*All of the VIEs' assets can be used to settle obligations of their primary beneficiary. Liabilities recognized as a result of consolidating these VIEs do not represent additional claims on the Company’s general assets (Note 2).
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
|
1.
|
Organization and nature of operations
|
ZW Data Action Technologies Inc. (f/k/a ChinaNet Online Holdings, Inc.) (the “Company”) was incorporated in the State of Texas in April 2006 and re-domiciled to become a Nevada corporation in October 2006. On June 26, 2009, the Company consummated a share exchange transaction with China Net Online Media Group Limited (the “Share Exchange”), a company organized under the laws of British Virgin Islands (“China Net BVI”). As a result of the Share Exchange, China Net BVI became a wholly owned subsidiary of the Company and the Company is now a holding company, which, through certain contractual arrangements with operating companies in the People’s Republic of China (the “PRC”), is engaged in providing Internet advertising, precision marketing, e-commerce online to offline (O2O) advertising and marketing services as well as the related data and technical services to small and medium enterprises (SMEs) in the PRC.
|
2.
|
|
Variable interest entities
|
Summarized below is the information related to the VIEs’ assets and liabilities reported in the Company’s condensed consolidated balance sheets as of June 30, 2021 and December 31, 2020, respectively:
|
|
|
June 30,
2021
|
|
|
December 31,
2020
|
|
|
|
|
US$(’000)
|
|
|
US$(’000)
|
|
|
|
|
(Unaudited)
|
|
|
|
|
|
|
Assets
|
|
|
|
|
|
|
|
|
|
Current assets:
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents
|
|
$
|
485
|
|
|
$
|
277
|
|
|
Accounts receivable, net
|
|
|
3,321
|
|
|
|
1,142
|
|
|
Prepayment and deposit to suppliers
|
|
|
3,022
|
|
|
|
2,818
|
|
|
Due from related parties
|
|
|
104
|
|
|
|
61
|
|
|
Other current assets
|
|
|
3
|
|
|
|
10
|
|
|
Total current assets
|
|
|
6,935
|
|
|
|
4,308
|
|
|
|
|
|
|
|
|
|
|
|
|
Long-term investments
|
|
|
450
|
|
|
|
67
|
|
|
Operating lease right-of-use assets
|
|
|
26
|
|
|
|
48
|
|
|
Property and equipment, net
|
|
|
90
|
|
|
|
32
|
|
|
Intangible assets, net
|
|
|
-
|
|
|
|
9
|
|
|
Long-term deposits and prepayments
|
|
|
85
|
|
|
|
-
|
|
|
Deferred tax assets, net
|
|
|
439
|
|
|
|
536
|
|
|
Total Assets
|
|
$
|
8,025
|
|
|
$
|
5,000
|
|
|
|
|
|
|
|
|
|
|
|
|
Liabilities
|
|
|
|
|
|
|
|
|
|
Current liabilities:
|
|
|
|
|
|
|
|
|
|
Accounts payable
|
|
$
|
1,015
|
|
|
$
|
270
|
|
|
Advance from customers
|
|
|
1,397
|
|
|
|
1,436
|
|
|
Accrued payroll and other accruals
|
|
|
93
|
|
|
|
168
|
|
|
Taxes payable
|
|
|
2,729
|
|
|
|
2,755
|
|
|
Operating lease liabilities
|
|
|
9
|
|
|
|
18
|
|
|
Lease payment liability related to short-term leases
|
|
|
109
|
|
|
|
108
|
|
|
Other current liabilities
|
|
|
55
|
|
|
|
213
|
|
|
Total current liabilities
|
|
|
5,407
|
|
|
|
4,968
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating lease liabilities-Non current
|
|
|
9
|
|
|
|
32
|
|
|
Total Liabilities
|
|
$
|
5,416
|
|
|
$
|
5,000
|
|
All of the VIEs' assets can be used to settle obligations of their primary beneficiary. Liabilities recognized as a result of consolidating these VIEs do not represent additional claims on the Company’s general assets.
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 six and three months ended June 30, 2021 and 2020, respectively:
|
|
|
Six Months Ended June 30,
|
|
|
Three Months Ended June 30,
|
|
|
|
|
2021
|
|
|
2020
|
|
|
2021
|
|
|
2020
|
|
|
|
|
US$(’000)
|
|
|
US$(’000)
|
|
|
US$(’000)
|
|
|
US$(’000)
|
|
|
|
|
(Unaudited)
|
|
|
(Unaudited)
|
|
|
(Unaudited)
|
|
|
(Unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenues
|
|
$
|
20,618
|
|
|
$
|
12,548
|
|
|
$
|
12,671
|
|
|
$
|
9,612
|
|
|
Cost of revenues
|
|
|
(23,132
|
)
|
|
|
(12,322
|
)
|
|
|
(14,394
|
)
|
|
|
(9,477
|
)
|
|
Total operating expenses
|
|
|
(712
|
)
|
|
|
(1,392
|
)
|
|
|
(322
|
)
|
|
|
(648
|
)
|
|
Net loss before allocation to noncontrolling interests
|
|
|
(3,407
|
)
|
|
|
(1,160
|
)
|
|
|
(2,126
|
)
|
|
|
(509
|
)
|
|
3.
|
|
Summary of significant accounting policies
|
The unaudited condensed consolidated interim financial statements are prepared and presented in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”).
The unaudited condensed consolidated interim financial information as of June 30, 2021 and for the six and three months ended June 30, 2021 and 2020 have been prepared pursuant to the rules and regulations of the Securities and Exchange Commission (the “SEC”). Certain information and footnote disclosures, which are normally included in complete consolidated financial statements prepared in accordance with U.S. GAAP, have been omitted pursuant to those rules and regulations. The unaudited condensed consolidated interim financial information should be read in conjunction with the financial statements and the notes thereto, included in the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2020, previously filed with the SEC (the “2020 Form 10-K”) on April 13, 2021.
In the opinion of management, all adjustments (which include normal recurring adjustments) necessary to present a fair statement of the Company’s condensed consolidated financial position as of June 30, 2021, its condensed consolidated results of operations for the six and three months ended June 30, 2021 and 2020, and its condensed consolidated cash flows for the six months ended June 30, 2021 and 2020, as applicable, have been made. The interim results of operations are not necessarily indicative of the operating results for the full fiscal year or any future periods.
|
b)
|
Principles of consolidation
|
The unaudited condensed consolidated interim financial statements include the accounts of all the subsidiaries and VIEs of the Company. All transactions and balances between the Company and its subsidiaries and VIEs have been eliminated upon consolidation.
