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0001376321 ZW Data Action Technologies Inc. false --12-31 Q2 2022 2,454 2,236 0.001 0.001 100,000,000 100,000,000 35,827,677 35,827,677 35,332,677 35,332,677 1,600 10,476 3,045 1,445 1,600 0 0.12 0.16 0.06 0.09 2.04 2.14 2.45 2.24 6 0.33 0 1.0 2.20 0.01 0.62 15.38 10 17 19 0.05 0.004 0.02 0.003 1.06 0.28 0.53 0.17 1.06 2.12 2.12 0.63 0.18 0.12 32.0 31.0 20.1 18.3 12.8 12.3 0.82 0.50 1.96 1.65 1.4927 1.4927 1.4927 3.02 3.02 3.02 15.2 13.2 0.12 0.1 0.06 0.05 5.0 0.75 2.0 0.30 3.0 0.45 0.08 0.03 6.86 6.76 0.03 0.02 0.35 0.14 0.01 0.04 0.16 0.10 0.06 Including approximately US$6.76 million share-based compensation expenses. The investor warrants issued in the 2018 Financing expired in July 2020. The placement agent warrants issued in the 2018 Financing were cashless exercised in July 2021. Closing date of the 2021 Financing. Less than 10%. Including approximately US$0.08 million share-based compensation expenses. 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 June 30, 2022

 

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, China 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 August 19, 2022, the registrant had 35,827,677 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, 2022 (Unaudited) and December 31, 2021

1-2

   

Condensed Consolidated Statements of Operations and Comprehensive Loss for the Six and Three Months Ended June 30, 2022 and 2021 (Unaudited)

3-4

   

Condensed Consolidated Statements of Cash Flows for the Six Months Ended June 30, 2022 and 2021 (Unaudited)

5-6

   

Condensed Consolidated Statements of Changes in Equity for the Six and Three Months Ended June 30, 2022 and 2021 (Unaudited)

7-8

   

Notes to Condensed Consolidated Financial Statements (Unaudited)

9-27

   

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

28-37

   
Item 3. Quantitative and Qualitative Disclosures About Market Risk

37

   

Item 4. Controls and Procedures

38

   

PART II. OTHER INFORMATION

 
   

Item 1. Legal Proceedings

38

   

Item 1A. Risk Factors

38

   

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

38

   

Item 3. Defaults Upon Senior Securities

38

   

Item 4. Mine Safety Disclosures

38

   

Item 5. Other Information

38

   

Item 6. Exhibits

39

   

Signatures

40

 

 

 

 

 

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,

2022

  

December 31,

2021

 
  

(US $)

  

(US $)

 
  

(Unaudited)

     

Assets

        

Current assets:

        

Cash and cash equivalents *

 $4,454  $7,173 

Accounts receivable, net of allowance for doubtful accounts of $2,454 and

$2,236, respectively *

  3,238   3,439 

Prepayment and deposit to suppliers *

  6,303   7,559 

Due from related parties *

  15   90 

Other current assets, net *

  1,602   1,657 

Total current assets

  15,612   19,918 
         

Long-term investments *

  2,216   2,280 

Operating lease right-of-use assets *

  2,038   2,019 

Property and equipment, net *

  307   375 

Intangible assets, net

  6,440   7,523 

Long-term deposits and prepayments *

  121   75 

Deferred tax assets, net *

  423   441 

Total Assets

 $27,157  $32,631 
         

Liabilities and Equity

        

Current liabilities:

        

Accounts payable *

 $567  $1,119 

Advance from customers *

  794   1,245 

Accrued payroll and other accruals *

  163   389 

Taxes payable *

  3,376   3,534 

Operating lease liabilities *

  391   202 

Lease payment liability related to short-term leases *

  105   152 

Other current liabilities *

  136   141 

Warrant liabilities

  257   2,039 

Total current liabilities

  5,789   8,821 

 

1

 

ZW DATA ACTION TECHNOLOGIES INC.

