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All of the VIEs' assets can be used to settle obligations of their primary beneficiary. 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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 September 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, PRC 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 filerSmaller 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 November 15, 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 September 30, 2021 (Unaudited) and December 31, 2020

1-2

     
 

Condensed Consolidated Statements of Operations and Comprehensive (Loss)/Income for the Nine and Three Months Ended September 30, 2021 and 2020 (Unaudited)

3-4

     
 

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

5-6

     
 

Condensed Consolidated Statements of Changes in Equity for the Nine and Three Months Ended September 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)

 

  

September 30, 2021

  

December 31, 2020

 
  

(US $)

  

(US $)

 
  

(Unaudited)

     

Assets

        

Current assets:

        

Cash and cash equivalents *

 $8,731  $4,297 

Accounts receivable, net of allowance for doubtful accounts of $2,198 and $4,247, respectively *

  2,669   2,407 

Prepayment and deposit to suppliers *

  8,673   4,657 

Due from related parties *

  96   61 

Other current assets *

  1,658   1,462 

Total current assets

  21,827   12,884 
         

Long-term investments *

  1,911   67 

Operating lease right-of-use assets *

  2,042   48 

Property and equipment, net *

  190   60 

Intangible assets, net *

  3,275   2,557 

Blockchain platform applications development costs

  4,408   4,406 

Long-term deposits and prepayments *

  481   39 

Deferred tax assets, net *

  781   606 

Total Assets

 $34,915  $20,667 
         

Liabilities and Equity

        

Current liabilities:

        

Accounts payable *

 $750  $608 

Advance from customers *

  1,311   1,436 

Accrued payroll and other accruals *

  350   489 

Taxes payable *

  3,414   3,430 

Operating lease liabilities *

  193   18 

Lease payment liability related to short-term leases *

  150   203 

Other current liabilities *

  136   333 

Warrant liabilities

  3,686   1,505 

Total current liabilities

  9,990   8,022 

 

1

 

ZW DATA ACTION TECHNOLOGIES INC.

CONDENSED CONSOLIDATED BALANCE SHEETS (CONTINUED)

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

 

  

September 30, 2021

  

December 31, 2020

 
  

(US $)

  

(US $)

 
  

(Unaudited)

     

Long-term liabilities:

        

Operating lease liabilities-Non current *

  1,923   32 

Long-term borrowing from a related party

  135   134 

Total Liabilities

  12,048   8,188 
         

Commitments and contingencies

          
         

Equity:

        

ZW Data Action Technologies Inc.’s stockholders’ equity

        

Common stock (US$0.001 par value; authorized 100,000,000 and 50,000,000 shares at September 30, 2021 and December 31, 2020, respectively; issued and outstanding 35,332,677 shares and 26,062,915 shares at September 30, 2021 and December 31, 2020, respectively)

  35   26 

Additional paid-in capital

  61,761   49,772 

Statutory reserves

  2,598   2,598 

Accumulated deficit

  (42,566)  (40,980)

Accumulated other comprehensive income

  1,104   1,129 

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

  22,932   12,545 
         

Noncontrolling interests

  (65)  (66)

Total equity

  22,867   12,479 
         

Total Liabilities and Equity

 $34,915  $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)/INCOME

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

 

   

Nine Months Ended September 30,

   

Three Months Ended September 30,

 
   

2021

   

2020

   

2021

   

2020

 
   

(US $)

   

(US $)

   

(US $)

   

(US $)

 
   

(Unaudited)

   

(Unaudited)

   

(Unaudited)

   

(Unaudited)

 

Revenues

                               

From unrelated parties

  $ 34,843     $ 27,086     $ 11,896     $ 12,300  

From a related party

    4       18       4       4  

Total revenues

    34,847       27,104       11,900       12,304  

Cost of revenues

    35,739       26,548       11,857       12,945  

Gross (loss)/profit

    (892 )     556       43       (641 )
                                 

Operating expenses

                               

Sales and marketing expenses

    159       293       58       58  

General and administrative expenses

    10,366       4,520       1,471       592  

Research and development expenses

    251       443       88       113  

Total operating expenses

    10,776       5,256       1,617       763  
                                 

Loss from operations

    (11,668 )     (4,700 )     (1,574 )     (1,404 )
                                 

Other income/(expenses)

                               

