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ZW Data Action Technologies(CNET) - 2023 Q1 - Quarterly Report
CNETZW Data Action Technologies(CNET)2023-05-21 16:00

Financial Performance - Revenues for Q1 2023 decreased to 6.316million,comparedto6.316 million, compared to 7.652 million in Q1 2022, representing a decline of 17.5%[186] - Gross loss for Q1 2023 was 314thousand,comparedtoagrossprofitof314 thousand, compared to a gross profit of 134 thousand in Q1 2022[186] - Total operating expenses for Q1 2023 decreased to 998thousand,downfrom998 thousand, down from 1.685 million in Q1 2022, a reduction of 40.8%[186] - Net loss for Q1 2023 was 1.143million,comparedtoanetlossof1.143 million, compared to a net loss of 717 thousand in Q1 2022[187] - Total revenues decreased to 6.32millionforQ12023from6.32 million for Q1 2023 from 7.65 million in Q1 2022, primarily due to a decline in Internet advertising and related data services[189] - Internet advertising revenues dropped to 0.13millioninQ12023from0.13 million in Q1 2023 from 1.06 million in Q1 2022, impacted by COVID-19 and shifts to cheaper advertising channels like search engine marketing[190] - Revenues from search engine marketing services decreased to 6.16millioninQ12023from6.16 million in Q1 2023 from 6.59 million in Q1 2022, affected by COVID-19 peak infections in China[191] - Blockchain-based SaaS services generated 0.03millioninsubscriptionfeerevenuesforQ12023[193]−Grosslossof0.03 million in subscription fee revenues for Q1 2023[193] - Gross loss of 0.31 million in Q1 2023 compared to a gross profit of 0.13millioninQ12022,withgrossmarginratedroppingto−50.13 million in Q1 2022, with gross margin rate dropping to -5% from 2%[199] - Operating expenses decreased to 1.00 million in Q1 2023 from 1.69 million in Q1 2022, with reductions in sales, marketing, and R&D expenses[201] - Sales and marketing expenses decreased to 0.05 million in Q1 2023 from 0.07millioninQ12022duetoCOVID−19impacts[202]−Generalandadministrativeexpensesdecreasedto0.07 million in Q1 2022 due to COVID-19 impacts[202] - General and administrative expenses decreased to 0.93 million in Q1 2023 from 1.55millioninQ12022,drivenbycostreductionplansandCOVID−19impacts[203]−Researchanddevelopmentexpensesdecreasedto1.55 million in Q1 2022, driven by cost reduction plans and COVID-19 impacts[203] - Research and development expenses decreased to 0.02 million in Q1 2023 from 0.07millioninQ12022duetoheadcountreductions[204]−Netlossincreasedto0.07 million in Q1 2022 due to headcount reductions[204] - Net loss increased to 1.14 million in Q1 2023 from 0.72millioninQ12022[206]CashFlowandLiquidity−CashandcashequivalentsasofMarch31,2023,wereapproximatelyUS0.72 million in Q1 2022[206] Cash Flow and Liquidity - Cash and cash equivalents as of March 31, 2023, were approximately US1.59 million[216] - Net cash used in operating activities for Q1 2023 was approximately US0.92million,primarilyduetonetlossandchangesinoperatingassetsandliabilities[221][222]−NetcashusedininvestingactivitiesforQ12023wasapproximatelyUS0.92 million, primarily due to net loss and changes in operating assets and liabilities[221][222] - Net cash used in investing activities for Q1 2023 was approximately US1.88 million, including a US2.0millionshort−termloanprovidedtoanunrelatedparty[226]−NocashwasprovidedbyorusedinfinancingactivitiesforQ12023andQ12022[228]−Thecompanyanticipatesaslowrecoveryofperformanceandimprovementincashflowstatusoverthenext12monthsduetotheimpactofCOVID−19onSMEs[231]−Thecompanyisactivelyseekingacquisitionsorjointventurestoexpanditscorebusiness,whichmaydecreaseliquidityintheshorttermbutimprovegrossmarginsandcashflowinthelongterm[230]−ThecompanyexpectsSaaSservicestogeneratepositivecashflowandimproveliquidityduetoself−developedsoftwareplatformtechnology[232]−Thecompanyanticipatescollectingshort−termworkingcapitalloansandrelatedinterestincomewithinthenext12months[233]−Thecompanyplanstonegotiatemorefavorablepaymenttermswithmajorsuppliersandreduceoperatingcoststhroughpersonneloptimizationandofficespacereduction[233]−Thecompanybelievescurrentcash,anticipatedcashflows,andliquiditymeasureswillensuresufficientcashtomeetobligationswithinthenext12months[234]−ThecompanymaypursueadditionalequityfinancingintheU.S.capitalmarkettoenhanceliquidityorincreasecashreservesforfutureinvestments[235]BusinessOperationsandStrategy−ThecompanyintroducedSaaSservicesinearly2022,offeringblockchain−poweredenterprisemanagementsolutionsviaitsBIFplatform[179]−ThecompanyoperatesthroughPRCsubsidiariesandVIEs,providingInternetadvertising,precisionmarketing,andblockchain−basedSaaSservices[178]−ThecompanyintroducedSaaSservicesinearly2022,offeringblockchain−poweredenterprisemanagementsolutions,butCOVID−19measuresnegativelyimpactedpromotionefforts[232]−ThecompanymodifiedSaaSservicestobemoreSME−friendly,includingapay−per−NFT−generationmodel,thoughrevenuesandprofitabilityhavenotmetexpectations[232]−Thecompanyplanstobroadenblockchain−basedSaaSapplicationscenarios,expandcoreadvertisingbusinessthroughacquisitions,andtargetoverseasusers[235]−Thecompanyobtaineda9.92.0 