ZW Data Action Technologies Inc.

Previous wording

The Public Company Accounting Oversight Board (“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 deprived our investors of the benefits of such inspections.

Current wording

The 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 deprived our investors of the benefits of such inspections.

Previous wording

We cannot assure you that our auditor will not be determined as a register public accounting firm that the PCAOB is unable to inspect or investigate completely for two consecutive years because of positions taken by the Chinese authorities and/or any other causes in the future. If the PCAOB in the future again determines that it is unable to inspect and investigate completely auditors in China mainland and Hong Kong, we may be identified as a Commission-Identified Issuer accordingly. If this happens, Nasdaq may determine to delist our common stock, and there is no certainty that we will be able to continue listing our common stock on other non-U.S. stock exchanges or that an active market for our common stock will immediately develop outside of the U.S. The prohibiting from trading in the United States or delisting of our common stock or the threat of their being delisted could cause the value of our common stock to significantly decline or be worthless, and thus you could lose all or substantial portion of your investment.

Current wording

We cannot assure you that our auditor will not be determined as a register public accounting firm that the PCAOB is unable to inspect or investigate completely for two consecutive years because of positions taken by the Chinese authorities and/or any other causes in the future. Each year, the PCAOB will determine whether it can inspect and investigate completely audit firms in mainland China and Hong Kong, among other jurisdictions. If the PCAOB in the future again determines that it is unable to inspect and investigate completely auditors in China mainland and Hong Kong, we may be identified as a Commission-Identified Issuer accordingly. If this happens, Nasdaq may determine to delist our common stock, and there is no certainty that we will be able to continue listing our common stock on other non-U.S. stock exchanges or that an active market for our common stock will immediately develop outside of the U.S. The prohibiting from trading in the United States or delisting of our common stock or the threat of their being delisted could cause the value of our common stock to significantly decline or be worthless, and thus you could lose all or substantial portion of your investment.

Previous wording

Our company was incorporated in the State of Texas in April 2006 and re-domiciled to become a Nevada corporation in October 2006. As a result of a share exchange transaction we consummated with China Net BVI in June 2009, we are now a holding company, which through certain contractual arrangements with operating companies in the PRC, is engaged in providing Internet advertising, precision marketing, blockchain-based SaaS services, and ecommerce O2O advertising and marketing services and the related data and technical services to SMEs in the PRC.

Current wording

Our company was incorporated in the State of Texas in April 2006 and re-domiciled to become a Nevada corporation in October 2006. As a result of a share exchange transaction we consummated with China Net BVI in June 2009, we are now a holding company, which through certain contractual arrangements with operating companies in the PRC, is engaged in providing Internet advertising, precision marketing, influencer marketing services as well as the related data and technical services to small and medium enterprises (SMEs). The Company also develops blockchain enabled web/mobile applications and provides software solutions, i.e., Software-as-a-Service (“SaaS”) services for clients and engages in IP licensing services.

Previous wording

Through our PRC operating subsidiaries and VIEs, we primarily operate a one-stop services for our clients on our Omni-channel advertising, precision marketing and data analysis management system. We offer a variety channels of advertising and marketing services through this system, which primarily include distribution of the right to use search engine marketing services we purchased from key search engines, provision of online advertising placements services on our web portals, provision of ecommerce O2O advertising and marketing services as well as provision of other related value-added data and technical services to maximize market exposure and effectiveness for our clients. Beginning in early 2022, we introduced our SaaS services to customers. The SaaS services were designated in providing one-stop blockchain-powered enterprise management solutions via our BIF platform in forms of unique NFT generation, data record, sharing, and storage module subscriptions.

Current wording

Through our operating subsidiaries, we primarily operate an integrated marketing and digital solutions platform for brand partners across multiple channels. We leverage our omni-channel advertising capabilities, precision marketing tools, and data-driven management systems to help clients enhance brand awareness, optimize customer acquisition, and maximize marketing effectiveness. We provide a comprehensive suite of services, including content-driven and influencer-based digital marketing, brand-focused social media campaigns, online advertising placement, and value-added data analytics and technical services. Beginning in early 2022, we introduced our SaaS services to customers. The SaaS services were designated in providing one-stop blockchain-powered enterprise management solutions via our BIF platform in forms of unique NFT generations, data record, share and storage modules subscriptions etc.

