[PART I. FINANCIAL INFORMATION](index=4&type=section&id=PART%20I.%20FINANCIAL%20INFORMATION) [Item 1. Interim Financial Statements](index=4&type=section&id=Item%201.%20Interim%20Financial%20Statements) This section presents unaudited condensed interim financial statements, notes, and addresses PCAOB inspection and delisting risks - The PCAOB was historically unable to inspect the company's auditor in Hong Kong, depriving investors of inspection benefits. While complete access was secured in **2022**, uncertainty remains regarding future inspections, which could lead to **delisting under the HFCAA**[8](index=8&type=chunk)[9](index=9&type=chunk)[13](index=13&type=chunk) [Condensed Consolidated Balance Sheets](index=6&type=section&id=Condensed%20Consolidated%20Balance%20Sheets) Balance sheets show decreased total assets and liabilities, reduced equity, with increased cash and decreased accounts receivable | Metric | June 30, 2025 (US$ '000) | December 31, 2024 (US$ '000) | Change (US$ '000) | % Change | | :----------------------------------- | :------------------------ | :-------------------------- | :---------------- | :------- | | Cash and cash equivalents | 1,706 | 812 | 894 | 110.1% | | Accounts receivable, net | 185 | 1,614 | (1,429) | -88.5% | | Total current assets | 7,983 | 9,173 | (1,190) | -13.0% | | Total Assets | 9,246 | 9,686 | (440) | -4.5% | | Total current liabilities | 5,430 | 5,846 | (416) | -7.1% | | Total Liabilities | 5,673 | 5,968 | (295) | -4.9% | | Total equity | 3,573 | 3,718 | (145) | -3.9% | [Condensed Consolidated Statements of Operations and Comprehensive Loss](index=8&type=section&id=Condensed%20Consolidated%20Statements%20of%20Operations%20and%20Comprehensive%20Loss) Revenues and gross profit significantly decreased, with net loss increasing for the three-month period and slightly decreasing for the six-month period | Metric (US$ '000) | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | Change (US$ '000) | % Change | | :----------------------------------- | :----------------------------- | :----------------------------- | :---------------- | :------- | | Revenues | 2,200 | 9,951 | (7,751) | -77.9% | | Cost of revenues | 1,993 | 9,551 | (7,558) | -79.1% | | Gross profit | 207 | 400 | (193) | -48.3% | | Total operating expenses | 1,468 | 1,623 | (155) | -9.6% | | Loss from operations | (1,261) | (1,223) | (38) | 3.1% | | Net loss | (1,167) | (1,082) | (85) | 7.8% | | Loss per common share (Basic & Diluted) | (0.50) | (0.55) | 0.05 | -9.1% | | Metric (US$ '000) | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Change (US$ '000) | % Change | | :----------------------------------- | :----------------------------- | :----------------------------- | :---------------- | :------- | | Revenues | 548 | 6,420 | (5,872) | -91.5% | | Cost of revenues | 501 | 6,092 | (5,591) | -91.8% | | Gross profit | 47 | 328 | (281) | -85.7% | | Total operating expenses | 729 | 629 | 100 | 15.9% | | Loss from operations | (682) | (301) | (381) | 126.6% | | Net loss | (637) | (232) | (405) | 174.6% | | Loss per common share (Basic & Diluted) | (0.27) | (0.11) | (0.16) | 145.5% | [Condensed Consolidated Statements of Cash Flows](index=10&type=section&id=Condensed%20Consolidated%20Statements%20of%20Cash%20Flows) Net cash increased due to investing and financing activities, despite operating cash usage, contrasting with a net decrease in the prior year | Cash Flow Activity (US$ '000) | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | Change (US$ '000) | | :------------------------------------ | :----------------------------- | :----------------------------- | :---------------- | | Net cash used in operating activities | (299) | (1,030) | 731 | | Net cash provided by investing activities | 456 | 651 | (195) | | Net cash provided by financing activities | 750 | 70 | 680 | | Net increase/(decrease) in cash and cash equivalents | 894 | (307) | 1,201 | | Cash and cash equivalents at end of period | 1,706 | 510 | 1,196 | [Condensed Consolidated Statements of Changes in Equity](index=12&type=section&id=Condensed%20Consolidated%20Statements%20of%20Changes%20in%20Equity) Total equity slightly decreased due to net losses and currency adjustments, partially offset by common stock issuance from private placement | Equity Component (US$ '000) | Balance, January 1, 2025 | Balance, June 30, 2025 | | :-------------------------- | :----------------------- | :--------------------- | | Common stock | 2 | 3 | | Additional paid-in capital | 63,102 | 64,176 | | Accumulated deficit | (63,451) | (64,619) | | Total stockholders' equity | 3,718 | 3,512 | - Issuance of common stock for private placement contributed **$1,075 thousand** to equity during the six months ended June 30, 2025[33](index=33&type=chunk) [Notes to Condensed Consolidated Financial Statements](index=14&type=section&id=Notes%20to%20Condensed%20Consolidated%20Financial%20Statements) These notes detail organization, VIEs, liquidity, accounting policies, and specific financial items, including asset acquisition and PRC dividend restrictions [1.5.1. Organization and Nature of Operations](index=14&type=section&id=1.5.1.