID policy in late 2022 with most of the travel restrictions and quarantine requirements lifted accordingly, the severe and negative impact of COVID-19 from 2020 through 2022 made economic recovery challenging in 2023.
In addition, one or more of our customers, partners, service providers or suppliers may experience financial distress, delayed or defaults on payment, file for bankruptcy protection, sharp diminishing of business, or suffer disruptions in their business due to the outbreak. Our customers continue to face a challenging macroeconomic environment in their respective industries and in the general economy.
Removed
While revenues increased in 2023, our customers continue to face a challenging macroeconomic environment in their respective industries and in the general economy, in part due to the significant adverse impact of the COVID-19 pandemic.
Added
A decrease in the demand for advertising media in general, and for our advertising and marketing services in particular, would materially and adversely affect our ability to generate revenues, and have a material adverse effect on our financial condition and results of operations.
Removed
It may be difficult for you to evaluate its performance and prospects.
Added
We do not plan to initiate any ICO in China or any other jurisdictions.
Removed
These contractual arrangements may not be as effective in providing us with control over the PRC Operating Entities as direct ownership.

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Item 1C. Cybersecurity

Cybersecurity — threats and controls disclosure

82 edited+32 added−27 removed84 unchanged
We offer a variety channels of advertising and marketing services through this system, which primarily include distribution of the right to use search engine marketing services we purchased from key search engines, provision of online advertising placements services on our web portals, provision of ecommerce O2O advertising and marketing services as well as provision of other related value-added data and technical services to maximize market exposure and effectiveness for our clients.
We offer a variety channels of advertising and marketing services through this system, which primarily include distribution of the right to use search engine marketing services we purchased from key search engines, influencer marketing services, provision of online advertising placements services on our web portals, provision of ecommerce O2O advertising and marketing services as well as provision of other related value-added data and technical services to maximize market exposure and effectiveness for our clients.
For the year ended December 31, 2023, we did not transfer any cash to our operating subsidiaries. One of our subsidiaries paid US$0.79 million operating expenses in cash on behalf of us to the service providers, as a repayment of the shareholder loans provided by us to this subsidiary in previous years.
For the year ended December 31, 2023, we did not transfer any cash to our operating subsidiaries; however, one of our subsidiaries paid US$0.79 million operating expenses in cash on behalf of us to the service providers, as a repayment of the shareholder loans provided by us to this subsidiary in previous years.
Our company, as a SEC smaller reporting company, has adopted the amendments in this ASU from January 1, 2023. The adoption of this ASU did not have a material impact on our consolidated financial position and results of operations. 51 A.
Our company, as a SEC smaller reporting company, has adopted the amendments in this ASU from January 1, 2023. The adoption of this ASU did not have a material impact on our consolidated financial position and results of operations.
The current interest rate is 12% per annum for the loan; (2) we received an aggregate of US$0.17 million repayments of short-term loan principals, of which US$0.1 million was related to a loan provided in fiscal 2021 and US$0.7 million in loan interest income; (3) investment and advances to ownership investee entities of US$0.06 million; (4) proceeds from the disposal of subsidiaries and investee entities in aggregate of US$0.43 million; (5) made payments for leasehold improvements and the purchase of vehicles, furniture and office equipment for US$0.08 million.
The current interest rate is 12% per annum for the loan; (2) we received an aggregate of US$0.17 million repayments of short-term loan principals, of which US$0.1 million was related to a loan provided in fiscal 2021 and US$0.07 million in loan interest income; (3) investment and advances to ownership investee entities of US$0.06 million; (4) proceeds from the disposal of subsidiaries and investee entities in aggregate of US$0.43 million; (5) made payments for leasehold improvements and the purchase of vehicles, furniture and office equipment for US$0.08 million.
If at any time the VIE agreements and the related fee structure between the consolidated VIEs and our WFOE is determined to be non-substantive and disallowed by Chinese tax authorities, the consolidated VIEs could, as a matter of last resort, make a non-deductible transfer to our WFOE for the amounts owed under the VIE agreements.
If at any time the VIE agreements and the related fee structure between the consolidated VIEs and our Rise King WFOE is determined to be non-substantive and disallowed by Chinese tax authorities, the consolidated VIEs could, as a matter of last resort, make a non-deductible transfer to our WFOE for the amounts owed under the VIE agreements.
This would result in such transfer being non-deductible expenses for the consolidated VIEs but still taxable income for our WFOE. If this happens, it may increase our tax burden and reduce our after-tax income in the PRC, and may materially and adversely affect our ability to make distributions to the holding company.
This would result in such transfer being non-deductible expenses for the consolidated VIEs but still taxable income for our Rise King WFOE. If this happens, it may increase our tax burden and reduce our after-tax income in the PRC, and may materially and adversely affect our ability to make distributions to the holding company.
Cash Flow Analysis for the Years Ended December 31, 2023 and 2022 Cash and cash equivalents represent cash on hand and deposits held at call with banks. We consider all highly liquid investments with original maturities of three months or less at the time of purchase to be cash equivalents.
Cash Flow Analysis for the Years Ended December 31, 2024 and 2023 Cash and cash equivalents represent cash on hand and deposits held at call with banks. We consider all highly liquid investments with original maturities of three months or less at the time of purchase to be cash equivalents.
In June 2023, we obtained a 9.9% equity interest in Wuhan Ju Liang, through subscription of a RMB0.99 million (approximately US$0.14 million) registered capital of the entity in cash, which mount was committed to be paid up before August 1, 2052.
In June 2023, we obtained a 9.9% equity interest in Wuhan Ju Liang, through subscription of a RMB0.99 million (approximately US$0.14 million) registered capital of the entity in cash, which amount was committed to be paid up before August 1, 2052.
We considered the policies discussed below to be critical to an understanding of our financial statements. 49 Foreign currency translation and transactions We conduct substantially all of our operations through our PRC operating subsidiaries and VIEs, PRC is the primary economic environment in which we operate.
We considered the policies discussed below to be critical to an understanding of our financial statements. 51 Foreign currency translation and transactions We conduct substantially all of our operations through our PRC operating subsidiaries and VIEs, PRC is the primary economic environment in which we operate.
Off-Balance Sheet Arrangements None. D. Disclosure of Contractual Obligations In August 2022, we obtained a 9.9% equity interest in Guangdong Yong Fu Xiang Health Management Co., Ltd (“Yong Fu Xiang”), through subscription of a RMB6.73 million (approximately US$0.97 million) registered capital of the entity in cash, which amount was committed to be paid up before December 31, 2065.
Off-Balance Sheet Arrangements None. 63 D. Disclosure of Contractual Obligations In August 2022, we obtained a 9.9% equity interest in Hunan Yong Fu Xiang Health Management Co., Ltd (“Yong Fu Xiang”), through subscription of a RMB6.73 million (approximately US$0.97 million) registered capital of the entity in cash, which amount was committed to be paid up before December 31, 2065.
RESULTS OF OPERATIONS FOR THE YEARS ENDED DECEMBER 31, 2023 AND 2022 The following table sets forth a summary, for the periods indicated, of our consolidated results of operations. Our historical results presented below are not necessarily indicative of the results that may be expected for any future period.
RESULTS OF OPERATIONS FOR THE YEARS ENDED DECEMBER 31, 2024 AND 2023 The following table sets forth a summary, for the periods indicated, of our consolidated results of operations. Our historical results presented below are not necessarily indicative of the results that may be expected for any future period.
