美国
证券和交易委员会
华盛顿特区20549
表格
截至季度结束日期的财务报告
or
在从____到_____的过渡期间
委托文件编号：001-39866
(根据其章程规定的注册人准确名称)
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（设立或组织的其他管辖区域） |
（纳税人识别号码） |
（总部地址）（邮政编码）
+
(注册人电话号码，包括区号)
不适用
（前名称、地址及财政年度，如果自上次报告以来有更改）
在法案第12(b)条的规定下注册的证券：
|
每个类别的标题 |
交易标的 |
在其上注册的交易所的名称 |
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请勾选以指示注册人（1）在过去12个月内（或在注册人被要求提交此类报告的较短期间内）是否已提交根据《1934年证券交易法》第13条或第15(d)条要求提交的所有报告，以及（2）在过去90天内是否受到此类提交要求：
请在以下勾选方框表示注册人是否已在Regulation S-T Rule 405规定的前12个月(或在注册人需要提交此类文件的较短期间内)提交了每个互动数据文件。
请勾选注册者是大型加速文件提交者、加速文件提交者、非加速文件提交者、小型报告公司还是新兴增长公司。请参见《证交易法》规则120亿.2 中“大型加速文件提交者”、“加速文件提交者”、“小型报告公司”和“新兴增长公司”的定义。
| 大型加速量申报人 ☐ | 加速量申报人 ☐ |
| 小型报告公司 |
|
| 新兴成长公司 |
如果是新兴成长型公司，在选中复选标记的同时，如果公司已选择不使用根据证券交易法第13(a)条提供的任何新的或修订后的财务会计准则的延长过渡期来符合新的或修订后的财务会计准则，则表明该公司已选择不使用根据证券交易法第13(a)条提供的任何新的或修订后的财务会计准则的延长过渡期来符合新的或修订后的财务会计准则。☐
请在方框中标记注册方是否为壳公司（如《交易所法》规则120亿.2所定义）。 是
截至2024年11月19日，注册方拥有
目录
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页面 |
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公开公司会计监督委员会（PCAOB）历来无法对我们的审计师进行审查，这是针对他们为我们的基本报表所执行的审计工作，而PCAOb无法对我们的审计师进行审查，使我们的投资者无法获得此类审查的好处。 “PCAOB”历史上，公开公司会计监督委员会（PCAOB）无法检查我们的审计师，针对他们为我们的基本报表执行的审计工作，而PCAOb无法检查我们的审计师，使我们的投资者无法从这些检查中获益。
我们的审计师，ARK Pro CPA & Co.（“ARK”），是我公司SEC备案文件中出具审计报告的独立注册会计师，作为在美国上市公司的审计师，以及在美国注册的会计师事务所，受美国法律约束，根据该法律，PCAOB定期开展检查，评估其遵守适用专业准则的情况。我们的审计师位于中国香港特别行政区（“香港”），中国，PCAOb无法在2022年之前进行检查和调查的司法管辖区。因此，我们及我公司证券投资者未能从这些PCAOb检查的益处中受益。2022年12月15日，PCAOb宣布已能够完全获准检查和调查设于2022年在中国内地和香港总部的PCAOb注册会计师事务所。然而，PCAOb过去无法检查香港审计师，相较于接受PCAOb检查的中国内地和香港之外的审计师，评估我公司独立注册会计师的审计程序或质量控制程序的有效性更加困难，这可能导致我公司的审计程序、报告的财务信息以及我们的基本财务报表质量令投资者和潜在投资者失去信心。
根据《外国公司问责法案》（HFCAA），我们的普通股可能被取消上市并禁止在美国交易， 该法案已被《加速外国公司问责法案》修订， 如果PCAOB无法完全检查或调查位于中国大陆和香港的审计师，我们的普通股可能会被取消上市，或者面临被取消上市的威胁，这可能导致我们普通股的价值大幅下降或变得一文不值，因此您可能会失去全部或大量投资。
在2020年12月18日，《保持外国公司问责法案》（HFCAA）签署成为法律，规定如果证券交易委员会（SEC）认定发行人提交的审计报告是由一家未被PCAOB检查的注册公共会计师事务所出具，并且自2021年起连续三年，那么SEC将禁止其普通股在美国的国家证券交易所或场外交易市场进行交易。此外，在2021年6月22日，美国参议院通过了《加速保持外国公司问责法案》，禁止任何注册单位的证券在美国任何证券交易所上市或在场外交易，如果该注册单位财务报表的审计师连续两年未接受PCAOB检查，而不是HFCAA法案中规定的连续三年。2021年12月2日，SEC采纳了最终修正案，以实施HFCAA的披露和提交要求，根据该规定，如果发行人提交的年度报告包含一份由PCAOB认定无法完全检查或调查的注册公共会计师事务所出具的审计报告，SEC将把该发行人标识为“委员会认定发行人”，并在被认定为委员会认定发行人后连续三年对其实施交易禁令。2022年12月29日，《加速保持外国公司问责法案》被签署成为法律。
2021年12月16日，审计委员会发出了HFCAA确定性报告（"2021 PCAob确定性"），通知证券交易委员会决定审计委员会无法完全检查或调查总部设在中国大陆和香港的注册会计师事务所，因为中国当局采取的立场，我们的审计师受到了这一决定的影响。2022年5月13日，在我们提交了截至2021年12月31日财政年度的10-k表格年度报告后，证券交易委员会确认将我们确定为HFCAA下的委员会确定的发行人。
在2022年8月26日，PCAOB与中国证券监督管理委员会（“CSRC”）及中华人民共和国财政部（“MOF”）签署了一份协议声明，规定了对总部位于中国大陆和香港的审计公司的检查及调查的相关事项（“协议”）。协议中声明，中国当局承诺PCAOB在其检查或调查中可以直接查看完整的审计工作底稿，并拥有对选定的审计公司和审计业务的唯一裁量权。该协议为PCAOB提供了全面检查和调查在中国大陆和香港注册的公共会计公司的权限。PCAOB随后全面测试了协议所要求的各个方面的合规性，以判断是否可以完全访问。这包括派遣PCAOB工作人员团队在2022年9月至11月期间的九周内，前往香港进行现场检查和调查。
2022年12月15日，PCAOB发布了其2022年HFCAA决定报告，通知美国证券交易委员会（SEC），PCAOB确认其已能够在2022年完全获得检查和调查中国大陆和香港总部的PCAOb注册的上市会计师事务所的完全访问权限。PCAOB董事会撤销了其2021年的PCAOB决定，即PCAOB无法完全检查或调查在中国大陆和香港总部注册的上市会计师事务所。基于这个原因，我们预计在提交截至2022年12月31日的年度报告后，不会被确定为委员会识别的发行人。然而，PCAOB能否继续满意地对中国大陆和香港总部注册的PCAOb注册的上市会计师事务所进行检查存在不确定性，并取决于一系列我们及我们的审计师无法控制的因素。
公开公司会计监督委员会（PCAOB）正在继续要求在中国大陆和香港获得完全的访问权限，并已计划在2023年初及以后恢复定期检查，继续进行正在进行的调查并根据需要启动新的调查。PCAOB不必等待另一年来重新评估其决定。如果中华人民共和国当局以任何方式阻碍PCAOB完全检查或调查的访问，PCAOB将立即考虑发布与《证券法执法改革和增强法案》一致的新决定。
我们无法保证我们的审计师不会被判断为注册为一个无法完全受美国审计监督委员会检查或调查两年的公共会计事务所，因为中国当局的立场和/或未来可能出现的其他原因。每年，美国审计监督委员会将判断能否完全检查和调查中国大陆和香港等其他司法管辖区内的审计公司。如果美国审计监督委员会未来再次判断无法完全检查和调查中国大陆和香港的审计师，我们可能会因此被确定为具有委员会确定身份的发行人。如果发生这种情况，纳斯达克可能决定将我们的普通股摘牌，并不能保证我们将能够继续在其他非美国的股票交易所上市，或者我们的普通股将立即在美国境外市场得到发展。在美国证券交易所禁止交易或取消上市我们的普通股，或者有被摘牌的威胁时，我们的普通股价值可能会大幅下跌或变得毫无价值，因此您可能会失去所有或大部分投资。
ZW DATA ACTION TECHNOLOGIES INC.
简明合并资产负债表
(以千为单位，除股票数量和每股数据外)
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九月三十日， 2024 |
12月31日， 2023 |
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（美元） |
（美元） |
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(未经审计) |
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资产 |
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流动资产： |
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现金及现金等价物 |
$ | $ | ||||||
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应收账款净额（扣除账户风险准备金）为 $ |
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预付款和向供应商存入资金 |
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其他流动资产净额 |
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总流动资产 |
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长期投资 |
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经营租赁使用权资产 |
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物业和设备，净值 |
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无形资产-净额 |
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总资产 |
$ | $ | ||||||
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负债和股东权益 |
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流动负债: |
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应付账款 * |
$ | $ | ||||||
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客户预付款 * |
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应计的工资和其他应计* |
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应付税款* |
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营运租赁负债* |
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短期租赁相关的租金支付责任* |
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来自投资者的预付款 |
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其他流动负债* |
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总流动负债 |
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ZW DATA ACTION TECHNOLOGIES INC.
合并资产负债表（续）
(以千为单位，除股票数量和每股数据外)
|
九月三十日， 2024 |
12月31日， 2023 |
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（美元） |
（美元） |
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(未经审计) |
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长期负债： |
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开多期借款来自关联方 |
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总负债 |
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承诺和 contingencies |
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股东权益： |
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ZW数据行动科技公司的股东权益 |
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额外实收资本** |
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法定储备金 |
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累积赤字 |
( |
) | ( |
) | ||||
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累计其他综合收益 |
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股东总数’ 股权 |
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非控制权益 |
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总股本 |
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总负债和股权 |
$ | $ | ||||||
请参见未经审计的简明合并财务报表附注
ZW DATA ACTION TECHNOLOGIES INC.
综合损失及综合损益简明综合表
(以千为单位，除股票数量和每股数据外)
|
截至9月30日的九个月 |
截至9月30日的三个月 |
|||||||||||||||
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2024 |
2023 |
2024 |
2023 |
|||||||||||||
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（美元） |
（美元） |
（美元） |
（美元） |
|||||||||||||
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(未经审计) |
(未经审计) |
(未经审计) |
(未经审计) |
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收入 |
$ | $ | $ | $ | ||||||||||||
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收入成本 |
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毛（亏损）/利润 |
( |
) | ( |
) | ||||||||||||
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运营费用 |
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销售与营销费用 |
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一般和行政费用 |
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研发费用 |
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总营业费用 |
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营业损失 |
( |
) | ( |
) | ( |
) | ( |
) | ||||||||
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其他收入/（费用） |
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利息收入 |
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其他费用，净额 |
( |
) | ( |
) | ( |
) | ( |
) | ||||||||
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长期投资的减值 |
( |
) | ( |
) | ||||||||||||
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子公司处置获得收益 |
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权证负债公允价值变动 |
||||||||||||||||
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其他总收益/(费用) |
||||||||||||||||
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税前损失（税收利益/费用）和非控制性权益 |
( |
) | ( |
) | ( |
) | ( |
) | ||||||||
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所得税收益/（费用） |
( |
) | ||||||||||||||
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净亏损 |
$ | ( |
) | $ | ( |
) | $ | ( |
) | $ | ( |
) | ||||
ZW DATA ACTION TECHNOLOGIES INC.
综合损失及综合损益简明综合表（续)
(以千为单位，除股票数量和每股数据外)
|
截至9月30日的九个月 |
截至9月30日的三个月 |
|||||||||||||||
|
2024 |
2023 |
2024 |
2023 |
|||||||||||||
|
（美元） |
（美元） |
（美元） |
（美元） |
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|
(未经审计) |
(未经审计) |
(未经审计) |
(未经审计) |
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|
净亏损 |
$ | ( |
) | $ | ( |
) | $ | ( |
) | $ | ( |
) | ||||
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归属于非控股权益公司的净亏损 |
( |
) | ||||||||||||||
|
ZW数据行动科技公司归属于净损失。 |
( |
) | ( |
) | ( |
) | ( |
) | ||||||||
|
净亏损 |
$ | ( |
) | $ | ( |
) | $ | ( |
) | $ | ( |
) | ||||
|
外币翻译收入/(损失) |
( |
) | ( |
) | ( |
) | ||||||||||
|
综合损失 |
( |
) | ( |
) | ( |
) | ( |
) | ||||||||
|
归属于非控股权益综合收益 |
( |
) | ||||||||||||||
|
ZW数据行动科技公司应归属综合损失 |
( |
) | ( |
) | ( |
) | ( |
) | ||||||||
|
每股亏损 |
||||||||||||||||
|
每股普通股的亏损 |
||||||||||||||||
|
基本和稀释** |
$ | ( |
) | $ | ( |
) | $ | ( |
) | $ | ( |
) | ||||
|
普通股平均流通股数： |
||||||||||||||||
|
基本和稀释** |
||||||||||||||||
请参见未经审计的简明合并财务报表附注
ZW DATA ACTION TECHNOLOGIES INC.
