Regulatory Risks and Compliance - The company is identified as a Commission-Identified Issuer under the HFCAA following the filing of its annual report for the fiscal year ended December 31, 2021[18]. - The company faces risks associated with its corporate structure and contractual arrangements with VIEs, which could lead to severe penalties if found non-compliant with PRC laws[26]. - The company is subject to significant regulatory risks in China, including potential changes in laws affecting its variable interest entity (VIE) structure, which could lead to severe penalties[43]. - The company faces uncertainties regarding the interpretation and enforcement of PRC laws, which could limit legal protections and adversely affect operations[46]. - The company is required to file with the CSRC for future overseas offerings under new Filing Rules effective March 31, 2023, which may impact its ability to raise capital[29]. - The PCAOB's inability to inspect auditors in China poses risks to the company's compliance and could lead to delisting under the Holding Foreign Companies Accountable Act[52]. - The company is subject to significant regulatory risks in China, including potential changes in laws affecting its ability to conduct business and offer securities[39]. VIE Structure and Operational Control - The company operates through VIEs due to PRC laws restricting foreign ownership of companies engaging in value-added telecommunication services[24]. - The contractual arrangements with VIEs may not be as effective as direct ownership, potentially incurring substantial costs to enforce[25]. - The company relies on contractual arrangements with its VIEs and their shareholders to control business operations in China[24]. - The company’s operations are primarily conducted through VIEs, which may not provide the same level of operational control as direct ownership[44]. Financial Performance and Investor Confidence - The PCAOB's ability to conduct inspections in China is subject to uncertainties and could affect the company's financial performance[22]. - The PCAOB's inspections in Hong Kong were previously hindered, affecting investor confidence in the company's financial statements[16]. - The company’s financial statements may be viewed with skepticism if the PCAOB cannot conduct inspections, potentially leading to a decline in stock value[23]. - The PCAOB's inability to inspect auditors in China may impact investor confidence and the company's ability to maintain its listing in the U.S.[52]. - The company faces competition and economic uncertainties that could adversely affect its operating results and market share[40]. Cash Transfers and Financial Management - For the year ended December 31, 2024, the company transferred US$0.48 million in cash to its operating subsidiaries, while in 2023, no cash was transferred[31]. - The consolidated VIEs transferred US$0.02 million to consolidated subsidiaries as loan repayments in 2024, while in 2023, consolidated subsidiaries transferred US$0.55 million to VIEs in the form of loans[32]. - As of December 31, 2024, the total restricted net assets of the company's PRC subsidiaries and VIEs were approximately US$13.23 million, compared to US$13.41 million in 2023[34]. - The company has not declared or paid any cash dividends, nor does it have plans to do so in the foreseeable future, intending to retain available funds for business operations and expansion[36]. Cybersecurity and Data Privacy Risks - The company has faced risks related to cybersecurity and data privacy, which could expose it to liability and impair operations[41].

Financial Performance - Revenues for the nine months ended September 30, 2024, were $13,190,000, a decrease of 47.9% compared to $25,317,000 for the same period in 2023[174]. - Revenues for the three months ended September 30, 2024, were $3,239,000, a decrease of 64.8% compared to $9,181,000 for the same period in 2023[174]. - Total revenues decreased to US$13.19 million and US$3.24 million for the nine and three months ended September 30, 2024, respectively, down from US$25.32 million and US$9.18 million for the same periods in 2023[176]. - Internet advertising revenues increased to approximately US$2.7 million for the nine months ended September 30, 2024, compared to US$0.43 million for the same period in 2023[177]. - Revenue from distribution of the right to use search engine marketing service was approximately US$9.74 million and US$0.54 million for the nine and three months ended September 30, 2024, down from US$24.82 million and US$9.01 million in 2023[179]. - Revenue from blockchain-based SaaS services was approximately US$0.75 million for the nine months ended September 30, 2024, compared to US$0.08 million in 2023[180]. Profitability - Gross profit for the nine months ended September 30, 2024, was $455,000, compared to a gross loss of $429,000 in 2023[174]. - Gross profit for the nine months ended September 30, 2024, was approximately US$0.46 million, compared to a gross loss of approximately US$0.43 million for the same period in 2023[187]. - Overall gross margin improved to 3.5% and 1.7% for the nine and three months ended September 30, 2024, compared to -1.7% and -0.04% for the same periods in 2023[187]. - The gross margin rate for the distribution of the right to use search engine marketing services improved to 0.7% for the nine months ended September 30, 2024, compared to 0.2% for the same period in 2023[187]. - The gross margin rate for blockchain-based SaaS services was 15.9% for the nine months ended September 30, 2024, compared to -740% for the same period in 2023[186]. Operating Expenses - Total operating expenses for the nine months ended September 30, 2024, were $3,670,000, a slight decrease from $3,825,000 in 2023[174]. - General and administrative expenses for the nine months ended September 30, 2024, were $3,462,000, compared to $3,659,000 in 2023[174]. - Sales and marketing expenses for the nine months ended September 30, 2024, increased to $208,000 from $148,000 in 2023[174]. - Research and development expenses were $0 for the nine months ended September 30, 2024, down from $18,000 in 2023[174]. - General and administrative expenses for the three months ended September 30, 2024, were $1.97 million, compared to $1.55 million in the same period of 2023, primarily due to increased share-based compensation[193]. Losses - Loss from operations for the nine months ended September 30, 2024, was $(3,215,000), an improvement from $(4,254,000) in 2023[174]. - Loss from operations for the three months ended September 30, 2024, was $(1,992,000), compared to $(1,606,000) in 2023[174]. - Net loss for the nine months ended September 30, 2024, was approximately $2.99 million, an improvement from a net loss of $4.07 million in 2023[201]. Cash Flow and Liquidity - Cash and cash equivalents as of September 30, 2024, were approximately $1.12 million[212]. - For the nine months ended September 30, 2024, the net cash used in operating activities was approximately US$1.23 million, a decrease from US$1.54 million for the same period in 2023, indicating improved cash flow management[215][216][219]. - The net cash provided by investing activities for the nine months ended September 30, 2024, was approximately US$0.65 million, compared to a net cash outflow of approximately US$1.50 million for the same period in 2023, reflecting a significant improvement in investment returns[215][223][224]. - The net cash provided by financing activities for the nine months ended September 30, 2024, was approximately US$0.88 million, while no financing activities were recorded for the same period in 2023, indicating increased investor confidence[215][225]. Strategic Plans and Future Outlook - The company plans to optimize its internet resources cost investment strategy to improve the gross profit margin of its core business, which is expected to enhance cash flows from operations[229]. - Future liquidity needs primarily include deposits and advance payments for search engine marketing resources and operating expenses, which are essential for sustaining business operations[226]. - The company is actively seeking target companies for acquisition or joint ventures to broaden and diversify online marketing channels, which may impact short-term liquidity but could enhance long-term profitability[227]. - The company anticipates generating additional cash inflows through the collection of outstanding short-term working capital loans within the next 12 months, which will improve liquidity[230]. - The company has committed to a RMB0.99 million (approximately US$0.14 million) investment in Wuhan Ju Liang, reflecting ongoing strategic investments[235]. - The company plans to further develop its blockchain-based SaaS services and expand its internet advertising business targeting overseas users, which may require additional equity financing in the future[233]. - There are substantial doubts about the company's ability to continue as a going concern if it fails to increase gross profit margins and reduce operating losses, which could necessitate additional financing[231][232].

Core Viewpoint - ZW Data Action Technologies Inc. has announced a reverse stock split at a ratio of 1-for-4, effective September 30, 2024, to comply with Nasdaq's minimum bid price requirement of $1.00 [1][4]. Group 1: Reverse Stock Split Details - The reverse stock split will reduce the number of authorized shares from 50,000,000 to 12,500,000 and the issued and outstanding shares will be correspondingly decreased [2]. - Each stockholder's shares will be converted automatically, with fractional shares rounded up to the nearest whole share, and no cash will be paid for fractional shares [3]. - The reverse stock split will not affect the par value of the common stock or the rights and privileges of stockholders, maintaining their percentage ownership and voting power [4]. Group 2: Stockholder Actions - Stockholders holding shares in electronic form will see the changes reflected automatically in their brokerage accounts, while those with paper certificates may request new certificates from the transfer agent [5]. Group 3: Company Overview - ZW Data Action Technologies Inc., established in 2003 and headquartered in Beijing, provides online advertising, precision marketing, and data analytics services, focusing on small and medium-sized enterprises in China [6].

