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On September 25, 2019, as a result of the close on the first half of the 2019 Financing, the exercise price of the warrants issued in 2018 Financing that contain the "full ratchet" price protection in the event of subsequent issuances below the applicable exercise price (the “Down round feature”) was adjusted to $1.4927. Including approximately US$6.86 million share-based compensation expenses. Less than 10%. The investor warrants issued in the 2018 Financing had expired during the year ended December 31, 2020. Including approximately US$1.99 million share-based compensation expenses. All of the VIEs' assets can be used to settle obligations of their primary beneficiary. Liabilities recognized as a result of consolidating these VIEs do not represent additional claims on the Company’s general assets (Note 2). 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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

 

FORM 10-Q

 

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

 

For the quarterly period ended June 30, 2021

 

or

 

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

 

For the transition period from ____ to _____

 

 

Commission File Number: 001-34647

 

ZW Data Action Technologies Inc.

(Exact name of registrant as specified in its charter)

 

Nevada

20-4672080

(State or other jurisdiction of incorporation or organization)

(I.R.S. Employer Identification No.)

 

Room 1106, Xinghuo Keji Plaza, No. 2 Fufeng Road, Fengtai District, Beijing, CN 100070

 

(Address of principal executive offices) (Zip Code)

 

+86-10-6084-6616

(Registrant’s telephone number, including area code)

 

N/A

(Former name, former address and former fiscal year, if changed since last report)

 

Securities registered pursuant to Section 12(b) of the Act:

 

Title of each class

 

Trading Symbol(s)

 

Name of each exchange on which registered

Common Stock, par value $0.001

 

CNET

 

Nasdaq Capital Market

 

Indicate by check whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days: Yes ☒ No ☐

 

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐

 

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

 

Large accelerated filer ☐Accelerated filer ☐
Non-accelerated filer ☒   Smaller reporting company
 Emerging growth company

 

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

 

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes No ☒

 

As of August 16, 2021, the registrant had 35,332,677 shares of common stock outstanding.

 

 

 

 

TABLE OF CONTENTS

 

PART I. FINANCIAL INFORMATION

PAGE

     

Item 1. 

Interim Financial Statements  
     
 

Condensed Consolidated Balance Sheets as of June 30, 2021 (Unaudited) and December 31, 2020

1-2

     
 

Condensed Consolidated Statements of Operations and Comprehensive Loss for the Six and Three Months Ended June 30, 2021 and 2020 (Unaudited)

3-4

     
 

Condensed Consolidated Statements of Cash Flows for the Six Months Ended June 30, 2021 and 2020 (Unaudited)

5-6

     
 

Condensed Consolidated Statements of Changes in Equity for the Six and Three Months Ended June 30, 2021 and 2020 (Unaudited)

7-8

     
 

Notes to Condensed Consolidated Financial Statements (Unaudited)

9-30

     

Item 2. 

Management’s Discussion and Analysis of Financial Condition and Results of Operations

31-40

   

Item 3. 

Quantitative and Qualitative Disclosures About Market Risk

40

     

Item 4. 

Controls and Procedures

40

     

PART II. OTHER INFORMATION

 
     

Item 1. 

Legal Proceedings

41

     

Item 1A. 

Risk Factors

41

   

Item 2. 

Unregistered Sales of Equity Securities and Use of Proceeds

41

     

Item 3. 

Defaults Upon Senior Securities

41

   

Item 4. 

Mine Safety Disclosures

41

     
Item 5. 

 

Other Information

41

     

Item 6. 