现金流量表简明综合报表
(以千为单位)
|
截至9月30日的九个月 |
||||||||
|
2024 |
2023 |
|||||||
|
（美元） |
（美元） |
|||||||
|
(未经审计) |
(未经审计) |
|||||||
|
经营活动现金流量 |
||||||||
|
净亏损 |
$ | ( |
) | $ | ( |
) | ||
|
调整净亏损为经营活动使用的现金净额 |
||||||||
|
折旧和摊销 |
||||||||
|
运营租赁权利资产摊销 |
||||||||
|
基于股份的补偿费用 |
||||||||
|
子公司处置获得收益 |
( |
) | ||||||
|
开多长期投资的减值 |
||||||||
|
固定资产处置损失 |
||||||||
|
信用损失准备金 |
||||||||
|
权证负债公允价值变动 |
( |
) | ||||||
|
递延所得税 |
( |
) | ||||||
|
其他非经营（收入）/亏损 |
( |
) | ( |
) | ||||
|
营运资产和负债的变化 |
||||||||
|
应收账款 |
( |
) | ||||||
|
预付款和向供应商存入资金 |
( |
) | ( |
) | ||||
|
其他流动资产 |
||||||||
|
应付账款 |
( |
) | ||||||
|
来自客户的预付款 |
( |
) | ||||||
|
应计工资和其他应计费用 |
( |
) | ( |
) | ||||
|
其他流动负债 |
( |
) | ||||||
|
应付税款 |
( |
) | ||||||
|
营运租赁负债 |
( |
) | ( |
) | ||||
|
用于经营活动的净现金 |
( |
) | ( |
) | ||||
|
投资活动现金流量 |
||||||||
|
车辆和办公设备的购买 |
( |
) | ( |
) | ||||
|
对持有投资实体的投资和预付款 |
( |
) | ( |
) | ||||
|
长期投资处置带来的净收益 |
||||||||
|
期间获得的现金 |
||||||||
|
期间解除合并的现金 |
( |
) | ||||||
|
其他投资合同的存入资金 |
( |
) | ||||||
|
对非关联方的短期贷款 |
( |
) | ||||||
|
对非关联方的短期贷款和利息收入的偿还 |
||||||||
|
投资活动提供的净现金流量/（使用的现金流量） |
( |
) | ||||||
ZW DATA ACTION TECHNOLOGIES INC.
简明合并现金流量表（续）
(以千为单位)
|
截至9月30日的九个月 |
||||||||
|
2024 |
2023 |
|||||||
|
（美元） |
（美元） |
|||||||
|
（未经审计） |
（未经审计） |
|||||||
|
来自融资活动的现金流量 |
||||||||
|
来自投资者的预付款 |
||||||||
|
来自非控股权益的资本出资 |
||||||||
|
融资活动提供的净现金 |
||||||||
|
汇率波动对现金和现金等价物的影响 |
( |
) | ||||||
|
现金和现金等价物的净增加/（减少） |
( |
) | ||||||
|
期初的现金和现金等价物 |
||||||||
|
期末的现金和现金等价物 |
$ | $ | ||||||
|
现金流信息的补充披露 |
||||||||
|
缴纳的所得税 |
$ | $ | ||||||
|
已支付的利息支出 |
$ | $ | ||||||
请参见未经审计的简明合并财务报表附注
ZW DATA ACTION TECHNOLOGIES INC.
股东权益简明综合表
2024年9月30日结束的九个月及三个月
|
普通股票* |
股东实缴资本* |
法定储备金 |
累积赤字 |
累计其他综合收益/（亏损） |
非控制权益 |
股东权益总额 |
||||||||||||||||||||||||||
|
股份数量 |
金额 |
|||||||||||||||||||||||||||||||
|
（美元） |
（美元） |
（美元） |
（美元） |
（美元） |
（美元） |
（美元） |
||||||||||||||||||||||||||
|
2024年1月1日余额 |
$ | $ | $ | $ | ( |
) | $ | $ | $ | |||||||||||||||||||||||
|
被收购的VIE中的非控股权益 |
- | |||||||||||||||||||||||||||||||
|
非控股权益的资本投入 |
- | - | - | - | - | - | ||||||||||||||||||||||||||
|
本期净亏损 |
- | ( |
) | ( |
) | ( |
) | |||||||||||||||||||||||||
|
外币兑换调整 |
- | |||||||||||||||||||||||||||||||
|
2024年6月30日余额（未经审计） |
$ | $ | $ | $ | ( |
) | $ | $ | $ | |||||||||||||||||||||||
|
以股份补偿的方式向雇员、董事和顾问提供服务 |
||||||||||||||||||||||||||||||||
|
处置VIE中的非控股权益 |
- | - | - | - | - | - | ( |
) | ( |
) | ||||||||||||||||||||||
|
本期净亏损 |
- | ( |
) | ( |
) | |||||||||||||||||||||||||||
|
外币兑换调整 |
- | ( |
) | ( |
) | |||||||||||||||||||||||||||
|
截至2024年9月30日的余额（未经审计） |
$ | $ | $ | $ | ( |
) | $ | $ | $ | |||||||||||||||||||||||
请参见未经审计的简明合并财务报表附注
ZW DATA ACTION TECHNOLOGIES INC.
股东权益简明综合表
截至2023年9月30日的九个月和三个月
|
普通股 |
追加实收资本 |
法定储备金 |
累积赤字 |
累计其他综合收益/(损失) |
总股本 |
|||||||||||||||||||||||
|
股份数量 |
金额 |
|||||||||||||||||||||||||||
|
（美元） |
（美元） |
（美元） |
（美元） |
（美元） |
（美元） |
|||||||||||||||||||||||
|
2023年1月1日余额** |
$ | $ | $ | $ | ( |
) | $ | $ | ||||||||||||||||||||
|
与采用ASU No. 2016-13，金融工具-信用损失（主题326）相关的累积效应调整 |
( |
) | ( |
) | ||||||||||||||||||||||||
|
员工和董事所提供的服务换取的股份报酬 |
||||||||||||||||||||||||||||
|
本期净亏损 |
- | ( |
) | ( |
) | |||||||||||||||||||||||
|
外币兑换调整 |
- | |||||||||||||||||||||||||||
|
2023年6月30日余额（未经审计） |
$ | $ | $ | $ | ( |
) | $ | $ | ||||||||||||||||||||
|
员工和董事所提供的服务换取的股份报酬 |
||||||||||||||||||||||||||||
|
本期净亏损 |
- | ( |
) | ( |
) | |||||||||||||||||||||||
|
外币兑换调整 |
- | ( |
) | ( |
) | |||||||||||||||||||||||
|
2023年9月30日的资产负债表(未经审计) |
$ | $ | $ | $ | ( |
) | $ | $ | ||||||||||||||||||||
请参见未经审计的简明合并财务报表附注
ZW DATA ACTION TECHNOLOGIES INC.
未经审计的简明合并财务报表附注
|
1. |
组织和经营性质 |
ZW 数据行动技术公司（以下简称“公司”）成立于2006年4月，注册地为德克萨斯州，并于2006年10月更改注册地成为内华达州公司。2009年6月26日，公司与中国上网在线传媒集团有限公司（以下简称“Share Exchange”）进行了一项股份交易交易，该公司是根据英属维尔京群岛法律组建的公司。由于股份交换，中国网BVI成为公司的全资子公司，公司现在是一家控股公司，通过与中国大陆运营公司签订的某些合同安排，从事为中国的中小企业提供互联网广告、精准营销、电子商务在线到线下（O2O）广告和营销服务以及相关数据和技术服务。该公司还开发基于区块链的网页/移动应用程序并为客户提供软件解决方案，即软件即服务（SaaS）服务。
|
2. |
变量利益实体 |
公司在中国并不是一家运营公司，而是一家位于内华达州的控股公司，并不拥有VIEs的股权。公司主要通过其在中国的子公司，即VIEs，开展业务，并与其签订了合同安排，以及它们在中国的子公司。以下是截至2024年9月30日和2023年12月31日，报告在公司简明合并资产负债表中的VIEs资产和负债相关信息的总结：
|
9月30日, 2024 |
12月31日， 2023 |
|||||||
|
美元（千） |
美元（千） |
|||||||
|
(未经审计) |
||||||||
|
资产 |
||||||||
|
流动资产： |
||||||||
|
现金及现金等价物 |
$ | $ | ||||||
|
应收账款，净额 |
||||||||
|
预付款和向供应商存入资金 |
||||||||
|
其他流动资产净额 |
||||||||
|
总流动资产 |
||||||||
|
物业和设备，净值 |
||||||||
|
|
||||||||
|
总资产 |
$ | $ | ||||||
|
负债 |
||||||||
|
流动负债: |
||||||||
|
应付账款 |
$ | $ | ||||||
|
来自客户的预付款 |
||||||||
|
应计工资和其他应计费用 |
||||||||
|
应付税款 |
||||||||
|
与开空租赁相关的租赁付款负债 |
||||||||
|
其他流动负债 |
||||||||
|
总流动负债 |
||||||||
|
总负债 |
$ | $ | ||||||
由于合并这些VIE而确认的负债并不代表对公司一般资产的额外索赔。
以下是与公司在截至2024年和2023年9月30日的九个月和三个月的简明合并营业报表和综合亏损中报告的VIEs财务表现相关的信息：
ZW DATA ACTION TECHNOLOGIES INC.
未经审计的简明合并财务报表附注
|
截至9月30日的九个月 |
截至9月30日的三个月 |
|||||||||||||||
|
2024 |
2023 |
2024 |
2023 |
|||||||||||||
|
美金（’000） |
美金（’000） |
美金（’000） |
美金（’000） |
|||||||||||||
|
(未经审计) |
(未经审计) |
(未经审计) |
(未经审计) |
|||||||||||||
|
收入 |
$ | $ | $ | $ | ||||||||||||
|
收入成本 |
( |
) | ( |
) | ( |
) | ( |
) | ||||||||
|
总营业费用 |
( |
) | ( |
) | ( |
) | ( |
) | ||||||||
|
净亏损 |
( |
) | ( |
) | ( |
) | ( |
) | ||||||||
|
3. |
流动性和资本资源 |
公司出现了运营亏损，并可能继续出现运营亏损，因此在公司实施未来的业务计划时，将产生负现金流。在截至2024年9月30日的九个月内，公司产生了运营亏损为美元
公司计划优化其互联网资源成本投资策略，以提高核心业务的毛利润率，并进一步加强应收账款管理，与主要供应商协商更有利的付款条款，这些都将有助于大幅增加经营现金流。为了进一步改善流动性，公司还计划通过优化各办公室的人员配置来降低运营成本，如有必要，还将缩减办公租赁空间。从2022年初开始，公司向客户推出了saas-云计算服务。公司的saas-云计算服务基于其自开发的区块链集成框架（“BIF”）平台提供。BIF平台使公司客户能够利用该平台作为企业管理软件，在线记录、分享和存储经营数据，和/或为其知识产权和证书生成独特设计的非同质化代币（“NFTs”）。虽然新saas-云计算服务业务的收入及其盈利能力未达到公司的预期，但公司仍然期望这些服务能产生积极的现金流并改善流动性，因为它们依赖于公司自开发的软件平台技术，从而减少对第三方服务提供商大量现金流出的需求。
如果公司未能实现这些目标，公司可能需要额外融资来执行其业务计划。如果需要额外融资，公司无法预测这种额外融资形式将是股权、债务还是其他形式，公司可能无法及时以可接受的条件或根本无法获得必要的额外资本。如果融资来源不可用，或者公司在增加毛利率和减少营运亏损方面不成功，公司可能无法实施当前扩张计划、偿还债务或应对竞争压力，任何这些情况都将对公司的业务、前景、财务状况和经营结果产生重大不利影响。这些因素严重怀疑公司在财务报表发布后一年内继续作为持续经营实体的能力。
截至2024年9月30日的未经审计的简明合并财务报表是在公司将继续作为持续经营的假设下编制的，这包括资产的实现和负债在合理时间内在正常业务过程中的偿还等。公司作为持续经营的能力取决于其不确定增加毛利润率、减少核心业务的营运亏损和/或获得额外的股权和/或债务融资的能力。截至2024年9月30日的附表财务报表不包括可能因这些不确定性结果而产生的任何调整。如果公司无法继续作为持续经营，它可能不得不清算其资产，且可能收到的金额低于财务报表中载列的价值。
|
4. |
自定义化学品摘要 重要会计政策 |
|
a) |
介绍的基础： |
未经审计的简明合并中期基本报表是根据美国通用会计原则（"U.S. GAAP"）编制和呈现的。
ZW DATA ACTION TECHNOLOGIES INC.
未经审计的简明合并财务报表附注
截至2024年9月30日和截至2024年和2023年9月30日的九个和三个月的未经审计的简明综合中期财务信息已按照美国证券交易委员会（"SEC"）的规定和制度编制。 根据这些规定，通常包含在按照美国通用会计准则编制的完整合并财务报表中的某些信息和脚注披露已被省略。 未经审计的简明综合中期财务信息应与已在公司年度报告中包括的财务报表和附注一起阅读，该年度报告是公司截至2023年12月31日的财政年度已在2024年6月28日向SEC提交的《2023年10-K表格》。
管理层认为，已做出了所有必要的调整（包括正常循环调整），以便公允地表达截至2024年9月30日的公司简明综合财务状况，以及截至2024年和2023年9月30日的简明综合经营业绩以及2024年和2023年9月30日的简明综合现金流量情况（如适用）。中期经营业绩未必反映全财政年度或任何未来期间的经营结果。
|
b) |
合并原则 |
未经审计的简明合并中期基本报表包括公司的所有子公司和VIE的账户。在合并时，公司与其子公司及VIE之间的所有交易和余额均已被排除。
|
c) |
估计的使用 |
按照美国公认会计原则编制基本报表要求管理层做出估计和假设，这些估计和假设影响这些合并基本报表日期资产和负债的报告金额及相关的或有资产和负债的披露，以及报告期间营业收入和费用的报告金额。公司根据最新可获得的信息、历史经验以及公司认为在当时情况下合乎合理的各种其他假设，持续评估这些估计和假设。由于使用估计是财务报告过程的一个重要组成部分，实际结果可能与这些估计有所不同。
|
d) |
外汇翻译 |
用于将人民币（中国大陆法定货币“RMB”）转换为美元以编制简明综合基本报表的汇率如下：
|
2024年9月30日 |
2023年12月31日 |
|||||||
|
除权益科目外的资产负债表项目 |
||||||||
|
截至9月30日的九个月 |
||||||||
|
2024 |
2023 |
|||||||
|
损益表和综合收益表中的项目 |
||||||||
|
截至9月30日的三个月 |
||||||||
|
2024 |
2023 |
|||||||
|
损益表和综合损益表中的项目 |
||||||||
未作出任何陈述，表明人民币金额可以或可在上述汇率下转换为美元。
|
e) |
目前预计信贷损失 |
ZW DATA ACTION TECHNOLOGIES INC.
