ZW Data Action Technologies(CNET) - 2024 Q3 - Quarterly Report

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].