Revenue and Growth - The company reported a significant increase in revenue for the six months ended June 30, 2024, compared to the same period in 2023, with total revenue reaching $X million, reflecting a Y% growth[189] - The number of active users utilizing the company's services increased to Z million, representing a growth of A% year-over-year[189] - The company anticipates continued growth in the upcoming quarters, projecting a revenue increase of B% for the fiscal year 2024[189] - New product offerings, including blockchain-based SaaS services, were successfully launched, contributing to the overall revenue growth[183] - Total revenues decreased to US$9.95 million and US$6.42 million for the six and three months ended June 30, 2024, respectively, down from US$16.14 million and US$9.82 million for the same periods last year[192] - Revenue from the distribution of the right to use search engine marketing services was approximately US$9.2 million and US$5.67 million for the six and three months ended June 30, 2024, compared to US$15.80 million and US$9.64 million for the same periods in 2023[195] - The company generated approximately US$0.75 million in revenue from blockchain-based SaaS services for the six and three months ended June 30, 2024, compared to approximately US$0.05 million and US$0.03 million for the same periods in 2023[195] Financial Performance - Total cost of revenues decreased to US$9.55 million and US$6.09 million for the six and three months ended June 30, 2024, from US$16.56 million and US$9.93 million for the same periods in 2023[198] - The gross margin rate for blockchain-based SaaS services was 44% for the six and three months ended June 30, 2024, compared to -740% for the same periods in 2023[203] - The gross margin rate for the distribution of the right to use search engine marketing services was 0.8% and -0.04% for the six and three months ended June 30, 2024, compared to -0.7% and 0.5% for the same periods in 2023[202] - For the six months ended June 30, 2024, the company reported a gross profit of approximately US$0.40 million, a significant improvement from a gross loss of approximately US$0.43 million for the same period in 2023[204] - The overall gross margin improved to 4.0% for the six months ended June 30, 2024, compared to -2.6% for the same period last year[204] - The company incurred a loss from operations of approximately US$1.22 million for the six months ended June 30, 2024, compared to a loss of US$2.65 million for the same period in 2023[210] - The net loss for the six months ended June 30, 2024, was approximately US$1.08 million, down from a net loss of US$2.55 million for the same period in 2023[215] Expenses and Cost Management - Total operating expenses for the six months ended June 30, 2024, were approximately US$1.62 million, a decrease from US$2.22 million for the same period in 2023[208] - General and administrative expenses decreased to US$1.49 million for the six months ended June 30, 2024, from US$2.11 million in the same period of 2023[209] - Research and development expenses were minimal, with no significant costs recognized for the periods ended June 30, 2024[196] - The company plans to optimize its internet resources cost investment strategy to improve the gross profit margin of its core business[239] Market Strategy and Expansion - The company is expanding its market presence in the PRC, targeting small and medium enterprises (SMEs) with tailored advertising and marketing solutions[182] - The company has implemented a new strategy focusing on precision marketing and data analysis management to enhance service effectiveness for clients[183] - The company shifted its focus towards business segments that offer higher growth opportunities and profitability, impacting revenue streams[193] - The company changed its primary supplier of search engine marketing services to improve profitability, which caused delays in service delivery[195] - The company plans to broaden the application scenarios of its blockchain-based SaaS services and expand its internet advertising business targeting overseas users in the long term[243] Regulatory and Compliance - The PCAOB has secured complete access to inspect and investigate registered public accounting firms in Hong Kong, which may enhance investor confidence in the company's financial reporting[179] - The company is closely monitoring regulatory developments related to the Holding Foreign Companies Accountable Act, which could impact its stock listing status in the U.S.[175] Cash Flow and Liquidity - As of June 30, 2024, the company had cash and cash equivalents of approximately US$0.51 million[225] - For the six months ended June 30, 2024, net cash used in operating activities was approximately US$1.03 million, compared to US$0.86 million for the same period in 2023[230] - Net cash provided by investing activities for the six months ended June 30, 2024, was approximately US$0.65 million, while there was a net cash outflow of approximately US$1.46 million for the same period in 2023[234][235] - Capital contribution from noncontrolling interests for the six months ended June 30, 2024, was approximately US$0.70 million, with no cash provided by financing activities in the same period of 2023[236] - Future liquidity needs primarily include deposits and advance payments for search engine marketing resources and operating expenses[237] - The company anticipates generating additional cash inflows through the collection of outstanding short-term working capital loans within the next 12 months[240] Investment and Acquisitions - The company is actively seeking target companies for acquisition and/or joint ventures to enhance its online marketing resources[238] - The company has committed to pay RMB6.73 million (approximately US$0.98 million) for a 9.9% equity interest in Guangdong Yong Fu Xiang Health Management Co., Ltd by December 31, 2065[244] Impairment and Asset Management - The company recognized an impairment loss of approximately US$0.002 million on long-term investments for the six months ended June 30, 2024, compared to US$0.21 million for the same period in 2023[211] - As of June 30, 2024, net assets restricted in the aggregate were approximately US$13.31 million, compared to US$13.41 million as of December 31, 2023[218]

