UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended SeptemberJune 30, 20202021
or
☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from ____ to _____
Commission File Number: 001-34647
ZW Data Action Technologies Inc.
(Exact name of registrant as specified in its charter)
Nevada | 20-4672080 |
(State or other jurisdiction of incorporation or organization) | (I.R.S. Employer Identification No.) |
Room 1106, Xinghuo Keji Plaza, No. 9 South Min Zhuang2 Fufeng Road, HaidianFengtai District, Beijing, PRC 100195CN 100070
(Address of principal executive offices) (Zip Code)
+86-10-6084-6616
(Registrant’s telephone number, including area code)
ChinaNet Online Holdings, Inc.N/A
(Former name, former address and former fiscal year, if changed since last report)
Securities registered pursuant to Section 12(b) of the Act:
Title of each class | Trading Symbol(s) | Name of each exchange on which registered | ||
Common Stock, par value $0.001 | CNET | Nasdaq Capital Market |
Indicate by check whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days: Yes ☒ No ☐
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
| Large accelerated filer ☐ | Accelerated filer ☐ | |
| Non-accelerated filer ☒ | Smaller reporting company ☒ | |
| Emerging growth company ☐ |
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒
As of November 13, 2020,August 16, 2021, the registrant had 21,741,92635,332,677 shares of common stock outstanding.
TABLE OF CONTENTS
PART I.FINANCIAL INFORMATION
Item 1.Interim Financial Statements
ZW DATA ACTION TECHNOLOGIES INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands, except for number of shares and per share data)
June 30, 2021 | December 31, 2020 | |||||||
(US $) | (US $) | |||||||
(Unaudited) | ||||||||
Assets | ||||||||
Current assets: | ||||||||
Cash and cash equivalents * | $ | 11,752 | $ | 4,297 | ||||
Accounts receivable, net of allowance for doubtful accounts of $2,207 and $4,247, respectively * | 3,707 | 2,407 | ||||||
Prepayment and deposit to suppliers * | 8,035 | 4,657 | ||||||
Due from related parties * | 104 | 61 | ||||||
Other current assets * | 462 | 1,462 | ||||||
Total current assets | 24,060 | 12,884 | ||||||
Long-term investments * | 450 | 67 | ||||||
Operating lease right-of-use assets * | 2,107 | 48 | ||||||
Property and equipment, net * | 116 | 60 | ||||||
Intangible assets, net * | 3,438 | 2,557 | ||||||
Blockchain platform applications development costs | 4,409 | 4,406 | ||||||
Long-term deposits and prepayments * | 1,716 | 39 | ||||||
Deferred tax assets, net * | 652 | 606 | ||||||
Total Assets | $ | 36,948 | $ | 20,667 | ||||
Liabilities and Equity | ||||||||
Current liabilities: | ||||||||
Accounts payable * | $ | 1,015 | $ | 608 | ||||
Advance from customers * | 1,539 | 1,436 | ||||||
Accrued payroll and other accruals * | 280 | 489 | ||||||
Taxes payable * | 3,408 | 3,430 | ||||||
Operating lease liabilities * | 187 | 18 | ||||||
Lease payment liability related to short-term leases * | 151 | 203 | ||||||
Other current liabilities * | 267 | 333 | ||||||
Warrant liabilities | 6,597 | 1,505 | ||||||
Total current liabilities | 13,444 | 8,022 | ||||||
September 30, 2020 | December 31, 2019 | |||||||
| (US $) | (US $) | |||||||
| (Unaudited) | ||||||||
| Assets | ||||||||
| Current assets: | ||||||||
| Cash and cash equivalents * | $ | 500 | $ | 1,603 | ||||
| Accounts receivable, net of allowance for doubtful accounts of $3,996 and $3,148, respectively * | 2,282 | 3,260 | ||||||
| Prepayment and deposit to suppliers * | 6,301 | 6,980 | ||||||
| Due from related parties, net * | 58 | 81 | ||||||
| Other current assets, net * | 961 | 11 | ||||||
| Total current assets | 10,102 | 11,935 | ||||||
| Long-term investments * | 64 | 35 | ||||||
| Operating lease right-of-use assets * | 4 | 12 | ||||||
| Property and equipment, net * | 74 | 78 | ||||||
| Intangible assets, net * | 1,288 | 1,899 | ||||||
| Blockchain platform applications development costs | 4,189 | 3,879 | ||||||
| Long-term prepayments | 474 | - | ||||||
| Deferred tax assets, net * | 815 | 713 | ||||||
| Total Assets | $ | 17,010 | $ | 18,551 | ||||
| Liabilities and Equity | ||||||||
| Current liabilities: | ||||||||
| Short-term bank loan * | $ | - | $ | 430 | ||||
| Accounts payable * | 552 | 408 | ||||||
| Advance from customers * | 2,822 | 2,006 | ||||||
| Accrued payroll and other accruals * | 442 | 491 | ||||||
| Taxes payable * | 3,290 | 3,214 | ||||||
| Lease payment liability related to short-term leases * | 222 | 136 | ||||||
| Other current liabilities * | 325 | 221 | ||||||
| Warrant liabilities | 103 | 107 | ||||||
| Total current liabilities | 7,756 | 7,013 | ||||||
ZW DATA ACTION TECHNOLOGIES INC.
CONDENSED CONSOLIDATED BALANCE SHEETS (CONTINUED)
(In thousands, except for number of shares and per share data)
September 30, 2020 | December 31, 2019 | 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 | 129 | 125 | 135 | 134 | ||||||||||||
| Total Liabilities | 7,885 | 7,138 | 15,558 | 8,188 | ||||||||||||
| Commitments and contingencies | ||||||||||||||||
| Equity: | ||||||||||||||||
| ZW Data Action Technologies Inc.’s stockholders’ equity | ||||||||||||||||
| Common stock (US$0.001 par value; authorized 50,000,000 shares; issued and outstanding 21,741,926 shares and 19,629,403 shares at September 30, 2020 and December 31, 2019, respectively) | 22 | 20 | ||||||||||||||
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 | 45,569 | 43,111 | 61,656 | 49,772 | ||||||||||||
| Statutory reserves | 2,607 | 2,607 | 2,598 | 2,598 | ||||||||||||
| Accumulated deficit | (40,384 | ) | (35,773 | ) | (43,941 | ) | (40,980 | ) | ||||||||
| Accumulated other comprehensive income | 1,371 | 1,505 | 1,107 | 1,129 | ||||||||||||
| Total ZW Data Action Technologies Inc.’s stockholders’ equity | 9,185 | 11,470 | 21,455 | 12,545 | ||||||||||||
| Noncontrolling interests | (60 | ) | (57 | ) | (65 | ) | (66 | ) | ||||||||
| Total equity | 9,125 | 11,413 | 21,390 | 12,479 | ||||||||||||
| Total Liabilities and Equity | $ | 17,010 | $ | 18,551 | $ | 36,948 | $ | 20,667 | ||||||||
*All of the VIEs' assets can be used to settle obligations of their primary beneficiary. Furthermore, liabilitiesLiabilities recognized as a result of consolidating these VIEs do not represent additional claims on the Company’s general assets (Note 2).
See notes to unaudited condensed consolidated financial statements
ZW DATA ACTION TECHNOLOGIES INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS
(In thousands, except for number of shares and per share data)
Six Months Ended June 30, | Three Months Ended June 30, | |||||||||||||||
2021 | 2020 | 2021 | 2020 | |||||||||||||
(US $) | (US $) | (US $) | (US $) | |||||||||||||
(Unaudited) | (Unaudited) | (Unaudited) | (Unaudited) | |||||||||||||
Revenues | ||||||||||||||||
From unrelated parties | $ | 22,947 | $ | 14,786 | $ | 14,551 | $ | 10,415 | ||||||||
From a related party | 0 | 14 | 0 | 1 | ||||||||||||
Total revenues | 22,947 | 14,800 | 14,551 | 10,416 | ||||||||||||
Cost of revenues | 23,882 | 13,603 | 14,769 | 10,118 | ||||||||||||
Gross (loss)/profit | (935 | ) | 1,197 | (218 | ) | 298 | ||||||||||
Operating expenses | ||||||||||||||||
Sales and marketing expenses | 101 | 235 | 73 | 70 | ||||||||||||
General and administrative expenses | 8,895 | 3,928 | 7,899 | 1,132 | ||||||||||||
Research and development expenses | 163 | 330 | 89 | 116 | ||||||||||||
Total operating expenses | 9,159 | 4,493 | 8,061 | 1,318 | ||||||||||||
Loss from operations | (10,094 | ) | (3,296 | ) | (8,279 | ) | (1,020 | ) | ||||||||
Other income/(expenses) | ||||||||||||||||
Interest income/(expense), net | 2 | (1 | ) | 1 | 0 | |||||||||||
Other income/(expenses), net | 302 | 17 | 326 | 18 | ||||||||||||
Loss on disposal of long-term investments | (38 | ) | 0 | (38 | ) | 0 | ||||||||||
Change in fair value of warrant liabilities | 6,829 | 68 | 4,322 | 22 | ||||||||||||
Total other income | 7,095 | 84 | 4,611 | 40 | ||||||||||||
Loss before income tax benefit/(expense) and noncontrolling interests | (2,999 | ) | (3,212 | ) | (3,668 | ) | (980 | ) | ||||||||
Income tax benefit/(expense) | 40 | (68 | ) | 22 | 10 | |||||||||||
Net loss | (2,959 | ) | (3,280 | ) | (3,646 | ) | (970 | ) | ||||||||
Net (income)/loss attributable to noncontrolling interests | (2 | ) | 2 | 0 | 2 | |||||||||||
Net loss attributable to ZW Data Action Technologies Inc. | $ | (2,961 | ) | $ | (3,278 | ) | $ | (3,646 | ) | $ | (968 | ) | ||||
ZW DATA ACTION TECHNOLOGIES INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS (CONTINUED)
(In thousands, except for number of shares and per share data)
| Nine Months Ended September 30, | Three Months Ended September 30, | |||||||||||||||
| 2020 | 2019 | 2020 | 2019 | |||||||||||||
| (US $) | (US $) | (US $) | (US $) | |||||||||||||
| (Unaudited) | (Unaudited) | (Unaudited) | (Unaudited) | |||||||||||||
| Revenues | ||||||||||||||||
| From unrelated parties | $ | 27,086 | $ | 39,025 | $ | 12,300 | $ | 15,113 | ||||||||
| From a related party | 18 | 503 | 4 | 395 | ||||||||||||
| Total revenues | 27,104 | 39,528 | 12,304 | 15,508 | ||||||||||||
| Cost of revenues | 26,548 | 37,828 | 12,945 | 14,616 | ||||||||||||
