2023 Q4 Form 10-Q Financial Statement

#000121465923014918 Filed on November 14, 2023

View on sec.gov

Income Statement

Concept 2023 Q4 2023 Q3 2022 Q3
Revenue $68.90K $35.15K $22.53K
YoY Change -17.94% 55.98%
Cost Of Revenue $73.40K $35.29K $17.24K
YoY Change 11.79% 104.75%
Gross Profit -$4.500K -$143.00 $5.297K
YoY Change -124.59% -102.7%
Gross Profit Margin -6.53% -0.41% 23.51%
Selling, General & Admin $104.7K $209.2K $111.8K
YoY Change -55.39% 87.15% 53.73%
% of Gross Profit 2109.87%
Research & Development
YoY Change
% of Gross Profit
Depreciation & Amortization $80.04K $80.04K -$12.56K
YoY Change 16.25% -737.26% -25220.0%
% of Gross Profit -237.12%
Operating Expenses $184.4K $288.9K $111.8K
YoY Change -21.44% 158.47% 53.72%
Operating Profit -$188.9K -$289.0K -$106.5K
YoY Change -12.73% 171.47% 46.43%
Interest Expense -$82.41K $52.12K -$71.08K
YoY Change 13.31% -173.32% -154.69%
% of Operating Profit
Other Income/Expense, Net $230.00 $269.00 $718.00
YoY Change -55.77% -62.53%
Pretax Income -$282.5K -$367.8K -$176.8K
YoY Change -2.15% 108.0% -12.76%
Income Tax
% Of Pretax Income
Net Earnings -$282.5K -$367.8K -$176.8K
YoY Change -2.15% 108.0% -12.76%
Net Earnings / Revenue -410.0% -1046.35% -784.66%
Basic Earnings Per Share -$0.01 -$0.01
Diluted Earnings Per Share -$0.02 -$0.01 -$8.413K
COMMON SHARES
Basic Shares Outstanding 22.49M shares 22.49M shares 21.02M shares
Diluted Shares Outstanding 24.62M shares 21.02M shares

Balance Sheet

Concept 2023 Q4 2023 Q3 2022 Q3
SHORT-TERM ASSETS
Cash & Short-Term Investments $5.330K $4.610K $2.660K
YoY Change -73.81% 73.31% -58.37%
Cash & Equivalents $5.334K $4.605K $2.657K
Short-Term Investments
Other Short-Term Assets $2.006K $10.08K $15.39K
YoY Change -75.17% -34.5% -84.61%
Inventory $9.193K
Prepaid Expenses $2.101K $6.100K $15.39K
Receivables $176.7K $33.61K $22.97K
Other Receivables $0.00 $0.00 $0.00
Total Short-Term Assets $186.1K $57.49K $41.01K
YoY Change 80.31% 40.18% -61.46%
LONG-TERM ASSETS
Property, Plant & Equipment $1.055K $1.398K $2.770K
YoY Change -56.53% -49.53% 515.56%
Goodwill
YoY Change
Intangibles
YoY Change
Long-Term Investments
YoY Change
Other Assets
YoY Change
Total Long-Term Assets $649.3K $764.1K $68.84K
YoY Change 70.5% 1009.98% 15197.56%
TOTAL ASSETS
Total Short-Term Assets $186.1K $57.49K $41.01K
Total Long-Term Assets $649.3K $764.1K $68.84K
Total Assets $835.4K $821.6K $109.8K
YoY Change 72.59% 647.94% 2.81%
SHORT-TERM LIABILITIES
YoY Change
Accounts Payable $279.9K $137.7K $25.45K
YoY Change 265.42% 441.02% -99.48%
Accrued Expenses $3.232M $3.213M $2.429M
YoY Change 22.89% 32.29%
Deferred Revenue
YoY Change
Short-Term Debt $1.307M $1.138M
YoY Change 14.91% -61.74%
Long-Term Debt Due
YoY Change
Total Short-Term Liabilities $5.058M $4.765M $3.692M
YoY Change 27.32% 29.06% -52.87%
LONG-TERM LIABILITIES
Long-Term Debt $2.892M $2.873M $2.799M
YoY Change 2.65% 2.63% 334.02%
Other Long-Term Liabilities $0.00 $0.00 $2.220K
YoY Change -100.0% -100.0%
Total Long-Term Liabilities $2.892M $2.873M $2.802M
YoY Change 1.5% 2.55% 334.36%
TOTAL LIABILITIES
Total Short-Term Liabilities $5.058M $4.765M $3.692M
Total Long-Term Liabilities $2.892M $2.873M $2.802M
Total Liabilities $7.950M $7.639M $6.494M
YoY Change 16.53% 17.63% -23.42%
SHAREHOLDERS EQUITY
Retained Earnings -$141.3M -$141.0M -$139.1M
YoY Change 1.37% 1.38%
Common Stock $132.5M $132.5M $131.0M
YoY Change 0.87% 1.12%
Preferred Stock
YoY Change
Treasury Stock (at cost)
YoY Change
Treasury Stock Shares
Shareholders Equity -$7.114M -$6.817M -$6.384M
YoY Change
Total Liabilities & Shareholders Equity $835.4K $821.6K $109.8K
YoY Change 72.59% 647.94% 2.81%

