GlobeNewswire Inc | Nov 13, 2020 04:30PM EST

November 13, 2020

BEIJING, Nov. 13, 2020 (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 and nine months ended September 30, 2020.

Third Quarterof 2020Financial Highlights

For the Three Months Ended September 30,($ millions, except per share data) 2020 2019 % ChangeRevenues $12.30 $15.51 -20.7%Gross profit (loss) ($0.64) $0.89 -171.9%Gross margin -5.2% 5.8% -11pp*Loss from operations ($1.40) ($0.28) -410.5%Operating loss margin -11.4% -1.8% -9.6ppNet loss attributable to CNET ($1.33) ($0.39) -243.6%Loss per share ($0.06) ($0.02) -200.0%*pp: percent points

-- Revenues decreased by 20.7% to $12.30 million for the third quarter of 2020, primarily due to the decrease in revenues from our Internet advertising and distribution of the right to use search engine marketing service business categories, as a result of the slow recovery after the COVID-19 outbreak. -- Gross loss was $0.64 million with a gross loss margin of 5.2% for the third quarter of 2020. -- Loss from operations was $1.40 million for the third quarter of 2020, compared to $0.28 million for the same period of last year, primarily attributable to the decrease in gross profit, which was partially offset by the decrease in operating expenses. -- Net loss attributable to CNET was $1.33 million, or loss per share of $0.06, for the third quarter of 2020, compared to net loss of $0.39 million, or loss per share of $0.02, for the same period of last year.

Despite continued decrease on a year-over-year basis, our third quarter revenues increased 18% sequentially and almost tripled from the trough level in the first quarter, highlighting the continuing post-pandemic recovery trend. Looking ahead, with restoring growth and profitability remaining a challenge for us in the near-term, we are actively pursuing new initiatives, opportunities, and strategic alternatives to right the ship, said Mr. Handong Cheng, Chairman and Chief Executive Officer of ZW Data Action Technologies.

Third Quarter 2020 Financial Results

Revenues

For the Three Months Ended September 30, 2020 2019 % Change- Internet advertising and related data 2,429 3,949 -38.5%service- Distribution of the right to use search 8,706 11,554 -24.6%engine marketing service- Data and technical services 300 5 NMInternet advertising and related services 11,435 15,508 -26.3%Ecommerce O2O advertisement and marketing 269 0 NMservicesTechnical solution services 600 0 NMTotal revenues 12,304 15,508 -20.7%

For the third quarter of 2020, revenues decreased by $3.20 million, or 20.7%, to $12.30 million from $15.51 million for the same period of last year. The decrease in revenues was primarily attributable to the decrease in revenues from the Internet advertising and distribution of the right to use search engine marketing service business categories, as a result of slow business recovery after the COVID-19 outbreak during the first quarter of 2020.

Cost of revenues

For the Three Months Ended September 30, 2020 2019 % Change- Internet advertising and related data 1,998 3,669 -45.5%service- Distribution of the right to use search 9,731 10,947 -11.1%engine marketing service- Data and technical services 265 0 NMInternet advertising and related services 11,994 14,616 -17.9%Ecommerce O2O advertisement and marketing 375 0 NMservicesTechnical solution services 576 0 NMTotal cost of revenues 12,945 14,616 -11.4%

Total cost of revenues decreased by $1.67 million, or 11.4%, to $12.95 million for the third quarter of 2020 from $14.62 million for the same period of last year. The decrease in cost of revenues was primary attributable to the decrease in costs associated with the distribution of the right to use search engine marketing service we purchased from key search engines and cost related to providing Internet advertising services on our ad portals, which was in line with the decrease in the related revenues as discussed above.

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

Gross loss was $0.64 million for the third quarter of 2020, compared to gross profit of $0.89 million for the same period of last year, which was primarily due to gross loss incurred from our main revenue stream, the distribution of the right to use search engine marketing service business category, as a result of the slow recovery of economy after the COVID-19 outbreak during the first quarter of 2020, which was partially offset by the increase in gross profit generated from Internet advertising business. Gross loss margin was 5.2% for third quarter of 2020, compared to gross profit margin of 5.8% for the same period of last year.

Operating expenses

Sales and marketing expenses decreased by $0.05 million, or 47.7%, to $0.06 million for the third quarter of 2020 from $0.11 million for the same period of last year. The decrease in sales and marketing expenses was mainly attributable to the decrease in performance based salary and bonus expenses, due to the decrease in revenues.

General and administrative expenses decreased by $0.23 million, or 27.5%, to $0.59 million for the third quarter of 2020 from $0.82 million for the same period of last year. The decrease in general and administrative expenses was mainly attributable to the decrease in general departmental expenses, as a result of cost reduction plan executed by management after the COVID-19 outbreak.