未经审计的简明合并财务报表附注
2023年1月，2016年6月，FASB发布了ASUNo. 2016-13, “金融工具-信贷损失（主题 326）：金融工具上信贷损失的计量”。该ASU中的修订要求对以摊余成本持有的金融资产进行预期信贷损失的计量和确认，取代现有的已产生损失减值模型，改为预期损失方法。作为一家SEC较小的报告公司，公司自2023年1月1日起， 采用修订的追溯过渡方法，并未在可比期间重新列示相关账户。相反，公司在2023年1月1日确认了一个累积影响调整，将其累计赤字的期初余额增加了美元
信贷损失准备金反映了公司对于预计在相关金融资产生命周期内将发生的信贷损失的当前估计。信贷损失准备金被呈现为从金融资产的摊销成本基础中扣除的一个估值账户，以呈现金融资产预期收回金额。
公司在设立、监控和调整信贷损失准备金时考虑各种因素，包括账龄和账龄趋势、客户/其他方的信用状况以及特定客户/其他方相关的特定风险。公司还监控其他风险因素和前瞻性信息，如特定国家风险和可能影响客户/其他方偿付能力的经济因素，以设立和调整其信贷损失准备金。公司通过对具有相似特征的财务资产进行集体评估以及在识别具有已知争议或收款问题的特定客户/其他方时，通过个别评估来评估收回能力。应收账款和对无关方的短期贷款在所有催收努力终止后进行核销。
以下表格总结了截至2024年和2023年9月30日的九个月和三个月内公司信用损失的变动：
|
截至9月30日的九个月 |
截至9月30日的三个月 |
|||||||||||||||
|
2024 |
2023 |
2024 |
2023 |
|||||||||||||
|
美元（千） |
美元（千） |
美元（千） |
美元（千） |
|||||||||||||
|
(未经审计) |
(未经审计) |
(未经审计) |
(未经审计) |
|||||||||||||
|
应收账款的信用损失： |
||||||||||||||||
|
期初余额 |
||||||||||||||||
|
在采纳ASU No. 2016-13《金融工具-信贷损失（第326号规范）》时的累积效应调整 |
||||||||||||||||
|
期间内的信用损失准备/(冲销) |
||||||||||||||||
|
期间内已注销 |
||||||||||||||||
|
汇兑调整 |
( |
) | ||||||||||||||
|
期末余额 |
||||||||||||||||
|
截至9月30日的九个月 |
截至9月30日的三个月 |
|||||||||||||||
|
2024 |
2023 |
2024 |
2023 |
|||||||||||||
|
美金（’000） |
美金（’000） |
美金（’000） |
美金（’000） |
|||||||||||||
|
(未经审计) |
(未经审计) |
(未经审计) |
(未经审计) |
|||||||||||||
|
其他流动资产的信用损失: |
||||||||||||||||
|
期初余额 |
||||||||||||||||
|
ASU No. 2016-13的采纳累积影响调整，金融工具-信用损失（第326号） |
||||||||||||||||
|
期间内的信用损失准备/(逆转) |
( |
) | ||||||||||||||
|
期间内核销 |
||||||||||||||||
|
汇兑调整 |
||||||||||||||||
|
期末余额 |
||||||||||||||||
ZW DATA ACTION TECHNOLOGIES INC.
未经审计的简明合并财务报表附注
|
f) |
公允价值衡量 |
2024年9月30日和2023年12月31日，根据公允价值层次，按照循环基础计量的负债情况如下：
|
报告日期的公允价值测量使用 |
||||||||||||||||
|
截至 2024年9月30日 |
报价市场交易 |
重要 |
重要 |
|||||||||||||
|
美元（千） |
美元（千） |
美元（千） |
美元（千） |
|||||||||||||
|
(未经审计) |
||||||||||||||||
|
权利债务（注14） |
||||||||||||||||
|
报告日期的公允价值测量使用 |
||||||||||||||||
|
截至 2023年12月31日 |
报价市场交易 |
重要 |
重要 |
|||||||||||||
|
美元（千） |
美元（千） |
美元（千） |
美元（千） |
|||||||||||||
|
权证负债（附注14） |
||||||||||||||||
|
g) |
股票拆分 |
公司董事会批准了公司已发行和流通的普通股每股面值$的股票逆向拆股的比率为1股换股。
When the Reverse Stock Split became effective, each shares of issued and outstanding Common Stock were converted into one newly issued and outstanding share of Common Stock. fractional shares were issued in connection with the Reverse Stock Split. Any fractional shares of Common Stock that would have otherwise resulted from the Reverse Stock Split were rounded up to the nearest full share. No cash or other consideration was paid in connection with any fractional shares that would otherwise have resulted from the Reverse Stock Split.
As a result of the Reverse Stock Split,
ZW DATA ACTION TECHNOLOGIES INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
Except where otherwise specified, all number of shares, number of warrants, share prices, exercise prices and per share data in the condensed consolidated financial statements and notes to the condensed consolidated financial statements have been retroactively restated as if the Reverse Stock Split occurred at the beginning of the periods presented.
|
h) |
Revenue recognition |
The following table present the Company’s revenues disaggregated by products and services and timing of revenue recognition:
|
Nine Months Ended September 30, |
Three Months Ended September 30, |
|||||||||||||||
|
2024 |
2023 |
2024 |
2023 |
|||||||||||||
|
US$(’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 |
||||||||||||||||
|
--online advertising placements |
||||||||||||||||
|
Blockchain-based SaaS services |
||||||||||||||||
|
Total revenues |
$ | $ | $ | $ | ||||||||||||
|
Nine Months Ended September 30, |
Three Months Ended September 30, |
|||||||||||||||
|
2024 |
2023 |
2024 |
2023 |
|||||||||||||
|
US$(’000) |
US$(’000) |
US$(’000) |
US$(’000) |
|||||||||||||
|
(Unaudited) |
(Unaudited) |
(Unaudited) |
(Unaudited) |
|||||||||||||
|
Revenue recognized over time |
||||||||||||||||
|
Revenue recognized at a point in time |
||||||||||||||||
|
Total revenues |
$ | $ | $ | $ | ||||||||||||
Contract balances
The table below summarized the movement of the Company’s contract liabilities for the nine months ended September 30, 2024:
|
Contract liabilities |
||||
|
US$(’000) |
||||
|
Balance as of January 1, 2024 |
||||
|
Exchange translation adjustment |
||||
|
Revenue recognized from beginning contract liability balances |
( |
) | ||
|
Advances received from customers related to unsatisfied performance obligations |
||||
|
Balance as of September 30, 2024(Unaudited) |
||||
Advance from customers related to unsatisfied performance obligations are generally refundable. Refund of advance from customers were insignificant for the nine and three months ended September 30, 2024 and 2023.
For the nine and three months ended September 30, 2024 and 2023, there were no revenue recognized from performance obligations that were satisfied in prior periods.
ZW DATA ACTION TECHNOLOGIES INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
|
i) |
Business combination |
我们根据 ASC 话题 805 采用收购法来核算我们的业务组合。商业组合收购方法要求将转让的考虑分配给资产，包括我们获得的可单独识别的资产和负债，基于它们的估计公允价值。 收购中支付的考虑按照资产交易日的资产转让的公允价值、负债发生和发行的股权工具，以及收购日的附带条件考虑而计量。 作为收购的直接费用在发生时计入费用。 收购的可识别资产、负债和附带负债不论有无非控股权益，都应当在收购日独立的以其公允价值计量。 （i） 收购成本、非控股权益的公允价值和在被购公司先前持有的股权利益的公允价值之和超过（ii） 被购公司可识别净资产的公允价值的超额部分应当被确认为商誉。 如果收购成本低于子公司所获净资产的公允价值，则差额直接确认为收入。
收购北京怡恩科技有限公司。
公司以人民币1元现金对北京易恩科技有限公司（“北京易恩”）收购了51%的股权。在截至2024年9月30日的三个月内，公司以人民币1元的现金对价出售了其在北京易恩的股权。
|
j) |
租赁 |
截至2024年9月30日，尚未确认任何经营租赁权益资产和总经营租赁负债。
经营租赁费用：
|
截至9月30日的九个月 |
截至9月30日的三个月 |
|||||||||||||||
|
2024 |
2023 |
2024 |
2023 |
|||||||||||||
|
美金（’000） |
美金（’000） |
美金（’000） |
美金（’000） |
|||||||||||||
|
(未经审计) |
(未经审计) |
(未经审计) |
(未经审计) |
|||||||||||||
|
长期经营租赁合同 |
||||||||||||||||
|
短期经营租赁合同 |
||||||||||||||||
|
总计 |
$ | $ | $ | $ | ||||||||||||
与经营租赁相关的补充信息:
|
截至9月30日的九个月 |
||||||||
|
2024 |
2023 |
|||||||
|
美金（’000） |
美金（’000） |
|||||||
|
(未经审计) |
(未经审计) |
|||||||
|
用于经营租赁的经营现金流量（千美元） |
||||||||
|
剩余平均租赁期限（年） |
- | |||||||
|
加权平均折扣率 |
% | |||||||
|
5. |
应收账款，净额 |
|
九月三十日 2024 |
十二月 31, 2023 |
|||||||
|
美元（'000） |
美元（'000） |
|||||||
|
（未经审计） |
||||||||
|
应收账款 |
||||||||
|
信用损失补贴 |
( |
) | ( |
) | ||||
|
应收账款，净额 |
||||||||
ZW DATA ACTION TECHNOLOGIES INC.
未经审计的简明合并财务报表附注
所有板块应收账款都不带利息。公司保留了一个估计的信用损失准备金，以将其应收账款减少到其认为将会收回的金额。公司根据账龄数据、历史收款经验、客户特定事实、当前经济状况以及合理可支持的未来经济状况预测，对其应收账款进行集体（池）基础评估，并确定信用损失准备金。截至2024年9月30日的九个月和三个月，公司分别提供了约美元
|
6. |
预付账款和存入资金给供应商 |
|
9月30日, 2024 |
2023年12月31日, 2023 |
|||||||
|
美金（’000） |
美金（’000） |
|||||||
|
(未经审计) |
||||||||
|
向广告资源供应商存款 |
||||||||
|
向广告资源供应商预付款 |
||||||||
|
用于投资活动的存款 |
||||||||
|
其他存款和预付款 |
||||||||
|
7. |
其他流动资产 |
|
9月30日, 2024 |
2023年12月31日, 2023 |
|||||||
|
美金（’000） |
美金（’000） |
|||||||
|
(未经审计) |
||||||||
|
与投资者实体股权出售相关的应收款项 |
||||||||
|
对非关联方的短期贷款 |
||||||||
|
短期贷款利息应收款项 |
||||||||
|
员工预支，用于业务操作 |
||||||||
|
其他流动资产合计 |
||||||||
|
信用损失准备金 |
( |
) | ( |
) | ||||
|
其他流动资产净额 |
||||||||
As of September 30, 2024, the Company provided unsecured, interest-bearing short-term loans to two unrelated parties, which were set forth as below. These short-term loans were recorded as other current assets.
On January 5, 2022, the Company provided a short-term working capital loan of US$
ZW DATA ACTION TECHNOLOGIES INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
On January 11, 2023, the Company provided a short-term loan of US$
The Company evaluates its short-term loans provided to unrelated parties for expected credit losses on a regular basis, and maintains an estimated allowance for credit losses to reduce its short-term loans to the amount that it believes will be collected. The Company evaluates its short-term loans on an individual basis and determines the allowance for credit loss based on creditworthiness of the borrowers, aging information, past transaction history with the borrowers and their current condition, as well as the current economic conditions and reasonable and supportable forecasts of future economic conditions. For the nine and three months ended September 30, 2024, the Company reversed US$
As of September 30, 2024, other current assets also included a US$
|
8. |
Long-term investments |
|
Amount |
||||
|
US$(’000) |
||||
|
Balance as of January 1, 2024 |
||||
|
Exchange translation adjustment |
||||
|
Cash investments during the year |
||||
|
Disposed during the year |
( |
) | ||
|
Impairment losses provided during the year |
( |
) | ||
|
Balance as of September 30, 2024 (Unaudited) |
||||
As of September 30, 2024, except for long-term investments which were fully impaired, the Company beneficially owned a
ZW DATA ACTION TECHNOLOGIES INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
On May 27, 2024, the Company sold approximately
The Company measures each investment which does 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.
