*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).

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS (CONTINUED)

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) sales channel expansion~~(O2O) advertising and marketing services as well as the related data and technical services to small and medium enterprises ~~(“SMEs”) and entrepreneurial management and networking services for entrepreneurs~~(SMEs) in the PRC.

As of September 30, 2017, the Company operated its business primarily in China through its PRC subsidiaries and operating entities, or Variable Interest Entities (“VIEs”) as discussed in the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2016, previously filed with the Securities and Exchange Commission (the “2016 Form 10-K”).

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~~June 30, ~~2017~~ 2021 and December 31, ~~2016,~~ 2020, respectively:

	September 30, 2017			December 31, 2016		June 30, 2021		December 31, 2020
		US$(’000)			US$(’000)	US$(’000)		US$(’000)
		(Unaudited)				(Unaudited)
Assets
Current assets:
Cash and cash equivalents	$	1,217		$	2,915	$	485	$	277
Term deposit		-			3,056
Accounts receivable, net		4,653			3,315		3,321		1,142
Other receivables, net		2,863			-
Prepayment and deposit to suppliers		5,382			4,710		3,022		2,818
Due from related parties, net		217			197
Due from related parties							104		61
Other current assets		41			71		3		10
Total current assets		14,373			14,264		6,935		4,308

Long-term investments		45			43		450		67
Operating lease right-of-use assets							26		48
Property and equipment, net		201			286		90		32
Intangible assets, net		4,934			5,468		0		9
Goodwill		5,195			4,970
Deferred tax assets		1,180			1,241
Long-term deposits and prepayments							85		0
Deferred tax assets, net							439		536
Total Assets	$	25,928		$	26,272	$	8,025	$	5,000

Liabilities
Current liabilities:
Short-term bank loan	$	753		$	721
Accounts payable		612			83	$	1,015	$	270
Advances from customers		2,267			1,388
Advance from customers							1,397		1,436
Accrued payroll and other accruals		195			256		93		168
Due to Control Group		11			10
Payable for purchasing of software technology		429			411
Taxes payable		2,639			2,480		2,729		2,755
Other payables		214	��		162
Operating lease liabilities							9		18
Lease payment liability related to short-term leases							109		108
Other current liabilities							55		213
Total current liabilities		7,120			5,511		5,407		4,968

Deferred tax Liabilities
Operating lease liabilities-Non current							9		32
Total Liabilities	$	7,120		$	5,511	$	5,416	$	5,000

~~F-7~~

~~CHINANET ONLINE HOLDINGS, 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.

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~~six and three months ended ~~September~~June 30, ~~2017~~ 2021 and ~~2016,~~2020, respectively:

Nine Months Ended September 30,
2017 2016
US$(’000) US$(’000)

Revenues 31,231 25,289
Cost of revenues (26,954 ) (19,186 )
Total operating expenses (5,895 ) (6,384 )
Loss from discontinued operations - (60 )
Net loss before allocation to noncontrolling interests (1,928 ) (603 )

	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	)

Three Months Ended September 30,
2017 2016
US$(’000) US$(’000)

Revenues 13,498 11,902
Cost of revenues (12,162 ) (9,872 )
Total operating expenses (2,736 ) (2,290 )
Net loss before allocation to noncontrolling interests (1,412 ) (343 )

3.	Summary of significant accounting policies

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~~June 30, ~~2017~~ 2021 and for the ~~nine~~six and three months ended ~~September~~June 30, ~~2017~~ 2021 and ~~2016~~2020 have been prepared ~~without audit,~~ pursuant to the rules and regulations of the Securities and Exchange Commission (the “SEC”). Certain information and footnote disclosures, which are normally included in ~~annual~~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 ~~2016~~Company’s Annual Report on Form ~~10-K.~~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~~June 30, ~~2017,~~ 2021, its condensed consolidated results of operations for the ~~nine~~six and three months ended ~~September~~June 30, ~~2017~~ 2021 and ~~2016,~~2020, and its condensed consolidated cash flows for the ~~nine~~six months ended ~~September~~June 30, ~~2017~~ 2021 and ~~2016,~~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.

~~F-8~~

~~CHINANET ONLINE HOLDINGS, INC.~~

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)~~

b)	Principles of consolidation

The unaudited condensed consolidated interim financial statements include the ~~financial statements~~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.

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 ~~condensed~~ 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.

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:

September 30, 2017 December 31, 2016

Balance sheet items, except for equity accounts 6.6369 6.9370

ZW DATA ACTION TECHNOLOGIES INC.

Nine Months Ended September 30,
2017 2016

Items in the statements of operations and comprehensive loss, and statements of cash flows 6.7983 6.5771

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

Three Months Ended September 30,
2017 2016
Items in the statements of operations and comprehensive loss, and statements of cash flows 6.6676 6.6648

	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)	~~Advertising costs~~ Fair value measurement

~~Advertising~~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)

(Unaudited)

Warrant liabilities (Note 16)

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)

Warrant liabilities (Note 16)

1,505

Revenue recognition

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

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		0		600		0		300
Ecommerce O2O advertising and marketing services		387		1,007		258		504
Technical solution services		0		645		0		0
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		0		645		0		0
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 ~~Company’s own brand building~~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 ~~not includable in cost~~generally refundable. Refund of ~~revenues, they are expensed when incurred or amortized over~~advance from customers were insignificant for the ~~estimated beneficial period~~six and ~~are included in “sales~~ three months ended June 30, 2021 and ~~marketing expenses” in the statements of operations and comprehensive loss.~~ 2020.

For the ~~nine~~six and three months ended ~~September~~June 30, ~~2017~~ 2021 and ~~2016, advertising expenses for the Company’s own brand building~~2020, there is 0 revenue recognized from performance obligations that were approximately US$1,583,000 and US$1,684,000, respectively. For the three months ended September 30, 2017 and 2016, advertising expenses for the Company’s own brand building were approximately US$480,000 and US$724,000, respectively.satisfied in prior periods.

g)	Research and development expenses

The Company accounts for expenses for the ~~cost of developing~~enhancement, maintenance and ~~upgrading technologies and~~technical support to the Company’s Internet platforms and intellectual ~~property~~properties that are used in its daily operations in research and development ~~cost.~~expenses. Research and development costs are charged to expense when incurred. Expenses for research and development for the ~~nine~~six months ended ~~September~~June 30, ~~2017~~ 2021 and ~~2016~~2020 were approximately US$~~1,012,000~~0.16 million and US$~~1,530,000,~~0.33 million, respectively. Expenses for research and development for the three months ended ~~September~~June 30, ~~2017~~ 2021 and ~~2016~~2020 were approximately US$~~312,000~~0.09 million and US$~~514,000,~~0.12 million, respectively.

~~F-9~~

~~CHINANET ONLINE HOLDINGS, INC.~~

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)~~

~~Impact of recently issued accounting standards~~

In May 2014, the Financial Accounting Standard Board (“FASB”) issued Accounting Standards Update (“ASU”) No. 2014-09, “Revenue from Contracts with Customers (Topic 606)” (as further amended or clarified by other

ZW DATA ACTION TECHNOLOGIES INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

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		79		15		35
Total	$	154	$	84	$	102	$	37

Supplemental information related ASUs issued subsequently in 2015, 2016 and 2017). ASU No. 2014-09 clarifies the principles for recognizing revenue and develops a common revenue standard for U.S. GAAP and IFRS. Simultaneously, this ASU supersedes the revenue recognition requirements in ASC Topic 605-Revenue Recognition and most industry-specific guidance throughout the Industry Topics of the Codification. The core principle of this ASU requires an entity to recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. To achieve that core principle, an entity should apply the five steps: (1) identify the contract(s) with a customer; (2) identify the performance obligations in the contract; (3) determine the transaction price; (4) allocate the transaction price to the performance obligations in the contract; (5) recognize revenue when (or as) the entity satisfies a performance obligation. For public business entities, certain not-for-profit entities, and certain employee benefit plans, the amendments in ASU No. 2014-09 and the amendments in other related ASUs that affected the guidance in ASU 2014-09 should be applied to annual reporting periods beginning after December 15, 2017, including interim reporting periods within that reporting period. Earlier application is permitted only as of annual reporting periods beginning after December 15, 2016, including interim reporting periods within that reporting period. The Company did not early adopt this ASU in fiscal 2017, and will apply the new revenue standard beginning January 1, 2018. Based on the Company’s preliminary evaluation, the Company does not currently expect the adoption of these amendments to have a material impact on its consolidated financial position and results of operations. However, adopting the new revenue standard will significantly increase the disclosure requirements of the sufficient information (qualitatively and quantitatively) to enable users of financial statements to understand the nature, amount, timing, and uncertainty of revenue and cash flows arising from contracts with customers. The Company plans to continue the evaluation and analysis of its adoption of ASU 2014-09 (including those subsequently issued updates that clarify or amend ASU 2014-09’s provisions) throughout 2017 as the Company works towards the implementation and finalizes its determination of the impact that the adoption will have on its consolidated financial statements.operating leases:

	Six Months Ended June 30, 2021
	(Unaudited)

Operating cash flows used for operating leases (US$’000)		63
Right-of-use assets obtained in exchange for new lease liabilities (US$’000)		2,179
Weighted-average remaining lease term (years)		7.63
Weighted-average discount rate		6	%

ZW DATA ACTION TECHNOLOGIES INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

~~Term deposit~~

Term deposit as of December 31, 2016 represented the amount of cash placed as a term deposit by one of the Company’s operating VIEs in a major financial institution in China, which management believes is of high credit quality. The term deposit matured on July 7, 2017. The interest rate of the term deposit was 2.25% per annum.

Accounts receivable, net

	September 30, 2017			December 31, 2016			June 30, 2021			December 31, 2020
	US$(’000)			US$(’000)			US$(’000)			US$(’000)
	(Unaudited)						(Unaudited)

Accounts receivable		8,802			6,034			5,914			6,654
Allowance for doubtful accounts		(4,149	)		(2,712	)		(2,207	)		(4,247	)
Accounts receivable, net		4,653			3,322			3,707			2,407

All of the accounts receivable are non-interest bearing. Based on the assessment of the collectability of the accounts receivable as of ~~September~~June 30, ~~2017~~ 2021 and December 31, ~~2016,~~ 2020, the Company provided approximately US$~~4,149,000~~2.21 million and US$~~2,712,000~~4.25 million allowance for doubtful accounts, respectively, which were primarily related to the accounts receivable of the Company’s ~~internet~~Internet advertising and ~~TV advertising business segment.~~related services segment with an aging over six months. The Company evaluates its accounts ~~receivables~~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 ~~nine~~six and three months ended ~~September~~June 30, ~~2017, approximately US$1,254,000 and US$1,283,000~~2021, 0 allowance for doubtful accounts was provided. For the ~~nine~~six and three months ended ~~September~~June 30, ~~2016, no~~2020, approximately US$0.75 million and US$0.34 million allowance for doubtful accounts was provided, ~~or reversed.~~

respectively. For the three months ended June 30, 2021, the Company charged off approximately US$2.08 million accounts receivable against its related allowance, as all means of collection have been exhausted and the potential for recovery is considered remote.

~~F-10~~

~~CHINANET ONLINE HOLDINGS, INC.~~ 5.		Prepayments and deposit to suppliers
~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)~~

~~Other receivables, net~~

	June 30, 2021		December 31, 2020
	US$(’000)		US$(’000)
	(Unaudited)

Deposits to advertising resources providers		619		307
Prepayments to advertising resources providers		4,390		3,696
Deposit and prepayment for other investing contracts		2,500		0
Other deposits and prepayments		526		654
		8,035		4,657

~~Other receivables as~~As of June 30, 2021, deposit and prepayment for other investing contracts consisted of a US$1.0 million refundable deposit paid for a potential merge and acquisition transaction, which will be refunded if no definitive agreement is reached among the parties before the expected closing date, i.e. September 30, ~~2017 represented~~2021, and a short-term working capital loan to an unrelated third party, which will expire on June 30, 2018. The loan is unsecured and non-interest bearing. The Company expects to fully collect this loan by the end of 2017. As of September 30, 2017 and December 31, 2016, other receivables also included approximately RMB6.0 (US$0.9 million) overdue contractual deposits, which were related to advertising resourcesUS$1.5 million prepayment paid in accordance with a cryptocurrency mining machine purchase contracts that had been completed with no further cooperation. Based on the assessment of the collectability of these overdue deposits as of September 30, 2017 and December 31, 2016, the Company had provided full allowance against these doubtful accounts.

7.	~~Prepayments and deposit to suppliers~~

September 30,
2017

December 31,
2016
US$(’000) US$(’000)
(Unaudited)

Deposits to internet resources providers 888 1,074
Prepayments to internet resources providers 3,639 2,874
Deposits to other services providers 753 721
Other deposits and prepayments 170 85
5,450 4,754

The Company purchases internet resources from large internet search engines and technical services from suppliers to attract more internet traffic to its advertising portals and provide value-added services to its clients.

According to the contracts signed between the Company and its suppliers, the Company is normally required to pay the contract amounts in advance. These prepayments will be transferred to cost of revenues when the related services are provided. As of September 30, 2017 and December 31, 2016, prepayments to internet resources providers primarily consisted of advance payments paid for purchasing internet resources from two of the Company’s largest internet resources suppliers.agreement, respectively.

As of ~~September 30, 2017 and December 31, 2016, deposits to other service provider represented~~ the ~~deposit for an advisory contract related to finding new investors~~date hereof, the Company is in the due diligence process for the potential merge and acquisition transaction.

Due to the recent policies promulgated by the Chinese government which ban cryptocurrency mining business commencing in May 2021, the Company ~~which will expire on December 31, 2017.~~

cancelled its cryptocurrency mining machine purchase agreement with the supplier and expects to be refunded with the prepayment of US$1.5 million in the second half of 2021.

ZW DATA ACTION TECHNOLOGIES INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

Due from related parties ~~net~~

September 30,
2017

December 31,
2016
US$(’000) US$(’000)
(Unaudited)

Beijing Saimeiwei Food Equipment Technology Co., Ltd. 33 31
Chuangshi Meiwei (Beijing) International Investment Management Co., Ltd. 156 150
ChinaNet Chuang Tou (Shenzhen) Co., Ltd. 14 -
Guohua Shiji (Beijing) Communication Co., Ltd. 181 175
Beijing Saturday Education Technology Co., Ltd. 1 1
385 357
Allowance for doubtful accounts (151 ) (144 )
Due from related parties, net 234 213

	June 30, 2021		December 31, 2020
	US$(’000)		US$(’000)
	(Unaudited)

Zhongwang Xiyue Technology (Beijing) Co., Ltd. (“Zhongwang Xiyue”)		61		61
Guangzhou Gong Xiang Technology Co., Ltd. (“Gong Xiang Technology”)		43		0
Due from related parties		104		61

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

As of ~~September~~June 30, ~~2017~~ 2021 and December 31, ~~2016,~~ 2020, due from Zhongwang Xiyue represented the outstanding receivable for advertising and marketing service that the Company provided to this related ~~parties primarily included~~party in its normal course of business, which is on the same terms as those provided to its unrelated clients.

As of June 30, 2021, due from Gong Xiang Technology was a short-term working capital ~~loans of RMB1.0 million (approximately US$0.15 million) and RMB1.2 million (approximately US$0.18 million)~~loan provided to Chuangshi Meiwei and Guohua Shiji, respectively. The working capital loans are lent to supplement the short-term operational needs of these related parties to assist certain of their business developing projects. The working capital loans are non-interest bearing and needsthis investee entity, which is expected to be repaid to the Company ~~within one year. Based on~~for the ~~assessment of the collectability, the Company provided approximately US$151,000 and US$144,000 allowance for doubtful accounts against its amounts due from related parties as of September 30, 2017 and~~ year ending December 31, ~~2016, respectively, which was related to the working capital loan lent to Chuangshi Meiwei.~~

2021.

~~F-11~~

~~CHINANET ONLINE HOLDINGS, INC.~~ 7.		Other current assets
~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)~~

9.	~~Long-term investments~~

September 30,
2017

December 31,
2016
US$(’000) US$(’000)
(Unaudited)

Equity method investments:
Investment in equity method investees 741 709
Advance to equity method investees 78 75
Impairment on equity method investments (819 ) (784 )
Total equity method investments - -

Cost method investments:
Investment in cost method investees 1,108 1,492
Impairment on cost method investments (159 ) (152 )
Total cost method investments 949 1,340

Total long-term investments 949 1,340

~~Equity method investments~~

	June 30, 2021						December 31,2020
	Gross		Allowance for doubtful accounts		Net		Gross		Allowance for doubtful accounts		Net
	US$(’000)		US$(’000)		US$(’000)		US$(’000)		US$(’000)		US$(’000)
	(Unaudited)		(Unaudited)		(Unaudited)

Staff advances for business operations		9		0		9		18		0		18
Short-term loan to an unrelated party		453		0		453		1,444		0		1,444
Total		462		0		462		1,462		0		1,462

As of ~~September~~June 30, ~~2017,~~2021, other current assets primarily include a temporary working capital loan that the Company ~~beneficially owned 23.18%~~provided to an unrelated party. This loan is unsecured, interest free, and 25.5% equity interest in Shenzhen Mingshan and Zhao Shang Ke Hubei, respectively. The Company accounts for its investments in these companies under equity method of accounting. Based on the facts of the significant decline in level of business activities from 2015, insufficient amount of working capital and the lack of commitment from majority shareholders, these two investment affiliates had become dormant and the possibility of the business recovery is ~~remote. As a result,~~expected to be fully repaid to the Company ~~reduced~~for the ~~carrying value of these investments to zero as of the end of 2015.~~year ending December 31, 2021.

Long-term investments

~~Cost method investments~~

	Gong Xiang Technology		Xiao Peng Education		Business Opportunity Chain Guangzhou		Local Chain Xi’an			Total
	US$(’000)		US$(’000)		US$(’000)		US$(’000)			US$(’000)

Balance as of January 1, 2021		0		0		29		38			67
Cash investment during the year		232		79		110		0			421
Disposed during the year		0		0		0		(38	)		(38	)
Balance as of June 30, 2021 (Unaudited)		232		79		139		0			450

As of ~~September~~June 30, ~~2017,~~2021, except for long-term investments which were fully impaired, the Company beneficially owned a 15%, 17% and 19% equity interest in ~~ChinaNet Chuang Tou~~Guangzhou Gong Xiang Technology Co., Ltd. (“Gong Xiang Technology”), Xiao Peng Education Technology (Hubei) Co., Ltd. (“Xiao Peng Education”) and ~~Guohua Shiji, respectively,~~Business Opportunity Chain (Guangzhou) Technology Co., Ltd. (“Business Opportunity Chain Guangzhou”), respectively.

ZW DATA ACTION TECHNOLOGIES INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

The Company measures these investments which do not have readily determinable fair values at cost minus impairment, if any, plus or minus changes resulting from observable price changes in orderly transactions for the identical or a ~~10%~~similar investment of the Company.

In May 2021, the Company disposed the 4.9% equity interest it owned in ~~Chuangshi Meiwei~~Local Chain Xi’an Information Technology Co., Ltd. (“Local Chain Xi’an”) to an unrelated party and Beijing Saturday, respectively, and a 15% equity interest in ChinaNet Korea. The Company accounts for its investments in these companies under cost method of accounting. As the business plan of ChinaNet Korea and Chuangshi Meiwei were not implemented smoothly and based on the facts of the significant decline in level of business activities, insufficient amount of working capital and the lack of commitment from majority shareholders, the possibility of the business recovery of these two companies is remote. As a result, the Company reduced the carrying value of these investments to zero as of the end of 2016. The following table summarizes the movement of the investments in cost method investeesrecorded an approximately US$0.04 million disposal loss for the ~~nine~~six and three months ended ~~September~~June 30, ~~2017:~~2021.