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:
ZW DATA ACTION TECHNOLOGIES INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
|
|
|
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)
|
Fair value measurement
|
Liabilities measured at fair value on a recurring basis by level within the fair value hierarchy as of June 30, 2021 and December 31, 2020 are as follows:
|
|
|
|
|
|
|
Fair value measurement at reporting date using
|
|
|
|
|
As of
June 30, 2021
|
|
|
Quoted Prices
in Active Markets
for Identical Assets/Liabilities
(Level 1)
|
|
|
Significant
Other
Observable Inputs
(Level 2)
|
|
|
Significant
Unobservable
Inputs
(Level 3)
|
|
|
|
|
US$(’000)
|
|
|
US$(’000)
|
|
|
US$(’000)
|
|
|
US$(’000)
|
|
|
|
|
(Unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Warrant liabilities (Note 16)
|
|
|
6,597
|
|
|
|
-
|
|
|
|
-
|
|
|
|
6,597
|
|
|
|
|
|
|
|
|
Fair value measurement at reporting date using
|
|
|
|
|
As of
December 31, 2020
|
|
|
Quoted Prices
in Active Markets
for Identical Assets/Liabilities
(Level 1)
|
|
|
Significant
Other
Observable Inputs
(Level 2)
|
|
|
Significant
Unobservable
Inputs
(Level 3)
|
|
|
|
|
US$(’000)
|
|
|
US$(’000)
|
|
|
US$(’000)
|
|
|
US$(’000)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Warrant liabilities (Note 16)
|
|
|
1,505
|
|
|
|
-
|
|
|
|
-
|
|
|
|
1,505
|
|
The following tables present the Company’s revenues disaggregated by products and services and timing of revenue recognition:
ZW DATA ACTION TECHNOLOGIES INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
|
|
|
Six Months Ended June 30,
|
|
|
Three Months Ended June 30,
|
|
|
|
|
2021
|
|
|
2020
|
|
|
2021
|
|
|
2020
|
|
|
|
|
US$(’000)
|
|
|
US$(’000)
|
|
|
US$(’000)
|
|
|
US$(’000)
|
|
|
|
|
(Unaudited)
|
|
|
(Unaudited)
|
|
|
(Unaudited)
|
|
|
(Unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Internet advertising and related services
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
--distribution of the right to use search engine marketing service
|
|
|
18,965
|
|
|
|
9,298
|
|
|
|
12,100
|
|
|
|
7,310
|
|
|
--online advertising placements
|
|
|
3,595
|
|
|
|
3,250
|
|
|
|
2,193
|
|
|
|
2,302
|
|
|
--data and technical services
|
|
|
-
|
|
|
|
600
|
|
|
|
-
|
|
|
|
300
|
|
|
Ecommerce O2O advertising and marketing services
|
|
|
387
|
|
|
|
1,007
|
|
|
|
258
|
|
|
|
504
|
|
|
Technical solution services
|
|
|
-
|
|
|
|
645
|
|
|
|
-
|
|
|
|
-
|
|
|
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
|
|
|
-
|
|
|
|
645
|
|
|
|
-
|
|
|
|
-
|
|
|
Total revenues
|
|
$
|
22,947
|
|
|
$
|
14,800
|
|
|
$
|
14,551
|
|
|
$
|
10,416
|
|
Contract costs
For the six and three months ended June 30, 2021 and 2020, the Company did not have any significant incremental costs of obtaining contracts with customers incurred and/or costs incurred in fulfilling contracts with customers, that shall be recognized as an asset and amortized to expenses in a pattern that matches the timing of the revenue recognition of the related contract.
Contract liabilities
The table below summarized the movement of the Company’s contract liabilities for the six months ended June 30, 2021:
|
|
|
Contract liabilities
|
|
|
|
|
US$(’000)
|
|
|
|
|
|
|
|
|
Balance as of January 1, 2021
|
|
|
1,436
|
|
|
Exchange translation adjustment
|
|
|
14
|
|
|
Revenue recognized from beginning contract liability balances
|
|
|
(1,245
|
)
|
|
Advances received from customers related to unsatisfied performance obligations
|
|
|
1,334
|
|
|
Balance as of June 30, 2021 (Unaudited)
|
|
$
|
1,539
|
|
Advance from customers related to unsatisfied performance obligations are generally refundable. Refund of advance from customers were insignificant for the six and three months ended June 30, 2021 and 2020.
For the six and three months ended June 30, 2021 and 2020, there is no revenue recognized from performance obligations that were satisfied in prior periods.
|
g)
|
Research and development expenses
|
The Company accounts for expenses for the enhancement, maintenance and technical support to the Company’s Internet platforms and intellectual properties that are used in its daily operations in research and development expenses. Research and development costs are charged to expense when incurred. Expenses for research and development for the six months ended June 30, 2021 and 2020 were approximately US$0.16 million and US$0.33 million, respectively. Expenses for research and development for the three months ended June 30, 2021 and 2020 were approximately US$0.09 million and US$0.12 million, respectively.
ZW DATA ACTION TECHNOLOGIES INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
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
|
|
|
|
June 30,
2021
|
|
|
December 31,
2020
|
|
|
|
|
US$(’000)
|
|
|
US$(’000)
|
|
|
|
|
(Unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accounts receivable
|
|
|
5,914
|
|
|
|
6,654
|
|
|
Allowance for doubtful accounts
|
|
|
(2,207
|
)
|
|
|
(4,247
|
)
|
|
Accounts receivable, net
|
|
|
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 June 30, 2021 and December 31, 2020, the Company provided approximately US$2.21 million and US$4.25 million allowance for doubtful accounts, respectively, which were primarily related to the accounts receivable of the Company’s Internet 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 six and three months ended June 30, 2021, no allowance for doubtful accounts was provided. For the six and three months ended June 30, 2020, approximately US$0.75 million and US$0.34 million allowance for doubtful accounts was provided, respectively. For the three months ended June 30, 2021, the Company charged off approximately US$2.08 million accounts receivable against its related allowance, as all means of collection have been exhausted and the potential for recovery is considered remote.
|
5.
|
|
Prepayments and deposit to suppliers
|
|
|
|
June 30,
2021
|
|
|
December 31,
2020
|
|
|
|
|
US$(’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
|
|
|
|
-
|
|
|
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$1.5 million in the second half of 2021.
ZW DATA ACTION TECHNOLOGIES INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
|
6.
|
|
Due from related parties
|
|
|
|
June 30,
2021
|
|
|
December 31,
2020
|
|
|
|
|
US$(’000)
|
|
|
US$(’000)
|
|
|
|
|
(Unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Zhongwang Xiyue Technology (Beijing) Co., Ltd. (“Zhongwang Xiyue”)
|
|
|
61
|
|
|
|
61
|
|
|
Guangzhou Gong Xiang Technology Co., Ltd. (“Gong Xiang Technology”)
|
|
|
43
|
|
|
|
-
|
|
|
Due from related parties
|
|
|
104
|
|
|
|
61
|
|
Related parties of the Company represented the Company’s direct or indirect unconsolidated investee companies and entities that the Company’s officers or directors can exercise significant influence.