Cashflow Statement

Concept 2023 Q4 2023 Q3 2022 Q3
OPERATING ACTIVITIES
Net Income -$282.5K -$367.8K -$176.8K
YoY Change -2.15% 108.0% -12.76%
Depreciation, Depletion And Amortization $80.04K $80.04K -$12.56K
YoY Change 16.25% -737.26% -25220.0%
Cash From Operating Activities -$126.9K -$37.90K -$17.51K
YoY Change 1023.65% 116.45% -94.53%
INVESTING ACTIVITIES
Capital Expenditures $0.00 $0.00 $0.00
YoY Change
Acquisitions
YoY Change
Other Investing Activities
YoY Change
Cash From Investing Activities $0.00 $0.00 $0.00
YoY Change
FINANCING ACTIVITIES
Cash Dividend Paid
YoY Change
Common Stock Issuance & Retirement, Net
YoY Change
Debt Paid & Issued, Net
YoY Change
Cash From Financing Activities 136.5K 40.54K 16.18K
YoY Change 391.89% 150.56% -94.95%
NET CHANGE
Cash From Operating Activities -126.9K -37.90K -17.51K
Cash From Investing Activities 0.000 0.000 0.000
Cash From Financing Activities 136.5K 40.54K 16.18K
Net Change In Cash 9.640K 2.640K -1.330K
YoY Change -41.43% -298.5% -931.25%
FREE CASH FLOW
Cash From Operating Activities -$126.9K -$37.90K -$17.51K
Capital Expenditures $0.00 $0.00 $0.00
Free Cash Flow -$126.9K -$37.90K -$17.51K
YoY Change 1023.65% 116.45%

