ZW Data Action Technologies Reports First Quarter 2023 Unaudited Financial Results


BEIJING, May 22, 2023 (GLOBE NEWSWIRE) -- ZW Data Action Technologies Inc. (Nasdaq: CNET) (the "Company"), an integrated online advertising, precision marketing, data analytics and other value-added services provider serving enterprise clients, today announced its unaudited financial results for the three months ended March 31, 2023.

First Quarter 2023 Financial Results

Revenues

For the first quarter of 2023, revenues decreased by approximately $1.34 million, or 17.5%, to $6.32 million from $7.65 million for the same period last year. The decrease in revenues was primarily attributable to the decrease in revenues from our Internet advertising and related data services business category, as a result of the peak infection of COVID-19 in China during the first fiscal quarter of 2023, which affected business of most of our small medium enterprises (“SMEs”) clients.

Cost of revenues

Total cost of revenues decreased by approximately $0.89 million, or 11.8%, to $6.63 million for the first quarter of 2023 from $7.52 million for the same period last year. The decrease in cost was primarily due to the decrease in cost related to providing Internet advertising and related data services on our ad portals, which was in line with the decrease in the related revenues.

Gross profit (loss) and gross profit (loss) margin

Gross loss was approximately $0.31 million for the first quarter of 2023, compared to a gross profit of $0.13 million for the same period last year. Overall gross loss margin rate was 5% for the first quarter of 2023, compared to a gross profit margin of 2% for the same period last year.

Operating expenses

Sales and marketing expenses was approximately $0.05 million for the first quarter of 2023, compared to $0.07 million for the same period last year. The decrease in sales and marketing expenses was mainly attributable to the peak infection of COVID-19 in China from November 2022 through February 2023, which affected a significant number of our workforce employed in our operations, and thus adversely affected our normal business activities during the first fiscal quarter of 2023.

General and administrative expenses decreased by approximately $0.62 million, or 39.8%, to $0.93 million for the first quarter of 2023 from $1.55 million for the same period last year. The decrease in general and administrative expenses was mainly attributable to the decrease in amortization of administrative assets of approximately $0.45 million and the decrease in general administrative expenses of approximately $0.47 million, as a result of the cost reduction plan executed by management and the adverse impact on our normal business activities of the peak infection of COVID-19 during the first fiscal quarter of 2023, which was partially offset by increase in allowance for expected credit losses of approximately $0.30 million.

Research and development expenses was approximately $0.02 million for the first quarter of 2023, compared to $0.07 million for the same period last year. The decrease in research and development expenses was primarily due to a reduction in headcount in our research and development department.

Operating loss

Loss from operations was approximately $1.31 million for the first quarter of 2023, compared to $1.55 million for the same period last year. Operating loss margin was 21% for the first quarter of 2023, compared to 20% for the same period last year.

Other income, net

Total other income, net was approximately $0.17 million for the first quarter of 2023, compared to $0.83 million for the same period last year. The decrease was primarily attributable to the decrease in gain from change in fair value of warrant liabilities.

Net loss attributable to CNET and loss per share

Net loss attributable to CNET was approximately $1.14 million, or loss per share of $0.16, for the first quarter of 2023. This was compared to $0.72 million, or loss per share of $0.10**, for the same period last year.

Financial Condition

As of March 31, 2023, the Company had cash and cash equivalents of approximately $1.59 million, compared to $4.39 million as of December 31, 2022. Accounts receivable, net was approximately $1.57 million as of March 31, 2023, compared to $1.75 million as of December 31, 2022. Working capital was approximately $5.55 million as of March 31, 2023, compared to $6.61 million as of December 31, 2022.

Net cash used in operating activities was approximately $0.92 million for the first quarter of 2023, compared to $0.89 million for the same period last year. Net cash used in investing activities was approximately $1.88 million for the first quarter of 2023, compared to $1.46 million for the same period last year.

About ZW Data Action Technologies Inc.

Established in 2003 and headquartered in Beijing, China, ZW Data Action Technologies Inc. (the “Company”) offers online advertising, precision marketing, data analytics and other value-added services for enterprise clients. Leveraging its fully integrated services platform, proprietary database, and cutting-edge algorithms, the Company delivers customized, result-driven business solutions for small and medium-sized enterprise clients in China. The Company also develops blockchain enabled web/mobile applications and software solutions for clients. More information about the Company can be found at: http://www.zdat.com/.

Safe Harbor Statement

This release contains certain "forward-looking statements" relating to the business of ZW Data Action Technologies Inc., which can be identified by the use of forward-looking terminology such as "believes," "expects," "anticipates," "estimates" or similar expressions. Such forward-looking statements involve known and unknown risks and uncertainties, including business uncertainties relating market demand, future capital requirements, and other factors that may cause actual results to be materially different from those described herein as anticipated, believed, estimated or expected. Certain of these risks and uncertainties are or will be described in greater detail in our filings with the Securities and Exchange Commission. These forward-looking statements are based on ZW Data Action Technologies Inc.’s current expectations and beliefs concerning future developments and their potential effects on the Company. There can be no assurance that future developments affecting ZW Data Action Technologies Inc. will be those anticipated by ZW Data Action Technologies Inc. These forward-looking statements involve a number of risks, uncertainties (some of which are beyond the control of the Company) or other assumptions that may cause actual results or performance to be materially different from those expressed or implied by such forward-looking statements. ZW Data Action Technologies Inc. undertakes no obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events or otherwise, except as may be required under applicable securities laws.