As of June 30, 2021 and December 31, 2020, due from Zhongwang Xiyue represented the outstanding receivable for advertising and marketing service that the Company provided to this related party in its normal course of business, which is on the same terms as those provided to its unrelated clients.
As of June 30, 2021, due from Gong Xiang Technology was a short-term working capital loan provided to this investee entity, which is expected to be repaid to the Company for the year ending December 31, 2021.
|
|
|
June 30, 2021
|
|
|
December 31,2020
|
|
|
|
|
Gross
|
|
|
Allowance for doubtful accounts
|
|
|
Net
|
|
|
Gross
|
|
|
Allowance for doubtful accounts
|
|
|
Net
|
|
|
|
|
US$(’000)
|
|
|
US$(’000)
|
|
|
US$(’000)
|
|
|
US$(’000)
|
|
|
US$(’000)
|
|
|
US$(’000)
|
|
|
|
|
(Unaudited)
|
|
|
(Unaudited)
|
|
|
(Unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Staff advances for business operations
|
|
|
9
|
|
|
|
-
|
|
|
|
9
|
|
|
|
18
|
|
|
|
-
|
|
|
|
18
|
|
|
Short-term loan to an unrelated party
|
|
|
453
|
|
|
|
-
|
|
|
|
453
|
|
|
|
1,444
|
|
|
|
-
|
|
|
|
1,444
|
|
|
Total
|
|
|
462
|
|
|
|
-
|
|
|
|
462
|
|
|
|
1,462
|
|
|
|
-
|
|
|
|
1,462
|
|
As of June 30, 2021, other current assets primarily include a temporary working capital loan that the Company provided to an unrelated party. This loan is unsecured, interest free, and is expected to be fully repaid to the Company for the year ending December 31, 2021.
|
|
|
Gong Xiang Technology
|
|
|
Xiao Peng Education
|
|
|
Business Opportunity Chain Guangzhou
|
|
|
Local Chain Xi’an
|
|
|
Total
|
|
|
|
|
US$(’000)
|
|
|
US$(’000)
|
|
|
US$(’000)
|
|
|
US$(’000)
|
|
|
US$(’000)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance as of January 1, 2021
|
|
|
-
|
|
|
|
-
|
|
|
|
29
|
|
|
|
38
|
|
|
|
67
|
|
|
Cash investment during the year
|
|
|
232
|
|
|
|
79
|
|
|
|
110
|
|
|
|
-
|
|
|
|
421
|
|
|
Disposed during the year
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
(38
|
)
|
|
|
(38
|
)
|
|
Balance as of June 30, 2021 (Unaudited)
|
|
|
232
|
|
|
|
79
|
|
|
|
139
|
|
|
|
-
|
|
|
|
450
|
|
As of June 30, 2021, except for long-term investments which were fully impaired, the Company beneficially owned a 15%, 17% and 19% equity interest in Guangzhou Gong Xiang Technology Co., Ltd. (“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.
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 May 2021, the Company disposed the 4.9% equity interest it owned in Local Chain Xi’an Information Technology Co., Ltd. (“Local Chain Xi’an”) to an unrelated party and recorded an approximately US$0.04 million disposal loss for the six and three months ended June 30, 2021.
|
9.
|
|
Property and equipment, net
|
|
|
|
June 30,
2021
|
|
|
December 31,
2020
|
|
|
|
|
US$(’000)
|
|
|
US$(’000)
|
|
|
|
|
(Unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Vehicles
|
|
|
873
|
|
|
|
811
|
|
|
Office equipment
|
|
|
908
|
|
|
|
894
|
|
|
Electronic devices
|
|
|
621
|
|
|
|
615
|
|
|
Property and equipment, cost
|
|
|
2,402
|
|
|
|
2,320
|
|
|
Less: accumulated depreciation
|
|
|
(2,286
|
)
|
|
|
(2,260
|
)
|
|
Property and equipment, net
|
|
|
116
|
|
|
|
60
|
|
Depreciation expenses for the six months ended June 30, 2021 and 2020 were approximately US$0.004 million and US$0.004 million, respectively. Depreciation expenses for the three months ended June 30, 2021 and 2020 were approximately US$0.003 million and US$0.002 million, respectively.
|
10.
|
|
Intangible assets, net
|
|
|
|
As of June 30, 2021 (Unaudited)
|
|
|
Items
|
|
Gross
Carrying
Value
|
|
|
Accumulated
Amortization
|
|
|
Impairment
|
|
|
Net
Carrying
Value
|
|
|
|
|
US$(’000)
|
|
|
US$(’000)
|
|
|
US$(’000)
|
|
|
US$(’000)
|
|
|
Intangible assets subject to amortization:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cloud compute software technology
|
|
|
1,437
|
|
|
|
(997
|
)
|
|
|
(440
|
)
|
|
|
-
|
|
|
Internet Ad tracking system
|
|
|
1,161
|
|
|
|
(58
|
)
|
|
|
-
|
|
|
|
1,103
|
|
|
Live streaming technology
|
|
|
1,500
|
|
|
|
(175
|
)
|
|
|
-
|
|
|
|
1,325
|
|
|
Licensed products use right
|
|
|
1,206
|
|
|
|
(196
|
)
|
|
|
-
|
|
|
|
1,010
|
|
|
Other computer software
|
|
|
121
|
|
|
|
(121
|
)
|
|
|
-
|
|
|
|
-
|
|
|
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
|
)
|
|
|
-
|
|
|
|
1,475
|
|
|
Licensed products use right
|
|
|
1,208
|
|
|
|
(135
|
)
|
|
|
-
|
|
|
|
1,073
|
|
|
Other computer software
|
|
|
120
|
|
|
|
(120
|
)
|
|
|
-
|
|
|
|
-
|
|
|
Total
|
|
$
|
4,251
|
|
|
$
|
(1,258
|
)
|
|
$
|
(436
|
)
|
|
$
|
2,557
|
|
Amortization expenses for the six months ended June 30, 2021 and 2020 were approximately US$0.28 million and US$0.41 million, respectively. Amortization expenses for the three months ended June 30, 2021 and 2020 were approximately US$0.17 million and US$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 5.68 years as of June 30, 2021, and assuming no further subsequent impairment of the underlying intangible assets, the estimated future amortization expenses is approximately US$0.33 million for the year ending December 31, 2021, approximately US$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 2018, the Company entered into technical development contracts with two unrelated entities for the development of two blockchain technology-based platform applications with a contract amount of US$4.50 million and RMB3.0 million (approximately US$0.46 million), respectively. These two blockchain technology-based applications are named OMG and Bo!News, respectively. As of June 30, 2021, in accordance with ASC 350-40 “Intangibles-Goodwill and Other-Internal-Use Software”, the Company capitalized approximately US$4.41 million development costs in the aggregate under these two contracts. During 2020, the Company further developed its Blockchain Integrated Framework (“BIF”) for retail business, to provide a framework platform for more accessible and efficient integration of small and medium sized retail business users. The Company plans to launch the upgraded Bo!News application by the end of the third fiscal quarter, which provides digitalized franchise management system for the SMEs. At the same time, BIF will be officially launched for SMEs’ smart retail business before the end of the year, which provides blockchain SaaS services, including: OMG membership card management, trusted and decentralized payment management and Non-Fungible Token (“NFT”) management services.