%20Organization%20and%20Nature%20of%20Operations) ZW Data Action Technologies Inc. is a Nevada holding company operating in China, providing internet advertising, marketing, data, blockchain SaaS, and IP licensing - The company operates as a Nevada holding company, conducting business in China through Hong Kong and mainland China subsidiaries and Variable Interest Entities (VIEs)[38](index=38&type=chunk)[39](index=39&type=chunk) - Core services include Internet advertising, precision marketing, influencer marketing, related data and technical services, blockchain-enabled web/mobile applications, SaaS services, and intellectual property (IP) licensing[38](index=38&type=chunk) [1.5.2. Variable Interest Entities (VIEs)](index=14&type=section&id=1.5.2.%20Variable%20Interest%20Entities%20(VIEs)) Consolidated VIEs reported total assets of **$1.216 million** and liabilities of **$3.694 million**, with a net loss of **$71 thousand** for six months, a significant reduction from prior year | Metric (US$ '000) | June 30, 2025 | December 31, 2024 | | :------------------------ | :------------ | :---------------- | | Total Assets | 1,216 | 1,334 | | Total Liabilities | 3,694 | 3,663 | | Metric (US$ '000) | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :---------------- | :----------------------------- | :----------------------------- | | Revenues | 49 | 9,201 | | Net loss | (71) | (1,067) | [1.5.3. Liquidity and Capital Resources (Notes)](index=16&type=section&id=1.5.3.%20Liquidity%20and%20Capital%20Resources%20(Notes)) Operating losses and negative cash flows raise **going concern doubts**; management plans to improve liquidity through resource optimization, collections, cost reduction, and AI acquisitions - The company incurred a loss from operations of **US$1.26 million** and a net operating cash outflow of **US$0.30 million** for the six months ended June 30, 2025[42](index=42&type=chunk) - Management plans to optimize internet resources cost, strengthen accounts receivable collection, negotiate favorable payment terms, and reduce operating costs to improve cash flows and liquidity[43](index=43&type=chunk) - The company is actively seeking to acquire businesses with AI capabilities and proprietary intellectual properties for more accurate marketing solutions and cost-efficient content creation[43](index=43&type=chunk) - These factors raise **substantial doubt** about the company's ability to continue as a **going concern** within one year[44](index=44&type=chunk)[45](index=45&type=chunk) [1.5.4. Summary of Significant Accounting Policies](index=17&type=section&id=1.5.4.%20Summary%20of%20Significant%20Accounting%20Policies) Financial statements adhere to U.S. GAAP, covering consolidation, credit losses, revenue recognition, a **1-for-4 reverse stock split**, and the Rahula asset acquisition - The company's financial statements are prepared in accordance with U.S. GAAP and include accounts of all subsidiaries and VIEs[46](index=46&type=chunk)[49](index=49&type=chunk) - A **1-for-4 reverse stock split** became effective on **September 30, 2024**, reducing authorized and outstanding common stock shares[55](index=55&type=chunk) - On **March 7, 2025**, the company acquired Rahula Digital Media (HK) Limited for **US$0.6 million**, primarily for its intellectual property rights on agent management, marketing data management, targeted marketing, and mass marketing systems and technologies. This was accounted for as an **asset acquisition**[61](index=61&type=chunk)[62](index=62&type=chunk)[64](index=64&type=chunk) [1.5.5. Accounts Receivable, Net](index=21&type=section&id=1.5.5.%20Accounts%20Receivable,%20Net) Net accounts receivable significantly decreased to **$0.185 million** from **$1.614 million**, with a **$0.309 million** credit loss allowance provided for the six months | Metric (US$ '000) | June 30, 2025 | December 31, 2024 | | :------------------------ | :------------ | :---------------- | | Accounts receivable | 5,330 | 6,431 | | Allowance for credit loss | (5,145) | (4,817) | | Accounts receivable, net | 185 | 1,614 | - Provision for credit loss for accounts receivable was **$309 thousand** for the six months ended June 30, 2025, compared to **$694 thousand** for the same period in 2024[54](index=54&type=chunk)[70](index=70&type=chunk) [1.5.6. Prepayments and Deposit to Suppliers](index=22&type=section&id=1.5.6.%20Prepayments%20and%20Deposit%20to%20Suppliers) Prepayments and deposits to suppliers increased to **$5.254 million** from **$4.508 million**, mainly due to higher prepayments to advertising resources providers | Metric (US$ '000) | June 30, 2025 | December 31, 2024 | | :-------------------------------- | :------------ | :---------------- | | Deposits to advertising resources providers | 529 | 612 | | Prepayments to advertising resources providers | 4,221 | 2,996 | | Total | 5,254 | 4,508 | [1.5.7. Other Current Assets](index=22&type=section&id=1.5.7.%20Other%20Current%20Assets) Net other current assets decreased to **$0.838 million** from **$2.239 million**, primarily due to reduced short-term loans and increased credit loss allowance | Metric (US$ '000) | June 30, 2025 | December 31, 2024 | | :------------------------ | :------------ | :---------------- | | Short-term loans to unrelated parties | 2,653 | 3,606 | | Allowance for credit loss | (1,890) | (1,513) | | Other current assets, net | 838 | 2,239 | - The company provided **$380 thousand** in credit losses on short-term loans for the six months ended June 30, 2025, compared to a reversal of **$50 thousand** for the same period in 2024[54](index=54&type=chunk)[75](index=75&type=chunk) - One short-term loan of **$0.62 million** to Digital Sun Ventures Limited remains outstanding and fully allowanced, with the company pursuing legal actions for collection[76](index=76&type=chunk) [1.5.8. Long-term Investments](index=23&type=section&id=1.5.8.