| Gross profit/(loss) | 556 | 1,700 | (641 | ) | 892 | |||||||||||
| Operating expenses | ||||||||||||||||
| Sales and marketing expenses | 293 | 461 | 58 | 111 | ||||||||||||
| General and administrative expenses | 4,520 | 2,875 | 592 | 817 | ||||||||||||
| Research and development expenses | 443 | 599 | 113 | 239 | ||||||||||||
| Total operating expenses | 5,256 | 3,935 | 763 | 1,167 | ||||||||||||
| Loss from operations | (4,700 | ) | (2,235 | ) | (1,404 | ) | (275 | ) | ||||||||
| Other income (expenses) | ||||||||||||||||
| Interest expense, net | - | (33 | ) | 1 | (10 | ) | ||||||||||
| Other expenses | (4 | ) | (6 | ) | (21 | ) | (2 | ) | ||||||||
| Change in fair value of warrant liabilities | 4 | 351 | (64 | ) | (120 | ) | ||||||||||
| Total other income | - | 312 | (84 | ) | (132 | ) | ||||||||||
| Loss before income tax benefit and noncontrolling interests | (4,700 | ) | (1,923 | ) | (1,488 | ) | (407 | ) | ||||||||
| Income tax benefit | 87 | 10 | 155 | 16 | ||||||||||||
| Net loss | (4,613 | ) | (1,913 | ) | (1,333 | ) | (391 | ) | ||||||||
| Net loss attributable to noncontrolling interests | 2 | 8 | - | 3 | ||||||||||||
| Net loss attributable to ZW Data Action Technologies Inc. | $ | (4,611 | ) | $ | (1,905 | ) | $ | (1,333 | ) | $ | (388 | ) | ||||
Six Months Ended June 30, | Three Months Ended June 30, | |||||||||||||||
2021 | 2020 | 2021 | 2020 | |||||||||||||
(US $) | (US $) | (US $) | (US $) | |||||||||||||
(Unaudited) | (Unaudited) | (Unaudited) | (Unaudited) | |||||||||||||
Net loss | $ | (2,959 | ) | $ | (3,280 | ) | $ | (3,646 | ) | $ | (970 | ) | ||||
Foreign currency translation (loss)/gain | (23 | ) | 68 | (4 | ) | (4 | ) | |||||||||
Comprehensive loss | $ | (2,982 | ) | $ | (3,212 | ) | $ | (3,650 | ) | $ | (974 | ) | ||||
Comprehensive (income)/loss attributable to noncontrolling interests | (1 | ) | 1 | 1 | 2 | |||||||||||
Comprehensive loss attributable to ZW Data Action Technologies Inc. | $ | (2,983 | ) | $ | (3,211 | ) | $ | (3,649 | ) | $ | (972 | ) | ||||
Loss per share | ||||||||||||||||
Loss per common share | ||||||||||||||||
Basic and diluted | $ | (0.10 | ) | $ | (0.16 | ) | $ | (0.11 | ) | $ | (0.04 | ) | ||||
Weighted average number of common shares outstanding: | ||||||||||||||||
Basic and diluted | 30,727,546 | 21,044,666 | 32,925,488 | 21,691,926 | ||||||||||||
ZW DATA ACTION TECHNOLOGIES INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS (CONTINUED)
(In thousands, except for number of shares and per share data)
| Nine Months Ended September 30, | Three Months Ended September 30, | |||||||||||||||
| 2020 | 2019 | 2020 | 2019 | |||||||||||||
| (US $) | (US $) | (US $) | (US $) | |||||||||||||
| (Unaudited) | (Unaudited) | (Unaudited) | (Unaudited) | |||||||||||||
| Net loss | $ | (4,613 | ) | $ | (1,913 | ) | $ | (1,333 | ) | $ | (391 | ) | ||||
| Foreign currency translation (loss)/gain | (135 | ) | 97 | (203 | ) | 73 | ||||||||||
| Comprehensive loss | $ | (4,748 | ) | $ | (1,816 | ) | $ | (1,536 | ) | $ | (318 | ) | ||||
| Comprehensive loss attributable to noncontrolling interests | 3 | 6 | 2 | 1 | ||||||||||||
| Comprehensive loss attributable to ZW Data Action Technologies Inc. | $ | (4,745 | ) | $ | (1,810 | ) | $ | (1,534 | ) | $ | (317 | ) | ||||
| Loss per share | ||||||||||||||||
| Loss per common share | ||||||||||||||||
| Basic and diluted | $ | (0.22 | ) | $ | (0.12 | ) | $ | (0.06 | ) | $ | (0.02 | ) | ||||
| Weighted average number of common shares outstanding: | ||||||||||||||||
| Basic and diluted | 21,271,301 | 16,447,233 | 21,720,259 | 16,517,440 | ||||||||||||
See notes to unaudited condensed consolidated financial statements
ZW DATA ACTION TECHNOLOGIES INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
| Nine Months Ended September 30, | Six Months Ended June 30, | |||||||||||||||
| 2020 | 2019 | 2021 | 2020 | |||||||||||||
| (US $) | (US $) | (US $) | (US $) | |||||||||||||
| (Unaudited) | (Unaudited) | (Unaudited) | (Unaudited) | |||||||||||||
| Cash flows from operating activities | ||||||||||||||||
| Net loss | $ | (4,613 | ) | $ | (1,913 | ) | $ | (2,959 | ) | $ | (3,280 | ) | ||||
| Adjustments to reconcile net loss to net cash provided by/(used in) operating activities | ||||||||||||||||
Adjustments to reconcile net loss to net cash (used in)/provided by operating activities | ||||||||||||||||
| Depreciation and amortization | 622 | 66 | 282 | 415 | ||||||||||||
| Amortization of operating lease right-of-use assets | 7 | 88 | 92 | 5 | ||||||||||||
| Share-based compensation expenses | 2,066 | 307 | 6,857 | 1,987 | ||||||||||||
| Provision for allowances for doubtful accounts | 751 | 445 | 0 | 747 | ||||||||||||
Loss on disposal of long-term investments | 38 | 0 | ||||||||||||||
| Deferred taxes | (87 | ) | (10 | ) | (40 | ) | 11 | |||||||||
| Change in fair value of warrant liabilities | (4 | ) | (351 | ) | (6,829 | ) | (68 | ) | ||||||||
| Changes in operating assets and liabilities | ||||||||||||||||
| Accounts receivable | 254 | (289 | ) | (1,284 | ) | (38 | ) | |||||||||
| Prepayment and deposit to suppliers | 1,077 | (5,191 | ) | (980 | ) | 2,090 | ||||||||||
| Due from related parties | 24 | 226 | 0 | 28 | ||||||||||||
| Other current assets | (5 | ) | 11 | 8 | (3 | ) | ||||||||||
| Long-term prepayments | (375 | ) | - | |||||||||||||
Long-term deposits and prepayments | (554 | ) | (750 | ) | ||||||||||||
| Accounts payable | 137 | (1,946 | ) | 403 | (9 | ) | ||||||||||
| Advance from customers | 754 | 4,151 | 89 | (362 | ) | |||||||||||
| Advance from a customer, related | - | 9 | ||||||||||||||
| Accrued payroll and other accruals | (55 | ) | (242 | ) | (197 | ) | (57 | ) | ||||||||
| Lease payment liability related to short-term leases | 81 | 180 | ||||||||||||||
| Other current liabilities | (38 | ) | 291 | (123 | ) | 326 | ||||||||||
| Taxes payable | 8 | 123 | (49 | ) | 89 | |||||||||||
| Prepaid lease payment | (9 | ) | (10 | ) | ||||||||||||
| Net cash provided by/(used in) operating activities | 595 | (4,055 | ) | |||||||||||||
Lease payment liability related to short-term leases | (54 | ) | 43 | |||||||||||||
Operating lease liabilities | (31 | ) | (9 | ) | ||||||||||||
Net cash (used in)/provided by operating activities | (5,331 | ) | 1,165 | |||||||||||||
| Cash flows from investing activities | ||||||||||||||||
| Investment to investee entities | (27 | ) | (36 | ) | ||||||||||||
Payment for leasehold improvements and purchase of vehicles, furniture and office equipment | (221 | ) | 0 | |||||||||||||
Cash effect of deconsolidation of VIEs’ subsidiaries | (8 | ) | 0 | |||||||||||||
Investments and advances to ownership investee entities | (463 | ) | (27 | ) | ||||||||||||
| Short-term loan to an unrelated party | (944 | ) | - | (312 | ) | (944 | ) | |||||||||
Repayment of short-term loan from an unrelated party | 1,303 | 0 | ||||||||||||||
Payment for purchase of software technologies | (1,160 | ) | 0 | |||||||||||||
Deposit and prepayment paid for contracts of other investing activities | (3,500 | ) | 0 | |||||||||||||
| Payment for blockchain platform applications development costs | (302 | ) | - | 0 | (302 | ) | ||||||||||
| Prepayment for software system development | - | (760 | ) | |||||||||||||
| Net cash used in investing activities | (1,273 | ) | (796 | ) | (4,361 | ) | (1,273 | ) | ||||||||
5 |
ZW DATA ACTION TECHNOLOGIES INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (CONTINUED)
(In thousands)
| Nine Months Ended September 30, | Six Months Ended June 30, | |||||||||||||||
| 2020 | 2019 | 2021 | 2020 | |||||||||||||
| (US $) | (US $) | (US $) | (US $) | |||||||||||||
| (Unaudited) | (Unaudited) | (Unaudited) | (Unaudited) | |||||||||||||
| Cash flows from financing activities | ||||||||||||||||
| Proceeds from issuance of common stock (net of cash offering cost of US$8) | - | 2,393 | ||||||||||||||
| Proceeds from short-term bank loan | - | 438 | ||||||||||||||
Proceeds from issuance of common stock and warrant (net of cash offering cost of US$1,600) | 17,111 | - | ||||||||||||||
| Repayment of short-term bank loan | (429 | ) | (875 | ) | 0 | (427 | ) | |||||||||
| Net cash (used in)/provided by financing activities | (429 | ) | 1,956 | |||||||||||||
Net cash provided by/(used in) financing activities | 17,111 | (427 | ) | |||||||||||||
| Effect of exchange rate fluctuation | 4 | (10 | ) | |||||||||||||
Effect of exchange rate fluctuation on cash and cash equivalents | 36 | (13 | ) | |||||||||||||
| Net decrease in cash and cash equivalents | (1,103 | ) | (2,905 | ) | ||||||||||||
Net increase/(decrease) in cash and cash equivalents | 7,455 | (548 | ) | |||||||||||||
| Cash and cash equivalents at beginning of the period | 1,603 | 3,742 | 4,297 | 1,603 | ||||||||||||
| Cash and cash equivalents at end of the period | $ | 500 | $ | 837 | $ | 11,752 | $ | 1,055 | ||||||||
| Supplemental disclosure of cash flow information | ||||||||||||||||
| Income taxes paid | $ | - | $ | - | $ | 0 | $ | 0 | ||||||||
| Interest expense paid | $ | 2 | $ | 36 | $ | 0 | $ | 2 | ||||||||
See notes to unaudited condensed consolidated financial statements
ZW DATA ACTION TECHNOLOGIES INC.
CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY
FOR THE NINE AND THREE MONTHS ENDED SEPTEMBER 30, 2020
(In thousands, except for number of shares)
| Common stock | Additional paid-in capital | Statutory reserves | Accumulated deficit | Accumulated other comprehensive income | Noncontrolling interests | Total equity | ||||||||||||||||||||||||||
| Number of shares | Amount | |||||||||||||||||||||||||||||||
| (US $) | (US $) | (US $) | (US $) | (US $) | (US $) | (US $) | ||||||||||||||||||||||||||
| Balance, January 1, 2020 | 19,629,403 | $ | 20 | $ | 43,111 | $ | 2,607 | $ | (35,773 | ) | $ | 1,505 | $ | (57 | ) | $ | 11,413 | |||||||||||||||
| Share-based compensation in exchange for services from nonemployees | 430,000 | - | 477 | - | - | - | - | 477 | ||||||||||||||||||||||||
| Share-based compensation in exchange for services from employees and directors | 1,632,523 | 2 | 1,905 | - | - | - | - | 1,907 | ||||||||||||||||||||||||
| Net loss for the period | - | - | - | - | (3,278 | ) | - | (2 | ) | (3,280 | ) | |||||||||||||||||||||
| Foreign currency translation adjustment | - | - | - | - | - | 67 | 1 | 68 | ||||||||||||||||||||||||
| Balance, June 30, 2020 (unaudited) | 21,691,926 | 22 | 45,493 | 2,607 | (39,051 | ) | 1,572 | (58 | ) | 10,585 | ||||||||||||||||||||||
| Share-based compensation in exchange for services from nonemployees | 50,000 | - | 76 | - | - | - | - | 76 | ||||||||||||||||||||||||
| Net loss for the period | - | - | - | - | (1,333 | ) | - | - | (1,333 | ) | ||||||||||||||||||||||
| Foreign currency translation adjustment | - | - | - | - | - | (201 | ) | (2 | ) | (203 | ) | |||||||||||||||||||||
| Balance, September 30, 2020 (Unaudited) | 21,741,926 | $ | 22 | $ | 45,569 | $ | 2,607 | $ | (40,384 | ) | $ | 1,371 | $ | (60 | ) | $ | 9,125 | |||||||||||||||
See notes to unaudited condensed consolidated financial statements
ZW DATA ACTION TECHNOLOGIES INC.
CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY
FOR THE SIX AND THREE MONTHS ENDED JUNE 30, 2021
(In thousands, except for number of shares)
| Common stock | Additional paid-in capital | Statutory reserves | Accumulated deficit | Accumulated other comprehensive income | Noncontrolling interests | Total equity | ||||||||||||||||||||||||||
| Number of shares | Amount | |||||||||||||||||||||||||||||||
| (US $) | (US $) | (US $) | (US $) | (US $) | (US $) | (US $) | ||||||||||||||||||||||||||
| Balance, January 1, 2019 | 16,382,543 | $ | 16 | $ | 38,275 | $ | 2,607 | $ | (34,512 | ) | $ | 1,457 | $ | (49 | ) | $ | 7,794 | |||||||||||||||
| Share-based compensation | 30,000 | - | 26 | - | - | - | - | 26 | ||||||||||||||||||||||||
| Net loss for the period | - | - | - | - | (1,517 | ) | - | (5 | ) | (1,522 | ) | |||||||||||||||||||||
| Foreign currency translation adjustment | - | - | - | - | - | 24 | - | 24 | ||||||||||||||||||||||||
| Balance, June 30, 2019 (Unaudited) | 16,412,543 | 16 | 38,301 | 2,607 | (36,029 | ) | 1,481 | (54 | ) | 6,322 | ||||||||||||||||||||||
| Issuance of common stock for private placement, net of $0.008 million direct offering cost | 1,608,430 | 2 | 2,391 | - | - | - | - | 2,393 | ||||||||||||||||||||||||
| Share-based compensation | - | - | 14 | - | - | - | - | 14 | ||||||||||||||||||||||||
| Net loss for the period | - | - | - | - | (388 | ) | - | (3 | ) | (391 | ) | |||||||||||||||||||||
| Foreign currency translation adjustment | - | - | - | - | - | 71 | 2 | 73 | ||||||||||||||||||||||||
| Balance, September 30, 2019 (Unaudited) | 18,020,973 | $ | 18 | $ | 40,706 | $ | 2,607 | $ | (36,417 | ) | $ | 1,552 | $ | (55 | ) | $ | 8,411 | |||||||||||||||
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 | |||||||||||||||
See notes to unaudited condensed consolidated financial statements
ZW DATA ACTION TECHNOLOGIES INC.
CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY
FOR THE SIX AND THREE MONTHS ENDED JUNE 30, 2020
(In thousands, except for number of shares)
Common stock | Additional paid-in capital | Statutory reserves | Accumulated deficit | Accumulated other comprehensive income | Noncontrolling interests | Total equity | ||||||||||||||||||||||||||
Number of shares | Amount | |||||||||||||||||||||||||||||||
(US $) | (US $) | (US $) | (US $) | (US $) | (US $) | (US $) | ||||||||||||||||||||||||||
Balance, January 1, 2020 | 19,629,403 | $ | 20 | $ | 43,111 | $ | 2,607 | $ | (35,773 | ) | $ | 1,505 | $ | (57 | ) | $ | 11,413 | |||||||||||||||
Share-based compensation in exchange for services from nonemployees | 430,000 | 0 | 477 | 0 | 0 | 0 | 0 | 477 | ||||||||||||||||||||||||
Share-based compensation in exchange for services from employees and directors | 1,632,523 | 2 | 1,897 | 0 | 0 | 0 | 0 | 1,899 | ||||||||||||||||||||||||
Net loss for the period | - | 0 | 0 | 0 | (2,310 | ) | 0 | 0 | (2,310 | ) | ||||||||||||||||||||||
Foreign currency translation adjustment | - | 0 | 0 | 0 | 0 | 71 | 1 | 72 | ||||||||||||||||||||||||
Balance, March 31, 2020 (unaudited) | 21,691,926 | 22 | 45,485 | 2,607 | (38,083 | ) | 1,576 | (56 | ) | 11,551 | ||||||||||||||||||||||
Share-based compensation | - | 0 | 8 | 0 | 0 | 0 | 0 | 8 | ||||||||||||||||||||||||
Net loss for the period | - | 0 | 0 | 0 | (968 | ) | 0 | (2 | ) | (970 | ) | |||||||||||||||||||||
Foreign currency translation adjustment | - | 0 | 0 | 0 | 0 | (4 | ) | 0 | (4 | ) | ||||||||||||||||||||||
Balance, June 30, 2020 (Unaudited) | 21,691,926 | $ | 22 | $ | 45,493 | $ | 2,607 | $ | (39,051 | ) | $ | 1,572 | $ | (58 | ) | $ | 10,585 | |||||||||||||||
See notes to unaudited condensed consolidated financial statements
ZW DATA ACTION TECHNOLOGIES INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
1. | Organization and nature of operations |
ZW Data Action Technologies Inc. (formerly known as(f/k/a ChinaNet Online Holdings, Inc.*) (the(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”)(SMEs) in the PRC. In early 2018, the Company commenced to expand its business into the blockchain industry and the related technology. As of September 30, 2020, the Company was in the process of developing its blockchain-powered platform applications (See Note 11).
* Effective October 14, 2020, the Company changed its corporate name from ChinaNet Online Holdings, Inc. to ZW Data Action Technologies Inc.
| 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 SeptemberJune 30, 2020 2021 and December 31, 2019, 2020, respectively:
September 30, 2020 | December 31, 2019 | June 30, 2021 | December 31, 2020 | |||||||||||||
| US$(’000) | US$(’000) | US$(’000) | US$(’000) | |||||||||||||
| (Unaudited) | (Unaudited) | |||||||||||||||
| Assets | ||||||||||||||||
| Current assets: | ||||||||||||||||
| Cash and cash equivalents | $ | 249 | $ | 699 | $ | 485 | $ | 277 | ||||||||
| Accounts receivable, net | 1,198 | 2,876 | 3,321 | 1,142 | ||||||||||||
| Prepayment and deposit to suppliers | 4,176 | 3,998 | 3,022 | 2,818 | ||||||||||||
| Due from related parties, net | 58 | 81 | ||||||||||||||
| Other current assets, net | 9 | 6 | ||||||||||||||
Due from related parties | 104 | 61 | ||||||||||||||
Other current assets | 3 | 10 | ||||||||||||||
| Total current assets | 5,690 | 7,660 | 6,935 | 4,308 | ||||||||||||
| Long-term investments | 64 | 35 | 450 | 67 | ||||||||||||
| Operating lease right-of-use assets | 4 | 12 | 26 | 48 | ||||||||||||
| Property and equipment, net | 39 | 40 | 90 | 32 | ||||||||||||
| Intangible assets, net | 13 | 25 | 0 | 9 | ||||||||||||
Long-term deposits and prepayments | 85 | 0 | ||||||||||||||
| Deferred tax assets, net | 815 | 713 | 439 | 536 | ||||||||||||
| Total Assets | $ | 6,625 | $ | 8,485 | $ | 8,025 | $ | 5,000 | ||||||||
| Liabilities | ||||||||||||||||
| Current liabilities: | ||||||||||||||||
| Short-term bank loan | $ | - | $ | 430 | ||||||||||||
| Accounts payable | 290 | 408 | $ | 1,015 | $ | 270 | ||||||||||
| Advance from customers | 2,553 | 2,006 | 1,397 | 1,436 | ||||||||||||
| Accrued payroll and other accruals | 188 | 132 | 93 | 168 | ||||||||||||
| Taxes payable | 2,632 | 2,568 | 2,729 | 2,755 | ||||||||||||
| Lease payment liability related to a short-term lease | 52 | 19 | ||||||||||||||
Operating lease liabilities | 9 | 18 | ||||||||||||||
Lease payment liability related to short-term leases | 109 | 108 | ||||||||||||||
| Other current liabilities | 157 | 84 | 55 | 213 | ||||||||||||
| Total current liabilities | 5,872 | 5,647 | 5,407 | 4,968 | ||||||||||||
Operating lease liabilities-Non current | 9 | 32 | ||||||||||||||
| Total Liabilities | $ | 5,872 | $ | 5,647 | $ | 5,416 | $ | 5,000 | ||||||||
ZW DATA ACTION TECHNOLOGIES INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
All of the VIEs' assets can be used to settle obligations of their primary beneficiary. Furthermore, liabilitiesLiabilities 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 ninesix and three months ended SeptemberJune 30, 2020 2021 and 2019,2020, respectively:
Nine Months Ended September 30, | Three Months Ended September 30, | Six Months Ended June 30, | Three Months Ended June 30, | |||||||||||||||||||||||||||||
| 2020 | 2019 | 2020 | 2019 | 2021 | 2020 | 2021 | 2020 | |||||||||||||||||||||||||
| US$(’000) | US$(’000) | US$(’000) | US$(’000) | US$(’000) | US$(’000) | US$(’000) | US$(’000) | |||||||||||||||||||||||||
| (Unaudited) | (Unaudited) | (Unaudited) | (Unaudited) | (Unaudited) | (Unaudited) | (Unaudited) | (Unaudited) | |||||||||||||||||||||||||
| Revenues | $ | 23,683 | $ | 39,523 | $ | 11,135 | $ | 15,503 | $ | 20,618 | $ | 12,548 | $ | 12,671 | $ | 9,612 | ||||||||||||||||
| Cost of revenues | (24,051 | ) | (37,828 | ) | (11,729 | ) | (14,616 | ) | (23,132 | ) | (12,322 | ) | (14,394 | ) | (9,477 | ) | ||||||||||||||||
| Total operating expenses | (1,515 | ) | (2,407 | ) | (123 | ) | (545 | ) | (712 | ) | (1,392 | ) | (322 | ) | (648 | ) | ||||||||||||||||
| Net (loss)/income before allocation to noncontrolling interests | (1,802 | ) | (742 | ) | (642 | ) | 344 | |||||||||||||||||||||||||
Net loss before allocation to noncontrolling interests | (3,407 | ) | (1,160 | ) | (2,126 | ) | (509 | ) | ||||||||||||||||||||||||
| 3. |
Summary of significant accounting policies |
a) | Basis of presentation |
The unaudited condensed consolidated interim financial statements are prepared and presented in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”).
