NETWORK CN INC. Special Note Regarding Forward Looking Statements
This Quarterly Report on Form 10-Q, including the following "Management's
Discussion and Analysis of Financial Condition and Results of Operations",
contains forward-looking statements within the meaning of Section 27A of the
Securities Act of 1933, as amended, and Section 21E of the Securities Exchange
Act of 1934, as amended. Such statements include, among others, those concerning
our expected financial performance and strategic and operational plans, as well
as all assumptions, expectations, predictions, intentions or beliefs about
future events. You are cautioned that any such forward-looking statements are
not guarantees of future performance and that a number of risks and
uncertainties could cause actual results of the Company to differ materially
from those anticipated, expressed or implied in the forward-looking statements.
The words "believe", "expect", "anticipate", "project", "targets", "optimistic",
"intend", "aim", "will" or similar expressions are intended to identify
forward-looking statements. All statements other than statements of historical
fact are statements that could be deemed forward-looking statements. Risks and
uncertainties that could cause actual results to differ materially from those
anticipated include risks related to our potential inability to raise additional
capital; changes in domestic and foreign laws, regulations and taxes;
uncertainties related to
COVID-19 Pandemic
In
The outbreak has resulted in authorities implementing numerous measures to try to contain the virus, such as quarantines and shelter in place orders. These measures may remain in place for a significant period of time and adversely affect our business, operations and financial condition as well as the business, operations and financial conditions of our business partners. The spread of the virus has also caused us to modify our business practices (including employee work locations and cancellation of physical participation in meetings) in ways that may be detrimental to our business (including working remotely and its attendant cybersecurity risks). We may take further actions as may be required by government authorities or that we determine are in the best interests of our employees. There is no certainty that such measures will be sufficient to mitigate the risks posed by the virus or otherwise be satisfactory to government authorities.
There has been no material adverse impact on the Company's 2021 and 2022 results of operations to date. The effect of COVID-19 and related events, those not yet known or knowable, could have a negative effect on the stock price, business prospects, financial condition, and results of operations of the Company, including as a result of quarantines, market volatility, market downturns and business closures.
For the reasons discussed above, the Company cannot reasonably estimate with any degree of certainty the future impact COVID-19 may have on the Company's results of operations, financial position, and liquidity. Notwithstanding any actions by national, state, and local governments to mitigate the impact of COVID-19 or by the Company to address the adverse impacts of COVID-19, there can be no assurance that any of the foregoing activities will be successful in mitigating or preventing significant adverse effects on the Company.
21 Table of Contents Use of Terms
Except as otherwise indicated by the context, references in this report to:
l "BVI" are references to the
l "China" and "PRC" are to
l the "Company", "NCN", "we", "us", or "our", are references to
a
Limited, or
limited company;
Kong limited company;
entity,
or Crown Eagle, a
(
a PRC limited;
(Global) Limited, or NCN (Global), a
subsidiary,
company;
company, and its subsidiary,
or Lianhe, a PRC limited company; Chuanghua Shanghai advertising Limited, a PRC
limited company;
or NCN Huamin, a PRC limited company; and the Company's variable interest
entity,
limited company;
l "NCN Management Services" are references to
BVI limited company;
l "RMB" are to the Renminbi, the legal currency of
l the "Securities Act" are to the Securities Act of 1933, as amended; and the
"Exchange Act" are to the Securities Exchange Act of 1934, as amended; and
l "
Overview of Our Business
Our mission is to become a nationwide leader in providing out-of-home
advertising in
To address these unfavorable market conditions, we continue to implement cost-cutting measures, including reductions in our workforce, office rentals, selling and marketing related expenses and other general and administrative expenses.