For the nine months ended September 30, 2024, the Company provided $
|
9. |
Property and equipment, net |
|
September 30, 2024 |
December 31, 2023 |
|||||||
|
US$(’000) |
US$(’000) |
|||||||
|
(Unaudited) |
||||||||
|
Vehicles |
||||||||
|
Office equipment |
||||||||
|
Electronic devices |
||||||||
|
Leasehold improvement |
||||||||
|
Property and equipment, cost |
||||||||
|
Less: accumulated depreciation |
( |
) | ( |
) | ||||
|
Property and equipment, net |
||||||||
Depreciation expenses for the nine months ended September 30, 2024 and 2023 were approximately US$
|
10. |
Intangible assets, net |
|
As of September 30, 2024 (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 |
( |
) | ( |
) | ||||||||||||
|
Licensed products use right |
( |
) | ( |
) | ||||||||||||
|
-- |
||||||||||||||||
|
Internet Ad tracking system |
( |
) | ( |
) | ||||||||||||
|
Live streaming technology |
( |
) | ( |
) | ||||||||||||
|
-- |
||||||||||||||||
|
Blockchain Integrated Framework |
( |
) | ( |
) | ||||||||||||
|
Bo!News application |
( |
) | ( |
) | ||||||||||||
|
Other computer software |
( |
) | ||||||||||||||
|
Total |
$ | $ | ( |
) | $ | ( |
) | $ | ||||||||
ZW DATA ACTION TECHNOLOGIES INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
|
截至2023年12月31日 |
||||||||||||||||
|
项目 |
毛额 账面价值 价值 |
累计 摊销 |
减值 |
净值 账面价值 价值 |
||||||||||||
|
美金（’000） |
美金（’000） |
美金（’000） |
美金（’000） |
|||||||||||||
|
受摊销影响的无形资产： |
||||||||||||||||
|
-- |
||||||||||||||||
|
云计算软件科技 |
( |
) | ( |
) | ||||||||||||
|
许可产品使用权 |
( |
) | ( |
) | ||||||||||||
|
-- |
||||||||||||||||
|
互联网广告追踪系统 |
( |
) | ( |
) | ||||||||||||
|
直播概念科技 |
( |
) | ( |
) | ||||||||||||
|
-- |
||||||||||||||||
|
区块链集成框架 |
( |
) | ( |
) | ||||||||||||
|
Bo!资讯应用程序 |
( |
) | ( |
) | ||||||||||||
|
其他计算机-半导体软件 |
( |
) | ||||||||||||||
|
总计 |
$ | $ | ( |
) | $ | ( |
) | $ | ||||||||
截至2024年9月30日和2023年9月30日的九个月的摊销费用约为美元
根据对有限寿命无形资产的调整后账面价值扣除减值损失，其加权平均剩余使用寿命为
|
11. |
应计工资和其他应计费用 |
|
9月30日, 2024 |
2023年12月31日, 2023 |
|||||||
|
美金（’000） |
美金（’000） |
|||||||
|
(未经审计) |
||||||||
|
应计工资和员工福利 |
||||||||
|
应计营业费用 |
||||||||
|
12. |
税务 |
截至2024年9月30日和2023年12月31日，应付税款包括：
|
9月30日, 2024 |
2023年12月31日, 2023 |
|||||||
|
美金（’000） |
美金（’000） |
|||||||
|
(未经审计) |
||||||||
|
应付营业税和附加税 |
||||||||
|
应付企业所得税 |
||||||||
|
gsun:法定准备成员 |
||||||||
ZW DATA ACTION TECHNOLOGIES INC.
未经审计的简明合并财务报表附注
截至2024年和2023年9月30日止九个月的期间，公司所得税益/(费用)包括:
|
截至9月30日的九个月 |
截至9月30日的三个月 |
|||||||||||||||
|
2024 |
2023 |
2024 |
2023 |
|||||||||||||
|
美金（’000） |
美金（’000） |
美金（’000） |
美金（’000） |
|||||||||||||
|
(未经审计) |
(未经审计) |
(未经审计) |
(未经审计) |
|||||||||||||
|
当前 |
||||||||||||||||
|
待摊费用 |
( |
) | ||||||||||||||
|
所得税收益/（费用） |
( |
) | ||||||||||||||
截至2024年9月30日和2023年12月31日，公司的递延税款资产如下：
|
9月30日, 2024 |
2023年12月31日, 2023 |
|||||||
|
美金（’000） |
美金（’000） |
|||||||
|
(未经审计) |
||||||||
|
可抵扣的净营业损失的税务影响 |
||||||||
|
经营租赁成本 |
||||||||
|
开多长期投资的减值 |
||||||||
|
无形资产减值 |
||||||||
|
坏账准备 |
||||||||
|
估值准备 |
( |
) | ( |
) | ||||
|
|
||||||||
截至2023年12月31日和2024年9月30日，美国控股公司已产生约为US$的累计净营业损失（“NOLs”）。
The NOLs carried forward incurred by the Company’s PRC subsidiaries and VIEs were approximately US$
ZW DATA ACTION TECHNOLOGIES INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
The Company recorded approximately US$
For the nine and three months ended September 30, 2024, the Company recorded approximately US$
|
13. |
Long-term borrowing from a related party |
Long-term borrowing from a related party is a non-interest bearing loan from a related parity of the Company relating to the original paid-in capital contribution in the Company’s wholly-owned subsidiary Rise King Century Technology Development (Beijing) Co., Ltd. (“Rise King WFOE”), which is not expected to be repaid within one year.
|
14. |
The Financing and 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 (the “2021 Financing”) and December 2020 (the “2020 Financing”) which warrants were accounted for as derivative liabilities and measured at fair value with changes in fair value be recorded in earnings in each reporting period. As of September 30, 2024, the warrants issued in the 2021 and 2020 Financing have expired. For the nine and three months ended September 30, 2024, the Company did not recognize any change in fair value of warrant liabilities. For the nine and three months ended September 30, 2023, the Company recorded a gain of approximately US$
Warrants issued and outstanding as of September 30, 2024 and their movements during the nine months then ended are as follows:
|
Warrant Outstanding* |
Warrant Exercisable* |
|||||||||||||||||||||||
|
Number of underlying shares |
Weighted |
Weighted |
Number of underlying shares |
Weighted |
Weighted |
|||||||||||||||||||
|
Balance, January 1, 2024 |
$ | $ | ||||||||||||||||||||||
|
Granted/Vested |
||||||||||||||||||||||||
|
Expired |
( |
) | ( |
) | ||||||||||||||||||||
|
Balance, September 30, 2024 (Unaudited) |
- | $ | - | $ | ||||||||||||||||||||
|
15. |
Restricted net assets |
The Company is a Nevada holding company with operations primarily conducted in China through its PRC subsidiaries, the consolidated VIEs and VIEs’ subsidiaries. The Company’s ability to pay dividends to U.S. investors may depend on receiving distributions from its PRC subsidiaries and settlement of the amounts owed under the VIE agreements from the consolidated VIEs. Any limitation on the ability of the Company’s PRC subsidiaries and the consolidated VIEs to make payments to the Company, or the tax implications of making payments to the Company, could have a material adverse effect on its ability to pay dividends to the U.S. investors.
The PRC regulations currently permit payment of dividends only out of accumulated profits, as determined in accordance with PRC accounting standards and regulations. The Company’s PRC subsidiaries, the consolidated VIEs and their subsidiaries in China are also required to set aside at least
ZW DATA ACTION TECHNOLOGIES INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
Under the PRC Enterprise Income Tax (“EIT”) Law and related regulations, dividends, interests, rent or royalties payable by a foreign-invested enterprise to its immediate holding company outside China are subject to a
There are no restrictions for the consolidated VIEs to settle the amounts owed under the VIE agreements to Rise King WFOE. However, arrangements and transactions among affiliated entities may be subject to audit or challenge by the PRC tax authorities. If at any time the VIE agreements and the related fee structure between the consolidated VIEs and Rise King WFOE is determined to be non-substantive and disallowed by Chinese tax authorities, the consolidated VIEs could, as a matter of last resort, make a non-deductible transfer to Rise King WFOE for the amounts owed under the VIE agreements. This would result in such transfer being non-deductible expenses for the consolidated VIEs but still taxable income for Rise King WFOE. If this happens, it may increase the Company’s tax burden and reduce its after-tax income in the PRC, and may materially and adversely affect its ability to make distributions to the holding company. The Company’s management is of the view that the likelihood that this scenario would happen is remote.
The Company’s PRC subsidiaries generate all of their revenue in Renminbi, Renminbi is not freely convertible into other currencies. As a result, any restriction on currency exchange may limit the ability of the Company’s PRC subsidiaries to pay dividends/make distributions to the Company. The Chinese government imposes controls on the convertibility of Renminbi into foreign currencies and, in certain cases, the remittance of currency out of China. Shortages in availability of foreign currency may then restrict the ability of the Company’s PRC subsidiaries to remit sufficient foreign currency to the Nevada holding company for the holding company to pay dividends to the U.S. investors. Renminbi is currently convertible under the “current account,” which includes dividends, trade and service-related foreign exchange transactions, but not under the “capital account,” which includes foreign direct investment and foreign debt. Currently, the Company’s PRC subsidiaries may purchase foreign currency for settlement of current account transactions, including payment of dividends to the Nevada holding company, without the approval of the State Administration of Foreign Exchange of China (the “SAFE”) by complying with certain procedural requirements. However, the relevant Chinese governmental authorities may limit or eliminate the Company’s ability to purchase foreign currencies in the future for current account transactions. The Chinese government may continue to strengthen its capital controls, and additional restrictions and substantial vetting processes may be instituted by the SAFE for cross-border transactions falling under both the current account and the capital account. Any existing and future restrictions on currency exchange may limit the Company’s ability to utilize revenue generated in Renminbi to pay dividends in foreign currencies to holders of the Company’s securities. Foreign exchange transactions under the capital account remain subject to limitations and require approvals from, or registration with, the SAFE and other relevant Chinese governmental authorities. This could affect the Company’s ability to obtain foreign currency through debt or equity financing for its PRC subsidiaries.
To date, none of the Company’s subsidiaries has made any distribution of earnings or issued any dividends to their respective shareholder in or outside of China, or to the Nevada holding company, and the Nevada holding company has never declared or paid any cash dividends to U.S. investors.
ZW DATA ACTION TECHNOLOGIES INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
The Company does not have any present plan to make any distribution of earnings/issue any dividends directly or indirectly to its Nevada holding company or pay any cash dividends on its common stock in the foreseeable future, because the Company currently intend to retain most, if not all, of its available funds and any future earnings to operate and expand the Company’s business.
|
16. |
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$
|
17. |
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 September 30, 2024,
Concentration of customers
|
Customer A |
Customer B |
Customer C |
Customer D |
Customer E |
Customer F |
Customer G |
|
|
Nine Months Ended September 30, 2024 |
|||||||
|
Revenues, customer concentration risk |
- |
* |
* |
- |
* |
* |
* |
|
Three Months Ended September 30, 2024 |
|||||||
|
Revenues, customer concentration risk |
- |
* |
* |
- |
|
|
|
|
Nine Months Ended September 30, 2023 |
|||||||
|
Revenues, customer concentration risk |
* |
* |
* |
|
- |
- |
- |
|
Three Months Ended September 30, 2023 |
|||||||
|
Revenues, customer concentration risk |
* |
* |
* |
|
|
|
|
|
As of September 30, 2024 |
|||||||
|
Accounts receivable, customer concentration risk |
* |
* |
* |
|
|
|
|
|
As of December 31, 2023 |
|||||||
|
Accounts receivable, customer concentration risk |
|
|
|
|
|
|
|
The following tables summarized the information about the Company’s concentration of customers for the nine and three months ended September 30, 2024 and 2023, respectively:
* 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 nine and three months ended September 30, 2024 and 2023, respectively:
|
Supplier A |
Supplier B |
Supplier C |
Supplier D |
Supplier E |
|||||
| Nine Months Ended September 30, 2024 | |||||||||
|
Cost of revenues, supplier concentration risk |
|
|
|
|
- |
||||
| Three Months Ended September 30, 2024 | |||||||||
|
Cost of revenues, supplier concentration risk |
* |
|
* |
* |
- |
||||
| Nine Months Ended September 30, 2023 | |||||||||
|
Cost of revenues, supplier concentration risk |
|
- |
* |
- |
|
||||
| Three Months Ended September 30, 2023 | |||||||||
|
Cost of revenues, supplier concentration risk |
|
- |
* |
- |
|
* Less than 10%.
- No transaction incurred for the reporting period.
|
18. |
Commitments and contingencies |
In June 2023, the Company acquired a
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 evaluates the status of each legal matter and assesses the potential financial exposure. If the potential loss from any legal proceedings or litigation is considered probable and the amount can be reasonably estimated, the Company accrues a liability for the estimated loss. Significant judgment is required to determine the probability of a loss and whether the amount of the loss is reasonably estimated. As of the date hereof, based on the information currently available, the Company believes that the loss contingencies that may arise as a result of currently pending legal proceedings are not reasonably likely to have a material adverse effect on the Company’s business, results of operations, financial condition, and cash flows.
|
19. |
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.
