ZW Data Action Technologies(CNET) - 2020 Q1 - Quarterly Report

Financial Performance - Total revenues for the three months ended March 31, 2020, were $4.384 million, a decrease of 48.8% from $8.567 million in the same period of 2019[13]. - Gross profit for the same period was $899 thousand, compared to $442 thousand in the prior year, indicating an increase in gross profit margin[13]. - The net loss for the three months ended March 31, 2020, was $2.310 million, compared to a net loss of $1.140 million in the same period of 2019, reflecting a worsening financial performance[15]. - The company reported a net loss of $2.310 million for the three months ended March 31, 2020, compared to a net loss of $1.138 million for the same period in 2019, resulting in a basic and diluted loss per share of $0.11[103][115]. - The company incurred a loss from operations of approximately $2.28 million for the three months ended March 31, 2020, compared to a loss of $0.74 million in 2019[139]. - The comprehensive loss attributable to ChinaNet Online Holdings, Inc. for the same period was $2,239,000, compared to $1,173,000 in the prior year, indicating an increase of 90.9%[15]. Cash Flow and Liquidity - Cash and cash equivalents at the end of the period were $1.555 million, a slight decrease from $1.603 million at the beginning of the period[18]. - The company reported a net cash provided by operating activities of $1.518 million for the three months ended March 31, 2020, compared to a net cash used of $2.270 million in the same period of 2019[16]. - Cash flows from operating activities showed a net cash provided of $1,518,000 for the three months ended March 31, 2020, compared to a net cash used of $2,270,000 in the same period of 2019, indicating a significant turnaround[16]. - There is substantial doubt about the company's ability to continue as a going concern within one year after the issuance of the financial statements, with plans to improve cash flow through various strategies[149]. Operating Expenses - Operating expenses increased significantly to $3.175 million from $1.180 million year-over-year, primarily due to higher general and administrative expenses[13]. - Total operating expenses for the three months ended March 31, 2020, were $3.175 million, with significant expenses in corporate operations amounting to $2.148 million[99]. - The company incurred share-based compensation expenses of approximately $1.919 million for the three months ended March 31, 2020, compared to $101,000 in the same period of 2019[110]. - General and administrative expenses rose to US$2.80 million for the three months ended March 31, 2020, from US$0.81 million in 2019, largely due to a US$1.55 million increase in share-based compensation[137]. Assets and Liabilities - Total current assets as of March 31, 2020, were approximately $6.05 million, down from $7.66 million as of December 31, 2019, indicating a decline of 21%[23]. - Total liabilities as of March 31, 2020, were approximately $4.63 million, a decrease from $5.65 million as of December 31, 2019, representing a reduction of 18%[23]. - The company reported total taxes payable of US$3.26 million as of March 31, 2020, slightly increasing from US$3.21 million as of December 31, 2019[66]. - The company has incurred aggregate net operating losses (NOLs) of approximately US$22.3 million as of March 31, 2020, with carryforwards expiring over time[68]. Revenue Breakdown - Revenue from internet advertising and related services was $3,236,000, accounting for 73.8% of total revenues, down from $8,562,000 in the prior year[37]. - The company recognized revenue of $3.74 million over time and $0.65 million at a point in time for the three months ended March 31, 2020[37]. - Revenues from Internet advertising and related services decreased significantly to $0.95 million and $1.99 million for the three months ended March 31, 2020, compared to $1.84 million and $6.73 million for the same period in 2019[124]. Strategic Initiatives - The company is in the process of developing blockchain-powered platform applications as part of its business expansion strategy[22]. - The company plans to optimize its internet resources cost investment strategy to improve gross profit margins and strengthen accounts receivable collection management[29]. - The company expects to officially open its new Guangzhou headquarters in July 2020 to enhance blockchain services and optimize client proximity[118]. Market and Operational Risks - The COVID-19 outbreak has adversely affected the company's business operations and cash flows, raising substantial doubt about its ability to continue as a going concern[29]. - The company’s operations were significantly impacted by the COVID-19 pandemic, leading to decreased advertising spending and delays in revenue growth[114]. - The company reported a significant concentration of supplier risk, with Supplier A accounting for 71% of the cost of revenues for the three months ended March 31, 2020[93].