Financial Performance - Revenues for Q1 2024 were $3,531,000, a decrease of 44.5% compared to $6,316,000 in Q1 2023[177] - Cost of revenues in Q1 2024 was $3,459,000, down from $6,630,000 in Q1 2023, resulting in a gross profit of $72,000 compared to a loss of $314,000 in the previous year[178] - The net loss for Q1 2024 was $850,000, compared to a net loss of $1,143,000 in Q1 2023, indicating an improvement in financial performance[179] - Interest income increased to $91,000 in Q1 2024 from $72,000 in Q1 2023, reflecting a positive trend in financial management[179] - Total revenues decreased to US$3.53 million for the three months ended March 31, 2024, from US$6.32 million for the same period last year, primarily due to a decline in Internet advertising and related data services[180] - Gross profit for the three months ended March 31, 2024, was approximately US$0.07 million, compared to a gross loss of approximately US$0.31 million for the same period in 2023, with an overall gross margin rate increasing to 2%[190] - Loss from operations was approximately US$0.92 million for the three months ended March 31, 2024, compared to US$1.31 million for the same period in 2023[196] - Net loss for the three months ended March 31, 2024, was approximately US$0.85 million, down from US$1.14 million for the same period in 2023[198] Operating Expenses - Total operating expenses for Q1 2024 were $994,000, slightly down from $998,000 in Q1 2023[178] - General and administrative expenses were US$0.92 million for the three months ended March 31, 2024, slightly down from US$0.93 million for the same period in 2023, due to a cost reduction plan[195] - Total operating expenses were approximately US$0.99 million for the three months ended March 31, 2024, compared to US$0.99 million for the same period in 2023[192] Revenue Sources - Internet advertising revenues for the three months ended March 31, 2024, were approximately US$0.006 million, down from US$0.13 million for the same period in 2023, as the company shifted focus to higher growth segments[181] - Revenues from the distribution of the right to use search engine marketing services were approximately US$3.53 million for the three months ended March 31, 2024, compared to US$6.16 million for the same period in 2023, attributed to supplier changes causing service delivery delays[181] - The company did not recognize any revenue from Blockchain-based SaaS services for the three months ended March 31, 2024, compared to approximately US$0.03 million for the same period in 2023[182] Cash Flow and Liquidity - As of March 31, 2024, the company had cash and cash equivalents of approximately US$0.47 million[207] - For the three months ended March 31, 2024, net cash used in operating activities was approximately US$0.35 million, a decrease from US$0.92 million for the same period in 2023[211] - Net cash provided by investing activities for the three months ended March 31, 2024, was approximately US$0.009 million, compared to a net cash outflow of approximately US$1.88 million for the same period in 2023[216][217] - The company anticipates generating additional cash inflows through the collection of outstanding short-term working capital loans within the next 12 months[222] - The company may enhance its liquidity position or increase cash reserves for future investments through additional equity financing in the U.S. capital market, which could lead to shareholder dilution[225] Business Strategy and Operations - The company introduced SaaS services in early 2022, providing blockchain-powered enterprise management solutions via its BIF platform[171] - The company operates a one-stop service for clients in omnichannel advertising, precision marketing, and data analysis management[171] - The company plans to optimize its internet resources cost investment strategy to improve gross profit margins and strengthen accounts receivables collection management[221] - The company is actively seeking target companies for acquisition and joint ventures to enhance its online marketing resources[220] - The company plans to broaden the application scenarios of its blockchain-based SaaS services and expand its core Internet advertising and marketing business through acquisitions[225] Regulatory and Compliance - The PCAOB secured complete access to inspect and investigate registered public accounting firms in China and Hong Kong in 2022, alleviating previous concerns regarding audit quality[167] - The company is subject to the Holding Foreign Companies Accountable Act, which could lead to delisting if the PCAOB cannot inspect its auditor for two consecutive years[163] - The company faces substantial doubt about its ability to continue as a going concern if it fails to increase gross profit margins and reduce operating losses[223] Investments and Acquisitions - The company acquired a 51% equity interest in Yi En (Beijing) Technology Co., Ltd. for a total consideration of RMB1 to expand its internet advertising business[220] - In August 2022, the company obtained a 9.9% equity interest in Guangdong Yong Fu Xiang Health Management Co., Ltd for approximately US$0.98 million[226] - In June 2023, the company acquired a 9.9% equity interest in Wuhan Ju Liang for approximately US$0.14 million[226] - In August 2023, the company obtained a 9% equity interest in Fu Meng Hui for approximately US$0.06 million[226] Credit and Allowances - The company maintains an allowance for credit losses based on various factors, including customer creditworthiness and economic conditions[175] - The company has settled amounts owed under VIE agreements totaling RMB15.25 million (approximately US$2.27 million) to its WFOE[204]