Exhibits

42

     

Signatures

43

 

 

 

 

PART I.  FINANCIAL INFORMATION

 

Item 1.   Interim Financial Statements

 

ZW DATA ACTION TECHNOLOGIES INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(In thousands, except for number of shares and per share data)

 
  

June 30,

2021

  

December 31,

2020

 
  

(US $)

  

(US $)

 
  

(Unaudited)

     

Assets

        

Current assets:

        

Cash and cash equivalents *

 $11,752  $4,297 

Accounts receivable, net of allowance for doubtful accounts of $2,207 and $4,247, respectively *

  3,707   2,407 

Prepayment and deposit to suppliers *

  8,035   4,657 

Due from related parties *

  104   61 

Other current assets *

  462   1,462 

Total current assets

  24,060   12,884 
         

Long-term investments *

  450   67 

Operating lease right-of-use assets *

  2,107   48 

Property and equipment, net *

  116   60 

Intangible assets, net *

  3,438   2,557 

Blockchain platform applications development costs

  4,409   4,406 

Long-term deposits and prepayments *

  1,716   39 

Deferred tax assets, net *

  652   606 

Total Assets

 $36,948  $20,667 
         

Liabilities and Equity

        

Current liabilities:

        

Accounts payable *

 $1,015  $608 

Advance from customers *

  1,539   1,436 

Accrued payroll and other accruals *

  280   489 

Taxes payable *

  3,408   3,430 

Operating lease liabilities *

  187   18 

Lease payment liability related to short-term leases *

  151   203 

Other current liabilities *

  267   333 

Warrant liabilities

  6,597   1,505 

Total current liabilities

  13,444   8,022 

 

 

1

ZW DATA ACTION TECHNOLOGIES INC.

CONDENSED CONSOLIDATED BALANCE SHEETS (CONTINUED)

(In thousands, except for number of shares and per share data)

 

  

June 30, 

2021

  

December 31,

2020

 
  

(US $)

  

(US $)

 
  

(Unaudited)

     

Long-term liabilities:

        

Operating lease liabilities-Non current *

  1,979   32 

Long-term borrowing from a director

  135   134 

Total Liabilities

  15,558   8,188 
         

Commitments and contingencies

          
         

Equity:

        

ZW Data Action Technologies Inc.’s stockholders’ equity

        

Common stock (US$0.001 par value; authorized 50,000,000 shares; issued and outstanding 35,290,650 shares and 26,062,915 shares at June 30, 2021 and December 31, 2020, respectively)

  35   26 

Additional paid-in capital

  61,656   49,772 

Statutory reserves

  2,598   2,598 

Accumulated deficit

  (43,941)  (40,980)

Accumulated other comprehensive income

  1,107   1,129 

Total ZW Data Action Technologies Inc.’s stockholders’ equity

  21,455   12,545 
         

Noncontrolling interests

  (65)  (66)

Total equity

  21,390   12,479 
         

Total Liabilities and Equity

 $36,948  $20,667 

 

*All of the VIEs' assets can be used to settle obligations of their primary beneficiary. Liabilities recognized as a result of consolidating these VIEs do not represent additional claims on the Company’s general assets (Note 2).

 

 

See notes to unaudited condensed consolidated financial statements

 

2

 

ZW DATA ACTION TECHNOLOGIES INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS

(In thousands, except for number of shares and per share data)

 

   

Six Months Ended June 30,

   

Three Months Ended June 30,

 
   

2021

   

2020

   

2021

   

2020

 
   

(US $)

   

(US $)

   

(US $)

   

(US $)

 
   

(Unaudited)

   

(Unaudited)

   

(Unaudited)

   

(Unaudited)

 

Revenues

                               

From unrelated parties

  $ 22,947     $ 14,786     $ 14,551     $ 10,415  

From a related party

    -       14       -       1  

Total revenues

    22,947       14,800       14,551       10,416  

Cost of revenues

    23,882       13,603       14,769       10,118  

Gross (loss)/profit

    (935 )     1,197       (218 )     298  
                                 

Operating expenses

                               

Sales and marketing expenses

    101       235       73       70  

General and administrative expenses

    8,895       3,928       7,899       1,132  

Research and development expenses

    163       330       89       116  

Total operating expenses

    9,159       4,493       8,061       1,318  
                                 

Loss from operations

    (10,094 )     (3,296 )     (8,279 )     (1,020 )
                                 

Other income/(expenses)

                               
                                 

Interest income/(expense), net

    2       (1 )     1       -  

Other income/(expenses), net

    302       17       326       18  

Loss on disposal of long-term investments

    (38 )     -       (38 )     -  

Change in fair value of warrant liabilities

    6,829       68       4,322       22  

Total other income

    7,095       84       4,611       40  
                                 

Loss before income tax benefit/(expense) and noncontrolling interests

    (2,999 )     (3,212 )     (3,668 )     (980 )

Income tax benefit/(expense)

    40       (68 )     22       10  

Net loss

    (2,959 )     (3,280 )     (3,646 )     (970 )

Net (income)/loss attributable to noncontrolling interests

    (2 )     2       -       2  

Net loss attributable to ZW Data Action Technologies Inc.