Previous wording

A. RESULTS OF OPERATIONS FOR THE SIX AND THREE MONTHS ENDED JUNE 30, 2025 AND 2024

Current wording

A. RESULTS OF OPERATIONS FOR THE NINE AND THREE MONTHS ENDED SEPTEMBER 30, 2025 AND 2024

Previous wording

Total Revenues: Our total revenues decreased to US$2.2 million and US$0.55 million for the six and three months ended June 30, 2025, respectively, from US$9.95 million and US$6.42 million for the same periods last year, respectively, which was primarily due to winding down of our main stream business segment - distribution of the right to use search engine marketing services.

Current wording

Total Revenues: Our total revenues decreased to US$3.92 million and US$1.72 million for the nine and three months ended September 30, 2025, respectively, from US$13.19 million and US$3.24 million for the same periods last year, respectively, which was primarily due to winding down of our main stream business segment - distribution of the right to use search engine marketing services.

Previous wording

Our cost of revenues consisted of costs directly related to the offering of our Internet advertising, precision marketing and related services, intellectual property amortization costs relating to our IP services, software platform amortization cost related to our blockchain-based SaaS service and costs related to enhancing our blockchain-based SaaS services. The following table sets forth our cost of revenues, disaggregated by type of services, by amount and gross profit ratio for the periods indicated, with inter-company transactions eliminated:

Current wording

Our cost of revenues consisted of costs directly related to the offering of our Internet advertising, precision marketing and related data and technical services, and software platform amortization cost related to our blockchain-based SaaS service. The following table sets forth our cost of revenues, disaggregated by type of services, by amount and gross profit ratio for the periods indicated, with inter-company transactions eliminated:

Previous wording

***Cost of revenues:***Our total cost of revenues decreased to US$1.99 million and US$0.50 million for the six and three months ended June 30, 2025, respectively, from US$9.55 million and US$6.09 million for the six and three months ended June 30, 2024, respectively. Our cost of revenues primarily consists of search engine marketing resources purchased from key search engines, influencer agency costs, cost of marketing services, amortization of intellectual property cost, software platform amortization cost related to our blockchain-based SaaS service, costs relating to enhancing our blockchain-based SaaS services and other direct costs associated with providing our services. The decrease in our total cost of revenues for the six and three months ended June 30, 2025 was primarily due to the reduced costs associated with distribution of the right to use search engine marketing service purchased from key search engines during the periods. This decrease was in line with the decrease in the related revenues as discussed above.

Current wording

***Cost of revenues:***Our total cost of revenues decreased to US$3.61 million and US$1.62 million for the nine and three months ended September 30, 2025, respectively, from US$12.74 million and US$3.18 million for the nine and three months ended September 30, 2024, respectively. Our cost of revenues primarily consists of search engine marketing resources purchased from key search engines, influencer agency costs, cost of marketing services, amortization of intellectual property cost, software platform amortization cost related to our blockchain-based SaaS service, costs relating to enhancing our blockchain-based SaaS services and other direct costs associated with providing our services. The decrease in our total cost of revenues for the nine and three months ended September 30, 2025 was primarily due to the reduced costs associated with distribution of the right to use search engine marketing service purchased from key search engines during the periods. This decrease was in line with the decrease in the related revenues as discussed above.

Previous wording

As a result of the foregoing, for the six months ended June 30, 2025, we incurred a gross profit of approximately US$0.21 million, compared with a gross profit of approximately US$0.40 million for the six months ended June 30, 2024. For the three months ended June 30, 2025, our gross profit was approximately US$0.05 million, compared to approximately US$0.33 million for the three months ended June 30, 2024. Our overall gross margin was 9.4% and 8.6% for the six and three months ended June 30, 2025, respectively, compared with 4.0% and 5.1% for the same periods last year. The increase in overall gross margin was primarily due to the increase in revenue of our higher-margin internet advertising and related marketing service business.

Current wording

As a result of the foregoing, for the nine and three months ended September 30, 2025, we incurred a gross profit of approximately US$0.31 million and US$0.1 million, respectively, compared to approximately US$0.46 million and US$0.06 million for the nine and three months ended September 30, 2024. Our overall gross margin was 7.8% and 5.7% for the nine and three months ended September 30, 2025, respectively, compared with 3.5% and 1.7% for the same periods last year, respectively. The increase in overall gross margin was primarily due to the increase in revenue of our higher-margin internet advertising and related marketing service business.