Research and development expenses decreased by $0.13 million, or 52.7%, to $0.11 million for the third quarter of 2020 from $0.24 million for the same period of last year. Research and development expenses accounted for 0.9% of total revenues for the third quarter of 2020, compared to 1.5% for the same period of last year.

Operating loss

Loss from operations was $1.40 million for the third quarter of 2020, compared to $0.28 million for the same period of last year. Operating loss margin was 11.4% for the third quarter of 2020, compared to 1.8% for the same period of last year.

Other income (expense), net

Total other expenses decreased to $0.08 million for the third quarter of 2020, compared to $0.13 million for the same period of last year, which was primarily related to change in fair value of warrant liabilities.

Net lossattributable to CNET and loss per share

Net loss attributable to CNET was $1.33 million, or loss per share of $0.06, for the third quarter of 2020. This compared to net loss attributable to CNET of $0.39 million, or loss per share of $0.02, for the same period of last year.

First Nine Months 2020 Financial Results

For the Nine Months Ended September 30,($ millions, except per share data) 2020 2019 % ChangeRevenues $27.10 $39.53 -31.4%Gross profit $0.56 $1.70 -67.3%Gross margin 2.1% 4.3% -2.2 pp*Loss from operations ($4.70) ($2.24) -110.3%Operating loss margin -17.3% -5.7% -11.7 ppNet loss attributable to CNET ($4.61) ($1.91) -142.0%Loss per share ($0.22) ($0.12) -83.3%*pp: percent points

Revenues

For the Nine Months Ended September 30, 2020 2019 % Change- Internet advertising and related data 5,679 9,384 -39.5 %service- Distribution of the right to use search 18,004 30,134 -40.3 %engine marketing service- Data and technical services 900 10 NM Internet advertising and related services 24,583 39,528 -37.8 %Ecommerce O2O advertisement and marketing 1,276 0 NM servicesTechnical solution services 1,245 0 NM Total revenues 27,104 39,528 -31.4 %

For the first nine months of 2020, revenues decreased by $12.42 million, or 31.4%, to $27.10 million from $39.53 million for the same period of last year. The decrease in revenues was primarily attributable to the decrease in revenues from our Internet advertising and distribution of the right to use search engine marketing service business categories, as a result of the COVID-19 outbreak during the first fiscal quarter and the slow recovery in the second and third quarters of 2020.

Cost of revenues

For the Nine Months Ended September 30, 2020 2019 % Change- Internet advertising and related data 4,904 8,887 -44.8 %service- Distribution of the right to use search 19,147 28,936 -33.8 %engine marketing service- Data and technical services 796 5 NM Internet advertising and related services 24,847 37,828 -34.3 %Ecommerce O2O advertisement and marketing 1,125 0 NM servicesTechnical solution services 576 0 NM Total cost of revenues 26,548 37,828 -29.8 %

For the first nine months of 2020, cost of revenues decreased by $11.28 million, or 29.8%, to $26.55 million from $37.83 million for the same period of last year, which was primarily due to the decrease in costs associated with the distribution of the right to use search engine marketing service we purchased from key search engines and cost related to providing Internet advertising services on our ad portals, which was in line with the decrease in the related revenues.

Gross profit and gross margin

Gross profit decreased by $1.14 million, or 67.3%, to $0.56 million for the first nine months of 2020 from $1.70 million for the same period of last year, as a result of the gross loss of our distribution of the right to use search engine marketing service and partially offset by and the increase in gross profit generated from our Internet advertising service, Ecommerce O2O advertising and marketing services and technical solution services during the first nine months of 2020.

Overall gross margin was 2.1% for first nine months of 2020, compared to 4.3% for the same period of last year.

Operating expenses

Sales and marketing expenses decreased by $0.17 million, or 36.4%, to $0.29 million for the first nine months of 2020 from $0.46 million for the same period of last year. The changes in sales and marketing expenses was mainly attributable to the following reasons: (1) staff salary and benefit expenses and general departmental expenses decreased by $0.29 million, due to office shutdown during the first fiscal quarter of 2020, resulted from the COVID-19 outbreak during the period and related epidemic control measures imposed by the local governments where we operate, and slow recovery of business performance after the outbreak in the following quarters; and (2) the increase in share-based compensation expenses of $0.12 million, related to restricted shares granted and issued to our sales staff during the first fiscal quarter of 2020.

General and administrative expenses increased by $1.65 million, or 57.2%, to $4.52 million for the first nine months of 2020 from $2.88 million for the same period of last year. The increases in general and administrative expenses was mainly attributable to the following reasons: (1) the increase in share-based compensation expenses of $1.49 million, due to restricted shares granted and issued in the first fiscal quarter of 2020; and (2) the increase in allowance for doubtful accounts of $0.31 million.