For more information, please contact:

Sherry Zheng        
Weitian Group LLC
Email: shunyu.zheng@weitian-ir.com
Phone: +1 718-213-7386


ZW DATA ACTION TECHNOLOGIES INC.
CONSOLIDATED BALANCE SHEETS
(In thousands, except for number of shares and per share data)
 
   March 31,
2023
 December 31,
2022
   (US $) (US $)
   (Unaudited)  
Assets     
Current assets:     
Cash and cash equivalents  $1,592 $4,391
Accounts receivable, net of allowance for credit loss of $4,070 and $3,760, respectively   1,567  1,745
Prepayment and deposit to suppliers   4,390  4,567
Other current assets, net   3,327  1,610
Total current assets   10,876  12,313
      
Long-term investments   1,604  1,596
Operating lease right-of-use assets   1,680  1,761
Property and equipment, net   225  249
Intangible assets, net   2,964  3,264
Long-term deposits and prepayments   69  69
Deferred tax assets, net   413  406
Total Assets  $17,831 $19,658
      
Liabilities and Equity     
Current liabilities:     
Accounts payable *  $218 $205
Advances from customers *   720  739
Accrued payroll and other accruals *   266  438
Taxes payable *   3,280  3,248
Operating lease liabilities *   310  347
Lease payment liabilities related to short-term leases *   103  101
Other current liabilities *   341  437
Warrant liabilities   84  185
Total current liabilities   5,322  5,700


Long-term liabilities:      
Operating lease liabilities-Non current   1,500   1,535  
Long-term borrowing from a related party   127   126  
Total Liabilities   6,949   7,361  
       
Commitments and contingencies      
       
Equity:      
ZW Data Action Technologies Inc.’s stockholders’ equity      
Common stock (US$0.001 par value; authorized 20,000,000 shares; issued and outstanding 7,174,506 shares at March 31, 2023 and December 31, 2022)   7  7** 
Additional paid-in capital   62,017  62,017** 
Statutory reserves   2,598   2,598  
Accumulated deficit   (54,859)  (53,525) 
Accumulated other comprehensive income   1,119   1,200  
Total stockholders’ equity   10,882   12,297  
       
Total Liabilities and Equity  $17,831  $19,658  

* Liabilities recognized as a result of consolidating these VIEs do not represent additional claims on the Company’s general assets.


ZW DATA ACTION TECHNOLOGIES INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS
(In thousands, except for number of shares and per share data)
     
  Three Months Ended March 31,
  2023   2022 
  (US $) (US $)
  (Unaudited) (Unaudited)
     
Revenues $6,316  $7,652 
Cost of revenues  6,630   7,518 
Gross (loss)/profit  (314)  134 
     
Operating expenses    
Sales and marketing expenses  48   69 
General and administrative expenses  932   1,548 
Research and development expenses  18   68 
Total operating expenses  998   1,685 
     
Loss from operations  (1,312)  (1,551)
     
Other income/(expenses)    
Interest income  72   46 
Other expenses, net  (5)  (9)
Change in fair value of warrant liabilities  101   795 
Total other income  168   832 
     
Loss before income tax benefit  (1,144)  (719)
Income tax benefit  1   2 
Net loss $(1,143) $(717)
     
     
Net loss $(1,143) $(717)
Foreign currency translation loss  (81)  (22)
Comprehensive loss $(1,224) $(739)
     
Loss per share    
Loss per common share    
     
Basic and diluted** $(0.16) $(0.10)
     
Weighted average number of common shares outstanding:    
     
Basic and diluted**  7,174,506   7,079,962 


ZW DATA ACTION TECHNOLOGIES INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
  
 Three Months Ended March 31,
  2023   2022 
 (US $)(US $)
 (Unaudited)(Unaudited)
Cash flows from operating activities  
Net loss$(1,143) $(717)
Adjustments to reconcile net loss to net cash used in operating activities  
Depreciation and amortization 322   554 
Amortization of operating lease right-of-use assets 106   60 
Share-based compensation expenses 35   56 
Provision for allowance for credit losses 301   - 
Deferred taxes (1)  (2)
Disposal of fixed assets 3   - 
Change in fair value of warrant liabilities (101)  (795)
Other non-operating income (72)  (45)
Changes in operating assets and liabilities  
Accounts receivable (56)  (159)
Prepayment and deposit to suppliers 171   914 
Other current assets (1)  13 
Accounts payable 10   (373)
Advances from customers (27)  (203)
Accrued payroll and other accruals (174)  (66)
Other current liabilities (184)  (36)
Taxes payable (8)  7 
Lease payment liability related to short-term leases -   (42)
Operating lease liabilities (97)  (56)
Net cash used in operating activities (916)  (890)
   
Cash flows from investing activities  
Repayment of short-term loans from ownership investee entities -   13 
Short-term loan to unrelated parties (2,000)  (2,500)
Repayment of short-term loans and interest income from unrelated parties 123   1,029 
Net cash used in investing activities (1,877)  (1,458)


Cash flows from financing activities   
    
Net cash provided by/(used in) financing activities -   - 
    
Effect of exchange rate fluctuation on cash and cash equivalents (6)  (1)
    
Net decrease in cash and cash equivalents (2,799)  (2,349)
    
Cash and cash equivalents at beginning of the period 4,391   7,173 
Cash and cash equivalents at end of the period$1,592  $4,824 
    

**Retrospectively restated for effect of the 1-for-5 reverse stock split effective on January 18, 2023.