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<p id="xdx_805_eus-gaap--NatureOfOperations_zWswfvoyXjde" style="font: 10pt Times New Roman; margin: 0pt 0"> </p> <table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman; width: 100%; margin-top: 0pt; margin-bottom: 0pt"><tr style="vertical-align: top"> <td style="width: 0"></td><td style="width: 81pt; text-align: left"><b>NOTE 1.</b></td><td><b><span id="xdx_823_znTdxTQqhBp1">ORGANIZATION AND PRINCIPAL ACTIVITIES</span></b></td> </tr></table> <p style="font: 10pt Times New Roman; margin: 0pt 0"> </p> <p style="font: 10pt Times New Roman; margin: 0pt 0; text-align: justify">Network CN Inc. was originally incorporated on September 10, 1993 in Delaware with headquarters in the Hong Kong Special Administrative Region of the People’s Republic of China (“PRC” or “China”).  Since August 2006, Network CN Inc., has been principally engaged in the provision of out-of-home advertising in China through the operation of a network of roadside LED panels, mega-size LED digital video billboards and light boxes in major cities.</p> <p style="font: 10pt Times New Roman; margin: 0pt 0"> </p> <p style="font: 10pt Times New Roman; margin: 0pt 0; text-align: justify">Details of the Company’s principal subsidiaries and variable interest entities as of September 30, 2023, are described in Note 3 – Subsidiaries and Variable Interest Entities.</p> <p style="font: 10pt Times New Roman; margin: 0pt 0"> </p> <p style="font: 10pt Times New Roman; margin: 0pt 0; background-color: white"><b>COVID-19 Pandemic</b></p> <p style="font: 10pt Times New Roman; margin: 0pt 0; background-color: white"> </p> <p style="font: 10pt Times New Roman; margin: 0pt 0; text-align: justify; background-color: white">In December 2019, an outbreak of COVID-19 was identified in China and was subsequently recognized as a global pandemic by the World Health Organization (“WHO”) on March 11, 2020. Since that time, COVID-19 has spread around the world and throughout the United States, including in the regions and countries in which we operate. Federal, state and local governments in the U.S and around the world have imposed restrictions on travel and business operations and are advising or requiring individuals to limit or eliminate time outside of their homes. Temporary closures of businesses have also been ordered in certain jurisdictions, and other businesses have temporarily closed voluntarily. These actions expanded significantly in March and April of 2020 throughout the U.S. Consequently, the COVID-19 outbreak has severely restricted the level of economic activity in the U.S. and around the world.</p> <p style="font: 10pt Times New Roman; margin: 0pt 0; background-color: white"> </p> <p style="font: 10pt Times New Roman; margin: 0pt 0; text-align: justify; background-color: white">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.</p> <p style="font: 10pt Times New Roman; margin: 0pt 0"> </p> <p style="font: 10pt Times New Roman; margin: 0pt 0; text-align: justify; background-color: white">There has been no material adverse impact on the Company’s 2023 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.</p> <p style="font: 10pt Times New Roman; margin: 0pt 0"> </p> <p style="font: 10pt Times New Roman; margin: 0pt 0; text-align: justify; background-color: white">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.</p> <p style="font: 10pt Times New Roman; margin: 0pt 0; text-align: justify; background-color: white"><b> </b></p> <p style="font: 10pt Times New Roman; margin: 0pt 0; text-align: justify; background-color: white"><b>Recent development</b></p> <p style="font: 10pt Times New Roman; margin: 0pt 0; text-align: justify; background-color: white"><b> </b></p> <p style="font: 10pt Times New Roman; margin: 0pt 0; text-align: justify; background-color: white"><b>Termination of commercial agreements</b></p> <p style="font: 10pt Times New Roman; margin: 0pt 0"> </p> <p style="font: 10pt Times New Roman; margin: 0pt 0; text-align: justify; background-color: white">In May 2023, the Board of Directors agreed and approved the termination of all commercial agreements with Beijing Huizhong Bona Media Advertising Co., Ltd (“Bona”) and Xingpin Shanghai Advertising Limited (“Xingpin”). The Company delivered termination notice to terminate all the commercial agreements with Bona and Xingpin and the Company will no longer able to exert control over Bona and Xingpin when the termination notices become effective.</p> <p style="font: 10pt Times New Roman; margin: 0pt 0; text-align: justify; background-color: white"><b> </b></p> <p style="font: 10pt Times New Roman; margin: 0pt 0; text-align: justify; background-color: white"><b>Our Business in Chengdu and Tianjin</b></p> <p style="font: 10pt Times New Roman; margin: 0pt 0"> </p> <p style="font: 10pt Times New Roman; margin: 0pt 0; text-align: justify; background-color: white">The Company actively developing its advertising network and explored new media project in Chengdu and Tianjin, China. The Company has established two newly subsidiaries, NCN (Chengdu) Culture Media Co., Ltd, (“NCN Chengdu”) and NCN (Tianjin) Culture Co., Ltd (“NCN Tianjin”), a wholly foreign-owned enterprise in Chengdu and Tianjin, China. The Company owns 100% of the established subsidiary