|
12.
|
|
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$1.0 million prepayment for the shares subscription of a 15.38% equity interest in an entity. This investment was made by the Company to jointly develop blockchain, key opinion leader and e-sports platform and to jointly operate IP data for e-sports and games with its two strategic partners. The transaction is expected to be consummated by the end of August 2021.
|
13.
|
|
Accrued payroll and other accruals
|
|
|
|
June 30,
2021
|
|
|
December 31,
2020
|
|
|
|
|
US$(’000)
|
|
|
US$(’000)
|
|
|
|
|
(Unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accrued payroll and staff welfare
|
|
|
179
|
|
|
|
229
|
|
|
Accrued operating expenses
|
|
|
101
|
|
|
|
260
|
|
|
|
|
|
280
|
|
|
|
489
|
|
As of June 30, 2021 and December 31, 2020, taxes payable consists of:
ZW DATA ACTION TECHNOLOGIES INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
|
|
|
June 30,
2021
|
|
|
December 31,
2020
|
|
|
|
|
US$(’000)
|
|
|
US$(’000)
|
|
|
|
|
(Unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Turnover tax and surcharge payable
|
|
|
1,313
|
|
|
|
1,353
|
|
|
Enterprise income tax payable
|
|
|
2,095
|
|
|
|
2,077
|
|
|
Total taxes payable
|
|
|
3,408
|
|
|
|
3,430
|
|
For the six and three months ended June 30, 2021 and 2020, the Company’s income tax benefit/(expenses) consisted of:
|
|
|
Six Months Ended June 30,
|
|
|
Three Months Ended June 30,
|
|
|
|
|
2021
|
|
|
2020
|
|
|
2021
|
|
|
2020
|
|
|
|
|
US$(’000)
|
|
|
US$(’000)
|
|
|
US$(’000)
|
|
|
US$(’000)
|
|
|
|
|
(Unaudited)
|
|
|
(Unaudited)
|
|
|
(Unaudited)
|
|
|
(Unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current
|
|
|
-
|
|
|
|
(57
|
)
|
|
|
-
|
|
|
|
26
|
|
|
Deferred
|
|
|
40
|
|
|
|
(11
|
)
|
|
|
22
|
|
|
|
(16
|
)
|
|
Income tax benefit/(expenses)
|
|
|
40
|
|
|
|
(68
|
)
|
|
|
22
|
|
|
|
10
|
|
The Company’s deferred tax assets as of June 30, 2021 and December 31, 2020 were as follows:
|
|
|
June 30,
2021
|
|
|
December 31,
2020
|
|
|
|
|
US$(’000)
|
|
|
US$(’000)
|
|
|
|
|
(Unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Tax effect of net operating losses carried forward
|
|
|
12,160
|
|
|
|
10,123
|
|
|
Operating lease cost
|
|
|
16
|
|
|
|
-
|
|
|
Bad debts provision
|
|
|
331
|
|
|
|
728
|
|
|
Valuation allowance
|
|
|
(11,855
|
)
|
|
|
(10,245
|
)
|
|
Deferred tax assets, net
|
|
|
652
|
|
|
|
606
|
|
The U.S. holding company has incurred aggregate NOLs of approximately US$30.4 million and US$23.3 million as of June 30, 2021 and December 31, 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$24.3 million and US$22.5 million as of June 30, 2021 and December 31, 2020, respectively. The losses carryforwards gradually expire over time, the last of which expires in 2031 due to certain subsidiary enjoys the High and New Technology Enterprise’s privileged NOLs carryforward policy. The related deferred tax assets were calculated based on the respective 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$11.9 million and US$10.2 million valuation allowance as of June 30, 2021 and December 31, 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 six and three months ended June 30, 2021, the Company recorded approximately US$1.96 million and US$1.65 million deferred tax valuation allowance, respectively. For the six and three months ended June 30, 2020, the Company recorded approximately US$0.76 million and US$0.21 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.
|
|
The Financing and warrant liabilities
|
The February 2021 Financing:
On February 18, 2021 (the “Closing Date”), the Company consummated a registered direct offering of 5,212,000 shares of the Company’s common stock to certain institutional investors at a purchase price of US$3.59 per share (the “February 2021 Financing”). As part of the transaction, the Company also issued to the investors warrants to purchase up to 2,606,000 shares of the Company’s common stock at an exercise price of US$3.59 per share (the “2021 Investor Warrants”). The 2021 Investor Warrants are exercisable at any time on or after February 18, 2021 and on or prior to the close of business on August 18, 2024 (the third and one-half years anniversary of the Closing Date). The Company received gross proceeds of approximately US$18.7 million from the February 2021 Financing.
The placement agent of the February 2021 Financing received (i) a placement fee in the amount equal to 7% of the gross proceeds and (ii) warrants to purchase up to 364,840 shares of the Company’s common stock at an exercise price of US$4.4875 per share. (the “2021 Placement Agent Warrants” and together with the 2021 Investor Warrants, the “2021 Warrants”). The 2021 Placement Agent Warrants are exercisable at any time on or after August 18, 2021 (the six-month anniversary of the Closing Date) and on or prior to the close of business on August 18, 2024 (the third and one-half years anniversary of the Closing Date).
The initial exercise prices of the 2021 Warrants are subject to anti-dilution provisions that require adjustment of the number of shares of common stock that may be acquired upon exercise of the 2021 Warrants, or to the exercise price of such shares, or both, to reflect stock dividends and splits, subsequent rights offerings, pro-rata distributions, and certain fundamental transactions. The 2021 Warrants also contain “full ratchet” price protection in the event of subsequent issuances below the applicable exercise price (the “Down round feature”).
The 2021 Warrants may not be exercised if it would result in the holder beneficially owning more than 4.99% of the Company’s outstanding common shares (the “Beneficial Ownership Limitation”). The holder of the 2021 Warrants, upon notice to the Company, may increase or decrease the Beneficial Ownership Limitation, provided that the Beneficial Ownership Limitation in no event exceeds 9.99% of the Company’s outstanding common shares. Any increase in the Beneficial Ownership Limitation will not be effective until the 61st day after such notice is delivered to the Company.