Research and development expenses decreased by $0.16 million, or 26.0%, to $0.44 million for the first nine months of 2020 from $0.60 million for the same period of last year. Research and development expenses accounted for 1.6% of total revenues for the first nine months of 2020, compared to 1.5% for the same period of last year.

Operating loss

Loss from operations increased by $2.47 million, or 110.3%, to $4.70 million for the first nine months of 2020 from $2.24 million for the same period of last year. Operating loss margin was 17.3% for the first nine months of 2020, compared to 5.7% for the same period of last year.

Other income (expense), net

Total other income was $nil for the first nine months of 2020, compared to $0.31 million for the same period of last year, which was primarily related to change in fair value of warrant liabilities.

Net lossattributable to CNET and loss per share

As a result of the foregoing, net loss attributable to CNET was $4.61 million, or loss per share of $0.22, for the first nine months of 2020. This compared to net loss attributable to CNET of $1.91 million, or loss per share of $0.12, for the same period of last year.

Financial Condition

As of September 30, 2020, the Company had cash and cash equivalents of $0.50 million, compared to $1.60 million as of December 31, 2019. Accounts receivable, net was $2.28 million as of September 30, 2020, compared to $3.26 million as of December 31, 2019. Working capital was $2.35 million as of September 30, 2020, compared to $4.92 million as of December 31, 2019.

Net cash provided by operating activities was $0.60 million for the first nine months of 2020, compared to net cash used in operating activities of $4.06 million for the same period of last year. Net cash used in investing activities was $1.27 million for the first nine months of 2020, compared to $0.80 million for the same period of last year. Net cash used in financing activities was $0.43 million for the first nine months of 2020, compared to net cash provided by financing activities of $1.96 million for the same period of last year.

Recent Developments

Effective October 14, 2020, the Company changed its corporate name change from ChinaNet Online Holdings, Inc. to ZW Data Action Technologies Inc.

On August 7, 2020, the Company appointed Mr. Charles Chiu to the position of the Companys Chief Operating Officer and Mr. Mark Li, the current Chief Financial Officer of the Company, to serve as Secretary of the Company. On the same date, Mr. George Chu resigned from the roles of Chief Operating Officer and Secretary of the Company due to personal reasons. Mr. Chu continued to serve as a director of the Board of Directors of the Company.

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, ZW Data Action Technologies delivers customized, result-driven business solutions for small and medium-sized enterprise clients in China. The Company also develops blockchain and artificial intelligence enabled web/mobile applications and software solutions for general public, enterprise clients, and government agencies. 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 to government regulation of our industry, market demand, reliance on key personnel, future capital requirements, competition in general 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 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 will be those anticipated by ZW Data Action Technologies. 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 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 ZhengWeitian Group LLCEmail: shunyu.zheng@weitian-ir.comPhone: +1 718-213-7386



ZW DATA ACTION TECHNOLOGIES INC.CONDENSED CONSOLIDATED BALANCE SHEETS(In thousands, except for number of shares and per share data)

September December 30, 31, 2020 2019 (US $) (US $) (Unaudited) Assets Current assets: Cash and cash equivalents $ 500 $ 1,603Accounts receivable, net of allowance for doubtful accounts of $3,996 and$3,148, respectively 2,282 3,260Prepayment and deposit to suppliers 6,301 6,980Due from related parties, net 58 81Other current assets, net 961 11Total current assets 10,102 11,935 Long-term investments 64 35Operating lease right-of-use assets 4 12Property and equipment, net 74 78Intangible assets, net 1,288 1,899Blockchain platform applications development costs 4,189 3,879Long-term prepayments 474 -Deferred tax assets, net 815 713Total Assets $ 17,010 $ 18,551 Liabilities and Equity Current liabilities: Short-term bank loan $ - $ 430Accounts payable 552 408Advance from customers 2,822 2,006Accrued payroll and other accruals 442 491Taxes payable 3,290 3,214Lease payment liability related to short-term 222 136leasesOther current liabilities 325 221Warrant liabilities 103 107Total current liabilities 7,756 7,013

Long-term liabilities: Long-term borrowing from a director 129 125 Total Liabilities 7,885 7,138 Commitments and contingencies Equity: ZW Data Action Technologies Inc.?s stockholders? equityCommon stock (US$0.001 par value; authorized 50,000,000 shares; issued andoutstanding 21,741,926 shares and 19,629,403 sharesat September 30, 2020 22 20 and December 31, 2019, respectively)Additional paid-in capital 45,569 43,111 Statutory reserves 2,607 2,607 Accumulated deficit (40,384 ) (35,773 )Accumulated other comprehensive income 1,371 1,505 Total ZW Data Action Technologies Inc.?s 9,185 11,470 stockholders? equity Noncontrolling interests (60 ) (57 )Total equity 9,125 11,413 Total Liabilities and Equity $ 17,010 $ 18,551

