ZW Data Action Technologies(CNET) - 2025 Q1 - Quarterly Report

Financial Performance - Revenues for Q1 2025 were $1,652,000, a decrease of 53% compared to $3,531,000 in Q1 2024[122] - Cost of revenues for Q1 2025 was $1,492,000, down from $3,459,000 in Q1 2024, reflecting a 57% reduction[123] - Gross profit for Q1 2025 was $160,000, compared to a gross profit of $72,000 in Q1 2024, indicating an increase in gross profit margin[123] - Total operating expenses decreased to $739,000 in Q1 2025 from $994,000 in Q1 2024, a reduction of approximately 26%[123] - Loss from operations improved to $(579,000) in Q1 2025 from $(922,000) in Q1 2024, showing a decrease in operational losses[123] - Net loss for the three months ended March 31, 2025, was approximately US$0.53 million, compared to a net loss of US$0.85 million for the same period in 2024[136] Revenue Sources - Total revenues decreased to US$1.65 million for the three months ended March 31, 2025, from US$3.53 million for the same period last year, primarily due to the winding down of search engine marketing services in the PRC[126] - Internet advertising revenues increased to approximately US$0.97 million for the three months ended March 31, 2025, compared to US$0.006 million for the same period in 2024, driven by a focus on higher-margin business segments[126] Cost Management - Cost of revenues decreased to US$1.49 million for the three months ended March 31, 2025, from US$3.46 million for the same period in 2024, reflecting a reduction in costs associated with search engine marketing services[127] - General and administrative expenses decreased to US$0.74 million for the three months ended March 31, 2025, from US$0.92 million for the same period in 2024, primarily due to a cost reduction plan[137] Cash Flow and Liquidity - As of March 31, 2025, the company had cash and cash equivalents of approximately US$0.81 million[146] - For the three months ended March 31, 2025, net cash used in operating activities was approximately US$0.98 million, compared to US$0.35 million for the same period in 2024[148][149] - The company reported a net cash inflow from investing activities of approximately US$0.48 million for the three months ended March 31, 2025, primarily due to the repayment of short-term loans and interest income[151] - Financing activities for the three months ended March 31, 2025, included advances from investors totaling approximately US$0.50 million[153] - The company has no current plans to distribute earnings or issue dividends to its holding company or U.S. investors in the foreseeable future[145] Strategic Initiatives - The company introduced SaaS services in early 2022, providing blockchain-powered enterprise management solutions[119] - The company is actively seeking to acquire businesses with AI capabilities and proprietary intellectual properties to enhance its marketing solutions[156] - The company plans to broaden the application of its blockchain-based SaaS services and expand its Internet advertising business through acquisitions targeting overseas users[162] - The company is engaged in strategic investments to expand its equity interests in health management companies[164][165] Regulatory Environment - The company is subject to the Holding Foreign Companies Accountable Act, which could lead to delisting if PCAOB inspections are not conducted[112] - 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[115] - The likelihood of the VIE agreements being challenged by PRC tax authorities is considered remote, with RMB15.25 million (approximately US$2.27 million) settled to the WFOE under these agreements[142] - The company has not experienced difficulties in obtaining credit facilities in the past, which may help address short-term liquidity deficits[159] Investments - In August 2022, the company acquired a 9.9% equity interest in Hunan Yong Fu Xiang Health Management Co., Ltd for RMB6.73 million (approximately US$0.98 million) with a commitment to pay by December 31, 2065[164] - In June 2023, the company obtained a 9.9% equity interest in Wuhan Ju Liang for RMB0.99 million (approximately US$0.14 million) with a commitment to pay by August 1, 2052[165]