ZW Data Action Technologies(CNET) - 2023 Q2 - Quarterly Report

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]