(2) the receipt of cash from operations from changes in operating assets and liabilities, such as: - prepayment and deposit to suppliers decreased by approximately US$0.04 million, primarily due to utilization of the prepayment made to suppliers as of December 31, 2022 through Ad resource and other services received from suppliers during fiscal 2023; - accounts receivable decreased by approximately US$0.59 million; - advances from customers increased by approximately US$0.12 million, due to advances from customers during the year; and - other current assets decreased by approximately US$0.003 million.
(5) the receipt of cash from operations from changes in operating assets and liabilities, such as: - prepayment and deposit to suppliers decreased by approximately US$0.04 million, primarily due to utilization of the prepayment made to suppliers as of December 31, 2022 through Ad resource and other services received from suppliers during fiscal 2023; 61 - accounts receivable decreased by approximately US$0.59 million; - advances from customers increased by approximately US$0.12 million, due to advances from customers during the year; and - other current assets decreased by approximately US$0.003 million.
Net cash provided by/(used in) investing activities: For the year ended December 31, 2023, our cash provided by investing activities included the following transactions: (1) we provided short-term loans of US$2 million in the aggregate to one unrelated party during the year.
For the year ended December 31, 2023, our cash provided by investing activities included the following transactions: (1) we provided short-term loans of US$2 million in the aggregate to one unrelated party during the year.
The increase in our total cost of revenues for the year ended December 31, 2023 was primarily due to the increase in costs associated with the distribution of the right to use search engine marketing service we purchased from key search engines, which was in line with the increase in the related revenues as discussed in the revenues section above. ● Costs for Internet advertising and data service primarily consist of cost of internet traffic flow and technical services we purchased from other portals and technical suppliers for obtaining effective sales lead generation to promote business opportunity advertisements placed on our own ad portals.
The decrease in our total cost of revenues for the year ended December 31, 2024 was primarily due to the decrease in costs associated with the distribution of the right to use search engine marketing service we purchased from key search engines, which was in line with the decrease in the related revenues as discussed in the revenues section above. ● Costs for Internet advertising and data service primarily consist of cost of internet traffic flow and technical services we purchased from other portals and technical suppliers for obtaining effective sales lead generation to promote business opportunity advertisements placed on our own ad portals.
Interest income: For the year ended December 31, 2023, we recognized an approximately US$0.3 million interest income, which was primarily related to the interest we earned from the short-term loans we provided to unrelated parties during the year.
Interest income: For the year ended December 31, 2024, we recognized an approximately US$0.3 million interest income, which was primarily related to the interest we earned from the short-term loans we provided to unrelated parties during the year.
If we ever determine to pay a dividend, we may experience difficulties in completing the administrative procedures necessary to obtain and remit foreign currency from China for the payment of such dividends from the profits of our PRC subsidiaries and VIEs. Securities Authorized for Issuance Under Equity Compensation Plans See “Item 11.
If we ever determine to pay a dividend, we may experience difficulties in completing the administrative procedures necessary to obtain and remit foreign currency from China for the payment of such dividends from the profits of our PRC subsidiaries and VIEs. 48 Securities Authorized for Issuance Under Equity Compensation Plans See “Item 12.
Recent Sales of Unregistered Securities Any previous sales of unregistered securities by the Company have been previously disclosed in our reports on Form 10-Q or Form 8-K, as applicable, filed with the SEC.
Unregistered Sales of Equity Securities Any previous sales of unregistered securities by the Company have been previously disclosed in our reports on Form 10-Q or Form 8-K, as applicable, filed with the SEC.
Our cost of revenues primarily consists of search engine marketing resources purchased from key search engines, cost of outdoor advertising resources, amortization of software platform development cost and other direct costs associated with providing our services.
Our cost of revenues primarily consists of search engine marketing resources purchased from key search engines, influencer agency costs, cost of outdoor advertising resources, amortization of software platform development cost and other direct costs associated with providing our services.
This could affect our ability to obtain foreign currency through debt or equity financing for our PRC subsidiaries. To date, the VIEs have settled to our WFOE the amount owed under the VIE agreements of RMB15.25 million (approximately US$2.27 million) in the aggregate.
This could affect our ability to obtain foreign currency through debt or equity financing for our PRC subsidiaries. 59 To date, the VIEs have settled to our Rise King WFOE the amount owed under the VIE agreements of RMB15.25 million (approximately US$2.27 million) in the aggregate.
In accordance with these PRC laws and regulations, our PRC subsidiaries, the consolidated VIEs and their subsidiaries are restricted in their ability to transfer a portion of their net assets to us. As of December 31, 2023 and 2022, net assets restricted in the aggregate, were approximately US$13.41 million and US$13.31 million, respectively.
In accordance with these PRC laws and regulations, our PRC subsidiaries, the consolidated VIEs and their subsidiaries are restricted in their ability to transfer a portion of their net assets to us. As of December 31, 2024 and 2023, net assets restricted in the aggregate, were approximately US$13.23 million and US$13.41 million, respectively.
The exchange rates used to translate amounts in Renminbi (“RMB”), the functional currency of the PRC, into our reporting currency, the United States Dollar (“U.S. dollar” or “US$”) for the purposes of preparing our consolidated financial statements are as follows: As of December 31, 2023 2022 Balance sheet items, except for equity accounts 7.0827 6.9646 Year Ended December 31, 2023 2022 Items in the statements of operations and comprehensive loss 7.0467 6.7261 Impairment of long-lived assets In accordance with ASC 360-10-35, long-lived assets, which include tangible long-lived assets and intangible long-lived assets, are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable.
The exchange rates used to translate amounts in Renminbi (“RMB”), the functional currency of the PRC, into our reporting currency, the United States Dollar (“U.S. dollar” or “US$”) for the purposes of preparing our consolidated financial statements are as follows: As of December 31, 2024 2023 Balance sheet items, except for equity accounts 7.1884 7.0827 Year Ended December 31, 2024 2023 Items in the statements of operations and comprehensive loss 7.1217 7.0467 Impairment of long-lived assets In accordance with ASC 360-10-35, long-lived assets, which include tangible long-lived assets and intangible long-lived assets, are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable.
Below table summarized the above cash transfers within our organization included in the cash flows statements of our Condensed Consolidating Schedules for the years ended December 31, 2023 and 2022, respectively, on page 28 under Risk Factors-Risks Relating to Regulation of Our Business and to Our Structure contained in Item 1A of this Annual Report: For the year ended December 31, 2023 The Company Consolidated Subsidiaries Consolidated VIEs Total US$’000 US$’000 US$’000 US$’000 Net cash transferred from/(to) companies within the organization presented as cash provided by/(used in) investing activities 787 (554 ) 233 Net cash transferred (to)/from companies within the organization presented as cash (used in)/provided by financing activities (787 ) 554 (233 ) 56 For the year ended December 31, 2022 The Company Consolidated Subsidiaries Consolidated VIEs Total US$’000 US$’000 US$’000 US$’000 Net cash transferred from/(to) companies within the organization presented as cash provided by/(used in) investing activities 481 (342 ) 139 Net cash transferred (to)/from companies within the organization presented as cash (used in)/provided by financing activities (481 ) 342 (139 ) As we conduct our operations primarily in China through our PRC subsidiaries, VIEs and their subsidiaries, and we intend to transfer most of our cash raised from the U.S. stock market to these operating entities to support their operations and expansions, our ability to pay dividends to U.S. investors may depend on receiving distributions from our PRC subsidiaries and settlement of the amounts owed under the VIE agreements from the consolidated VIEs.
