Significant Accounting Policies (Policies)

9 Months Ended

Sep. 30, 2022

Accounting Policies [Abstract]

Basis of Accounting, Policy [Policy Text Block]

a)  Basis of presentation 

The unaudited condensed consolidated interim financial statements are prepared and presented in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”).

The unaudited condensed consolidated interim financial information as of September 30, 2022 and for the nine and three months ended September 30, 2022 and 2021 have been prepared pursuant to the rules and regulations of the U.S. Securities and Exchange Commission (the “SEC”). Certain information and footnote disclosures, which are normally included in complete consolidated financial statements prepared in accordance with U.S. GAAP, have been omitted pursuant to those rules and regulations. The unaudited condensed consolidated interim financial information should be read in conjunction with the financial statements and the notes thereto, included in the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2021, previously filed with the SEC (the “2021 Form 10-K”) on April 15, 2022.

In the opinion of management, all adjustments (which include normal recurring adjustments) necessary to present a fair statement of the Company’s condensed consolidated financial position as of September 30, 2022, its condensed consolidated results of operations for the nine and three months ended September 30, 2022 and 2021, and its condensed consolidated cash flows for the nine months ended September 30, 2022 and 2021, as applicable, have been made. The interim results of operations are not necessarily indicative of the operating results for the full fiscal year or any future periods.

Consolidation, Policy [Policy Text Block]

b)  Principles of consolidation

The unaudited condensed consolidated interim financial statements include the accounts of all the subsidiaries and VIEs of the Company. All transactions and balances between the Company and its subsidiaries and VIEs have been eliminated upon consolidation.

Use of Estimates, Policy [Policy Text Block]

c)  Use of estimates

The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and the related disclosure of contingent assets and liabilities at the date of these consolidated financial statements, and the reported amounts of revenue and expenses during the reporting period. The Company continually evaluates these estimates and assumptions based on the most recently available information, historical experience and various other assumptions that the Company believes to be reasonable under the circumstances. Since the use of estimates is an integral component of the financial reporting process, actual results could differ from those estimates.

Foreign Currency Transactions and Translations Policy [Policy Text Block]

d)  Foreign currency translation

The exchange rates used to translate amounts in RMB into US$ for the purposes of preparing the condensed consolidated financial statements are as follows:

	September 30, 2022		December 31, 2021
Balance sheet items, except for equity accounts		7.0998		6.3757
	Nine Months Ended September 30,
	2022		2021
Items in the statements of operations and comprehensive loss		6.6068		6.4714
	Three Months Ended September 30,
	2022		2021
Items in the statements of operations and comprehensive loss		6.8287		6.4707

No representation is made that the RMB amounts could have been, or could be converted into US$ at the above rates.

Cash and Cash Equivalents, Policy [Policy Text Block]

e)  Cash and cash equivalents

Cash and cash equivalents consist of cash on hand and bank deposits, which are unrestricted as to withdrawal and use. The Company considers all highly liquid investments with original maturities of three months or less at the time of purchase to be cash equivalents.

The Company’s cash are held in accounts at major financial institutions located in the U.S. and the PRC. The Company believes that these financial institutions are of high credit quality, all of which have participated in the federal/national deposit insurance scheme of their respective jurisdiction. The Company’s cash held in accounts at the financial institutions in the U.S. are insured by the Federal Deposit Insurance Corporation (FDIC) for up to US$0.25 million per depositor per insured bank and the cash held in accounts at the financial institutions in the PRC are insured by the Deposit Insurance Capital Corporation (DICC), a wholly-owned subsidiary of the People’s Bank of China, for up to RMB0.50 million per depositor per insured bank. The Company, its subsidiaries, VIEs and VIEs’ subsidiaries have not experienced any losses in such accounts in the U.S. and the PRC and do not believe its cash is exposed to any significant risk.

Fair Value Measurement, Policy [Policy Text Block]

f)  Fair value measurement

Liabilities measured at fair value on a recurring basis by level within the fair value hierarchy as of September 30, 2022 and December 31, 2021 are as follows:

			Fair value measurement at reporting date using
	As of September 30, 2022		Quoted Prices in Active Markets for Identical Assets/Liabilities (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
	US$(’000)		US$(’000)		US$(’000)		US$(’000)
	(Unaudited)
Warrant liabilities (Note 16)		1,280		-		-		1,280

			Fair value measurement at reporting date using
	As of December 31, 2021		Quoted Prices in Active Markets for Identical Assets/Liabilities (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
	US$(’000)		US$(’000)		US$(’000)		US$(’000)
Warrant liabilities (Note 16)		2,039		-		-		2,039

Revenue from Contract with Customer [Policy Text Block]

g)  Revenue recognition

The following table present the Company’s revenues disaggregated by products and services:

	Nine Months Ended September 30,				Three Months Ended September 30,
	2022		2021		2022		2021
	US$(’000)		US$(’000)		US$(’000)		US$(’000)
	(Unaudited)		(Unaudited)		(Unaudited)		(Unaudited)
Internet advertising and related services
--distribution of the right to use search engine marketing service		18,605		28,613		6,236		9,648
--online advertising placements		3,208		5,720		980		2,125
Ecommerce O2O advertising and marketing services		-		514		-		127
Total revenues	$	21,813	$	34,847	$	7,216	$	11,900

For the nine and three months ended September 30, 2022 and 2021, all the revenues were recognized over time, as the customers simultaneously received and consumed the benefits provided by the Company’s performance as the Company performed.

ZW DATA ACTION TECHNOLOGIES INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

Contract costs

For the nine and three months ended September 30, 2022 and 2021, the Company did not have any significant incremental costs of obtaining contracts with customers incurred and/or costs incurred in fulfilling contracts with customers, which shall be recognized as an asset and amortized to expenses in a pattern that matches the timing of the revenue recognition of the related contract.

Contract liabilities

The table below summarized the movement of the Company’s contract liabilities for the nine months ended September 30, 2022:

	Contract liabilities
	US$(’000)
Balance as of January 1, 2022		1,245
Exchange translation adjustment		(127	)
Revenue recognized from beginning contract liability balances		(1,039	)
Advances received from customers related to unsatisfied performance obligations		872
Balance as of September 30, 2022(Unaudited)	$	951

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, 2022 and 2021.

For the nine and three months ended September 30, 2022 and 2021, there is no revenue recognized from performance obligations that were satisfied in prior periods.

Research and Development Expense, Policy [Policy Text Block]

h)  Research and development expenses

The Company accounts for expenses for the enhancement, maintenance and technical support to the Company’s Internet platforms and intellectual properties that are used in its daily operations in research and development expenses. Research and development costs are charged to expenses when incurred. Expenses for research and development for the nine months ended September 30, 2022 and 2021 were approximately US$0.18 million and US$0.25 million, respectively. Expenses for research and development for the three months ended September 30, 2022 and 2021 were approximately US$0.06 million and US$0.09 million, respectively.

Lessee, Leases [Policy Text Block]

i)  Lease

As of September 30, 2022, operating lease right-of-use assets and total operating lease liabilities recognized was approximately US$1.84 million and US$1.95 million, respectively.