%20Long-term%20Investments) Long-term investments remained stable at **$0.397 million** with no impairment, holding minority equity interests in three companies | Metric (US$ '000) | January 1, 2025 | June 30, 2025 | | :------------------------ | :-------------- | :------------ | | Balance | 397 | 397 | - The company holds **7.69%**, **9.9%**, and **9.9%** equity interests in New Business Holdings Limited, Hunan Yong Fu Xiang Health Management Co., Ltd, and Wuhan Ju Liang Media Co., Ltd, respectively[78](index=78&type=chunk) - No impairment loss was provided against long-term investments for the six months ended June 30, 2025[80](index=80&type=chunk) [1.5.9. Property and Equipment, Net](index=24&type=section&id=1.5.9.%20Property%20and%20Equipment,%20Net) Net property and equipment increased to **$0.161 million** from **$0.116 million**, driven by additions in leasehold improvements and office equipment, offset by depreciation | Metric (US$ '000) | June 30, 2025 | December 31, 2024 | | :------------------------ | :------------ | :---------------- | | Property and equipment, cost | 1,911 | 1,838 | | Accumulated depreciation | (1,750) | (1,722) | | Property and equipment, net | 161 | 116 | - Depreciation expenses were approximately **$0.02 million** for the six months ended June 30, 2025, a decrease from **$0.06 million** in the prior year[81](index=81&type=chunk) [1.5.10. Intangible Assets, Net](index=24&type=section&id=1.5.10.%20Intangible%20Assets,%20Net) Net intangible assets increased to **$0.635 million** due to Rahula IP acquisition, with significantly decreased amortization expenses for the six months | Intangible Asset (US$ '000) | Gross Carrying Value | Accumulated Amortization | Impairment | Net Carrying Value (June 30, 2025) | | :-------------------------- | :------------------- | :----------------------- | :--------- | :--------------------------------- | | Rahula's Intellectual Property | 707 | (72) | - | 635 | - Amortization expenses for the six months ended June 30, 2025, were approximately **$0.07 million**, a significant decrease from **$0.42 million** for the same period in 2024[83](index=83&type=chunk) - Estimated future amortization expenses are **$0.12 million** for 2025, **$0.24 million** for 2026, **$0.24 million** for 2027, and **$0.05 million** for 2028[84](index=84&type=chunk) [1.5.11. Accrued Payroll and Other Accruals](index=25&type=section&id=1.5.11.%20Accrued%20Payroll%20and%20Other%20Accruals) Accrued payroll and other accruals decreased to **$0.155 million** from **$0.557 million**, mainly due to reduced accrued operating expenses | Metric (US$ '000) | June 30, 2025 | December 31, 2024 | | :------------------------ | :------------ | :---------------- | | Accrued payroll and staff welfare | 72 | 71 | | Accrued operating expenses | 83 | 486 | | Total | 155 | 557 | [1.5.12. Taxation](index=26&type=section&id=1.5.12.%20Taxation) Total taxes payable remained stable at **$3.175 million**; the company has significant NOLs in the U.S. and PRC, with PRC regulations restricting dividend payments and imposing withholding taxes | Metric (US$ '000) | June 30, 2025 | December 31, 2024 | | :------------------------ | :------------ | :---------------- | | Turnover tax and surcharge payable | 1,923 | 1,247 | | Enterprise income tax payable | 1,252 | 1,905 | | Total taxes payable | 3,175 | 3,152 | - The U.S. holding company has aggregate NOLs of approximately **US$34.67 million** as of June 30, 2025, with a **full valuation allowance** due to uncertainties in future utilization[86](index=86&type=chunk) - PRC subsidiaries and VIEs have NOLs of approximately **US$11 million** as of June 30, 2025, expiring by **2028**[87](index=87&type=chunk) - Net assets restricted in the aggregate due to PRC regulations were approximately **US$13.18 million** as of June 30, 2025, limiting dividend payments to the Nevada holding company[92](index=92&type=chunk) - Dividends from PRC subsidiaries to the Hong Kong holding company may be subject to a **10% withholding tax**, or **5%** if certain beneficial owner and tax resident conditions are met, which is not assured[93](index=93&type=chunk) [1.5.13. Long-term Borrowing from a Related Party](index=27&type=section&id=1.5.13.%20Long-term%20Borrowing%20from%20a%20Related%20Party) A non-interest bearing long-term borrowing from a related party, linked to Rise King WFOE's capital contribution, is not expected to be repaid within one year - A non-interest bearing long-term loan from a related party is outstanding, linked to the original paid-in capital contribution in Rise King WFOE, with no repayment expected within one year[90](index=90&type=chunk) [1.5.14. Restricted Net Assets](index=27&type=section&id=1.5.14.%20Restricted%20Net%20Assets) PRC regulations restrict net asset transfers from subsidiaries and VIEs, impacting dividend payments to U.S. investors, with **$13.18 million** restricted as of June 30, 2025 - PRC regulations require subsidiaries and VIEs to set aside at least **10%** of after-tax profit to statutory surplus reserve until it reaches **50%** of registered capital, restricting asset transfer[92](index=92&type=chunk) - As of June 30, 2025, approximately **US$13.18 million** of net assets were restricted, impacting the ability to pay dividends to U.S. investors[92](index=92&type=chunk) - The company does not currently plan to distribute earnings or pay cash dividends, intending to retain funds for business operations and expansion[97](index=97&type=chunk) [1.5.15. Employee Defined Contribution Plan](index=28&type=section&id=1.5.15.