Previous wording

***Operating Expenses:***Our total operating expenses was approximately US$1.47 million and US$0.73 million for the six and three months ended June 30, 2025, respectively, compared with approximately US$1.62 million and US$0.63 million for the six and three months ended June 30, 2024, respectively.

Current wording

***Operating Expenses:***Our total operating expenses was approximately US$1.72 million and US$0.25 million for the nine and three months ended September 30, 2025, respectively, compared with approximately US$3.67 million and US$2.05 million for the nine and three months ended September 30, 2024, respectively.

Previous wording

***Loss from operations:***As a result of the foregoing, we incurred a loss from operations of approximately US$1.26 million and US$1.22 million for the six months ended June 30, 2025 and 2024, respectively. For the three months ended June 30, 2025 and 2024, we incurred a loss from operations of approximately US$0.68 million and US$0.30 million, respectively.

Current wording

***Loss from operations:***As a result of the foregoing, we incurred a loss from operations of approximately US$1.41 million and US$3.22 million for the nine months ended September 30, 2025 and 2024, respectively. For the three months ended September 30, 2025 and 2024, we incurred a loss from operations of approximately US$0.15 million and US$1.99 million, respectively.

Previous wording

***Interest Income:***For the six and three months ended June 30, 2025, interest income recognized was primarily related to the interest earned from the short-term loans we provided to unrelated parties.

Current wording

***Interest Income:***For the nine and three months ended September 30, 2025, interest income recognized were primarily related to the interest we earned from the short-term loans we provided to unrelated parties.

Previous wording

***Impairment on long-term investments:***For the six and three months ended June 30, 2025, we did not recognize any impairment loss on long-term investments. For the six and three months ended June 30, 2024, we recognized approximately US$0.002 million impairment loss on long-term investments, which was related to our cash investments in one of our unconsolidated investee entities whose business activities had become dormant.

Current wording

***Impairment on long-term investments:For the nine months ended September 30, 2025, we recognized nil in impairment loss on long-term investments. ***For the nine months ended September 30, 2024, we recognized approximately US$0.002 million in impairment loss on long-term investments, which was related to our cash investments in one of our unconsolidated investee entities whose business activities had become dormant.

Previous wording

***Loss before income tax benefit/(expense):***As a result of the foregoing, our loss before income tax benefit was approximately US$1.17 million and US$1.08 million for the six months ended June 30, 2025 and 2024, respectively. For the three months ended June 30, 2025, we incurred an approximately US$0.64 million loss before income tax expense, compared with an approximately US$0.23 million loss before income tax expense for the three months ended June 30, 2024.

Current wording

***Loss before income tax benefit/(expense):***As a result of the foregoing, our loss before income tax benefit was approximately US$1.27 million and US$2.99 million for the nine months ended September 30, 2025 and 2024, respectively. For the three months ended September 30, 2025, we incurred an approximately US$0.11 million loss before income tax expense, compared with an approximately US$1.91 million loss before income tax expense for the three months ended September 30, 2024.

Previous wording

Income Tax benefit/(expense): For the six months ended June 30, 2025 and 2024, we recognized approximately nil and US$0.004 million, respectively, in income tax benefits. For the three months ended June 30, 2025 and 2024, we recognized approximately US$0.001 million and US$0.001 million, respectively, in income tax benefits. These benefits were related to net operating loss incurred by one of our operating VIEs during each respective period. We anticipate that these losses will likely be utilized against future earnings of this entity.

Current wording

Income Tax benefit/(expense): For the nine months ended September 30, 2025 and 2024, we recognized approximately US$0.001 million in income tax expense and US$0.004 million in income tax benefits. For the three months ended September 30, 2025 and 2024, we recognized approximately US$0.001 million and nil, respectively, in income tax expenses. These benefits were related to the net operating loss incurred by one of our operating VIEs for each respective period. We anticipate these losses will likely be utilized against future earnings of this entity.

Previous wording

***Net loss:***As a result of the foregoing, for the six months ended June 30, 2025 and 2024, we incurred a total net loss of approximately US$1.17 million and US$1.08 million, respectively. For the three months ended June 30, 2025, we recognized a net loss of approximately US$0.64 million, compared with a net loss of approximately US$0.23 million for the three months ended June 30, 2024.