Beijing
Saturday Guohua Shiji
ChinaNet
Chuang Tou
Total
US$(’000) US$(’000) US$(’000) US$(’000)

Balance as of December 31, 2016 16 27 1,297 1,340
Withdraw of cash investment - - (452 ) (452 )
Exchange translation adjustment 1 1 59 61
Balance as of September 30, 2017 (Unaudited) 17 28 904 949

~~F-12~~

~~CHINANET ONLINE HOLDINGS, INC.~~

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)~~

The Company contributed RMB9,000,000 (approximately US$1.35 million) in cash upon incorporation of ChinaNet Chuang Tou in November 2015. During the three months ended September 30, 2017, as approved by the shareholders of ChinaNet Chuang Tou, the Company withdrew RMB3,000,000 (approximately US$0.45 million) cash investment from ChinaNet Chuang Tou. This transaction does not have any impact on the shareholding and other shareholders’ rights of the Company in ChinaNet Chuang Tou.

~~10.~~

Property and equipment, net

	September 30, 2017			December 31, 2016			June 30, 2021			December 31, 2020
	US$(’000)			US$(’000)			US$(’000)			US$(’000)
	(Unaudited)						(Unaudited)

Leasehold improvement		332			317
Vehicles		797			763			873			811
Office equipment		1,434			1,371			908			894
Electronic devices		1,146			1,096			621			615
Property and equipment, cost		3,709			3,547			2,402			2,320
Less: accumulated depreciation		(3,207	)		(2,922	)		(2,286	)		(2,260	)
Less: impairment loss on abandoned fixed assets		(161	)		(154	)
Property and equipment, net		341			471			116			60

Depreciation expenses ~~in the aggregate~~ for the ~~nine~~six months ended ~~September~~June 30, ~~2017~~ 2021 and ~~2016~~2020 were approximately US$~~149,000~~0.004 million and US$~~193,000,~~0.004 million, respectively. Depreciation expenses ~~in the aggregate~~ for the three months ended ~~September~~June 30, ~~2017~~ 2021 and ~~2016~~2020 were approximately US$~~49,000~~0.003 million and US$~~56,000,~~0.002 million, respectively.

10.

~~11.~~

Intangible assets, net

September 30,
2017

December 31,
2016
US$(’000) US$(’000)
(Unaudited)
Intangible assets not subject to amortization:
Domain name 1,455 1,393
Intangible assets subject to amortization:
Customer relationship 2,007 1,920
Non-compete agreements 1,104 1,057
Software technologies 310 295
Cloud compute software technology 1,399 1,338
Intelligent marketing data service platform 4,865 4,655
Internet safety, information exchange security and data encryption software 1,959 1,874
Cloud video management system 1,431 1,369
Other computer software 118 113
Intangible assets, cost 14,648 14,014
Less: accumulated amortization (6,035 ) (4,875 )
Less: accumulated impairment losses (1,960 ) (1,875 )
Intangible assets, net 6,653 7,264

	As of June 30, 2021 (Unaudited)
Items	Gross Carrying Value		Accumulated Amortization			Impairment			Net Carrying Value
	US$(’000)		US$(’000)			US$(’000)			US$(’000)
Intangible assets subject to amortization:
Cloud compute software technology		1,437		(997	)		(440	)		0
Internet Ad tracking system		1,161		(58	)		0			1,103
Live streaming technology		1,500		(175	)		0			1,325
Licensed products use right		1,206		(196	)		0			1,010
Other computer software		121		(121	)		0			0
Total	$	5,425	$	(1,547	)	$	(440	)	$	3,438

	As of December 31, 2020
Items	Gross Carrying Value		Accumulated Amortization			Impairment			Net Carrying Value
	US$(’000)		US$(’000)			US$(’000)			US$(’000)
Intangible assets subject to amortization:
Cloud compute software technology		1,423		(978	)		(436	)		9
Live streaming technology		1,500		(25	)		0			1,475
Licensed products use right		1,208		(135	)		0			1,073
Other computer software		120		(120	)		0			0
Total	$	4,251	$	(1,258	)	$	(436	)	$	2,557

~~F-13~~

~~CHINANET ONLINE HOLDINGS, INC.~~

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)~~

Amortization expenses ~~in aggregate~~ for the ~~nine~~six months ended ~~September~~June 30, ~~2017~~ 2021 and ~~2016~~2020 were approximately US$~~917,000~~0.28 million and US$~~977,000,~~0.41 million, respectively. Amortization expenses ~~in aggregate~~ for the three months ended ~~September~~June 30, ~~2017~~ 2021 and ~~2016~~2020 were approximately US$~~310,000~~0.17 million and US$~~354,000,~~0.21 million, respectively.

Based on the ~~current~~adjusted carrying value of the finite-lived intangible assets ~~recorded,~~after the deduction of the impairment losses, which has a weighted average remaining useful life ~~was 5.85~~of 5.68 years as of ~~September~~June 30, ~~2017,~~ 2021, and assuming no further subsequent impairment of the underlying intangible assets, the estimated future amortization expenses is approximately US$~~308,000~~0.33 million for the ~~three months~~year ending December 31, ~~2017,~~ 2021, approximately ~~US$1,232,000~~US$0.65 million each year for the ~~years~~year ending December 31, ~~2018~~ 2022 through ~~2020, and~~2024, approximately US$~~1,161,000~~0.63 million for the year ending December 31, ~~2021.~~

2025, and approximately US$0.18 million for the year ending December 31, 2026.

11.

~~12.~~

~~Goodwill~~Blockchain software application platform development costs

	~~Amount~~
	~~US$(’000)~~

~~Balance as of December 31, 2016~~		~~4,970~~
~~Exchange translation adjustment~~		~~225~~
~~Balance as of September 30, 2017 (unaudited)~~		~~5,195~~

In 2018, the Company entered into technical development contracts with two unrelated entities for the development of two blockchain technology-based platform applications with a contract amount of US$4.50 million and RMB3.0 million (approximately US$0.46 million), respectively. These two blockchain technology-based applications are named OMG and Bo!News, respectively. As of June 30, 2021, in accordance with ASC 350-40 “Intangibles-Goodwill and Other-Internal-Use Software”, the Company capitalized approximately US$4.41 million development costs in the aggregate under these two contracts. During 2020, the Company further developed its Blockchain Integrated Framework (“BIF”) for retail business, to provide a framework platform for more accessible and efficient integration of small and medium sized retail business users. The Company plans to launch the upgraded Bo!News application by the end of the third fiscal quarter, which provides digitalized franchise management system for the SMEs. At the same time, BIF will be officially launched for SMEs’ smart retail business before the end of the year, which provides blockchain SaaS services, including: OMG membership card management, trusted and decentralized payment management and Non-Fungible Token (“NFT”) management services.

12.

~~13.~~

~~Short-term bank loan~~Long-term deposits and prepayments

As of ~~December 31, 2016, one~~June 30, 2021, long-term deposits and prepayments consisted of an approximately US$0.56 million of the Company’s ~~VIEs borrowed two short-term bank loans~~operating deposits and prepayments that were not expected to be refunded or consumed within one year of ~~RMB5.0~~June 30, 2021, an approximately US$0.16 million ~~(approximately US$0.7 million),~~prepayment for the leasehold improvement project of the Company’s Guangzhou office, which is expected to be completed in the ~~aggregate, from~~second half of fiscal 2021, and a ~~major financial institution~~US$1.0 million prepayment for the shares subscription of a 15.38% equity interest in ~~China to supplement its short-term working capital needs. The short-term bank loan of RMB3.0 million (approximately US$0.4 million) matured and~~an entity. This investment was repaid on July 18, 2017, and was re-borrowed on August 16, 2017, which will mature on August 15, 2018. The remaining short-term bank loan of RMB 2.0 million (approximately US$0.3 million) matured and was repaid on October 18, 2017, and was re-borrowed on October 23, 2017, which will mature on October 22, 2018. The current interest rate of these short-term bank loan is 5.655% per annum, which is 30% over the benchmark rate of the People’s Bank of China (the “PBOC”).

~~14.~~

~~Accrued payroll and other accruals~~

September 30,
2017

December 31,
2016
US$(’000) US$(’000)
(Unaudited)

Accrued payroll and staff welfare 241 319
Accrued operating expenses 288 366
529 685

~~15.~~

~~Due to new investors related to terminated security purchase agreements~~

~~In May 2015,~~made by the Company ~~entered into securities purchase agreements~~to jointly develop blockchain, key opinion leader and e-sports platform and to jointly operate IP data for e-sports and games with Beijing Jinrun Fangzhou Science & Technology Co, Ltd. (“Jinrun Fangzhou”) and Dongsys Innovation (Beijing) Technology Development Co., Ltd. (“Dongsys Innovation”), public companies listed on the National Equities Exchange and Quotations of the PRC (the “NEEQ”), respectively, pursuantits two strategic partners. The transaction is expected to which these companies agreed to purchase a certain number of shares of common stock of the Company. The Company had received the 10% guarantee payment and 15% prepayment in an aggregate amount equal to US$806,000 from Jinrun Fangzhou, and the 10% guarantee payment in an amount equal to US$117,000 from Dongsys Innovation, respectively.

~~Due to certain restriction stipulated in the “Measures for Overseas Investment Management” issued~~be consummated by the ~~Ministry~~end of Commerce of the PRC (the “MOFCOM”), the Company and its investors experienced difficulties in obtaining approval for the transactions from the MOFCOM. As a result, on May 12, 2016, the Company terminated the security purchase agreements with the two investors, respectively. The Company did not make any repayment to these investors afterwards during 2016 and the first nine months of 2017. As agreed by the parties, beginning on January 1, 2017, the Company will bear a 12% annualized interest rate for the unpaid amounts and the amounts shall be refunded to the investors no later than December 31, 2017. The Company expects to settle the balances with the two investors within 2017. Interest expense for the unpaid amounts accrued for the nine and three months ended September 30, 2017 was approximately US$0.08 million and US$0.03 million, which has been recorded in other payables account.

August 2021.

~~F-14~~

~~CHINANET ONLINE HOLDINGS, INC.~~ *13.*		Accrued payroll and other accruals
~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)~~

~~16.~~

~~Payable for purchasing of software technology~~

	June 30, 2021		December 31, 2020
	US$(’000)		US$(’000)
	(Unaudited)

Accrued payroll and staff welfare		179		229
Accrued operating expenses		101		260
		280		489

Payable for purchasing of software technology as of September 30, 2017 and December 31, 2016 represented the remaining outstanding payment balance of approximately RMB2.85 million (approximately US$0.4 million) for purchasing of software technology, which transaction consummated in the fourth fiscal quarter of 2016. The Company expects to settle the balance with the counter party within 2017.

14.

~~17.~~

~~Taxation~~

~~Income tax~~

~~The entities within the Company file separate tax returns in the respective tax jurisdictions in which they operate.~~

i). The Company is incorporated in the state of Nevada. Under the current law of Nevada, the Company is not subject to state corporate income tax. Following the Share Exchange, the Company became a holding company and does not conduct any substantial operations of its own. No provision for federal corporate income tax has been made in the financial statements as the Company has no assessable profits for the nine and three months ended September 30, 2017, or any prior periods. The Company does not provide for U.S. taxes or foreign withholding taxes on undistributed earnings from its non-U.S. subsidiaries because such earnings are intended to be reinvested indefinitely. If undistributed earnings were distributed, foreign tax credits could become available under current law to reduce the resulting U.S. income tax liability.

ii). China Net BVI was incorporated in the British Virgin Islands (“BVI”). Under the current law of the BVI, China Net BVI is not subject to tax on income or capital gains. Additionally, upon payments of dividends by China Net BVI to its shareholders, no BVI withholding tax will be imposed.

iii). China Net HK was incorporated in Hong Kong and does not conduct any substantial operations of its own. No provision for Hong Kong profits tax has been made in the financial statements as China Net HK has no assessable profits for the nine and three months ended September 30, 2017 or any prior periods. Additionally, upon payments of dividends by China Net HK to its shareholders, no Hong Kong withholding tax will be imposed.

iv). The Company’s PRC operating subsidiaries and VIEs, being incorporated in the PRC, are governed by the income tax law of the PRC and is subject to PRC enterprise income tax (“EIT”). The EIT rate of PRC is 25%, which applies to both domestic and foreign invested enterprises.

In November 2015, Business Opportunity Online was re-approved by the related PRC governmental authorities as a High and New Technology Enterprise, which enabled the entity, as approved by the local tax authorities of Beijing, the PRC, to continue enjoying the favorable statutory tax rate of 15% until November 2018. Therefore, for the nine and three months ended September 30, 2017 and 2016, the applicable income tax rate of Business Opportunity Online was 15%.

~~The applicable income tax rate for other PRC operating entities of the Company was 25% for the nine and three months ended September 30, 2017 and 2016.~~

The current EIT law also imposed a 10% withholding income tax for dividends distributed by a foreign invested enterprise to its immediate holding company outside China. A lower withholding tax rate will be applied if there is a tax treaty arrangement between mainland China and the jurisdiction of the foreign holding company. Holding companies in Hong Kong, for example, will be subject to a 5% withholding tax rate.

~~F-15~~

~~CHINANET ONLINE HOLDINGS, INC.~~Taxation

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)~~

For the nine and three months ended September 30, 2017 and 2016, the preferential income tax treatment enjoyed by the Company’s PRC VIE, Business Opportunity Online was based on the current applicable laws and regulations of the PRC and approved by the related government regulatory authorities and local tax authorities where Business Opportunity Online operates in. The preferential income tax treatment is subject to change in accordance with the PRC government economic development policies and regulations. The preferential income tax treatment is primarily determined by the regulation and policies of the PRC government in the context of the overall economic policy and strategy. As a result, the uncertainty of the preferential income tax treatment is subject to, but not limited to, the PRC government policy on supporting any specific industry’s development under the outlook and strategy of overall macroeconomic development.

~~Turnover taxes and the relevant surcharges~~

Service revenues provided by the Company’s PRC operating subsidiaries and VIEs were subject to Value Added Tax (“VAT”). VAT rate for provision of modern services (other than lease of corporeal movables) is 6% and for small scale taxpayer, 3%. Therefore, for the nine and three months ended September 30, 2017 and 2016, the Company’s service revenues are subject to VAT at a rate of 6%, after deducting the VAT paid for the services purchased from suppliers, or at a rate of 3% without any deduction of VAT paid for the services purchased from suppliers. The surcharges of the VAT is 12%-14% of the VAT, depending on which tax jurisdiction the Company’s PRC operating subsidiaries and VIE operate in.

As of ~~September~~June 30, ~~2017~~ 2021 and December 31, ~~2016,~~ 2020, taxes payable consists of:

September 30,
2017

December 31,
2016
US$(’000) US$(’000)
(Unaudited)

Turnover tax and surcharge payable 1,246 1,147
Enterprise income tax payable 1,843 1,763
Total taxes payable 3,089 2,910

ZW DATA ACTION TECHNOLOGIES INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

	June 30, 2021		December 31, 2020
	US$(’000)		US$(’000)
	(Unaudited)

Turnover tax and surcharge payable		1,313		1,353
Enterprise income tax payable		2,095		2,077
Total taxes payable		3,408		3,430

For the ~~nine~~six and three months ended ~~September~~June 30, ~~2017~~ 2021 and ~~2016,~~2020, the Company’s income tax ~~expense~~benefit/(expenses) consisted of:

	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)

Current		0		(57	)		0		26
Deferred		40		(11	)		22		(16	)
Income tax benefit/(expenses)		40		(68	)		22		10

The Company’s deferred tax assets ~~at September~~as of June 30, ~~2017~~ 2021 and December 31, ~~2016~~ 2020 were as follows:

	September 30, 2017			December 31, 2016			June 30, 2021			December 31, 2020
	US$(’000)			US$(’000)			US$(’000)			US$(’000)
	(Unaudited)						(Unaudited)

Tax effect of net operating losses carried forward		10,252			9,345			12,160			10,123
Operating lease cost								16			0
Bad debts provision		1,180			931			331			728
Valuation allowance		(9,959	)		(8,754	)		(11,855	)		(10,245	)
Total deferred tax assets		1,473			1,522
Deferred tax assets, net								652			606

~~F-16~~

~~CHINANET ONLINE HOLDINGS, INC.~~

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)~~

The ~~net operating losses carried forward~~U.S. holding company has incurred ~~by the Company (excluding its PRC operating subsidiaries~~aggregate NOLs of approximately US$30.4 million and ~~VIEs) were approximately~~ US$~~18,168,000~~ 23.3 million as of June 30, 2021 and ~~US$17,544,000 at September 30, 2017 and~~ December 31, ~~2016, respectively, which loss is applicable to the Company’s U.S. income tax return and carry forwards~~ 2020, respectively. The NOLs carryforwards as of December 31, 2017 gradually expire over time, the last of which expires in 2037. A NOLs incurred after December 31, 2017 will no longer be available to carry back but can be carried forward indefinitely, subject to an annual limit of 80% on the amount of taxable income that can be offset by NOLs arising in tax years ending after December 31, 2017. The Company maintains a full valuation allowance ~~has been recorded because it is considered more likely than not that the~~against its net U.S. deferred tax assets, since due to uncertainties surrounding future utilization, the Company estimates there will not be ~~realized through~~ sufficient future earnings ~~of the entity~~ to ~~which the operating losses relate.~~utilize its U.S. deferred tax assets.

The ~~net operating losses~~NOLs carried forward ~~(excluding bad debts provision and non-deductible expenses)~~ incurred by the Company’s PRC subsidiaries and VIEs were approximately US$~~19,945,000~~24.3 million and US$~~17,939,000 at September~~22.5 million as of June 30, ~~2017~~ 2021 and December 31, ~~2016, respectively, which loss is applicable to the Company’s PRC income tax return and carry forwards~~2020, respectively. The losses carryforwards gradually expire over time, the last of which expires in ~~2022.~~2031 due to certain subsidiary enjoys the High and New Technology Enterprise’s privileged NOLs carryforward policy. The related deferred tax assets were calculated based on the respective ~~net operating losses~~NOLs incurred by each of the PRC subsidiaries and VIEs and the respective corresponding enacted tax rate that will be in effect in the period in which the losses are expected to be utilized.

ZW DATA ACTION TECHNOLOGIES INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

The Company recorded approximately US$~~645,000~~11.9 million and US$~~446,000 net~~10.2 million valuation allowance ~~for the nine months ended September~~as of June 30, ~~2017~~ 2021 and ~~2016, respectively, and approximately US$142,000 and US$149,000 net valuation allowance for the three months ended September 30, 2017 and 2016,~~ December 31, 2020, respectively, because it is considered more likely than not that ~~this~~a portion of the deferred tax assets will not be realized through sufficient future earnings of the entities to which the operating losses ~~relate. The~~related.

For the six and three months ended June 30, 2021, the Company ~~also utilized~~recorded approximately US$~~119,000~~1.96 million and US$~~267,000 previously recognized~~1.65 million deferred tax ~~assets for~~valuation allowance, respectively. For the ~~nine~~six and three months ended ~~September~~June 30, ~~2017~~2020, the Company recorded approximately US$0.76 million and ~~2016, respectively, and approximately~~ US$~~8,000 and US$74,000 previously recognized~~0.21 million deferred tax ~~assets for the three months ended September 30, 2017 and 2016, respectively, due to earnings generated during the respective periods.~~valuation allowance, respectively.

Full valuation allowance to bad debts provision related deferred tax assets were recorded because it is considered more likely than not that this portion of deferred tax assets will not be realized through bad debts verification by the local tax authorities where the PRC subsidiaries and VIEs operate in.

15.

The tax authority of the PRC government conducts periodic and ad hoc tax filing reviews on business enterprises operating in the PRC after those enterprises had completed their relevant tax filings, hence the Company’s tax filings may not be finalized. It is therefore uncertain as to whether the PRC tax authority may take different views about the Company’s tax filings which may lead to additional tax liabilities.