%20Employee%20Defined%20Contribution%20Plan) PRC employees participate in a government-mandated defined contribution plan, with **$0.03 million** in employee benefits expensed for the six months - Full-time employees in the PRC participate in a government-mandated defined contribution plan[98](index=98&type=chunk) - Total employee benefits expensed were approximately **US$0.03 million** for the six months ended June 30, 2025, down from **US$0.05 million** in 2024[98](index=98&type=chunk) [1.5.16. Concentration of Risk](index=28&type=section&id=1.5.16.%20Concentration%20of%20Risk) The company faces credit risk with **90%** cash in China, high customer concentration (**93%** from three customers), and significant supplier concentration (**94%** from three suppliers) - **90%** of the company's cash and cash equivalents are held by major financial institutions in China[99](index=99&type=chunk) - For the six months ended June 30, 2025, three customers (A, B, C) accounted for **44%**, **28%**, and **21%** of total revenues, respectively[100](index=100&type=chunk) - For the six months ended June 30, 2025, three suppliers (A, B, C) accounted for **44%**, **28%**, and **22%** of total cost of revenues, respectively[102](index=102&type=chunk) [1.5.17. Commitments and Contingencies](index=31&type=section&id=1.5.17.%20Commitments%20and%20Contingencies) The company committed **US$0.14 million** for a **9.9%** equity interest in Wuhan Ju Liang by 2052, with no material legal proceedings pending or threatened - The company committed to a **RMB0.99 million** (approx. **US$0.14 million**) cash payment for a **9.9%** equity interest in Wuhan Ju Liang by **August 1, 2052**[104](index=104&type=chunk) - The company is not currently a party to any material legal or administrative proceedings and is not aware of any pending or threatened[105](index=105&type=chunk) [1.5.18. Segment Reporting](index=31&type=section&id=1.5.18.%20Segment%20Reporting) The company reports three segments: Internet Ad, IP Services, and Blockchain technology, with Internet Ad generating highest revenue but an operating loss, while others showed income | Segment (US$ '000) | Revenues (6M 2025) | Operating Income/(Loss) (6M 2025) | Total Assets (June 30, 2025) | | :----------------- | :----------------- | :-------------------------------- | :--------------------------- | | Internet Ad and related service | 1,488 | (176) | 7,399 | | IP Services | 97 | 26 | 636 | | Blockchain technology | 615 | 55 | 55 | | Segment (US$ '000) | Revenues (6M 2024) | Operating Income/(Loss) (6M 2024) | Total Assets (June 30, 2024) | | :----------------- | :----------------- | :-------------------------------- | :--------------------------- | | Internet Ad and related service | 9,201 | (813) | 7,657 | | Blockchain technology | 750 | 330 | 1,171 | [1.5.19. Loss per Share](index=33&type=section&id=1.5.19.%20Loss%20per%20Share) Basic and diluted loss per share for six months was **$(0.50)** (improved from **$(0.55)**), and for three months was **$(0.27)** (compared to **$(0.11)**) | Metric | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :------------------------------------ | :----------------------------- | :----------------------------- | | Net loss attributable to ZW Data Action Technologies Inc. (US$ '000) | (1,168) | (1,066) | | Weighted average number of common shares outstanding | 2,342,790 | 1,926,205 | | Loss per share-Basic and diluted (US$) | (0.50) | (0.55) | | Metric | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | | :------------------------------------ | :----------------------------- | :----------------------------- | | Net loss attributable to ZW Data Action Technologies Inc. (US$ '000) | (637) | (216) | | Weighted average number of common shares outstanding | 2,383,918 | 1,926,205 | | Loss per share-Basic and diluted (US$) | (0.27) | (0.11) | [1.5.20. Share-based Compensation Expenses](index=34&type=section&id=1.5.20.%20Share-based%20Compensation%20Expenses) The company recognized **$0.287 million** in share-based compensation expenses for the six months, related to common stock granted to consultants in August 2024 - Approximately **0.18 million** fully-vested common shares were granted to business and financial consultants in **August 2024**[114](index=114&type=chunk) | Expense Category (US$ '000) | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :--------------------------- | :----------------------------- | :----------------------------- | | General and administrative expenses | 287 | - | | Total | 287 | - | [1.5.21. Subsequent Events](index=34&type=section&id=1.5.21.%20Subsequent%20Events) The company has evaluated subsequent events through the financial statement issuance date and determined there are no material events requiring disclosure - No material subsequent events were identified through the date the financial statements were issued[116](index=116&type=chunk) [Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations](index=35&type=section&id=Item%202.%20Management's%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) This section discusses financial condition, operations, PCAOB risks, business segments, and detailed analysis of revenues, costs, expenses, and liquidity, highlighting revenue decline and going concern risks [2.1. Forward-Looking Statements](index=35&type=section&id=2.1.