  $ (2,961 )   $ (3,278 )   $ (3,646 )   $ (968 )

 

 

3

 

ZW DATA ACTION TECHNOLOGIES INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS (CONTINUED)

(In thousands, except for number of shares and per share data)

 

 

   

Six Months Ended June 30,

   

Three Months Ended June 30,

 
   

2021

   

2020

   

2021

   

2020

 
   

(US $)

   

(US $)

   

(US $)

   

(US $)

 
   

(Unaudited)

   

(Unaudited)

   

(Unaudited)

   

(Unaudited)

 
                                 

Net loss

  $ (2,959 )   $ (3,280 )   $ (3,646 )   $ (970 )

Foreign currency translation (loss)/gain

    (23 )     68       (4 )     (4 )

Comprehensive loss

  $ (2,982 )   $ (3,212 )   $ (3,650 )   $ (974 )

Comprehensive (income)/loss attributable to noncontrolling interests

    (1 )     1       1       2  

Comprehensive loss attributable to ZW Data Action Technologies Inc.

  $ (2,983 )   $ (3,211 )   $ (3,649 )   $ (972 )
                                 

Loss per share

                               

Loss per common share

                               

Basic and diluted

  $ (0.10 )   $ (0.16 )   $ (0.11 )   $ (0.04 )
                                 

Weighted average number of common shares outstanding:

                               

Basic and diluted

    30,727,546       21,044,666       32,925,488       21,691,926  

 

 

 

See notes to unaudited condensed consolidated financial statements

 

4

 

ZW DATA ACTION TECHNOLOGIES INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(In thousands)

 

  

Six Months Ended June 30,

 
  

2021

  

2020

 
  

(US $)

  

(US $)

 
  

(Unaudited)

  

(Unaudited)

 

Cash flows from operating activities

        

Net loss

 $(2,959) $(3,280)

Adjustments to reconcile net loss to net cash (used in)/provided by operating activities

        

Depreciation and amortization

  282   415 

Amortization of operating lease right-of-use assets

  92   5 

Share-based compensation expenses

  6,857   1,987 

Provision for allowances for doubtful accounts

  -   747 

Loss on disposal of long-term investments

  38   - 

Deferred taxes

  (40)  11 

Change in fair value of warrant liabilities

  (6,829)  (68)

Changes in operating assets and liabilities

        

Accounts receivable

  (1,284)  (38)

Prepayment and deposit to suppliers

  (980)  2,090 

Due from related parties

  -   28 

Other current assets

  8   (3)

Long-term deposits and prepayments

  (554)  (750)

Accounts payable

  403   (9)

Advance from customers

  89   (362)

Accrued payroll and other accruals

  (197)  (57)

Other current liabilities

  (123)  326 

Taxes payable

  (49)  89 

Lease payment liability related to short-term leases

  (54)  43 

Operating lease liabilities

  (31)  (9)

Net cash (used in)/provided by operating activities

  (5,331)  1,165 
         

Cash flows from investing activities

        

Payment for leasehold improvements and purchase of vehicles, furniture and office equipment

  (221)  - 

Cash effect of deconsolidation of VIEs’ subsidiaries

  (8)  - 

Investments and advances to ownership investee entities

  (463)  (27)

Short-term loan to an unrelated party

  (312)  (944)

Repayment of short-term loan from an unrelated party

  1,303   - 

Payment for purchase of software technologies

  (1,160)  - 

Deposit and prepayment paid for contracts of other investing activities

  (3,500)  - 

Payment for blockchain platform applications development costs

  -   (302)

