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

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

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

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

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

Financial Performance - Revenues for Q1 2023 decreased to $6.316 million, compared to $7.652 million in Q1 2022, representing a decline of 17.5%[186] - Gross loss for Q1 2023 was $314 thousand, compared to a gross profit of $134 thousand in Q1 2022[186] - Total operating expenses for Q1 2023 decreased to $998 thousand, down from $1.685 million in Q1 2022, a reduction of 40.8%[186] - Net loss for Q1 2023 was $1.143 million, compared to a net loss of $717 thousand in Q1 2022[187] - Total revenues decreased to $6.32 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 $0.13 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 $6.16 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 $0.03 million in subscription fee revenues for Q1 2023[193] - Gross loss of $0.31 million in Q1 2023 compared to a gross profit of $0.13 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 $0.07 million in Q1 2022 due to COVID-19 impacts[202] - General and administrative expenses decreased to $0.93 million in Q1 2023 from $1.55 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 $0.07 million in Q1 2022 due to headcount reductions[204] - Net loss increased to $1.14 million in Q1 2023 from $0.72 million in Q1 2022[206] Cash Flow and Liquidity - Cash and cash equivalents as of March 31, 2023, were approximately US$1.59 million[216] - Net cash used in operating activities for Q1 2023 was approximately US$0.92 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 US$1.88 million, including a US$2.0 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 US$0.98 million)[236] - The company obtained a 9% equity interest in Guangzhou Yuan Qi Man Man Technology Co., Ltd. for RMB0.09 million (approximately US$0.01 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 US$13.68 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]

UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-K ☒ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the Fiscal Year Ended December 31, 2022 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 NO. 001-34647 ZW DATA ACTION TECHNOLOGIES INC. (Exact name of registrant as specified in its charter) Nevada 20-4672080 (State or other jurisdict ...