The unaudited condensed consolidated interim financial information as of SeptemberJune 30, 2020 2021 and for the ninesix and three months ended SeptemberJune 30, 2020 2021 and 20192020 have been prepared pursuant to the rules and regulations of the Securities and Exchange Commission (the “SEC”). Certain information and footnote disclosures, which are normally included in complete consolidated financial statements prepared in accordance with U.S. GAAP, have been omitted pursuant to those rules and regulations. The unaudited condensed consolidated interim financial information should be read in conjunction with the financial statements and the notes thereto, included in the Company’s Annual Report on Form 10-K10-K for the fiscal year ended December 31, 2019, 2020, previously filed with the SEC (the “2019“2020 Form 10-K”10-K”) on May 27, 2020.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 SeptemberJune 30, 2020, 2021, its condensed consolidated results of operations for the ninesix and three months ended SeptemberJune 30, 2020 2021 and 2019,2020, and its condensed consolidated cash flows for the ninesix months ended SeptemberJune 30, 2020 2021 and 2019,2020, 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.
The Company incurred operating losses and may continue to incur operating losses, and as a result, to generate negative cash flows as the Company implements its future business plan. The Company’s net loss attributable to stockholders for the nine and three months ended September 30, 2020 was approximately US$4.61 million and US$1.33 million, compared with approximately US$1.91 million and US$0.39 million for the nine and three months ended September 30, 2019, respectively. As of September 30, 2020, the Company had cash and cash equivalents of approximately US$0.50 million, compared with approximately US$1.60 million as of December 31, 2019.
The Company does not currently have sufficient cash or commitments for financing to sustain its operation for the twelve months from the issuance date of these financial statements. The Company plans to optimize its internet resources cost investment strategy to improve the gross profit margin of its core business and to further strengthen the accounts receivables collection management and negotiate with vendors for more favorable payment terms, all of which will help to substantially increase the cashflows from operations. However, the COVID-19 outbreak incurred in the first fiscal quarter of 2020 in the PRC has had and may continue to have an adverse effect on the Company’s business operations and cashflows. If the Company fails to achieve these goals, the Company may need additional financing to execute its business plan. If additional financing is required, the Company cannot predict whether this additional financing will be in the form of equity, debt, or another form, and the Company may not be able to obtain the necessary additional capital in a timely manner, on acceptable terms, or at all. In the event that financing sources are not available, or that the Company is unsuccessful in increasing its gross profit margin and reducing operating losses, the Company may be unable to implement its current plans for expansion, repay debt obligations or respond to competitive pressures, any of which would have a material adverse effect on the Company’s business, prospects, financial condition and results of operations. These factors raise substantial doubt about the Company's ability to continue as a going concern within one year after the date that the financial statements are issued.
b) |
ZW DATA ACTION TECHNOLOGIES INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
The unaudited condensed consolidated financial statements as of September 30, 2020 have been prepared under the assumption that the Company will continue as a going concern, which contemplates, among other things, the realization of assets and the satisfaction of liabilities in the normal course of business over a reasonable period of time. The Company's ability to continue as a going concern is dependent upon its uncertain ability to increase gross profit margin and reduce operating loss from its core business and/or obtain additional financing. The accompanying financial statements as of September 30, 2020 do not include any adjustments that might result from the outcome of these uncertainties. If the Company is unable to continue as a going concern, it may have to liquidate its assets and may receive less than the value at which those assets are carried on the financial statements.
| Principles of consolidation |
The unaudited condensed consolidated interim financial statements include the accounts of all the subsidiaries and VIEs of the Company. All transactions and balances between the Company and its subsidiaries and VIEs have been eliminated upon consolidation.
c) | Use of estimates |
The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and the related disclosure of contingent assets and liabilities at the date of these consolidated financial statements, and the reported amounts of revenue and expenses during the reporting period. The Company continually evaluates these estimates and assumptions based on the most recently available information, historical experience and various other assumptions that the Company believes to be reasonable under the circumstances. Since the use of estimates is an integral component of the financial reporting process, actual results could differ from those estimates.
d) | Foreign currency translation |
The exchange rates used to translate amounts in RMB into US$ for the purposes of preparing the condensed consolidated financial statements are as follows:
| September 30, 2020 | December 31, 2019 | |||||||
| Balance sheet items, except for equity accounts | 6.8101 | 6.9762 |
ZW DATA ACTION TECHNOLOGIES INC.
| Nine Months Ended September 30, | ||||||||
| 2020 | 2019 | |||||||
| Items in the statements of operations and comprehensive loss | 6.9917 | 6.8541 | ||||||
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
| Three Months Ended September 30, | ||||||||
| 2020 | 2019 | |||||||
| Items in the statements of operations and comprehensive loss | 6.9205 | 6.9872 | ||||||
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) |
ZW DATA ACTION TECHNOLOGIES INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
| Fair value measurement |
Liabilities measured at fair value on a recurring basis by level within the fair value hierarchy as of SeptemberJune 30, 2020 2021 and December 31, 2019 2020 are as follows:
Fair value measurement at reporting date using | ||||||||||||||
As of September 30, 2020 | Quoted Prices in Active Markets for Identical Assets/Liabilities (Level 1) | Significant Other Observable Inputs (Level 2) | Significant Unobservable Inputs (Level 3) | |||||||||||
| US$(’000) | US$(’000) | US$(’000) | US$(’000) | |||||||||||
| (Unaudited) | ||||||||||||||
| Warrant liabilities (Note 17) | 103 | - | - | 103 | ||||||||||
Fair value measurement at reporting date using | ||||||||||||||||
As of June 30, 2021 | Quoted Prices | Significant | Significant | |||||||||||||
US$(’000) | US$(’000) | US$(’000) | US$(’000) | |||||||||||||
(Unaudited) | ||||||||||||||||
Warrant liabilities (Note 16) | 6,597 | 0 | 0 | 6,597 | ||||||||||||
Fair value measurement at reporting date using | ||||||||||||||
As of December 31, 2019 | Quoted Prices in Active Markets for Identical Assets/Liabilities (Level 1) | Significant Other Observable Inputs (Level 2) | Significant Unobservable Inputs (Level 3) | |||||||||||
| US$(’000) | US$(’000) | US$(’000) | US$(’000) | |||||||||||
| Warrant liabilities (Note 17) | 107 | - | - | 107 | ||||||||||
Fair value measurement at reporting date using | ||||||||||||||||
As of December 31, 2020 | Quoted Prices | Significant | Significant | |||||||||||||
US$(’000) | US$(’000) | US$(’000) | US$(’000) | |||||||||||||
Warrant liabilities (Note 16) | 1,505 | 0 | 0 | 1,505 | ||||||||||||
f) | Revenue recognition |
The following tables present the Company’s revenues disaggregated by products and services and timing of revenue recognition:
Nine Months Ended September 30, | Three Months Ended September 30, | |||||||||||||||
| 2020 | 2019 | 2020 | 2019 | |||||||||||||
| 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 | 18,004 | 30,134 | 8,706 | 11,554 | ||||||||||||
| --online advertising placements | 5,679 | 9,131 | 2,429 | 3,725 | ||||||||||||
| --sales of effective sales lead information | - | 253 | - | 224 | ||||||||||||
| --data and technical services | 900 | 10 | 300 | 5 | ||||||||||||
| Ecommerce O2O advertising and marketing services | 1,276 | - | 269 | - | ||||||||||||
| Technical solution services | 1,245 | - | 600 | - | ||||||||||||
| Total revenues | $ | 27,104 | $ | 39,528 | $ | 12,304 | $ | 15,508 | ||||||||
ZW DATA ACTION TECHNOLOGIES INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
Nine Months Ended September 30, | Three Months Ended September 30, | |||||||||||||||
| 2020 | 2019 | 2020 | 2019 | |||||||||||||
| US$(’000) | US$(’000) | US$(’000) | US$(’000) | |||||||||||||
| (Unaudited) | (Unaudited) | (Unaudited) | (Unaudited) | |||||||||||||
| Revenue recognized over time | 25,859 | 39,275 | 11,704 | 15,284 | ||||||||||||
| Revenue recognized at a point in time | 1,245 | 253 | 600 | 224 | ||||||||||||
| Total revenues | $ | 27,104 | $ | 39,528 | $ | 12,304 | $ | 15,508 | ||||||||
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 ninesix and three months ended SeptemberJune 30, 2020 2021 and 2019,2020, 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 ninesix months ended SeptemberJune 30, 2020:2021:
Contract liabilities | ||||
US$(’000) | ||||
Balance as of January 1, 2021 | 1,436 | |||
Exchange translation adjustment | 14 | |||
Revenue recognized from beginning contract liability balances | (1,245 | ) | ||
Advances received from customers related to unsatisfied performance obligations | 1,334 | |||
Balance as of June 30, 2021 (Unaudited) | $ | 1,539 | ||
Advance from customers related to unsatisfied performance obligations are generally refundable. Refund of advance from customerscustomers were insignificantinsignificant for the ninesix and three months ended SeptemberJune 30, 2020 2021 and 2019.2020.
For the ninesix and three months ended SeptemberJune 30, 2020 2021 and 2019,2020, there is no0 revenue recognized from performance obligations that were satisfied in prior periods.
g) | Research and development expenses |
The Company accounts for expenses for the enhancement, maintenance and technical support to the Company’s Internet platforms and intellectual properties that are used in its daily operations in research and development expenses. Research and development costs are charged to expense when incurred. Expenses for research and development for the ninesix months ended SeptemberJune 30, 2020 2021 and 20192020 were approximately US$0.440.16 million and US$0.600.33 million, respectively. Expenses for research and development for the three months ended SeptemberJune 30, 2020 2021 and 20192020 were approximately US$0.110.09 million and US$0.240.12 million, respectively.