For more information relating to our business, please refer to Part I, "Item 1 -
Business" of our Annual Report on Form 10-K for the fiscal year ended
Recent development Our Business inNingbo
The Company explored new media project in
Issuance of Convertible Promissory Note
On
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Exercise of conversion option
On
Private Placement
On
Increase of authorized capital
On
Identification of New projects
On
On
The closing of Exchange was not completed on
Results of Operations
The following results of operations is based upon and should be read in
conjunction with the Company's unaudited consolidated financial statements and
the notes thereto included in Part I - Financial Information, "Item 1. Financial
Statement." All amounts are expressed in
Comparison of Three Months Ended
Revenues. Our revenues consist primarily of income from out-of-home advertising
panels. We recognize revenue in the period when advertisements are either aired
or published. Revenues for the three months ended
Cost of Revenues. Cost of revenues primarily consists of fees to obtain rights
to operate advertising panels. Cost of revenues for the three months ended
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General and Administrative Expenses - General and administrative expenses
primarily consist of compensation related expenses (including salaries paid to
executive and employees, employee bonuses and other staff welfare and benefits,
rental expenses, depreciation expenses, fees for professional services, travel
expenses and miscellaneous office expenses). General and administrative expenses
for the three months ended
Other income - Other income for the three months ended
Interest and Other Debt-Related Expenses - Interest expense and other
debt-related expenses for the three months ended
Income Taxes - The Company derives all of its income in the PRC and is subject
to income tax in the PRC. No income tax was recorded during the three months
ended
Net Loss - The Company incurred a net loss of
Comparison of Nine Months Ended
Revenues. Our revenues consist primarily of income from out-of-home advertising
panels. We recognize revenue in the period when advertisements are either aired
or published. Revenues for the nine months ended
Cost of Revenues. Cost of revenues primarily consists of fees to obtain rights
to operate advertising panels. Cost of revenues for the nine months ended
General and Administrative Expenses - General and administrative expenses for
the nine months ended
Other income - Other income for the nine months ended
Interest and Other Debt-Related Expenses- Interest expense and other
debt-related expenses for the nine months ended
Income Taxes - The Company derives all of its income in the PRC and is subject
to income tax in the PRC. No income tax was recorded during the nine months
ended
Net Loss - The Company incurred a net loss of
Liquidity and Capital Resources
As of
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The following table sets forth a summary of our cash flows for the periods
indicated:
For the Nine Months Ended
September 30, 2022 September 30, 2021
Net cash used in operating activities $ (187,110 ) $ (320,335 )
Net cash used in investing activities (1,078 ) -
Net cash provided by financing activities 169,405 320,513
Effect of exchange rate changes on cash (237 ) 248
Net increase in cash (19,020 ) 426
Cash, beginning of period 21,677 5,967
Cash, end of period $ 2,657 $ 6,393
Operating Activities
Net cash used in operating activities for the nine months ended
Our cash flow projections indicate that our current assets and projected revenues from our existing project will not be sufficient to fund operations over the next twelve months. This raises substantial doubt about our ability to continue as a going concern. We intend to rely on the issuance of additional equity and debt securities as well as on our note holders' exercise of their conversion option to convert our notes to our common stock, in order to fund our operations. However, it may be difficult for us to raise funds in the current economic environment. We cannot give assurance that we will be able to generate sufficient revenue or raise new funds, and our note holders will exercise their conversion option before the note is due. In any such case, we may not be able to continue as a going concern.
Investing Activities
Net cash used in investing activities for the nine months ended
Financing Activities
Net cash provided by financing activities was
Short-term Loan
As of
Capital Expenditures
Net cash used in investing activities for the nine months ended
Contractual Obligations and Commercial Commitments
The following table presents certain payments due under contractual obligations
with minimum firm commitments as of
Payments due by period
Due in Due in Due in
Total 2022 2023-2024 2025-2026 Thereafter
Debt Obligations (a)
- - - 2,500,000
Short Term Loan (b) 1,137,616 1,137,616 - - -
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(a) Debt Obligations. We issued an aggregate of
(b) Short Term Loan. We have entered into short-term loan agreements with
unrelated individuals. Those loans with an aggregate amount of
Recent Accounting Pronouncements
The Company has implemented all new accounting pronouncements that are in effect. These pronouncements did not have any material impact on the consolidated financial statements unless otherwise disclosed, and we do not believe that there are any other new accounting pronouncements that have been issued that might have a material impact on our financial position or results of operations.
Off Balance Sheet Arrangements
We do not have any off-balance sheet arrangements that have or are reasonably likely to have a current or future effect on our financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources that are material to our investors.
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