~~18.~~

Long-term borrowing from a director

Long-term borrowing from a director is a non-interest bearing loan from a director of the Company relating to the original paid-in capital contribution in the Company’s wholly-owned subsidiary Rise King WFOE, which is not expected to be repaid within one year.

16.

The Financing and warrant liabilities

The February 2021 Financing:

On February 18, 2021 (the “Closing Date”), the Company consummated a registered direct offering of 5,212,000 shares of the Company’s common stock to certain institutional investors at a purchase price of US$3.59 per share (the “February 2021 Financing”). As part of the transaction, the Company also issued to the investors warrants to purchase up to 2,606,000 shares of the Company’s common stock at an exercise price of US$3.59 per share (the “2021 Investor Warrants”). The 2021 Investor Warrants are exercisable at any time on or after February 18, 2021 and on or prior to the close of business on August 18, 2024 (the third and one-half years anniversary of the Closing Date). The Company received gross proceeds of approximately US$18.7 million from the February 2021 Financing.

The placement agent of the February 2021 Financing received (i) a placement fee in the amount equal to 7% of the gross proceeds and (ii) warrants to purchase up to 364,840 shares of the Company’s common stock at an exercise price of US$4.4875 per share. (the “2021 Placement Agent Warrants” and together with the 2021 Investor Warrants, the “2021 Warrants”). The 2021 Placement Agent Warrants are exercisable at any time on or after August 18, 2021 (the six-month anniversary of the Closing Date) and on or prior to the close of business on August 18, 2024 (the third and one-half years anniversary of the Closing Date).

The initial exercise prices of the 2021 Warrants are subject to anti-dilution provisions that require adjustment of the number of shares of common stock that may be acquired upon exercise of the 2021 Warrants, or to the exercise price of such shares, or both, to reflect stock dividends and splits, subsequent rights offerings, pro-rata distributions, and certain fundamental transactions. The 2021 Warrants also contain “full ratchet” price protection in the event of subsequent issuances below the applicable exercise price (the “Down round feature”).

The 2021 Warrants may not be exercised if it would result in the holder beneficially owning more than 4.99% of the Company’s outstanding common shares (the “Beneficial Ownership Limitation”). The holder of the 2021 Warrants, upon notice to the Company, may increase or decrease the Beneficial Ownership Limitation, provided that the Beneficial Ownership Limitation in no event exceeds 9.99% of the Company’s outstanding common shares. Any increase in the Beneficial Ownership Limitation will not be effective until the 61^st day after such notice is delivered to the Company.

Accounting for securities issued in the February 2021 Financing

The Company determined that the Company’s common stock issued in the February 2021 Financing should be classified as permanent equity as there was no redemption provision at the option of the holders that is not within the control the Company on or after an agreed upon date.

The Company analyzed the 2021 Warrants issued in the February 2021 Financing in accordance with ASC Topic 815 “Derivatives and Hedging”. In accordance with ASC Topic 815, the Company determined that the 2021 Warrants should not be considered index to its own stock, as the strike price of the 2021 Warrants is dominated in a currency (U.S. dollar) other than the functional currency of the Company (Renminbi or Yuan). As a result, the 2021 Warrants does not meet the scope exception of ASC Topic 815, therefore, should be accounted for as derivative liabilities and measure at fair value with changes in fair value be recorded in earnings in each reporting period.

ZW DATA ACTION TECHNOLOGIES INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

Fair value of the warrants

The Company used Binomial model to determine the fair value of the 2021 Warrants based on the assumptions summarized as below:

	As of February 18, 2021

	2021 Investor Warrants			2021 Placement Agent Warrants

Stock price	$	4.48		$	4.48
Years to maturity		3.50			3.50
Risk-free interest rate		0.26	%		0.26	%
Dividend yield		0			0
Expected volatility		168	%		168	%
Exercise Price	$	3.59		$	4.4875

Fair value of the warrant	$	4.02		$	3.96

Warrant liabilities (US$’000)	$	10,476		$	1,445

Stock price is the closing bid price of the Company’s common stock at the respective valuation date. Years to maturity is the respective remaining contract life of the warrants. Yield-to-maturities in continuous compounding of the United States Government Bonds with the time-to-maturities same as the respective warrant are adopted as the risk-free rate. Annualized historical stock price volatility of the Company at the respective valuation date is deemed to be appropriate to serve as the expected volatility of the stock price of the Company. The dividend yield is calculated based on management’s estimate of dividends to be paid on the underlying stock. Exercise price is the contractual exercise price of the 2021 Warrants.

Allocation of gross proceeds from the February 2021 Financing

The Company allocated the total proceeds from the February 2021 Financing as summarized below:

	Initial measurement
	(USD’000)

Investor Warrants		10,476
Common Stock (par value and additional paid in capital)		8,235
Total proceeds from the Financing		18,711

The 2021 Investor Warrants issued in the February 2021 Financing was initially measurement at fair value. The residual amount, representing difference between the total proceeds and the fair value of the 2021 Investor Warrants as of the Closing Date was assigned as the carrying value of the common stock issued in the February 2021 Financing.

Offering costs

Offering costs in the amount of approximately US$3.05 million consisting of cash payment of approximately US$1.31 million placement fee, approximately US$0.29 million other direct offering cost of professional service fees and fair value of the 2021 Placement Agent Warrants of approximately US$1.45 million, which were charged to additional paid-in-capital.

Subsequent measurement and changes in fair value of the warrant liabilities

The Company issued warrants to certain institutional investors and the Company’s placement agent in the registered direct offerings consummated in February 2021, December 2020 and January 2018, which warrants were accounted for as derivative liabilities and measure at fair value with changes in fair value be recorded in earnings in each reporting period.

ZW DATA ACTION TECHNOLOGIES INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

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

Warrants issued in the February 2021 Financing:

	2021 Investor Warrants						2021 Placement Agent Warrants
	June 30, 2021			March 31, 2021			June 30, 2021			March 31, 2021

Stock price	$	2.00		$	2.64		$	2.00		$	2.64
Years to maturity		3.14			3.38			3.14			3.38
Risk-free interest rate		0.48	%		0.41	%		0.48	%		0.41	%
Dividend yield		0			0			0			0
Expected volatility		114	%		168	%		114	%		168	%
Exercise Price	$	3.59		$	3.59		$	4.4875		$	4.4875

Fair value of the warrant	$	1.25		$	2.28		$	1.18		$	2.24

Warrant liabilities (US$’000)	$	3,257		$	5,942		$	431		$	817

Warrants issued in the 2020 Financing:

On December 14, 2020, the Company consummated a registered direct offering of 4,320,989 shares of the Company’s common stock to certain institutional investors at a purchase price of US$1.62 per share (the “2020 Financing”). As part of the transaction, the Company also issued, to the investors warrants to purchase up to 1,728,396 shares of the Company’s common stock at an exercise price of U$$2.03 per share (the “2020 Investor Warrants”), and to the placement agent, warrants to purchase up to 302,469 shares of the Company’s common stock on substantially the same terms as the 2020 Investor Warrants (the “2020 Placement Agent Warrants” and together with the 2020 Investor Warrants, the “2020 Warrants”). The 2020 Warrants are exercisable at any time on or after June 14, 2021 and on or prior to the close of business on December 14, 2023.

	2020 Investor Warrants and 2020 Placement Agent Warrants
	June 30, 2021			March 31, 2021			December 31, 2020

Stock price	$	2.00		$	2.64		$	1.35
Years to maturity		2.45			2.70			2.95
Risk-free interest rate		0.34	%		0.29	%		0.17	%
Dividend yield		0			0			0
Expected volatility		120	%		120	%		102	%
Exercise Price	$	2.03		$	2.03		$	2.03

Fair value of the warrant	$	1.40		$	1.95		$	0.74

Investor warrants liabilities (US$’000)	$	2,420		$	3,370		$	1,279

Placement agent warrants liabilities (US$’000)	$	423		$	590		$	224

Warrants issued in the 2018 Financing:

On January 17, 2018, the Company consummated a registered direct offering of 2,150,001 shares of the Company’s common stock to certain institutional investors at a purchase price of US$5.15 per share (“the 2018 Financing”). As part of the transaction, the Company also issued, to the investors warrants (the “2018 Investor Warrants”) to purchase up to 645,000 shares of the Company’s common stock at an exercise price of $6.60 per share. The 2018 Investors Warrants expired on July 18, 2020. The placement agent of the 2018 Financing received warrants to purchase up to 129,000 shares of the Company’s common stock at an exercise price of US$6.60 per share, with a three-year term (the “2018 Placement Agent Warrants” and together with the 2018 Investor Warrants, the “2018 Warrants”). On September 25, 2019, the exercise price of the 2018 Warrants was adjusted to US$1.4927. On January 18, 2021, the expiration date of the 2018 Placement Agent Warrants was extended to July 18, 2021.

ZW DATA ACTION TECHNOLOGIES INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

	2018 Placement Agent Warrants
	June 30, 2021			March 31, 2021			December 31, 2020

Stock price	$	2.00		$	2.64		$	1.35
Years to maturity		0.05			0.30			0.05
Risk-free interest rate		0.04	%		0.03	%		0.08	%
Dividend yield		0			0			0
Expected volatility		74	%		206	%		59	%
Exercise Price	$	1.4927		$	1.4927		$	1.4927

Fair value of the warrant	$	0.51		$	1.55		$	0.02

Warrant liabilities (US$’000)	$	66		$	200		$	2

For the six and three months ended June 30, 2020:

Warrants issued in the 2018 Financing:

	2018 Investors warrants									2018 Placement agent warrants
	June 30, 2020			March 31, 2020			December 31, 2019			June 30, 2020			March 31, 2020			December 31, 2019

Stock price	$	1.00		$	0.95		$	1.17		$	1.00		$	0.95		$	1.17
Years to maturity		0.05			0.30			0.55			0.55			0.80			1.05
Risk-free interest rate		0.19	%		0.10	%		1.58	%		0.18	%		0.13	%		1.57	%
Dividend yield		0			0			0			0			0			0
Expected volatility		143	%		99	%		60	%		112	%		78	%		80	%
Exercise Price	$	1.4927		$	1.4927		$	1.4927		$	1.4927		$	1.4927		$	1.4927

Fair value of the warrant	$	0.02		$	0.07		$	0.11		$	0.20		$	0.12		$	0.28

Warrant Liabilities (US$’000)	$	13		$	45		$	71		$	26		$	16		$	36

Changes in fair value of warrant liabilities

Six and Three Months Ended June 30, 2021 (Unaudited)

									Change in Fair Value (gain)/loss
		As of June 31, 2021		As of March 31, 2021		As of February 18, 2021		As of December 31, 2020	Six Months Ended June 30, 2021			Three Months Ended June 30, 2021
	(US$’000)		(US$’000)		(US$’000)		(US$’000)		(US$’000)			(US$’000)

Warrants issued in the February 2021 Financing:
--Investor Warrants		3,257		5,942		10,476		*		(7,219	)		(2,685	)
--Placement Agent Warrants		431		817		1,445		*		(1,014	)		(386	)
Warrants issued in the 2020 Financing:
--Investor Warrants		2,420		3,370		*		1,279		1,141			(950	)
--Placement Agent Warrants		423		590		*		224		199			(167	)
Warrants issued in the 2018 Financing:
--Placement Agent Warrants		66		200		*		2		64			(134	)
		6,597		10,919		11,921		1,505		(6,829	)		(4,322	)

ZW DATA ACTION TECHNOLOGIES INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

Six and Three Months Ended June 30, 2020 (Unaudited)

							Change in Fair Value (gain)/loss
		As of June 30, 2020		As of March 31, 2020		As of December 31, 2019	Six Months Ended June 30, 2020			Three Months Ended June 30, 2020
	(US$’000)		(US$’000)		(US$’000)		(US$’000)			(US$’000)

Warrants issued in the 2018 Financing:
--Investor Warrants		13		45		71		(58	)		(32	)
--Placement Agent Warrants		26		16		36		(10	)		10
Warrant liabilities		39		61		107		(68	)		(22	)

Warrants issued and outstanding as of June 30, 2021 and their movements during the six months then ended are as follows:

	Warrant Outstanding						Warrant Exercisable
	Number of underlying shares		Weighted Average Remaining Contractual Life (Years)		Weighted Average Exercise Price		Number of underlying shares		Weighted Average Remaining Contractual Life (Years)		Weighted Average Exercise Price

Balance, January 1, 2021		2,159,865		2.78	$	2.00		129,000		0.05	$	1.4927
Granted/Vested		2,970,840		3.14	$	3.70		4,636,865		2.84	$	2.91
Forfeited		0						-
Exercised		0						-
Balance, June 30, 2021 (Unaudited)		5,130,705		2.79	$	2.98		4,765,865		2.76	$	2.87

17.

~~19.~~

Restricted net assets

As ~~most~~substantially all of the Company’s operations are conducted through its PRC ~~subsidiary~~subsidiaries and VIEs, the Company’s ability to pay dividends is primarily dependent on receiving distributions of funds from its PRC ~~subsidiary~~subsidiaries and VIEs. Relevant PRC statutory laws and regulations permit payments of dividends by its PRC ~~subsidiary~~subsidiaries and VIEs only out of their retained earnings, if any, as determined in accordance with PRC accounting standards and regulations and after it has met the PRC requirements for appropriation to statutory reserves. Paid in capital of the PRC ~~subsidiary~~subsidiaries and VIEs included in the Company’s consolidated net assets are also non-distributable for dividend purposes.

In accordance with the PRC regulations on Enterprises with Foreign Investment, a WFOE established in the PRC is required to provide certain statutory reserves, namely general reserve fund, the enterprise expansion fund and staff welfare and bonus fund which are appropriated from net profit as reported in the enterprise’s PRC statutory accounts. A WFOE is required to allocate at least 10% of its annual after-tax profit to the general reserve until such reserve has reached 50% of its registered capital based on the enterprise’s PRC statutory accounts. Appropriations to the enterprise expansion fund and staff welfare and bonus fund are at the discretion of the board of directors. The aforementioned reserves can only be used for specific purposes and are not distributable as cash dividends. Rise King WFOE is subject to the above mandated restrictions on distributable profits. Additionally, in accordance with the Company Law of the PRC, a domestic enterprise is required to provide a statutory common reserve of at least 10% of its annual after-tax profit until such reserve has reached 50% of its registered capital based on the enterprise’s PRC statutory accounts. A domestic enterprise is also required to provide for a discretionary surplus reserve, at the discretion of the board of directors. The aforementioned reserves can only be used for specific purposes and are not distributable as cash dividends. All of the Company’s other PRC subsidiaries and PRC VIEs are subject to the above mandated restrictions on distributable profits.

~~F-17~~

~~CHINANET ONLINE HOLDINGS, INC.~~

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)~~

~~As a result of~~In accordance with these PRC laws and regulations, the Company’s PRC ~~subsidiary~~subsidiaries and VIEs are restricted in their ability to transfer a portion of their net assets to the Company. As of ~~September~~June 30, ~~2017~~ 2021 and December 31, ~~2016,~~ 2020, net assets restricted in the aggregate, which include paid-in capital and statutory reserve funds of the Company’s PRC ~~subsidiary~~subsidiaries and VIEs that are included in the Company’s consolidated net assets, ~~was~~were approximately US$~~8.1~~13.2 million and US$~~7.8~~8.2 million, respectively.

The current PRC Enterprise Income Tax (“EIT”) Law also ~~imposed~~imposes a 10% withholding income tax for dividends distributed by a foreign invested enterprise to its immediate holding company outside China. A lower withholding tax rate will be applied if there is a tax treaty arrangement between mainland China and the jurisdiction of the foreign holding company. ~~Holding companies in Hong Kong, for example, will be subject to a 5% rate.~~

ZW DATA ACTION TECHNOLOGIES INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

The ability of the Company’s PRC ~~subsidiary~~subsidiaries and VIEs to make dividends and other payments to the Company may also be restricted by changes in applicable foreign exchange and other laws and regulations.

Foreign currency exchange regulation in China is primarily governed by the following rules:

~~Foreign Exchange Administration Rules (1996), as amended in August 2008, or the Exchange Rules;~~

~~Administration Rules of the Settlement, Sale and Payment of Foreign Exchange (1996), or the Administration Rules.~~

●

Foreign Exchange Administration Rules (1996), as amended in August 2008, or the Exchange Rules;

●

Administration Rules of the Settlement, Sale and Payment of Foreign Exchange (1996), or the Administration Rules.

Currently, under the Administration Rules, Renminbi is freely convertible for current account items, including the distribution of dividends, interest payments, trade and service related foreign exchange transactions, but not for capital account items, such as direct investments, loans, repatriation of investments and investments in securities outside of China, unless the prior approval of the State Administration of Foreign Exchange (the “SAFE”) is obtained and prior registration with the SAFE is made. Foreign-invested enterprises like Rise King WFOE that need foreign exchange for the distribution of profits to its shareholders may effect payment from their foreign exchange accounts or purchase and pay foreign exchange rates at the designated foreign exchange banks to their foreign shareholders by producing board resolutions for such profit distribution. Based on their needs, foreign-invested enterprises are permitted to open foreign exchange settlement accounts for current account receipts and payments of foreign exchange along with specialized accounts for capital account receipts and payments of foreign exchange at certain designated foreign exchange banks.

Although the current Exchange Rules allow ~~the convertibility~~converting of Chinese Renminbi into foreign currency for current account items, conversion of Chinese Renminbi into foreign exchange for capital items, such as foreign direct investment, loans or securities, requires the approval of SAFE, which is under the authority of the People’s Bank of China. These approvals, however, do not guarantee the availability of foreign currency conversion. The Company cannot be sure that it will be able to obtain all required conversion approvals for its operations or the Chinese regulatory authorities will not impose greater restrictions on the convertibility of Chinese Renminbi in the future. Currently, most of the Company’s retained earnings are generated in Renminbi. Any future restrictions on currency exchanges may limit the Company’s ability to use its retained earnings generated in Renminbi to make dividends or other payments in U.S. dollars or fund possible business activities outside China.

As of September 30, 2017 and December 31, 2016, there was approximately US$14.8 million and US$17.6 million retained earnings in the aggregate, respectively, which was generated by the Company’s PRC subsidiary and VIEs in Renminbi included in the Company’s consolidated net assets, aside from US$2.6 million and US$2.5 million of statutory reserve funds as of September 30, 2017 and December 31, 2016, respectively, that may be affected by increased restrictions on currency exchanges in the future, and accordingly, may further limit the Company’s PRC subsidiary’s and VIEs’ ability to make dividends or other payments in U.S. dollars to the Company, in addition to the approximately US$8.1 million and US$7.8 million of restricted net assets as of September 30, 2017 and December 31, 2016, as discussed above.

18.

~~F-18~~

~~CHINANET ONLINE HOLDINGS, INC.~~

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)~~

~~20.~~

Employee defined contribution plan

Full time employees of the Company in the PRC participate in a government mandated defined contribution plan, pursuant to which certain pension benefits, medical care, employee housing fund and other welfare benefits are provided to employees. Chinese labor regulations require that the PRC subsidiaries of the Company make contributions to the government for these benefits based on certain percentages of the employees’ salaries. The employee benefits were expensed as incurred. The Company has no legal obligation for the benefits beyond the contributions made. The total amounts for such employee benefits were approximately US$~~318,000~~0.10 million and US$~~456,000~~0.06 million for the ~~nine~~six months ended ~~September~~June 30, ~~2017~~ 2021 and ~~2016,~~2020, respectively. The total amounts for such employee benefits were approximately US$~~92,000~~0.05 million and US$~~158,000~~0.02 million for the three months ended ~~September~~June 30, ~~2017~~ 2021 and ~~2016,~~2020, respectively.

19.