CONDENSED CONSOLIDATED BALANCE SHEETS (CONTINUED)

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

 

  

June 30,

2022

  

December 31,

2021

 
  

(US $)

  

(US $)

 
  

(Unaudited)

     

Long-term liabilities:

        

Operating lease liabilities-Non current *

  1,748   1,907 

Long-term borrowing from a related party

  130   137 

Total Liabilities

  7,667   10,865 
         

Commitments and contingencies

          
         

Equity:

        

ZW Data Action Technologies Inc.’s stockholders’ equity

        

Common stock (US$0.001 par value; authorized 100,000,000 shares; issued

and outstanding 35,827,677 shares and 35,332,677 shares at June 30, 2022

and December 31, 2021, respectively)

  36   35 

Additional paid-in capital

  61,956   61,785 

Statutory reserves

  2,598   2,598 

Accumulated deficit

  (46,165)  (43,734)

Accumulated other comprehensive income

  1,065   1,082 

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

  19,490   21,766 
         

Total equity

  19,490   21,766 
         

Total Liabilities and Equity

 $27,157  $32,631 

 

 

*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,

 
  

2022

  

2021

  

2022

  

2021

 
  

(US $)

  

(US $)

  

(US $)

  

(US $)

 
  

(Unaudited)

  

(Unaudited)

  

(Unaudited)

  

(Unaudited)

 

Revenues

                

From unrelated parties

 $14,597  $22,947  $6,945  $14,551 

From a related party

  -   -   -   - 

Total revenues

  14,597   22,947   6,945   14,551 

Cost of revenues

  14,544   23,882   7,026   14,769 

Gross profit/(loss)

  53   (935)  (81)  (218)
                 

Operating expenses

                

Sales and marketing expenses

  147   101   78   73 

General and administrative expenses

  4,046   8,895   2,498   7,899 

Research and development expenses

  124   163   56   89 

Total operating expenses

  4,317   9,159   2,632   8,061 
                 

Loss from operations

  (4,264)  (10,094)  (2,713)  (8,279)
                 

Other income/(expenses)

                

Interest income

  75   2   29   1 

Other (expenses)/income, net

  (28)  302   (19)  326 

Loss on disposal of long-term investments

  -   (38)  -   (38)

Change in fair value of warrant liabilities

  1,782   6,829   987   4,322 

Total other income

  1,829   7,095   997   4,611 
                 

Loss before income tax benefit and noncontrolling interests

  (2,435)  (2,999)  (1,716)  (3,668)

Income tax benefit

  4   40   2   22 

Net loss

  (2,431)  (2,959)  (1,714)  (3,646)

Net income attributable to noncontrolling interests

  -   (2)  -   - 

Net loss attributable to ZW Data Action Technologies Inc.

 $(2,431)  $(2,961)  $(1,714) $(3,646)

 

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,

 
  

2022

  

2021

  

2022

  

2021

 
  

(US $)

  

(US $)

  

(US $)

  

(US $)

 
  

(Unaudited)

  

(Unaudited)

  

(Unaudited)

  

(Unaudited)

 
                 

Net loss

 $(2,431) $(2,959) $(1,714) $(3,646)

Foreign currency translation (loss)/gain

  (17)  (23)  5   (4)

Comprehensive loss

 $(2,448) $(2,982) $(1,709) $(3,650)

Comprehensive (income)/loss attributable to noncontrolling interests

  -   (1)  -   1 

Comprehensive loss attributable to ZW Data Action Technologies Inc.

 $(2,448) $(2,983) $(1,709) $(3,649)
                 

Loss per share

                

Loss per common share

                

Basic and diluted

 $(0.07) $(0.10) $(0.05) $(0.11)
                 

Weighted average number of common shares outstanding:

                

Basic and diluted

  35,442,345   30,727,546   35,528,776   32,925,488 

 

 

 

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,

 
  

2022

  

2021

 
  

(US $)

  

(US $)

 
  

(Unaudited)

  

(Unaudited)

 

Cash flows from operating activities

        

Net loss

 $(2,431) $(2,959)

Adjustments to reconcile net loss to net cash used in operating activities

        

Depreciation and amortization

  1,108   282 

Amortization of operating lease right-of-use assets

  134   92 

Share-based compensation expenses

  84   6,857 

Provision for allowances for doubtful accounts

  947   - 

Loss on disposal of long-term investments

  -   38 

Deferred taxes

  (4)  (40)

Change in fair value of warrant liabilities

  (1,782)  (6,829)

Other non-operating income

  (72)  - 

Changes in operating assets and liabilities

        

Accounts receivable

  (290)  (1,284)

Prepayment and deposit to suppliers

  1,100   (980)

Due from related parties

  60   - 

Other current assets

  29   8 

Long-term deposits and prepayments

  (51)  (554)