ZW DATA ACTION TECHNOLOGIES INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
Nine Months Ended September 30, 2024 (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 |
||||||||||||||||||||||||
|
Cost of revenues |
||||||||||||||||||||||||
|
Total operating expenses |
||||||||||||||||||||||||
|
Depreciation and amortization expense included in cost of revenues and total operating expenses |
||||||||||||||||||||||||
|
Operating income/(loss) |
( |
) | ( |
) | ( |
) | ( |
) | ||||||||||||||||
|
Impairment on long-term investments |
( |
) | ( |
) | ||||||||||||||||||||
|
Gain on disposal of subsidiaries |
- | |||||||||||||||||||||||
|
Net income/(loss) |
( |
) | ( |
) | ( |
) | ( |
) | ||||||||||||||||
|
Total assets-September 30, 2024 |
( |
) | ||||||||||||||||||||||
|
Total assets-December 31, 2023 |
( |
) | ||||||||||||||||||||||
Three Months Ended September 30, 2024 (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 |
||||||||||||||||||||||||
|
Cost of revenues |
||||||||||||||||||||||||
|
Total operating expenses |
||||||||||||||||||||||||
|
Depreciation and amortization expense included in cost of revenues and total operating expenses |
||||||||||||||||||||||||
|
Operating income/(loss) |
( |
) | ( |
) | ( |
) | ( |
) | ||||||||||||||||
|
Gain on disposal of subsidiaries |
||||||||||||||||||||||||
|
Net income/(loss) |
( |
) | ( |
) | ( |
) | ( |
) | ||||||||||||||||
ZW DATA ACTION TECHNOLOGIES INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
Nine Months Ended September 30, 2023 (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 |
||||||||||||||||||||||||
|
Cost of revenues |
||||||||||||||||||||||||
|
Total operating expenses |
|
|||||||||||||||||||||||
|
Depreciation and amortization expense included in cost of revenues and total operating expenses |
||||||||||||||||||||||||
|
Operating loss |
( |
) | ( |
) | ( |
) | ( |
) | ( |
) | ||||||||||||||
|
Change in fair value of warrant liabilities |
||||||||||||||||||||||||
|
Net loss |
( |
) | ( |
) | ( |
) | ( |
) | ( |
) | ||||||||||||||
|
Total assets-September 30, 2023 |
( |
) | ||||||||||||||||||||||
|
Total assets-December 31, 2022 |
( |
) | ||||||||||||||||||||||
|
(1) |
|
Three Months Ended September 30, 2023 (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 |
||||||||||||||||||||||||
|
Cost of revenues |
||||||||||||||||||||||||
|
Total operating expenses |
||||||||||||||||||||||||
|
Depreciation and amortization expense included in cost of revenues and total operating expenses |
||||||||||||||||||||||||
|
Operating loss |
( |
) | ( |
) | ( |
) | ( |
) | ( |
) | ||||||||||||||
|
Change in fair value of warrant liabilities |
||||||||||||||||||||||||
|
Net loss |
( |
) | ( |
) | ( |
) | ( |
) | ( |
) | ||||||||||||||
|
(1) |
|
ZW DATA ACTION TECHNOLOGIES INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
|
20. |
Loss per share |
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):
|
Nine Months Ended September 30, |
Three Months Ended September 30, |
|||||||||||||||
|
2024 |
2023 |
2024 |
2023 |
|||||||||||||
|
(Unaudited) |
(Unaudited) |
(Unaudited) |
(Unaudited) |
|||||||||||||
|
Net loss |
$ | ( |
) | $ | ( |
) | $ | ( |
) | $ | ( |
) | ||||
|
Net (income)/loss attributable to noncontrolling interests from continued operations |
( |
) | ||||||||||||||
|
Net loss attributable to ZW Data Action Technologies Inc. (numerator for basic and diluted loss per share) |
$ | ( |
) | $ | ( |
) | $ | ( |
) | $ | ( |
) | ||||
|
Weighted average number of common shares outstanding -Basic and diluted* |
||||||||||||||||
|
Loss per share-Basic and diluted* |
$ | ( |
) | $ | ( |
) | $ | ( |
) | $ | ( |
) | ||||
For the nine and three months ended September 30, 2024 and 2023, the diluted loss per share calculation did not include any outstanding warrants to purchase the Company’s common stock, because they were out-of-the-money and their effect was anti-dilutive.
ZW DATA ACTION TECHNOLOGIES INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
|
21. |
Share-based compensation expenses |
In September 2024, under its 2023 Omnibus Securities and Incentive Plan, the Company granted and issued
In April 2023, under its 2020 Omnibus Securities and Incentive Plan, the Company granted and issued
In June 2022, the Company granted and issued
The table below summarized share-based compensation expenses recorded for the nine and three months ended September 30, 2024 and 2023, respectively:
|
Nine Months Ended September 30, |
Three Months Ended September 30, |
|||||||||||||||
|
2024 |
2023 |
2024 |
2023 |
|||||||||||||
|
US$(’000) |
US$(’000) |
US$(’000) |
US$(’000) |
|||||||||||||
|
(Unaudited) |
(Unaudited) |
(Unaudited) |
(Unaudited) |
|||||||||||||
|
Sales and marketing expenses |
||||||||||||||||
|
General and administrative expenses |
||||||||||||||||
|
Research and development expenses |
||||||||||||||||
|
Total |
||||||||||||||||
|
22. |
Subsequent events |
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 general economic downturn in the PRC lead by a challenging macroeconomic environment 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. While the Chinese government has introduced various stimulus measures in 2024 to boost the economy and the property sector, there remains uncertainty as to the future impact of the recent economic downturn in the PRC. The Company will continue to assess the impact of general economic conditions on its operations for future periods.
Except for the above mentioned matters, no other material events which are required to be adjusted or disclosed as of the date of this consolidated financial statements.
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations
Forward-Looking Statements
You should read the following discussion and analysis of our financial condition and results of operations in conjunction with our consolidated financial statements and the related notes included elsewhere in this interim report. Our consolidated financial statements have been prepared in accordance with U.S. GAAP. The following discussion and analysis contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934, including, without limitation, statements regarding our expectations, beliefs, intentions or future strategies that are signified by the words “expect,” “anticipate,” “intend,” “believe,” or similar language. All forward-looking statements included in this document are based on information available to us on the date hereof, and we assume no obligation to update any such forward-looking statements. Our business and financial performance are subject to substantial risks and uncertainties. Actual results could differ materially from those projected in the forward-looking statements. In evaluating our business, you should carefully consider the information set forth under the heading “Risk Factors” in our Annual Report on Form 10-K for the fiscal year ended December 31, 2023. Readers are cautioned not to place undue reliance on these forward-looking statements.
The Public Company Accounting Oversight Board (the “PCAOB”) had historically been unable to inspect our auditor in relation to their audit work performed for our financial statements and the inability of the PCAOB to conduct inspections over our auditor deprived our investors of the benefits of such inspections.
Our auditor, ARK Pro CPA & Co. (“ARK”), the independent registered public accounting firm that issues the audit report in our SEC filings, as an auditor of companies that are traded publicly in the United States and a firm registered with the PCAOB, is subject to laws in the United States, pursuant to which the PCAOB conducts regular inspections to assess its compliance with the applicable professional standards. Our auditor is located in Hong Kong Special Administrative Region of the PRC ("Hong Kong"), China, a jurisdiction where the PCAOB was unable to conduct inspections and investigations before 2022. As a result, we and investors in our securities were deprived of the benefits of such PCAOB inspections. On December 15, 2022, the PCAOB announced that it was able to secure complete access to inspect and investigate PCAOB-registered public accounting firms headquartered in China mainland and Hong Kong in 2022. However, the inability of the PCAOB to conduct inspections of auditors in Hong Kong in the past made it more difficult to evaluate the effectiveness of our independent registered public accounting firm’s audit procedures or quality control procedures as compared to auditors outside of China mainland and Hong Kong that have been subject to the PCAOB inspections, which could cause investors and potential investors in our securities to lose confidence in our audit procedures and reported financial information and the quality of our financial statements.
Our common stock may be delisted and prohibited from trading in the United States under the Holding Foreign Companies Accountable Act, or the HFCAA, as amended by the Accelerating Holding Foreign Companies Accountable Act, if the PCAOB is unable to inspect or investigate completely auditors located in China mainland and Hong Kong. The delisting of our common stock or the threat of their being delisted could cause the value of our common stock to significantly decline or be worthless, and thus you could lose all or substantial portion of your investment.
On December 18, 2020, the Holding Foreign Companies Accountable Act, or the HFCAA, was signed into law that states if the SEC determines that issuers have filed audit reports issued by a registered public accounting firm that has not been subject to PCAOB inspection for three consecutive years beginning in 2021, the SEC shall prohibit its common stock from being traded on a national securities exchange or in the over-the-counter trading market in the U.S. Furthermore, on June 22, 2021, the U.S. Senate passed the Accelerating Holding Foreign Companies Accountable Act, to prohibit securities of any registrant from being listed on any of the U.S. securities exchanges or traded over-the-counter if the auditor of the registrant’s financial statements is not subject to PCAOB inspection for two consecutive years, instead of three consecutive years as enacted in the HFCAA. On December 2, 2021, the SEC adopted final amendments implementing the disclosure and submission requirements of the HFCAA, pursuant to which the SEC will identify an issuer as a “Commission-Identified Issuer” if the issuer has filed an annual report containing an audit report issued by a registered public accounting firm that the PCAOB has determined it is unable to inspect or investigate completely, and will then impose a trading prohibition on an issuer after it is identified as a Commission-Identified Issuer for three consecutive years. On December 29, 2022, the Accelerating Holding Foreign Companies Accountable Act was signed into law.
On December 16, 2021, the PCAOB issued a HFCAA Determination Report (the “2021 PCAOB Determinations”) to notify the SEC of its determination that the PCAOB was unable to inspect or investigate completely registered public accounting firms headquartered in China mainland and Hong Kong because of positions taken by the Chinese authorities, and our auditor was subject to this determination. On May 13, 2022, the SEC conclusively identified us as a Commission-Identified Issuer under the HFCAA following the filing of our annual report on Form 10-K for the fiscal year ended December 31, 2021.
On August 26, 2022, the PCAOB signed a Statement of Protocol on agreement governing on inspections of audit firms based in mainland China and Hong Kong, with China Securities Regulatory Commission (“CSRC”) and Ministry of Finance (“MOF”) of the PRC, in regarding to governing inspections and investigations of audit firms headquartered in mainland China and Hong Kong (the “Agreement”). As stated in the Agreement, the Chinese authorities committed that the PCAOB has direct access to view complete audit work papers under its inspections or investigations and has sole discretion to the selected audit firms and audit engagements. The Agreement opens access for the PCAOB to inspect and investigate the registered public accounting firms in mainland China and Hong Kong completely. The PCAOB then thoroughly tested compliance with every aspect of the Agreement necessary to determine complete access. This included sending a team of PCAOB staff to conduct on-site inspections and investigations in Hong Kong over a nine-week period from September to November 2022.
On December 15, 2022, the PCAOB issued its 2022 HFCAA Determination Report to notify the SEC of its determination that the PCAOB was able to secure complete access to inspect and investigate PCAOB-registered public accounting firms headquartered in China mainland and Hong Kong completely in 2022. The PCAOB Board vacated its 2021 PCAOB Determinations that the PCAOB was unable to inspect or investigate completely registered public accounting firms headquartered in China mainland and Hong Kong. For this reason, we do not expect to be identified as a Commission-Identified Issuer following the filing of our annual report for the fiscal year ended December 31, 2022. However, whether the PCAOB will continue to be able to satisfactorily conduct inspections of PCAOB-registered public accounting firms headquartered in China mainland and Hong Kong is subject to uncertainty and depends on a number of factors out of our, and our auditor’s, control.
The PCAOB is continuing to demand complete access in China mainland and Hong Kong moving forward and is already making plans to resume regular inspections in early 2023 and beyond, as well as to continue pursuing ongoing investigations and initiate new investigations as needed. The PCAOB does not have to wait another year to reassess its determinations. Should the PRC authorities obstruct the PCAOB’s access to inspect or investigate completely in any way and at any point, the PCAOB will act immediately to consider the need to issue new determinations consistent with the HFCAA.
We cannot assure you that our auditor will not be determined as a register public accounting firm that the PCAOB is unable to inspect or investigate completely for two consecutive years because of positions taken by the Chinese authorities and/or any other causes in the future. Each year, the PCAOB will determine whether it can inspect and investigate completely audit firms in mainland China and Hong Kong, among other jurisdictions. If the PCAOB in the future again determines that it is unable to inspect and investigate completely auditors in China mainland and Hong Kong, we may be identified as a Commission-Identified Issuer accordingly. If this happens, Nasdaq may determine to delist our common stock, and there is no certainty that we will be able to continue listing our common stock on other non-U.S. stock exchanges or that an active market for our common stock will immediately develop outside of the U.S. The prohibiting from trading in the United States or delisting of our common stock or the threat of their being delisted could cause the value of our common stock to significantly decline or be worthless, and thus you could lose all or substantial portion of your investment.
Overview
Our company was incorporated in the State of Texas in April 2006 and re-domiciled to become a Nevada corporation in October 2006. As a result of a share exchange transaction we consummated with China Net BVI in June 2009, we are now a holding company, which through certain contractual arrangements with operating companies in the PRC, is engaged in providing Internet advertising, precision marketing, blockchain-based SaaS services, and ecommerce O2O advertising and marketing services and the related data and technical services to SMEs in the PRC.
Through our PRC operating subsidiaries and VIEs, we primarily operate a one-stop services for our clients on our Omni-channel advertising, precision marketing and data analysis management system. We offer a variety channels of advertising and marketing services through this system, which primarily include distribution of the right to use search engine marketing services we purchased from key search engines, provision of online advertising placements services on our web portals, provision of ecommerce O2O advertising and marketing services as well as provision of other related value-added data and technical services to maximize market exposure and effectiveness for our clients. Beginning in early 2022, we introduced our SaaS services to customers. The SaaS services were designated in providing one-stop blockchain-powered enterprise management solutions via our BIF platform in forms of unique NFT generations, data record, share and storage modules subscriptions etc.
Basis of presentation, management estimates and critical accounting policies
Our unaudited condensed consolidated financial statements have been prepared in accordance with generally accepted accounting principles in the United States of America (“U.S. GAAP”) and include the accounts of our company, and all of our subsidiaries and VIEs. We prepare financial statements in conformity with U.S. GAAP, which requires us to make estimates and assumptions that affect the reported amounts of assets and liabilities, disclosure of contingent assets and liabilities on the date of the financial statements and the reported amounts of revenues and expenses during the financial reporting period. We continually evaluate these estimates and assumptions based on the most recently available information, our own historical experience and various other assumptions that we believe to be reasonable under the circumstances. Since the use of estimates is an integral component of the financial reporting process, actual results could differ from those estimates. Some of our accounting policies require higher degrees of judgment than others in their application. In order to understand the significant accounting policies that we adopted for the preparation of our condensed consolidated interim financial statements, readers should refer to the information set forth in Note 4 “Summary of significant accounting policies” to our audited financial statements in our 2023 Form 10-K.