Current wording

***Net loss:***As a result of the foregoing, for the nine months ended September 30, 2025 and 2024, we incurred a total net loss of approximately US$1.28 million and US$2.99 million, respectively. For the three months ended September 30, 2025, we recognized a net loss of approximately US$0.11 million, compared with a net loss of approximately US$1.91 million for the three months ended September 30, 2024.

Previous wording

The PRC regulations currently permit payment of dividends only out of accumulated profits, as determined in accordance with PRC accounting standards and regulations. Our PRC subsidiaries, the consolidated VIEs and their subsidiaries in China are also required to set aside at least 10% of their respective after-tax profit based on the PRC accounting standards and regulations each year to the statutory surplus reserve, until the balance in the reserve reaches 50% of the registered capital of the respective PRC entities. In accordance with these PRC laws and regulations, our PRC subsidiaries, the consolidated VIEs and their subsidiaries are restricted in their ability to transfer a portion of their net assets to us. As of June 30, 2025 and December 31, 2024, net assets restricted in the aggregate, which include paid-in capital and statutory reserve funds of our PRC subsidiaries, the consolidated VIEs and their subsidiaries that are included in our consolidated net assets, were approximately US$13.18 million and US$13.31 million, respectively. Appropriations to the enterprise expansion fund and staff welfare and bonus fund of a foreign-invested PRC entity and appropriation to the discretionary surplus reserve of other PRC entities are at the discretion of the board of directors. To date, none of our PRC subsidiaries, the consolidated VIEs and their subsidiaries appropriated any of these non-mandatory funds and reserves. Furthermore, if these entities incur debt on their own in the future, the instruments governing the debt may restrict their ability to pay dividends or make other payments.

Current wording

The PRC regulations currently permit payment of dividends only out of accumulated profits, as determined in accordance with PRC accounting standards and regulations. Our PRC subsidiaries, the consolidated VIEs and their subsidiaries in China are also required to set aside at least 10% of their respective after-tax profit based on the PRC accounting standards and regulations each year to the statutory surplus reserve, until the balance in the reserve reaches 50% of the registered capital of the respective PRC entities. In accordance with these PRC laws and regulations, our PRC subsidiaries, the consolidated VIEs and their subsidiaries are restricted in their ability to transfer a portion of their net assets to us. As of September 30, 2025 and December 31, 2024, net assets restricted in the aggregate, which include paid-in capital and statutory reserve funds of our PRC subsidiaries, the consolidated VIEs and their subsidiaries that are included in our consolidated net assets, were approximately US$13.16 million and US$13.31 million, respectively. Appropriations to the enterprise expansion fund and staff welfare and bonus fund of a foreign-invested PRC entity and appropriation to the discretionary surplus reserve of other PRC entities are at the discretion of the board of directors. To date, none of our PRC subsidiaries, the consolidated VIEs and their subsidiaries appropriated any of these non-mandatory funds and reserves. Furthermore, if these entities incur debt on their own in the future, the instruments governing the debt may restrict their ability to pay dividends or make other payments.

Previous wording

Cash Flow Analysis for the Six Months Ended June 30, 2025 and 2024

Current wording

Cash Flow Analysis for the Nine Months Ended September 30, 2025 and 2024

Previous wording

Cash and cash equivalents represent cash on hand and deposits held at call with banks. We consider all highly liquid investments with original maturities of three months or less at the time of purchase to be cash equivalents. As of June 30, 2025, we had cash and cash equivalents of approximately US$1.7 million.

Current wording

Cash and cash equivalents represent cash on hand and deposits held at call with banks. We consider all highly liquid investments with original maturities of three months or less at the time of purchase to be cash equivalents. As of September 30, 2025, we had cash and cash equivalents of approximately US$1.76 million.

Previous wording

Our liquidity needs include (i) net cash used in operating activities that consists of (a) cash required to fund the initial build-out, continued expansion of our network and new services and (b) our working capital needs, which include deposits and advance payments to search engine resources and other advertising resources providers, payment of our operating expenses and financing of our accounts receivable; and (ii) net cash used in investing activities that consist of the investment to expand technologies related to our existing and future business activities, investment to enhance the functionality of our current advertising portals for providing advertising, marketing and data services and to secure the safety of our general network, and investment to establish joint ventures with strategic partners for the development of new technologies and services. To date, we have financed our liquidity needs primarily through proceeds we generated from financing activities.