Net cash used in investing activities

  (4,361)  (1,273)

 

5

ZW DATA ACTION TECHNOLOGIES INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (CONTINUED)

(In thousands)

 

  

Six Months Ended June 30,

 
  

2021

  

2020

 
  

(US $)

  

(US $)

 
  

(Unaudited)

  

(Unaudited)

 

Cash flows from financing activities

        

Proceeds from issuance of common stock and warrant (net of cash offering cost of US$1,600)

  17,111   - 

Repayment of short-term bank loan

  -   (427)

Net cash provided by/(used in) financing activities

  17,111   (427)
         

Effect of exchange rate fluctuation on cash and cash equivalents

  36   (13)
         

Net increase/(decrease) in cash and cash equivalents

  7,455   (548)
         

Cash and cash equivalents at beginning of the period

  4,297   1,603 

Cash and cash equivalents at end of the period

 $11,752  $1,055 
         

Supplemental disclosure of cash flow information

        
         

Income taxes paid

 $-  $- 

Interest expense paid

 $-  $2 

 

 

See notes to unaudited condensed consolidated financial statements

 

6

 

ZW DATA ACTION TECHNOLOGIES INC.

CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY

FOR THE SIX AND THREE MONTHS ENDED JUNE 30, 2021

(In thousands, except for number of shares)

 

 

 

  

Common stock

  

Additional paid-in capital

  

Statutory reserves

  

Accumulated deficit

  

Accumulated other comprehensive income

  

Noncontrolling interests

  

Total equity

 
  

Number of shares

  

Amount

                         
      

(US $)

  

(US $)

  

(US $)

  

(US $)

  

(US $)

  

(US $)

  

(US $)

 
                                 

Balance, January 1, 2021

  26,062,915  $26  $49,772  $2,598  $(40,980) $1,129  $(66) $12,479 

Issuance of common stock for private placement, net of $10.48 million proceeds allocated to investor warrants labilities and $3.05 million direct offering costs (including $1.45 million proceeds allocated to placement agent warrants liabilities), respectively

  5,212,000   5   5,185   -   -   -   -   5,190 

Share-based compensation in exchange for services from employees and directors

  30,000   -   23   -   -   -   -   23 

Net income for the period

  -   -   -   -   685   -   2   687 

Foreign currency translation adjustment

  -   -   -   -   -   (19)  -   (19)

Balance, March 31, 2021 (unaudited)

  31,304,915  $31  $54,980  $2,598  $(40,295) $1,110  $(64) $18,360 

Share-based compensation in exchange for services from employees and directors

  3,985,735   4   6,676   -   -   -   -   6,680 

Net loss for the period

  -   -   -   -   (3,646)  -   -   (3,646)

Foreign currency translation adjustment

  -   -   -   -   -   (3)  (1)  (4)

Balance, June 30, 2021 (Unaudited)

  35,290,650  $35  $61,656  $2,598  $(43,941) $1,107  $(65) $21,390 

 

 

See notes to unaudited condensed consolidated financial statements

 

7

ZW DATA ACTION TECHNOLOGIES INC.

CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY

FOR THE SIX AND THREE MONTHS ENDED JUNE 30, 2020

(In thousands, except for number of shares)

 

 

 

  

Common stock

  

Additional paid-in capital

  

Statutory reserves

  

Accumulated deficit

  

Accumulated other comprehensive income

  

Noncontrolling interests

  

Total equity

 
  

Number of shares

  

Amount

                         
      

(US $)

  

(US $)

  

(US $)

  

(US $)

  

(US $)

  

(US $)

  

(US $)

 
                                 

Balance, January 1, 2020

  19,629,403  $20  $43,111  $2,607  $(35,773) $1,505  $(57) $11,413 

Share-based compensation in exchange for services from nonemployees

  430,000   -   477   -   -   -   -   477 

Share-based compensation in exchange for services from employees and directors

  1,632,523   2   1,897   -   -   -   -   1,899 

Net loss for the period

  -   -   -   -   (2,310)  -   -   (2,310)

