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Note 16 - Warrant Liabilities

9 Months Ended

Sep. 30, 2022

16.

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”), December 2020 (the “2020 Financing”), and January 2018 (the “2018 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.

Warrants issued in the 2021 Financing:

	2021 Investors Warrants									2021 Placement Agent Warrants
	September 30, 2022			June 30, 2022			December 31, 2021			September 30, 2022			June 30, 2022			December 31, 2021

Stock price	$	0.92		$	0.34		$	1.00		$	0.92		$	0.34		$	1.00
Years to maturity		1.88			2.13			2.63			1.88			2.13			2.63
Risk-free interest rate		4.16	%		2.97	%		0.87	%		4.16	%		2.97	%		0.87	%
Dividend yield		-			-			-			-			-			-
Expected volatility		127	%		124	%		115	%		127	%		124	%		115	%
Exercise Price	$	3.59		$	3.59		$	3.59		$	4.4875		$	4.4875		$	4.4875

Fair value of the warrant	$	0.297		$	0.064		$	0.37		$	0.287		$	0.061		$	0.36

Warrant Liabilities (US$’000)	$	782		$	167		$	964		$	106		$	22		$	132

	2021 Investors Warrants									2021 Placement Agent Warrants
	September 30, 2021			June 30, 2021			February 18, 2021*			September 30, 2021			June 30, 2021			February 18, 2021*

Stock price	$	1.26		$	2.00		$	4.48		$	1.26		$	2.00		$	4.48
Years to maturity		2.88			3.14			3.50			2.88			3.14			3.50
Risk-free interest rate		0.50	%		0.48	%		0.26	%		0.50	%		0.48	%		0.26	%
Dividend yield		-			-			-			-			-			-
Expected volatility		115	%		114	%		168	%		115	%		114	%		168	%
Exercise Price	$	3.59		$	3.59		$	3.59		$	4.4875		$	4.4875		$	4.4875

Fair value of the warrant	$	0.70		$	1.25		$	4.02		$	0.65		$	1.18		$	3.96

Warrant Liabilities (US$’000)	$	1,824		$	3,257		$	10,476		$	237		$	431		$	1,445

* Closing date of the 2021 Financing.

ZW DATA ACTION TECHNOLOGIES INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

Warrants issued in the 2020 Financing:

	2020 Investors Warrants									2020 Placement Agent Warrants
	September 30, 2022			June 30, 2022			December 31, 2021			September 30, 2022			June 30, 2022			December 31, 2021

Stock price	$	0.92		$	0.34		$	1.00		$	0.92		$	0.34		$	1.00
Years to maturity		1.20			1.45			1.95			1.20			1.45			1.95
Risk-free interest rate		3.90	%		2.79	%		0.72	%		3.90	%		2.79	%		0.72	%
Dividend yield		-			-			-			-			-			-
Expected volatility		103	%		107	%		128	%		103	%		107	%		128	%
Exercise Price	$	2.03		$	2.03		$	2.03		$	2.03		$	2.03		$	2.03

Fair value of the warrant	$	0.195		$	0.033		$	0.46		$	0.211		$	0.036		$	0.49

Warrant Liabilities (US$’000)	$	328		$	57		$	795		$	64		$	11		$	148

	2020 Investors Warrants									2020 Placement Agent Warrants
	September 30, 2021			June 30, 2021			December 31, 2020			September 30, 2021			June 30, 2021			December 31, 2020

Stock price	$	1.26		$	2.00		$	1.35		$	1.26		$	2.00		$	1.35
Years to maturity		2.20			2.45			2.95			2.20			2.45			2.95
Risk-free interest rate		0.34	%		0.34	%		0.17	%		0.34	%		0.34	%		0.17	%
Dividend yield		-			-			-			-			-			-
Expected volatility		122	%		120	%		102	%		122	%		120	%		102	%
Exercise Price	$	2.03		$	2.03		$	2.03		$	2.03		$	2.03		$	2.03

Fair value of the warrant	$	0.80		$	1.40		$	0.74		$	0.80		$	1.40		$	0.74

Warrant Liabilities (US$’000)	$	1,383		$	2,420		$	1,279		$	242		$	423		$	224

Warrants issued in the 2018 Financing:

	2018 Placement Agent Warrants
	July 2, 2021*			June 30, 2021			December 31, 2020

Stock price	$	1.94		$	2.00		$	1.35
Years to maturity		0.04			0.05			0.05
Risk-free interest rate		0.05	%		0.04	%		0.08	%
Dividend yield		-			-			-
Expected volatility		75	%		74	%		59	%
Exercise Price	$	1.4927		$	1.4927		$	1.4927

Fair value of the warrant	$	0.45		$	0.51		$	0.02

Warrant liabilities (US$’000)	$	58		$	66		$	2

* The investor warrants issued in the 2018 Financing expired in July 2020. The placement agent warrants issued in the 2018 Financing were cashless exercised on July 2, 2021.

ZW DATA ACTION TECHNOLOGIES INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

Changes in fair value of warrant liabilities

Nine and Three Months Ended September 30, 2022 (Unaudited)

	As of September 30, 2022		As of June 30, 2022		As of December 31, 2021		Change in Fair Value (gain)/loss
	As of September 30, 2022		As of June 30, 2022		As of December 31, 2021		Nine Months Ended September 30, 2022			Three Months Ended September 30, 2022
	(US$’000)		(US$’000)		(US$’000)		(US$’000)			(US$’000)

Warrants issued in the 2021 Financing:
--Investor Warrants		782		167		964		(182	)		615
--Placement Agent Warrants		106		22		132		(26	)		84
Warrants issued in the 2020 Financing:
--Investor Warrants		328		57		795		(467	)		271
--Placement Agent Warrants		64		11		148		(84	)		53
Warrant Liabilities		1,280		257		2,039		(759	)		1,023

Nine and Three Months Ended September 30, 2021 (Unaudited)

											Change in Fair Value (gain)/loss
	As of September 30, 2021		As of July 2, 2021		As of June 30, 2021		As of February 18, 2021		As of December 31, 2020		Nine Months Ended September 30, 2021			Three Months Ended September 30, 2021
	(US$’000)		(US$’000)		(US$’000)		(US$’000)		(US$’000)		(US$’000)			(US$’000)

Warrants issued in the 2021 Financing:
--Investor Warrants		1,824		*		3,257		10,476		*		(8,652	)		(1,433	)
--Placement Agent Warrants		237		*		431		1,445		*		(1,208	)		(194	)
Warrants issued in the 2020 Financing:
--Investor Warrants		1,383		*		2,420		*		1,279		104			(1,037	)
--Placement Agent Warrants		242		*		423		*		224		18			(181	)
Warrants issued in the 2018 Financing:
--Placement Agent Warrants		-		58		66		*		2		56			(8	)
		3,686		58		6,597		11,921		1,505		(9,682	)		(2,853	)

* Not applicable.

Warrants issued and outstanding as of September 30, 2022 and their movements during the nine months then ended are as follows:

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

Balance, January 1, 2022		5,001,705		2.36	$	3.02		5,001,705		2.36	$	3.02
Granted/Vested		-						-
Exercised		-						-
Balance, September 30, 2022 (Unaudited)		5,001,705		1.61	$	3.02		5,001,705		1.61	$	3.02