Note 1 - Organization and Nature of Operations

12 Months Ended

Dec. 31, 2020

Notes to Financial Statements

Nature of Operations [Text Block]

1. Organization and nature of operations

ZW Data Action Technologies Inc. (f/k/a ChinaNet Online Holdings, Inc.) (the “Company”) was incorporated in the State of Texas in

April 2006

and re-domiciled to become a Nevada corporation in

October 2006.

On

June 26, 2009,

the Company consummated a share exchange transaction with China Net Online Media Group Limited (the “Share Exchange”), a company organized under the laws of British Virgin Islands (“China Net BVI”). As a result of the Share Exchange, China Net BVI became a wholly owned subsidiary of the Company and the Company is now a holding company, which, through certain contractual arrangements with operating companies in the People's Republic of China (the “PRC”), is engaged in providing Internet advertising, precision marketing, e-commerce online to offline (

O2O

) advertising and marketing services as well as the related data and technical services to small and medium enterprises (SMEs) in the PRC. In early

2018,

the Company commenced expansion into the blockchain industry and the related technology. For the years ended

December 31, 2020

and

2019,

the Company was in the process of developing its blockchain-powered platform applications (See Note

11

).

The Company's wholly owned subsidiary, China Net BVI was incorporated in the British Virgin Islands on

August 13, 2007.

On

April 11, 2008,

China Net BVI became the parent holding company of a group of companies comprised of CNET Online Technology Co. Limited, a Hong Kong company (“China Net HK”), which established and is the parent company of Rise King Century Technology Development (Beijing) Co., Ltd., a wholly foreign-owned enterprise (“WFOE”) established in the PRC (“Rise King WFOE”). The Company refers to the transactions that resulted in China Net BVI becoming an indirect parent company of Rise King WFOE as the “Offshore Restructuring.”

PRC regulations prohibit direct foreign ownership of business entities providing internet content, or ICP services in the PRC, and used to restrict foreign ownership of business entities engaging in the advertising business, which was subsequently lifted in

June 2015.

To satisfy PRC laws and regulations, the Company conducts certain business in the PRC through its Variable Interest Entities (“VIEs”). Through a series of contractual agreements (the “Contractual Agreements” or “VIE Agreements”) between Rise King WFOE and Business Opportunity Online (Beijing) Network Technology Co., Ltd. (“Business Opportunity Online”), Beijing CNET Online Advertising Co., Ltd. (“Beijing CNET Online”) (collectively the “PRC Operating Entities” or the “VIEs”) and its common individual owners (the “PRC Shareholders” or the “Control Group”), the Company, through Rise King WFOE, secures significant rights to influence the PRC Operating Entities' business operations, policies and management, approve all matters requiring shareholder approval, and the right to receive the income earned by the PRC Operating Entities. In return, Rise King WFOE provides consulting services to the PRC Operating Entities. In addition, to ensure that the PRC Operating Entities and the PRC Shareholders perform their obligations under the Contractual Arrangements, the PRC Shareholders have pledged all of their equity interests in the PRC Operating Entities to Rise King WFOE. They also entered into an option agreement with Rise King WFOE which provides that at such time as when the restrictions under PRC law on foreign ownership of Chinese companies engaging in the Internet content, information services or advertising business in China are lifted, Rise King WFOE

may

exercise its option to purchase the equity interests in the PRC Operating Entities, directly.

Pursuant to the Contractual Agreements, all of the equity owners' rights and obligations of the VIEs were assigned to Rise King WFOE, which resulted in the equity owners lacking the ability to make decisions that have a significant effect on the VIEs, Rise King WFOE's ability to extract the profits from the operation of the VIEs and assume the residual benefits of the VIEs. Due to the fact that Rise King WFOE and its indirect parent are the sole interest holders of the VIEs, the Company included the assets, liabilities, revenues and expenses of the VIEs in its consolidated financial statements, which is consistent with the provisions of FASB Accounting Standards Codification ("ASC") Topic

810

“Consolidation”, subtopic

10.

As of

December 31, 2020,

the Company's consolidated subsidiaries and VIEs are summarized as follows:

Name of the subsidiary or VIE	Place and date of incorporation	Percentage of ownership	Principal activities
China Net Online Media Group Limited (“China Net BVI”) (1)	British Virgin Islands August 13, 2007	100%	Investment holding company
CNET Online Technology Co. Limited (“China Net HK”) (1)	Hong Kong, PRC September 4, 2007	100%	Investment holding company
ChinaNet Investment Holding Ltd. (“ChinaNet Investment BVI”) (1)	British Virgin Islands January 12, 2015	100%	Investment holding company
Grandon Investments Limited (“Grandon BVI”) (1)	British Virgin Islands February 13, 2006	100%	Investment holding company, providing technical services
Winner Glory Limited (“Winner Glory HK”) (1)	Hong Kong, PRC August 12, 2020	100%	Investment holding company, providing technical services
Rise King Century Technology Development (Beijing) Co., Ltd. (“Rise King WFOE”) (1)	PRC January 17, 2008	100%	Investment holding company, providing technical services
ChinaNet Online Holdings Co., Ltd. (“ChinaNet Online PRC”) (1)	PRC August 31, 2015	100%	Investment holding company
Business Opportunity Chain (Beijing) Technology Development Co., Ltd.   (“Business Opportunity Chain Beijing”) (1)	PRC May 11, 2018	51%	Providing research and develop and other technical support services for the blockchain business unit
Business Opportunity Online (Beijing) Network Technology Co., Ltd. (“Business Opportunity Online”) (2)	PRC December 8, 2004	100%	Providing online advertising, precision marketing and the related data services
Beijing CNET Online Advertising Co., Ltd. (“Beijing CNET” Online) (2)	PRC January 27, 2003	100%	Providing advertising, marketing and related value-added services
Beijing Chuang Fu Tian Xia Network Technology Co., Ltd. (“Beijing Chuang Fu Tian Xia”) (2)	PRC March 1, 2011	100%	Providing online advertising, precision marketing and the related data services
Business Opportunity Online (Hubei) Network Technology Co., Ltd. (“Business Opportunity Online Hubei”) (2)	PRC January 28, 2011	100%	Providing online advertising, precision marketing and the related data services
Beijing Chuang Shi Xin Qi Advertising Media Co., Ltd. (“Beijing Chuang Shi Xin Qi”) (2)	PRC April 16, 2014	100%	Providing online advertising, precision marketing and the related data services
Beijing Shi Ji Cheng Yuan Advertising Media Co., Ltd. (“Beijing Shi Ji Cheng Yuan”) (2) (3)	PRC May 22, 2014	100%	Providing online advertising, precision marketing and the related data services
Beijing Hong Da Shi Xing Network Technology Co., Ltd. (“Beijing Hong Da Shi Xing”) (2)	PRC April 16, 2014	100%	Providing online advertising, precision marketing and the related data services
ChinaNet Online (Guangdong) Technology Co., Ltd. (“ChinaNet Online Guangdong”) (2)	PRC May 26, 2020	100%	Developing and operating blockchain technology-based products and services, and other related value-added services.
Qiweilian (Guangzhou) Technology Co., Ltd. (“Qiweilian Guangzhou”) (2) (4)	PRC October 23, 2020	51%	Providing digital business promotion services.

( 1 ) A direct or indirect subsidiary of the Company.

( 2 ) The Company's consolidated VIE, or a direct or indirect subsidiary of the Company's consolidated VIE.

( 3 ) The Company sold this entity to unrelated parties in January 2021.

( 4 ) The Company sold this entity to unrelated parties in March 2021.