Foreign currency translation adjustment

  -   -   -   -   -   71   1   72 

Balance, March 31, 2020 (unaudited)

  21,691,926   22   45,485   2,607   (38,083)  1,576   (56)  11,551 

Share-based compensation

  -   -   8   -   -   -   -   8 

Net loss for the period

  -   -   -   -   (968)  -   (2)  (970)

Foreign currency translation adjustment

  -   -   -   -   -   (4)  -   (4)

Balance, June 30, 2020 (Unaudited)

  21,691,926  $22  $45,493  $2,607  $(39,051) $1,572  $(58) $10,585 

 

 

See notes to unaudited condensed consolidated financial statements

 

8

ZW DATA ACTION TECHNOLOGIES INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

 

 

 

1.

Organization and nature of operations

 

ZW Data Action Technologies Inc. (f/k/a ChinaNet Online Holdings, Inc.) (the “Company”) was incorporated in the State of Texas in April 2006 and re-domiciled to become a Nevada corporation in October 2006. On June 26, 2009, the Company consummated a share exchange transaction with China Net Online Media Group Limited (the “Share Exchange”), a company organized under the laws of British Virgin Islands (“China Net BVI”). As a result of the Share Exchange, China Net BVI became a wholly owned subsidiary of the Company and the Company is now a holding company, which, through certain contractual arrangements with operating companies in the People’s Republic of China (the “PRC”), is engaged in providing Internet advertising, precision marketing, e-commerce online to offline (O2O) advertising and marketing services as well as the related data and technical services to small and medium enterprises (SMEs) in the PRC.

 

 
2.

 

Variable interest entities

 

Summarized below is the information related to the VIEs’ assets and liabilities reported in the Company’s condensed consolidated balance sheets as of June 30, 2021 and December 31, 2020, respectively:

 

  

June 30,

2021

  

December 31,

2020

 
  

US$(000)

  

US$(000)

 
  

(Unaudited)

     

Assets

        

Current assets:

        

Cash and cash equivalents

 $485  $277 

Accounts receivable, net

  3,321   1,142 

Prepayment and deposit to suppliers

  3,022   2,818 

Due from related parties

  104   61 

Other current assets

  3   10 

Total current assets

  6,935   4,308 
         

Long-term investments

  450   67 

Operating lease right-of-use assets

  26   48 

Property and equipment, net

  90   32 

Intangible assets, net

  -   9 

Long-term deposits and prepayments

  85   - 

Deferred tax assets, net

  439   536 

Total Assets

 $8,025  $5,000 
         

Liabilities

        

Current liabilities:

        

Accounts payable

 $1,015  $270 

Advance from customers

  1,397   1,436 

Accrued payroll and other accruals

  93   168 

Taxes payable

  2,729   2,755 

Operating lease liabilities

  9   18 

Lease payment liability related to short-term leases

  109   108 

Other current liabilities

  55   213 

Total current liabilities

  5,407   4,968 
         

Operating lease liabilities-Non current

  9   32 

Total Liabilities

 $5,416  $5,000 

 

All of the VIEs' assets can be used to settle obligations of their primary beneficiary. Liabilities recognized as a result of consolidating these VIEs do not represent additional claims on the Company’s general assets.

 

9

ZW DATA ACTION TECHNOLOGIES INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

 

 

Summarized below is the information related to the financial performance of the VIEs reported in the Company’s condensed consolidated statements of operations and comprehensive loss for the six and three months ended June 30, 2021 and 2020, respectively:

 

  

Six Months Ended June 30,

  

Three Months Ended June 30,

 
  

2021

  

2020

  

2021

  

2020

 
  

US$(000)

  

US$(000)

  

US$(000)

  

US$(000)

 
  

(Unaudited)

  

(Unaudited)

  

(Unaudited)

  

(Unaudited)

 
                 

Revenues

 $20,618  $12,548  $12,671  $9,612 

Cost of revenues

  (23,132)  (12,322)  (14,394)  (9,477)

Total operating expenses

  (712)  (1,392)  (322)  (648)

Net loss before allocation to noncontrolling interests

  (3,407)  (1,160)  (2,126)  (509)

 

 
3.