Below table summarized the above cash transfers within our organization included in the cash flows statements of our Condensed Consolidating Schedules for the years ended December 31, 2024 and 2023, respectively, on page 28 under Risk Factors-Risks Relating to Regulation of Our Business and to Our Structure contained in Item 1A of this Annual Report: For the year ended December 31, 2024 The Company Consolidated Subsidiaries Consolidated VIEs Total US$’000 US$’000 US$’000 US$’000 Net cash transferred from/(to) companies within the organization presented as cash provided by/(used in) investing activities (477 ) 19 (458 ) Net cash transferred (to)/from companies within the organization presented as cash (used in)/provided by financing activities 477 (19 ) 458 For the year ended December 31, 2023 The Company Consolidated Subsidiaries Consolidated VIEs Total US$’000 US$’000 US$’000 US$’000 Net cash transferred from/(to) companies within the organization presented as cash provided by/(used in) investing activities 787 (554 ) 233 Net cash transferred (to)/from companies within the organization presented as cash (used in)/provided by financing activities (787 ) 554 (233 ) 58 As we conduct our operations primarily in China through our PRC subsidiaries, VIEs and their subsidiaries, and we intend to transfer most of our cash raised from the U.S. stock market to these operating entities to support their operations and expansions, our ability to pay dividends to U.S. investors may depend on receiving distributions from our PRC subsidiaries and settlement of the amounts owed under the VIE agreements from the consolidated VIEs.
When the Reverse Stock Split became effective, each five shares of issued and outstanding Common Stock were automatically converted into one newly issued and outstanding share of Common Stock. No fractional shares were issued in connection with the Reverse Stock Split.
When the Reverse Stock Split became effective, each four shares of issued and outstanding Common Stock were converted into one newly issued and outstanding share of Common Stock. No fractional shares were issued in connection with the Reverse Stock Split.
In the aggregate, these transactions resulted in a net cash outflow provided by investing activities of approximately US$1.54 million for the year ended December 31, 2023.
In aggregate, these transactions resulted in a net cash outflow used in investing activities of approximately US$1.54 million for the year ended December 31, 2023.
The gross margin rate of this business category for the years ended December 31, 2023 and 2022 was 17% and 10%, respectively. ● Costs for distribution of the right to use search engine marketing service was direct search engine resource consumed for the right to use search engine marketing service that we purchased from key search engines and distributed to our customers.
The gross margin rate of this business category for the years ended December 31, 2024 and 2023 was 9.8% and 17.1%, respectively. ● Costs for distribution of the right to use search engine marketing service was direct search engine resource consumed for the right to use search engine marketing service that we purchased from key search engines and distributed to our customers.
Loss from operations: As a result of the foregoing, we incurred a net loss from operations of approximately US$6.01 million and US$11.12 million for the years ended December 31, 2023 and 2022, respectively. Change in fair value of warrant liabilities: We issued warrants in financing activities.
Loss from operations: As a result of the foregoing, we incurred a net loss from operations of approximately US$3.76 million and US$6.01 million for the years ended December 31, 2024 and 2023, respectively. Change in fair value of warrant liabilities: We issued warrants in financing activities.
As a result of a share exchange transaction we consummated with China Net BVI in June 2009, we are now a holding company, which through certain contractual arrangements with operating companies in the PRC, is engaged in providing Internet advertising, precision marketing, blockchain-based SaaS services and ecommerce O2O advertising and marketing services and the related data and technical services to SMEs in the PRC.
As a result of a share exchange transaction we consummated with China Net BVI in June 2009, we are now a holding company, which through certain contractual arrangements with operating companies in the PRC, is primarily engaged in providing Internet advertising, precision marketing, blockchain-based SaaS services and e-commerce online to offline (“O2O”) advertising and marketing and the related data and technical services to SMEs in the PRC.
Due to certain aspects of our business nature, the fluctuation of our sales and marketing expenses usually does not have a direct linear relationship with the fluctuation of our net revenues. 54 ● General and administrative expenses: Our general and administrative expenses were approximately US$4.06 million and US$8.3 million for the years ended December 31, 2023 and 2022, respectively.
Due to certain aspects of our business nature, the fluctuation of our sales and marketing expenses usually does not have a direct linear relationship with the fluctuation of our net revenues. 56 ● General and administrative expenses: Our general and administrative expenses were approximately US$4.0 million and US$4.06 million for the years ended December 31, 2024 and 2023, respectively.
For the year ended December 31, 2022, we recognized a total deferred income tax expense of US$0.003 million in relation to the net operating loss incurred by one of our operating VIEs, which we consider likely to be utilized with future earnings of this entity Net loss: As a result of the foregoing, for the years ended December 31, 2023 and 2022, we incurred a net loss of approximately US$5.97 million and US$9.79 million, respectively.
For the year ended December 31, 2023, we recognized a total deferred income tax benefit of US$0.002 million in relation to the net operating loss incurred by one of our operating VIEs, which we consider likely to be utilized with future earnings of this entity Net loss: As a result of the foregoing, for the years ended December 31, 2024 and 2023, we incurred a net loss of approximately US$3.77 million and US$5.97 million, respectively.
Equity Repurchases During the fourth quarter of our fiscal year ended December 31, 2023, neither we nor any “affiliated purchaser” (as defined in Rule 10b-18(a)(3) under the Exchange Act) purchased any shares of our Common Stock, the only class of our equity securities registered pursuant to Section 12 of the Exchange Act.
Purchases of Equity Securities by the Issuer and Affiliated Purchasers During the fourth quarter of our fiscal year ended December 31, 2024, neither we nor any “affiliated purchaser” (as defined in Rule 10b-18(a)(3) under the Exchange Act) purchased any shares of our Common Stock, the only class of our equity securities registered pursuant to Section 12 of the Exchange Act.
As a result, the number of shares of our authorized Common Stock was reduced from 100,000,000 shares to 20,000,000 shares and the issued and outstanding number of shares of the Common Stock was correspondingly decreased. The Reverse Stock Split has no effect on the par value of our Common Stock or authorized shares of preferred stock.
As a result, the number of shares of the Company’s authorized Common Stock was reduced from 50,000,000 shares to 12,500,000 shares and the issued and outstanding number of shares of the Common Stock was correspondingly decreased. The Reverse Stock Split has no effect on the par value of the Company’s Common Stock or authorized shares of preferred stock.
Impairment on long-term investments: For the year ended December 31, 2023, we recognized an approximately US$0.43 million impairment loss on long-term investments, which was related to the following: 1) our cash investments in our unconsolidated investee entities whose business activities had become dormant as of the end of fiscal 2023 and 2) the reduced valuation of our equity interest in one of our unconsolidated investee entities as of the end of fiscal 2023.
Impairment on long-term investments: For the year ended December 31, 2024, we recognized an approximately US$0.002 million impairment loss on long-term investments, which was related to the following: 1) our cash investments in our unconsolidated investee entities whose business activities had become dormant as of the end of fiscal 2024.
ITEM 4 MINE SAFETY DISCLOSURES Not applicable . PART II. ITEM 5 MARKET FOR REGISTRANT ’ S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES Our Common Stock has been listed on the Nasdaq Capital Market under the symbol “CNET” since October 29, 2013.