%20Forward-Looking%20Statements) This section contains forward-looking statements subject to substantial risks and uncertainties, where actual results may differ materially from projections - The discussion contains forward-looking statements, which are subject to **substantial risks and uncertainties**, and actual results may differ materially from projections[118](index=118&type=chunk) [2.2. PCAOB Inspection and HFCAA Risk](index=35&type=section&id=2.2.%20PCAOB%20Inspection%20and%20HFCAA%20Risk) The company discusses historical PCAOB inspection inability and **delisting risk** under HFCAA; despite **2022** access, future inspection uncertainty poses a continued **delisting threat** - The PCAOB was historically unable to inspect the company's auditor in Hong Kong, leading to concerns about audit quality and investor confidence[119](index=119&type=chunk) - The company's common stock faces **delisting risk** under the HFCAA if the PCAOB is unable to inspect or investigate auditors in China mainland and Hong Kong for **two consecutive years**[120](index=120&type=chunk)[121](index=121&type=chunk) - Although the PCAOB secured complete access in **2022** and vacated its prior determinations, the ability to conduct satisfactory inspections in the future remains uncertain and outside the company's control[124](index=124&type=chunk)[126](index=126&type=chunk) [2.3. Overview of Business](index=36&type=section&id=2.3.%20Overview%20of%20Business) The company is a holding company providing internet advertising, precision marketing, blockchain SaaS, and related data/technical services to PRC SMEs through subsidiaries and VIEs - The company is a Nevada holding company providing Internet advertising, precision marketing, blockchain-based SaaS services, and related data and technical services to SMEs in the PRC[127](index=127&type=chunk) - Services include distribution of search engine marketing, online advertising placements, e-commerce O2O advertising, and blockchain-powered enterprise management solutions via its BIF platform[128](index=128&type=chunk) [2.4. Basis of Presentation, Management Estimates and Critical Accounting Policies](index=37&type=section&id=2.4.%20Basis%20of%20Presentation,%20Management%20Estimates%20and%20Critical%20Accounting%20Policies) Unaudited condensed consolidated financial statements are prepared under U.S. GAAP, requiring estimates for critical accounting policies like revenue recognition, credit loss, and warrant liabilities - Financial statements are prepared in conformity with U.S. GAAP, requiring estimates and assumptions[129](index=129&type=chunk) - Critical accounting policies include revenue recognition, estimation of current expected credit loss, and fair value measurement of warrant liabilities[130](index=130&type=chunk) [2.5. Results of Operations](index=37&type=section&id=2.5.%20Results%20of%20Operations) Total revenues and gross profit significantly declined due to winding down search engine marketing, though gross margin improved from a shift to higher-margin services, leading to increased operating and net losses [2.5.1. Revenues](index=39&type=section&id=2.5.1.%20Revenues) Total revenues significantly decreased to **$2.2 million** (six months) and **$0.55 million** (three months) due to winding down search engine marketing, partially offset by new internet advertising and IP services | Revenue Type (US$ '000) | 6 Months Ended June 30, 2025 | 6 Months Ended June 30, 2024 | Change (US$ '000) | % Change | | :--------------------------------------- | :--------------------------- | :--------------------------- | :---------------- | :------- | | Internet advertising and related marketing service | 1,439 | - | 1,439 | N/A | | Distribution of search engine marketing service | 49 | 9,201 | (9,152) | -99.5% | | IP Services | 97 | - | 97 | N/A | | Blockchain-based SaaS services | 615 | 750 | (135) | -18.0% | | Total Revenues | 2,200 | 9,951 | (7,751) | -77.9% | - The decrease in total revenues was primarily due to the **winding down of the distribution of search engine marketing services**[135](index=135&type=chunk) - Internet advertising and related marketing services revenue increased significantly due to a shift in focus towards higher-margin influencer marketing, marketing and branding strategy, creative development, and digital advertising management services for Hong Kong and overseas clients[135](index=135&type=chunk) [2.5.2. Cost of Revenues](index=40&type=section&id=2.5.2.%20Cost%20of%20Revenues) Total cost of revenues significantly decreased to **$1.99 million** (six months) and **$0.50 million** (three months) in line with reduced search engine marketing, improving overall gross margins | Cost Type (US$ '000) | 6 Months Ended June 30, 2025 | 6 Months Ended June 30, 2024 | Change (US$ '000) | % Change | | :--------------------------------------- | :--------------------------- | :--------------------------- | :---------------- | :------- | | Internet advertising and related marketing service | 1,323 | - | 1,323 | N/A | | Distribution of search engine marketing service | 39 | 9,131 | (9,092) | -99.6% | | IP Services | 71 | - | 71 | N/A | | Blockchain-based SaaS services | 560 | 420 | 140 | 33.3% | | Total Cost of Revenues | 1,993 | 9,551 | (7,558) | -79.1% | | Gross Margin Rate | 6 Months Ended June 30, 2025 | 6 Months Ended June 30, 2024 | | :---------------- | :--------------------------- | :--------------------------- | | Overall | 9.4% | 4.0% | | Internet advertising and related marketing service | 8.1% | - | | Distribution of search engine marketing service | 20.4% | 0.8% | | IP Services | 26.8% | - | | Blockchain-based SaaS services | 8.9% | 44% | - The decrease in total cost of revenues was primarily due to **reduced costs associated with the winding down of search engine marketing services**[136](index=136&type=chunk) [2.5.3. Gross Profit](index=41&type=section&id=2.5.3.