Interest income/(expense), net

    3       -       1       1  

Other income/(expenses), net

    265       (4 )     (37 )     (21 )

Loss on disposal of long-term investments

    (38 )     -       -       -  

Change in fair value of warrant liabilities

    9,682       4       2,853       (64 )

Total other income/(expenses)

    9,912       -       2,817       (84 )
                                 

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

    (1,756 )     (4,700 )     1,243       (1,488 )

Income tax benefit

    171       87       131       155  

Net (loss)/income

    (1,585 )     (4,613 )     1,374       (1,333 )

Net (income)/loss attributable to noncontrolling interests

    (1 )     2       1       -  

Net (loss)/income attributable to ZW Data Action Technologies Inc.

  $ (1,586 )   $ (4,611 )   $ 1,375     $ (1,333 )

 

 

3

 

ZW DATA ACTION TECHNOLOGIES INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE (LOSS)/INCOMECONTINUED

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

 

   

Nine Months Ended September 30,

   

Three Months Ended September 30,

 
   

2021

   

2020

   

2021

   

2020

 
   

(US $)

   

(US $)

   

(US $)

   

(US $)

 
   

(Unaudited)

   

(Unaudited)

   

(Unaudited)

   

(Unaudited)

 
                                 

Net (loss)/income

  $ (1,585 )   $ (4,613 )   $ 1,374     $ (1,333 )

Foreign currency translation loss

    (25 )     (135 )     (2 )     (203 )

Comprehensive (loss)/income

  $ (1,610 )   $ (4,748 )   $ 1,372     $ (1,536 )

Comprehensive (income)/loss attributable to noncontrolling interests

    (1 )     3       -       2  

Comprehensive (loss)/income attributable to ZW Data Action Technologies Inc.

  $ (1,611 )   $ (4,745 )   $ 1,372     $ (1,534 )
                                 

(Loss)/earnings per share

                               

(Loss)/earnings per common share

                               

Basic and diluted

  $ (0.05 )   $ (0.22 )   $ 0.04     $ (0.06 )
                                 

Weighted average number of common shares outstanding:

                               

Basic and diluted

    32,279,304       21,271,301       35,332,220       21,720,259  

 

 

See notes to unaudited condensed consolidated financial statements

 

4

 

ZW DATA ACTION TECHNOLOGIES INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(In thousands)

 

   

Nine Months Ended September 30,

 
   

2021

   

2020

 
   

(US $)

   

(US $)

 
   

(Unaudited)

   

(Unaudited)

 

Cash flows from operating activities

               

Net loss

  $ (1,585 )   $ (4,613 )

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

               

Depreciation and amortization

    450       622  

Amortization of operating lease right-of-use assets

    149       7  

Share-based compensation expenses

    6,945       2,066  

Provision for allowances for doubtful accounts

    -       751  

Loss on disposal of long-term investments

    38       -  

Deferred taxes

    (171 )     (87 )

Change in fair value of warrant liabilities

    (9,682 )     (4 )

Other losses

    24       -  

Changes in operating assets and liabilities

               

Accounts receivable

    (257 )     254  

Prepayment and deposit to suppliers

    (1,698 )     1,077  

Due from related parties

    -       24  

Other current assets

    6       (5 )

Long-term deposits and prepayments

    (314 )     (375 )

Accounts payable

    142       137  

Advance from customers

    (133 )     754  

Accrued payroll and other accruals

    (126 )     (55 )

Other current liabilities

    (230 )     (38 )

Taxes payable

    (31 )     8  

Lease payment liability related to short-term leases

    (54 )     81  

Operating lease liabilities

    (73 )     (9 )

Net cash (used in)/provided by operating activities

    (6,600 )     595  
                 

Cash flows from investing activities

               

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

    (306 )     -  

Cash effect of deconsolidation of VIEs’ subsidiaries

    (8 )     -  

Investments and advances to ownership investee entities

    (1,919 )     (27 )

Short-term loan to an unrelated party

    (1,507 )     (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

    (2,500 )     -  

Payment for blockchain platform applications development costs

    -       (302 )

Net cash used in investing activities

    (6,097 )     (1,273 )

 

5

 

ZW DATA ACTION TECHNOLOGIES INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (CONTINUED)

(In thousands)

 

   

Nine Months Ended September 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

    -       (429 )