As of September 30, 2020, operating lease right-of-use assets recognized by the Company was approximately US$4,000. The Company had no operating lease liabilities as of September 30, 2020.
For the nine months ended September 30, 2020 and 2019, total operating lease cost recognized was approximately US$121,000 (including approximately US$114,000 of short-term lease cost) and US$284,000 (including approximately US$194,000 of short-term lease cost), respectively.
For the three months ended September 30, 2020 and 2019, total operating lease cost recognized was approximately US$37,000 (including approximately US$35,000 of short-term lease cost) and US$66,000 (including approximately US$64,000 of short-term lease cost), respectively.
ZW DATA ACTION TECHNOLOGIES INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
h) | Lease |
As of June 30, 2021, operating lease right-of-use assets and total operating lease liabilities recognized was approximately US$2.11 million and US$2.17 million, respectively.
Maturity of operating lease liabilities
Operating leases | |||||
US$(’000) | |||||
(Unaudited) | |||||
Six months ending December 31, 2021 | 147 | ||||
Year ending December 31, | |||||
| -2022 | 316 | ||||
| -2023 | 331 | ||||
| -2024 | 337 | ||||
| -2025 | 354 | ||||
| -2026 | 372 | ||||
-thereafter | 869 | ||||
Total undiscounted lease payments | 2,726 | ||||
Less: imputed interest | (560 | ) | |||
Total operating lease liabilities as of June 30, 2021 | $ | 2,166 | |||
Including: | |||||
Operating lease liabilities | 187 | ||||
Operating lease liabilities-Non current | 1,979 | ||||
| $ | 2,166 | ||||
Operating lease expenses:
Six Months Ended June 30, | Three Months Ended June 30, | |||||||||||||||
2021 | 2020 | 2021 | 2020 | |||||||||||||
US$(’000) | US$(’000) | US$(’000) | US$(’000) | |||||||||||||
(Unaudited) | (Unaudited) | (Unaudited) | (Unaudited) | |||||||||||||
Long-term operating lease contracts | 124 | 5 | 87 | 2 | ||||||||||||
Short-term operating lease contracts | 30 | 79 | 15 | 35 | ||||||||||||
Total | $ | 154 | $ | 84 | $ | 102 | $ | 37 | ||||||||
Supplemental information related to 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)
4. |
Accounts receivable, net |
September 30, 2020 | December 31, 2019 | June 30, 2021 | December 31, 2020 | |||||||||||||
| US$(’000) | US$(’000) | US$(’000) | US$(’000) | |||||||||||||
| (Unaudited) | (Unaudited) | |||||||||||||||
| Accounts receivable | 6,278 | 6,408 | 5,914 | 6,654 | ||||||||||||
| Allowance for doubtful accounts | (3,996 | ) | (3,148 | ) | (2,207 | ) | (4,247 | ) | ||||||||
| Accounts receivable, net | 2,282 | 3,260 | 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 SeptemberJune 30, 2020 2021 and December 31, 2019, 2020, the Company provided approximately US$4.002.21 million and US$3.154.25 million allowance for doubtful accounts, respectively, which were primarily related to the accounts receivable of the Company’s internetInternet advertising and related services segment with an aging over six months. The Company evaluates its accounts receivable with an aging over six months and determines the allowance based on aging data, historical collection experience, customer specific facts and economic conditions. For the ninesix and three months ended SeptemberJune 30, 2021, 0 allowance for doubtful accounts was provided. For the six and three months ended June 30, 2020, approximately US$0.75 million and US$nil0.34 million allowance for doubtful accounts was provided, respectively. For the nine and three months ended SeptemberJune 30, 2019,2021, the Company charged off approximately US$0.452.08 million accounts receivable against its related allowance, as all means of collection have been exhausted and US$nil million allowancethe potential for doubtful accounts was provided, respectively.recovery is considered remote.
5. | Prepayments and deposit to suppliers |
September 30, 2020 | December 31, 2019 | |||||||
| US$(’000) | US$(’000) | |||||||
| (Unaudited) | ||||||||
| Deposits to internet resources providers | 1,323 | 1,315 | ||||||
| Prepayments to internet resources providers | 4,121 | 4,361 | ||||||
| Prepayment of license fee | 591 | 1,062 | ||||||
| Other deposits and prepayments | 266 | 242 | ||||||
| 6,301 | 6,980 | |||||||
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 | |||||||
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, 2021, and a US$1.5 million prepayment paid in accordance with a cryptocurrency mining machine purchase agreement, respectively.
As of the 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 cancelled its cryptocurrency mining machine purchase agreement with the supplier and expects to be refunded with the prepayment of US$1.5 million in the second half of 2021.
ZW DATA ACTION TECHNOLOGIES INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
6. | Due from related parties |
September 30, 2020 | December 31, 2019 | |||||||
| US$(’000) | US$(’000) | |||||||
| (Unaudited) | ||||||||
| Zhongwang Xiyue Technology (Beijing) Co., Ltd. (“Zhongwang Xiyue”) | 58 | 81 | ||||||
| Guohua Shiji (Beijing) Communication Co., Ltd. (“Guohua Shiji”) | 176 | 172 | ||||||
| 234 | 253 | |||||||
| Allowance for doubtful accounts | (176 | ) | (172 | ) | ||||
| Due from related parties, net | 58 | 81 | ||||||
June 30, 2021 | December 31, 2020 | |||||||
US$(’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 and entities that the Company’s officers or directors can exercise significant influence.
ZW DATA ACTION TECHNOLOGIES INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
As of SeptemberJune 30, 2020 2021 and December 31, 2019, 2020, due from Zhongwang Xiyue represented the outstanding receivable for advertising and marketing service that the Company provided to this related party in its normal course of business, which is on the same terms as those provided to its unrelated clients.clients.
As of SeptemberJune 30, 2020 and December 31, 2019, 2021, due from related parties also includedGong Xiang Technology was a short-term working capital loan of RMB1.2 million (approximately US$0.18 million)provided to Guohua Shiji,this investee entity, which is expected to be repaid to the Company had provided full allowance to against.for the year ending December 31, 2021.
7. | Other current assets |
| September 30, 2020 | December 31,2019 | June 30, 2021 | December 31,2020 | |||||||||||||||||||||||||||||||||||||||||||||
| Gross | Allowance for doubtful accounts | Net | Gross | Allowance for doubtful accounts | Net | Gross | Allowance for doubtful accounts | Net | Gross | Allowance for doubtful accounts | Net | |||||||||||||||||||||||||||||||||||||
| US$(’000) | US$(’000) | US$(’000) | US$(’000) | US$(’000) | US$(’000) | US$(’000) | US$(’000) | US$(’000) | US$(’000) | US$(’000) | US$(’000) | |||||||||||||||||||||||||||||||||||||
| (Unaudited) | (Unaudited) | (Unaudited) | (Unaudited) | (Unaudited) | (Unaudited) | |||||||||||||||||||||||||||||||||||||||||||
| Staff advances for business operations | 17 | - | 17 | 11 | - | 11 | 9 | 0 | 9 | 18 | 0 | 18 | ||||||||||||||||||||||||||||||||||||
| Short-term loan to an unrelated party | 944 | - | 944 | - | - | - | 453 | 0 | 453 | 1,444 | 0 | 1,444 | ||||||||||||||||||||||||||||||||||||
| Overdue deposits | 734 | (734 | ) | - | 717 | (717 | ) | - | ||||||||||||||||||||||||||||||||||||||||
| Total | 1,695 | (734 | ) | 961 | 728 | (717 | ) | 11 | 462 | 0 | 462 | 1,462 | 0 | 1,462 | ||||||||||||||||||||||||||||||||||
As of SeptemberJune 30, 2020, 2021, other current assets primarily include a temporary working capital loan that the Company lentprovided to an unrelated party during the nine months ended September 30, 2020.party. This loan is unsecured, interest free, and payment on demand.is expected to be fully repaid to the Company for the year ending December 31, 2021.
8. | Long-term investments |
Gong Xiang Technology | Xiao Peng Education | Business Opportunity Chain Guangzhou | Local Chain Xi’an | Total | ||||||||||||||||
US$(’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 SeptemberJune 30, 2020 and December 31, 2019, other current assets also included an approximately RMB5 million (approximately US$0.7 million) overdue contractual deposit related to an advertising resources purchase contract that had been completed with no further cooperation. Based on the assessment of the collectability of this overdue deposit as of September 30, 2020 and December 31, 2019,2021, except for long-term investments which were fully impaired, the Company had provided full allowance to against this doubtful account.
As of September 30, 2020, the Company’s long-term investments consisted of an investment of approximately RMB0.25 million (approximately US$0.03 million)beneficially owned a 15%, 17% and an investment of RMB0.19 million (approximately US$0.03 million)19% equity interest in cash to two of its indirect equity ownership investee entities, Local Chain Xi’an InformationGuangzhou Gong Xiang Technology Co., Ltd. (“Local Chain Xi’an”Gong Xiang Technology”), Xiao Peng Education Technology (Hubei) Co., Ltd. (“Xiao Peng Education”) and Business Opportunity Chain (Guangzhou) Technology Co., Ltd. (“Business Opportunity Chain Guangzhou”), respectively. The Company beneficially owns a 4.9% and a 19% equity interest in Local Chain Xi’an and 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 similar investment of the Company.
In July 2020, due to May 2021, the facts that Shenzhen City Mingshan NetworkCompany disposed the 4.9% equity interest it owned in Local Chain Xi’an Information Technology Co., Ltd. (“Shenzhen Mingshan”Local Chain Xi’an”) to an unrelated party and ChinaNet Chuang Tou (Shenzhen) Co., Ltd. (“ChinaNet Chuang Tou”) had become dormant since 2015recorded an approximately US$0.04 million disposal loss for the six and 2018, respectively, as approved by all the respective shareholders of these two entities, ChinaNet Chuang Tou and Shenzhen Mingshan were officially closed and deregistered with the competent local authorities. The Company used to own a 19% and a 23.18% equity interest in ChinaNet Chuang Tou and Shenzhen Mingshan, respectively. The Company’s equity investments in these entities had been fully impaired in previous years before the deregistration.three months ended June 30, 2021.
ZW DATA ACTION TECHNOLOGIES INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
9. | Property and equipment, net |
September 30, 2020 | December 31, 2019 | June 30, 2021 | December 31, 2020 | |||||||||||||
| US$(’000) | US$(’000) | US$(’000) | US$(’000) | |||||||||||||
| (Unaudited) | (Unaudited) | |||||||||||||||
| Vehicles | 777 | 758 | 873 | 811 | ||||||||||||
| Office equipment | 1,363 | 1,331 | 908 | 894 | ||||||||||||
| Electronic devices | 960 | 937 | 621 | 615 | ||||||||||||
| Property and equipment, cost | 3,100 | 3,026 | 2,402 | 2,320 | ||||||||||||
| Less: accumulated depreciation | (3,026 | ) | (2,948 | ) | (2,286 | ) | (2,260 | ) | ||||||||
| Property and equipment, net | 74 | 78 | 116 | 60 | ||||||||||||
Depreciation expenses for the ninesix months ended SeptemberJune 30, 2020 2021 and 20192020 were approximately US$6,0000.004 million and US$53,000,0.004 million, respectively. Depreciation expenses for the three months ended SeptemberJune 30, 2020 2021 and 20192020 were approximately US$2,0000.003 million and US$10,000,0.002 million, respectively.