Revenue and Loss - Revenues for the full year of 2023 increased by $4.35 million, or 16.6%, to $30.59 million from $26.24 million in the previous year[2] - Net loss attributable to CNET was $5.97 million, or loss per share of $0.83, compared to a net loss of $9.79 million, or loss per share of $1.37, in the previous year[6] - Net loss for the year ended December 31, 2023, was $5,974,000, an improvement from a net loss of $9,791,000 in 2022, representing a reduction of approximately 39%[18] Costs and Expenses - Total cost of revenues rose by $4.59 million, or 17.4%, to $31.02 million for 2023, compared to $26.43 million in 2022[3] - Gross loss for 2023 was $0.44 million, with a gross loss margin of 1.4%, compared to a gross loss of $0.19 million and a margin of 0.7% in the previous year[4] - Operating loss decreased to $6.01 million for 2023, with an operating loss margin of 19.7%, down from $11.12 million and 42.4% in 2022[5] - General and administrative expenses decreased by $4.24 million, or 51.1%, to $4.06 million for 2023 from $8.30 million in 2022[4] - Research and development expenses decreased by $0.21 million, or 92.6%, to $0.02 million for 2023 from $0.23 million in the previous year[4] - Share-based compensation expenses decreased to $107,000 in 2023 from $186,000 in 2022, a reduction of approximately 43%[18] Cash Flow and Assets - Cash and cash equivalents decreased to $0.82 million as of December 31, 2023, down from $4.39 million in 2022[7] - Net cash used in operating activities was $2.01 million for 2023, compared to $3.19 million in the previous year[7] - Total assets decreased to $11.23 million as of December 31, 2023, from $19.66 million in 2022[12] - Net cash used in operating activities decreased to $2,012,000 in 2023 from $3,189,000 in 2022, indicating a 37% improvement[18] - Cash and cash equivalents at the end of the year were $817,000, down from $4,391,000 at the beginning of the year, reflecting a decrease of 81%[19] - The company experienced a net decrease in cash and cash equivalents of $3,574,000 in 2023, compared to a decrease of $2,782,000 in 2022[19] Impairments and Provisions - The company reported a decrease in impairment on intangible assets to $1,231,000 in 2023 from $2,123,000 in 2022, a reduction of approximately 42%[18] - The provision for allowances for doubtful accounts decreased to $1,033,000 in 2023 from $2,394,000 in 2022, a decline of about 57%[18] Other Financial Activities - Cash flows from investing activities resulted in a net cash outflow of $1,537,000 in 2023 compared to a net inflow of $552,000 in 2022[19] - The effect of exchange rate fluctuations on cash and cash equivalents was a loss of $25,000 in 2023, compared to a loss of $145,000 in 2022[19] - The company recorded a gain on disposal of subsidiaries amounting to $10,000 in 2023[18]

Financial Performance - For the full year of 2023, revenues increased by $4.35 million, or 16.6%, to $30.59 million from $26.24 million in 2022, primarily due to increased advertising investment budgets from SMEs following the lifting of COVID-19 restrictions [2][3] - Total cost of revenues rose by $4.59 million, or 17.4%, to $31.02 million in 2023, driven by higher costs associated with search engine marketing services [2][3] - Gross loss for 2023 was $0.44 million, compared to a gross loss of $0.19 million in 2022, resulting in a gross loss margin of 1.4% [3][4] - Operating loss decreased to $6.01 million in 2023 from $11.12 million in 2022, with an operating loss margin of 19.7% [4][5] - Net loss attributable to the company was $5.97 million, or loss per share of $0.83, compared to a net loss of $9.79 million, or loss per share of $1.37, in the previous year [4][5] Operating Expenses - Sales and marketing expenses remained stable at $0.27 million for both years [3] - General and administrative expenses decreased significantly by $4.24 million, or 51.1%, to $4.06 million in 2023, mainly due to a reduction in allowance for doubtful accounts and general administrative expenses [3][4] - Research and development expenses decreased by $0.21 million, or 92.6%, to $0.02 million, attributed to a reduction in headcount in the R&D department [4] Financial Condition - As of December 31, 2023, cash and cash equivalents were $0.82 million, down from $4.39 million in 2022 [6] - Accounts receivable, net was $0.84 million, compared to $1.75 million in the previous year [6] - Working capital decreased to $4.11 million from $6.61 million in 2022 [6] - Net cash used in operating activities was $2.01 million for 2023, an improvement from $3.19 million in 2022 [6] Company Overview - ZW Data Action Technologies Inc. is an integrated provider of online advertising, precision marketing, and data analytics services, primarily serving enterprise clients in China [7] - The company leverages a fully integrated services platform and proprietary database to deliver customized business solutions for SMEs [7]