Accounts payable

  (513)  403 

Advance from customers

  (402)  89 

Accrued payroll and other accruals

  (220)  (197)

Other current liabilities

  311   (123)

Taxes payable

  8   (49)

Lease payment liability related to short-term leases

  (41)  (54)

Operating lease liabilities

  (119)  (31)

Net cash used in operating activities

  (2,144)  (5,331)
         

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)

Repayment from ownership investee entities

  12   - 

Short-term loans to unrelated parties

  (2,600)  (312)

Repayment of short-term loans and interest income from unrelated parties

  2,109   1,303 

Payment for purchase of software technologies

  -   (1,160)

Deposit and prepayment paid for contracts of other investing activities

  -   (3,500)

Net cash used in investing activities

  (479)  (4,361)

 

5

 

ZW DATA ACTION TECHNOLOGIES INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (CONTINUED)

(In thousands)

 

  

Six Months Ended June 30,

 
  

2022

  

2021

 
  

(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 

Net cash provided by financing activities

  -   17,111 
         

Effect of exchange rate fluctuation on cash and cash equivalents

  (96)  36 
         

Net (decrease)/increase in cash and cash equivalents

  (2,719)  7,455 
         

Cash and cash equivalents at beginning of the period

  7,173   4,297 

Cash and cash equivalents at end of the period

 $4,454  $11,752 
         

Supplemental disclosure of cash flow information

        
         

Income taxes paid

 $-  $- 

Interest expense paid

 $-  $- 

 

 

 

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, 2022

(In thousands, except for number of shares)

 

  

Common stock

  

Additional

paid-in

capital

  

Statutory

reserves

  

Accumulated deficit

  

Accumulated other comprehensive income (loss)

  

Total equity

 
  

Number of shares

  

Amount

                     
      

(US $)

  

(US $)

  

(US $)

  

(US $)

  

(US $)

  

(US $)

 
                             

Balance, January 1, 2022

  35,332,677  $35  $61,785  $2,598  $(43,734) $1,082  $21,766 

Share-based compensation in exchange for

services from employees and directors

  95,000   -   16   -   -   -   16 

Net loss for the period

  -   -   -   -   (717)  -   (717)

Foreign currency translation adjustment

  -   -   -   -   -   (22)  (22)

Balance, March 31, 2022 (unaudited)

  35,427,677  $35  $61,801  $2,598  $(44,451) $1,060  $21,043 

Share-based compensation in exchange for

services from nonemployees

  400,000   1   139   -   -   -   140 

Share-based compensation in exchange for

services from employees and directors

  -   -   16   -   -   -   16 

Net loss for the period

  -   -   -   -   (1,714)  -   (1,714)

Foreign currency translation adjustment

  -   -   -   -   -   5   5 

Balance, June 30, 2022 (unaudited)

  35,827,677  $36  $61,956  $2,598  $(46,165) $1,065  $19,490 

 

 

 

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, 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 $10,476 proceeds allocated to investor warrants labilities and $3,045 direct offering costs (including $1,445 proceeds allocated to placement agent warrants liabilities and $1,600 cash offering cost, respectively), 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

 

8

 

ZW DATA ACTION TECHNOLOGIES INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

 

 

1.

Organization and nature of operations

 

ZW Data Action Technologies 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

 

To satisfy PRC laws and regulations, the Company conducts certain business in the PRC through its PRC subsidiaries and operating entities (the “VIEs”).

 

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, 2022 and December 31, 2021, respectively:

 

  

June 30,

2022

  

December 31,

2021

 
  

US$(000)

  

US$(000)

 
  

(Unaudited)

     

Assets

        

Current assets:

        

Cash and cash equivalents

 $577  $181 

Accounts receivable, net

  3,238   2,796 

Prepayment and deposit to suppliers

  3,429   5,287 

Due from related parties

  15   90 

Other current assets, net

  3   4 

Total current assets

  7,262   8,358 
         

Long-term investments

  471   496 

Operating lease right-of-use assets

  250   21 

Property and equipment, net

  138   168 

Long-term deposits and prepayments

  49   - 

Deferred tax assets, net

  423   441 

Total Assets

 $8,593  $9,484 
         

Liabilities

        

Current liabilities:

        

Accounts payable

 $567  $1,119 

Advance from customers

  735   1,113 

Accrued payroll and other accruals

  61   83 

Taxes payable

  2,714   2,849 

Operating lease liabilities

  195   9 

Lease payment liability related to short-term leases

  105   110 

Other current liabilities

  48   53 

Total current liabilities

  4,425   5,336 
         

Operating lease liabilities-Non current

  48   10 

Total Liabilities

 $4,473  $5,346 

 

9

ZW DATA ACTION TECHNOLOGIES INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

 

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.