10. | Intangible assets, net |
As of June 30, 2021 (Unaudited) | ||||||||||||||||
Items | Gross Carrying Value | Accumulated Amortization | Impairment | Net Carrying Value | ||||||||||||
US$(’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 | ||||||
| As of September 30, 2020 (Unaudited) | ||||||||||||||||
| Items | Gross Carrying Value | Accumulated Amortization | Impairment | Net Carrying Value | ||||||||||||
| US$(’000) | US$(’000) | US$(’000) | US$(’000) | |||||||||||||
| Intangible assets not subject to amortization: | ||||||||||||||||
| Domain name | 1,418 | - | (1,418 | ) | - | |||||||||||
| Intangible assets subject to amortization: | ||||||||||||||||
| Customer relationship | 1,956 | (1,956 | ) | - | - | |||||||||||
| Non-compete agreements | 1,076 | (584 | ) | (492 | ) | - | ||||||||||
| Software technologies | 301 | (301 | ) | - | - | |||||||||||
| Intelligent marketing data service platform | 4,741 | (1,920 | ) | (2,821 | ) | - | ||||||||||
| Internet safety, information exchange security and data encryption software | 1,909 | (430 | ) | (1,479 | ) | - | ||||||||||
| Cloud video management system | 1,395 | (346 | ) | (1,049 | ) | - | ||||||||||
| Cloud compute software technology | 1,363 | (932 | ) | (418 | ) | 13 | ||||||||||
| Licensed products use right | 1,208 | (105 | ) | - | 1,103 | |||||||||||
| Other computer software | 875 | (703 | ) | - | 172 | |||||||||||
| Total | $ | 16,242 | $ | (7,277 | ) | $ | (7,677 | ) | $ | 1,288 | ||||||
| As of December 31, 2019 | ||||||||||||||||
| Items | Gross Carrying Value | Accumulated Amortization | Impairment | Net Carrying Value | ||||||||||||
| US$(’000) | US$(’000) | US$(’000) | US$(’000) | |||||||||||||
| Intangible assets not subject to amortization: | ||||||||||||||||
| Domain name | 1,385 | - | (1,385 | ) | - | |||||||||||
| Intangible assets subject to amortization: | ||||||||||||||||
| Customer relationship | 1,909 | (1,909 | ) | - | - | |||||||||||
| Non-compete agreements | 1,051 | (571 | ) | (480 | ) | - | ||||||||||
| Software technologies | 294 | (294 | ) | - | - | |||||||||||
| Intelligent marketing data service platform | 4,629 | (1,876 | ) | (2,753 | ) | - | ||||||||||
| Internet safety, information exchange security and data encryption software | 1,863 | (419 | ) | (1,444 | ) | - | ||||||||||
| Cloud video management system | 1,362 | (338 | ) | (1,024 | ) | - | ||||||||||
| Cloud compute software technology | 1,331 | (898 | ) | (408 | ) | 25 | ||||||||||
| Licensed products use right | 1,202 | (15 | ) | - | 1,187 | |||||||||||
| Other computer software | 872 | (185 | ) | - | 687 | |||||||||||
| Total | $ | 15,898 | $ | (6,505 | ) | $ | (7,494 | ) | $ | 1,899 | ||||||
ZW DATA ACTION TECHNOLOGIES INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
Amortization expenses for the ninesix months ended SeptemberJune 30, 2020 2021 and 20192020 were approximately US$616,0000.28 million and US$13,000,0.41 million, respectively. Amortization expenses for the three months ended SeptemberJune 30, 2020 2021 and 20192020 were approximately US$205,0000.17 million and US$4,000,0.21 million, respectively.
Based on the adjusted carrying value of the finite-lived intangible assets after the deduction of the impairment losses, which has a weighted average remaining useful life of 5.775.68 years as of SeptemberJune 30, 2020, 2021, and assuming no further subsequent impairment of the underlying intangible assets, thethe estimated future amortization expenses is approximately US$0.210.33 million for the year ending December 31, 2020, approximately US$0.13 million for the year ending December 31, 2021, and approximately US$0.12US$0.65 million each year for the year ending December 31, 2022 through 2024,. approximately US$0.63 million for the year ending December 31, 2025, and approximately US$0.18 million for the year ending December 31, 2026.
11. |
| Blockchain software application platform development costs |
In February 2018, the Company entered into a technical development contractcontracts with antwo unrelated entity to develop aentities for the development of two blockchain technology-based platform application for internal use by the Company. Totalapplications with a contract amount of the contract was US$4.5 million. In March 2018, the Company entered into a 4.50 million and RMB3.0 million (approximately US$0.440.46 million) social network-based software application development contract with another unrelated entity, which software application the Company had further combined into the current under developing blockchain technology-based platform., respectively. These two blockchain technology-based applications are named OMG and Bo!News, respectively. As of SeptemberJune 30, 2020 and December 31, 2019, 2021, in accordance with ASC 350-40350-40 “Intangibles-Goodwill and Other-Internal-Use Software”, the Company capitalized approximately US$4.19 million and US$3.884.41 million development costs in the aggregate under these two contracts, respectively. As of the date hereof, contracts. During 2020, the Company is in the processfurther developed its Blockchain Integrated Framework (“BIF”) for retail business, to provide a framework platform for more accessible and efficient integration of further developingsmall and adjusting its blockchain-powered applications on the blockchain infrastructure platform to make the platform a better synergism with the currentmedium sized retail business and client base.users. The Company originally scheduled to complete the adjustments and upgrades of Bo!News,plans to launch the OMG for trialupgraded Bo!News application by the end of May 2020,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. | Long-term deposits and prepayments |
As of June 30, 2021, long-term deposits and prepayments consisted of an approximately US$0.56 million of the Company’s operating deposits and prepayments that were not expected to be refunded or consumed within one year of June 30, 2021, an approximately US$0.16 million prepayment for the leasehold improvement project of the Company’s Guangzhou office, which is expected to be completed in the second half of fiscal 2021, and a US$1.0 million prepayment for the shares subscription of a 15.38% equity interest in an entity. This investment was made by the Company to jointly develop blockchain, key opinion leader and e-sports platform and to complete the integration of BO!Newsjointly operate IP data for e-sports and OMG for commercial releasegames with its two strategic partners. The transaction is expected to be consummated by the end of 2020. However, due to the COVID-19 outbreak in China during the first fiscal quarter of 2020, the Company currently anticipates that the commercial releasing schedule will likely be postponed.August 2021.
13. | Accrued payroll and other accruals |
According to the development contracts the Company signed with the counter parties, the Company will not bear any development risk related loss unless the counter party has no fault during the development and the causes for failure is considered reasonable as agreed by both parties. In the latter case, the related development loss will be shared by both parties based on further negotiations. As of the date hereof, the Company has not been aware of any technical risks or other factors that may lead to any failure or partial failure of these development projects.
June 30, 2021 | December 31, 2020 | |||||||
US$(’000) | US$(’000) | |||||||
(Unaudited) | ||||||||
Accrued payroll and staff welfare | 179 | 229 | ||||||
Accrued operating expenses | 101 | 260 | ||||||
| 280 | 489 | |||||||
14. |
As of SeptemberJune 30, 2021 and December 31, 2020, long-term prepayments represented a portion of the Company’s prepayments, of which approximately US$0.37 million was paid to one of its advertising resource suppliers and the remaining approximately US$0.10 million was paid to one of its professional service suppliers. The Company recorded these amounts as long-term prepayments because they were not expected to be consumed within one year of September 30, 2020.taxes payable consists of:
ZW DATA ACTION TECHNOLOGIES INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
As of December 31, 2019, the Company had a revolving credit facility of RMB5.0 million (approximately US$0.7 million) for short-term working capital loans granted by a major financial institution in China, which expired in January 2020.
As of December 31, 2019, under the revolving credit facility, the Company borrowed RMB3.0 million (approximately US$0.43 million) short-term bank loan, which matured and was repaid in January 2020.
September 30, 2020 | December 31, 2019 | |||||||
| US$(’000) | US$(’000) | |||||||
| (Unaudited) | ||||||||
| Accrued payroll and staff welfare | 237 | 173 | ||||||
| Accrued operating expenses | 205 | 318 | ||||||
| 442 | 491 | |||||||
As of September 30, 2020 and December 31, 2019, taxes payable consists of:
September 30, 2020 | December 31, 2019 | |||||||
| US$(’000) | US$(’000) | |||||||
| (Unaudited) | ||||||||
| PRC turnover tax and surcharge payable | 1,280 | 1,244 | ||||||
| PRC enterprise income tax payable | 2,010 | 1,970 | ||||||
| Total taxes payable | 3,290 | 3,214 | ||||||
June 30, 2021 | December 31, 2020 | |||||||
US$(’000) | US$(’000) | |||||||
(Unaudited) | ||||||||
Turnover tax and surcharge payable | 1,313 | 1,353 | ||||||
Enterprise income tax payable | 2,095 | 2,077 | ||||||
Total taxes payable | 3,408 | 3,430 | ||||||
For the ninesix and three months ended SeptemberJune 30, 2020 2021 and 2019,2020, the Company’s income tax benefitbenefit/(expenses) consisted of:
| Nine Months Ended September 30, | Three Months Ended September 30, | Six Months Ended June 30, | Three Months Ended June 30, | |||||||||||||||||||||||||||||
| 2020 | 2019 | 2020 | 2019 | 2021 | 2020 | 2021 | 2020 | |||||||||||||||||||||||||
| US$(’000) | US$(’000) | US$(’000) | US$(’000) | US$(’000) | US$(’000) | US$(’000) | US$(’000) | |||||||||||||||||||||||||
| (Unaudited) | (Unaudited) | (Unaudited) | (Unaudited) | (Unaudited) | (Unaudited) | (Unaudited) | (Unaudited) | |||||||||||||||||||||||||
| Current | - | - | 57 | - | 0 | (57 | ) | 0 | 26 | |||||||||||||||||||||||
| Deferred | 87 | 10 | 98 | 16 | 40 | (11 | ) | 22 | (16 | ) | ||||||||||||||||||||||
| Income tax benefit | 87 | 10 | 155 | 16 | ||||||||||||||||||||||||||||
Income tax benefit/(expenses) | 40 | (68 | ) | 22 | 10 | |||||||||||||||||||||||||||
The Company’s deferred tax assets as of SeptemberJune 30, 2020 2021 and December 31, 2019 2020 were as follows:
September 30, 2020 | December 31, 2019 | June 30, 2021 | December 31, 2020 | |||||||||||||
| US$(’000) | US$(’000) | US$(’000) | US$(’000) | |||||||||||||
| (Unaudited) | (Unaudited) | |||||||||||||||
| Tax effect of net operating losses carried forward | 10,148 | 9,160 | 12,160 | 10,123 | ||||||||||||
Operating lease cost | 16 | 0 | ||||||||||||||
| Bad debts provision | 890 | 743 | 331 | 728 | ||||||||||||
| Valuation allowance | (10,223 | ) | (9,190 | ) | (11,855 | ) | (10,245 | ) | ||||||||
| Deferred tax assets, net | 815 | 713 | 652 | 606 | ||||||||||||
ZW DATA ACTION TECHNOLOGIES INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
The U.S. holding company has incurred aggregate NOLs of approximately US$22.830.4 million and US$20.323.3 million as of SeptemberJune 30, 2020 2021 and December 31, 2019, 2020, respectively. The NOLs carryforwards as of December 31, 2017 gradually expire over time, the last of which expires in 2037. 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 against its net U.S. deferred tax assets, since due to uncertainties surrounding future utilization, the Company estimates there will not be sufficient future earnings to utilize its U.S. deferred tax assets.