ITEM 5 MARKET FOR REGISTRANT ’ S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES Market Information Our Common Stock has been listed on the Nasdaq Capital Market under the symbol “CNET” since October 29, 2013.
For NFT generation service provided through our BIF platform, revenues are recognized based on a fixed price per NFT generation, when a NFT is generated, delivered and accepted by customers (“point in time”).
Revenues related to our influencer marketing services are recognized based on when the marketing service is completed and accepted by our clients. For NFT generation service provided through our BIF platform, revenues are recognized based on a fixed price per NFT generation, when a NFT is generated, delivered and accepted by customers (“point in time”).
Net loss attributable to ZW Data Action Technologies Inc.: Net loss attributable to ZW Data Action Technologies Inc. was approximately US$5.97 million and US$9.79 million for the years ended December 31, 2023 and 2022, respectively. B.
Net loss attributable to ZW Data Action Technologies Inc.: Net loss attributable to ZW Data Action Technologies Inc. was approximately US$3.76 million and US$5.97 million for the years ended December 31, 2024 and 2023, respectively. 57 B.
As of December 31, 2023, we had cash and cash equivalents of approximately US$0.82 million.
As of December 31, 2024, we had cash and cash equivalents of approximately US$0.81 million.
(6) offset by the use from operations from changes in operating assets and liabilities, such as: - accounts payable decreased by approximately US$0.85 million, primarily due to settlement of the amount due to a major internet Ad resource provider as of December 31, 2021 during the year; - accounts receivable increased by approximately US$0.28 million; - advance from customers decreased by approximately US$0.42 million; - operating lease liabilities and lease liabilities related to short-term leases decreased by approximately US$0.34 million in the aggregate, due to payment for our office lease costs during the year; and - taxes payable decreased by approximately US$0.01 million.
(6) offset by the use from operations from changes in operating assets and liabilities, such as: - accounts payable decreased by approximately US$0.001 million, primarily due to settlement of the amount due to a major internet Ad resource provider as of December 31, 2022 during the year; - Other current liabilities and accruals in aggregate decreased by approximately US$0.26 million; - operating lease liabilities and lease liabilities related to short-term leases decreased by approximately US$0.34 million in the aggregate, due to payment for our office lease costs during the year; and - taxes payable decreased by approximately US$0.004 million.
Gross margin rate of this service for the year ended December 31, 2023 was -1,021% compared to 21% last year. This decrease in gross margin was related to the slower than expected demand in the sales of our blockchain-based SaaS service in 2023 in conjunction with the amortized development cost of our blockchain-based SaaS service.
Gross margin rate of this service for the year ended December 31, 2023 was -12.1% compared to -1,021% last year. This increase in gross margin was related to the improved sales of our blockchain-based SaaS service in 2024 in conjunction with the amortized development cost of our blockchain-based SaaS service.
Readers are cautioned not to place undue reliance on these forward-looking statements. 47 The Public Company Accounting Oversight Board (the “ PCAOB ” ) had historically been unable to inspect our auditor in relation to their audit work performed for our financial statements and the inability of the PCAOB to conduct inspections over our auditor has deprived our investors with the benefits of such inspections.
The Public Company Accounting Oversight Board (the “ PCAOB ” ) had historically been unable to inspect our auditor in relation to their audit work performed for our financial statements and the inability of the PCAOB to conduct inspections over our auditor has deprived our investors with the benefits of such inspections.
In the aggregate, these transactions resulted in a net cash inflow provided by investing activities of approximately US$0.55 million for the year ended December 31, 2022. 60 Net cash provided by financing activities: For the year ended December 31, 2023, no cash was provided by or used in financing activities.
In aggregate, these transactions resulted in net cash inflow of provided by financing activities of approximately US$1.15 million for the year ended December 31, 2024. For the year ended December 31, 2023, no cash was provided by or used in financing activities.
Dividends We have never paid any dividends on our Common Stock and we plan to retain earnings, if any, for use in the development and growth of our business.
Holders As of April 15, 2025, there were 607 record holders of our Common Stock. Dividends We have never paid any dividends on our Common Stock and we plan to retain earnings, if any, for use in the development and growth of our business.
For the year ended December 31, 2023, the decrease in our research and development expenses was primarily due to a reduction in headcount in our research and development department, compared with last year. ● Impairment on intangible assets: For the year ended December 31, 2023, we recorded approximately US$1.23 million impairment loss associated with our intangible assets, due to insufficient estimated future cash flows expected to be generated by these assets.
For the year ended December 31, 2024, the decrease in our research and development expenses was primarily due to a reduction in headcount in our research and development department, compared with last year. ● Impairment on intangible assets: For the year ended December 31, 2024 and 2023, we recorded nil and US$1.23 million in impairment loss associated with our intangible assets, respectively.
The decrease primarily resulted from the Company’s shifting of its focus towards business segments that offer higher growth opportunities. ● Revenue generated from distribution of the right to use search engine marketing service for the year ended December 31, 2023 was approximately US$30.06 million, compared with approximately US$22.26 million for the year ended December 31, 2022.
The increase is primarily resulted from the Company’s shifting of its focus towards business segments that offer higher margins which includes influencer marketing. ● Revenue generated from distribution of the right to use search engine marketing service for the year ended December 31, 2024 was approximately US$9.91 million, compared with approximately US$30.06 million for the year ended December 31, 2023.
As the implicit rates of our leases cannot be readily determined, in accordance with ASC Topic 842-20-30-3, we then use our incremental borrowing rate as the discount rate to determine the present value of our lease payments for each of our lease contracts with a duration of over twelve months.
Instead, we recognized the lease payments of these short-term leases in our consolidated statements of operations and comprehensive loss on a straight-line basis over the lease term. 52 As the implicit rates of our leases cannot be readily determined, in accordance with ASC Topic 842-20-30-3, we then use our incremental borrowing rate as the discount rate to determine the present value of our lease payments for each of our lease contracts with a duration of over twelve months.
The following tables set forth our operating expenses, divided into their major categories by amount and as a percentage of our total revenues for the periods indicated.
Operating Expenses Our operating expenses consist of sales and marketing expenses, general and administrative expenses, research and development expenses and impairment on intangible assets. The following tables set forth our operating expenses, divided into their major categories by amount and as a percentage of our total revenues for the periods indicated.
We cannot assure you that our auditor will not be determined as a register public accounting firm that the PCAOB is unable to inspect or investigate completely for two consecutive years because of positions taken by the Chinese authorities and/or any other causes in the future.
Should the PRC authorities obstruct the PCAOB’s access to inspect or investigate completely in any way and at any point, the PCAOB will act immediately to consider the need to issue new determinations consistent with the HFCAA. 50 We cannot assure you that our auditor will not be determined as a register public accounting firm that the PCAOB is unable to inspect or investigate completely for two consecutive years because of positions taken by the Chinese authorities and/or any other causes in the future.
Any fractional shares of Common Stock that would have otherwise resulted from the Reverse Stock Split were rounded up to the nearest full share.
Any fractional shares of Common Stock that would have otherwise resulted from the Reverse Stock Split were rounded up to the nearest full share. No cash or other consideration was paid in connection with any fractional shares that would otherwise have resulted from the Reverse Stock Split.