Accounting for securities issued in the February 2021 Financing
The Company determined that the Company’s common stock issued in the February 2021 Financing should be classified as permanent equity as there was no redemption provision at the option of the holders that is not within the control the Company on or after an agreed upon date.
The Company analyzed the 2021 Warrants issued in the February 2021 Financing in accordance with ASC Topic 815 “Derivatives and Hedging”. In accordance with ASC Topic 815, the Company determined that the 2021 Warrants should not be considered index to its own stock, as the strike price of the 2021 Warrants is dominated in a currency (U.S. dollar) other than the functional currency of the Company (Renminbi or Yuan). As a result, the 2021 Warrants does not meet the scope exception of ASC Topic 815, therefore, should be accounted for as derivative liabilities and measure at fair value with changes in fair value be recorded in earnings in each reporting period.
ZW DATA ACTION TECHNOLOGIES INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
Fair value of the warrants
The Company used Binomial model to determine the fair value of the 2021 Warrants based on the assumptions summarized as below:
|
|
|
As of February 18, 2021
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2021 Investor Warrants
|
|
|
2021 Placement Agent Warrants
|
|
|
|
|
|
|
|
|
|
|
|
|
Stock price
|
|
$
|
4.48
|
|
|
$
|
4.48
|
|
|
Years to maturity
|
|
|
3.50
|
|
|
|
3.50
|
|
|
Risk-free interest rate
|
|
|
0.26
|
%
|
|
|
0.26
|
%
|
|
Dividend yield
|
|
|
-
|
|
|
|
-
|
|
|
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
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
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
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
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
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
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
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
Expected volatility
|
|
|
143
|
%
|
|
|
99
|
%
|
|
|
60
|
%
|
|
|
112
|
%
|
|
|
78
|
%
|
|
|
80
|
%
|
|
Exercise Price
|
|
$
|
1.4927
|
|
|
$
|
1.4927
|
|
|
$
|
1.4927
|
|
|
$
|
1.4927
|
|
|
$
|
1.4927
|
|
|
$
|
1.4927
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fair value of the warrant
|
|
$
|
0.02
|
|
|
$
|
0.07
|
|
|
$
|
0.11
|
|
|
$
|
0.20
|
|
|
$
|
0.12
|
|
|
$
|
0.28
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Warrant Liabilities (US$’000)
|
|
$
|
13
|
|
|
$
|
45
|
|
|
$
|
71
|
|
|
$
|
26
|
|
|
$
|
16
|
|
|
$
|
36
|
|
Changes in fair value of warrant liabilities
Six and Three Months Ended June 30, 2021 (Unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Change in Fair Value
(gain)/loss
|
|
|
|
|
|
As of
June 31, 2021
|
|
|
|
As of
March 31, 2021
|
|
|
|
As of
February 18, 2021
|
|
|
|
As of
December 31, 2020
|
|
|
Six Months Ended
June 30, 2021
|
|
|
Three Months Ended
June 30, 2021
|
|
|
|
|
(US$’000)
|
|
|
(US$’000)
|
|
|
(US$’000)
|
|
|
(US$’000)
|
|
|
(US$’000)
|
|
|
(US$’000)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Warrants issued in the February 2021 Financing:
|
|
|
--Investor Warrants
|
|
|
3,257
|
|
|
|
5,942
|
|
|
|
10,476
|
|
|
|
*
|
|
|
|
(7,219
|
)
|
|
|
(2,685
|
)
|
|
--Placement Agent Warrants
|
|
|
431
|
|
|
|
817
|
|
|
|
1,445
|
|
|
|
*
|
|
|
|
(1,014
|
)
|
|
|
(386
|
)
|
|
Warrants issued in the 2020 Financing:
|
|
|
--Investor Warrants
|
|
|
2,420
|
|
|
|
3,370
|
|
|
|
*
|
|
|
|
1,279
|
|
|
|
1,141
|
|
|
|
(950
|
)
|
|
--Placement Agent Warrants
|
|
|
423
|
|
|
|
590
|
|
|
|
*
|
|
|
|
224
|
|
|
|
199
|
|
|
|
(167
|
)
|
|
Warrants issued in the 2018 Financing:
|
|
|
--Placement Agent Warrants
|
|
|
66
|
|
|
|
200
|
|
|
|
*
|
|
|
|
2
|
|
|
|
64
|
|
|
|
(134
|
)
|
|
|
|
|
6,597
|
|
|
|
10,919
|
|
|
|
11,921
|
|
|
|
1,505
|
|
|
|
(6,829
|
)
|
|
|
(4,322
|
)
|
ZW DATA ACTION TECHNOLOGIES INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
Six and Three Months Ended June 30, 2020 (Unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
Change in Fair Value (gain)/loss
|
|
|
|
|
|
As of
June 30, 2020
|
|
|
|
As of
March 31, 2020
|
|
|
|
As of
December 31, 2019
|
|
|
Six Months Ended
June 30, 2020
|
|
|
Three Months Ended
June 30, 2020
|
|
|
|
|
(US$’000)
|
|
|
(US$’000)
|
|
|
(US$’000)
|
|
|
(US$’000)
|
|
|
(US$’000)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Warrants issued in the 2018 Financing:
|
|
|
--Investor Warrants
|
|
|
13
|
|
|
|
45
|
|
|
|
71
|
|
|
|
(58
|
)
|
|
|
(32
|
)
|
|
--Placement Agent Warrants
|
|
|
26
|
|
|
|
16
|
|
|
|
36
|
|
|
|
(10
|
)
|
|
|
10
|
|
|
Warrant liabilities
|
|
|
39
|
|
|
|
61
|
|
|
|
107
|
|
|
|
(68
|
)
|
|
|
(22
|
)
|
Warrants issued and outstanding as of June 30, 2021 and their movements during the six months then ended are as follows:
|
|
|
Warrant Outstanding
|
|
|
Warrant Exercisable
|
|
|
|
|
Number of underlying shares
|
|
|
Weighted
Average
Remaining
Contractual
Life (Years)
|
|
|
Weighted
Average
Exercise
Price
|
|
|
Number of underlying shares
|
|
|
Weighted
Average
Remaining
Contractual
Life (Years)
|
|
|
Weighted
Average
Exercise
Price
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance, January 1, 2021
|
|
|
2,159,865
|
|
|
|
2.78
|
|
|
$
|
2.00
|
|
|
|
129,000
|
|
|
|
0.05
|
|
|
$
|
1.4927
|
|
|
Granted/Vested
|
|
|
2,970,840
|
|
|
|
3.14
|
|
|
$
|
3.70
|
|
|
|
4,636,865
|
|
|
|
2.84
|
|
|
$
|
2.91
|
|
|
Forfeited
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
Exercised
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
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 June 30, 2021 and December 31, 2020, net assets restricted in the aggregate, which include paid-in capital and statutory reserve funds of the Company’s PRC subsidiaries and VIEs that are included in the Company’s consolidated net assets, were approximately US$13.2 million and US$8.2 million, respectively.