The NOLs carried forward incurred by the Company’s PRC subsidiaries and VIEs were approximately US$25.224.3 million and US$23.622.5 million as of SeptemberJune 30, 2020 2021 and December 31, 2019, 2020, respectively. The losses carryforwards gradually expire over time, the last of which expires in 20302031 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 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$10.2211.9 million and US$9.1910.2 million valuation allowance as of SeptemberJune 30, 2020 2021 and December 31, 2019, 2020, respectively, because it is considered more likely than not that a portion of the deferred tax assets will not be realized through sufficient future earnings of the entities to which the operating losses related.
For the ninesix and three months ended SeptemberJune 30, 2020, 2021, the Company recorded approximately US$0.901.96 million and US$0.141.65 million deferred tax valuation allowance, respectively. For the ninesix and three months ended SeptemberJune 30, 2019, 2020, the Company recorded approximately US$0.420.76 million deferred tax valuation allowance. For the three months ended September 30, 2019, the Company reversed approximately and US$0.030.21 million deferred tax valuation allowance,. respectively.
15. | 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. |
TheFebruary 2021 Financing:
On February 18, 2021 (the “Closing Date”), the Company consummated a registered direct offering in January 2018of 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 “2018 “February 2021 Financing”), as. As part of the transaction, the Company also issued to the investors and the placement agent warrants to purchase up to 645,000 shares and 129,0002,606,000 shares of the Company’s common stock at an exercise price of $6.60US$3.59 per share respectively.(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 accounted for these warrants as derivative liabilities. As a result, these warrants were remeasured at fair value asreceived gross proceeds of each reporting date with changes in fair value be recorded in earnings in each reporting period.
Fair value ofapproximately US$18.7 million from the warrantsFebruary 2021 Financing.
The Company used Binomial model to determine the fair valueplacement 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, basedthe “2021 Warrants”). The 2021 Placement Agent Warrants are exercisable at any time on or after August 18, 2021 (the assumptions summarized as below: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).
| Investors warrants | Placement agent warrants | |||||||||||||||||||||||
| December 31, 2019 | June 30, 2020 | September 30, 2020 # | December 31, 2019 | June 30, 2020 | September 30, 2020 | |||||||||||||||||||
| Stock price | $ | 1.17 | $ | 1.00 | $ | 1.17 | $ | 1.00 | $ | 2.02 | ||||||||||||||
| Years to maturity | 0.55 | 0.05 | 1.05 | 0.55 | 0.30 | |||||||||||||||||||
| Risk-free interest rate | 1.58 | % | 0.19 | % | 1.57 | % | 0.18 | % | 0.13 | % | ||||||||||||||
| Dividend yield | - | - | - | - | - | |||||||||||||||||||
| Expected volatility | 60 | % | 143 | % | 80 | % | 112 | % | 133 | % | ||||||||||||||
| Exercise Price * | $ | 1.4927 | $ | 1.4927 | $ | 1.4927 | $ | 1.4927 | $ | 1.4927 | ||||||||||||||
| Fair value of the warrant | $ | 0.11 | $ | 0.02 | $ | - | $ | 0.28 | $ | 0.20 | $ | 0.80 | ||||||||||||
| Warrant Liabilities (US$’000) | $ | 71 | $ | 13 | $ | - | $ | 36 | $ | 26 | $ | 103 | ||||||||||||
ZW DATA ACTION TECHNOLOGIES INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
| Investors warrants | Placement agent warrants | |||||||||||||||||||||||
| December 31, 2018 | June 30, 2019 | September 30, 2019 | December 31, 2018 | June 30, 2019 | September 30, 2019 | |||||||||||||||||||
| Stock price | $ | 1.34 | $ | 1.35 | $ | 1.30 | $ | 1.34 | $ | 1.35 | $ | 1.30 | ||||||||||||
| Years to maturity | 1.55 | 1.05 | 0.80 | 2.05 | 1.55 | 1.30 | ||||||||||||||||||
| Risk-free interest rate | 2.50 | % | 1.73 | % | 1.79 | % | 2.50 | % | 1.73 | % | 1.57 | % | ||||||||||||
| Dividend yield | - | - | - | - | - | - | ||||||||||||||||||
| Expected volatility | 199 | % | 90 | % | 82 | % | 176 | % | 202 | % | 83 | % | ||||||||||||
| Exercise Price | $ | 6.60 | $ | 6.60 | $ | 1.4927 | $ | 6.60 | $ | 6.60 | $ | 1.4927 | ||||||||||||
| Fair value of the warrant | $ | 0.78 | $ | 0.05 | $ | 0.31 | $ | 0.80 | $ | 0.80 | $ | 0.43 | ||||||||||||
| Warrant Liabilities (US$’000) | $ | 503 | $ | 32 | $ | 200 | $ | 103 | $ | 103 | $ | 55 | ||||||||||||
* On September 25, 2019, as a resultThe initial exercise prices of the close on2021 Warrants are subject to anti-dilution provisions that require adjustment of the first halfnumber of a private placement with a selected groupshares of investors,common stock that may be acquired upon exercise of the 2021 Warrants, or to the exercise price of the warrants issued in the 2018 Financing thatsuch shares, or both, to reflect stock dividends and splits, subsequent rights offerings, pro-rata distributions, and certain fundamental transactions. The 2021 Warrants also contain the “full ratchet” price protection in the event of subsequent issuances below the applicable exercise price (the “Down round feature”) was adjusted to $1.4927..
# The investor warrants had expired during2021 Warrants may not be exercised if it would result in the three months ended September 30, 2020.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 61st day after such notice is delivered to the Company.
Accounting for securities issued in the February 2021 Financing
Changes
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 of warrant liabilitiesbe recorded in earnings in each reporting period.
Nine and Three Months Ended September 30, 2020 (Unaudited)
| As of | As of | As of | Change in Fair Value (gain)/loss | |||||||||||||||||
September 30, 2020 | June 30, 2020 | December 31, 2019 | Nine Months Ended September 30, 2020 | Three Months Ended September 30, 2020 | ||||||||||||||||
| Fair value of the Warrants: | ||||||||||||||||||||
| Investor warrants | - | 13 | 71 | (71 | ) | (13 | ) | |||||||||||||
| Placement agent warrants | 103 | 26 | 36 | 67 | 77 | |||||||||||||||
| Warrant liabilities | 103 | 39 | 107 | (4 | ) | 64 | ||||||||||||||
Nine and Three Months Ended September 30, 2019 (Unaudited)
| As of | As of | As of | Change in Fair Value (gain)/loss | |||||||||||||||||
September 30, 2019 | June 30, 2019 | December 31, 2018 | Nine Months Ended September 30, 2019 | Three Months Ended September 30, 2019 | ||||||||||||||||
| Fair value of the Warrants: | ||||||||||||||||||||
| Investor warrants | 200 | 32 | 503 | (303 | ) | 168 | ||||||||||||||
| Placement agent warrants | 55 | 103 | 103 | (48 | ) | (48 | ) | |||||||||||||
| Warrant liabilities | 255 | 135 | 606 | (351 | ) | 120 | ||||||||||||||
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 SeptemberJune 30, 2020 2021 and their movements during the ninesix 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, 2020 | 774,000 | 0.63 | $ | 1.4927 | 774,000 | 0.63 | $ | 1.4927 | ||||||||||||||||
| Granted/Vested | - | - | ||||||||||||||||||||||
| Expired | (645,000 | ) | (645,000 | ) | ||||||||||||||||||||
| Exercised | - | - | ||||||||||||||||||||||
| Balance, September 30, 2020 (Unaudited) | 129,000 | 0.13 | $ | 1.4927 | 129,000 | 0.13 | $ | 1.4927 | ||||||||||||||||
Warrant Outstanding | Warrant Exercisable | |||||||||||||||||||||||
Number of underlying shares | Weighted | Weighted | Number of underlying shares | Weighted | Weighted | |||||||||||||||||||
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. |
| Restricted net assets |
As substantially all of the Company’s operations are conducted through its PRC subsidiaries and VIEs, the Company’s ability to pay dividends is primarily dependent on receiving distributions of funds from its PRC subsidiaries and VIEs. Relevant PRC statutory laws and regulations permit payments of dividends by its PRC 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 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.
In accordance with these PRC laws and regulations, the Company’s PRC subsidiaries and VIEs are restricted in their ability to transfer a portion of their net assets to the Company. As of SeptemberJune 30, 2020 2021 and December 31, 2019, 2020, net assets restricted in the aggregate, which include paid-in capital and statutory reserve funds of the Company’s PRC subsidiaries and VIEs that are included in the Company’s consolidated net assets, were both approximately US$6.21 million.13.2 million and US$8.2 million, respectively.
The current PRC Enterprise Income Tax (“EIT”) Law also 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% withholding tax rate, subject to approval from the related PRC tax authorities.
ZW DATA ACTION TECHNOLOGIES INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
The ability of the Company’s PRC 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 |
● | Administration Rules of the Settlement, Sale and Payment of Foreign Exchange |
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.
ZW DATA ACTION TECHNOLOGIES INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
Although the current Exchange Rules allow 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.
18. | 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$0.080.10 million and US$0.260.06 million for the ninesix months ended SeptemberJune 30, 2020 2021 and 2019,2020, respectively. The total amounts for such employee benefits were approximately US$0.030.05 million and US$0.090.02 million for the three months ended SeptemberJune 30, 2020 2021 and 2019,2020, respectively.
19. | 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, accounts receivable, and accounts receivable.deposits and loans to unrelated parties. As of SeptemberJune 30, 2020, substantially all2021, 41% of the Company’s cash and cash equivalents were held by major financial institutions located in China.Mainland and Hong Kong, China, 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 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 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 receivable isand deposits and loans to unrelated parties are significantly reduced.reduced.