 

Summary of significant accounting policies

 

 

a)

Basis of presentation 

 

The unaudited condensed consolidated interim financial statements are prepared and presented in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”).

 

The unaudited condensed consolidated interim financial information as of June 30, 2021 and for the six and three months ended June 30, 2021 and 2020 have been prepared pursuant to the rules and regulations of the Securities and Exchange Commission (the “SEC”). Certain information and footnote disclosures, which are normally included in complete consolidated financial statements prepared in accordance with U.S. GAAP, have been omitted pursuant to those rules and regulations. The unaudited condensed consolidated interim financial information should be read in conjunction with the financial statements and the notes thereto, included in the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2020, previously filed with the SEC (the “2020 Form 10-K”) on April 13, 2021.

 

In the opinion of management, all adjustments (which include normal recurring adjustments) necessary to present a fair statement of the Company’s condensed consolidated financial position as of June 30, 2021, its condensed consolidated results of operations for the six and three months ended June 30, 2021 and 2020, and its condensed consolidated cash flows for the six months ended June 30, 2021 and 2020, as applicable, have been made. The interim results of operations are not necessarily indicative of the operating results for the full fiscal year or any future periods.

 

 

b)

Principles of consolidation

 

The unaudited condensed consolidated interim financial statements include the accounts of all the subsidiaries and VIEs of the Company. All transactions and balances between the Company and its subsidiaries and VIEs have been eliminated upon consolidation.

 

 

c)

Use of estimates

 

The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and the related disclosure of contingent assets and liabilities at the date of these consolidated financial statements, and the reported amounts of revenue and expenses during the reporting period. The Company continually evaluates these estimates and assumptions based on the most recently available information, historical experience and various other assumptions that the Company believes to be reasonable under the circumstances. Since the use of estimates is an integral component of the financial reporting process, actual results could differ from those estimates.

 

 

d)

Foreign currency translation

 

The exchange rates used to translate amounts in RMB into US$ for the purposes of preparing the condensed consolidated financial statements are as follows:

 

10

ZW DATA ACTION TECHNOLOGIES INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

 

 

  

June 30, 2021

  

December 31, 2020

 
         

Balance sheet items, except for equity accounts

  6.4601   6.5249 

 

  

Six Months Ended June 30,

 
  

2021

  

2020

 
         

Items in the statements of operations and comprehensive loss

  6.4718   7.0319 

 

  

Three Months Ended June 30,

 
  

2021

  

2020

 
         

Items in the statements of operations and comprehensive loss

  6.4596   7.0839 

 

No representation is made that the RMB amounts could have been, or could be converted into US$ at the above rates.

 

 

e)

Fair value measurement

 

Liabilities measured at fair value on a recurring basis by level within the fair value hierarchy as of June 30, 2021 and December 31, 2020 are as follows:

 

      

Fair value measurement at reporting date using

 
  

As of

June 30, 2021

  

Quoted Prices
in Active Markets
for Identical Assets/Liabilities
(Level 1)

  

Significant
Other
Observable Inputs
(Level 2)

  

Significant
Unobservable
Inputs
(Level 3)

 
  

US$(000)

  

US$(000)

  

US$(000)

  

US$(000)

 
  

(Unaudited)

             
                 

Warrant liabilities (Note 16)

  6,597   -   -   6,597 

 

      

Fair value measurement at reporting date using

 
  

As of

December 31, 2020

  

Quoted Prices
in Active Markets
for Identical Assets/Liabilities
(Level 1)

  

Significant
Other
Observable Inputs
(Level 2)

  

Significant
Unobservable
Inputs
(Level 3)

 
  

US$(000)

  

US$(000)

  

US$(000)

  

US$(000)

 
                 

Warrant liabilities (Note 16)

  1,505   -   -   1,505 

 

 

f)

Revenue recognition

 

The following tables present the Company’s revenues disaggregated by products and services and timing of revenue recognition:

 

11

ZW DATA ACTION TECHNOLOGIES INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

 

 

  

Six Months Ended June 30,

  

Three Months Ended June 30,

 
  

