ZW Data Action Technologies (CNET) risk factors, FY2024 10-K

Risks Related to Our Business

1. 01We are susceptible to general economic conditions, natural catastrophic events and public health crises, and a potential downturn in advertising and marketing spending by advertisers could adversely affect our operating results in the near future
2. 02We may be subject to, and may expend significant resources in defending against, government actions and civil suits based on the content and services we provide through our Internet advertising and data service platforms
3. 03We operate in the advertising and data service industry, which is particularly sensitive to changes in economic conditions and advertising trends
4. 04a decline in advertising and marketing spending in general
5. 05We face significant competition, and if we do not compete successfully against new and existing competitors, we may lose our market share, and our profitability may be adversely affected
6. 06Key employees are essential to growing our business
7. 07We may need additional capital and we may not be able to obtain it at acceptable terms, or at all, which could adversely affect our liquidity and financial position
8. 08Our failure to protect our intellectual property rights could have a negative impact on our business
9. 09We may be subject to intellectual property infringement claims or other allegations, which may materially and adversely affect our business, financial condition and prospects
10. 10We rely on computer software and hardware systems in managing our operations, the failure of which could adversely affect our business, financial condition and results of operations
11. 11Any failure or interruptions in the internet infrastructure, bandwidth providers, data center providers, other third parties or our own systems for providing our solutions to customers could negatively impact our business
12. 12Privacy and data security concerns, laws, or other regulations could expose us to liability or impair our operations
13. 13The occurrence of security breaches and cyber-attacks could negatively impact our business
14. 14Our blockchain business is at an early stage and the PRC laws and regulations may have a potential effect

Risks Relating to Regulation of Our Business and to Our Structure

1. 15requiring us or Rise King WFOE and/or PRC Operating Entities to restructure the relevant ownership structure or operations
2. 16We rely on contractual arrangements with the PRC Operating Entities and their shareholders for our China operations, which may not be as effective in providing operational control as direct ownership
3. 17Condensed Consolidating Schedules
4. 18Cash and cash equivalents
5. 19Long-term deposits and prepayments
6. 20Lease payment liabilities related to short-term leases
7. 21Long-term borrowing from a related party
8. 22Prepayment and deposit to suppliers
9. 23Net income attributable to noncontrolling interests
10. 24Cash and cash equivalents, at beginning of the year
11. 25Net cash (used in)/provided by financing activities
12. 26Our operations and assets in China are subject to significant political and economic uncertainties
13. 27The PRC government’s significant oversight and discretion over our business operation could result in a material adverse change in our operations and the value of our listed securities
14. 28The PRC legal system is a civil law system based on written statutes. Unlike the common law system, prior court decisions may be cited for reference but have limited precedential value
15. 29PRC regulations relating to mergers and acquisitions of domestic enterprises by foreign investors may increase the administrative burden we face and create regulatory uncertainties
16. 30The approval of and the filing with the CSRC or other PRC government authorities may be required in connection with our future offshore offerings under PRC law, and, if required, we cannot predict whether or for how long we will be able to obtain such approval or complete such filing
17. 31Substantial uncertainties exist with respect to the interpretation and implementation of cybersecurity related regulations and cybersecurity review as well as any impact these may have on our business operations
18. 32On November 7, 2016, the Standing Committee of the National People’s Congress issued the Cyber Security Law, which imposes more stringent requirements on operators of “critical information infrastructure,” especially in data storage and cross-border data transfer
19. 33We may be adversely affected by the complexity, uncertainties and changes in PRC licensing and regulation of internet businesses
20. 34We derive a substantial portion of our sales from China
21. 35Currency fluctuations and restrictions on currency exchange may adversely affect our business, including limiting our ability to convert Chinese Renminbi into foreign currencies and, if Chinese Renminbi were to decline in value, reducing our revenue in U.S. dollar terms
22. 36We may have limited legal recourse under PRC laws if disputes arise under our contracts with third parties
23. 37We must comply with the Foreign Corrupt Practices Act
24. 38Changes in foreign exchange regulations in the PRC may affect our ability to pay dividends in foreign currency or conduct other foreign exchange business
25. 39Any limitation on the ability of our PRC subsidiaries and VIEs to make payments to us, or the tax implications of making payments to us, could have a material adverse effect on our ability to conduct our business or our financial condition
26. 40The Public Company Accounting Oversight Board (the “PCAOB”) had historically been unable to inspect our auditor in relation to their audit work performed for our financial statements and the inability of the PCAOB to conduct inspections over our auditor has deprived our investors with the benefits of such inspections
27. 41If we become directly subject to the scrutiny involving U.S. listed Chinese companies, we may have to expend significant resources to investigate and/or defend the matter, which could harm our business operations, stock price and reputation
28. 42Future inflation in China may inhibit our activity to conduct business in China
29. 43The enforcement of the PRC Labor Contract Law and other labor-related regulations in the PRC may adversely affect our business and results of operations
30. 44We may have difficulty establishing adequate management, legal and financial controls in the PRC
31. 45You may experience difficulties in effecting service of legal process, enforcing foreign judgments or bringing original actions in China based on United States or other foreign laws against us and our management
32. 46It may be difficult for overseas regulators to conduct investigation or collect evidence within China
33. 47PRC enterprise income tax law could adversely affect our business and our net income
34. 48Under the EIT Law, we may be classified as a “resident enterprise” of China. Such classification will likely result in unfavorable tax consequences to us and holders of our securities

Risks Related to our Securities

1. 49Our Common Stock is traded on the Nasdaq Stock Market LLC (“Nasdaq”), a national securities exchange
2. 50Insiders have substantial control over us, and they could delay or prevent a change in our corporate control even if our other stockholders wanted it to occur
3. 51There may not be sufficient liquidity in the market for our securities in order for investors to sell their securities
4. 52The market price of our Common Stock may be volatile
5. 53We may need additional capital and may sell additional securities or other equity securities or incur indebtedness, which could result in additional dilution to our shareholders or increase our debt service obligations
6. 54We have not paid dividends in the past and do not expect to pay dividends in the future, and any return on investment may be limited to the value of our stock
7. 55Techniques employed by manipulative short sellers in Chinese small cap stocks may drive down the market price of our common stock