For the year ended December 31, 2023, our total cost of revenues for distribution of the right to use search engine marketing service increased to US$29.81 million, compared with US$22.89 million for last year. Gross margin rate of this service for the year ended December 31, 2023 was 1%, compared with -3% last year.
For the year ended December 31, 2024, our total cost of revenues for distribution of the right to use search engine marketing service increased to US$9.84 million, compared with US$29.81 million for last year.
If China Net HK is not considered to be the “beneficial owner” of the dividends by the Chinese local tax authority, any dividends paid to it by our PRC subsidiaries would be subject to a withholding tax rate of 10%. 57 There are no restrictions for the consolidated VIEs to settle the amounts owed under the VIE agreements to our WFOE.
If China Net HK is not considered to be the “beneficial owner” of the dividends by the Chinese local tax authority, any dividends paid to it by our PRC subsidiaries would be subject to a withholding tax rate of 10%.
The following table sets forth our cost of revenues, disaggregated by type of services, by amount and gross profit ratio for the periods indicated, with inter-company transactions eliminated: Year Ended December 31, 2023 2022 (Amounts expressed in thousands of US dollars, except percentages) Revenue Cost GP ratio Revenue Cost GP ratio -Internet advertising and related data service $ 450 373 17 % $ 3,548 3,199 10 % -Distribution of the right to use search engine marketing service 30,060 29,807 1 % 22,262 22,894 -3 % Internet advertising and related services 30,510 30,180 1 % 25,810 26,093 -1 % Blockchain-based SaaS services 75 841 -1,021 % 425 336 21 % Total $ 30,585 $ 31,021 -1.4 % $ 26,235 $ 26,429 -1 % Cost of revenues: our total cost of revenues increased to approximately US$31.02 million for the year ended December 31, 2023, compared with US$26.43 million for the year ended December 31, 2022.
The following table sets forth our cost of revenues, disaggregated by type of services, by amount and gross profit ratio for the periods indicated, with inter-company transactions eliminated: Year Ended December 31, 2024 2023 (Amounts expressed in thousands of US dollars, except percentages) Revenue Cost GP ratio Revenue Cost GP ratio -Internet advertising and related data service $ 4,780 4,310 9.8 % $ 450 373 17.1 % -Distribution of the right to use search engine marketing service 9,909 9,842 0.7 % 30,060 29,807 0.8 % Internet advertising and related services 14,689 14,152 3.7 % 30,510 30,180 1.1 % Blockchain-based SaaS services 750 841 -12.1 % 75 841 -1,021.3 % Total $ 15,439 $ 14,993 2.9 % $ 30,585 $ 31,021 -1.4 % Cost of revenues: our total cost of revenues decreased to approximately US$14.99 million for the year ended December 31, 2024, compared with US$31.02 million for the year ended December 31, 2023.
This included sending a team of PCAOB staff to conduct on-site inspections and investigations in Hong Kong over a nine-week period from September to November 2022. 48 On December 15, 2022, the PCAOB issued its 2022 HFCAA Determination Report to notify the SEC of its determination that the PCAOB was able to secure complete access to inspect and investigate PCAOB-registered public accounting firms headquartered in China mainland and Hong Kong completely in 2022.
On December 15, 2022, the PCAOB issued its 2022 HFCAA Determination Report to notify the SEC of its determination that the PCAOB was able to secure complete access to inspect and investigate PCAOB-registered public accounting firms headquartered in China mainland and Hong Kong completely in 2022.
Year Ended December 31, 2023 2022 (Amounts expressed in thousands of US dollars, except percentages) Amount Percentage of total revenue Amount Percentage of total revenue Total Revenues $ 30,585 100 % $ 26,235 100 % Gross (loss)/profit (436 ) -1 % (194 ) -1 % Sales and marketing expenses 267 1 % 269 1 % General and administrative expenses 4,061 13 % 8,304 32 % Research and development expenses 17 0.05 % 229 1 % Impairment on intangible assets 1,231 4 % 2,123 8 % Total operating expenses 5,576 18 % 10,925 42 % Operating Expenses: Our operating expenses were approximately US$5.58 million and US$10.93 million for the years ended December 31, 2023 and 2022, respectively. ● Sales and marketing expenses: For the year ended December 31, 2023, our sales and marketing expenses was approximately US$0.27 million, which remained approximately the same as the previous year.
Year Ended December 31, 2024 2023 (Amounts expressed in thousands of US dollars, except percentages) Amount Percentage of total revenue Amount Percentage of total revenue Total Revenues $ 15,439 100 % $ 30,585 100 % Gross (loss)/profit 446 2.9 % (436 ) -1 % Sales and marketing expenses 207 1.3 % 267 0.9 % General and administrative expenses 3,996 25.9 % 4,061 13.3 % Research and development expenses - - 17 0.1 % Impairment on intangible assets - - 1,231 4 % Total operating expenses 4,203 27.2 % 5,576 18.2 % Operating Expenses: Our operating expenses were approximately US$4.20 million and US$5.58 million for the years ended December 31, 2024 and 2023, respectively. ● Sales and marketing expenses: For the year ended December 31, 2024, our sales and marketing expenses was approximately US$0.21 million, compared to approximately US$0.27 million in the previous year.
Although revenue and profitability of our new SaaS services have not met expectations, it still brings the Company positive cashflow, as these services provided are based on technologies of our self-developed software platform, which does not require further material cash outflow to other third-party service providers.
Although revenues from the new SaaS services business and its profitability have not met our expectations, it is expected to bring us positive cash flow and help to improve our liquidity, as these services are provided based on technologies of our self-developed software platform, which does not need any further material cash outflow to other third-party service providers.
To date, we have financed our liquidity need primarily through proceeds we generated from financing activities. 58 The following table provides detailed information about our net cash flow for the periods indicated: Year Ended December 31, 2023 2022 Amounts in thousands of US dollars Net cash used in operating activities $ (2,012 ) $ (3,189 ) Net cash provided by/(used in) investing activities (1,537 ) 552 Net cash provided by financing activities - - Effect of exchange rate changes (25 ) (145 ) Net (decrease)/increase in cash and cash equivalents $ (3,574 ) $ (2,782 ) Net cash used in operating activities: For the year ended December 31, 2023, our net cash used in operating activities of approximately US$2.01 million were primarily attributable to: (1) net loss excluding approximately US$1.29 million of non-cash expenses of depreciation and amortizations; approximately US$0.36 million of amortization of operating lease right-of-use assets, approximately US$0.11 million of share-based compensation; approximately US$0.006 million in loss on disposal of fixed assets; approximately US$1.23 million in impairment on intangible assets; approximately US$0.19 million of gain from change in fair value of warrant liabilities; approximately US$1.03 million of allowance for doubtful accounts; approximately US$0.43 million of impairment on long-term investments; approximately US$0.002 million of deferred tax benefit; approximately US$0.14 million in effects of termination of an operating lease contract; approximately US$0.01 million in gain on disposal of subsidiaries; and approximately US$0.30 million of non-operating income, yielded the non-cash, non-operating items excluded net loss of approximately US$2.15 million.