 

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, 2022 and 2021, respectively:

 

  

Six Months Ended June 30,

  

Three Months Ended June 30,

 
  

2022

  

2021

  

2022

  

2021

 
  

US$(000)

  

US$(000)

  

US$(000)

  

US$(000)

 
  

(Unaudited)

  

(Unaudited)

  

(Unaudited)

  

(Unaudited)

 
                 

Revenues

 $13,862  $20,618  $6,664  $12,671 

Cost of revenues

  (14,544)  (23,132)  (7,026)  (14,394)

Total operating expenses

  (848)  (712)  (589)  (322)

Net loss before allocation to noncontrolling interests

  (1,553)  (3,407)  (968)  (2,126)

 

 

 

 

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, 2022 and for the six and three months ended June 30, 2022 and 2021 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, 2021, previously filed with the SEC (the “2021 Form 10-K”) on April 15, 2022.

 

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, 2022, its condensed consolidated results of operations for the six and three months ended June 30, 2022 and 2021, and its condensed consolidated cash flows for the six months ended June 30, 2022 and 2021, 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.

 

10

ZW DATA ACTION TECHNOLOGIES INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

 

 

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:

 

  

June 30, 2022

  

December 31, 2021

 
         

Balance sheet items, except for equity accounts

  6.7114   6.3757 
         
  

Six Months Ended June 30,

 
  

2022

  

2021

 
         

Items in the statements of operations and comprehensive loss

  6.4835   6.4718 
         
  

Three Months Ended June 30,

 
  

2022

  

2021

 
         

Items in the statements of operations and comprehensive loss

  6.6144   6.4596 

 

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, 2022 and December 31, 2021 are as follows:

 

      

Fair value measurement at reporting date using

 
  

As of

June 30, 2022

  

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 15)

  257   -   -   257

 

 

      

Fair value measurement at reporting date using

 
  

As of

December 31, 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)

 
                 

Warrant liabilities (Note 15)

  2,039   -   -   2,039 

 

11

ZW DATA ACTION TECHNOLOGIES INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

 

 

f)

Revenue recognition

 

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

 

  

Six Months Ended June 30,

  

Three Months Ended June 30,

 
  

2022

  

2021

  

2022

  

2021

 
  

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

  12,369   18,965   5,775   12,100 

--online advertising placements

  2,228   3,595   1,170   2,193 

Ecommerce O2O advertising and marketing services

  -   387   -   258 

Total revenues

 $14,597  $22,947  $6,945  $14,551

 

 

  

Six Months Ended June 30,

  

Three Months Ended June 30,

 
  

2022

  

2021

  

2022

  

2021

 
  

US$(000)

  

US$(000)

  

US$(000)

  

US$(000)

 
  

(Unaudited)

  

(Unaudited)

  

(Unaudited)

  

(Unaudited)

 
                 

Revenue recognized over time

  14,597   22,947   6,945   14,551 

Revenue recognized at a point in time

  -   -   -   - 

Total revenues

 $14,597  $22,947  $6,945  $14,551 

 

Contract costs

 

For the six and three months ended June 30, 2022 and 2021, 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, 2022:

 

  

Contract liabilities

 
  

US$(000)

 
     

Balance as of January 1, 2022

  1,245 

Exchange translation adjustment

  (62)

Revenue recognized from beginning contract liability balances

  (1,150)

Advances received from customers related to unsatisfied performance obligations

  761 

Balance as of June 30, 2022 (Unaudited)

 $794 

 

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, 2022 and 2021.

 

For the six and three months ended June 30, 2022 and 2021, 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, 2022 and 2021 were approximately US$0.12 million and US$0.16 million, respectively. Expenses for research and development for the three months ended June 30, 2022 and 2021 were approximately US$0.06 million and US$0.09 million, respectively.

 

12

ZW DATA ACTION TECHNOLOGIES INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

 

 

h)

Lease

 

As of June 30, 2022, operating lease right-of-use assets and total operating lease liabilities recognized was approximately US$2.04 million and US$2.14 million, respectively.