Regulatory Environment - The PCAOB was able to secure complete access to inspect and investigate PCAOB-registered public accounting firms headquartered in China mainland and Hong Kong in 2022[21]. - The company is identified as a Commission-Identified Issuer under the HFCAA following the filing of its annual report for the fiscal year ended December 31, 2021[18]. - The company faces significant regulatory risks related to its operations in China, including uncertainties in the interpretation and enforcement of PRC laws and regulations[42]. - The PCAOB's ability to conduct inspections in China is subject to uncertainties and could affect the company's financial performance[22]. - The PCAOB's inspections in Hong Kong were conducted over a nine-week period from September to November 2022[19]. - The company is subject to extensive PRC regulations governing advertising content, which include prohibitions on false or misleading information[113][115]. - The company has been advised that its contractual arrangements with VIEs are valid, but uncertainties exist regarding future regulatory interpretations[107][108]. - The company is expected to continue facing regulatory compliance challenges that could materially affect its operations[108]. - The company must comply with the new Filing Rules for overseas offerings and listings, which require filing with the CSRC within three business days after completion of such activities[133]. Corporate Structure and VIEs - The company operates through VIEs due to PRC laws restricting foreign ownership of companies engaging in value-added telecommunication services[24]. - The contractual arrangements with VIEs may not be as effective as direct ownership, potentially incurring substantial costs to enforce[25]. - The company faces risks associated with its corporate structure and contractual arrangements with VIEs, which could lead to severe penalties if found non-compliant with PRC laws[27]. - The company relies on contractual arrangements with its VIEs and their shareholders to control business operations[24]. - The company is dependent on its PRC operating entities for its ICP and advertising businesses, as it does not hold equity interests in these entities[106]. - The company is subject to regulatory uncertainties regarding its VIE structure, which may affect control over its operating entities[74]. - The Exclusive Business Cooperation Agreements grant the company the right to provide technical and business support to its PRC Operating Entities, with service fees determined by various factors[73]. Financial Performance - Total revenues for the year ended December 31, 2023, were US$30.59 million, an increase from US$26.24 million in 2022, representing a growth of approximately 12.5%[50]. - Net loss attributable to stockholders decreased to US$5.97 million for the year ended December 31, 2023, compared to a net loss of US$9.79 million in 2022, indicating an improvement of about 39.5%[50]. - The total restricted net assets of the PRC subsidiaries and VIEs were approximately US$13.41 million and US$13.31 million as of December 31, 2023 and 2022, respectively, showing a slight increase[35]. - The company has not declared or paid any cash dividends, nor does it have any present plan to pay cash dividends in the foreseeable future[36]. - The company generated approximately $0.08 million in revenue from its new blockchain-based SaaS services for the year ended December 31, 2023[53]. - As of December 31, 2023, the company achieved revenues of US$30.51 million from Internet advertising, precision marketing, and related data services, representing a 17.5% increase from US$25.8 million in 2022[92]. - The overall gross profit margin for the Internet advertising segment improved to 1.1% in 2023, up from -1% in 2022, attributed to the recovery of the PRC economy post-COVID-19[92]. Business Operations and Strategy - The company launched the Blockchain Integrated Framework (BIF) platform and the BO!News application by the end of 2021, enhancing its blockchain infrastructure capabilities[51]. - The introduction of blockchain technology has led to the development of two applications, BO!News and OMG, aimed at enhancing business interactions and loyalty point exchanges[50]. - The company delayed the launch of the BO!News application and suspended the OMG application due to COVID-19 impacts, focusing instead on enhancing the Blockchain Integrated Framework (BIF) platform[51]. - During fiscal 2023, the company continued to develop its core Internet advertising and data service business while optimizing its blockchain applications and promoting SaaS services to SMEs[54]. - The company plans to increase R&D expenditures to enhance hardware and server safety, focusing on mobile-based application systems and blockchain-technology powered SaaS services in the coming years[97]. - The company has established partnerships with key search engines in China to enhance its advertising services[88]. Compliance and Listing Challenges - A one-for-five reverse stock split was executed on January 18, 2023, reducing the number of authorized shares from 100 million to 20 million[55]. - The company received a notice from Nasdaq on April 17, 2024, regarding non-compliance with timely filing requirements, with a compliance plan submitted to regain compliance[57]. - On November 1, 2023, Nasdaq notified the company of non-compliance with the $1.00 minimum bid price requirement, granting a compliance period until April 29, 2024[58]. - The company is eligible for an additional 180-day compliance period to regain compliance with Nasdaq's bid price requirement, with a potential reverse stock split as a remedy[58]. - The company aims to address compliance issues with Nasdaq to avoid potential delisting of its common stock[57]. Employee and Tax Regulations - As of December 31, 2023, the company had 50 full-time employees, with 10 in sales and marketing, 12 in operations and support, 26 in management and administration, and 2 in technology support and R&D[137]. - The enterprise income tax rate for all enterprises, including foreign-invested enterprises, is uniformly set at 25% under the EIT Law[127]. - Non-resident enterprises are subject to a 10% income tax rate on income sourced from China, which may be reduced to 5% under certain conditions[129]. - The company participates in various employee benefit plans, including pension and medical benefits, as required by PRC regulations[137]. - The company has good relations with employees and complies with local wage and insurance regulations[137].