[PART I. FINANCIAL INFORMATION](index=4&type=section&id=PART%20I.%20FINANCIAL%20INFORMATION) [Interim Financial Statements](index=4&type=section&id=Item%201.%20Interim%20Financial%20Statements) This section presents the unaudited condensed consolidated financial statements, revealing declines in assets, revenue, and a widening net loss, alongside significant delisting risks - The company is identified as a 'Commission-Identified Issuer' under the HFCAA, risking **U.S. stock delisting as early as 2024** due to its Hong Kong-based auditor being on the PCAOB's uninspectable list[5](index=5&type=chunk)[7](index=7&type=chunk)[8](index=8&type=chunk) - The company is actively seeking U.S. audit firms not on the PCAOB's determination list to mitigate delisting risk[9](index=9&type=chunk) - An agreement was signed on August 26, 2022, between the PCAOB and Chinese authorities to allow inspections of audit firms, though its final outcome and effectiveness remain uncertain[10](index=10&type=chunk) [Condensed Consolidated Balance Sheets](index=5&type=section&id=Condensed%20Consolidated%20Balance%20Sheets) Total assets decreased to **$25.0 million** from **$32.6 million**, driven by reduced cash, while liabilities and equity also declined Condensed Consolidated Balance Sheet Highlights (in thousands) | Account | Sep 30, 2022 (Unaudited) | Dec 31, 2021 | | :--- | :--- | :--- | | **Assets** | | | | Cash and cash equivalents | $2,154 | $7,173 | | Total current assets | $14,384 | $19,918 | | Total Assets | $25,000 | $32,631 | | **Liabilities & Equity** | | | | Total current liabilities | $6,561 | $8,821 | | Total Liabilities | $8,241 | $10,856 | | Total stockholders' equity | $16,759 | $21,766 | | Total Liabilities and Equity | $25,000 | $32,631 | [Condensed Consolidated Statements of Operations](index=7&type=section&id=Condensed%20Consolidated%20Statements%20of%20Operations%20and%20Comprehensive%20(Loss)%2FIncome) Revenues for the nine months fell to **$21.8 million** from **$34.8 million**, resulting in a net loss of **$5.3 million**, a significant increase from the prior year Statement of Operations Highlights (in thousands, except per share data) | Metric | Nine Months Ended Sep 30, 2022 | Nine Months Ended Sep 30, 2021 | Three Months Ended Sep 30, 2022 | Three Months Ended Sep 30, 2021 | | :--- | :--- | :--- | :--- | :--- | | Total Revenues | $21,813 | $34,847 | $7,216 | $11,900 | | Gross Profit/(Loss) | $2 | $(892) | $(51) | $43 | | Loss from Operations | $(6,095) | $(11,668) | $(1,831) | $(1,574) | | Net (Loss)/Income | $(5,271) | $(1,585) | $(2,840) | $1,374 | | Basic and Diluted (LPS)/EPS | $(0.15) | $(0.05) | $(0.08) | $0.04 | [Condensed Consolidated Statements of Cash Flows](index=9&type=section&id=Condensed%20Consolidated%20Statements%20of%20Cash%20Flows) Net cash used in operating activities improved to **$4.4 million**, while investing activities decreased significantly, resulting in a **$5.0 million** net cash decrease due to no financing activities Cash Flow Summary for the Nine Months Ended September 30 (in thousands) | Cash Flow Activity | 2022 (Unaudited) | 2021 (Unaudited) | | :--- | :--- | :--- | | Net cash used in operating activities | $(4,409) | $(6,600) | | Net cash used in investing activities | $(479) | $(6,097) | | Net cash provided by financing activities | $0 | $17,111 | | **Net (decrease)/increase in cash** | **$(5,019)** | **$4,434** | [Notes to Condensed Consolidated Financial Statements](index=14&type=section&id=Notes%20to%20Condensed%20Consolidated%20Financial%20Statements) Notes detail the company's VIE structure, significant liquidity challenges with **$4.41 million** net operating cash outflow, and plans for new SaaS services, alongside disclosures on concentrations and asset transfer restrictions - The company operates as a Nevada holding company through contractual arrangements with Chinese Variable Interest Entities (VIEs), holding no equity ownership in them[38](index=38&type=chunk) - The company faces liquidity issues, with a **$6.10 million** loss from operations and a **$4.41 million** net operating cash outflow for the nine months ended September 30, 2022, relying on financing and planning new SaaS services and cost reductions for improvement[43](index=43&type=chunk)[45](index=45&type=chunk)[47](index=47&type=chunk) - Net assets of approximately **$15.2 million** as of September 30, 2022, are restricted from transfer to the U.S. holding company due to PRC regulations[128](index=128&type=chunk) Supplier Concentration (Cost of Revenues) | Period | Supplier A | Supplier B | Supplier C | | :--- | :--- | :--- | :--- | | Nine Months 2022 | 53% | 27% | <10% | | Three Months 2022 | 63% | 13% | 14% | [Management's Discussion and Analysis of Financial Condition and Results of Operations](index=41&type=section&id=Item%202.%20Management's%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) Management attributes the **37%** revenue decline to COVID-19 impacts, reports a **$5.3 million** net loss, and outlines strategies including new SaaS services and cost reductions to improve liquidity and performance - Total revenues decreased to **$21.81 million** for the nine months ended September 30, 2022, from **$34.85 million** in the prior year, primarily due to COVID-19 impacts on SME clients in China[189](index=189&type=chunk)[190](index=190&type=chunk) - General and administrative expenses for the nine months decreased to **$5.70 million** from **$10.37 million**, primarily due to a **$6.81 million** decrease in share-based compensation expenses[207](index=207&type=chunk) - The company is introducing new Software-as-a-Service (SaaS) offerings based on its Blockchain Integrated Framework (BIF) platform, projecting approximately **$0.50 million** in SaaS revenues in the next six months to improve performance and cash flow[179](index=179&type=chunk)[241](index=241&type=chunk) - To improve liquidity, the company plans to negotiate better payment terms with suppliers, reduce operating costs, and potentially apply for revolving credit facilities from PRC banks[243](index=243&type=chunk) [Quantitative and Qualitative Disclosures About Market Risk](index=56&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) This section is not applicable as the company qualifies as a smaller reporting company - Disclosure is not applicable to smaller reporting companies[246](index=246&type=chunk) [Controls and Procedures](index=56&type=section&id=Item%204.%20Controls%20and%20Procedures) Management concluded that disclosure controls and procedures were effective as of September 30, 2022, with no material changes to internal control over financial reporting during the quarter - The principal executive and financial officers concluded that disclosure controls and procedures were effective as of September 30, 2022[246](index=246&type=chunk) - No material changes occurred in the company's internal control over financial reporting during the fiscal quarter[247](index=247&type=chunk) [PART II. OTHER INFORMATION](index=56&type=section&id=PART%20II.%20OTHER%20INFORMATION) [Legal Proceedings](index=56&type=section&id=Item%201.%20Legal%20Proceedings) The company is not currently a party to any material legal or administrative proceedings, nor is it aware of any pending or threatened ones - The company is not currently a party to any material legal or administrative proceedings[248](index=248&type=chunk) [Risk Factors](index=57&type=section&id=Item%201A.%20Risk%20Factors) This section is omitted as the company qualifies as a smaller reporting company - Information is omitted based on the company's status as a smaller reporting company[250](index=250&type=chunk) [Unregistered Sales of Equity Securities and Use of Proceeds](index=57&type=section&id=Item%202.%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds) No unregistered sales of equity securities or use of proceeds were reported for the period - None reported for the period[250](index=250&type=chunk) [Defaults Upon Senior Securities](index=57&type=section&id=Item%203.%20Defaults%20Upon%20Senior%20Securities) No defaults upon senior securities were reported - None reported[250](index=250&type=chunk) [Mine Safety Disclosures](index=57&type=section&id=Item%204.%20Mine%20Safety%20Disclosures) This section is not applicable to the company's operations - Not applicable[250](index=250&type=chunk) [Other Information](index=57&type=section&id=Item%205.%20Other%20Information) No other information was reported for the period - None reported[250](index=250&type=chunk) [Exhibits](index=58&type=section&id=Item%206.%20Exhibits) This section lists exhibits filed with the Form 10-Q, including officer certifications and Inline XBRL financial data files - Exhibits filed include Certifications of the Principal Executive Officer and Principal Accounting and Financial Officer (Exhibits 31.1, 31.2, 32.1) and Inline XBRL data (Exhibit 101)[252](index=252&type=chunk)[253](index=253&type=chunk)[254](index=254&type=chunk)[255](index=255&type=chunk)