For the year ended December 31, 2023, our net cash used in operating activities of approximately US$2.01 million were primarily attributable to: (4) net loss excluding approximately US$1.29 million of non-cash expenses of depreciation and amortizations; approximately US$0.36 million of amortization of operating lease right-of-use assets, approximately US$0.11 million of share-based compensation; approximately US$0.006 million in loss on disposal of fixed assets; approximately US$1.23 million in impairment on intangible assets; approximately US$0.19 million of gain from change in fair value of warrant liabilities; approximately US$1.03 million of allowance for doubtful accounts; approximately US$0.43 million of impairment on long-term investments; approximately US$0.002 million of deferred tax benefit; approximately US$0.14 million in effects of termination of an operating lease contract; approximately US$0.01 million in gain on disposal of subsidiaries; and approximately US$0.30 million of non-operating income, yielded the non-cash, non-operating items excluded net loss of approximately US$2.15 million.
However, the inability of the PCAOB to conduct inspections of auditors in Hong Kong in the past made it more difficult to evaluate the effectiveness of our independent registered public accounting firm’s audit procedures or quality control procedures as compared to auditors outside of China mainland and Hong Kong that have been subject to the PCAOB inspections, which could cause investors and potential investors in our securities to lose confidence in our audit procedures and reported financial information and the quality of our financial statements.
However, the inability of the PCAOB to conduct inspections of auditors in Hong Kong in the past made it more difficult to evaluate the effectiveness of our independent registered public accounting firm’s audit procedures or quality control procedures as compared to auditors outside of China mainland and Hong Kong that have been subject to the PCAOB inspections, which could cause investors and potential investors in our securities to lose confidence in our audit procedures and reported financial information and the quality of our financial statements. 49 Our common stock may be delisted and prohibited from trading in the United States under the Holding Foreign Companies Accountable Act, or the HFCAA, as amended by the Accelerating Holding Foreign Companies Accountable Act, if the PCAOB is unable to inspect or investigate completely auditors located in China mainland and Hong Kong.
In evaluating our business, you should carefully consider the information set forth under the heading “ Risk Factors ” and elsewhere in this Form 10-K.
In evaluating our business, you should carefully consider the information set forth under the heading “ Risk Factors ” and elsewhere in this Form 10-K. Readers are cautioned not to place undue reliance on these forward-looking statements.
We have not experienced any difficulties in obtaining such credit facility before, and this could result in fixed obligations and incremental cost of interest; (3) in consideration of the long-term cooperation history and good track records with our major suppliers, we plan to negotiate with our suppliers for more favorable payment terms; and (4) we plan to reduce our operating costs through optimizing the personnel structure among different offices and reduce our office leasing spaces, if needed.
We have not experienced any difficulties in obtaining such credit facility before, and this could result in fixed obligations and incremental cost of interest; (3) equity financing for which we have already entered into securities purchase agreements; (4) we plan to reduce our operating costs through optimizing the personnel structure among different offices and reduce our office leasing spaces, if needed.
(5) the receipt of cash from operations from changes in operating assets and liabilities, such as: - prepayment and deposit to suppliers decreased by approximately US$1.65 million, primarily due to utilization of the prepayment made to suppliers as of December 31, 2021 through Ad resource and other services received from suppliers during fiscal 2022; - other current liabilities and accruals increased by approximately US$0.90 million in the aggregate, primarily due to delay paying these liabilities to improve the working capital status during the year; - due from related parties in relation to advertising services provided to related parties decreased by approximately US$0.06 million; and - other current assets decreased by approximately US$0.002 million.
(2) the receipt of cash from operations from changes in operating assets and liabilities, such as: - prepayment and deposit to suppliers decreased by approximately US$0.62 million, primarily due to utilization of the prepayment made to suppliers as of December 31, 2023 through Ad resource and other services received from suppliers during fiscal 2024; - other current liabilities and accruals increased by US$0.70 million; and - taxes payable increased by US$0.002 million.
Although revenues from the new SaaS services business and its profitability have not met our expectations, it is expected to bring us positive cash flow and help to improve our liquidity, as these services are provided based on technologies of our self-developed software platform, which does not need any further material cash outflow to other third-party service providers. 61 In addition, for the next 12 months from the date hereof, we anticipate to generate additional cash inflows and/or improve our liquidity through the following: (1) our short-term working capital loans provided to unrelated parties will mature within the next 12 months that we anticipate collecting these loan principals and the related interest income within the next 12 months; (2) if at any time we anticipate insufficiency of our working capital, we can apply for revolving credit facility from commercial banks in the PRC to supplement our short-term liquidity deficit.
In addition, for the next 12 months from the date hereof, we anticipate to generate additional cash inflows and/or improve our liquidity through the following: (1) our short-term working capital loans provided to unrelated parties will mature within the next 12 months that we anticipate collecting these loan principals and the related interest income within the next 12 months; (2) if at any time we anticipate insufficiency of our working capital, we can apply for revolving credit facility from commercial banks in the PRC to supplement our short-term liquidity deficit.
The property listed in Item 2 is the office for our subsidiaries and operating VIEs in Guangzhou, Guangdong province, and is primarily used by all of our business segments. We believe that our existing facilities and equipment are well maintained and in good operating condition and are sufficient to meet our needs for the foreseeable future.
The property listed in Item 2 is the office for our subsidiaries and operating VIEs in Guangzhou, Guangdong province, and is primarily used by all of our business segments.
Year Ended December 31, 2023 2022 US$ US$ Revenues $ 30,585 $ 26,235 Cost of revenues 31,021 26,429 Gross (loss)/profit (436 ) (194 ) Operating expenses Sales and marketing expenses 267 269 General and administrative expenses 4,061 8,304 Research and development expenses 17 229 Impairment on intangible assets 1,231 2,123 Total operating expenses 5,576 10,925 Loss from operations (6,012 ) (11,119 ) Other income (expenses) Change in fair value of warrant liabilities 185 1,854 Interest income 298 116 Impairment on long-term investments (433 ) (596 ) Gain on disposal of subsidiaries 10 - Other expense, net (24 ) (49 ) Total other income 36 1,325 Loss before income tax benefit/(expense) and noncontrolling interests (5,976 ) (9,794 ) Income tax benefit/(expense) 2 3 Net loss (5,974 ) (9,791 ) Net income attributable to noncontrolling interests - - Net loss attributable to ZW Data Action Technologies Inc. $ (5,974 ) $ (9,791 ) Loss per share Loss per common share Basic and diluted $ (0.83 ) $ (1.37 ) Weighted average number of common shares outstanding: Basic and diluted 7,194,890 7,136,290 REVENUES The following tables set forth a breakdown of our total revenues, disaggregated by type of services for the periods indicated, with inter-company transactions eliminated: Year Ended December 31, 2023 2022 Revenue type (Amounts expressed in thousands of US dollars, except percentages) -Internet advertising and related data service $ 450 1.5 % $ 3,548 13.5 % -Distribution of the right to use search engine marketing service 30,060 98.3 % 22,262 84.9 % Internet advertising and related services 30,510 99.8 % 25,810 98.4 % Blockchain-based SaaS services 75 0.2 % 425 1.6 % Total $ 30,585 100 % $ 26,235 100 % Total Revenues : Our total revenues increased to approximately US$30.59 million for the year ended December 31, 2023 from approximately US$26.24 million for the year ended December 31, 2022, which was primarily due to the increase in sales from our internet advertising and related services. 52 We derive the majority of our revenues from distribution of the right to use the search engine marketing (“SEM”) services, sale of advertising space on our internet ad portals, and provision of the related data and technical services, all of which management considers as one aggregate business operation and relies upon the consolidated results of all operations in this business unit to make decisions about allocating resources and evaluating performance. ● Internet advertising revenues for the year ended December 31, 2023 was approximately US$0.45 million, compared with approximately US$3.55 million for the year ended December 31, 2022.