~~21.~~

Concentration of risk

Credit risk

Financial instruments that potentially subject the Company to significant concentrations of credit risk consist primarily of cash and cash equivalents, ~~term deposit~~accounts receivable, and ~~accounts receivable.~~deposits and loans to unrelated parties. As of ~~September~~June 30, ~~2017 and December 31, 2016, substantially all~~2021, 41% of the Company’s cash and cash equivalents ~~and term deposit~~ were held by major financial institutions located in Mainland and Hong Kong, China, ~~which management~~the remaining 59% was held by financial institutions located in the United States of America. The Company believes that these financial institutions located in China and the United States of America are of high credit quality. For accounts ~~receivables,~~receivable and deposits and loans to unrelated parties, the Company extends credit based on an evaluation of the customer’s or other parties’ financial condition, generally without requiring collateral or other security. In order to minimize the credit risk, the Company delegated a team responsible for credit approvals and other monitoring procedures to ensure that follow-up action is taken to recover overdue debts. Further, the Company reviews the recoverable amount of each individual ~~trade debt~~receivable at each balance sheet date to ensure that adequate allowances are made for doubtful accounts. In this regard, the Company considers that the Company’s credit risk for accounts ~~receivables is~~receivable and deposits and loans to unrelated parties are significantly reduced.

~~Risk arising from operations in foreign countries~~

ZW DATA ACTION TECHNOLOGIES INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

All of the Company’s operations are conducted within the PRC. The Company’s operations in the PRC are subject to various political, economic, and other risks and uncertainties inherent in the PRC. Among other risks, the Company’s operations in the PRC are subject to the risks of restrictions on transfer of funds, changing taxation policies, foreign exchange restrictions and political conditions and governmental regulations.

~~Currency convertibility risk~~

Significant part of the Company’s businesses is transacted in RMB, which is not freely convertible into foreign currencies. All foreign exchange transactions take place either through the People’s Bank of China or other banks authorized to buy and sell foreign currencies at the exchange rates quoted by the People’s Bank of China. Approval of foreign currency payments by the People’s Bank of China or other regulatory institutions requires submitting a payment application form together with suppliers’ invoices and signed contracts. These exchange control measures imposed by the PRC government authorities may restrict the ability of the Company’s PRC subsidiaries and VIEs to transfer its net assets, which to the Company through loans, advances or cash dividends.

Concentration of customers

For the nine months ended September 30, 2017, three customers individually accounted for 14%, 11% and 11% of the Company’s revenues. For the three months ended September 30, 2017, two of the three customers individually accounted for 25% and 16% of the Company’s revenues. Except for the aforementioned customer, there was no other single customer who accounted for more than 10% of the Company’s revenues for the nine or three months ended September 30, 2017.

For the three months ended September 30, 2016, two customers individually accounted for 14% and 12% of the Company’s revenues. Except for the aforementioned customers, there was no other single customer who accounted for more than 10% of the Company’s revenues for the nine or three months ended September 30, 2016.

As of September 30, 2017, three customers individually accounted for 15%, 14% and 13% of the Company’s accounts receivable. As of December 31, 2016, two customers individually accounted for 22% and 14% of the Company’s accounts receivable. Except for the aforementioned, there was no other single customer who accounted for more than 10% of the Company’s accounts receivable as of September 30, 2017 or December 31, 2016.

~~F-19~~

~~CHINANET ONLINE HOLDINGS, INC.~~

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)~~

~~Concentration of suppliers~~

For the nine months ended September 30, 2017, two suppliers individually accounted for 68% and 22% of the Company’s cost of revenues. For the three months ended September 30, 2017, the same two suppliers individually accounted for 58% and 29% of the Company’s cost of revenues. Except for the afore-mentioned, there was no other single supplier who accounted for more than 10% of the Company’s cost of revenues for the nine or three months ended September 30, 2017.

For the nine months ended September 30, 2016, two suppliers individually accounted for 28% and 37% of the Company’s cost of revenues. For the three months ended September 30, 2016, the same two suppliers individually accounted for 52% and 16% of the Company’s cost of revenues. Except for the afore-mentioned, there was no other single supplier who accounted for more than 10% of the Company’s cost of revenues for the nine or three months ended September 30, 2016.

~~22.~~

~~Commitments and contingencies~~

The following ~~table sets forth~~tables summarized the information about the Company’s ~~operating lease commitment~~concentration of customers for the six and three months ended June 30, 2021 and 2020, respectively:

	Customer A			Customer B			Customer C			Customer D			Customer E			Customer F

Six Months Ended June 30, 2021
Revenues, customer concentration risk		11	%		14	%		*			-			-			*

Three Months Ended June 30, 2021
Revenues, customer concentration risk		14	%		12	%		*			-			-			*

Six Months Ended June 30, 2020
Revenues, customer concentration risk		-			-			*			*			*			-

Three Months Ended June 30, 2020
Revenues, customer concentration risk		-			-			*			*			*			-

As of June 30, 2021
Accounts receivable, customer concentration risk		62	%		-			17	%		-			-			10	%

As of December 31, 2020
Accounts receivable, customer concentration risk		-			-			28	%		27	%		21	%		-

* Less than 10%.

- No transaction incurred for the reporting period/no balance existed as of ~~September~~the reporting date.

Concentration of suppliers

The following tables summarized the information about the Company’s concentration of suppliers for the six and three months ended June 30, ~~2017:~~2021 and 2020, respectively:

	Supplier A			Supplier B

Six Months Ended June 30, 2021
Cost of revenues, supplier concentration risk		73	%		12	%

Three Months Ended June 30, 2021
Cost of revenues, supplier concentration risk		86	%		*

Six Months Ended June 30, 2020
Cost of revenues, supplier concentration risk		-			78	%

Three Months Ended June 30, 2020
Cost of revenues, supplier concentration risk		-			81	%

* Less than 10%.

- No transaction incurred for the reporting period/no balance existed as of the reporting date.

Office Rental
US$(’000)
(Unaudited)
Three months ending December 31,
-2017 111
Year ending December 31,
-2018 445
-2019 111
Total $ 667

20.

Commitments and contingencies

In 2018, the Company entered into contracts with two unrelated third parties in relation to the development of the Company’s blockchain technology-powered platform applications. Total contract amount of these two contracts was approximately US$4.96 million. As of June 30, 2021, the Company had paid approximately US$4.41 million in the aggregate. The remaining unpaid contract amount is expected to be paid during the year ending December 31, 2021.

ZW DATA ACTION TECHNOLOGIES INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

~~Excluding rental expenses included~~The Company is currently not a party to any legal or administrative proceedings and are not aware of any pending or threatened legal or administrative proceedings against us in discontinued operation for the nine months ended September 30, 2016, rental expenses under operating leases for the nine months ended September 30, 2017 and 2016 were approximately US$304,000 and US$447,000, respectively. For the three months ended September 30, 2017 and 2016, rental expenses under operating leases were approximately US$113,000 and US$137,000, respectively.

all material aspects. The Company may from time to time become a party to various legal or administrative proceedings arising in its ordinary course of business.

21.

~~23.~~

Segment reporting

The Company follows ASC Topic 280 “Segment Reporting”, which requires that companies disclose segment data based on how management makes decisions about allocating resources to segments and evaluating their performance. Reportable operating segments include components of an entity about which separate financial information is available and which operating results are regularly reviewed by the chief operating decision maker (“CODM”), the Company’s Chief Executive Officer, to make decisions about resources to be allocated to the segment and assess each operating segment’s performance.

~~Nine~~Six Months Ended ~~September~~June 30, ~~2017 (Unaudited)~~2021 (Unaudited)

Internet Ad.
and data service TV &
Bank kiosks
Ad. Others Inter-
segment
and
reconciling
item Total
US$
(‘000) US$
(‘000) US$
(‘000) US$
(‘000) US$
(‘000)

Revenues 31,287 - - - 31,287
Cost of revenues 26,955 - - 26,955
Total operating expenses 5,828 47 1,938 ⁽¹⁾ - 7,813
Depreciation and amortization expense included in total operating expenses 996 1 70 - 1,067
Operating loss (1,496 ) (47 ) (1,938 ) - (3,481 )

Expenditure for long-term assets - - 2 - 2

Net loss from continuing operations (1,887 ) (47 ) (1,940 ) - (3,874 )

Total assets – September 30, 2017 28,982 476 11,170 (11,488 ) 29,140
Total assets – December 31, 2016 29,520 348 11,882 (11,708 ) 30,042

~~(1)~~

~~Including approximately US$484,000 share-based compensation expenses.~~

	Internet Ad and related service			Ecommerce O2O Ad and marketing services			Blockchain technology			Corporate			Inter-segment and reconciling item			Total
	US$ (‘000)			US$ (‘000)			US$ (‘000)			US$ (‘000)			US$ (‘000)			US$ (‘000)

Revenues		22,560			387			0			0			0			22,947
Cost of revenues		23,132			750			0			0			0			23,882
Total operating expenses		590			658			1			7,910	(1)		0			9,159
Depreciation and amortization expense included in total operating expenses		130			150			1			1			0			282
Operating loss		(1,162	)		(1,021	)		(1	)		(7,910	)		0			(10,094	)

Change in fair value of warrant liabilities		0			0			0			6,829			0			6,829

Net loss		(966	)		(1,021	)		(2	)		(970	)		0			(2,959	)

Expenditure for long-term assets		1,220			0			0			161			0			1,381

Total assets-June 30, 2021		11,515			4,588			4,410			45,422			(28,987	)		36,948
Total assets-December 31, 2020		8,310			3,206			4,409			27,766			(23,024	)		20,667

(1) Including approximately US$6.86 million share-based compensation expenses.

~~F-20~~

~~CHINANET ONLINE HOLDINGS, INC.~~

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)~~

ZW DATA ACTION TECHNOLOGIES INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

Three Months Ended ~~September~~June 30, ~~2017 (Unaudited)~~2021 (Unaudited)

Internet Ad.
and data service TV &
Bank kiosks
Ad. Others Inter-
segment
and
reconciling
item Total
US$
(‘000) US$
(‘000) US$
(‘000) US$
(‘000) US$
(‘000)

Revenues 13,523 - - - 13,523
Cost of revenues 12,163 - - - 12,163
Total operating expenses 2,646 (9 ) 733 ⁽¹⁾ - 3,370
Depreciation and amortization expense included in total operating expenses 338 - 22 - 360
Operating income/(loss) (1,286 ) 9 (733 ) - (2,010 )

Expenditure for long-term assets - - - - -

Net (loss)/income from continuing operations (1,324 ) 9 (733 ) - (2,048 )

~~(1)~~

~~Including approximately US$136,000 share-based compensation expenses.~~

	Internet Ad. and related service			Ecommerce O2O Ad and marketing services			Blockchain technology			Corporate			Inter-segment and reconciling item		Total
	US$ (‘000)			US$ (‘000)			US$ (‘000)			US$ (‘000)			US$ (‘000)		US$ (‘000)

Revenues		14,293			258			0			0			0		14,551
Cost of revenues		14,394			375			0			0			0		14,769
Total operating expenses		207			455			0			7,399	(1)		0		8,061
Depreciation and amortization expense included in total operating expenses		95			75			0			0			0		170
Operating loss		(308	)		(572	)		0			(7,399	)		0		(8,279	)

Change in fair value of warrant liabilities		0			0			0			4,322			0		4,322

Net loss		(12	)		(572	)		(1	)		(3,061	)		0		(3,646	)

Expenditure for long-term assets		60			0			0			161			0		221

~~Nine~~(1) Including approximately US$6.76 million share-based compensation expenses.

Six Months Ended ~~September~~June 30, ~~2016 (Unaudited)~~2020 (Unaudited)

	Internet Ad. and data service			TV & Bank kiosks Ad.			Others			Inter- segment and reconciling item		Total			Internet Ad and related service			Ecommerce O2O Ad and marketing services		Blockchain technology			Corporate			Inter-segment and reconciling item		Total
	US$ (‘000)			US$ (‘000)			US$ (‘000)			US$ (‘000)		US$ (‘000)			US$ (‘000)			US$ (‘000)		US$ (‘000)			US$ (‘000)			US$ (‘000)		US$ (‘000)

Revenues		25,398			-			-			-		25,398			13,148			1,007		0			645			0		14,800
Cost of revenues		19,269			-			-			-		19,269			12,853			750		0			0			0		13,603
Total operating expenses		6,625			106			3,158	⁽¹⁾		-		9,889			1,952			9		4			2,528	(1)		0		4,493
Depreciation and amortization expense included in total operating expenses		1,079			15			76			-		1,170			412			0		1			2			0		415
Operating loss		(496	)		(106	)		(3,158	)		-		(3,760	)
Operating (loss)/income																(1,657	)		248		(4	)		(1,883	)		0		(3,296	)

Change in fair value of warrant liabilities																0			0		0			68			0		68

Expenditure for long-term assets		2,036			-			103			-		2,139			0			0		302			0			0		302

Net loss from continuing operations		(758	)		(105	)		(3,096	)		-		(3,959	)
Net (loss)/income																(1,650	)		204		(4	)		(1,830	)		0		(3,280	)

~~(1)~~

~~Including approximately US$1,718,000 share-based compensation expenses.~~

(1) Including approximately US$1.99 million share-based compensation expenses.

~~F-21~~

~~CHINANET ONLINE HOLDINGS, INC.~~

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)~~

ZW DATA ACTION TECHNOLOGIES INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

Three Months Ended ~~September~~June 30, ~~2016 (Unaudited)~~2020 (Unaudited)

	Internet Ad and related service			Ecommerce O2O Ad and marketing services		Blockchain technology			Corporate			Inter-segment and reconciling item		Total
	US$ (‘000)			US$ (‘000)		US$ (‘000)			US$ (‘000)			US$ (‘000)		US$ (‘000)

Revenues		9,912			504		0			0			0		10,416
Cost of revenues		9,743			375		0			0			0		10,118
Total operating expenses		930			5		3			380	(1)		0		1,318
Depreciation and amortization expense included in total operating expenses		206			0		1			1			0		208
Operating (loss)/income		(761	)		124		(3	)		(380	)		0		(1,020	)

Change in fair value of warrant liabilities		0			0		0			22			0		22

Net (loss)/income		(757	)		101		(3	)		(311	)		0		(970	)

(1) Including approximately US$0.07 million share-based compensation expenses.

Internet Ad.
and data service TV &
Bank kiosks
Ad. Others Inter-
segment
and
reconciling
item Total
US$
(‘000) US$
(‘000) US$
(‘000) US$
(‘000) US$
(‘000)

Revenues 11,902 - - - 11,902
Cost of revenues 9,874 - - - 9,874
Total operating expenses 2,418 30 944 ⁽¹⁾ - 3,392
Depreciation and amortization expense included in total operating expenses 367 14 29 - 410
Operating loss (390 ) (30 ) (944 ) - (1,364 )

Expenditure for long-term assets - - - - -

Net loss from continuing operations (474 ) (29 ) (948 ) - (1,451 )

22.

~~(1)~~

~~Including approximately US$583,000 share-based compensation expenses.~~

~~24.~~

Loss per share

Basic and diluted ~~loss~~(loss per share for each of the periods presented are calculated as follows (All amounts, except number of shares and per share data, are presented in thousands of U.S. dollars):

Nine Months Ended
September 30,

Three Months Ended
September 30,
2017 2016 2017 2016
US$(’000) US$(’000) US$(’000) US$(’000)
(Unaudited) (Unaudited) (Unaudited) (Unaudited)

Net loss attributable to ChinaNet Online Holdings, Inc. from continuing operations (numerator for basic and diluted loss per share from continuing operations) $ (3,963 ) $ (4,103 ) $ (2,087 ) $ (1,472 )

Net loss attributable to ChinaNet Online Holdings, Inc. from discontinued operation (numerator for basic and diluted loss per share from discontinued operation) $ - $ (60 ) $ - $ -

Weighted average number of common shares outstanding -Basic and diluted 12,019,040 11,353,657 12,074,304 11,358,971

Loss per share-Basic and diluted from continuing operations $ (0.33 ) $ (0.36 ) $ (0.17 ) $ (0.13 )
Loss per share-Basic and diluted from discontinued operations $ - $ (0.01 ) $ - $ -

	Six Months Ended June 30,						Three Months Ended June 30,
	2021			2020			2021			2020
	(Unaudited)			(Unaudited)			(Unaudited)			(Unaudited)

Net loss attributable to ZW Data Action Technologies Inc. (numerator for basic and diluted loss per share)	$	(2,961	)	$	(3,278	)	$	(3,646	)	$	(968	)


Weighted average number of common shares outstanding -Basic and diluted		30,727,546			21,044,666			32,925,488			21,691,926

Loss per share-Basic and diluted	$	(0.10	)	$	(0.16	)	$	(0.11	)	$	(0.04	)

~~F-22~~

~~CHINANET ONLINE HOLDINGS, INC.~~

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)~~

For the ~~nine~~six and three months ended ~~September~~June 30, ~~2017,~~2021 and 2020, the diluted loss per share calculation ~~for continuing operations~~ did not include any outstanding warrants and options to purchase ~~up to 835,216 shares of~~ the Company’s ~~common stock, because they were out of the money, and did not include 266,238 shares of unvested restricted~~ common stock, because their effect was ~~anti-dilutive, as~~anti-dilutive.

ZW DATA ACTION TECHNOLOGIES INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

23.

Share-based compensation expenses

In May 2021, under its 2020 Omnibus Securities and Incentive Plan, the Company ~~incurred a loss for the periods from continuing operations.~~

~~For the nine~~granted and three months ended September 30, 2016, the diluted loss per share calculation for continuing and discontinued operations did not include options to purchase up to 835,216 shares of the Company’s common stock, because they were out of the money, and did not include 799,571 shares of unvested restricted common stock, because their effect was anti-dilutive, as the Company incurred a loss for the periods from both continuing and discontinued operations.

~~25.~~

~~Share-based compensation expenses~~

~~The Company granted 75,000 and 20,000~~issued 3.99 million fully-vested shares of the Company’s restricted common stock to its ~~investor relations~~management and employees for their services ~~provider, in exchange~~provided to the Company. These shares were valued at the closing bid price of the Company’s common stock on the date of grant, which was US$1.67 per share. Total compensation expenses recognized was approximately US$6.66 million for both the six and three months ended June 30, 2021.

In March 2021, under its ~~services~~2020 Omnibus Securities and Incentive Plan, the Company granted and issued 0.03 million fully-vested shares of the Company’s restricted common stock to one of the Company’s independent directors for his service to the Company for the year ~~ended~~ ending December 31, ~~2017 and 2016, respectively.~~ 2021. These shares were valued at the closing bid price of the Company’s common stock on the date of grant, which was US$~~1.02~~3.13 per share. Total compensation expenses amortized for the six and three months ended June 30, 2021 was approximately US$~~3.00~~0.05 million and US$0.02 million, respectively.

For the six and three months ended June 30, 2021, the Company also amortized an approximately US$0.15 million and US$0.08 million compensation expense in the aggregate, respectively, which was related to fully-vested and nonforfeitable restricted common stock granted and issued to two of its service providers in March 2020 and August 2020, respectively.

During the first half year of 2020, under its 2015 Omnibus Securities and Incentive Plan, the Company granted and issued in the aggregate of approximately 1.63 million fully-vested shares of the Company’s restricted common stock to its management, employees and directors. These shares were valued at the closing bid price of the Company’s common stock on the respective date of grant. Total compensation expenses of approximately US$1.91 and US$0.01 million was recorded for the six and three months ended June 30, 2020, respectively.

In March 2020, the Company granted and issued 0.43 million shares of the Company restricted common stock to a management consulting and advisory service provider in exchange for its service for a two-year period. According to the service agreement, these shares are fully-vested upon issuance at the contract inception and shall not be subject to forfeiture upon termination of the agreement. The Company valued these shares at US$1.11 per share, the closing bid price of the Company’s common stock on the earlier of the performance commitment date or the date service was completed, respectively. Total compensation expense recognized for the service was US$57,380 and US$19,130 for the nine and three months ended September 30, 2017, respectively. Total compensation expense recognized for the service was US$45,000 and US$15,000 for the nine and three months ended September 30, 2016, respectively.