ZW DATA ACTION TECHNOLOGIES INC.CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS(In thousands, except for number of shares and per share data)

Nine Months Ended September Three Months Ended September 30, 30, 2020 2019 2020 2019 (US $) (US $) (US $) (US $) (Unaudited) (Unaudited) (Unaudited) (Unaudited)Revenues From unrelated $ 27,086 $ 39,025 $ 12,300 $ 15,113 partiesFrom a related 18 503 4 395 partyTotal revenues 27,104 39,528 12,304 15,508 Cost of 26,548 37,828 12,945 14,616 revenuesGross profit/ 556 1,700 (641 ) 892 (loss) Operating expensesSales andmarketing 293 461 58 111 expensesGeneral andadministrative 4,520 2,875 592 817 expensesResearch anddevelopment 443 599 113 239 expensesTotal operating 5,256 3,935 763 1,167 expenses Loss from (4,700 ) (2,235 ) (1,404 ) (275 )operations Other income (expenses)Interest - (33 ) 1 (10 )expense, netOther expenses (4 ) (6 ) (21 ) (2 )Change in fairvalue of 4 351 (64 ) (120 )warrantliabilitiesTotal other - 312 (84 ) (132 )income Loss beforeincome taxbenefit and (4,700 ) (1,923 ) (1,488 ) (407 )noncontrollinginterestsIncome tax 87 10 155 16 benefitNet loss (4,613 ) (1,913 ) (1,333 ) (391 )Net lossattributable to 2 8 - 3 noncontrollinginterestsNet lossattributable toZW Data Action $ (4,611 ) $ (1,905 ) $ (1,333 ) $ (388 )TechnologiesInc.

Net loss $ (4,613 ) $ (1,913 ) $ (1,333 ) $ (391 )Foreigncurrency (135 ) 97 (203 ) 73 translation(loss)/gainComprehensive $ (4,748 ) $ (1,816 ) $ (1,536 ) $ (318 )lossComprehensivelossattributable 3 6 2 1 tononcontrollinginterestsComprehensivelossattributableto ZW Data $ (4,745 ) $ (1,810 ) $ (1,534 ) $ (317 )ActionTechnologiesInc. Loss per share Loss per common shareBasic and $ (0.22 ) $ (0.12 ) $ (0.06 ) $ (0.02 )diluted Weightedaverage numberof common sharesoutstanding:Basic and 21,271,301 16,447,233 21,720,259 16,517,440 diluted

ZW DATA ACTION TECHNOLOGIES INC.CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS(In thousands)

Nine Months Ended September 30, 2020 2019 (US $) (US $) (Unaudited) (Unaudited)Cash flows from operating activities Net loss $ (4,613 ) $ (1,913 )Adjustments to reconcile net loss to netcash provided by/(used in) operating activitiesDepreciation and amortization 622 66 Amortization of operating lease right-of-use 7 - 88 assetsShare-based compensation expenses 2,066 307 Provision for allowances for doubtful 751 445 accountsDeferred taxes (87 ) (10 )Change in fair value of warrant liabilities (4 ) (351 )Changes in operating assets and liabilities Accounts receivable 254 (289 )Prepayment and deposit to suppliers 1,077 (5,191 )Due from related parties 24 226 Other current assets (5 ) 11 Long-term prepayments (375 ) - Accounts payable 137 (1,946 )Advance from customers 754 4,151 Advance from a customer, related - 9 Accrued payroll and other accruals (55 ) (242 )Lease payment liability related to 81 180 short-term leasesOther current liabilities (38 ) 291 Taxes payable 8 123 Prepaid lease payment (9 ) (10 )Net cash provided by/(used in) operating 595 (4,055 )activities Cash flows from investing activities Investment to investee entities (27 ) (36 )Short-term loan to an unrelated party (944 ) - Payment for blockchain platform applications (302 ) - development costsPrepayment for software system development - (760 )Net cash used in investing activities (1,273 ) (796 ) Cash flows from financing activities Proceeds from issuance of common stock (net - 2,393 of cash offering cost of US$8)Proceeds from short-term bank loan - 438 Repayment of short-term bank loan (429 ) (875 )Net cash (used in)/provided by financing (429 ) 1,956 activities Effect of exchange rate fluctuation 4 (10 ) Net decrease in cash and cash equivalents (1,103 ) (2,905 ) Cash and cash equivalents at beginning of 1,603 3,742 the periodCash and cash equivalents at end of the $ 500 $ 837 period Supplemental disclosure of cash flow information Income taxes paid $ - $ - Interest expense paid $ 2 $ 36