 

Maturity of operating lease liabilities

 

  

Operating leases

 
  

US$(000)

 
  

(Unaudited)

 
     

Six months ending December 31, 2022

  246 

Year ending December 31,

    
-2023  465 
-2024  324 
-2025  341 
-2026  358 
-2027  376 

-thereafter

  461 

Total undiscounted lease payments

  2,571 

Less: imputed interest

  (432)

Total operating lease liabilities as of June 30, 2022

 $2,139 
     

Including:

    

Operating lease liabilities

  391 

Operating lease liabilities-Non current

  1,748 
  $2,139 

 

Operating lease expenses:

 

  

Six Months Ended June 30,

  

Three Months Ended June 30,

 
  

2022

  

2021

  

2022

  

2021

 
  

US$(000)

  

US$(000)

  

US$(000)

  

US$(000)

 
  

(Unaudited)

  

(Unaudited)

  

(Unaudited)

  

(Unaudited)

 
                 

Long-term operating lease contracts

  193   124   103   87 

Short-term operating lease contracts

  29   30   14   15 

Total

 $222  $154  $117  $102 

 

Supplemental information related to operating leases:

 

  

Six Months Ended

June 30, 2022

 
  

(Unaudited)

 
     

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

  178 

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

  259 

Weighted-average remaining lease term (years)

  6.06 

Weighted-average discount rate

  6%

 

13

ZW DATA ACTION TECHNOLOGIES INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

 

 

4.

Accounts receivable, net

 

  

June 30,

2022

  

December 31,

2021

 
  

US$(000)

  

US$(000)

 
  

(Unaudited)

     
         

Accounts receivable

  5,692   5,675 

Allowance for doubtful accounts

  (2,454)  (2,236)

Accounts receivable, net

  3,238   3,439 

 

All of the accounts receivable are non-interest bearing. Based on the assessment of the collectability of the accounts receivable as of June 30, 2022 and December 31, 2021, the Company provided approximately US$2.45 million and US$2.24 million allowance for doubtful accounts, respectively, which were primarily related to the accounts receivable of the Company’s Internet advertising and related services segment and Ecommerce O2O Ad and marketing services segment with an aging over six months. The Company evaluates its accounts receivable with an aging over six months and determines the allowance based on aging data, historical collection experience, customer specific facts and economic conditions. For the six and three months ended June 30, 2022, the Company provided approximately US$0.33 million allowance for doubtful accounts. For the six and three months ended June 30, 2021, no allowance for doubtful accounts was provided.

 

 

5.

Prepayments and deposit to suppliers

 

  

June 30,

2022

  

December 31,

2021

 
  

US$(000)

  

US$(000)

 
  

(Unaudited)

     
         

Deposits to advertising resources providers

  599   934 

Prepayments to advertising resources providers

  4,207   5,185 

Deposit and prepayment for other investing contracts

  1,000   1,000 

Other deposits and prepayments

  497   440 
   6,303   7,559 

 

As of June 30, 2022, deposit and prepayment for other investing contracts represented a US$1.0 million refundable deposit paid for a potential acquisition transaction, which will be refunded if no definitive agreement is reached among the parties before the expected closing date, i.e.,  December 31, 2022. As of the date hereof, the Company is in the progress of the due diligence process of the target company.

 

 

6.

Due from related parties

 

  

June 30,

2022

  

December 31,

2021

 
  

US$(000)

  

US$(000)

 
  

(Unaudited)

     
         

Zhongwang Xiyue Technology (Beijing) Co., Ltd. (“Zhongwang Xiyue”)

  1   62 

Guangzhou Gong Xiang Technology Co., Ltd. (“Gong Xiang Technology”)

  14   28 

Due from related parties

  15   90 

 

Related parties of the Company represented the Company’s direct or indirect unconsolidated investee companies and entities that the Company’s officers or directors can exercise significant influence.

 

14

ZW DATA ACTION TECHNOLOGIES INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

 

As of  June 30, 2022 and  December 31, 2021, due from Zhongwang Xiyue represented the outstanding receivables for the advertising and marketing service that the Company provided to this related party in its normal course of business, which is on the same terms as those provided to its unrelated clients.

 

As of  June 30, 2022 and December 31, 2021, due from Gong Xiang Technology was a short-term working capital loan provided to this investee entity. Such loan is expected to be fully repaid to the Company for the year ending  December 31, 2022.

 

 

7.

Other current assets, net