In July 2017, the Company issued 75,000 shares of the Company’s restricted common stock to two management consulting service providers in exchange for its services to the Company for a 12-month period commencing on July 1, 2017. These shares were valued at US$1.00 per share, the closing bid price of the Company’s common stock on the earlier of the performance commitment date or the date service was completed. Total compensation expense recognized for the nine and three months ended September 30, 2017 was approximately US$18,750, respectively.

~~F-23~~

~~CHINANET ONLINE HOLDINGS, INC.~~

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)~~

In February 2017, the Company granted 20,000 shares of the Company’s restricted common stock to one of its independent directors in exchange for his services provided to the Company. These shares were valued at US$1.12 per share, the closing bid price of the Company’s common stock on thegrant date of ~~grant. Total compensation expense recognized for the nine~~these shares and ~~three months ended September 30, 2017 was US$22,400 and US$nil, respectively.~~

On April 1, 2016, the Company granted 16,000 shares of the Company’s restricted common stock in aggregate to two marketing service providers in exchange for their services to the Company for a 12-month period commencing on April 1, 2016. These shares were valued at US$1.73 per share, the closing bid price of the Company’s common stock on the earlier of the performance commitment date or the date service was completed. Total compensation expense recognized for the nine and three months ended September 30, 2017 was approximately US$6,900 and US$nil, respectively. Total compensation expense recognized for the nine and three months ended September 30, 2016 was approximately US$13,800 and US$6,900, respectively.

On September 14, 2015, under its 2015 Omnibus Securities and Incentive Plan, the Company granted its employees in the aggregate of 266,238 shares of the Company’s restricted common stock, which will be vested on the third anniversary of the date of the grant. These shares were valued at US$2.10 per share, the closing bid price of the Company’s common stock on the date of grant. The Company adopted a 5% forfeiture rate for recognition ofrecorded the related ~~compensation expenses~~total cost of approximately US$0.48 million as a prepayment asset in prepayment and deposit to suppliers account upon grant and issuance of these ~~unvested~~fully-vested and nonforfeitable shares. Total compensation expenses ~~recognized~~amortized for the ~~nine~~six and three months ended ~~September~~June 30, ~~2017~~ 2020 was approximately US$~~132,300~~0.08 million and US$~~44,600 respectively. Total compensation expenses recognized for the nine and three months ended September 30, 2016 was approximately US$132,790 and US$44,600, respectively.~~

On September 14, 2015, under its 2015 Omnibus Securities and Incentive Plan, the Company also granted 5-year common stock purchase options to its employees, in the aggregate, to purchase up to 477,240 shares of the Company’s restricted common stock at an exercise price of US$2.10 per share, of which 159,080 options vested upon the date of grant, 159,080 options vested on September 14, 2016 and the remaining 159,080 options vested on September 14, 2017. These options were valuated at US$1.03-US$1.39 per option. Total compensation expenses recognized for these options for the nine and three months ended September 30, 2017 was approximately US$155,000 and US$53,100, respectively. Total compensation expenses recognized for these options for the nine and three months ended September 30, 2016 was approximately US$150,000 and US$57,500,0.06 million, respectively.

The Company granted 140,000 shares of the Company’s restricted common stock to a management consulting service provider in exchange for its services to the Company for a 24-month period commencing on May 1, 2015. These shares were valued at US$3.93 per share, the closing bid price of the Company’s common stock on the earlier of the performance commitment date or the date service was completed. Totaltable below summarized share-based compensation ~~expense recognized~~expenses recorded for the ~~nine~~six and three months ended ~~September~~June 30, ~~2017 was approximately US$91,580~~ 2021 and ~~US$nil, respectively. Total compensation expense recognized for the nine and three months ended September 30, 2016 was approximately US$206,100 and US$68,700, respectively.~~2020, respectively:

On December 30, 2014, the Company issued 1,680,000 shares of the Company’s restricted common stock to its executive officers, of which 613,334 restricted shares vested upon issuance, 533,333 restricted shares vested on December 30, 2015 and the remaining 533,333 restricted shares vested on December 30, 2016. The restricted stock was valued at $2.93 per share, the closing bid price of the Company’s common stock on the date of grant. Total compensation expenses recognized for the nine and three months ended September 30, 2016 was US$1,170,000 and US$390,000, respectively.

**The number of restricted common stocks, common stock purchase options and the related stock price discussed in the above paragraphs, which related transactions occurred before August 19, 2016, have been retroactively restated to reflect the Company’s 1 for 2.5 reverse stock split, which was effective on August 19, 2016.

~~F-24~~

~~CHINANET ONLINE HOLDINGS, INC.~~

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)~~

~~Options issued and outstanding at September 30, 2017 and their movements during the nine months then ended are as follows:~~

Option Outstanding Option Exercisable
Number of
underlying
shares Weighted
Average
Remaining
Contractual
Life (Years) Weighted
Average
Exercise
Price Number of
underlying
shares Weighted
Average
Remaining
Contractual
Life (Years) Weighted
Average
Exercise
Price

Balance, December 31, 2016 835,216 4.04 $ 2.49 676,136 4.11 $ 2.59
Granted/Vested - 159,080 2.95 $ 2.10
Forfeited - -
Exercised - -
Balance, September 30, 2017 (unaudited) 835,216 3.29 $ 2.49 835,216 3.29 $ 2.49

	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)

Sales and marketing expenses		0		122		0		0
General and administrative expenses		6,857		1,719		6,757		68
Research and development expenses		0		146		0		0
Total		6,857		1,987		6,757		68

The aggregate unrecognized share-based compensation expenses as of ~~September~~June 30, ~~2017~~ 2021 was approximately US$0.21 million, of which approximately US$0.17 million will be recognized for the year ending December 31, 2021 and ~~2016 is~~ approximately US$~~233,000 and US$1,111,000, respectively.~~0.04 million will be recognized for the year ending December 31, 2022.

ZW DATA ACTION TECHNOLOGIES INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

Options issued and outstanding as of June 30, 2021 and their movements during the six months then ended are as follows:

	Option Outstanding						Option Exercisable
	Number of underlying shares		Weighted Average Remaining Contractual Life (Years)		Weighted Average Exercise Price		Number of underlying shares		Weighted Average Remaining Contractual Life (Years)		Weighted Average Exercise Price

Balance, January 1, 2021		277,976		0.91	$	3.00		277,976		0.91	$	3.00
Granted/Vested		0						-
Expired		0						-
Exercised		0						-
Balance, June 30, 2021 (Unaudited)		277,976		0.41	$	3.00		277,976		0.41	$	3.00

24.

~~26.~~

Subsequent ~~event~~events

In July 2021, the Company issued 0.04 million shares of the Company’s restricted common stock for the cashless settlement of the 129,000 Placement Agent Warrants issued in the 2018 Financing.

The Company ~~has performed~~ primarily conducts its operations in the PRC. In January 2020, an ~~evaluation~~outbreak of ~~subsequent events through~~a novel coronavirus (COVID-19) surfaced in Wuhan City, Hubei province of the PRC, and spread all over the country during the first fiscal quarter of 2020. The spread of COVID-19 resulted in the World Health Organization declaring the outbreak of COVID-19 as a global pandemic. The Company’s principal business activity is to provide advertising and marketing services to small and medium enterprises in the PRC, which is particularly sensitive to changes in general economic conditions. The pandemic of COVID-19 in the PRC had caused and may continue to cause decreases in or delays in advertising spending, and had negatively impacted and may continue to negatively impact the Company’s short-term ability to grow revenues. Although the Chinese government had declared the COVID-19 outbreak largely under control within its border since the second fiscal quarter of 2020, the Company will continue to assess its financial impacts for the future periods. There can be no assurance that this assessment will enable the Company to avoid part or all of any impact from the spread of COVID-19 or its consequences, including downturns in business sentiment generally or in the Company’s sector in particular.

Except for the above mentioned matters, no other material event which are required to be adjusted or disclosed as of the date ~~the financial statements were issued, and has determined that there are no such events that are material to the~~of this consolidated financial statements.

F-25

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

Forward-Looking Statements

You should read the following discussion and analysis of our financial condition and results of operations in conjunction with our consolidated financial statements and the related notes included elsewhere in this interim report. Our consolidated financial statements have been prepared in accordance with U.S. GAAP. The following discussion and analysis contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934, including, without limitation, statements regarding our expectations, beliefs, intentions or future strategies that are signified by the words ~~“expect,~~“expect,” ~~“anticipate,~~“anticipate,” ~~“intend,~~“intend,” ~~“believe,~~“believe,” or similar language. All forward-looking statements included in this document are based on information available to us on the date hereof, and we assume no obligation to update any such forward-looking statements. Our business and financial performance are subject to substantial risks and uncertainties. Actual results could differ materially from those projected in the forward-looking statements. In evaluating our business, you should carefully consider the information set forth under the heading ~~“Risk Factors”~~“Risk Factors” in our Annual Report on Form 10-K for the fiscal year ended December 31, ~~2016.~~2020. Readers are cautioned not to place undue reliance on these forward-looking statements.

Overview

~~We were~~Our 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, we consummated~~As a result of a share exchange transaction we consummated 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 us and~~in June 2009, we are now a holding company, which through certain contractual arrangements with operating ~~entities~~companies in the PRC, is engaged in providing Internet advertising, precision marketing, ~~online-to-offline (O2O) sales channel expansion~~other ecommerce O2O advertising and marketing services and the related data and technical services to SMEs ~~in China and entrepreneurial management and networking services for entrepreneurs~~ in the PRC.

Through our PRC operating subsidiaries and VIEs, we primarily operate a one-stop services for our clients on our ~~integrated service platform, primarily including omni-channel~~Omni-channel advertising, precision ~~advertising~~marketing and ~~marketing system platform, CloudX, and its~~ data analysis management system. Our omni-channel precision advertising and marketing system platform consists primarily of all major digital advertising and marketing portals, include internet and mobile, and our other non-digital advertising units, such as TV and paper ads. We ~~provide and monitor varieties~~offer variety channels of advertising and marketing ~~campaigns~~services through ~~CloudX and generates effective sales leads through the combination effects~~this system, which primarily include distribution of the ~~Internet, mobile, content and others, including TV and offline medias. We also provide~~right to use search engine marketing services we purchased from key search engines, provision of online advertising placements on our web portals, provision of ecommerce O2O advertising and marketing services as well as provision of other related value-added data and technical services ~~through CloudX~~ to maximize market exposure and effectiveness for our clients. Our data analysis management system is an information and data analysis portal for SMEs or entrepreneurs who plans to start their own business, helping them for a higher survival and faster deal closing rate. It is built based on the cores of CloudX to further expand our service and data-link to assist our clients in developing their sales both online and offline, which establishes a traceable and looped online to offline (O2O) ecosystem for our clients in their ground sales expansion throughout the cities in the PRC. During the past few years, we have been cooperating with third parties to develop our SMEs intelligent operation and marketing data service platform and applications, which consists of several online cloud technology based tools on digital advertising and marketing, sales lead management, elite store management, client membership management and other administrative operational management tools. These are specifically designed for small business in China to match their simplicity. We are intending to utilize these applications to create a social community-based consumption ecosystem, sustained by our in-process developing Big Data and artificial intelligent technologies, and analyzing data from operation, prediction and prescription which lead the SMEs improving their marketing efficiency with better return on investment (ROI) and sales effectiveness with their target customers.

Basis of presentation, management estimates and critical accounting policies

Our unaudited condensed consolidated ~~interim~~ financial statements have been prepared in accordance with generally accepted accounting principles in the United States of America (“U.S. ~~GAAP for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X, as promulgated by the SEC,~~GAAP”) and include the accounts of our ~~Company,~~company, and all of our subsidiaries and VIEs. We prepare financial statements in conformity with U.S. GAAP, which requires us to make estimates and assumptions that affect the reported amounts of assets and liabilities, disclosure of contingent assets and liabilities on the date of the financial statements and the reported amounts of revenues and expenses during the financial reporting period. We continually evaluate these estimates and assumptions based on the most recently available information, our own historical experience and various other assumptions that we believe 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. Some of our accounting policies require higher degrees of judgment than others in their application. In order to understand the significant accounting policies that we adopted for the preparation of our condensed consolidated interim financial statements, ~~you~~readers should refer to the information set forth in Note 3 “Summary of significant accounting policies” to our audited financial statements in our ~~2016~~2020 Form 10-K.

A.RESULTS OF OPERATIONS FOR THE ~~NINE~~SIX AND THREE MONTHS ENDED ~~SEPTEMBER~~JUNE 30, ~~2017~~2021 AND ~~2016~~2020

The following table sets forth a summary, for the periods indicated, of our consolidated results of operations. Our historical results presented below are not necessarily indicative of the results that may be expected for any future period. All amounts, except number of shares and per share data, are presented in thousands of U.S. dollars.

	Nine Months Ended September 30,						Three Months Ended September 30,
	2017			2016			2017			2016			Six Months Ended June 30,						Three Months Ended June 30,
	US$			US$			US$			US$			2021			2020			2021			2020
	(Unaudited)			(Unaudited)			(Unaudited)			(Unaudited)			(US $)			(US $)			(US $)			(US $)
													(Unaudited)			(Unaudited)			(Unaudited)			(Unaudited)
Revenues
From unrelated parties	$	31,171		$	25,017		$	13,509		$	11,741		$	22,947		$	14,786		$	14,551		$	10,415
From related parties		116			381			14			161
From a related party														-			14			-			1
Total revenues		31,287			25,398			13,523			11,902			22,947			14,800			14,551			10,416
Cost of revenues		26,955			19,269			12,163			9,874			23,882			13,603			14,769			10,118
Gross profit		4,332			6,129			1,360			2,028			(935	)		1,197			(218	)		298

Operating expenses
Sales and marketing expenses		2,399			3,069			740			1,126			101			235			73			70
General and administrative expenses		4,402			5,290			2,318			1,752			8,895			3,928			7,899			1,132
Research and development expenses		1,012			1,530			312			514			163			330			89			116
Total operating expenses		7,813			9,889			3,370			3,392			9,159			4,493			8,061			1,318

Loss from operations		(3,481	)		(3,760	)		(2,010	)		(1,364	)		(10,094	)		(3,296	)		(8,279	)		(1,020	)

Other income (expenses)
Interest income		39			72			2			19
Interest expense		(109	)		(4	)		(36	)		(4	)
Other expenses		(208	)		(112	)		(2	)		(99	)
Total other expenses		(278	)		(44	)		(36	)		(84	)

Loss before income tax expense, noncontrolling interests and discontinued operation		(3,759	)		(3,804	)		(2,046	)		(1,448	)
Income tax expense		(115	)		(155	)		(2	)		(3	)
Loss from continuing operations		(3,874	)		(3,959	)		(2,048	)		(1,451	)
Loss from and on disposal of discontinued operation, net of income tax		-			(60	)		-			-
Interest income/(expense), net														2			(1	)		1			-
Other income/(expense), 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		(3,874	)		(4,019	)		(2,048	)		(1,451	)		(2,959	)		(3,280	)		(3,646	)		(970	)
Net income attributable to noncontrolling interests from continuing operations		(89	)		(144	)		(39	)		(21	)
Net loss attributable to ChinaNet Online Holdings, Inc.	$	(3,963	)	$	(4,163	)	$	(2,087	)	$	(1,472	)
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	)

Revenues

The following tables set forth a breakdown of our total revenues, ~~divided into three segments~~disaggregated by type of services for the periods indicated, with ~~inter-segment~~inter-company transactions eliminated:

Nine Months Ended September 30,
2017 2016
Revenue type (Amounts expressed in thousands of US dollars, except percentages)

-Internet advertising and data service $ 6,978 22.3 % $ 13,676 53.8 %
-Search engine marketing and data service 24,253 77.5 % 11,701 46.1 %
-Technical services 56 0.2 % 21 0.1 %
Internet advertising and related data services $ 31,287 100 % $ 25,398 100 %

	Six Months Ended June 30,
	2021				2020
Revenue type	(Amounts expressed in thousands of US dollars, except percentages)

-Internet advertising and related data service	$	3,595	15.7	%	$	3,250	22.0	%
-Distribution of the right to use search engine marketing service		18,965	82.6	%		9,298	62.8	%
-Data and technical services		-	-			600	4.1	%
Internet advertising and related services		22,560	98.3	%		13,148	88.9	%
Ecommerce O2O advertising and marketing services		387	1.7	%		1,007	6.8	%
Technical solution services		-	-			645	4.3	%
Total	$	22,947	100	%	$	14,800	100	%

Three Months Ended September 30,
2017 2016
Revenue type (Amounts expressed in thousands of US dollars, except percentages)

-Internet advertising and data service $ 2,232 16.5 % $ 4,387 36.9 %
-Search engine marketing and data service 11,266 83.3 % 7,515 63.1 %
-Technical services 25 0.2 % - -
Internet advertising and related data services $ 13,523 100 % $ 11,902 100 %

	Three Months Ended June 30,
	2021				2020
Revenue type	(Amounts expressed in thousands of US dollars, except percentages)

-Internet advertising and related data service	$	2,193	15.1	%	$	2,302	22.1	%
-Distribution of the right to use search engine marketing service		12,100	83.1	%		7,310	70.2	%
-Data and technical services		-	-			300	2.9	%
Internet advertising and related services		14,293	98.2	%		9,912	95.2	%
Ecommerce O2O advertising and marketing services		258	1.8	%		504	4.8	%
Total	$	14,551	100	%	$	10,416	100	%

Total Revenues: Our total revenues increased to US$~~31.3~~22.95 million and US$~~13.5~~14.55 million ~~respectively,~~ for the ~~nine~~six and three months ended ~~September~~June 30, ~~2017~~2021, respectively, from US$~~25.4~~14.80 million and US$~~11.9~~10.42 million ~~respectively,~~ for the same ~~period~~periods last year, respectively, which was primarily due to the increase in our main stream service revenues, ~~from~~i.e. distribution of the right to use search engine marketing ~~and data service during the periods.~~

We derive the majority of our internet advertising and related data service revenues from the sales of effective sales leads and advertising space from our internet portals, sales of omni-channel and search engine marketing and data service and other related value added services, including content management services, to unrelated third parties and to certain related parties. Our internet advertising and related data services to related parties were provided in the ordinary course of business on the same terms as those provided to our unrelated customers. For the nine and three months ended September 30, 2017 and 2016, our service revenues from related parties in the aggregate was less than 1.5% of the total revenues for each respective reporting period.

The tables below summarize the revenues, cost of revenues, gross profit and net loss generated from each of our VIEs and subsidiaries for the nine and three months ended September 30, 2017 and 2016, respectively, with inter-company transactions eliminated:

~~For the nine months ended September 30, 2017:~~

Name of subsidiary or VIE Revenue from
unrelated parties Revenue from
related parties Total
($’000) ($’000) ($’000)

Rise King WFOE and subsidiaries 56 - 56
Business Opportunity Online and subsidiaries 31,115 116 31,231
Total revenues 31,171 116 31,287

~~For the three months ended September 30, 2017:~~

Name of subsidiary or VIE Revenue from
unrelated parties Revenue from
related parties Total
($’000) ($’000) ($’000)

Rise King WFOE and subsidiaries 25 - 25
Business Opportunity Online and subsidiaries 13,484 14 13,498
Total revenues 13,509 14 13,523

~~For the nine months ended September 30, 2017:~~

Name of subsidiary or VIE Cost of Revenues Gross Profit
($’000) ($’000)

Rise King WFOE and subsidiaries 1 55
Business Opportunity Online and subsidiaries 26,954 4,277
Total 26,955 4,332

~~For the three months ended September 30, 2017:~~

Name of subsidiary or VIE Cost of Revenues Gross Profit
($’000) ($’000)

Rise King WFOE and subsidiaries 1 24
Business Opportunity Online and subsidiaries 12,162 1,336
Total 12,163 1,360

~~For the nine months ended September 30, 2017:~~services.

