AirNet(ANTE) - 2024 Q4 - Annual Report

Company Structure and Operations - AirNet Technology Inc. is a Cayman Islands holding company with no substantive operations, controlling its business through subsidiaries and consolidated affiliated entities[21]. - AirNet Online holds an 80% stake in AirNet Online, which controls various subsidiaries and VIEs through contractual arrangements[18]. - AirNet Technology Inc. does not own any shares in the consolidated affiliated entities, relying instead on contractual arrangements for control[23]. - The company operates under a VIE structure, which poses unique risks, including potential penalties from the PRC government if contractual arrangements are deemed non-compliant[32]. - The VIE agreements allow AirNet Technology Inc. to consolidate financial results and receive economic benefits from the VIEs[33]. - The company operates primarily through contractual arrangements with VIEs in China, including AirNet Online, Linghang Shengshi, and Iwangfan[117]. - The company intends to gradually shift its advertising business to Shenzhen Yuehang to reduce reliance on the current VIE structure[117]. Financial Performance - For the year ended December 31, 2022, AirNet Technology Inc. reported net revenues of US$2.868 million and a gross loss of US$2.355 million[37]. - For the year ended December 31, 2023, net revenues decreased to US$0.858 million with a gross loss of US$0.518 million[37]. - For the year ended December 31, 2024, net revenues further declined to US$0.343 million with a gross profit of US$0.037 million[37]. - The operating loss for the year ended December 31, 2022, was US$14.079 million, while for 2023 it was US$4.055 million, and for 2024 it was US$6.780 million[37][38]. - AirNet Technology Inc. has not paid any dividends and does not plan to do so in the foreseeable future, intending to retain available funds for business operations and expansion[31]. - The total shareholders' equity decreased from$11,849,000 as of December 31, 2023, to $10,927,000 as of December 31, 2024, reflecting a decline of approximately 7.8$(1,817,000), compared to a net cash provided of $752,000 in 2022[40]. - Net cash provided by financing activities decreased from$1,212,000 in 2022 to $(1,222,000) in 2023, showing a shift of approximately 201.2$22,721,000, a significant recovery from the previous year[40]. - The company may need to raise additional debt or sell equity securities for future acquisitions, which could increase financial obligations and dilute shareholder value[97]. - The company may require additional capital due to changing business conditions, which could result in dilution of shares or increased debt service obligations[104]. Regulatory and Compliance Risks - The company is subject to risks under the Holding Foreign Companies Accountable Act (HFCAA), which could lead to delisting if identified as a "Commission-Identified Issuer" for two consecutive years[26]. - The PCAOB has secured complete access to inspect and investigate registered public accounting firms in mainland China and Hong Kong, which may alleviate some compliance risks[26]. - The company is subject to new regulations regarding overseas listings, which may require future filings with the CSRC for follow-on offerings[45]. - The company is subject to new cybersecurity regulations, which may require compliance and could lead to increased costs[144][146]. - Compliance with PRC laws and regulations is costly, and failure to comply could result in government sanctions, including fines and revocation of advertising licenses[107]. - The PRC tax authorities may require adjustments to taxable income that could adversely affect the ability of subsidiaries to pay dividends[131]. Market and Economic Conditions - The demand for air travel significantly influences the company's results, with fluctuations linked to economic conditions and seasonal factors[94]. - The company faces significant competition in the advertising industry, which could reduce operating margins and profitability[92]. - A severe downturn in the global or Chinese economy could materially affect the company's financial condition and results of operations[147]. - Economic growth in China has been uneven and is expected to slow down, which may adversely affect the company's business and financial condition[148]. Operational Challenges - The company has faced significant operational challenges, including the need to attract advertisers and manage costs effectively, which could adversely affect its business and financial condition[69]. - The company has terminated its advertising service at long-haul buses and gas stations, and ceased operations for Wi-Fi services on trains, focusing instead on in-flight content and connectivity[66]. - The company began exploring the in-flight business in 2018, which has been adversely affected by COVID-19, impacting future growth prospects[74]. - The company's ability to generate sufficient cash flow is dependent on the acceptance of its air travel media network by advertisers and the viewing public[71]. Legal and Governance Issues - The company has identified material weaknesses in its internal control over financial reporting as of December 31, 2024, which could lead to inaccurate financial reporting and loss of investor confidence[103]. - The company has not maintained effective internal control over financial reporting and disclosure controls, which could negatively impact the reliability of its financial information[102]. - The company's directors have discretion over the inspection of corporate records, which may hinder shareholders' ability to obtain necessary information[209]. - The company's corporate governance practices may differ significantly from U.S. requirements, potentially affording shareholders less protection[210]. Currency and Foreign Exchange Risks - Fluctuations in the value of the Renminbi may materially affect the company's revenues, earnings, and financial position, as most transactions are denominated in Renminbi[163][164]. - Limited hedging options are available in China to mitigate foreign currency exchange risk, which may lead to significant currency exchange losses[165]. - Currency exchange restrictions may limit the company's ability to utilize cash held in mainland China or generated by a PRC entity for operations outside of mainland China or for paying dividends in foreign currencies[166]. Shareholder and Market Concerns - The trading price of the company's American Depositary Shares (ADSs) has been volatile, and failure to comply with Nasdaq listing requirements could lead to delisting[66]. - The trading price of the company's ADSs has been volatile, ranging from $0.26 to$2.90 per ADS during 2024, with a last reported price of $0.475 per ADS on December 31, 2024[212]. - The company has faced scrutiny and negative publicity related to U.S.-listed Chinese companies, which could impact its stock price and business operations[199]. - The company's public shareholders may have limited rights and remedies in emerging markets, making it harder to pursue claims common in the U.S.[211].