ZW DATA ACTION TECHNOLOGIES INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
Concentration of customers
The following tables summarized the information about the Company’s concentration of customers for the ninesix and three months ended SeptemberJune 30, 2020 2021 and 2019,2020, respectively:
| Customer A | Customer B | Customer C | Customer D | Customer E | Customer F | Customer A | Customer B | Customer C | Customer D | Customer E | Customer F | |||||||||||||||||||||||||
| Nine Months Ended September 30, 2020 | ||||||||||||||||||||||||||||||||||||
Six Months Ended June 30, 2021 | ||||||||||||||||||||||||||||||||||||
| Revenues, customer concentration risk | * | * | 16% | * | * | - | 11 | % | 14 | % | * | - | - | * | ||||||||||||||||||||||
| Three Months Ended September 30, 2020 | ||||||||||||||||||||||||||||||||||||
Three Months Ended June 30, 2021 | ||||||||||||||||||||||||||||||||||||
| Revenues, customer concentration risk | * | * | 21% | * | * | - | 14 | % | 12 | % | * | - | - | * | ||||||||||||||||||||||
| Nine Months Ended September 30, 2019 | ||||||||||||||||||||||||||||||||||||
Six Months Ended June 30, 2020 | ||||||||||||||||||||||||||||||||||||
| Revenues, customer concentration risk | 11% | * | * | - | - | * | - | - | * | * | * | - | ||||||||||||||||||||||||
| Three Months Ended September 30, 2019 | ||||||||||||||||||||||||||||||||||||
Three Months Ended June 30, 2020 | ||||||||||||||||||||||||||||||||||||
| Revenues, customer concentration risk | * | * | * | - | - | 10% | - | - | * | * | * | - | ||||||||||||||||||||||||
| As of September 30, 2020 | ||||||||||||||||||||||||||||||||||||
As of June 30, 2021 | ||||||||||||||||||||||||||||||||||||
| Accounts receivable, customer concentration risk | 33% | * | * | 27% | 15% | - | 62 | % | - | 17 | % | - | - | 10 | % | |||||||||||||||||||||
| As of December 31, 2019 | ||||||||||||||||||||||||||||||||||||
As of December 31, 2020 | ||||||||||||||||||||||||||||||||||||
| Accounts receivable, customer concentration risk | 57% | 13% | 12% | - | - | - | - | - | 28 | % | 27 | % | 21 | % | - | |||||||||||||||||||||
* Less than 10%.
- No transaction incurred for the reporting period/no balance existed as of the reporting date.
ZW DATA ACTION TECHNOLOGIES INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
Concentration of suppliers
The following tables summarized the information about the Company’s concentration of suppliers for the ninesix and three months ended SeptemberJune 30, 2020 2021 and 2019,2020, 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.
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$4.944.96 million. As of SeptemberJune 30, 2020, 2021, the Company had paid approximately US$4.194.41 million in the aggerate, and theaggregate. The remaining unpaid contract amount is expected to be paid during the year ending December 31, 2020.2021.
ZW DATA ACTION TECHNOLOGIES INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
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 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. | 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.
Previously, the Company had four reportable segments, which were Internet advertising and related services, TV advertising service, Blockchain technology and Corporate. From fiscal 2020, the Company has a new reportable segment, which is Ecommerce O2O advertising and marketing services segment. In additional, due to the Company’s TV advertising business gradually became dormant since fiscal 2019, and the remaining general operating expenses, net loss and total assets amounts of the Company’s TV advertising segment were and are expected to continue be immaterial, the Company combines the results of operations of its TV advertising segment and other disclosure information with its new Ecommerce O2O advertising and marketing services segment in fiscal 2020. As a result, the related disclosures for the respective corresponding periods in fiscal 2019 have been reclassified in comfort with the disclosures in fiscal 2020.Six Months Ended June 30, 2021 (Unaudited)
Internet Ad and related service | Ecommerce | 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$6.86 million share-based compensation expenses.
ZW DATA ACTION TECHNOLOGIES INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
Nine Months Ended September 30, 2020 (Unaudited)
| Internet Ad and related service | Ecommerce O2O Ad and marketing services | Blockchain technology | Corporate | Inter-segment and reconciling item | Total | |||||||||||||||||||
| US$ (‘000) | US$ (‘000) | US$ (‘000) | US$ (‘000) | US$ (‘000) | US$ (‘000) | |||||||||||||||||||
| Revenues | 24,583 | 1,276 | - | 1,245 | - | 27,104 | ||||||||||||||||||
| Cost of revenues | 24,847 | 1,125 | - | 576 | - | 26,548 | ||||||||||||||||||
| Total operating expenses | 2,361 | 15 | 5 | 2,875 | (1) | - | 5,256 | |||||||||||||||||
| Depreciation and amortization expense included in total operating expenses | 617 | - | 2 | 3 | - | 622 | ||||||||||||||||||
| Operating (loss)/income | (2,625 | ) | 136 | (5 | ) | (2,206 | ) | - | (4,700 | ) | ||||||||||||||
| Change in fair value of warrant liabilities | - | - | - | 4 | - | 4 | ||||||||||||||||||
| Expenditure for long-term assets | - | - | 302 | - | - | 302 | ||||||||||||||||||
| Net (loss)/income | (2,543 | ) | 110 | (5 | ) | (2,175 | ) | - | (4,613 | ) | ||||||||||||||
| Total assets- September 30, 2020 | 10,830 | 2,093 | 4,193 | 21,224 | (21,330 | ) | 17,010 | |||||||||||||||||
| Total assets-December 31, 2019 | 13,332 | 2,075 | 3,885 | 21,338 | (22,079 | ) | 18,551 | |||||||||||||||||
Three Months Ended SeptemberJune 30, 2021 (Unaudited)
Internet Ad. and related service | Ecommerce | 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 | ||||||||||||||||||
(1) Including approximately US$6.76 million share-based compensation expenses.
Six Months Ended June 30, 2020 (Unaudited)(Unaudited)
| Internet Ad. and related service | Ecommerce O2O Ad and marketing services | Blockchain technology | Corporate | Inter-segment and reconciling item | Total | Internet Ad and related service | Ecommerce | Blockchain technology | Corporate | Inter-segment and reconciling item | Total | |||||||||||||||||||||||||||||||||||||
| US$ (‘000) | US$ (‘000) | US$ (‘000) | US$ (‘000) | US$ (‘000) | US$ (‘000) | US$ (‘000) | US$ (‘000) | US$ (‘000) | US$ (‘000) | US$ (‘000) | US$ (‘000) | |||||||||||||||||||||||||||||||||||||
| Revenues | 11,435 | 269 | - | 600 | - | 12,304 | 13,148 | 1,007 | 0 | 645 | 0 | 14,800 | ||||||||||||||||||||||||||||||||||||
| Cost of revenues | 11,994 | 375 | - | 576 | - | 12,945 | 12,853 | 750 | 0 | 0 | 0 | 13,603 | ||||||||||||||||||||||||||||||||||||
| Total operating expenses | 409 | 6 | 1 | 347 | (1) | - | 763 | 1,952 | 9 | 4 | 2,528 | (1) | 0 | 4,493 | ||||||||||||||||||||||||||||||||||
| Depreciation and amortization expense included in total operating expenses | 205 | - | 1 | 1 | - | 207 | 412 | 0 | 1 | 2 | 0 | 415 | ||||||||||||||||||||||||||||||||||||
| Operating loss | (968 | ) | (112 | ) | (1 | ) | (323 | ) | - | (1,404 | ) | |||||||||||||||||||||||||||||||||||||
Operating (loss)/income | (1,657 | ) | 248 | (4 | ) | (1,883 | ) | 0 | (3,296 | ) | ||||||||||||||||||||||||||||||||||||||
| Change in fair value of warrant liabilities | - | - | - | (64 | ) | - | (64 | ) | 0 | 0 | 0 | 68 | 0 | 68 | ||||||||||||||||||||||||||||||||||
| Net loss | (893 | ) | (94 | ) | (1 | ) | (345 | ) | - | (1,333 | ) | |||||||||||||||||||||||||||||||||||||
| Expenditure for long-term assets | 0 | 0 | 302 | 0 | 0 | 302 | ||||||||||||||||||||||||||||||||||||||||||
Net (loss)/income | (1,650 | ) | 204 | (4 | ) | (1,830 | ) | 0 | (3,280 | ) | ||||||||||||||||||||||||||||||||||||||
(1) Including approximately US$1.99 million share-based compensation expenses.
ZW DATA ACTION TECHNOLOGIES INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
Nine Months Ended September 30, 2019 (Unaudited)
| Internet Ad and related service | Ecommerce O2O Ad and marketing services | Blockchain technology | Corporate | Inter-segment and reconciling item | Total | |||||||||||||||||||
| US$ (‘000) | US$ (‘000) | US$ (‘000) | US$ (‘000) | US$ (‘000) | US$ (‘000) | |||||||||||||||||||
| Revenues | 39,528 | - | - | - | - | 39,528 | ||||||||||||||||||
| Cost of revenues | 37,828 | - | - | - | - | 37,828 | ||||||||||||||||||
| Total operating expenses | 2,525 | 42 | 18 | 1,350 | (1) | - | 3,935 | |||||||||||||||||
| Depreciation and amortization expense included in total operating expenses | 47 | - | 2 | 17 | - | 66 | ||||||||||||||||||
| Operating loss | (825 | ) | (42 | ) | (18 | ) | (1,350 | ) | - | (2,235 | ) | |||||||||||||
| Change in fair value of warrant liabilities | - | - | - | 351 | - | 351 | ||||||||||||||||||
| Expenditure for long-term assets | 760 | - | - | - | - | 760 | ||||||||||||||||||
| Net loss | (854 | ) | (42 | ) | (18 | ) | (999 | ) | - | (1,913 | ) | |||||||||||||
Three Months Ended SeptemberJune 30, 2019 (Unaudited)2020 (Unaudited)
Internet Ad and related service | Ecommerce | 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$0.07 million share-based compensation expenses.
| Internet Ad and related service | Ecommerce O2O Ad and marketing services | Blockchain technology | Corporate | Inter-segment and reconciling item | Total | |||||||||||||||||||
| US$ (‘000) | US$ (‘000) | US$ (‘000) | US$ (‘000) | US$ (‘000) | US$ (‘000) | |||||||||||||||||||
| Revenues | 15,508 | - | - | - | - | 15,508 | ||||||||||||||||||
| Cost of revenues | 14,616 | - | - | - | - | 14,616 | ||||||||||||||||||
| Total operating expenses | 675 | 6 | 7 | 479 | (1) | - | 1,167 | |||||||||||||||||
| Depreciation and amortization expense included in total operating expenses | 12 | - | 1 | 1 | - | 14 | ||||||||||||||||||
| Operating income/(loss) | 217 | (6 | ) | (7 | ) | (479 | ) | - | (275 | ) | ||||||||||||||
| Change in fair value of warrant liabilities | - | - | - | (120 | ) | - | (120 | ) | ||||||||||||||||
| Expenditure for long-term assets | 760 | - | - | - | - | 760 | ||||||||||||||||||
| Net income/(loss) | 221 | (6 | ) | (7 | ) | (599 | ) | - | (391 | ) | ||||||||||||||