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United States securities and exchange commission logo
September 9, 2022
Handong Cheng
Chief Executive Officer
ZW Data Action Technologies Inc.
Room 1106, Xinghuo Keji Plaza
No. 2 Fufeng Road
Fengtai District , Beijing
China 100070
Re: ZW Data Action
Technologies Inc.
Form 10-K for the
Fiscal Year Ended December 31, 2021
File No. 001-34647
Dear Handong Cheng:
We have limited our review of your filing to the financial
statements and related
disclosures and have the following comments. In some of our comments, we
may ask you to
provide us with information so we may better understand your disclosure.
Please respond to these comments within ten business days by
providing the requested
information or advise us as soon as possible when you will respond. If
you do not believe our
comments apply to your facts and circumstances, please tell us why in
your response.
After reviewing your
response to these comments, we may have additional comments.
Form 10-K for the Fiscal Year Ended December 31, 2021
Our Subsidiaries, Variable Interest Entities (VIEs) and Ownership
Interest Investment Affiliates,
page 3
1. Please revise your
organizational structure to refer to your current name, ZW Data Action
Technologies, Inc.
Revise throughout the filing as appropriate, including the footnotes to
your financial
statements. Disclose when and why the name changed and if the change
has been reflected in
all VIE contractual agreements.
2. Revise your
organizational structure diagram to not use solid lines with arrows when
describing the VIEs.
Instead consider using dashed lines without arrows when describing
the VIEs.
3. We note your disclosure
on page 4 that in order to control the business and operations of
the PRC Operating
Entities and consolidate the financial results of the two companies in a
Handong Cheng
FirstName LastNameHandong
ZW Data Action Technologies Cheng
Inc.
Comapany 9,
September NameZW
2022 Data Action Technologies Inc.
September
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manner that does not violate the related PRC laws, Rise King WFOE
executed the
Contractual Agreements with the PRC Shareholders and each of the PRC
Operating
Entities. However, neither the investors in the holding company nor
the holding company
itself have an equity ownership in, direct foreign investment in, or
control of, through such
ownership or investment, the VIE. Accordingly, please refrain from
implying that the
contractual agreements are equivalent to equity ownership in the
business of the VIE. Any
references to control or benefits that accrue to you because of the
VIE should be limited to
a clear description of the conditions you have satisfied for
consolidation of the VIE under
U.S. GAAP. Please also disclose, if true, that the VIE agreements have
not been tested in
a court of law.
Liquidity and Capital Resources, page 53
4. At the forefront of your Liquidity and Capital Resources section
provide a clear
description of how cash is transferred through your organization.
Disclose your intentions
to distribute earnings or settle amounts owed under the VIE
agreements. Quantify any
cash flows and transfers of other assets by type that have occurred
between the holding
company, its subsidiaries, and the consolidated VIEs, and direction of
transfer. Quantify
any dividends or distributions that a subsidiary or consolidated VIE
have made to the
holding company and which entity made such transfer, and their tax
consequences.
Similarly quantify dividends or distributions made to U.S. investors,
the source, and their
tax consequences. Your disclosure should make clear if no transfers,
dividends, or
distributions have been made to date. Describe any restrictions on
foreign exchange and
your ability to transfer cash between entities, across borders, and to
U.S. investors.
Describe any restrictions and limitations on your ability to
distribute earnings from the
company, including your subsidiaries and/or the consolidated VIEs, to
the parent company
and U.S. investors as well as the ability to settle amounts owed under
the VIE
agreements. We note your disclosure on page 56 is not specific to your
organization and
doesn't explain how the restrictions have impacted your cash
transfers.
5. Provide disclosure regarding your ability to generate and obtain
adequate amounts of cash
to meet your cash requirements, and your plans for cash in the
short-term and separately
in the long-term. Also, state whether in your opinion, the working
capital is sufficient for
your present requirements, or, if not, how you propose to provide the
additional working
capital needed. We refer to guidance in Item 303 of Regulation S-K.
6. We note based on your disclosure on page F-24 that you have a
unsecured, interest free,
working capital loan to an unrelated party. Please disclose the entity
and/or person who
received the loan(s) and the business reason for providing unsecured,
interest free loans to
unrelated parties.
Report of Independent Registered Public Accounting Firm, page F-1
7. The report by your independent registered public accounting firm
refers to a critical audit
matter, specifically, "assessing the Company's ability to meet its
trailing twelve-month
Handong Cheng
FirstName LastNameHandong
ZW Data Action Technologies Cheng
Inc.
Comapany 9,
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2022 Data Action Technologies Inc.
September
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profitability covenant for the twelve months from the date that the
consolidated financial
statements are issued." Please provide disclosure regarding this
specific covenant.
Discuss what agreement specifies this covenant, the terms of the
covenant, if you met the
covenant, and if you are at risk of not meeting the covenant.
Disclosure should be
provided in both your Liquidity and Capital Resources section and in
the Notes to
Consolidated Financial Statements.
Consolidated Balance Sheet, page F-4
8. Your footnote on page F-4 states that, "All of the VIEs' assets can be
used to settle
obligations of their primary beneficiary." However on page F-34 you
state, "As of
December 31, 2021 and 2020, net assets restricted in the aggregate,
which include paid-in
capital and statutory reserve funds of the Company s PRC
subsidiaries and VIEs that are
included in the Company s consolidated net assets, were
approximately US$13.2 million
and US$8.2 million, respectively." Please clarify and explain the
apparent contradiction
between these two statements.
Notes to Consolidated Financial Statements
1. Organization and nature of operations, page F-10
9. Your table on page F-11 discloses that you own 100% ownership in your
VIEs. Since you
do not hold 100% equity interest in your VIEs, please revise
accordingly.
3. Summary of significant accounting policies
e) Cash and cash equivalents, page F-15
10. Disclose the jurisdiction(s) that hold your cash and cash equivalents
and address:
to what extent financial institutions in those jurisdictions
insure your cash and cash
equivalents;
any restrictions associated with the transfer of cash outside its
current jurisdiction;
how cash is transferred through your organization;
your intentions to distribute earnings or settle amounts owed to
the parent holding
company; and
state whether any transfers, dividends, or distributions have been
made to date
between the holding company, its subsidiaries, consolidated VIEs,
and your U.S.
investors, and quantify the amounts where applicable.
General
11. At the forefront of your filing, your MD&A and financial statements,
prominently disclose that your auditor is subject to the
determinations announced by the
PCAOB on December 16, 2021 and how the Holding Foreign Companies
Accountable
Act and related regulations will affect your company.
In closing, we remind you that the company and its management are
responsible for the
accuracy and adequacy of their disclosures, notwithstanding any review,
comments, action or
Handong Cheng
ZW Data Action Technologies Inc.
September 9, 2022
Page 4
absence of action by the staff.
You may contact Inessa Kessman, Senior Staff Accountant at 202-551-3371
or Robert
Littlepage, Accounting Branch Chief at 202-551-3361 with any questions.
FirstName LastNameHandong Cheng Sincerely,
Comapany NameZW Data Action Technologies Inc.
Division of
Corporation Finance
September 9, 2022 Page 4 Office of Technology
FirstName LastName