~~Name of subsidiary or VIE~~		~~Net Loss~~
	●	~~($’000)~~ Internet advertising revenues for the six and three months ended June 30, 2021 was approximately US$3.60 million and US$2.19 million, respectively, compared with US$3.25 million and US$2.30 million for the six and three months ended June 30, 2020, respectively. Management expects no significant fluctuation on service revenues from this business category in the second half of 2021, compared with that in the same period last year.

	●
~~Rise King WFOE~~ Revenue generated from distribution of the right to use search engine marketing service for the six and ~~subsidiaries~~		~~(1,322~~	)
~~Business Opportunity Online~~three months ended June 30, 2021 was approximately US$18.97 million and ~~subsidiaries~~		~~(1,865~~	)
~~Beijing CNET Online~~US$12.10 million, respectively, compared with approximately US$9.30 million and ~~subsidiaries~~		~~(63~~	)
~~ChinaNet Online Holdings, Inc.~~		~~(624~~	)
~~Total net loss before allocation~~US$7.31 million for the six and three months ended June 30, 2020, respectively. The significant increase of revenues from this business category for both the six and three months ended June 30, 2021 were directly attributable to the ~~noncontrolling interest~~		~~(3,874~~	)successful containment of the COVID-19 epidemic in China within the first half year of fiscal 2020, which resulted in the gradually recovery of business activities and economy since the second half of fiscal 2020. Although there are COVID-19 cases rebound in several provinces in China since July 2021 and uncertainties associated with the future developments of the pandemic still exist, management expects that revenues from this business will be stable in the second half of 2021, compared with that in the same period last year.

~~For the three months ended September 30, 2017:~~

~~Name of subsidiary or VIE~~		~~Net Loss~~
	●	~~($’000)~~ For the six and three months ended June 30, 2021, we generated an approximately US$0.39 million and US$0.26 million Ecommerce O2O advertising and marketing service revenues, respectively, compared with an approximately US$1.01 million and US$0.50 million service revenues generated for the six and three months ended June 30, 2020, respectively. We generated these revenues from distribution of the advertising spaces in outdoor billboards we purchased from a third party for the reporting periods.

~~Rise King WFOE and subsidiaries~~			~~(373~~	)
~~Business Opportunity Online and subsidiaries~~			~~(1,395~~	)
~~Beijing CNET Online and subsidiaries~~			~~(17~~	)
~~ChinaNet Online Holdings, Inc.~~			~~(263~~	)
~~Total net loss before allocation to the noncontrolling interest~~			~~(2,048~~	)

~~For the nine months ended September 30, 2016:~~

Name of subsidiary or VIE Revenue from
unrelated parties Revenue from
related parties Total
($’000) ($’000) ($’000)

Rise King WFOE and subsidiaries 109 - 109
Business Opportunity Online and subsidiaries 24,908 381 25,289
Total revenues 25,017 381 25,398

~~For the three months ended September 30, 2016:~~

Name of subsidiary or VIE Revenue from
unrelated parties Revenue from
related parties Total
($’000) ($’000) ($’000)

Rise King WFOE and subsidiaries - - -
Business Opportunity Online and subsidiaries 11,741 161 11,902
Total revenues 11,741 161 11,902

~~For the nine months ended September 30, 2016:~~

Name of subsidiary or VIE Cost of Revenues Gross Profit
($’000) ($’000)

Rise King WFOE and subsidiaries 83 26
Business Opportunity Online and subsidiaries 19,186 6,103
Total 19,269 6,129

~~For the three months ended September 30, 2016:~~

Name of subsidiary or VIE Cost of Revenues Gross Profit/(Loss)
($’000) ($’000)

Rise King WFOE and subsidiaries 2 (2 )
Business Opportunity Online and subsidiaries 9,872 2,030
Total 9,874 2,028

~~For the nine months ended September 30, 2016:~~

~~Name of subsidiary or VIE~~	~~Net Loss~~
	~~($’000)~~

~~Rise King WFOE and subsidiaries~~		~~(1,595~~	)
~~Business Opportunity Online and subsidiaries~~		~~(437~~	)
~~Beijing CNET Online and subsidiaries~~		~~(105~~	)
~~ChinaNet Online Holdings, Inc.~~		~~(1,822~~	)
~~Total net loss from continuing operations before allocation to the noncontrolling interest~~		~~(3,959~~	)
~~Loss from discontinued operations~~		~~(60~~	)
~~Total net loss before allocation to the noncontrolling interest~~		~~(4,019~~	)

~~For the three months ended September 30, 2016:~~

~~Name of subsidiary or VIE~~	~~Net Loss~~
	~~($’000)~~

~~Rise King WFOE and subsidiaries~~		~~(444~~	)
~~Business Opportunity Online and subsidiaries~~		~~(304~~	)
~~Beijing CNET Online and subsidiaries~~		~~(39~~	)
~~ChinaNet Online Holdings, Inc.~~		~~(664~~	)
~~Total net loss from continuing operations before allocation to the noncontrolling interest~~		~~(1,451~~	)
~~Loss from discontinued operations~~		-
~~Total net loss before allocation to the noncontrolling interest~~		~~(1,451~~	)

Management considers revenues generated from internet advertising and data service, search engine marketing and data service and other related technical services as one aggregate business operation and relies upon the consolidated results of all the operations in this business unit to make decisions about allocating resources and evaluating performance.

Internet advertising and data service revenues for the nine and three months ended September 30, 2017 decreased to approximately US$6.99 million and US$2.23 million, respectively, compared with US$13.68 million and US$4.39 million for the same periods in 2016, respectively. The decrease in our internet advertising and data service revenues during the period responded our strategy to further upgrading our internet advertising, omni-channel marketing and data services to our larger SME clients and eliminating smaller and non-profitable clients, and due to the overall economy slowdown in China, which resulted in lower consumer and business spending, our clients continued tightening their advertising and marketing investment budget on omni-channel advertising and marketing, and focused more on singular ad. cheaper advertising channel, e.g. search engine marketing and data service. The decrease in our internet advertising and data service revenues is considered temporary during our business transition and technology development. During the past few years, we have optimized our internet marketing analytics and cost control system to provide more accurate result and more spontaneous feedback to our clients, which is especially helpful to our larger clients, we also optimized our online promotion tactics to improve cost efficiency, which lead to the foundation of the framework of CloudX. The process of developing self-learning mechanism for our internet marketing tactics have helped the Company and our clients achieved more accurate advertising and marketing results with more acceptable and lower costs, and have led to increasing sales lead conversion rate. The technical improvement and potential advertising and marketing technology breakthrough will further help increasing our market penetration in the SME segment and potentially expand our customer segments, thereby continuing to increase our recurring revenues in future periods.

Revenue generated from search engine marketing and data services for the nine and three months ended September 30, 2017 increased to approximately US$24.25 million and US$11.27 million, respectively, compared with US$11.70 million and US$7.52 million for the same periods in 2016, respectively. This enhanced third-party search engine marketing and data service is to help our clients select and prioritize effective key words from analyzed keywords database for different search engines, combinations of key-words or combinations of sentences to achieve higher sales lead conversion rate with CloudX on both mobile and PC searches. As discussed in the above paragraph, due to the overall economy slowdown in China, our clients also tightened their advertising and marketing investment budget and turn to choose more economic and singular marketing channel with more direct feedback and results, e.g. search engine marketing and data service etc. Therefore, there was a significant increase in search engine market and data service during the nine and three months ended September 30, 2017, compared with the same periods last year.

Cost of revenues

Our cost of revenues consisted of costs directly related to the offering of our Internet advertising, precision marketing and related data and technical services, and ~~technical services.~~cost related to our Ecommerce O2O advertising and marketing service. The following table sets forth our cost of revenues, ~~divided into three segments,~~disaggregated by type of services, by amount and gross profit ratio for the periods indicated, with ~~inter-segment~~inter-company transactions eliminated:

Nine Months Ended September 30,
2017 2016
(Amounts expressed in thousands of US dollars, except percentages)
Revenue Cost GP ratio Revenue Cost GP ratio

-Internet advertisement and data service $ 6,978 $ 3,864 45 % $ 13,676 $ 7,863 43 %
-Search engine marketing and data service 24,253 23,090 5 % 11,701 11,402 3 %
-Technical services 56 1 98 % 21 4 81 %
Internet advertising and related data services $ 31,287 $ 26,955 14 % $ 25,398 $ 19,269 24 %

	Six Months Ended June 30,
	2021							2020
	(Amounts expressed in thousands of US dollars, except percentages)
	Revenue		Cost		GP ratio			Revenue		Cost		GP ratio

-Internet advertising and related data service	$	3,595	$	3,245		10	%	$	3,250	$	2,906		11	%
-Distribution of the right to use search engine marketing service		18,965		19,887		-5	%		9,298		9,416		-1	%
-Data and technical services		-		-		-			600		531		12	%
Internet advertising and related services		22,560		23,132		-3	%		13,148		12,853		2	%
Ecommerce O2O advertising and marketing services		387		750		-94	%		1,007		750		26	%
Technical solution services		-		-		-			645		-		100	%
Total	$	22,947	$	23,882		-4	%	$	14,800	$	13,603		8	%

Three Months Ended September 30,
2017 2016
(Amounts expressed in thousands of US dollars, except percentages)
Revenue Cost GP ratio Revenue Cost GP ratio

-Internet advertisement and data service $ 2,232 $ 1,291 42 % $ 4,387 $ 2,534 42 %
-Search engine marketing and data service 11,266 10,871 4 % 7,515 7,338 2 %
-Technical services 25 1 96 % - 2 -
Internet advertising and related data services $ 13,523 $ 12,163 10 % $ 11,902 $ 9,874 17 %

	Three Months Ended June 30,
	2021							2020
	(Amounts expressed in thousands of US dollars, except percentages)
	Revenue		Cost		GP ratio			Revenue		Cost		GP ratio

-Internet advertising and related data service	$	2,193	$	1,968		10	%	$	2,302	$	2,072		10	%
-Distribution of the right to use search engine marketing service		12,100		12,426		-3	%		7,310		7,405		-1	%
-Data and technical services		-		-		-			300		266		11	%
Internet advertising and related services		14,293		14,394		-1	%		9,912		9,743		2	%
Ecommerce O2O advertising and marketing services		258		375		-45	%		504		375		26	%
Total	$	14,551	$	14,769		-1	%	$	10,416	$	10,118		3	%

Cost of ~~revenues~~revenues: ~~: Our~~our total cost of revenues increased to US$~~26.96~~23.88 million and US$~~12.16~~14.77 million for the ~~nine~~six and three months ended ~~September~~June 30, ~~2017,~~2021, respectively, from US$~~19.27~~13.60 million and US$~~9.87~~10.12 million for the ~~same periods~~six and three months ended June 30, 2020, respectively. Our cost of revenues primarily consists of search engine marketing resources purchased from key search engines, cost of outdoor advertising resource and other direct costs associated with providing our services. The increase in ~~2016, respectively, which~~our total cost of revenues for the six and three months ended June 30, 2021 was primarily due to the increase in costs associated with distribution of the right to use search engine marketing ~~and data~~ service ~~and was~~we purchased from key search engines during the periods, which were in line with the increase in the related revenues as discussed above. Our cost of revenues related to our advertising, marketing and data services primarily consists of internet resources purchased from key search engines and technical services providers related to lead generation, sponsored search and other direct cost associated with providing services.

~~For internet~~

●

Costs for Internet advertising and data service primarily consist of cost of internet traffic flow and technical services we purchased from other portals and technical suppliers for obtaining effective sales lead generation to promote business opportunity advertisements placed on our own ad portals. For the six and three months ended June 30, 2021, our total cost of revenues for Internet advertising and data service was approximately US$3.25 million and US$1.97 million, respectively, compared with approximately US$2.91 million and US$2.07 million for the six and three months ended June 30, 2020, respectively. The gross margin rate of our Internet advertising and data service was 10% for both the six and three months ended June 30, 2021, compared with 11% and 10% for the six and three months ended June 30, 2020, respectively. We anticipate the gross margin rate will improve in the second half of fiscal 2021 along with the increase in revenues from this business category.

●

Costs for distribution of the right to use search engine marketing service was direct search engine resource consumed for the right to use search engine marketing service that we purchased from key search engines and distributed to our customers. We purchased these search engine resources from well-known search engines in China, for example, Baidu, Qihu 360 and Sohu (Sogou) etc. We purchased the resource in relatively large amounts under our own name at a relatively lower rate compared to the market rates. We charged our clients the actual cost they consumed on search engines for the use of this service and a premium at certain percentage of that actual consumed cost. For the six and three months ended June 30, 2021, our total cost of revenues for distribution of the right to use search engine marketing service increased significantly to US$19.89 million and US$12.43 million, respectively, compared with US$9.42 million and US$7.41 million for the same periods last year, respectively, which was in line with the increase in revenues as a result of business recovery after successful containment of the COVID-19 epidemic in China. Gross margin rate of this business category was -5% and -3% for the six and three months ended June 30, 2021, respectively, significantly improved from -9% gross margin rate incurred for the first fiscal quarter of 2021. Gross margin rate of this business category was -1% for both the six and three months ended June 30, 2020. We anticipant the gross margin rate will continue to improve in the second half of fiscal 2021, as we anticipate continuous increase in service revenues and the related cost consumption from this business category, which may put us in a better position to negotiate a lower rate with the suppliers in future periods.

●

For the six months ended June 30, 2021 and 2020, cost for our Ecommerce O2O advertising and marketing service was both approximately US$0.75 million, and for the three months ended June 30, 2021 and 2020, cost for our Ecommerce O2O advertising and marketing service was both approximately US$0.38 million, which costs represented the amortized cost of the related outdoor billboards ad spaces we pre-purchased during the periods.

Gross (loss)/profit

As a result of the foregoing, we incurred a gross loss of approximately US$0.94 million and ~~data service, cost associated with obtaining internet resources was~~US$0.22 million for the largest component of our cost of revenues, accounting for over 80% of our total internet advertising and data service cost of revenues. We purchased these internet resources from other well-known search engines, internet portals and mobile portals in China, for example, Baidu, Qihu 360, Sohu (Sogou), WeChat, Toutiao and others. The purchase of these internet resources in large amounts allowed us to negotiate discounts with our suppliers. For the ninesix and three months ended ~~September~~June 30, ~~2017, our total cost~~2021, respectively, compared with a gross profit of ~~revenues for internet advertising and data service was~~approximately US$~~3.86~~1.20 million and US$~~1.29~~0.30 million for the six and three months ended June 30, 2020, respectively. Our overall gross margin was -4% and -1% for the six and three months ended June 30, 2021, respectively, compared with ~~US$7.86 million~~8% and ~~US$2.53 million~~3% for the same periods last year, respectively. The ~~decrease in our total cost~~incurrence of ~~revenues associated with internet advertising~~gross loss and data service was in line with the decrease in internet advertising and data service revenues as discussed in the above section. During the past few years, we continued developing our precision advertising and marketing system, CloudX, which optimized our digital marketing tactics by conglomerating different marketing channel for a single large customer and relatively increasing our classified segment and industry level marketing scheme with improved cost efficiency. These helped us and our clients achieve better lead results and effects with more acceptable and lower costs, and better ROI. Despite of temporarily decreasing in revenue, thenegative gross margin rate for ~~our internet advertising and data service remained at~~ the ~~level of 45% and 42% for the nine~~six and three months ended ~~September~~June 30, ~~2017, respectively, compared with 43% and 42% for~~2021 was directly resulted from the ~~nine and three months ended September 30, 2016, respectively.~~

~~Costs for~~negative gross margin rate incurred by our main stream of service revenues, i.e. distribution of the right to use search engine marketing services, which accounted for approximately 82.6% and data service was direct internet resource costs consumed for search engine marketing and data service provided to clients as described above. We normally charge our clients a service fee for this service on the certain percentage of the related direct cost consumed. Due to further implementation of the CloudX system in this service, which optimized our internet advertising and marketing tactics and improved the cost efficiency in providing search engine marketing and data service, i.e. less cost consumed for the similar results or ROI achieved. As a result, our gross margin rate for this service increased to 5% and 4% for the nine and three months ended September 30, 2017, respectively, compared with 3% and 2% for the same periods last year, respectively.

~~Gross Profit~~

As a result of the foregoing, our gross profit was US$4.33 million and US$1.36 million, respectively, for the nine and three months ended September 30, 2017, compared with US$6.13 million and US$2.03 million, respectively, for the nine and three months ended September 30, 2016. Our overall gross margin decreased to 14% and 10% for the nine and three months ended September 30, 2017, respectively, compared with 24% and 17% for the nine and three months ended September 30, 2016. The decrease in our overall gross margin rate was a direct result of the increase in revenues from the relative lower margin search engine marketing and data service for the nine and three months ended September 30, 2017, compared with that in the same periods last year, which constituted approximately 77.5% and 83.3%83.1% of our total revenues for the ~~nine~~six and three months ended ~~September~~June 30, ~~2017, respectively,~~2021, respectively. Our gross margin for distribution of the right to use search engine marketing services improved to -3% for the second fiscal quarter of 2021 from -9% for the first fiscal quarter of 2021, as a result of the significant increase in revenues and the related cost consumption from this business category in the second fiscal quarter of 2021, which allowed us obtained a lower rate for the search engine marketing resources purchased from the suppliers, compared with ~~46.1% and 63.1% of the total revenues~~that in the ~~same periods last year, respectively.~~first fiscal quarter of 2021.

Operating Expenses ~~and Net Loss~~

Our operating expenses consist of sales and marketing expenses, general and administrative expenses and research and development expenses. The following tables set forth our operating expenses, divided into their major categories by amount and as a percentage of our total revenues for the periods indicated.

	Nine Months Ended September 30,										Six Months Ended June 30,
	2017					2016					2021						2020
	(Amounts expressed in thousands of US dollars, except percentages)										(Amounts expressed in thousands of US dollars, except percentages)
	Amount		% of total revenue			Amount		% of total revenue			Amount			% of total revenue			Amount		% of total revenue

Total Revenues	$	31,287		100	%	$	25,398		100	%
Gross Profit		4,332		14	%		6,129		24	%
Total revenues											$	22,947			100	%	$	14,800		100	%
Gross (loss)/profit												(935	)		-4	%		1,197		8	%
Sales and marketing expenses		2,399		8	%		3,069		12	%		101			-	%		235		2	%
General and administrative expenses		4,402		14	%		5,290		21	%		8,895			39	%		3,928		26	%
Research and development expenses		1,012		3	%		1,530		6	%		163			1	%		330		2	%
Total operating expenses	$	7,813		25	%	$	9,889		39	%	$	9,159			40	%	$	4,493		30	%

	Three Months Ended September 30,										Three Months Ended June 30,
	2017					2016					2021						2020
	(Amounts expressed in thousands of US dollars, except percentages)										(Amounts expressed in thousands of US dollars, except percentages)
	Amount		% of total revenue			Amount		% of total revenue			Amount			% of total revenue			Amount		% of total revenue

Total Revenues	$	13,523		100	%	$	11,902		100	%
Gross Profit		1,360		10	%		2,028		17	%
Total revenues											$	14,551			100	%	$	10,416		100	%
Gross (loss)/profit												(218	)		-1	%		298		3	%
Sales and marketing expenses		740		6	%		1,126		9	%		73			-	%		70		1	%
General and administrative expenses		2,318		17	%		1,752		15	%		7,899			54	%		1,132		11	%
Research and development expenses		312		2	%		514		4	%		89			1	%		116		1	%
Total operating expenses	$	3,370		25	%	$	3,392		28	%	$	8,061			55	%	$	1,318		13	%

Operating Expenses: Our total operating expenses ~~decreased to~~was approximately US$~~7.81~~9.16 million and US$8.06 million for the ~~nine~~six and three months ended ~~September~~June 30, ~~2017 from~~2021, respectively, compared with approximately US$~~9.89~~4.49 million and US$1.32 million for the six and three months ended June 30, 2020, respectively.