companies. In January 2023, NCN Chengdu and Tianjin started its operation and acquired rights to operate advertising panels in Chengdu and Tianjin. <span style="background-color: white">On April 25, 2023, the Company agreed to issue <span id="xdx_903_eus-gaap--StockIssuedDuringPeriodSharesNewIssues_c20230401__20230425__srt--TitleOfIndividualAxis__custom--QiHaoMember_pdd" title="Agreed to issued shsares">933,964</span> and <span id="xdx_902_eus-gaap--StockIssuedDuringPeriodSharesNewIssues_c20230401__20230425__srt--TitleOfIndividualAxis__custom--YangWuQiangMember_pdd" title="Agreed to issued shsares">1,131,960</span> restricted shares of the Company’s common stock to the employee, Qi Hao and Yang Wu Qiang, respectively. On January 1, 2023, NCN Chengdu and Tianjin entered into an employment contract with Qi Hao and Yang Wu Qiang (“the employees”) under which the employees agreed to bring in the advertising rights in Chengdu and Tianjin to the Company and the Company will reward him for <span id="xdx_900_ecustom--RewardOfShares_c20230102__srt--TitleOfIndividualAxis__custom--ChengduMember_pdd" title="Reward of shares">933,964</span> and <span id="xdx_900_ecustom--RewardOfShares_c20230102__srt--TitleOfIndividualAxis__custom--TianjinMember_pdd" title="Reward of shares">1,131,960</span> shares of the Company’s common stock. On May 16, 2023, Mr. Qi Hao resigned and the Company early terminated the advertising rights fee contracts in Tianjin and <span id="xdx_901_ecustom--NumberOfSharesCancelled_c20230501__20230516__us-gaap--BusinessAcquisitionAxis__custom--TianjinMember_pdd" title="Number of shares cancelled">933,964</span> shares issued were cancelled. </span></p> <p style="font: 10pt Times New Roman; margin: 0pt 0"> </p> <p style="font: 10pt Times New Roman; margin: 0pt 0; text-align: justify"><b>Our Business in Ningbo</b></p> <p style="font: 10pt Times New Roman; margin: 0pt 0; text-align: justify; background-color: white"><b> </b></p> <p style="font: 10pt Times New Roman; margin: 0pt 0; text-align: justify; background-color: white">The Company explored new media project in Ningbo, China and decided to restart its business and expects that will improve the Company’s future financial performance. In April 2022, the Company has established a newly subsidiary, NCN (Ningbo) Culture Media Co., Ltd (“NCN Ningbo”), a wholly foreign-owned enterprise in Ningbo, China. The Company owns 100% of the established subsidiary company, NCN Ningbo. In August 2022, NCN Ningbo started its operation and acquired rights to operate advertising panels in Ningbo, China and sell advertising airtime to our customers directly. <span style="background-color: white">On February 1, 2023, the Company agreed to issue 606,881 restricted shares of the Company’s common stock to the employee, Chen Zhu. On October 1, 2022, NCN Ningbo entered into an employment contract with Chen Zhu (“the employee”) under which the employee agreed to bring in the advertising rights in Ningbo to the Company and the Company will reward him for 606,881 shares of the Company’s common stock. </span></p> <p style="font: 10pt Times New Roman; margin: 0pt 0; text-align: justify; background-color: white"><b> </b></p> <p style="font: 10pt Times New Roman; margin: 0pt 0; text-align: justify; background-color: white"><b>Issuance of Convertible Promissory Note</b></p> <p style="font: 10pt Times New Roman; margin: 0pt 0"> </p> <p style="font: 10pt Times New Roman; margin: 0pt 0; text-align: justify; background-color: white">On January 18, 2022, the Company entered into a Subscription Agreement under which the Subscriber agreed to purchase the 1% Senior Unsecured Convertible Note Agreement from the Company for an agreement purchase price of two million five hundred thousand US Dollars ($<span id="xdx_900_ecustom--AgreementPurchasePrice_c20220118__us-gaap--TypeOfArrangementAxis__custom--SubscriptionAgreementMember_pp0p0" title="Agreement purchase price">2,500,000</span>). On the same date, the Company signed the with 1% Senior Unsecured Convertible Note Agreement under which the Company may sell and issue to the Subscriber up to an aggregate maximum amount of $<span id="xdx_90E_eus-gaap--DebtInstrumentFaceAmount_c20220118__us-gaap--TypeOfArrangementAxis__custom--SubscriptionAgreementMember_pp0p0" title="Principal amount">2,500,000</span> in principal amount of Convertible Notes prior to January 19, 2027. The Convertible Promissory Notes issued to the Investor are convertible at the holder’s option into shares of Company common stock at $<span id="xdx_90E_eus-gaap--SharesIssuedPricePerShare_c20220118__us-gaap--TypeOfArrangementAxis__custom--SubscriptionAgreementMember_pdd" title="Shares issued price per share">1.25</span> per share.