Net cash provided by/(used in) financing activities

    17,111       (429 )
                 

Effect of exchange rate fluctuation on cash and cash equivalents

    20       4  
                 

Net increase/(decrease) in cash and cash equivalents

    4,434       (1,103 )
                 

Cash and cash equivalents at beginning of the period

    4,297       1,603  

Cash and cash equivalents at end of the period

  $ 8,731     $ 500  
                 

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 NINE AND THREE MONTHS ENDED SEPTEMBER 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

  4,015,735   4   6,699   -   -   -   -   6,703 

Net (loss)/income for the period

  -   -   -   -   (2,961)  -   2   (2,959)

Foreign currency translation adjustment

  -   -   -   -   -   (22)  (1)  (23)

Balance, June 30, 2021 (unaudited)

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

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

  -   -   23   -   -   -   -   23 

Cashless exercise of warrants

  42,027   -   82   -   -   -   -   82 

Net income/(loss) for the period

  -   -   -   -   1,375   -   (1)  1,374 

Foreign currency translation adjustment

  -   -   -   -   -   (3)  1   (2)

Balance, September 30, 2021 (Unaudited)

  35,332,677  $35  $61,761  $2,598  $(42,566) $1,104  $(65) $22,867 

 

 

See notes to unaudited condensed consolidated financial statements

 

7

 

ZW DATA ACTION TECHNOLOGIES INC.

CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY

FOR THE NINE AND THREE MONTHS ENDED SEPTEMBER 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   1,905   -   -   -   -   1,907 

Net loss for the period

  -   -   -   -   (3,278)  -   (2)  (3,280)

Foreign currency translation adjustment

  -   -   -   -   -   67   1   68 

Balance, June 30, 2020 (unaudited)

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

Share-based compensation in exchange for services from nonemployees

  50,000   -   76   -   -   -   -   76 

Net loss for the period

  -   -   -   -   (1,333)  -   -   (1,333)

Foreign currency translation adjustment

  -   -   -   -   -   (201)  (2)  (203)

Balance, September 30, 2020 (Unaudited)

  21,741,926  $22  $45,569  $2,607  $(40,384) $1,371  $(60) $9,125 

 

 

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, Ecommerce 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 September 30, 2021 and December 31, 2020, respectively:

 

  

September 30,

2021

  

December 31,
2020

 
  

US$(000)

  

US$(000)

 
  

(Unaudited)

     

Assets

        

Current assets:

        

Cash and cash equivalents

 $143  $277 

Accounts receivable, net

  2,155   1,142 

Prepayment and deposit to suppliers

  4,233   2,818 

Due from related parties

  96   61 

Other current assets

  3   10 

Total current assets

  6,630   4,308 
         

Long-term investments

  449   67 

Operating lease right-of-use assets

  23   48 

Property and equipment, net

  86   32 

Intangible assets, net

  -   9 

Long-term deposits and prepayments

  88   - 

Deferred tax assets, net

  436   536 

Total Assets

 $7,712  $5,000 
         

Liabilities

        

Current liabilities:

        

Accounts payable

 $750  $270 

Advance from customers

  1,108   1,436 

Accrued payroll and other accruals

  75   168 

Taxes payable

  2,737   2,755 

Operating lease liabilities

  9   18 

Lease payment liability related to short-term leases

  109   108 

Other current liabilities

  73   213 

Total current liabilities

  4,861   4,968 
         

Operating lease liabilities-Non current

  10   32 

Total Liabilities

 $4,871  $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 nine and three months ended September 30, 2021 and 2020, respectively:

 

  

Nine Months Ended September 30,

  

Three Months Ended September 30,

 
  

2021

  

2020

  

2021

  

2020

 
  

US$(000)

  

US$(000)

  

US$(000)

  

US$(000)

 
  

(Unaudited)

  

(Unaudited)

  

(Unaudited)

  

(Unaudited)

 
                 

Revenues

 $30,932  $23,683  $10,314  $11,135 

Cost of revenues

  (34,614)  (24,051)  (11,482)  (11,729)

Total operating expenses

  (1,184)  (1,515)  (472)  (123)

Net loss before allocation to noncontrolling interests

  (5,062)  (1,802)  (1,655)  (642)

 

 
 