We believe that the assumptions and estimates associated with revenue recognition, estimation of current expected credit loss and fair value measurement of warrant liabilities have the greatest potential impacts on our condensed consolidated financial statements. Therefore, we consider these to be our critical accounting policies and estimates.
|
● |
Our revenues are recognized when control of the promised services is transferred to our customers, in an amount that reflects the consideration we expect to be entitled to in exchange for those services. Our revenues from distribution of the right to use search engine marketing service are recognized on a gross basis, because we determine that we are a principal in the transaction who control the services before they are transferred to our customers. |
|
|
● |
We maintain an allowance for credit losses for accounts receivable and short-term loans provided to unrelated parties, which are recorded as valuation accounts that are deducted from the amortized cost basis of the related financial assets to present the net amount expected to be collected on the financial assets. The allowance for credit losses reflects our current estimate of credit losses expected to be incurred over the life of the related financial assets. We consider various factors in establishing, monitoring, and adjusting our allowance for credit losses, including the aging and aging trends, customer/other parties’ creditworthiness and specific exposures related to particular customers/other parties. We also monitor other risk factors and forward-looking information, such as country specific risks and economic factors that may affect a customer/other party’s ability to pay in establishing and adjusting its allowance for credit losses. We assess collectability by reviewing the financial assets on a collective basis where similar characteristics exist and on an individual basis when we identify specific customers/other parties with known disputes or collectability issues. Accounts receivable and short-term loans to unrelated parties are written off after all collection efforts have ceased. |
|
|
● |
We determined that the warrants we issued in various financing activities should be accounted for as derivative liabilities and measured at fair value with changes in fair value be recorded in earnings in each reporting period. Fair value is defined as the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. The fair value of our warrant liabilities was determined based on significant unobservable inputs, such as volatility of our stock price, risk free interest rate. |
|
A. |
RESULTS OF OPERATIONS FOR THE NINE AND THREE MONTHS ENDED SEPTEMBER 30, 2024 AND 2023 |
The following table sets forth a summary, for the periods indicated, of our consolidated results of operations. Our historical results presented below are not necessarily indicative of the results that may be expected for any future period. All amounts are presented in thousands of U.S. dollars.
|
Nine Months Ended September 30, |
Three Months Ended September 30, |
|||||||||||||||
|
2024 |
2023 |
2024 |
2023 |
|||||||||||||
|
(US $) |
(US $) |
(US $) |
(US $) |
|||||||||||||
|
(Unaudited) |
(Unaudited) |
(Unaudited) |
(Unaudited) |
|||||||||||||
|
Revenues |
13,190 | 25,317 | 3,239 | 9,181 | ||||||||||||
|
Cost of revenues |
12,735 | 25,746 | 3,184 | 9,185 | ||||||||||||
|
Gross (loss)/ profit |
455 | (429 | ) | 55 | (4 | ) | ||||||||||
|
Operating expenses |
||||||||||||||||
|
Sales and marketing expenses |
208 | 148 | 75 | 55 | ||||||||||||
|
General and administrative expenses |
3,462 | 3,659 | 1,972 | 1,547 | ||||||||||||
|
Research and development expenses |
- | 18 | - | - | ||||||||||||
|
Total operating expenses |
3,670 | 3,825 | 2,047 | 1,602 | ||||||||||||
|
Loss from operations |
(3,215 | ) | (4,254 | ) | (1,992 | ) | (1,606 | ) | ||||||||
|
Other income/(expenses) |
||||||||||||||||
|
Interest income |
233 | 230 | 66 | 79 | ||||||||||||
|
Other expenses, net |
(30 | ) | (20 | ) | (2 | ) | (6 | ) | ||||||||
|
Impairment of long-term investments |
(2 | ) | (207 | ) | - | 2 | ||||||||||
|
Gain on disposal of subsidiaries |
23 | - | 23 | - | ||||||||||||
|
Change in fair value of warrant liabilities |
- | 185 | - | 13 | ||||||||||||
|
Total other income/(expenses) |
224 | 188 | 87 | 88 | ||||||||||||
|
Loss before income tax benefit/(expense) |
(2,991 | ) | (4,066 | ) | (1,905 | ) | (1,518 | ) | ||||||||
|
Income tax benefit/(expense) |
4 | - | - | (2 | ) | |||||||||||
|
Net loss |
(2,987 | ) | $ | (4,066 | ) | $ | (1,905 | ) | $ | (1,520 | ) | |||||
|
Net loss attributable to noncontrolling interests |
7 | - | (9 | ) | - | |||||||||||
|
Net loss attributable to ZW Data Action Technologies Inc. |
$ | (2,980 | ) | $ | (4,066 | ) | $ | (1,914 | ) | $ | (1,520 | ) | ||||
Revenues
The following tables set forth a breakdown of our total revenues, disaggregated by type of services for the periods indicated, with inter-company transactions eliminated:
|
Nine Months Ended September 30, |
||||||||||||||||
|
2024 |
2023 |
|||||||||||||||
|
Revenue type |
(Amounts expressed in thousands of US dollars, except percentages) |
|||||||||||||||
|
-Internet advertising and related data service |
$ | 2,700 | 20.5 | % | $ | 427 | 1.7 | % | ||||||||
|
-Distribution of the right to use search engine marketing service |
9,740 | 73.8 | % | 24,815 | 98.0 | % | ||||||||||
|
Internet advertising and related services |
12,440 | 94.3 | % | 25,242 | 99.7 | % | ||||||||||
|
Blockchain-based SaaS services |
750 | 5.7 | % | 75 | 0.3 | % | ||||||||||
|
Total |
$ | 13,190 | 100 | % | $ | 25,317 | 100 | % | ||||||||
|
Three Months Ended September 30, |
||||||||||||||||
|
2024 |
2023 |
|||||||||||||||
|
Revenue type |
(Amounts expressed in thousands of US dollars, except percentages) |
|||||||||||||||
|
-Internet advertising and related data service |
$ | 2,700 | 83.4 | % | $ | 145 | 1.6 | % | ||||||||
|
-Distribution of the right to use search engine marketing service |
539 | 16.6 | % | 9,011 | 98.1 | % | ||||||||||
|
Internet advertising and related services |
3,239 | 100 | % | 9,156 | 99.7 | % | ||||||||||
|
Blockchain-based SaaS services |
- | - | 25 | 0.3 | % | |||||||||||
|
Total |
$ | 3,239 | 100 | % | $ | 9,181 | 100 | % | ||||||||
Total Revenues: Our total revenues decreased to US$13.19 million and US$3.24 million for the nine and three months ended September 30, 2024, respectively, from US$25.32 million and US$9.18 million for the same periods last year, respectively, which was primarily due to the decrease in our main stream service revenues, i.e., distribution of the right to use search engine marketing services.
|
● |
Internet advertising revenues for both the nine and three months ended September 30, 2024 was approximately US$2.7 million, compared with US$0.43 million and US$0.15 million for the nine and three months ended September 30, 2023, respectively. The increase primarily resulted from the Company providing influencer marketing services during the three months ended September 30, 2024 which offer higher growth opportunities and profitability. |
| ● |
Revenue generated from distribution of the right to use search engine marketing service for the nine and three months ended September 30, 2024 was approximately US$9.74 million and US$0.54 million, respectively, compared with approximately US$24.82 million and US$9.01 million for the nine and three months ended September 30, 2023, respectively. The decline in revenue from this business category was primarily attributable to the Company shifting its business strategy to focus more on profitability. |
|
| ● |
For the nine and three months ended September 30, 2024, we generated approximately US$0.75 million and nil in revenue from our blockchain-based SaaS services, respectively, compared with approximately US$0.08 million and US$0.03 million for the nine and three months ended September 30, 2023, respectively. |
Cost of revenues
Our cost of revenues consisted of costs directly related to the offering of our Internet advertising, precision marketing and related data and technical services, and software platform amortization cost related to our blockchain-based SaaS service. The following table sets forth our cost of revenues, disaggregated by type of services, by amount and gross profit ratio for the periods indicated, with inter-company transactions eliminated:
|
Nine Months Ended September 30, |
||||||||||||||||||||||||
|
2024 |
2023 |
|||||||||||||||||||||||
|
(Amounts expressed in thousands of US dollars, except percentages) |
||||||||||||||||||||||||
|
Revenue |
Cost |
GP ratio |
Revenue |
Cost |
GP ratio |
|||||||||||||||||||
|
-Internet advertising and related data service |
$ | 2,700 | $ | 2,430 | 10 | % | $ | 427 | $ | 350 | 18 | % | ||||||||||||
|
-Distribution of the right to use search engine marketing service |
9,740 | 9,674 | 0.7 | % | 24,815 | 24,766 | 0.2 | % | ||||||||||||||||
|
Internet advertising and related services |
12,440 | 12,104 | 2.7 | % | 25,242 | 25,116 | 0.5 | % | ||||||||||||||||
|
Blockchain-based SaaS services |
750 | 631 | 15.9 | % | 75 | 630 | -740 | % | ||||||||||||||||
|
Total |
$ | 13,190 | $ | 12,735 | 3.5 | % | $ | 25,317 | $ | 25,746 | -2 | % | ||||||||||||
|
Three Months Ended September 30, |
||||||||||||||||||||||||
|
2024 |
2023 |
|||||||||||||||||||||||
|
(Amounts expressed in thousands of US dollars, except percentages) |
||||||||||||||||||||||||
|
Revenue |
Cost |
GP ratio |
Revenue |
Cost |
GP ratio |
|||||||||||||||||||
|
-Internet advertising and related data service |
$ | 2,700 | $ | 2,430 | 10 | % | $ | 145 | $ | 116 | 20 | % | ||||||||||||
|
-Distribution of the right to use search engine marketing service |
539 | 544 | -0.9 | % | 9,011 | 8,859 | 2 | % | ||||||||||||||||
|
Internet advertising and related services |
3,239 | 2,974 | 8.2 | % | 9,156 | 8,975 | 2 | % | ||||||||||||||||
|
Blockchain-based SaaS services |
- | 210 | - | 25 | 210 | -740 | % | |||||||||||||||||
|
Total |
$ | 3,239 | $ | 3,184 | 1.7 | % | $ | 9,181 | $ | 9,185 | -0.04 | % | ||||||||||||
Cost of revenues: Our total cost of revenues decreased to US$12.74 million and US$3.18 million for the nine and three months ended September 30, 2024, respectively, from US$25.75 million and US$9.19 million for the nine and three months ended September 30, 2023, respectively. Our cost of revenues primarily consists of search engine marketing resources purchased from key search engines, amortization of software platform development cost and other direct costs associated with providing our services. The decrease in our total cost of revenues for the nine and three months ended September 30, 2024 was primarily due to the decrease in costs associated with distribution of the right to use search engine marketing service we purchased from key search engines during the periods, which was in line with the decrease in the related revenues as discussed above.
| ● |
Costs for internet advertising and data service primarily consist of cost of internet traffic flow and technical services we purchased from other portals and technical suppliers for obtaining effective sales lead generation to promote business opportunity advertisements placed on our own ad portals. It also includes the cost of influencer marketing services that corresponds with our influencer marketing business. For the nine and three months ended September 30, 2024, our total cost of revenues for Internet advertising and data service was approximately US$2.43 million, compared with approximately US$0.35 million and US$0.12 million for the nine and three months ended September 30, 2023, respectively. The gross margin rate of our Internet advertising and data service was 10% for the nine and three months ended September 30, 2024, compared with 18% and 20% for the nine and three months ended September 30, 2023, respectively. |
| ● |
Costs for distribution of the right to use search engine marketing service was direct search engine resources consumed for the right to use search engine marketing service that we purchased from key search engines and distributed to our customers. We purchased these search engine resources from well-known search engines and/or their delegated agencies in China, for example, Baidu, Qihu 360 and Sohu (Sogou) etc. We purchased the resources in relatively large amounts under our own name at a relatively lower rate compared to the market rates. We charged our clients the actual cost they consumed on search engines for the use of this service and a premium at certain percentage of that actual consumed cost. For the nine and three months ended September 30, 2024, our total cost of revenues for distribution of the right to use search engine marketing service was US$9.67 million and US$0.54 million, respectively, compared with US$24.77 million and US$8.86 million for the same periods last year, respectively. The decrease in cost of revenues for the nine and three months ended September 30, 2024 was in line with the decrease in revenues from this business category. Gross margin rate of this business category was 0.7% and -0.9% for the nine and three months ended September 30, 2024, respectively, compared with 0.2% and 2% gross margin rate incurred for the same periods last year, respectively. |
| ● |
For the nine months and three months ended September 30, 2024, cost for our blockchain-based SaaS services was approximately US$0.63 million and US$0.21 million, respectively, compared with approximately US$0.63 million and US$0.21 million for the nine and three months ended September 30, 2023, respectively. Costs for our blockchain-based SaaS services consist of the amortized cost of our self-developed BIF platform. Gross margin rate of this business category was 15.9% and nil for the nine and three months ended September 30, 2024, respectively, compared with -740% gross margin rate for the same periods last year. |
Gross (loss)/profit
As a result of the foregoing, for the nine months ended September 30, 2024, we incurred a gross profit of approximately US$0.46 million, compared with a gross loss of approximately US$0.43 million for the nine months ended September 30, 2023. For the three months ended September 30, 2024, we incurred an approximately US$0.06 million gross profit, compared with a gross loss of approximately US$0.004 million for the three months ended September 30, 2023. Our overall gross margin was 3.5% and 1.7% for the nine and three months ended September 30, 2024, respectively, compared with -1.7% and -0.04% for the same periods last year, respectively. For the nine months ended September 30, 2024, the gross margin rate of our main stream of service revenues, i.e. distribution of the right to use search engine marketing services, improved to 0.7%, compared with 0.2% gross margin rate for the same period last year. In addition, for the nine months ended September 30, 2024, the gross margin rate of our blockchain-based SaaS services was 15.9%, compared with -740% for the same period last year.