●

Sales and marketing expenses: Sales and marketing expenses was US$0.10 million and US$0.07 million for the six and three months ended June 30, 2021, respectively, compared with approximately US$0.24 million and US$0.07 million for the six and three months ended June 30, 2020, respectively. Our sales and marketing expenses primarily consist of advertising expenses for brand development that we pay to different media outlets for the promotion and marketing of our advertising web portals and our services, staff salaries and benefits, performance bonuses, travel expenses, communication expenses and other general office expenses of our sales department. Due to certain aspects of our business nature, the fluctuation of our sales and marketing expenses usually does not have a direct linear relationship with the fluctuation of our net revenues. For the six months ended June 30, 2021, the decrease in our sales and marketing expenses was primarily due to the decrease in share-based compensation expenses of approximately US$0.12 million, related to restricted shares granted and issued to our sales staff during the first fiscal quarter of last year. For the three months ended June 30, 2021, there was no significant fluctuation of our sales and marketing expenses, compared with that for the same period last year.

●

General and administrative expenses: General and administrative expenses was US$8.90 million and US$7.90 million for the six and three months ended June 30, 2021, respectively, compared with US$3.93 million and US$1.13 million for the six and three months ended June 30, 2020, respectively. Our general and administrative expenses primarily consist of salaries and benefits of management, accounting, human resources and administrative personnel, office rentals, depreciation of office equipment, allowance for doubtful accounts, professional service fees, maintenance, utilities and other general office expenses of our supporting and administrative departments. For the six months ended June 30, 2021, the change in our general and administrative expenses was primarily due to the following reasons: (1) the increase in share-based compensation expenses of approximately US$5.14 million, due to more shares of the Company’s restricted common stock were granted and issued to management and employees in the second fiscal quarter of 2021, compared with that granted and issued in the first fiscal quarter of last year; (2) the increase in general office administrative expense of approximately US$0.58 million, primarily attributable to the increase in lease cost of the new office in Guangzhou and recovery from the COVID-19 epidemic, which resulted in the office shutdown during the first fiscal quarter of last year; and (3) the decrease in allowance for doubtful accounts of approximately US$0.75 million, due to strength of collection management. For the three months ended June 30, 2021, the change in our general and administrative expenses was primarily attributable to the followings, due to the same reasons as discussed above: (1) the increase in share-based compensation expenses of approximately US$6.69 million; (2) the increase in general departmental expenses of approximately US$0.42 million; and (3) the decrease in allowance for doubtful accounts of approximately US$0.34 million.

● Research and development expenses: Research and development expenses was approximately US$0.16 million and US$0.09 million for the six and three months ended June 30, 2021, respectively, compared with approximately US$0.33 million and US$0.12 million for the six and three months ended June 30, 2020, respectively. Our research and development expenses primarily consist of salaries and benefits of our staff in the research and development department, equipment depreciation expenses, and office utilities and supplies allocated to our research and development department etc. For the six months ended June 30, 2021, the decrease in our research and development expenses was primarily due to the decrease in share-based compensation expenses of approximately US$0.15 million, related to restricted shares granted and issued to our research and development staff during the first fiscal quarter of last year. For the three months ended June 30, 2021, the decrease in our research and development expenses was primarily due to a decrease in number of staff in our research and development department, compared with the same period last year.

Loss from operations: As a result of ~~2016.~~the foregoing, we incurred a loss from operations of approximately US$10.09 million and US$3.30 million for the six months ended June 30, 2021 and 2020, respectively. For the three months ended ~~September~~June 30, ~~2017,~~2021 and 2020, we incurred a loss from operations of approximately US$8.28 million and US$1.02 million, respectively.

Change in fair value of warrant liabilities: We issued warrants in various of our ~~total operating expenses decreased slightly to~~financing activities, which we determined that should be accounted for as derivative liabilities, as the warrants are dominated in a currency (U.S. dollar) other than our functional currency (Renminbi or Yuan). As a result, a gain of change in fair value of these warrant liabilities of approximately US$~~3.37~~6.83 million ~~from~~and US$~~3.39~~4.32 million was recorded for the ~~same period of 2016.~~

Sales and marketing expenses: Sales and marketing expenses decreased to US$2.40 million for the nine months ended September 30, 2017 from US$3.07 million for the same period of 2016. For the three months ended September 30, 2017, sales and marketing expenses decreased to US$0.74 million from US$1.13 million for the same period of 2016. Our sales and marketing expenses primarily consist of advertising expenses for brand development that we pay to different media outlets for the promotion and marketing of our advertising web portals, other advertising and promotional expenses, staff salaries, staff benefits, performance bonuses, travelling expenses, communication expenses and other general office expenses of our sales department. For the nine months ended September 30, 2017, the change in our sales and marketing expenses was primarily due to the following reasons: (1) the decrease in advertising expenses for brand development of approximately US$0.10 million; and (2) the decrease in staff salaries and benefit and other general expenses of our sales department of approximately US$0.57 million, due to the cost reduction plan executed by management and decrease in headcount in our sales department. For the three months ended September 30, 2017, the reasons for the change in our sales and marketing expenses were similar to those for the nine months ended September 30, 2017, as discussed above.

General and administrative expenses: General and administrative expenses decreased to US$4.40 million for the nine months ended September 30, 2017 from US$5.29 million for the same period in 2016. For the three months ended September 30, 2017, general and administrative expenses increased to US$2.32 million from US$1.75 million for the same period of 2016. Our general and administrative expenses primarily consist of salaries and benefits for management, accounting and administrative personnel, office rentals, depreciation and amortization, professional service fees, maintenance, utilities and other office expenses. For the nine months ended September 30, 2017, the change in our general and administrative expenses was primarily due to the following reasons: (1) the decrease in general administrative expenses, such as: professional service expenses, salary and benefit expenses and other general office expenses of approximately US$0.77 million, due to cost reduction plan executed by management; (2) the decrease in rental expenses of approximately US$0.14 million, due to less office space rented during the nine months ended September 30, 2017, compared with the same period in 2016; (3) the provision of allowance for doubtful accounts for the nine months ended September 30, 2017 of approximately US$1.25 million; and (4) the decrease in share-based compensation expenses of approximately US$1.23 million, primarily related to restricted shares awarded to management in 2014, which had been fully vested by the end of 2016. For the three months ended September 30, 2017, the increase in our general and administrative expenses was primarily due to the provision of allowance for doubtful accounts of approximately US$1.28 million during the period, which was partially offset by the decrease in general administrative expenses, rental expense, and share-based compensation expense during the period, similar to those discussed for the nine months ended September 30, 2017.

~~Research and development expenses: Research and development expenses were US$1.01 million and US$0.31 million for the nine~~six and three months ended ~~September~~June 30, ~~2017,~~2021, respectively, compared ~~to US$1.53 million and US$0.51 million for the nine and three months ended September 30, 2016, respectively. Our research and development expenses primarily consist~~with a gain of ~~salaries and benefits for the research and development staff, equipment depreciation expenses, and office utilities and supplies allocated to our research and development department. The decrease~~change in ~~research and development expenses for the nine and three months ended September 30, 2017, compared with the same periods last year, were primarily due to the decrease in headcount~~fair value of ~~our research and development department and the cost reduction plan executed by management.~~

•

~~Loss from operations:~~ ~~As a result~~these warrant liabilities of the foregoing, we incurred a loss from operations of approximately US$3.48 million and US$3.76 million for the nine months ended September 30, 2017 and 2016, respectively. We incurred a loss from operations of approximately US$2.01 million and US$1.36 million for the three months ended September 30, 2017 and 2016, respectively.

•

~~Interest income:~~ For the nine and three months ended September 30, 2017 and 2016, interest income we earned was primarily contributed from the approximately US$3 million of term deposit we placed in one of the major financial institutions in the PRC, which matured in July 2017.

•

~~Interest expense:~~ For the nine and three months ended September 30, 2017, interest expense incurred were primarily related to the short-term bank loan we borrowed from major financial institutions in the PRC to supplement our short-term working capital needs and amounts due from new investors related to terminated security purchase agreements as discussed in Note 15. For the nine and three months ended September 30, 2016, interest expense incurred was primarily related to the short-term bank loan we borrowed from major financial institutions in the PRC during the periods.

•

~~Loss before income tax expense, noncontrolling interests and discontinued operation:~~ As a result of the foregoing, our loss before income tax expense, noncontrolling interest and discontinued operation was approximately US$3.76 million and US$3.80 million for the nine months ended September 30, 2017 and 2016, respectively. Our loss before income tax expense, noncontrolling interest and discontinued operation was approximately US$2.05 million and US$1.45 million for the three months ended September 30, 2017 and 2016, respectively.

•

~~Income Tax expense:~~ We recognized a net deferred income tax expense of approximately US$0.12 million and US$0.002 million for the nine and three months ended September 30, 2017, respectively, which was primarily related to utilizing deferred tax assets recognized in previous years due to earnings generated during the periods.

We recognized a net deferred income tax expense of approximately US$0.16 million and US$0.003 million for the nine and three months ended September 30, 2016, respectively. For the nine and three months ended September 30, 2016, approximately US$0.09 million and US$0.03 million of our income tax benefit, respectively, was in relation to the amortization of the intangible assets identified in the acquisition transactions consummated in previous years; approximately US$0.07 million and US$~~nil of our~~0.02 million recorded for the six and three months ended June 30, 2020, respectively.

Loss before income tax benefit/(expense) and noncontrolling interests: As a result of the foregoing, our loss before income tax benefit/(expense) and noncontrolling interest was approximately US$3.00 million and US$3.21 million for the six months ended June 30, 2021 and 2020, respectively. Our loss before income tax benefit/(expense) and noncontrolling interest was approximately US$3.67 million and US$0.98 million for the three months ended June 30, 2021 and 2020, respectively.

Income Tax benefit/(expense): For the six months ended June 30, 2021, we recognized an approximately US$0.14 million income tax benefit ~~was~~ in relation to the net operating loss incurred by one of our ~~PRC~~ operating VIEs for the period, ~~respectively,~~ which we consider likely to be ~~able to~~ utilized with respect to future earnings of ~~the entities to~~this entity, which ~~the operating losses relate; and we also incurred~~amount was partially offset by an approximately US$~~0.31~~0.08 million and an approximately US$0.02 million income tax expense recognized in relation to additional deferred tax assets provision provided and utilization of prior period recognized deferred tax assets by two other operating VIEs during the period, respectively. For the three months ended June 30, 2021, we recognized an approximately US$0.04 million income tax benefit in relation to the net operating loss incurred by one of our operating VIEs for the period, which amount was partially offset by an approximately US$0.02 million income tax expense recognized in relation to utilization of prior period recognized deferred tax assets by another operating VIE during the period. For the six months ended June 30, 2020, we recognized an approximately US$0.06 million income tax expense in relation to net income generated by one of our operating subsidiaries for the period, and an approximately US$0.01 million income tax expense in relation to utilization of previously recognized deferred tax assets by another operating VIE for the period. For the three months ended June 30, 2020, we reversed an approximately US$0.03 million income tax expense due to less net income generated by one of our operating subsidiaries, compared with its net income generated in the first fiscal quarter, and recognized an approximately US$0,02 million income tax expense in relation to utilization of previously recognized deferred tax assets by another operating VIE for the period.

Net loss: As a result of the foregoing, for the six months ended June 30, 2021 and 2020, we incurred a total net loss of approximately US$2.96 million and US$~~0.033~~3.28 million, ~~deferred income tax expense by utilizing deferred tax assets recognized~~respectively. For the three months ended June 30, 2021 and 2020, we incurred a total net loss of approximately US$3.65 million and US$0.97 million, respectively.

Net (income)/loss attributable to noncontrolling interest: In May 2018, we incorporated a majority-owned subsidiary, Business Opportunity Chain, in ~~previous years~~which we beneficially own 51% equity interest. In October 2020, we incorporated another majority-owned subsidiary, Qiweilian Guangzhou and beneficially owned 51% equity interest. In March 2021, due to ~~earnings generated during~~changes in business strategy of the ~~periods,~~noncontrolling interest shareholder of Qiweilian Guangzhou, we suspended the cooperation with that shareholder and sold our 51% equity interest in Qiweilian Guangzhou to unrelated parties. For the six and three months ended June 30, 2021, net income allocated to the noncontrolling interest shareholder of Qiweilian Guangzhou, before we deconsolidated the entity, offset by the net loss allocated to the noncontrolling interest of Business Opportunity Chain was approximately US$0.002 million and US$nil, respectively. For the six and three months ended June 30, 2020, net loss allocated to the noncontrolling interest of Business Opportunity Chain was both approximately US$0.002 million.

•

~~Loss from continuing operations:~~ As a result of the foregoing, we incurred a net loss from continuing operations of approximately US$3.87 million and US$3.96 million for the nine months ended September 30, 2017 and 2016, respectively. We incurred a net loss from continuing operations of approximately US$2.05 million and US$1.45 million for the three months ended September 30, 2017 and 2016, respectively.

•

~~Loss from and on disposal of discontinued operation, net of income tax:~~ We exited our brand management and sales channel building business segment in the fourth fiscal quarter of 2015, operated by a former VIE of ours, Quanzhou City Zhilang Network Technology Co., Ltd. (“Quanzhou Zhi Lang”), which qualified for presentation as a discontinued operation. In June 2016, we disposed Quanzhou Zhi Lang to an unaffiliated third-party. The results of operations of discontinued operation (including loss on disposal of the discontinued operation) was presented as a separate component in the condensed consolidated statements of operations and comprehensive loss, which was approximately US$0.06 million for the nine months ended September 30, 2016.

•

~~Net loss:~~ As a result of the foregoing, for the nine months ended September 30, 2017 and 2016, we incurred a total net loss of approximately US$3.87 million and US$4.02 million, respectively. For the three months ended September 30, 2017 and 2016, we incurred a total net loss of approximately US$2.05 million and US$1.45 million, respectively.

•

~~Net income attributable to noncontrolling interest from continuing operations:~~ Beijing Chuang Fu Tian Xia was 51% owned by Business Opportunity Online upon incorporation. For the nine and three months ended September 30, 2017, net income allocated to the noncontrolling interests of Beijing Chuang Fu Tian Xia was approximately US$0.09 million and US$0.04 million, respectively. For the nine and three months ended September 30, 2016, net income allocated to the noncontrolling interests of Beijing Chuang Fu Tian Xia was approximately US$0.14 million and US$0.02 million, respectively.

•

~~Net loss attributable to ChinaNet Online Holdings, Inc.:~~ Total net loss as adjusted by net loss attributable to the noncontrolling interest shareholders as discussed above yields the net loss attributable to ChinaNet Online Holdings, Inc. Net loss attributable to ChinaNet Online Holdings, Inc. was US$3.96 million and US$4.16 million for the nine months ended September 30, 2017 and 2016, respectively. Net loss attributable to ChinaNet Online Holdings, Inc. was US$2.09 million and US$1.47 million for the three months ended September 30, 2017 and 2016, respectively.

Net loss attributable to ZW Data Action Technologies Inc.: Total net loss as adjusted by net income/(loss) attributable to the noncontrolling interest shareholders as discussed above yields the net loss attributable to ZW Data Action Technologies Inc. Net loss attributable to ZW Data Action Technologies Inc. was approximately US$2.96 million and US$3.28 million for the six months ended June 30, 2021 and 2020, respectively. Net loss attributable to ZW Data Action Technologies Inc. was approximately US$3.65 million and US$0.97 million for the three months ended June 30, 2021 and 2020, respectively.

B.LIQUIDITY AND CAPITAL RESOURCES

Cash and cash equivalents represent cash on hand and deposits held at call with banks. We consider all highly liquid investments with original maturities of three months or less at the time of purchase to be cash equivalents. As of ~~September~~June 30, ~~2017,~~2021, we had cash and cash equivalents of approximately US$~~1.23~~11.75 million.

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

The following table provides detailed information about our net cash flow for the periods indicated:

Nine Months Ended September 30,
2017 2016
Amounts in thousands of US dollars

Net cash used in operating activities (2,654 ) (1,853 )
Net cash provided by/(used in) investing activities 762 (2,904 )
Net cash provided by financing activities - 456
Changes in cash and cash equivalents included in assets classified as held for sale - 132
Effect of foreign currency exchange rate changes on cash 91 (88 )
Net decrease in cash and cash equivalents $ (1,801 ) $ (4,257 )

	Six Months Ended June 30,
	2021			2020
	Amounts in thousands of US dollars

Net cash (used in)/provided by operating activities	$	(5,331	)	$	1,165
Net cash used in investing activities		(4,361	)	��	(1,273	)
Net cash provided by/(used in) financing activities		17,111			(427	)
Effect of foreign currency exchange rate changes		36			(13	)
Net increase/(decrease) in cash and cash equivalents	$	7,455		$	(548	)

Net cash ~~used in~~(used in)/provided by operating activities

For the ~~nine~~six months ended ~~September~~June 30, ~~2017,~~2021, our net cash used in operating activities of approximately US$~~2.65~~5.33 million were primarily attributable to:

(1)

net loss excluding approximately US$~~1.07~~0.28 million of non-cash expenses of depreciation and amortizations; approximately US$~~0.48~~0.09 million amortization of operating lease right-of-use assets, approximately US$6.86 million share-based compensation; approximately US$~~1.25~~6.83 million ~~provision~~gain from change in fair value of ~~allowance for doubtful accounts~~warrant liabilities, approximately US$0.04 million loss on disposal of long-term investment and approximately US$~~0.12~~0.04 million deferred ~~income~~ tax ~~expense,~~benefit, yielded the non-cash items excluded net loss of approximately US$~~0.95 million;~~2.56 million.

(2)

the receipt of cash from operations from changes in operating assets and liabilities such as:

	-
	-	accounts payable increased by approximately US$0.40 million, due to more favorable payment terms granted by a new supplier;

	-	advance from customers increased by approximately US$~~0.76~~0.09 million, primarily due to ~~increase in advanced~~new advance payments received from customers ~~related to search engine marketing~~during the period, which was partially offset by recognition of revenue from opening contract liabilities during the period; and ~~data service;~~

~~accounts payable, other payables and taxes payable in the aggregate increased by approximately US$0.59 million; and~~

other current assets decreased by approximately US$~~0.03~~0.01 million.

	~~(3)~~
	(3)	offset by the use from operations from changes in operating assets and liabilities such as:

	-
	-	accounts receivable ~~and due from related parties for advertising services provided~~ increased by approximately ~~US$2.45~~$1.28 million, ~~primarily~~ due to significantly increase in ~~search engine marketing and data service~~ revenues during the period;

	-
	-	prepayment and deposit to suppliers increased by approximately US$~~0.47 million;~~0.98 million, primarily due to ~~increase in~~new deposits and prepayments ~~to search engine marketing and data service~~made for the purchase of various advertising resources ~~providers~~ during the period;

	-	long-term deposits and prepayments increased by approximately US$0.55 million, which were made for the purchase of advertising resource and lease of our new office spaces during the period, and these amounts were not expected to be consumed or refunded within one year of June 30, 2021; and

	-
	-	accruals, tax payables, operating lease liabilities, short-term lease payment payables and other current liabilities decreased by approximately US$~~0.17 million.~~0.46 million in the aggregate, due to settlement of these operating liabilities during the period.