million short-term loan provided to an unrelated party[226] - No cash was provided by or used in financing activities for Q1 2023 and Q1 2022[228] - The company anticipates a slow recovery of performance and improvement in cash flow status over the next 12 months due to the impact of COVID-19 on SMEs[231] - The company is actively seeking acquisitions or joint ventures to expand its core business, which may decrease liquidity in the short term but improve gross margins and cash flow in the long term[230] - The company expects SaaS services to generate positive cash flow and improve liquidity due to self-developed software platform technology[232] - The company anticipates collecting short-term working capital loans and related interest income within the next 12 months[233] - The company plans to negotiate more favorable payment terms with major suppliers and reduce operating costs through personnel optimization and office space reduction[233] - The company believes current cash, anticipated cash flows, and liquidity measures will ensure sufficient cash to meet obligations within the next 12 months[234] - The company may pursue additional equity financing in the U.S. capital market to enhance liquidity or increase cash reserves for future investments[235] Business Operations and Strategy - The company introduced SaaS services in early 2022, offering blockchain-powered enterprise management solutions via its BIF platform[179] - The company operates through PRC subsidiaries and VIEs, providing Internet advertising, precision marketing, and blockchain-based SaaS services[178] - The company introduced SaaS services in early 2022, offering blockchain-powered enterprise management solutions, but COVID-19 measures negatively impacted promotion efforts[232] - The company modified SaaS services to be more SME-friendly, including a pay-per-NFT-generation model, though revenues and profitability have not met expectations[232] - The company plans to broaden blockchain-based SaaS application scenarios, expand core advertising business through acquisitions, and target overseas users[235] - The company obtained a 9.9% equity interest in Guangdong Yong Fu Xiang Health Management Co., Ltd. for RMB6.73 million (approximately US0.98 million)[236] - The company obtained a 9% equity interest in Guangzhou Yuan Qi Man Man Technology Co., Ltd. for RMB0.09 million (approximately US0.01million)[236]RegulatoryandCompliance−ThePCAOBsecuredcompleteaccesstoinspectandinvestigatePCAOB−registeredpublicaccountingfirmsinChinamainlandandHongKongin2022[175]−Thecompany′sauditor,locatedinHongKong,waspreviouslynotsubjecttoPCAOBinspections,whichcouldhaveimpactedinvestorconfidenceinthequalityoffinancialstatements[169]−ThecompanyfacesrisksofdelistingfromU.S.exchangesundertheHFCAAifPCAOBinspectionsareobstructedinthefuture[177]−NetassetsrestrictedduetoPRCregulationswereapproximatelyUS0.01 million)[236] Regulatory and Compliance - The PCAOB secured complete access to inspect and investigate PCAOB-registered public accounting firms in China mainland and Hong Kong in 2022[175] - The company's auditor, located in Hong Kong, was previously not subject to PCAOB inspections, which could have impacted investor confidence in the quality of financial statements[169] - The company faces risks of delisting from U.S. exchanges under the HFCAA if PCAOB inspections are obstructed in the future[177] - Net assets restricted due to PRC regulations were approximately US13.68 million as of March 31, 2023, and US$13.31 million as of December 31, 2022[209] - Dividends payable by foreign-invested enterprises to holding companies outside China are subject to a 10% withholding tax, with a potential reduction to 5% under certain conditions[210] Financial Instruments and Valuation - The fair value of warrant liabilities is determined based on unobservable inputs such as stock price volatility and risk-free interest rate[184]