Revenue Performance - Total revenues decreased to US$7.65 million for the three months ended March 31, 2022, down from US$8.40 million for the same period last year, primarily due to a decline in Internet advertising revenues [146]. - Revenues from Internet advertising and related services decreased to US$1.06 million and US$6.59 million, respectively, compared to US$1.40 million and US$6.87 million for the same period in 2021, attributed to regional COVID-19 outbreaks affecting SMEs [147]. - For the three months ended March 31, 2022, total revenues were approximately US$7.65 million, a decrease from US$8.40 million for the same period in 2021 [156]. Cost and Profitability - Cost of revenues decreased to US$7.52 million for the three months ended March 31, 2022, from US$9.11 million for the same period in 2021, reflecting a decrease in costs associated with search engine marketing services [150]. - Gross profit for the three months ended March 31, 2022, was US$134,000, compared to a gross loss of US$717,000 for the same period in 2021 [143]. - The gross margin rate for Internet advertising and related services was 8% for the three months ended March 31, 2022, compared to 9% for the same period in 2021 [151]. - The gross margin rate for the distribution of search engine marketing services improved to 1% for the three months ended March 31, 2022, from -9% in the same period last year [152]. - Gross profit for the three months ended March 31, 2022, was approximately US$0.13 million, compared to a gross loss of approximately US$0.72 million for the same period in 2021, resulting in an overall gross margin improvement to 2% from -9% [154]. Operating Expenses - Operating expenses increased to US$1.69 million for the three months ended March 31, 2022, from US$1.10 million in the same period last year, driven by higher general and administrative expenses [143]. - Total operating expenses increased to approximately US$1.69 million for the three months ended March 31, 2022, from US$1.10 million for the same period in 2021, representing 22.0% of total revenues [156]. Net Income and Loss - Net loss attributable to ZW Data Action Technologies Inc. was US$717,000 for the three months ended March 31, 2022, compared to a net income of US$685,000 for the same period in 2021 [143]. - The company incurred a loss from operations of approximately US$1.55 million for the three months ended March 31, 2022, compared to a loss of US$1.82 million for the same period in 2021 [157]. - The net loss attributable to ZW Data Action Technologies Inc. was approximately US$0.72 million for the three months ended March 31, 2022, compared to a net income of approximately US$0.69 million for the same period in 2021 [165]. Cash Flow and Investments - Net cash used in operating activities was approximately US$0.89 million for the three months ended March 31, 2022, a significant improvement from US$3.71 million for the same period in 2021 [170]. - Net cash used in investing activities resulted in an outflow of approximately US$1.46 million for the three months ended March 31, 2022, compared to US$1.87 million for the same period in 2021 [175]. - The company had cash and cash equivalents of approximately US$4.82 million as of March 31, 2022 [166]. - The company acquired a 9.09% equity interest in Shenzhen Global Best Products for RMB5.0 million (approximately US$0.79 million) and made an initial cash investment of RMB2.0 million (approximately US$0.32 million) in 2021 [184]. - The remaining investment amount of RMB3.0 million (approximately US$0.47 million) in Global Best Products is expected to be paid by December 31, 2022 [184]. Tax and Legal Matters - The company recognized an income tax benefit of approximately US$0.002 million for the three months ended March 31, 2022, compared to US$0.10 million for the same period in 2021 [163]. - The current PRC Enterprise Income Tax Law imposes a 10% withholding income tax on dividends distributed by foreign invested enterprises, which was previously exempted [180]. - The company is currently not a party to any legal or administrative proceedings, indicating a stable legal standing [189]. Internal Controls and Procedures - The company’s disclosure controls and procedures were evaluated as effective as of March 31, 2022, ensuring timely reporting of required information [186]. - There were no changes in internal control over financial reporting that materially affected the company during the first fiscal quarter of 2022 [188]. Future Expectations - The company anticipates maintaining the gross margin rate for Internet advertising services at current levels in the following quarters of fiscal 2022 [151]. - The company expects slight improvement in the gross margin rate for search engine marketing services in the upcoming quarters of fiscal 2022 [152].