%20Gross%20Profit) Gross profit decreased to **$0.21 million** (six months) and **$0.05 million** (three months), but overall gross margin improved to **9.4%** and **8.6%** due to a shift to higher-margin services | Metric (US$ '000) | 6 Months Ended June 30, 2025 | 6 Months Ended June 30, 2024 | Change (US$ '000) | % Change | | :---------------- | :--------------------------- | :--------------------------- | :---------------- | :------- | | Gross profit | 207 | 400 | (193) | -48.3% | | Gross margin | 9.4% | 4.0% | 5.4% pts | 135.0% | | Metric (US$ '000) | 3 Months Ended June 30, 2025 | 3 Months Ended June 30, 2024 | Change (US$ '000) | % Change | | :---------------- | :--------------------------- | :--------------------------- | :---------------- | :------- | | Gross profit | 47 | 328 | (281) | -85.7% | | Gross margin | 8.6% | 5.1% | 3.5% pts | 68.6% | [2.5.4. Operating Expenses](index=41&type=section&id=2.5.4.%20Operating%20Expenses) Total operating expenses decreased to **$1.47 million** (six months) but increased to **$0.73 million** (three months), with changes in G&A due to share-based compensation, credit loss allowance, and cost reductions | Expense (US$ '000) | 6 Months Ended June 30, 2025 | 6 Months Ended June 30, 2024 | Change (US$ '000) | % Change | | :----------------- | :--------------------------- | :--------------------------- | :---------------- | :------- | | Sales and marketing expenses | - | 133 | (133) | -100.0% | | General and administrative expenses | 1,468 | 1,490 | (22) | -1.5% | | Total operating expenses | 1,468 | 1,623 | (155) | -9.6% | | Expense (US$ '000) | 3 Months Ended June 30, 2025 | 3 Months Ended June 30, 2024 | Change (US$ '000) | % Change | | :----------------- | :--------------------------- | :--------------------------- | :---------------- | :------- | | Sales and marketing expenses | - | 54 | (54) | -100.0% | | General and administrative expenses | 729 | 575 | 154 | 26.8% | | Total operating expenses | 729 | 629 | 100 | 15.9% | - General and administrative expenses for the six months ended June 30, 2025, increased due to **$0.29 million** in share-based compensation and **$0.03 million** in credit loss allowance, offset by a **$0.34 million** decrease from cost reduction plans[147](index=147&type=chunk) [2.5.5. Loss from Operations](index=42&type=section&id=2.5.5.%20Loss%20from%20Operations) Loss from operations increased to **$1.26 million** (six months) and significantly to **$0.68 million** (three months) compared to prior year periods | Metric (US$ '000) | 6 Months Ended June 30, 2025 | 6 Months Ended June 30, 2024 | Change (US$ '000) | % Change | | :----------------- | :--------------------------- | :--------------------------- | :---------------- | :------- | | Loss from operations | (1,261) | (1,223) | (38) | 3.1% | | Metric (US$ '000) | 3 Months Ended June 30, 2025 | 3 Months Ended June 30, 2024 | Change (US$ '000) | % Change | | :----------------- | :--------------------------- | :--------------------------- | :---------------- | :------- | | Loss from operations | (682) | (301) | (381) | 126.6% | [2.5.6. Other Income/(Expenses)](index=42&type=section&id=2.5.6.%20Other%20Income/(Expenses)) Total other income decreased for both periods due to lower interest income from short-term loans, with no impairment loss on long-term investments in 2025 | Metric (US$ '000) | 6 Months Ended June 30, 2025 | 6 Months Ended June 30, 2024 | Change (US$ '000) | % Change | | :----------------- | :--------------------------- | :--------------------------- | :---------------- | :------- | | Interest income | 99 | 167 | (68) | -40.7% | | Total other income/(expenses) | 94 | 137 | (43) | -31.4% | | Metric (US$ '000) | 3 Months Ended June 30, 2025 | 3 Months Ended June 30, 2024 | Change (US$ '000) | % Change | | :----------------- | :--------------------------- | :--------------------------- | :---------------- | :------- | | Interest income | 45 | 76 | (31) | -40.8% | | Total other income/(expenses) | 44 | 68 | (24) | -35.3% | - No impairment loss on long-term investments was recognized for the six and three months ended June 30, 2025[145](index=145&type=chunk) [2.5.7. Loss Before Income Tax Benefit/(Expense)](index=42&type=section&id=2.5.7.%20Loss%20Before%20Income%20Tax%20Benefit/(Expense)) Loss before income tax benefit increased to **$1.17 million** (six months) and significantly to **$0.64 million** (three months) compared to prior year periods | Metric (US$ '000) | 6 Months Ended June 30, 2025 | 6 Months Ended June 30, 2024 | Change (US$ '000) | % Change | | :----------------- | :--------------------------- | :--------------------------- | :---------------- | :------- | | Loss before income tax benefit/(expense) | (1,167) | (1,086) | (81) | 7.5% | | Metric (US$ '000) | 3 Months Ended June 30, 2025 | 3 Months Ended June 30, 2024 | Change (US$ '000) | % Change | | :----------------- | :--------------------------- | :--------------------------- | :---------------- | :------- | | Loss before income tax benefit/(expense) | (638) | (233) | (405) | 173.8% | [2.5.8. Income Tax Benefit/(Expense)](index=43&type=section&id=2.5.8.