Current wording

Our liquidity needs include (i) net cash used in operating activities that consists of (a) cash required to fund the initial build-out, continued expansion of our network and new services and (b) our working capital needs, which include deposits and advance payments to advertising resources providers, payment of our operating expenses and financing of our accounts receivable; and (ii) net cash used in investing activities that consist of the investment to expand technologies related to our existing and future business activities, investment to enhance the functionality of our current advertising portals for providing advertising, marketing and data services and to secure the safety of our general network, and investment to establish joint ventures with strategic partners for the development of new technologies and services. To date, we have financed our liquidity needs primarily through proceeds we generated from financing activities.

Previous wording

For the six months ended June 30, 2025, our net cash used in operating activities of approximately US$0.30 million were primarily attributable to:

Current wording

For the nine months ended September 30, 2025, our net cash used in operating activities of approximately US$0.78 million were primarily attributable to:

Previous wording

For the six months ended June 30, 2024, our net cash used in operating activities of approximately US$1.03 million were primarily attributable to:

Current wording

For the nine months ended September 30, 2024, our net cash used in operating activities of approximately US$1.23 million were primarily attributable to:

Previous wording

For the six months ended June 30, 2025, (1) we purchased office equipment of approximately US$0.07 million; (2) we received repayment of short-term loans and interest income of approximately US$1.12 million; and (3) we purchased intellectual property of approximately US$0.60 million through the acquisition of Rahula. In the aggregate, these transactions resulted in a net cash inflow from investing activities of approximately US$0.46 million for the six months ended June 30, 2025.

Current wording

For the nine months ended September 30, 2025, (1) we purchased office equipment and leasehold improvements of approximately US$0.07 million; (2) we received repayment of short-term loans and interest income of approximately US$1.12 million; and (3) we purchased intellectual property of approximately US$0.60 million through the acquisition of Rahula. In the aggregate, these transactions resulted in a net cash inflow from investing activities of approximately US$0.46 million for the nine months ended September 30, 2025.

Previous wording

For the six months ended June 30, 2024, (1) we purchased office equipment of approximately US$0.003 million; (2) we made an additional investment of approximately US$0.002 million to one of our unconsolidated investee entities; (3) we collected US$0.49 million in short-term loan principal from short-term loans we provided to unrelated parties in previous periods; (4) we received total interest payment of approximately US$0.41 million, which was attributable to short-term loans we provided to unrelated parties in previous periods; (5) we received approximately US$0.15 million in proceeds from the disposal of long-term investments; (6) we acquired cash of approximately US$0.009 million through the acquisition of a 51% equity interest in Beijing Yi En; and (7) we made deposits on investment contracts of approximately US$0.40 million. In the aggregate, these transactions resulted in a net cash inflow from investing activities of approximately US$0.65 million for the six months ended June 30, 2024.

Current wording

For the nine months ended September 30, 2024, (1) we purchased office equipment of approximately US$0.003 million; (2) we made an additional investment of approximately US$0.002 million to one of our unconsolidated investee entities; (3) we collected US$0.49 million in short-term loan principal from short-term loans we provided to unrelated parties in previous periods; (4) we received total interest payment of approximately US$0.41 million, which was attributable to short-term loans we provided to unrelated parties in previous periods; (5) we received approximately US$0.15 million in proceeds from the disposal of long-term investments; (6) we acquired cash of approximately US$0.009 million through the acquisition of a 51% equity interest in Beijing Yi En; (7) we recognized deconsolidation of cash during the period of US$0.006 million; and (8) we made deposits on investment contracts of approximately US$0.40 million. In the aggregate, these transactions resulted in a net cash inflow from investing activities of approximately US$0.65 million for the nine months ended September 30, 2024.

Previous wording

For the six months ended June 30, 2025, our cash provided by financing activities included the following transactions: we received advances from investors of approximately US$0.75 million.

Current wording

For the nine months ended September 30, 2025, we received an advance from investors of approximately US$1.28 million.