</p> <p style="font: 10pt Times New Roman; margin: 0pt 0"> </p> <p style="font: 10pt Times New Roman; margin: 0pt 0; text-align: justify; background-color: white"><b>Authorized capital</b></p> <p style="font: 10pt Times New Roman; margin: 0pt 0"> </p> <p style="font: 10pt Times New Roman; margin: 0pt 0; text-align: justify; background-color: white">On April 28, 2020, the Board of Directors and Majority of stockholders of the Company approved to increase the total number of authorized shares of Common Stock from <span id="xdx_903_eus-gaap--CommonStockSharesAuthorized_c20200428_pdd" title="Common stock, authorized">26,666,667</span> to 100,000,000,000. On October 11, 2021, we filed a Certificate of Amendment to our Certificate of Incorporation with the Delaware Secretary of State to increase our authorized shares of common stock from 26,666,667 to 100,000,000,000 and the increase had approved by Delaware secretary of state on April 5, 2022. On March 22, 2023, the Board of Directors and Majority of stockholders of the Company approved to decrease the total number of authorized shares of Common Stock from 100,000,000,000 to <span id="xdx_902_eus-gaap--CommonStockSharesAuthorized_iI_c20230930_zDxPEiSEywU1" title="Common stock, authorized"><span id="xdx_901_eus-gaap--CommonStockSharesAuthorized_iI_c20221231_z7wrmMG4m5I8" title="Common stock, authorized">100,000,000</span></span>.</p> <p style="font: 10pt Times New Roman; margin: 0pt 0"> </p> <p style="font: 10pt Times New Roman; margin: 0pt 0"><b>Going Concern</b></p> <p style="font: 10pt Times New Roman; margin: 0pt 0"> </p> <p style="font: 10pt Times New Roman; margin: 0pt 0; text-align: justify">The Company has experienced recurring net losses $<span id="xdx_90C_eus-gaap--NetIncomeLoss_iN_pp0p0_di_c20230701__20230930_zZB6na2L2I5i" title="Net loss">367,780</span> and $<span id="xdx_903_eus-gaap--NetIncomeLoss_iN_pp0p0_di_c20220701__20220930_zD7Skvz5A8x5" title="Net loss">176,816</span> for the three months ended September 30, 2023 and 2022 respectively, and $<span id="xdx_90E_eus-gaap--NetIncomeLoss_iN_pp0p0_di_c20230101__20230930_z2htLhShARZk" title="Net loss">1,623,859</span> and $<span id="xdx_904_eus-gaap--NetIncomeLoss_iN_pp0p0_di_c20220101__20220930_zcDoxdnWvNw" title="Net loss">636,578</span> for the nine months ended September 30, 2023 and 2022 respectively. As of September 30, 2023, and December 31, 2022, the Company has stockholders’ deficit of $<span id="xdx_90B_eus-gaap--StockholdersEquity_iNI_pp0p0_di_c20230930_zRKbnu0EmkA3" title="Stockholders' deficits">6,816,952</span> and $<span id="xdx_901_eus-gaap--StockholdersEquity_iNI_pp0p0_di_c20221231_zpQGM7VT0lv" title="Stockholders' deficits">6,337,754</span>, respectively. These factors raise substantial doubt about the Company’s ability to continue as a going concern. The Company’s plans regarding those concerns are addressed in the following paragraph. The unaudited consolidated financial statements do not include any adjustments that might result from the outcome of this uncertainty.</p> <p style="font: 10pt Times New Roman; margin: 0pt 0"> </p> <p style="font: 10pt Times New Roman; margin: 0pt 0; text-align: justify">In response to current financial conditions, the Company has actively explored new prominent media projects in order to provide a wider range of media and advertising services and improve our financial performance. If the project can start to operate, the Company expects that the project will improve the Company’s future financial performance. The Company expects that the new project can generate positive cashflow.</p> <p style="font: 10pt Times New Roman; margin: 0pt 0"> </p> <p style="font: 10pt Times New Roman; margin: 0pt 0; text-align: justify">The existing cash and cash equivalents together with highly liquid current assets are insufficient to fund the Company’s operations for the next twelve months. The Company will need to rely upon some combination of cash generated from the Company’s operations, or proceeds from the issuance of the Company’s equity and debt securities as well as the exercise of the conversion option by the Company’s note holders to convert the notes to the Company’s common stock, in order to maintain the Company’s operations. Based on the Company’s best estimates, the Company believes that there are sufficient financial resources to meet the cash requirements for the coming twelve months and the unaudited consolidated financial statements have been prepared on a going concern basis. However, there can be no assurance the Company will be able to continue as a going concern. These uncertainties may result in adverse effects on continuation of the Company as a going concern. The accompany unaudited consolidated financial statements do not reflect any adjustments that might result from the outcome of these uncertainties.</p>
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<p id="xdx_842_eus-gaap--UseOfEstimates_zeZEyXb6Naxh" style="font: 10pt Times New Roman; margin: 0pt 0; text-align: justify"><b><i>(C) <span id="xdx_869_zARCd7O6ha2i">Use of Estimates</span></i></b></p> <p style="font: 10pt Times New Roman; margin: 0pt 0"> </p> <p style="font: 10pt Times New Roman; margin: 0pt 0; text-align: justify">In preparing unaudited consolidated financial statements in conformity with GAAP, management is required to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities as of the date of the financial statements and the reported amounts of revenues and expenses during the reported period. Actual results could differ from those estimates. Differences from those estimates are reported in the period they become known and are disclosed to the extent they are material to the unaudited consolidated financial statements taken as a whole.</p> <p style="font: 10pt Times New Roman; margin: 0pt 0"> </p>
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