2021

  

2020

  

2021

  

2020

 
  

US$(000)

  

US$(000)

  

US$(000)

  

US$(000)

 
  

(Unaudited)

  

(Unaudited)

  

(Unaudited)

  

(Unaudited)

 
                 

Internet advertising and related services

                

--distribution of the right to use search engine marketing service

  18,965   9,298   12,100   7,310 

--online advertising placements

  3,595   3,250   2,193   2,302 

--data and technical services

  -   600   -   300 

Ecommerce O2O advertising and marketing services

  387   1,007   258   504 

Technical solution services

  -   645   -   - 

Total revenues

 $22,947  $14,800  $14,551  $10,416 

 

  

Six Months Ended June 30,

  

Three Months Ended June 30,

 
  

2021

  

2020

  

2021

  

2020

 
  

US$(000)

  

US$(000)

  

US$(000)

  

US$(000)

 
  

(Unaudited)

  

(Unaudited)

  

(Unaudited)

  

(Unaudited)

 
                 

Revenue recognized over time

  22,947   14,155   14,551   10,416 

Revenue recognized at a point in time

  -   645   -   - 

Total revenues

 $22,947  $14,800  $14,551  $10,416 

 

Contract costs

 

For the six and three months ended June 30, 2021 and 2020, the Company did not have any significant incremental costs of obtaining contracts with customers incurred and/or costs incurred in fulfilling contracts with customers, that shall be recognized as an asset and amortized to expenses in a pattern that matches the timing of the revenue recognition of the related contract.

 

Contract liabilities

 

The table below summarized the movement of the Company’s contract liabilities for the six months ended June 30, 2021:

 

  

Contract liabilities

 
  

US$(000)

 
     

Balance as of January 1, 2021

  1,436 

Exchange translation adjustment

  14 

Revenue recognized from beginning contract liability balances

  (1,245)

Advances received from customers related to unsatisfied performance obligations

  1,334 

Balance as of June 30, 2021 (Unaudited)

 $1,539 

 

Advance from customers related to unsatisfied performance obligations are generally refundable. Refund of advance from customers were insignificant for the six and three months ended June 30, 2021 and 2020.

 

For the six and three months ended June 30, 2021 and 2020, there is no revenue recognized from performance obligations that were satisfied in prior periods.

 

 

g)

Research and development expenses

 

The Company accounts for expenses for the enhancement, maintenance and technical support to the Company’s Internet platforms and intellectual properties that are used in its daily operations in research and development expenses. Research and development costs are charged to expense when incurred. Expenses for research and development for the six months ended June 30, 2021 and 2020 were approximately US$0.16 million and US$0.33 million, respectively. Expenses for research and development for the three months ended June 30, 2021 and 2020 were approximately US$0.09 million and US$0.12 million, respectively.

 

12

ZW DATA ACTION TECHNOLOGIES INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

 

 

 

h)

Lease

 

As of June 30, 2021, operating lease right-of-use assets and total operating lease liabilities recognized was approximately US$2.11 million and US$2.17 million, respectively.

 

Maturity of operating lease liabilities

 

   

Operating leases

 
   

US$(000)

 
   

(Unaudited)

 
      

Six months ending December 31, 2021

   147 

Year ending December 31,

     
-2022   316 
-2023   331 
-2024   337 
-2025   354 
-2026   372 

-thereafter

   869 

Total undiscounted lease payments

   2,726 

Less: imputed interest

   (560)

Total operating lease liabilities as of June 30, 2021

  $2,166 
      

Including:

     

Operating lease liabilities

   187 

Operating lease liabilities-Non current

   1,979 
   $2,166 

 

Operating lease expenses:

 

  

Six Months Ended June 30,

  

Three Months Ended June 30,

 
  

2021

  

2020

  

2021

  

2020

 
  

US$(000)

  

US$(000)

  

US$(000)

  

US$(000)

 
  

(Unaudited)

  

(Unaudited)

  

(Unaudited)

  

(Unaudited)

 
                 

Long-term operating lease contracts

  124   5   87   2 

Short-term operating lease contracts

  30