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.
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 (1996), as amended in August 2008, or the Exchange Rules;
|
|
|
●
|
Administration Rules of the Settlement, Sale and Payment of Foreign Exchange (1996), or the Administration Rules.
|
Currently, under the Administration Rules, Renminbi is freely convertible for current account items, including the distribution of dividends, interest payments, trade and service related foreign exchange transactions, but not for capital account items, such as direct investments, loans, repatriation of investments and investments in securities outside of China, unless the prior approval of the State Administration of Foreign Exchange (the “SAFE”) is obtained and prior registration with the SAFE is made. Foreign-invested enterprises like Rise King WFOE that need foreign exchange for the distribution of profits to its shareholders may effect payment from their foreign exchange accounts or purchase and pay foreign exchange rates at the designated foreign exchange banks to their foreign shareholders by producing board resolutions for such profit distribution. Based on their needs, foreign-invested enterprises are permitted to open foreign exchange settlement accounts for current account receipts and payments of foreign exchange along with specialized accounts for capital account receipts and payments of foreign exchange at certain designated foreign exchange banks.
Although the current Exchange Rules allow 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$0.10 million and US$0.06 million for the six months ended June 30, 2021 and 2020, respectively. The total amounts for such employee benefits were approximately US$0.05 million and US$0.02 million for the three months ended June 30, 2021 and 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 deposits and loans to unrelated parties. As of June 30, 2021, 41% of the Company’s cash and cash equivalents were held by major financial institutions located in 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 and deposits and loans to unrelated parties are significantly 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 six and three months ended June 30, 2021 and 2020, respectively:
|
|
|
Customer A
|
|
|
Customer B
|
|
|
Customer C
|
|
|
Customer D
|
|
|
Customer E
|
|
|
Customer F
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Six Months Ended June 30, 2021
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenues, customer concentration risk
|
|
|
11
|
%
|
|
|
14
|
%
|
|
|
*
|
|
|
|
-
|
|
|
|
-
|
|
|
|
*
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended June 30, 2021
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenues, customer concentration risk
|
|
|
14
|
%
|
|
|
12
|
%
|
|
|
*
|
|
|
|
-
|
|
|
|
-
|
|
|
|
*
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Six Months Ended June 30, 2020
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenues, customer concentration risk
|
|
|
-
|
|
|
|
-
|
|
|
|
*
|
|
|
|
*
|
|
|
|
*
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended June 30, 2020
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenues, customer concentration risk
|
|
|
-
|
|
|
|
-
|
|
|
|
*
|
|
|
|
*
|
|
|
|
*
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As of June 30, 2021
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accounts receivable, customer concentration risk
|
|
|
62
|
%
|
|
|
-
|
|
|
|
17
|
%
|
|
|
-
|
|
|
|
-
|
|
|
|
10
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As of December 31, 2020
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accounts receivable, customer concentration risk
|
|
|
-
|
|
|
|
-
|
|
|
|
28
|
%
|
|
|
27
|
%
|
|
|
21
|
%
|
|
|
-
|
|
* Less than 10%.
- No transaction incurred for the reporting period/no balance existed as of the reporting date.
Concentration of suppliers
The following tables summarized the information about the Company’s concentration of suppliers for the six and three months ended June 30, 2021 and 2020, respectively:
|
|
|
Supplier A
|
|
|
Supplier B
|
|
|
|
|
|
|
|
|
|
|
|
|
Six Months Ended June 30, 2021
|
|
|
|
|
|
|
|
|
|
Cost of revenues, supplier concentration risk
|
|
|
73
|
%
|
|
|
12
|
%
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended June 30, 2021
|
|
|
|
|
|
|
|
|
|
Cost of revenues, supplier concentration risk
|
|
|
86
|
%
|
|
|
*
|
|
|
|
|
|
|
|
|
|
|
|
|
Six Months Ended June 30, 2020
|
|
|
|
|
|
|
|
|
|
Cost of revenues, supplier concentration risk
|
|
|
-
|
|
|
|
78
|
%
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended June 30, 2020
|
|
|
|
|
|
|
|
|
|
Cost of revenues, supplier concentration risk
|
|
|
-
|
|
|
|
81
|
%
|
* Less than 10%.
- No transaction incurred for the reporting period/no balance existed as of the reporting date.
|
20.
|
|
Commitments and contingencies
|
In 2018, the Company entered into contracts with two unrelated third parties in relation to the development of the Company’s blockchain technology-powered platform applications. Total contract amount of these two contracts was approximately US$4.96 million. As of June 30, 2021, the Company had paid approximately US$4.41 million in the aggregate. The remaining unpaid contract amount is expected to be paid during the year ending December 31, 2021.
ZW DATA ACTION TECHNOLOGIES INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
The Company is currently not a party to any legal or administrative proceedings and are not aware of any pending or threatened legal or administrative proceedings against us in all material aspects. The Company may from time to time become a party to various legal or administrative proceedings arising in its ordinary course of business.
The Company follows ASC Topic 280 “Segment Reporting”, which requires that companies disclose segment data based on how management makes decisions about allocating resources to segments and evaluating their performance. Reportable operating segments include components of an entity about which separate financial information is available and which operating results are regularly reviewed by the chief operating decision maker (“CODM”), the Company’s Chief Executive Officer, to make decisions about resources to be allocated to the segment and assess each operating segment’s performance.
Six Months Ended June 30, 2021 (Unaudited)
|
|
|
Internet Ad
and related service
|
|
|
Ecommerce
O2O Ad and
marketing
services
|
|
|
Blockchain technology
|
|
|
Corporate
|
|
|
Inter-segment and reconciling item
|
|
|
Total
|
|
|
|
|
US$
(‘000)
|
|
|
US$
(‘000)
|
|
|
US$
(‘000)
|
|
|
US$
(‘000)
|
|
|
US$
(‘000)
|
|
|
US$
(‘000)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenues
|
|
|
22,560
|
|
|
|
387
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
22,947
|
|
|
Cost of revenues
|
|
|
23,132
|
|
|
|
750
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
23,882
|
|
|
Total operating expenses
|
|
|
590
|
|
|
|
658
|
|
|
|
1
|
|
|
|
7,910
|
(1)
|
|
|
-
|
|
|
|
9,159
|
|
|
Depreciation and amortization expense included in total operating expenses
|
|
|
130
|
|
|
|
150
|
|
|
|
1
|
|
|
|
1
|
|
|
|
-
|
|
|
|
282
|
|
|
Operating loss
|
|
|
(1,162
|
)
|
|
|
(1,021
|
)
|
|
|
(1
|
)
|
|
|
(7,910
|
)
|
|
|
-
|
|
|
|
(10,094
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Change in fair value of warrant liabilities
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
6,829
|
|
|
|
-
|
|
|
|
6,829
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss
|
|
|
(966
|
)
|
|
|
(1,021
|
)
|
|
|
(2
|
)
|
|
|
(970
|
)
|
|
|
-
|
|
|
|
(2,959
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Expenditure for long-term assets
|
|
|
1,220
|
|
|
|
-
|
|
|
|
-
|
|
|
|
161
|
|
|
|
-
|
|
|
|
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$6.86 million share-based compensation expenses.