Year Ended December 31, 2024 2023 US$ US$ Revenues $ 15,439 $ 30,585 Cost of revenues 14,993 31,021 Gross (loss)/profit 446 (436 ) Operating expenses Sales and marketing expenses 207 267 General and administrative expenses 3,996 4,061 Research and development expenses - 17 Impairment on intangible assets - 1,231 Total operating expenses 4,203 5,576 Loss from operations (3,757 ) (6,012 ) Other income (expenses) Change in fair value of warrant liabilities - 185 Interest income 298 298 Impairment on long-term investments (2 ) (433 ) Gain on disposal of subsidiaries 23 10 Other income/(expense,) net 68 (24 ) Total other income 387 36 Loss before income tax benefit/(expense) and noncontrolling interests (3,370 ) (5,976 ) Income tax benefit/(expense) (399 ) 2 Net loss (3,769 ) (5,974 ) Net loss attributable to noncontrolling interests 8 - Net loss attributable to ZW Data Action Technologies Inc. $ (3,761 ) $ (5,974 ) Loss per share Loss per common share Basic and diluted $ (1.86 ) $ (3.11 ) Weighted average number of common shares outstanding: Basic and diluted 2,021,492 1,923,801 53 REVENUES The following tables set forth a breakdown of our total revenues, disaggregated by type of services for the periods indicated, with inter-company transactions eliminated: Year Ended December 31, 2024 2023 Revenue type (Amounts expressed in thousands of US dollars, except percentages) -Internet advertising and related data service $ 4,780 31.0 % $ 450 1.5 % -Distribution of the right to use search engine marketing service 9,909 64.2 % 30,060 98.3 % Internet advertising and related services 14,689 95.2 % 30,510 99.8 % Blockchain-based SaaS services 750 4.8 % 75 0.2 % Total $ 15,439 100 % $ 30,585 100 % Total Revenues : Our total revenues decreased to approximately US$15.44 million for the year ended December 31, 2024 from approximately US$30.59 million for the year ended December 31, 2023, which was primarily due to the winding down of our distribution of the right to use search engine marketing service in the PRC but increases in higher margin internet advertising and related services such as influencer marketing.
From time to time, as appropriate under our overall cybersecurity program, we engage third-party experts to support the assessment of cyber related risks, including to conduct cyber penetration testing. 45 To its knowledge, the Company has not experienced a material cybersecurity breach within the last three years, nor identified any risks from cybersecurity threats that have materially affected us, including our business strategy, results of operations or financial condition.
To its knowledge, the Company has not experienced a material cybersecurity breach within the last three years, nor identified any risks from cybersecurity threats that have materially affected us, including our business strategy, results of operations or financial condition. ITEM 2 PROPERTIES The following table summarizes the location of real property we currently lease.
For the year ended December 31, 2023 and 2022, our total cost of revenues for Internet advertising and data service was approximately US$0.37 million and US$3.2 million, respectively.
Our costs also include the cost of operating our influencer marketing services which includes the fees for collaborating with various influencer agencies. For the year ended December 31, 2024 and 2023, our total cost of revenues for Internet advertising and data service was approximately US$4.31 million and US$0.37 million, respectively.
As an accounting policy, we elected not to recognize right-of-use asset and related lease liability to these short-term leases. Instead, we recognized the lease payments of these short-term leases in our consolidated statements of operations and comprehensive loss on a straight-line basis over the lease term.
As an accounting policy, we elected not to recognize right-of-use asset and related lease liability to these short-term leases.
We determined that these warrants should be accounted for as derivative liabilities, as the warrants are dominated in a currency (U.S. dollar) other than our functional currency (Renminbi or Yuan).
We determined that these warrants should be accounted for as derivative liabilities, as the warrants are dominated in a currency (U.S. dollar) other than our functional currency (Renminbi or Yuan). As a result, a gain of change in fair value of approximately nil and US$0.19 million was recorded in earnings for the years ended December 31, 2024 and 2023, respectively.
For the years ended December 31, 2023 and 2022, our operating subsidiaries transferred US$0.55 million and US$0.34 million cash to the consolidated VIEs in form of loans, respectively. Other than the cash transfers above, no other assets were transferred within our organization for the years ended December 31, 2023 and 2022.
Other than the cash transfers above, no other assets were transferred within our organization for the years ended December 31, 2024 and 2023.
ITEM 3 LEGAL PROCEEDINGS We are currently not a party to any legal or administrative proceedings and are not aware of any pending or threatened legal or administrative proceedings against us in all material aspects. We may from time to time become a party to various legal or administrative proceedings arising in the ordinary course of our business.
We may from time to time become a party to various legal or administrative proceedings arising in the ordinary course of our business. ITEM 4 MINE SAFETY DISCLOSURES Not applicable . PART II.
Except this, we do not have other material non-operational cash requirements within 12 months from the date hereof. Our current core business is to provide advertising and marketing services to small and medium enterprises (“SMEs”) in the PRC, which is particularly sensitive to changes in general economic conditions.
Our current core business is to provide advertising and marketing services to small and medium enterprises (“SMEs”), which is particularly sensitive to changes in general economic conditions.
Other than office spaces leases, we do not have any other contract that is or contains a lease under ASC Topic 842. 50 Our lease contracts do not contain any option for us to extend or terminate the lease, and do not contain the option for us to purchase the underlying assets.
Our lease contracts do not contain any option for us to extend or terminate the lease, and do not contain the option for us to purchase the underlying assets.
However, arrangements and transactions among affiliated entities may be subject to audit or challenge by the PRC tax authorities.
There are no restrictions for the consolidated VIEs to settle the amounts owed under the VIE agreements to our Rise King WFOE. However, arrangements and transactions among affiliated entities may be subject to audit or challenge by the PRC tax authorities.
This in turn improved the advertising investment budgets and advertising service demands of our SME clients which resulted in improved gross margins. 53 ● For the year ended December 31, 2023 and 2022, cost of our blockchain-based SaaS services was approximately US$0.84 million and US$0.34 million, respectively.
Gross margin rate of this service for the year ended December 31, 2024 was 0.7%, compared with 0.8% last year. ● For the year ended December 31, 2024 and 2023, cost of our blockchain-based SaaS services was approximately US$0.84 million and US$0.84 million, respectively.
For the year ended December 31, 2023, the changes in our general and administrative expenses were primarily due to the following factors: (1) a decrease in allowance for doubtful accounts of approximately US$1.4 million, attributable to the end of the COVID-19 quarantine requirements and travel restrictions, which significantly disrupted our business operations through 2022 and adversely impacted the liquidity of our SME clients, and (2) a decrease of approximately US$2.9 million in general departmental expenses. ● Research and development expenses: Our research and development expenses were approximately US$0.02 million and US$0.23 million for the years ended December 31, 2023 and 2022, respectively.
For the year ended December 31, 2023, the changes in our general and administrative expenses were primarily due to the following factors: (1) an increase in share based compensation of approximately US$0.58 million, offset by (2) a decrease of approximately US$0.46 million in general departmental expenses and (3) a decrease of allowance for doubtful of accounts of approximately US$0.18 million. ● Research and development expenses: Our research and development expenses were approximately nil and US$0.02 million for the years ended December 31, 2024 and 2023, respectively.