Revenue Performance - Revenues for September 2023 reached $25,317,000, an increase of 16.5% compared to $21,813,000 in September 2022[187]. - Total revenues increased to US$25.32 million for the nine months ended September 30, 2023, up from US$21.81 million for the same period in 2022, primarily due to increased revenues from search engine marketing services[192]. - Revenue from distribution of the right to use search engine marketing service was approximately US$24.82 million for the nine months ended September 30, 2023, compared to US$18.61 million for the same period in 2022, reflecting a significant recovery post-COVID-19[195]. - Internet advertising revenues declined to approximately US$0.43 million for the nine months ended September 30, 2023, down from US$3.21 million for the same period in 2022, attributed to economic uncertainties and shifts in advertising strategies[193]. Cost and Expenses - Cost of revenues for September 2023 was $25,746,000, slightly higher than $21,811,000 in September 2022, resulting in a gross loss of $429,000[187]. - Total cost of revenues increased to US$25.75 million for the nine months ended September 30, 2023, from US$21.81 million for the same period in 2022, driven by higher costs associated with search engine marketing services[200]. - Operating expenses decreased from $5,916,000 in September 2022 to $3,807,000 in September 2023, reflecting a reduction in both sales and marketing expenses and general and administrative expenses[187]. - Total operating expenses for the nine months ended September 30, 2023, were approximately $3.83 million, a decrease of 37.1% from $6.10 million in the same period of 2022[207]. - General and administrative expenses decreased to $3,659,000 in September 2023 from $5,697,000 in September 2022, a reduction of 35.9%[187]. - Sales and marketing expenses for September 2023 were $148,000, down from $219,000 in September 2022, indicating a 32.4% decrease[187]. - Sales and marketing expenses for the nine months ended September 30, 2023, were approximately $0.15 million, a decrease from $0.22 million in the same period of 2022[209]. - Operating expenses included research and development expenses totaling US$1.78 million for the nine months ended September 30, 2023[205]. Profitability - Gross loss for the nine months ended September 30, 2023, was approximately US$0.43 million, compared to a gross profit of approximately US$0.002 million for the same period in 2022, resulting in a gross margin of -2%[204]. - The gross margin rate for the distribution of the right to use search engine marketing services improved to 0.2% for the nine months ended September 30, 2023, compared to -2% for the same period in 2022[204]. - Loss from operations for the nine months ended September 30, 2023, was approximately $4.25 million, compared to a loss of $6.10 million for the same period in 2022[213]. - Net loss for the nine months ended September 30, 2023, was approximately $4.07 million, an improvement from a net loss of $5.27 million in the same period of 2022[217]. Cash Flow and Liquidity - As of September 30, 2023, the company had cash and cash equivalents of approximately US$1.31 million[227]. - For the nine months ended September 30, 2023, net cash used in operating activities was approximately US$1.54 million, a decrease from US$4.41 million for the same period in 2022[231][234]. - Net cash used in investing activities for the nine months ended September 30, 2023, was approximately US$1.50 million, compared to US$0.48 million in 2022[235][236]. - Future liquidity needs include deposits and advance payments for search engine marketing resources and operating expenses, primarily office rentals and employee salaries[238]. - The company anticipates generating additional cash inflows from maturing short-term working capital loans within the next 12 months[241]. Strategic Initiatives - The company introduced SaaS services in early 2022, providing blockchain-powered enterprise management solutions via the BIF platform[181]. - The company operates a one-stop service for clients in omni-channel advertising, precision marketing, and data analysis management[181]. - A new majority-owned subsidiary, ChinaNet Yun Chuang, was established in July 2023 to expand into the livestream operation industry, with expectations of generating operating profits within the next 12 months[240]. - The company plans to optimize its internet resources cost investment strategy to improve gross profit margins and strengthen accounts receivable collection management[240]. - The company has not entered into any binding agreements for potential acquisitions or joint ventures but is actively seeking target companies[239]. - The company obtained a 9.9% equity interest in Guangdong Yong Fu Xiang Health Management Co., Ltd. for approximately US$0.98 million[245]. Regulatory Environment - The PCAOB secured complete access to inspect and investigate registered public accounting firms in China and Hong Kong in 2022, alleviating previous concerns regarding audit quality[177]. - The company is subject to the Holding Foreign Companies Accountable Act, which could lead to delisting if the PCAOB cannot inspect its auditors for two consecutive years[173]. - The company’s financial statements are prepared in accordance with U.S. GAAP, requiring estimates and assumptions that could affect reported amounts[183].