%20Income%20Tax%20Benefit/(Expense)) Negligible income tax benefits were recognized for both periods, primarily related to net operating losses from an operating VIE | Metric (US$ '000) | 6 Months Ended June 30, 2025 | 6 Months Ended June 30, 2024 | | :----------------- | :--------------------------- | :--------------------------- | | Income tax benefit | - | 4 | | Metric (US$ '000) | 3 Months Ended June 30, 2025 | 3 Months Ended June 30, 2024 | | :----------------- | :--------------------------- | :--------------------------- | | Income tax benefit | 1 | 1 | [2.5.9. Net Loss](index=43&type=section&id=2.5.9.%20Net%20Loss) Total net loss was **$1.17 million** (six months) and **$0.64 million** (three months), compared to **$1.08 million** and **$0.23 million** in prior year periods | Metric (US$ '000) | 6 Months Ended June 30, 2025 | 6 Months Ended June 30, 2024 | Change (US$ '000) | % Change | | :----------------- | :--------------------------- | :--------------------------- | :---------------- | :------- | | Net loss | (1,167) | (1,082) | (85) | 7.8% | | Metric (US$ '000) | 3 Months Ended June 30, 2025 | 3 Months Ended June 30, 2024 | Change (US$ '000) | % Change | | :----------------- | :--------------------------- | :--------------------------- | :---------------- | :------- | | Net loss | (637) | (232) | (405) | 174.6% | [2.6. Liquidity and Capital Resources (MD&A)](index=43&type=section&id=2.6.%20Liquidity%20and%20Capital%20Resources%20(MD%26A)) Liquidity is primarily from financing, facing operating losses and negative cash flows; PRC regulations restrict cash transfers and dividends, and despite plans for loan collection, equity financing, and cost reductions, **going concern doubts** remain [2.6.1. Cash Transfer within Our Organization and the Related Restrictions](index=43&type=section&id=2.6.1.%20Cash%20Transfer%20within%20Our%20Organization%20and%20the%20Related%20Restrictions) Intercompany cash transfers require approval; PRC regulations restrict dividend payments from subsidiaries and VIEs, including statutory reserves and potential **10% withholding tax**, with **$13.18 million** restricted net assets - Intercompany cash transfers within the organization require prior approval from the financial director and CEO/CFO[150](index=150&type=chunk) - PRC regulations restrict dividend payments from PRC subsidiaries and VIEs, requiring **10%** of after-tax profit to be set aside for statutory surplus reserve[152](index=152&type=chunk) - As of June 30, 2025, approximately **US$13.18 million** in net assets were restricted, impacting the ability to transfer funds to the Nevada holding company[152](index=152&type=chunk) - Dividends from PRC entities to the Hong Kong holding company may be subject to a **10% withholding tax**, or **5%** if beneficial owner and tax resident conditions are met, which is not assured[153](index=153&type=chunk) [2.6.2. Cash Flow Analysis](index=44&type=section&id=2.6.2.%20Cash%20Flow%20Analysis) Net cash used in operating activities decreased to **$0.30 million**; investing activities provided **$0.46 million** (from loan repayments and IP acquisition); financing activities significantly increased to **$0.75 million** from investor advances | Cash Flow Activity (US$ '000) | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :------------------------------------ | :----------------------------- | :----------------------------- | | Net cash used in operating activities | (299) | (1,030) | | Net cash provided by investing activities | 456 | 651 | | Net cash provided by financing activities | 750 | 70 | | Net increase/(decrease) in cash and cash equivalents | 894 | (307) | - Net cash used in operating activities decreased due to lower net loss (excluding non-cash items) and favorable changes in accounts receivable and advance from customers, offset by increased prepayments[161](index=161&type=chunk) - Net cash provided by investing activities in 2025 included **$1.12 million** from short-term loan repayments and **$0.60 million** for intellectual property acquisition (Rahula)[162](index=162&type=chunk) - Net cash provided by financing activities in 2025 was primarily from **$0.75 million** in advances from investors[164](index=164&type=chunk) [2.6.3. Future Liquidity, Material Cash Requirements and Capital Resources](index=47&type=section&id=2.6.3.%20Future%20Liquidity,%20Material%20Cash%20Requirements%20and%20Capital%20Resources) Future liquidity needs include working capital; plans involve AI business acquisition, loan collection, and cost reduction, but **going concern uncertainty** remains, potentially requiring additional financing and shareholder dilution - Future short-term liquidity needs include working capital for influencer marketing, digital marketing services, and operating expenses[165](index=165&type=chunk) - The company is actively seeking to acquire businesses with AI capabilities and proprietary intellectual properties to enhance marketing solutions and cost-efficient content creation[166](index=166&type=chunk) - Plans to improve liquidity include collecting maturing short-term loans, pursuing equity financing, and reducing operating costs through personnel optimization and office space reduction[168](index=168&type=chunk) - These factors raise **substantial doubt** about the company's ability to continue as a **going concern** within one year[169](index=169&type=chunk)[170](index=170&type=chunk) [2.6.4. Off-Balance Sheet Arrangements](index=48&type=section&id=2.6.4.