Operating Expenses
Our operating expenses consist of sales and marketing expenses, general and administrative expenses and research and development expenses. The following tables set forth our operating expenses, divided into their major categories by amount and as a percentage of our total revenues for the periods indicated.
|
Nine Months Ended September 30, |
||||||||||||||||
|
2024 |
2023 |
|||||||||||||||
|
(Amounts expressed in thousands of US dollars, except percentages) |
||||||||||||||||
|
Amount |
% of total revenue |
Amount |
% of total revenue |
|||||||||||||
|
Total revenues |
$ | 13,190 | 100 | % | $ | 25,317 | 100 | % | ||||||||
|
Gross profit/(loss) |
455 | 3.5 | % | (429 | ) | -1.7 | % | |||||||||
|
Sales and marketing expenses |
208 | 1.6 | % | 148 | 0.6 | % | ||||||||||
|
General and administrative expenses |
3,462 | 26.2 | % | 3,659 | 14.5 | % | ||||||||||
|
Research and development expenses |
- | - | 18 | 0.1 | % | |||||||||||
|
Total operating expenses |
$ | 3,670 | 27.8 | % | $ | 3,825 | 15.1 | % | ||||||||
|
Three Months Ended September 30, |
||||||||||||||||
|
2024 |
2023 |
|||||||||||||||
|
(Amounts expressed in thousands of US dollars, except percentages) |
||||||||||||||||
|
Amount |
% of total revenue |
Amount |
% of total revenue |
|||||||||||||
|
Total revenues |
$ | 3,239 | 100 | % | $ | 9,181 | 100 | % | ||||||||
|
Gross profit/(loss) |
55 | 1.7 | % | (4 | ) | -0.04 | % | |||||||||
|
Sales and marketing expenses |
75 | 2.3 | % | 55 | 0.6 | % | ||||||||||
|
General and administrative expenses |
1,972 | 60.9 | % | 1,547 | 16.9 | % | ||||||||||
|
Research and development expenses |
- | - | - | - | ||||||||||||
|
Total operating expenses |
$ | 2,047 | 63.2 | % | $ | 1,602 | 17.4 | % | ||||||||
Operating Expenses: Our total operating expenses was approximately US$3.67 million and US$2.05 million for the nine and three months ended September 30, 2024, respectively, compared with approximately US$3.83 million and US$1.60 million for the nine and three months ended September 30, 2023, respectively.
| ● |
Sales and marketing expenses: Sales and marketing expenses was US$0.21 million and US$0.08 million for the nine and three months ended September 30, 2024, respectively, compared with approximately US$0.15 million and US$0.06 million for the nine and three months ended September 30, 2023, respectively. Our sales and marketing expenses primarily consist of staff salaries and benefits, performance bonuses, travel expenses, communication expenses and other general office expenses of our sales department. Due to certain aspects of our business nature, the fluctuation of our sales and marketing expenses usually does not have a direct linear relationship with the fluctuation of our net revenues. |
| ● |
General and administrative expenses: General and administrative expenses was US$3.46 million and US$1.97 million for the nine and three months ended September 30, 2024, respectively, compared with US$3.66 million and US$1.55 million for the nine and three months ended September 30, 2023, respectively. Our general and administrative expenses primarily consist of salaries and benefits of management, accounting, human resources and administrative personnel, office rentals, depreciation of office equipment, allowance for doubtful accounts, professional service fees, maintenance, utilities and other general office expenses of our supporting and administrative departments. For the nine months ended September 30, 2024, the change in our general and administrative expenses was primarily due to the following reasons: (1) the increase in share-based compensation expenses of approximately US$1.55 million, due to the issuance of 0.375 million fully-vested shares of the Company’s restricted common stock during the three months ended September 30, 2024, compared to the same period last year; (2) the decrease in allowance for expected credit losses of approximately US$0.58 million; and (3) the decrease in other general administrative expenses of approximately US$1.17 million, as a result of the cost reduction plan executed by the management. For the three months ended September 30, 2024, the changes in our general and administrative expenses was primarily attributable to the following reasons: (1) the increase in share-based compensation expenses of approximately US$1.63 million, due to the issuance of 0.375 million fully-vested shares of the Company’s restricted common stock during the three months ended September 30, 2024, compared to the same period last year; (2) the decrease in other general administrative expenses of approximately US$0.43 million, as a result of the cost reduction plan executed by management; and (3) the decrease in allowance for expected credit losses of approximately US$0.77 million, respectively. |
Loss from operations: As a result of the foregoing, we incurred a loss from operations of approximately US$3.22 million and US$4.25 million for the nine months ended September 30, 2024 and 2023, respectively. For the three months ended September 30, 2024 and 2023, we incurred a loss from operations of approximately US$1.99 million and US$1.61 million, respectively.
Interest Income: For the nine and three months ended September 30, 2024, interest income recognized were primarily related to the interest we earned from the short-term loans we provided to unrelated parties.
Impairment on long-term investments: For the nine months ended September 30, 2024, we recognized approximately US$0.002 million in impairment loss on long-term investments, which was related to our cash investments in one of our unconsolidated investee entities whose business activities had become dormant. For the nine months ended September 30, 2023, we recognized approximately US$0.21 million impairment loss on long-term investments.
Change in fair value of warrant liabilities: We issued warrants in financing activities. We determined that these warrants should be accounted for as derivative liabilities, as the warrants are dominated in a currency (U.S. dollar) other than our functional currency (Renminbi or Yuan). For the nine and three months ended September 30, 2024, we did not recognize any change in fair value of these warrant liabilities, compared to a gain of change in fair value of approximately US$0.19 million and US$0.01 million for the nine and three months ended September 30, 2023, respectively.
Loss before income tax benefit/(expense): As a result of the foregoing, our loss before income tax benefit was approximately US$2.99 million and US$4.066 million for the nine months ended September 30, 2024 and 2023, respectively. For the three months ended September 30, 2024, we incurred an approximately US$1.91 million loss before income tax expense, compared with an approximately US$1.52 million loss before income tax expense for the three months ended September 30, 2023.
Income Tax benefit/(expense): For the nine months ended September 30, 2024 and 2023, we recognized approximately US$0.004 million and nil, respectively, in income tax benefits. For the three months ended September 30, 2024 and 2023, we recognized approximately nil and US$0.002 million, respectively, in income tax expenses. These benefits were related to the net operating loss incurred by one of our operating VIEs for each respective period. We anticipate these losses will likely be utilized against future earnings of this entity.
Net loss: As a result of the foregoing, for the nine months ended September 30, 2024 and 2023, we incurred a total net loss of approximately US$2.99 million and US$4.066 million, respectively. For the three months ended September 30, 2024, we recognized a net loss of approximately US$1.91 million, compared with a net loss of approximately US$1.52 million for the three months ended September 30, 2023.
B. LIQUIDITY AND CAPITAL RESOURCES
Cash Transfer within Our Organization and the Related Restrictions
We are a Nevada holding company with operations primarily conducted in China through our PRC subsidiaries, VIEs and VIEs’ subsidiaries. The intercompany flow of funds within our organization is effected through capital contributions and intercompany loans. We do not have written policies regarding intercompany cash transfer within our organization. In accordance with our current internal cash management practices, all intercompany cash transfer within our organization requires prior approval by our financial director and our chief financial officer/or our chief executive officer before execution.
As we conduct our operations primarily in China through our PRC subsidiaries, VIEs and their subsidiaries, and we intend to transfer most of our cash raised from the U.S. stock market to these operating entities to support their operations and expansions, our ability to pay dividends to U.S. investors may depend on receiving distributions from our PRC subsidiaries and settlement of the amounts owed under the VIE agreements from the consolidated VIEs. Any limitation on the ability of our PRC subsidiaries and the consolidated VIEs to make payments to us, or the tax implications of making payments to us, could have a material adverse effect on our ability to pay dividends to our U.S. investors.
The PRC regulations currently permit payment of dividends only out of accumulated profits, as determined in accordance with PRC accounting standards and regulations. Our PRC subsidiaries, the consolidated VIEs and their subsidiaries in China are also required to set aside at least 10% of their respective after-tax profit based on the PRC accounting standards and regulations each year to the statutory surplus reserve, until the balance in the reserve reaches 50% of the registered capital of the respective PRC entities. In accordance with these PRC laws and regulations, our PRC subsidiaries, the consolidated VIEs and their subsidiaries are restricted in their ability to transfer a portion of their net assets to us. As of September 30, 2024 and December 31, 2023, net assets restricted in the aggregate, which include paid-in capital and statutory reserve funds of our PRC subsidiaries, the consolidated VIEs and their subsidiaries that are included in our consolidated net assets, were approximately US$13.26 million and US$13.41 million, respectively. Appropriations to the enterprise expansion fund and staff welfare and bonus fund of a foreign-invested PRC entity and appropriation to the discretionary surplus reserve of other PRC entities are at the discretion of the board of directors. To date, none of our PRC subsidiaries, the consolidated VIEs and their subsidiaries appropriated any of these non-mandatory funds and reserves. Furthermore, if these entities incur debt on their own in the future, the instruments governing the debt may restrict their ability to pay dividends or make other payments.
Under the PRC Enterprise Income Tax (“EIT”) Law and related regulations, dividends, interests, rent or royalties payable by a foreign-invested enterprise to its immediate holding company outside China are subject to a 10% withholding tax. 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. Hong Kong has a tax arrangement with China that provides for a 5% withholding tax on dividends subject to certain conditions and requirements, such as the requirements that the Hong Kong enterprise owns at least 25% of the PRC enterprise distributing the dividend at all times within the 12-month period immediately preceding the distribution of dividends and provides that the recipient can demonstrate it is a Hong Kong tax resident and it is the beneficial owner of the dividends. The PRC government adopted regulations in 2018 which stipulate that in determining whether a non-resident enterprise has the status as a beneficial owner, comprehensive analysis shall be conducted based on the factors listed therein and the actual circumstances of the specific case shall be taken into consideration. Specifically, it expressly excludes an agent or a designated payee from being considered as a “beneficial owner”. We own our PRC subsidiaries through China Net HK. China Net HK currently does not hold a Hong Kong tax resident certificate from the Inland Revenue Department of Hong Kong, there is no assurance that the reduced withholding tax rate will be available for us. If China Net HK is not considered to be the “beneficial owner” of the dividends by the Chinese local tax authority, any dividends paid to it by our PRC subsidiaries would be subject to a withholding tax rate of 10%.
There are no restrictions for the consolidated VIEs to settle the amounts owed under the VIE agreements to our WFOE. However, arrangements and transactions among affiliated entities may be subject to audit or challenge by the PRC tax authorities. If at any time the VIE agreements and the related fee structure between the consolidated VIEs and our WFOE is determined to be non-substantive and disallowed by Chinese tax authorities, the consolidated VIEs could, as a matter of last resort, make a non-deductible transfer to our WFOE for the amounts owed under the VIE agreements. This would result in such transfer being non-deductible expenses for the consolidated VIEs but still taxable income for our WFOE. If this happens, it may increase our tax burden and reduce our after-tax income in the PRC, and may materially and adversely affect our ability to make distributions to the holding company. Our management is of the view that the likelihood that this scenario would happen is remote. To date, the VIEs have settled to our WFOE the amount owed under the VIE agreements of RMB15.25 million (approximately US$2.27 million) in the aggregate.
Our PRC subsidiaries generate all of their revenue in Renminbi, Renminbi is not freely convertible into other currencies. As a result, any restriction on currency exchange may limit the ability of our PRC subsidiaries to pay dividends/make distributions to us. The Chinese government imposes controls on the convertibility of Renminbi into foreign currencies and, in certain cases, the remittance of currency out of China. Shortages in availability of foreign currency may then restrict the ability of our PRC subsidiaries to remit sufficient foreign currency to us for us to pay dividends to the U.S. investors. Renminbi is currently convertible under the “current account,” which includes dividends, trade and service-related foreign exchange transactions, but not under the “capital account,” which includes foreign direct investment and foreign debt. Currently, our PRC subsidiaries may purchase foreign currency for settlement of current account transactions, including payment of dividends to us, without the approval of the State Administration of Foreign Exchange of China (the “SAFE”) by complying with certain procedural requirements. However, the relevant Chinese governmental authorities may limit or eliminate our ability to purchase foreign currencies in the future for current account transactions. The Chinese government may continue to strengthen its capital controls, and additional restrictions and substantial vetting processes may be instituted by the SAFE for cross-border transactions falling under both the current account and the capital account. Any existing and future restrictions on currency exchange may limit our ability to utilize revenue generated in Renminbi to pay dividends in foreign currencies to holders of our securities. Foreign exchange transactions under the capital account remain subject to limitations and require approvals from, or registration with, the SAFE and other relevant Chinese governmental authorities. This could affect our ability to obtain foreign currency through debt or equity financing for our PRC subsidiaries.
To date, none of our subsidiaries has made any distribution of earnings or issued any dividends to their respective shareholder in or outside of China, or to the Nevada holding company, and the Nevada holding company has never declared or paid any cash dividends to U.S. investors.
We do not have any present plan to make any distribution of earnings/issue any dividends directly or indirectly to our Nevada holding company or pay any cash dividends on our common stock in the foreseeable future because we currently intend to retain most, if not all, of our available funds and any future earnings to operate and expand our business.