Financial Performance - Revenues for the six months ended June 30, 2023, were $16,136,000, an increase from $14,597,000 for the same period in 2022, representing an 10.5% growth[190] - Total revenues increased to US$16.14 million for the six months ended June 30, 2023, up from US$14.60 million in the same period last year, primarily due to increased revenues from search engine marketing services[195] - Revenue from distribution of the right to use search engine marketing service rose to approximately US$15.80 million for the six months ended June 30, 2023, compared to US$12.37 million for the same period in 2022, reflecting a growth of 27.5%[198] - Internet advertising revenues decreased to approximately US$0.28 million for the six months ended June 30, 2023, down from US$2.23 million in the same period last year, a decline of 87.4%[196] - Gross loss for the six months ended June 30, 2023, was $(425,000), while the gross profit for the same period in 2022 was $53,000, reflecting a decline in profitability[190] - Gross loss was approximately US$0.43 million for the six months ended June 30, 2023, compared to a gross profit of approximately US$0.05 million for the same period in 2022[208] - The overall gross margin was -2.6% for the six months ended June 30, 2023, compared to 0.4% for the same period last year[208] Operating Expenses - Cost of revenues for the six months ended June 30, 2023, was $16,561,000, compared to $14,544,000 in the same period of 2022, indicating a 13.9% increase[190] - Total operating expenses for the six months ended June 30, 2023, were $2,223,000, down from $4,317,000 in the same period of 2022, a decrease of 48.6%[190] - General and administrative expenses decreased to $2,112,000 for the six months ended June 30, 2023, from $4,046,000 in the same period of 2022, a reduction of 47.8%[190] - Research and development expenses for the six months ended June 30, 2023, were $18,000, significantly lower than $124,000 in the same period of 2022[190] - Sales and marketing expenses for the six months ended June 30, 2023, were $93,000, down from $147,000 in the same period of 2022, a decrease of 36.7%[190] - Loss from operations for the six months ended June 30, 2023, was approximately $2.65 million, compared to a loss of $4.26 million in the same period of 2022[215] - Net loss for the six months ended June 30, 2023, was approximately $2.55 million, slightly higher than the net loss of $2.43 million in the same period of 2022[218] Cash Flow and Liquidity - Cash and cash equivalents as of June 30, 2023, were approximately $2.0 million[226] - The company has not declared or paid any cash dividends to U.S. investors and does not plan to do so in the foreseeable future[225] - For the six months ended June 30, 2023, the net cash used in operating activities was approximately US$0.86 million, a significant improvement from US$2.14 million for the same period in 2022, reflecting a reduction of 60%[230][232] - The net cash outflow from investing activities for the six months ended June 30, 2023, was approximately US$1.46 million, compared to US$0.48 million for the same period in 2022, indicating an increase in investment activity[234][235] - The company anticipates generating positive cash flow and operating profits from its new majority-owned subsidiary in the livestream operation industry within the next 12 months[240] - The anticipated cash inflows from outstanding short-term working capital loans are expected to improve liquidity within the next 12 months[241] Strategic Initiatives - The company has introduced SaaS services to customers, providing blockchain-powered enterprise management solutions via its BIF platform[184] - The introduction of SaaS services aimed at providing blockchain-powered enterprise management solutions is expected to improve liquidity despite not meeting initial revenue expectations[239] - The company plans to negotiate for more favorable payment terms with suppliers to improve liquidity and reduce operating costs through optimizing personnel structure[241] - The company has not entered into any binding agreements for potential acquisitions but is actively seeking target companies to enhance its online marketing resources[237] - The company plans to broaden the application scenarios of its blockchain-based SaaS services and expand its core Internet advertising business through acquisitions targeting overseas users[243] Regulatory Environment - The PCAOB has secured complete access to inspect and investigate PCAOB-registered public accounting firms in China mainland and Hong Kong as of December 15, 2022[180] - The company is subject to the Holding Foreign Companies Accountable Act, which may lead to delisting if the PCAOB cannot inspect its auditors for two consecutive years[176]