%20Off-Balance%20Sheet%20Arrangements) The company has no off-balance sheet arrangements - The company has no off-balance sheet arrangements[172](index=172&type=chunk) [2.6.5. Disclosure of Contractual Obligations](index=48&type=section&id=2.6.5.%20Disclosure%20of%20Contractual%20Obligations) The company has commitments to pay **US$0.98 million** for Hunan Yong Fu Xiang equity by **2065** and **US$0.14 million** for Wuhan Ju Liang equity by **2052** - Committed to pay approximately **US$0.98 million** for a **9.9%** equity interest in Hunan Yong Fu Xiang Health Management Co., Ltd by **December 31, 2065**[173](index=173&type=chunk) - Committed to pay approximately **US$0.14 million** for a **9.9%** equity interest in Wuhan Ju Liang by **August 1, 2052**[174](index=174&type=chunk) [Item 3. Quantitative and Qualitative Disclosures About Market Risk](index=48&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) This item is not applicable to the company due to its status as a smaller reporting company - This disclosure is not applicable to the company as it is a smaller reporting company[175](index=175&type=chunk) [Item 4. Controls and Procedures](index=48&type=section&id=Item%204.%20Controls%20and%20Procedures) Management concluded disclosure controls and procedures were effective as of **June 30, 2025**, with no material changes in internal control over financial reporting during the quarter [4.1. Evaluation of Disclosure Controls and Procedures](index=48&type=section&id=4.1.%20Evaluation%20of%20Disclosure%20Controls%20and%20Procedures) Management concluded that disclosure controls and procedures were effective as of **June 30, 2025** - Management concluded that the company's disclosure controls and procedures were effective as of June 30, 2025[176](index=176&type=chunk) [4.2. Changes in Internal Control over Financial Reporting](index=49&type=section&id=4.2.%20Changes%20in%20Internal%20Control%20over%20Financial%20Reporting) No material changes in internal control over financial reporting occurred during the fiscal quarter ended **June 30, 2025** - No material changes in internal control over financial reporting occurred during the fiscal quarter ended June 30, 2025[177](index=177&type=chunk) [PART II. OTHER INFORMATION](index=49&type=section&id=PART%20II.%20OTHER%20INFORMATION) [Item 1. Legal Proceedings](index=49&type=section&id=Item%201.%20Legal%20Proceedings) The company is not currently a party to any material legal or administrative proceedings and is unaware of any pending or threatened proceedings - The company is not currently a party to any material legal or administrative proceedings and is not aware of any pending or threatened proceedings[178](index=178&type=chunk) [Item 1A. Risk Factors](index=49&type=section&id=Item%201A.%20Risk%20Factors) Risk factor disclosures are omitted due to the company's status as a smaller reporting company - Risk factor disclosures are omitted due to the company's status as a smaller reporting company[179](index=179&type=chunk) [Item 2. Unregistered Sales of Equity Securities and Use of Proceeds](index=49&type=section&id=Item%202.%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds) No unregistered sales of equity securities or use of proceeds to report - No unregistered sales of equity securities or use of proceeds to report[180](index=180&type=chunk) [Item 3. Defaults Upon Senior Securities](index=49&type=section&id=Item%203.%20Defaults%20Upon%20Senior%20Securities) No defaults upon senior securities to report - No defaults upon senior securities to report[181](index=181&type=chunk) [Item 4. Mine Safety Disclosures](index=49&type=section&id=Item%204.%20Mine%20Safety%20Disclosures) Mine safety disclosures are not applicable to the company - Mine safety disclosures are not applicable to the company[182](index=182&type=chunk) [Item 5. Other Information](index=49&type=section&id=Item%205.%20Other%20Information) No directors or officers reported adoption or termination of Rule 10b5-1 or non-Rule 10b5-1 trading arrangements during the fiscal quarter - No directors or officers reported the adoption or termination of Rule 10b5-1 or non-Rule 10b5-1 trading arrangements during the quarter[183](index=183&type=chunk) [Item 6. Exhibits](index=50&type=section&id=Item%206.%20Exhibits) This section lists filed exhibits, including certifications from the Principal Executive Officer and Principal Accounting and Financial Officer, and Inline XBRL data - The report includes certifications from the Principal Executive Officer and Principal Accounting and Financial Officer (Exhibits **31.1**, **31.2**, **32.1**)[185](index=185&type=chunk) - Inline XBRL data files are provided as Exhibit **101** and **104**[185](index=185&type=chunk) [Signatures](index=51&type=section&id=Signatures) The report was signed by Handong Cheng, CEO and Acting CFO, on behalf of ZW Data Action Technologies Inc. on **August 14, 2025** - The report was signed by Handong Cheng, Chief Executive Officer and Acting Chief Financial Officer, on **August 14, 2025**[189](index=189&type=chunk)

UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-Q ☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended March 31, 2025 or ☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from ____ to _____ Commission File Number: 001-34647 ZW Data Action Technologies Inc. (Exact name of registrant as specified in its charter) Nevada 20-4672080 (State or other ...

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].