For the ~~nine~~six months ended ~~September~~June 30, ~~2016,~~2020, our net cash ~~used in~~provided by operating activities of approximately US$~~1.85~~1.17 million were primarily attributable to:

(1)

net loss excluding approximately US$~~1.17~~0.42 million of non-cash expenses of depreciation and ~~amortizations;~~amortization; approximately US$~~1.72~~1.99 million share-based ~~compensation;~~compensation expenses; approximately US$~~0.12~~0.75 million allowance for doubtful accounts, approximately US$0.07 million gain in fair value of ~~loss on disposal of fixed assets,~~warrant liabilities and approximately US$0.01 million ~~loss on deconsolidation of VIE and approximately US$0.16 million of net~~ deferred ~~income~~ tax expense yielded the non-cash ~~items~~item excluded net loss of approximately US$~~0.85 million;~~0.18 million.

(2)

the receipt of cash from operations from changes in operating assets and liabilities such as:

	-	~~other receivable~~
	-	prepayment and deposit to suppliers decreased by approximately US$~~1.42~~2.09 million, primarily due to ~~subsequent collection~~utilization of ~~TV advertisement deposit~~the prepayment made to suppliers in fiscal 2019 through Ad resource and ~~prepayment receivable related to a contract expired on December 31, 2014;~~other services received from suppliers during the six months ended June 30, 2020;

	-
	-	tax payables, short-term lease payment payables and other current ~~assets~~liabilities increased by approximately US$0.46 million in the aggregate, primarily due to temporary delay of some payments as a result of the COVID-19 outbreak and some of the payments were not due until later periods, and

	-	amount due from related parties decreased by approximately US$~~0.02 million;~~0.03 million.

~~other payables increased by approximately US$0.40 million; and~~

(3)

~~taxes payable increased by approximately US$0.07 million.~~

~~(3)~~

offset by the use from operations from changes in operating assets and liabilities such as:

	-	~~accounts receivable and due from related parties for advertising services provided~~
	-	long-term prepayment increased by approximately US$~~1.22 million;~~0.75 million, which prepayment was made for the purchase of ad resource during the first fiscal quarter of 2020, and this amount was not expected to be consumed within one year of June 30, 2020;

~~deposit and prepayment to suppliers increased by approximately US$1.17 million;~~

advance from customers decreased by approximately US$~~0.11 million;~~0.36 million, primarily due to recognition of revenue from opening contract liabilities during the period;

	-
	-	accounts ~~payable decreased~~receivable and other current assets increased by approximately US$~~0.13~~0.04 million; and

	-
	-	accounts payable, accruals decreased by approximately US$~~0.15 million; and~~0.08 million.

~~contingent liability decreased by US$0.13 million.~~

Net cash ~~provided by/(~~used ~~in)~~in investing activities

For the ~~nine~~six months ended ~~September~~June 30, ~~2017, our cash provided by investing activities included the following transactions:~~2021, (1) we ~~spent~~paid an aggregate of approximately US$~~0.002~~0.22 million for the purchase of ~~general~~vehicles, furniture and office ~~equipment;~~equipment, and for our leasehold improvement project in Guangzhou; (2) ~~our term deposit~~we made an aggregate of approximately US$~~3.12 million matured in July 2017, which was recorded as a cash inflow from investing activities during the period; (3) we withdrew approximately US$0.44~~0.42 million cash investment ~~from~~to our investee entities, and provided an additional approximately US$0.04 million temporary loan to one of our ~~cost method~~ investee ~~companies during~~entities; (3) we paid US$1.16 million for the ~~period,~~purchase of an Internet Ad tracking system to further enhance the effectiveness of our Internet advertising business; (4) we provided to an unrelated party short-term loans of approximately US$1.75 million in the aggregate, of which an approximately US$0.31 million was ~~also recorded~~provided in the first fiscal quarter of 2021, the borrower repaid an approximately US$1.30 million in the second fiscal quarter of 2021, and the remaining balance of approximately US$0.45 million is expected to be repaid for the year ending December 31, 2021; (5) cash decreased by approximately US$0.01 as a ~~cash inflow from investing activities~~result of deconsolidation of VIEs’ subsidiaries during the period; and ~~(4)~~(6) we ~~lent~~made an aggregate of US$3.50 million deposit and prepayment for other investing activities, including: (i) a ~~short-term working capital loan~~US$1.0 million refundable deposit for a potential merge and acquisition transaction, which will be refunded if no definitive agreement is reached by September 30, 2021; (ii) a US$1.5 million prepayment in accordance with a cryptocurrency mining machine purchase agreement, which had been cancelled due to the industry banning policies announced by the government, and the prepayment is expected to be refunded in the second half of ~~approximately~~fiscal 2021; and (iii) a US$~~2.8~~1.0 million toprepayment for the shares subscription of a 15.38% equity interest in an ~~unrelated third party during the period.~~entity, for jointly developing blockchain, key opinion leader and e-sports platform and jointly operating IP data for e-sports and games with strategic partners. In the aggregate, these transactions resulted in a ~~net~~ cash ~~inflow~~outflow from investing activities of approximately US$~~0.76~~4.36 million for the ~~nine~~six months ended ~~September~~June 30, ~~2017.~~2021.

For the ~~nine~~six months ended ~~September~~June 30, ~~2016, our cash used in investing activities included the following transactions:~~2020, (1) we ~~spent~~invested RMB0.19 million (approximately US$0.03 million) to a newly established entity, in which we hold a 19% equity interest; (2) we made an additional payment of approximately US$~~0.15~~0.30 million for the ~~purchase~~development of ~~general office equipment~~our blockchain technology-based platform applications; and expenditures on leasehold improvements; (2) we paid approximately US$1.98 million to purchase software technology related to Internet operation safety, information exchange security and data encryption and management; (3) we ~~lent two of our cost method investees~~provided to an ~~aggregate~~unrelated party a short-term loan of approximately US$0.31 million of short-term working capital loans during the period; (4) we made additional investments to our investee companies of approximately US$0.47 million in aggregate during the period; (5) cash divested from deconsolidation of VIE of approximately US$0.02 million; and (6) proceeds from disposal of investee companies of approximately US$0.030.94 million. In the aggregate, these transactions resulted in a ~~net~~ cash outflow from investing activities of approximately US$~~2.90~~1.27 million for the ~~nine~~six months ended ~~September~~June 30, ~~2016.~~2020.

Net cash provided byby/(used in) financing activities

For the ~~nine~~six months ended ~~September~~June 30, ~~2017,~~2021, we consummated an offering of approximately 5.21 million shares of our common stock to certain institutional investors at a purchase price of $3.59 per share. As part of the transaction, we also issued to the investors and the placement agent warrants to purchase up to 2.61 million shares and 0.36 million shares of our common stock, respectively, with an exercise price of $3.59 per share and US$4.4875 per share, respectively. We received net proceeds of approximately US$17.1 million, after deduction of approximately US$1.6 million direct financing cost paid in cash.

For the six months ended June 30, 2020, we repaid an approximately US$~~0.4~~0.43 million short-term bank loan matured in July 2017, which was recorded as a cash outflow from financing activities during the period, and we re-borrowed the loan in August 2017 for one-year until August 2018, which was recorded as cash provided by financing activities during the period.

For the nine months ended September 30, 2016, we borrowed approximately US$0.46 million short-term bank loan from one of the major commercial banks in the PRC, which was recorded as cash provided by financing activities during the period.January 2020.

Restricted Net Assets

As ~~most~~substantially all of our operations are conducted through our PRC ~~subsidiary~~subsidiaries and VIEs, our ability to pay dividends is primarily dependent on receiving distributions of funds from our PRC ~~subsidiary~~subsidiaries and VIEs. Relevant PRC statutory laws and regulations permit payments of dividends by our PRC ~~subsidiary~~subsidiaries and VIEs only out of their retained earnings, if any, as determined in accordance with PRC accounting standards and regulations and after it has met the PRC requirements for appropriation to statutory reserves. Paid in capital of the PRC ~~subsidiary~~subsidiaries and VIEs included in our consolidated net assets are also not distributable for dividend purposes.

In accordance with the PRC regulations on Enterprises with Foreign Investment, a WFOE established in the PRC is required to provide certain statutory reserves, namely general reserve fund, the enterprise expansion fund and staff welfare and bonus fund which are appropriated from net profit as reported in the enterprise’s PRC statutory accounts. A WFOE is required to allocate at least 10% of its annual after-tax profit to the general reserve until such reserve has reached 50% of its registered capital based on the enterprise’s PRC statutory accounts. Appropriations to the enterprise expansion fund and staff welfare and bonus fund are at the discretion of the board of directors. The aforementioned reserves can only be used for specific purposes and are not distributable as cash dividends. Rise King WFOE is subject to the above mandated restrictions on distributable profits. Additionally, in accordance with the Company Law of the PRC, a domestic enterprise is required to provide a statutory common reserve of at least 10% of its annual after-tax profit until such reserve has reached 50% of its registered capital based on the enterprise’s PRC statutory accounts. A domestic enterprise is also required to provide for a discretionary surplus reserve, at the discretion of the board of directors. The aforementioned reserves can only be used for specific purposes and are not distributable as cash dividends. All of our other PRC subsidiaries and PRC VIEs are subject to the above mandated restrictions on distributable profits.

~~As a result of~~In accordance with these PRC laws and regulations, our PRC ~~subsidiary~~subsidiaries and VIEs are restricted in their ability to transfer a portion of their net assets to us. As of ~~September~~June 30, ~~2017~~2021 and December 31, ~~2016,~~2020, net assets restricted in the aggregate, which includes paid-in capital and statutory reserve funds of our PRC ~~subsidiary~~subsidiaries and VIEs that are included in our consolidated net assets ~~was~~were approximately US$~~8.1~~13.2 million and US$~~7.8~~8.2 million, respectively.

The current PRC Enterprise Income Tax (“EIT”) Law also ~~imposed~~imposes a 10% withholding income tax for dividends distributed by a foreign invested enterprise to its immediate holding company outside ~~China.~~China, which were exempted under the previous EIT law. A lower withholding tax rate will be applied if there is a tax treaty arrangement between mainland China and the jurisdiction of the foreign holding company. ~~Holding companies in Hong Kong, for example, will be subject to a 5% rate.~~

The ability of our PRC subsidiaries to make dividends and other payments to us may also be restricted by changes in applicable foreign exchange and other laws and regulations.

Foreign currency exchange regulation in China is primarily governed by the following rules:

~~Foreign Exchange Administration Rules (1996), as amended in August 2008, or the Exchange Rules;~~

●

Foreign Exchange Administration Rules (1996), as amended in August 2008, or the Exchange Rules;

~~Administration Rules of the Settlement, Sale and Payment of Foreign Exchange (1996), or the Administration Rules.~~

●

Administration Rules of the Settlement, Sale and Payment of Foreign Exchange (1996), or the Administration Rules.

Currently, under the Administration Rules, Renminbi is freely convertible for current account items, including the distribution of dividends, interest payments, trade and service related foreign exchange transactions, but not for capital account items, such as direct investments, loans, repatriation of investments and investments in securities outside of China, unless the prior approval of the State Administration of Foreign Exchange (the “SAFE”) is obtained and prior registration with the SAFE is made. Foreign-invested enterprises like Rise King WFOE that need foreign exchange for the distribution of profits to its shareholders may effect payment from their foreign exchange accounts or purchase and pay foreign exchange rates at the designated foreign exchange banks to their foreign shareholders by producing board resolutions for such profit distribution. Based on their needs, foreign-invested enterprises are permitted to open foreign exchange settlement accounts for current account receipts and payments of foreign exchange along with specialized accounts for capital account receipts and payments of foreign exchange at certain designated foreign exchange banks.

Although the current Exchange Rules allow ~~the convertibility~~converting of ~~Chinese~~ Renminbi into foreign currency for current account items, conversion of ~~Chinese~~ Renminbi into foreign exchange for capital items, such as foreign direct investment, loans or securities, requires the approval of SAFE, which is under the authority of the People’s Bank of China. These approvals, however, do not guarantee the availability of foreign currency conversion. We cannot be sure that it will be able to obtain all required conversion approvals for our operations or the Chinese regulatory authorities will not impose greater restrictions on the convertibility of ~~Chinese~~ Renminbi in the future. Currently, most of our retained earnings are generated in Renminbi. Any future restrictions on currency exchanges may limit our ability to use retained earnings generated in Renminbi to make dividends or other payments in U.S. dollars or fund possible business activities outside China.

As of September 30, 2017 and December 31, 2016, there were approximately US$14.8 million and US$17.6 million retained earnings in the aggregate, respectively, which were generated by our PRC subsidiary and VIEs in Renminbi included in our consolidated net assets, aside from US$2.6 million and US$2.5 million of statutory reserve funds as of September 30, 2017 and December 31, 2016, respectively, that may be affected by increased restrictions on currency exchanges in the future, and accordingly, may further limit our PRC subsidiary’s or VIEs’ ability to make dividends or other payments in U.S. dollars to us, in addition to the approximately US$8.1 million and US$7.8 million of restricted net assets as of September 30, 2017 and December 31, 2016, as discussed above.

C.OFF-BALANCE SHEET ARRANGEMENTS

None.

Item 3. Quantitative and Qualitative Disclosures About Market Risk

Not applicable to smaller reporting companies.

Item 4. Controls and Procedures

Evaluation of Disclosure Controls and Procedures

Under the supervision and with the participation of our management, including our principal executive officer and principal accounting and financial officer, we conducted an evaluation of the effectiveness of our disclosure controls and procedures as of the ~~end of the~~ fiscal quarter ended ~~September~~June 30, ~~2017,~~2021, as such term is defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act. Based on this evaluation, our principal executive officer and principal financial officer have concluded that during the period covered by this report, the Company’s disclosure controls and procedures were effective as of such date to ensure that information required to be disclosed by us in our Exchange Act reports is recorded, processed, summarized, and reported within the time periods specified in the SEC’s rules and forms, and that such information is accumulated and communicated to our management, including our principal executive officer and principal financial officer or persons performing similar functions, as appropriate to allow timely decisions regarding required disclosure.

Changes in Internal Control over Financial Reporting

There was no change in our internal control over financial reporting that occurred during the ~~third~~ fiscal quarter of ~~2017~~2021 covered by this Quarterly Report on Form 10-Q that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

PART II. OTHER INFORMATION

Item 1. Legal Proceedings

We are currently not a party to any legal or administrative proceedings and are not aware of any pending or threatened legal or administrative proceedings against us in all material aspects. We may from time to time become a party to various legal or administrative proceedings arising in the ordinary course of our business.

Item 1A. Risk Factors

This information has been omitted based on the Company’s status as a smaller reporting company.

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

None.

Item 3.Defaults Upon Senior Securities

None.

Item 4. Mine Safety Disclosures

~~None.~~Not applicable.

Item 5. Other Information

None.

Item 6. Exhibits

The exhibits listed on the Exhibit Index below are provided as part of this report.

Exhibit No.		Document Description
31.1		Certification of the Principal Executive Officer pursuant to Rule 13A-14(A)/15D-14(A) of the Securities Exchange Act of 1934, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

31.2		Certification of the Principal Accounting and Financial Officer pursuant to Rule 13A-14(A)/15D-14(A) of the Securities Exchange Act of 1934, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

32.1		Certification of the Principal Executive Officer and of the Principal Accounting and Financial Officer pursuant to 18 U.S.C. 1350 (Section 906 of the Sarbanes-Oxley Act of 2002).

101		The following materials are filed herewith: (i) Inline XBRL Instance, (ii) Inline XBRL Taxonomy Extension Schema, (iii) Inline XBRL Taxonomy Extension Calculation, (iv) XBRL Taxonomy Extension Labels, (v) XBRL Taxonomy Extension Presentation, and (vi) Inline XBRL Taxonomy Extension Definition.

104		Cover Page Interactive Data ~~Files~~File – The cover page interactive data file does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document.

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

	~~CHINANET ONLINE HOLDINGS,~~ZW DATA ACTION TECHNOLOGIES INC.


Date: ~~November 14, 2017~~August 16, 2021	By:	/s/ Handong Cheng
		~~Name: Handong Cheng~~
		~~Title: Chief Executive Officer~~ ~~(Principal Executive Officer)~~

	~~By:~~	Name: Handong Cheng
		Title: Chief Executive Officer
		(Principal Executive Officer)

	By:	/s/ ~~Zhige Zhang~~ Mark Li
		Name: ~~Zhige Zhang~~Mark Li
		Title: Chief Financial Officer
		(Principal Accounting and Financial Officer)

Nevada	20-4672080
(State or other jurisdiction of incorporation or organization)	~~(I.R.S.~~ (I.R.S. Employer Identification No.)

Title of each class		Trading Symbol(s)		Name of each exchange on which registered
Common Stock, par value $0.001		CNET		Nasdaq Capital Market

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

PART I. FINANCIAL INFORMATION		PAGE

Item 1.	Interim Financial Statements

	Condensed Consolidated Balance Sheets as of ~~September~~June 30, ~~2017~~2021 (Unaudited) and December 31, ~~2016~~2020	~~F1-F2~~1-2

	Condensed Consolidated Statements of Operations and Comprehensive Loss for the ~~Nine~~Six and Three Months Ended ~~September~~June 30, ~~2017~~2021 and ~~2016~~2020 (Unaudited)	~~F3-F4~~3-4

	Condensed Consolidated Statements of Cash Flows for the ~~Nine~~Six Months Ended ~~September~~June 30, ~~2017~~2021 and ~~2016~~2020 (Unaudited)	~~F5-F6~~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)	~~F7-F25~~9-30

Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	~~26-38~~31-40

Item 3.	Quantitative and Qualitative Disclosures About Market Risk	3840

~~Item 4. Controls and Procedures~~		39

Item 4.	Controls and Procedures	40

PART II. OTHER INFORMATION

Item 1.	Legal Proceedings	3941

Item 1A.	Risk Factors	3941

Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	3941

Item 3.	Defaults Upon Senior Securities	3941

Item 4.	Mine Safety Disclosures	3941

Item 5.	Other Information	3941

Item 6.	Exhibits	4042

Signatures		4143

	September 30, 2017			December 31, 2016			June 30, 2021			December 31, 2020
	(US $)			(US $)			(US $)			(US $)
	(Unaudited)						(Unaudited)
Long-term liabilities:
Operating lease liabilities-Non current *								1,979			32
Long-term borrowing from a director		132			126			135			134
Total Liabilities		9,462			7,746			15,558			8,188

Commitments and contingencies

Equity:
ChinaNet Online Holdings, Inc.’s stockholders’ equity
Common stock (US$0.001 par value; authorized 50,000,000 shares; issued and outstanding 12,340,542 shares and 12,158,542 shares at September 30, 2017 and December 31, 2016, respectively)		12			12
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		29,769			29,285			61,656			49,772
Statutory reserves		2,607			2,607			2,598			2,598
Accumulated deficit		(14,325	)		(10,362	)		(43,941	)		(40,980	)
Accumulated other comprehensive income		1,504			700			1,107			1,129
Total ChinaNet Online Holdings, Inc.’s stockholders’ equity		19,567			22,242
Total ZW Data Action Technologies Inc.’s stockholders’ equity								21,455			12,545

Noncontrolling interests		111			54			(65	)		(66	)
Total equity		19,678			22,296			21,390			12,479


Total Liabilities and Equity	$	29,140		$	30,042		$	36,948		$	20,667

	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		0		0			0			0			5,190
Share-based compensation in exchange for services from employees and directors		30,000		0		23		0		0			0			0			23
Net income for the period		-		0		0		0		685			0			2			687
Foreign currency translation adjustment		-		0		0		0		0			(19	)		0			(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		0		0			0			0			6,680
Net loss for the period		-		0		0		0		(3,646	)		0			0			(3,646	)
Foreign currency translation adjustment		-		0		0		0		0			(3	)		(1	)		(4	)
Balance, June 30, 2021 (Unaudited)		35,290,650	$	35	$	61,656	$	2,598	$	(43,941	)	$	1,107		$	(65	)	$	21,390