ZW DATA ACTION TECHNOLOGIES INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
Three Months Ended June 30, 2021 (Unaudited)
|
|
|
Internet Ad.
and related service
|
|
|
Ecommerce
O2O Ad and
marketing
services
|
|
|
Blockchain technology
|
|
|
Corporate
|
|
|
Inter-segment and reconciling item
|
|
|
Total
|
|
|
|
|
US$
(‘000)
|
|
|
US$
(‘000)
|
|
|
US$
(‘000)
|
|
|
US$
(‘000)
|
|
|
US$
(‘000)
|
|
|
US$
(‘000)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenues
|
|
|
14,293
|
|
|
|
258
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
14,551
|
|
|
Cost of revenues
|
|
|
14,394
|
|
|
|
375
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
14,769
|
|
|
Total operating expenses
|
|
|
207
|
|
|
|
455
|
|
|
|
-
|
|
|
|
7,399
|
(1)
|
|
|
-
|
|
|
|
8,061
|
|
|
Depreciation and amortization expense included in total operating expenses
|
|
|
95
|
|
|
|
75
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
170
|
|
|
Operating loss
|
|
|
(308
|
)
|
|
|
(572
|
)
|
|
|
-
|
|
|
|
(7,399
|
)
|
|
|
-
|
|
|
|
(8,279
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Change in fair value of warrant liabilities
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
4,322
|
|
|
|
-
|
|
|
|
4,322
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss
|
|
|
(12
|
)
|
|
|
(572
|
)
|
|
|
(1
|
)
|
|
|
(3,061
|
)
|
|
|
-
|
|
|
|
(3,646
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Expenditure for long-term assets
|
|
|
60
|
|
|
|
-
|
|
|
|
-
|
|
|
|
161
|
|
|
|
-
|
|
|
|
221
|
|
(1) Including approximately US$6.76 million share-based compensation expenses.
Six Months Ended June 30, 2020 (Unaudited)
|
|
|
Internet Ad
and related service
|
|
|
Ecommerce
O2O Ad and
marketing
services
|
|
|
Blockchain technology
|
|
|
Corporate
|
|
|
Inter-segment and reconciling item
|
|
|
Total
|
|
|
|
|
US$
(‘000)
|
|
|
US$
(‘000)
|
|
|
US$
(‘000)
|
|
|
US$
(‘000)
|
|
|
US$
(‘000)
|
|
|
US$
(‘000)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenues
|
|
|
13,148
|
|
|
|
1,007
|
|
|
|
-
|
|
|
|
645
|
|
|
|
-
|
|
|
|
14,800
|
|
|
Cost of revenues
|
|
|
12,853
|
|
|
|
750
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
13,603
|
|
|
Total operating expenses
|
|
|
1,952
|
|
|
|
9
|
|
|
|
4
|
|
|
|
2,528
|
(1)
|
|
|
-
|
|
|
|
4,493
|
|
|
Depreciation and amortization expense included in total operating expenses
|
|
|
412
|
|
|
|
-
|
|
|
|
1
|
|
|
|
2
|
|
|
|
-
|
|
|
|
415
|
|
|
Operating (loss)/income
|
|
|
(1,657
|
)
|
|
|
248
|
|
|
|
(4
|
)
|
|
|
(1,883
|
)
|
|
|
-
|
|
|
|
(3,296
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Change in fair value of warrant liabilities
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
68
|
|
|
|
-
|
|
|
|
68
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Expenditure for long-term assets
|
|
|
-
|
|
|
|
-
|
|
|
|
302
|
|
|
|
-
|
|
|
|
-
|
|
|
|
302
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net (loss)/income
|
|
|
(1,650
|
)
|
|
|
204
|
|
|
|
(4
|
)
|
|
|
(1,830
|
)
|
|
|
-
|
|
|
|
(3,280
|
)
|
(1) Including approximately US$1.99 million share-based compensation expenses.
ZW DATA ACTION TECHNOLOGIES INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
Three Months Ended June 30, 2020 (Unaudited)
|
|
|
Internet Ad
and related service
|
|
|
Ecommerce
O2O Ad and
marketing
services
|
|
|
Blockchain technology
|
|
|
Corporate
|
|
|
Inter-segment and reconciling item
|
|
|
Total
|
|
|
|
|
US$
(‘000)
|
|
|
US$
(‘000)
|
|
|
US$
(‘000)
|
|
|
US$
(‘000)
|
|
|
US$
(‘000)
|
|
|
US$
(‘000)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenues
|
|
|
9,912
|
|
|
|
504
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
10,416
|
|
|
Cost of revenues
|
|
|
9,743
|
|
|
|
375
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
10,118
|
|
|
Total operating expenses
|
|
|
930
|
|
|
|
5
|
|
|
|
3
|
|
|
|
380
|
(1)
|
|
|
-
|
|
|
|
1,318
|
|
|
Depreciation and amortization expense included in total operating expenses
|
|
|
206
|
|
|
|
-
|
|
|
|
1
|
|
|
|
1
|
|
|
|
-
|
|
|
|
208
|
|
|
Operating (loss)/income
|
|
|
(761
|
)
|
|
|
124
|
|
|
|
(3
|
)
|
|
|
(380
|
)
|
|
|
-
|
|
|
|
(1,020
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Change in fair value of warrant liabilities
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
22
|
|
|
|
-
|
|
|
|
22
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net (loss)/income
|
|
|
(757
|
)
|
|
|
101
|
|
|
|
(3
|
)
|
|
|
(311
|
)
|
|
|
-
|
|
|
|
(970
|
)
|
(1) Including approximately US$0.07 million share-based compensation expenses.