This may incur incremental costs related to employee layoff compensation and contract termination penalty.
This may incur incremental costs related to employee layoff compensation and contract termination penalty. If the Company fails to achieve these goals, the Company may need additional financing to execute its business plan.
Future Liquidity, Material Cash Requirements and Capital Resources Our future short-term liquidity needs within 12 months from the date hereof primarily include deposits and advance payments required for the purchase of search engine marketing resources and other online marketing resources to be distributed to our customers and payments for our operating expenses, which mainly consist of office rentals and employee salary and benefit.
Future Liquidity, Material Cash Requirements and Capital Resources Our future short-term liquidity needs within 12 months from the date hereof primarily include deposits and advance payments required for the purchase of online marketing resources to be distributed to our customers and payments for our operating expenses, which mainly consist of office rentals and employee salary and benefit. 62 In addition, in order to further develop our core business, i.e., our Internet advertising and related data service business, broaden and diversify the online marketing channels for customers, reinforce our industry competitive advantage, we are actively seeking to acquire businesses and build teams with AI capabilities and proprietary intellectual properties that enable more accurate marketing solutions and cost efficient content creation.
Loss before income tax (benefit)/expense and noncontrolling interest: As a result of the foregoing, our loss before income tax (benefit)/expense and noncontrolling interest was approximately US$5.98 million and US$9.79 million for the years ended December 31, 2023 and 2022, respectively. 55 Income tax (benefit)/expense: For the year ended December 31, 2023, we recognized a deferred income tax benefit of approximately US$0.002 million in relation to the net operating loss incurred by one of our operating VIEs, which we consider likely to be utilized with future earnings of this entity.
Loss before income tax (benefit)/expense and noncontrolling interest: As a result of the foregoing, our loss before income tax (benefit)/expense and noncontrolling interest was approximately US$3.37 million and US$5.98 million for the years ended December 31, 2024 and 2023, respectively.
Executive Compensation” for the aggregate information regarding our equity compensation plans in effect on December 31, 2023.
Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters ” for the aggregate information regarding our equity compensation plans in effect on December 31, 2024.
(3) offset by the use from operations from changes in operating assets and liabilities, such as: - accounts payable decreased by approximately US$0.001 million, primarily due to settlement of the amount due to a major internet Ad resource provider as of December 31, 2022 during the year; - Other current liabilities and accruals in aggregate decreased by approximately US$0.26 million; - operating lease liabilities and lease liabilities related to short-term leases decreased by approximately US$0.34 million in the aggregate, due to payment for our office lease costs during the year; and - taxes payable decreased by approximately US$0.004 million. 59 For the year ended December 31, 2022, our net cash used in operating activities of approximately US$3.19 million were primarily attributable to: (4) net loss excluding approximately US$2.22 million of non-cash expenses of depreciation and amortizations; approximately US$0.34 million of amortization of operating lease right-of-use assets, approximately US$0.19 million of share-based compensation; approximately US$1.85 million of gain from change in fair value of warrant liabilities; approximately US$2.39 million of allowance for doubtful accounts; approximately US$0.60 million of impairment on long-term investments; approximately US$2.12 million of impairment on intangible assets; approximately US$0.003 million of deferred tax benefit; and approximately US$0.11 million of non-operating income, yielded the non-cash, non-operating items excluded net loss of approximately US$3.91 million.
(3) offset by the use from operations from changes in operating assets and liabilities, such as: - accounts payable decreased by approximately US$0.11 million, primarily due to settlement of the amount due to a major internet Ad resource provider as of December 31, 2023 during the year; - accounts receivable increased by US$1.67 million; - advances from customers decreased by US$0.28 million due to decreases in advances from customers during the year; - operating lease liabilities and lease liabilities related to short-term leases decreased by approximately US$0.02 million in the aggregate, due to payment for our office lease costs during the year; and - other current assets increased by US$0.003 million.
We account for these leases in accordance with ASC Topic 842 “Leases”.
We account for these leases in accordance with ASC Topic 842 “Leases”. Other than office spaces leases, we do not have any other contract that is or contains a lease under ASC Topic 842.
For the year ended December 31, 2022, our cash provided by investing activities included the following transactions: (1) we provided short-term loans of US$2.60 million in the aggregate to two unrelated parties during the year.
Net cash provided by financing activities: For the year ended December 31, 2024, our cash provided by financing activities included the following transactions: (1) we received advances from investors of approximately US$1.08 million and (2) capital contribution from noncontrolling interest of approximately US$0.07 million.
For the year ended December 31, 2022, we did not transfer cash to our operating subsidiaries. One of our subsidiaries paid US$0.48 million operating expenses in cash on behalf of us to the service providers, as a repayment of the shareholder loans provided by us to this subsidiary in previous years.
For the year ended December 31, 2024, we transferred US$0.48 million in cash to our operating subsidiaries.

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Item 7A. Quantitative and Qualitative Disclosures About Market Risk

Market Risk — interest-rate, FX, commodity exposure

3 edited+0 added−1 removed5 unchanged
During the fiscal years ended December 31, 2022 and 2021 and through July 26, 2023, neither the Company nor anyone on its behalf consulted with ARK regarding (i) the application of accounting principles to any specified transaction, either completed or proposed or the type of audit opinion that might be rendered on the Company’s consolidated financial statements, and neither a written report nor oral advice was provided to the Company that ARK concluded was an important factor considered by the Company in reaching a decision as to any accounting, auditing, or financial reporting issue, or (ii) any matter that was either the subject of a “disagreement,” as defined in Item 304(a)(1)(iv) of Regulation S-K, or a “reportable event,” as defined in Item 304(a)(1)(v) of Regulation S-K.
During the fiscal years ended December 31, 2022 and 2021 and through July 26, 2023, neither the Company nor anyone on its behalf consulted with ARK regarding (i) the application of accounting principles to any specified transaction, either completed or proposed or the type of audit opinion that might be rendered on the Company’s consolidated financial statements, and neither a written report nor oral advice was provided to the Company that ARK concluded was an important factor considered by the Company in reaching a decision as to any accounting, auditing, or financial reporting issue, or (ii) any matter that was either the subject of a “disagreement,” as defined in Item 304(a)(1)(iv) of Regulation S-K, or a “reportable event,” as defined in Item 304(a)(1)(v) of Regulation S-K. 64
On July 26, 2023, the Audit Committee of the Board of Directors of the Company approved the dismissal of Centurion ZD CPA & Co. (“Centurion”) as independent registered public accounting firm of the Company, effective immediately.
ITEM 9 CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE a) Dismissal of Independent Registered Public Accounting Firm. On July 26, 2023, the Audit Committee of the Board of Directors of the Company approved the dismissal of Centurion ZD CPA & Co. (“Centurion”) as independent registered public accounting firm of the Company, effective immediately.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK As a smaller reporting company, we are not required to include disclosure under this Item.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK As a smaller reporting company, we are not required to include disclosure under this Item. ITEM 8 FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA Consolidated Financial Statements Our consolidated financial statements and the notes thereto begin on page F-1 of this Annual Report.
Removed
ITEM 8 FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA Consolidated Financial Statements Our consolidated financial statements and the notes thereto begin on page F-1 of this Annual Report. 62 ITEM 9 CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE a) Dismissal of Independent Registered Public Accounting Firm.

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