Cash Flow Analysis for the Nine Months Ended September 30, 2024 and 2023
Cash and cash equivalents represent cash on hand and deposits held at call with banks. We consider all highly liquid investments with original maturities of three months or less at the time of purchase to be cash equivalents. As of September 30, 2024, we had cash and cash equivalents of approximately US$1.12 million.
Our liquidity needs include (i) net cash used in operating activities that consists of (a) cash required to fund the initial build-out, continued expansion of our network and new services and (b) our working capital needs, which include deposits and advance payments to search engine resources and other advertising resources providers, payment of our operating expenses and financing of our accounts receivable; and (ii) net cash used in investing activities that consist of the investment to expand technologies related to our existing and future business activities, investment to enhance the functionality of our current advertising portals for providing advertising, marketing and data services and to secure the safety of our general network, and investment to establish joint ventures with strategic partners for the development of new technologies and services. To date, we have financed our liquidity needs primarily through proceeds we generated from financing activities.
The following table provides detailed information about our net cash flow for the periods indicated:
|
Nine Months Ended September 30, |
||||||||
|
2024 |
2023 |
|||||||
|
Amounts in thousands of US dollars |
||||||||
|
Net cash used in operating activities |
$ | (1,228 | ) | $ | (1,536 | ) | ||
|
Net cash provided by/(used in) investing activities |
645 | (1,499 | ) | |||||
|
Net cash provided by financing activities |
876 | - | ||||||
|
Effect of foreign currency exchange rate changes |
13 | (42 | ) | |||||
|
Net increase/(decrease) in cash and cash equivalents |
$ | 306 | $ | (3,077 | ) | |||
Net cash used in operating activities
For the nine months ended September 30, 2024, our net cash used in operating activities of approximately US$1.23 million were primarily attributable to:
| (1)
|
net loss excluding approximately US$0.71 million of non-cash expenses of depreciation and amortizations, approximately US$0.02 million amortization of operating lease right-of-use assets, approximately US$1.64 million of share-based compensation expenses, approximately US$0.02 million of gain on disposal of subsidiaries, approximately US$0.002 million impairment on long-term investments, approximately US$0.003 million loss on disposal of fixed assets, approximately US$0.77 million allowance for credit losses, approximately US$0.004 million deferred tax benefit and approximately US$0.23 million non-operating income, yielded the non-cash, non-operating items excluded net loss of approximately US$0.10 million. |
|
(2) |
the receipt of cash from operations from changes in operating assets and liabilities such as: |
|
- |
accounts payable increased by approximately US$0.30 million; and |
|
- |
other current liabilities and taxes payable increased by approximately US$0.39 million. |
|
(3) |
offset by the use from operations from changes in operating assets and liabilities such as: |
|
- |
accounts receivable increased by approximately US$1.43 million; |
|
- |
prepayment and deposit to suppliers increased by approximately US$0.02 million; |
|
- |
Advances from customers decreased by approximately US$0.09 million; and |
|
- |
accruals and operating lease liabilities decreased by approximately US$0.02 million in the aggregate, due to settlement of these operating liabilities during the period. |
For the nine months ended September 30, 2023, our net cash used in operating activities of approximately US$1.54 million were primarily attributable to:
|
(4) |
net loss excluding approximately US$0.97 million of non-cash expenses of depreciation and amortizations; approximately US$0.31 million amortization of operating lease right-of-use assets, approximately US$0.10 million share-based compensation, approximately US$0.19 million gain from change in fair value of warrant liabilities, approximately US$1.35 million allowance for credit losses, approximately US$0.01million loss on disposal of fixed assets and approximately US$0.23 million non-operating income, yielded the non-cash, non-operating items excluded net loss of approximately US$1.55 million. |
|
(5) |
the receipt of cash from operations from changes in operating assets and liabilities such as: |
|
- |
accounts receivable decreased by approximately US$0.66 million, primarily due to collections from two major clients during the period; and |
|
- |
advance from customers increased by approximately US$0.43 million. |
|
(6) |
offset by the use from operations from changes in operating assets and liabilities such as: |
|
- |
prepayment and deposit to suppliers increased by approximately US$0.39 million; |
|
- |
account payables decreased by approximately US$0.003 million; |
|
- |
the other current liabilities and taxes payables decreased by approximately US$0.08 million; and |
|
- |
accruals, operating lease liabilities and short-term lease payment payables decreased by approximately US$0.60 million in the aggregate, due to the settlement of these operating liabilities during the period. |
Net cash used in investing activities
For the nine months ended September 30, 2024, (1) we purchased office equipment of approximately US$0.003 million; (2) we made an additional investment of approximately US$0.002 million to one of our unconsolidated investee entities; (3) we collected US$0.49 million in short-term loan principal from short-term loans we provided to unrelated parties in previous periods; (4) we received total interest payment of approximately US$0.41 million, which was attributable to short-term loans we provided to unrelated parties in previous periods; (5) we received approximately US$0.15 million in proceeds from the disposal of long-term investments; (6) we acquired cash of approximately US$0.009 million through the acquisition of a 51% equity interest in Beijing Yi En; (7) we recognized deconsolidation of cash during the period of US$0.006 million; and (8) we made deposits on investment contracts of approximately US$0.40 million. In the aggregate, these transactions resulted in a net cash inflow from investing activities of approximately US$0.65 million for the nine months ended September 30, 2024.
For the nine months ended September 30, 2023, (1) we provided to an unrelated party a short-term loan of US$2.0 million. The loan is unsecured and bears a fixed annualized interest rate of 12%. The original maturity date of this loan was July 17, 2023. On July 1, 2023, we extended the term of this loan for a six-month period to January 18, 2024; (2) we collected an US$0.10 million short-term loan, which was provided to another unrelated party in April 2022; (3) we received a total interest income of approximately US$0.07 million, which was attributable to short-term loans we provided to unrelated parties in previous periods; (4) we made an additional investment of approximately US$0.04 million to one of our unconsolidated investee entities; (5) we received an approximately US$0.43 million proceeds from the disposal of our equity interest in another unconsolidated investee entity to an unrelated party; and (6) we made an deposit of approximately US0.05 million for equipment purchase. In the aggregate, these transactions resulted in a net cash outflow from investing activities of approximately US$1.50 million for the nine months ended September 30, 2023.
Net cash provided by financing activities
For the nine months ended September 30, 2024, (1) we received an advance from investors of approximately US$0.81 million; and (2) we recognized capital contribution from noncontrolling interests of approximately US$0.07 million. In contrast, no cash was provided by or used in financing activities for the nine months ended September 30, 2023.
Future Liquidity, Material Cash Requirements and Capital Resources
Our future short-term liquidity needs within 12 months from the date hereof primarily include deposits and advance payments required for the purchase of search engine marketing resources and other online marketing resources to be distributed to our customers and payments for our operating expenses, which mainly consist of office rentals and employee salary and benefit.
In addition, in order to further develop our core business, i.e., our internet advertising and related data service business, broaden and diversify the online marketing channels for customers, reinforce our industry competitive advantage and secure our client base, we are actively seeking target companies with complementary online marketing resources for acquisition and/or joint ventures cooperation. It is not yet certain when the potential acquisition and/or cooperation will be consummated and what form(s) of consideration will be transferred by us. If this transaction were to be consummated, it will materially decrease our liquidity in the short run when the cash consideration, if any, is transferred. However, upon consummation of the acquisition, operating profits and new cash inflow may be generated from the acquired subsidiary, which may also help to improve the overall gross margin and cash flow status of our core business through the expected synergies of combining operations of the new acquired subsidiary and our own. Except this, we do not have other material non-operational cash requirements within 12 months from the date hereof.
We plan to optimize our internet resources cost investment strategy to improve the gross profit margin of our core business. Additionally, we will focus on improving accounts receivables collection management and negotiating better payment terms with major suppliers. These efforts are expected to substantially boost our cash flows from operations. In addition, to further improve our liquidity, we plan to reduce our operating costs through optimizing the personnel structure among different offices, and reduce our office leasing spaces, if needed. Beginning in early 2022, we began offering our SaaS services to customers. Our SaaS services are provided based on technologies of our self-developed Blockchain Integrated Framework (“BIF”) platform, which allows clients to utilize the BIF platform as an enterprise management software to record, share and store operating data on-chain, and/or to generate unique designed Non-fungible Token (“NFTs”) for their intellectual properties and certificates. Although revenues from the new SaaS services business and its profitability have not met our expectations, we anticipate that it will generate positive cash flow and improve our liquidity. This is because these services leverage our self-developed software platform, which does not require significant cash outflow to third-party service providers.
In addition, for the next 12 months from the date hereof, we anticipate to generate additional cash inflows and/or improve our liquidity through the following: (1) our current outstanding short-term working capital loans provided to unrelated parties will mature within the next 12 months that we anticipate collecting these loan principals and the related interest income within the next 12 months; (2) if at any time we anticipate insufficiency of our working capital, we can apply for revolving credit facility from commercial banks in the PRC to supplement our short-term liquidity deficit. We have not experienced any difficulties in obtaining such credit facility before, and this could result in fixed obligations and incremental cost of interest; (3) in consideration of the long-term cooperation history and good track records with our major suppliers, we plan to negotiate with our suppliers for more favorable payment terms; and (4) we plan to reduce our operating costs through optimizing the personnel structure among different offices and reduce our office leasing spaces, if needed. This may incur incremental costs related to employee layoff compensation and contract termination penalty.
If we fail to achieve these goals, we may need additional financing to execute our business plan. If additional financing is required, we cannot predict whether this additional financing will be in the form of equity, debt, or another form, and we may not be able to obtain the necessary additional capital on a timely basis, on acceptable terms, or at all. In the event that financing sources are not available, or that we are unsuccessful in increasing our gross profit margin and reducing operating losses, we may be unable to implement our current plans for expansion, repay debt obligations or respond to competitive pressures, any of which would have a material adverse effect on our business, prospects, financial condition and results of operations. These factors raise substantial doubt about our ability to continue as a going concern within one year after the date that the financial statements are issued.
The unaudited condensed consolidated financial statements as of September 30, 2024 have been prepared under the assumption that we 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. Our ability to continue as a going concern is dependent upon our uncertain ability to increase gross profit margin and reduce operating loss from our core business and/or obtain additional equity and/or debt financing. The accompanying financial statements as of September 30, 2024 do not include any adjustments that might result from the outcome of these uncertainties. If we are unable to continue as a going concern, we may have to liquidate our assets and may receive less than the value at which those assets are carried on the financial statements.
In the long term, beyond the next 12 months, we plan to further broaden the application scenarios of our blockchain-based SaaS services to be offered to the customers, continue expanding our core Internet advertising and marketing business through acquisitions, and develop Internet advertising and marketing channels that target overseas Internet users. As such, we may decide to enhance our liquidity position or increase our cash reserve for future investments through additional equity financing in the U.S. capital market. This would result in further dilution to our shareholders. We cannot assure you that such financing will be available in amounts or on terms acceptable to us, or at all.
C. Off-Balance Sheet Arrangements
None.
D. Disclosure of Contractual Obligations
In June 2023, we acquired a 9.9% equity interest in Wuhan Ju Liang, through subscription of a RMB0.99 million (approximately US$0.14 million) in registered capital of the entity in cash, which amount was committed to be paid up before August 1, 2052.
Item 3. Quantitative and Qualitative Disclosures About Market Risk
Not applicable to smaller reporting companies.
Item 4. Controls and Procedures
Evaluation of Disclosure Controls and Procedures
Under the supervision and with the participation of our management, including our principal executive officer and principal accounting and financial officer, we conducted an evaluation of the effectiveness of our disclosure controls and procedures as of the fiscal quarter ended September 30, 2024, as such term is defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act. Based on this evaluation, our principal executive officer and principal financial officer have concluded that during the period covered by this report, the Company’s disclosure controls and procedures were effective as of such date to ensure that information required to be disclosed by us in our Exchange Act reports is recorded, processed, summarized, and reported within the time periods specified in the SEC’s rules and forms, and that such information is accumulated and communicated to our management, including our principal executive officer and principal financial officer or persons performing similar functions, as appropriate to allow timely decisions regarding required disclosure.
Changes in Internal Control over Financial Reporting
There was no change in our internal control over financial reporting that occurred during the fiscal quarter of 2024 covered by this Quarterly Report on Form 10-Q that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.
We are currently not a party to any legal or administrative proceedings and are not aware of any pending or threatened legal or administrative proceedings against us in all material aspects. We may from time to time become a party to various legal or administrative proceedings arising in the ordinary course of our business.
This information has been omitted based on the Company’s status as a smaller reporting company.
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
None.
Item 3. Defaults Upon Senior Securities
None.
Item 4. Mine Safety Disclosures
Not applicable.
During our fiscal quarter ended September 30, 2024, of our directors or officers informed us of the adoption or termination of a “Rule 10b5-1 trading arrangement” or “non-Rule 10b5-1 trading arrangement” as those terms are defined in Item 408(a) of Regulation S-K.
The exhibits listed on the Exhibit Index below are provided as part of this report.
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Exhibit No. |
Document Description |
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101 |
The following materials are filed herewith: (i) Inline XBRL Instance, (ii) Inline XBRL Taxonomy Extension Schema, (iii) Inline XBRL Taxonomy Extension Calculation, (iv) XBRL Taxonomy Extension Labels, (v) XBRL Taxonomy Extension Presentation, and (vi) Inline XBRL Taxonomy Extension Definition. |
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104 |
Cover Page Interactive Data File – The cover page interactive data file does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document. |
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
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ZW DATA ACTION TECHNOLOGIES INC. |
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Date: November 19, 2024 |
By: |
/s/ Handong Cheng |
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Name: Handong Cheng |
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Title: Chief Executive Officer and Acting Chief Financial Officer (Principal Executive Officer and Principal Accounting and Financial Officer) |
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