Basic and diluted (loss per share for each of the periods presented are calculated as follows (All amounts, except number of shares and per share data, are presented in thousands of U.S. dollars):
|
|
|
Six Months Ended June 30,
|
|
|
Three Months Ended June 30,
|
|
|
|
|
2021
|
|
|
2020
|
|
|
2021
|
|
|
2020
|
|
|
|
|
(Unaudited)
|
|
|
(Unaudited)
|
|
|
(Unaudited)
|
|
|
(Unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss attributable to ZW Data Action Technologies Inc. (numerator for basic and diluted loss per share)
|
|
$
|
(2,961
|
)
|
|
$
|
(3,278
|
)
|
|
$
|
(3,646
|
)
|
|
$
|
(968
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average number of common shares outstanding -Basic and diluted
|
|
|
30,727,546
|
|
|
|
21,044,666
|
|
|
|
32,925,488
|
|
|
|
21,691,926
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loss per share-Basic and diluted
|
|
$
|
(0.10
|
)
|
|
$
|
(0.16
|
)
|
|
$
|
(0.11
|
)
|
|
$
|
(0.04
|
)
|
For the six and three months ended June 30, 2021 and 2020, the diluted loss per share calculation did not include any outstanding warrants and options to purchase the Company’s common stock, because their effect was anti-dilutive.
ZW DATA ACTION TECHNOLOGIES INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
|
23.
|
|
Share-based compensation expenses
|
In May 2021, under its 2020 Omnibus Securities and Incentive Plan, the Company granted and issued 3.99 million fully-vested shares of the Company’s restricted common stock to its management and employees for their services provided to the Company. These shares were valued at the closing bid price of the Company’s common stock on the date of grant, which was US$1.67 per share. Total compensation expenses recognized was approximately US$6.66 million for both the six and three months ended June 30, 2021.
In March 2021, under its 2020 Omnibus Securities and Incentive Plan, the Company granted and issued 0.03 million fully-vested shares of the Company’s restricted common stock to one of the Company’s independent directors for his service to the Company for the year ending December 31, 2021. These shares were valued at the closing bid price of the Company’s common stock on the date of grant, which was US$3.13 per share. Total compensation expenses amortized for the six and three months ended June 30, 2021 was approximately US$0.05 million and US$0.02 million, respectively.
For the six and three months ended June 30, 2021, the Company also amortized an approximately US$0.15 million and US$0.08 million compensation expense in the aggregate, respectively, which was related to fully-vested and nonforfeitable restricted common stock granted and issued to two of its service providers in March 2020 and August 2020, respectively.
During the first half year of 2020, under its 2015 Omnibus Securities and Incentive Plan, the Company granted and issued in the aggregate of approximately 1.63 million fully-vested shares of the Company’s restricted common stock to its management, employees and directors. These shares were valued at the closing bid price of the Company’s common stock on the respective date of grant. Total compensation expenses of approximately US$1.91 and US$0.01 million was recorded for the six and three months ended June 30, 2020, respectively.
In March 2020, the Company granted and issued 0.43 million shares of the Company restricted common stock to a management consulting and advisory service provider in exchange for its service for a two-year period. According to the service agreement, these shares are fully-vested upon issuance at the contract inception and shall not be subject to forfeiture upon termination of the agreement. The Company valued these shares at US$1.11 per share, the closing bid price of the Company’s common stock on the grant date of these shares and recorded the related total cost of approximately US$0.48 million as a prepayment asset in prepayment and deposit to suppliers account upon grant and issuance of these fully-vested and nonforfeitable shares. Total compensation expenses amortized for the six and three months ended June 30, 2020 was approximately US$0.08 million and US$0.06 million, respectively.
The table below summarized share-based compensation expenses recorded for the six and three months ended June 30, 2021 and 2020, respectively:
|
|
|
Six Months Ended June 30,
|
|
|
Three Months Ended June 30,
|
|
|
|
|
2021
|
|
|
2020
|
|
|
2021
|
|
|
2020
|
|
|
|
|
US$(’000)
|
|
|
US$(’000)
|
|
|
US$(’000)
|
|
|
US$(’000)
|
|
|
|
|
(Unaudited)
|
|
|
(Unaudited)
|
|
|
(Unaudited)
|
|
|
(Unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Sales and marketing expenses
|
|
|
-
|
|
|
|
122
|
|
|
|
-
|
|
|
|
-
|
|
|
General and administrative expenses
|
|
|
6,857
|
|
|
|
1,719
|
|
|
|
6,757
|
|
|
|
68
|
|
|
Research and development expenses
|
|
|
-
|
|
|
|
146
|
|
|
|
-
|
|
|
|
-
|
|
|
Total
|
|
|
6,857
|
|
|
|
1,987
|
|
|
|
6,757
|
|
|
|
68
|
|
The aggregate unrecognized share-based compensation expenses as of June 30, 2021 was approximately US$0.21 million, of which approximately US$0.17 million will be recognized for the year ending December 31, 2021 and approximately US$0.04 million will be recognized for the year ending December 31, 2022.
ZW DATA ACTION TECHNOLOGIES INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
Options issued and outstanding as of June 30, 2021 and their movements during the six months then ended are as follows:
|
|
|
Option Outstanding
|
|
|
Option Exercisable
|
|
|
|
|
Number of underlying shares
|
|
|
Weighted
Average
Remaining
Contractual
Life (Years)
|
|
|
Weighted
Average
Exercise
Price
|
|
|
Number of underlying shares
|
|
|
Weighted
Average
Remaining
Contractual
Life (Years)
|
|
|
Weighted
Average
Exercise
Price
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance, January 1, 2021
|
|
|
277,976
|
|
|
|
0.91
|
|
|
$
|
3.00
|
|
|
|
277,976
|
|
|
|
0.91
|
|
|
$
|
3.00
|
|
|
Granted/Vested
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
Expired
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
Exercised
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
Balance, June 30, 2021 (Unaudited)
|
|
|
277,976
|
|
|
|
0.41
|
|
|
$
|
3.00
|
|
|
|
277,976
|
|
|
|
0.41
|
|
|
$
|
3.00
|
|
In July 2021, the Company issued 0.04 million shares of the Company’s restricted common stock for the cashless settlement of the 129,000 Placement Agent Warrants issued in the 2018 Financing.
The Company primarily conducts its operations in the PRC. In January 2020, an outbreak of a novel coronavirus (COVID-19) surfaced in Wuhan City, Hubei province of the PRC, and spread all over the country during the first fiscal quarter of 2020. The spread of COVID-19 resulted in the World Health Organization declaring the outbreak of COVID-19 as a global pandemic. The Company’s principal business activity is to provide advertising and marketing services to small and medium enterprises in the PRC, which is particularly sensitive to changes in general economic conditions. The pandemic of COVID-19 in the PRC had caused and may continue to cause decreases in or delays in advertising spending, and had negatively impacted and may continue to negatively impact the Company’s short-term ability to grow revenues. Although the Chinese government had declared the COVID-19 outbreak largely under control within its border since the second fiscal quarter of 2020, the Company will continue to assess its financial impacts for the future periods. There can be no assurance that this assessment will enable the Company to avoid part or all of any impact from the spread of COVID-19 or its consequences, including downturns in business sentiment generally or in the Company’s sector in particular.
Except for the above mentioned matters, no other material event which are required to be adjusted or disclosed as of the date of this consolidated financial statements.