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 September 30, 2021 and for the nine and three months ended September 30, 2021 and 2020 have been prepared pursuant to the rules and regulations of the U.S. 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 September 30, 2021, its condensed consolidated results of operations for the nine and three months ended September 30, 2021 and 2020, and its condensed consolidated cash flows for the nine months ended September 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)

 

  

September 30, 2021

  

December 31, 2020

 
         

Balance sheet items, except for equity accounts

  6.4854   6.5249 

 

  

Nine Months Ended September 30,

 
  

2021

  

2020

 
         

Items in the statements of operations and comprehensive loss

  6.4714   6.9917 

 

  

Three Months Ended September 30,

 
  

2021

  

2020

 
         

Items in the statements of operations and comprehensive loss

  6.4707   6.9205 

 

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 September 30, 2021 and December 31, 2020 are as follows:

 

      

Fair value measurement at reporting date using

 
  

As of

September 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)

  3,686   -   -   3,686 

 

      

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:

 

  

Nine Months Ended September 30,

  

Three Months Ended September 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

  28,613   18,004   9,648   8,706 

--online advertising placements

  5,720   5,679   2,125   2,429 

--data and technical services

  -   900   -   300 

Ecommerce O2O advertising and marketing services

  514   1,276   127   269 

Technical solution services

  -   1,245   -   600 

Total revenues

 $34,847  $27,104  $11,900  $12,304 

 

11

ZW DATA ACTION TECHNOLOGIES INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

 

  

Nine Months Ended September 30,

  

Three Months Ended September 30,

 
  

2021

  

2020

  

2021

  

2020

 
  

US$(000)

  

US$(000)

  

US$(000)

  

US$(000)

 
  

(Unaudited)

  

(Unaudited)

  

(Unaudited)

  

(Unaudited)

 
                 

Revenue recognized over time

  34,847   25,859   11,900   11,704 

Revenue recognized at a point in time

  -   1,245   -   600 

Total revenues

 $34,847  $27,104  $11,900  $12,304 

 

Contract costs

 

For the nine and three months ended September 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, which 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 nine months ended September 30, 2021:

 

  

Contract liabilities

 
  

US$(000)

 
     

Balance as of January 1, 2021

  1,436 

Exchange translation adjustment

  9 

Revenue recognized from beginning contract liability balances

  (1,305)

Advances received from customers related to unsatisfied performance obligations

  1,171 

Balance as of September 30, 2021 (Unaudited)

 $1,311 

 

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

 

For the nine and three months ended September 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 nine months ended September 30, 2021 and 2020 were approximately US$0.25 million and US$0.44 million, respectively. Expenses for research and development for the three months ended September 30, 2021 and 2020 were approximately US$0.09 million and US$0.11 million, respectively.

 

12

ZW DATA ACTION TECHNOLOGIES INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

 

 

h)

Lease

 

As of September 30, 2021, operating lease right-of-use assets and total operating lease liabilities recognized was approximately US$2.04 million and US$2.12 million, respectively.

 

Maturity of operating lease liabilities

 

   

Operating leases

 
   

US$(000)

 
   

(Unaudited)

 
      

Three months ending December 31, 2021

   73 

Year ending December 31,

     
-2022   315 
-2023   330 
-2024   336 
-2025   353 
-2026   370 

-thereafter

   866 

Total undiscounted lease payments

   2,643 

Less: imputed interest

   (527)

Total operating lease liabilities as of September 30, 2021

  $2,116 
      

Including:

     

Operating lease liabilities

   193 

Operating lease liabilities-Non current

   1,923 
   $2,116 

 

Operating lease expenses:

 

  

Nine Months Ended September 30,

  

Three Months Ended September 30,

 
  

2021

  

2020

  

2021

  

2020

 
  

US$(000)

  

US$(000)

  

US$(000)

  

US$(000)

 
  

(Unaudited)

  

(Unaudited)

  

(Unaudited)

  

(Unaudited)

 
                 

Long-term operating lease contracts

  212   7   88   2 

Short-term operating lease contracts

  45   114   15   35 

Total

 $257  $121  $103  $37 

 

Supplemental information related to operating leases:

 

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Nine Months Ended September 30, 2021

 
  

(Unaudited)

 
     

Operating cash flows used for operating leases (US$’000)

  136 

Right-of-use assets obtained in exchange for new lease liabilities (US$’000)

  2,179 

Weighted-average remaining lease term (years)

  7.38