Previous wording

For the six months ended June 30, 2024, capital contribution from noncontrolling interests was approximately US$0.07 million.

Current wording

For the nine months ended September 30, 2024, capital contribution from noncontrolling interests was approximately US$0.07 million and we received advances from investors of approximately US$0.81 million.

Previous wording

In addition, in order to further develop our core business, i.e., our Internet advertising and related marketing service business, broaden and diversify the online marketing channels for customers, reinforce our industry competitive advantage, we are actively seeking to acquire businesses and build teams with AI capabilities and proprietary intellectual properties that enable more accurate marketing solutions and cost efficient content creation. On March 7, 2025, ChinaNet Investment Holding Limited (the “Purchaser”), a British Virgin Islands company and an indirect wholly-owned subsidiary of ZW Data Action Technologies Inc. acquired the 10,000 shares of Rahula Digital Media (HK) Limited, a Hong Kong company (the "Rahula") that Vickie Chan, an individual (the “Seller”) owned, pursuant to that certain Share Sale and Purchase Agreement, dated March 3, 2025, entered into by and between the Purchaser and the Seller for a total consideration of US$0.6 million. Rahula owns 100% equity interest in Shenzhen Shangye Business Consulting Services Co., Ltd., a People’s Republic of China company (together as “Rahula Group”). Rahula Group is principally engaged in the development and monetization of intellectual property rights on agent management, marketing data management, targeted marketing and mass marketing systems and technologies.

Current wording

The Company plans to optimize its internet resources cost investment strategy to improve the gross profit margin of its core business and to further strengthen the accounts receivables collection management, and negotiate with major suppliers for more favorable payment terms, all of which will help to substantially increase the cashflows from operations. In addition, as we wind down our search engine marketing distribution service in the PRC, we are seeing an improvement in our gross margins as well as significantly reduced operating expenses that will improve our cash flow and liquidity in the next 12 months. Also, in order to further develop our core business, i.e., our Internet advertising and related marketing service business, broaden and diversify the online marketing channels for customers, reinforce our industry competitive advantage, we are actively seeking to acquire businesses and build teams with AI capabilities and proprietary intellectual properties that enable more accurate marketing solutions and cost efficient content creation. On March 7, 2025, ChinaNet Investment Holding Limited (the “Purchaser”), a British Virgin Islands company and an indirect wholly-owned subsidiary of ZW Data Action Technologies Inc. acquired the 10,000 shares of Rahula Digital Media (HK) Limited, a Hong Kong company (the "Rahula") that Vickie Chan, an individual (the “Seller”) owned, pursuant to that certain Share Sale and Purchase Agreement, dated March 3, 2025, entered into by and between the Purchaser and the Seller for a total consideration of US$0.6 million. Rahula owns 100% equity interest in Shenzhen Shangye Business Consulting Services Co., Ltd., a People’s Republic of China company (together as “Rahula Group”). Rahula Group is principally engaged in the development and monetization of intellectual property rights on agent management, marketing data management, targeted marketing and mass marketing systems and technologies.

Previous wording

In addition, for the next 12 months from the date hereof, we anticipate to generate additional cash inflows and/or improve our liquidity through the following: (1) our short-term working capital loans provided to unrelated parties will mature within the next 12 months that we anticipate collecting these loan principals and the related interest income within the next 12 months; (2) equity financing for which we have already entered into securities purchase agreements; (3) we plan to reduce our operating costs through optimizing the personnel structure among different offices and reduce our office leasing spaces, if needed. This may incur incremental costs related to employee layoff compensation and contract termination penalty.

Current wording

In addition, for the next 12 months from the date hereof, we anticipate to generate additional cash inflows and/or improve our liquidity through the following: (1) our short-term working capital loans provided to unrelated parties will mature within the next 12 months that we anticipate collecting these loan principals and the related interest income within the next 12 months; (2) if at any time we anticipate insufficiency of our working capital, we can apply for revolving credit facility from commercial banks in the PRC to supplement our short-term liquidity deficit. We have not experienced any difficulties in obtaining such credit facility before, and this could result in fixed obligations and incremental cost of interest; (3) equity financing; (4) we plan to reduce our operating costs through optimizing the personnel structure among different offices and reduce our office leasing spaces, if needed. This may incur incremental costs related to employee layoff compensation and contract termination penalty.