WEB NEWS Comments & Business Outlook
(UNAUDITED)
Three Months Ended
Nine Months Ended
Note
September 30,
2015
September 30,
2014
September 30,
2015
September 30,
2014
REVENUES
Advertising services
$
-
$
204,234
$
-
$
667,752
COST OF REVENUES
Cost of advertising services
-
(161,469
)
-
(1,032,972
)
GROSS GAIN/(LOSS)
-
42,765
-
(365,220
)
OPERATING EXPENSES
Selling and marketing
-
(9,947
)
-
(51,339
)
General and administrative
(137,343
)
(212,282
)
(436,176
)
(715,296
)
Gain from write-off of long-aged
payables
-
-
437,749
-
Gain from disposal of subsidiaries
-
-
129,726
-
Stock based compensation for
services
(667
)
(6,291
)
(351,976
)
(74,473
)
Total Operating Expenses
(138,010
)
(228,520
)
(220,677
)
(841,108
)
GAIN/(LOSS) FROM
OPERATIONS
(138,010
)
(185,755
)
(220,677
)
(1,206,328
)
OTHER INCOME, NET
Interest income
1
2
3
30
Other income, net
-
1,730
-
6,805
Total Other Income, Net
1
1,732
3
6,835
INTEREST AND OTHER DEBT-
RELATED EXPENSES
Amortization of deferred charges
and debt discount
9
-
-
-
(935,588
)
Interest expense
7, 8&9
(121,694
)
(88,788
)
(347,380
)
(257,461
)
Total Interest and Other Debt–
Related Expenses
(121,694
)
(88,788
)
(347,380
)
(1,193,049
)
NET LOSS BEFORE INCOME
TAXES
(259,703
)
(272,811
)
(568,054
)
(2,392,542
)
Income taxes
-
-
-
NET LOSS
$
(259,703
)
$
(272,811
)
$
(568,054
)
$
(2,392,542
)
OTHER COMPREHENSIVE
INCOME (LOSS)
Foreign currency translation gain
(loss)
(106
)
(2,557
)
1,340
5,632
Total other comprehensive
income (loss)
(106
)
(2,557
)
1,340
5,632
COMPREHENSIVE LOSS
$
(259,809
)
$
(275,368
)
$
(566,714
)
$
(2,386,910
)
NET LOSS PER COMMON
SHARE – BASIC AND
DILUTED+
13
$
(0.032
)
$
(0.035
)
$
(0.071
)
$
(0.313
)
WEIGHTED AVERAGE
SHARES OUTSTANDING –
BASIC AND DILUTED+
13
8,041,881
7,727,964
7,986,272
7,648,731
Management Discussion and Analysis
Revenues – Our revenues consist primarily of income from out-of-home advertising panels. We recognize revenue in the period when advertisements are displayed. Revenues from advertising services for the three months ended September 30, 2015 were $nil, as compared to $204,234 for the corresponding prior year period. The decrease was attributed to the termination of two media advertising projects in Shanghai and Zuhai in June 2014 and September 2014, respectively.
Net Loss – The Company incurred a net loss of $259,703 for the three months ended September 30, 2015, a decrease of 5%, as compared to $272,811 for the corresponding prior year period. The decrease in net loss was primarily due to continuous cost cutting and set off by the increase in interest expenses during the three months ended September 30, 2015.
Comments & Business Outlook
FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 2015 AND 2014
(UNAUDITED)
Three Months Ended
Six Months Ended
Note
June 30,
2015
June 30,
2014
June 30,
2015
June 30,
2014
REVENUES
Advertising services
$
-
$
219,516
$
-
$
463,518
COST OF REVENUES
Cost of advertising services
-
(442,511
)
-
(871,503
)
GROSS LOSS
-
(222,995
)
-
(407,985
)
OPERATING EXPENSES
Selling and marketing
-
(19,324
)
-
(41,392
)
General and administrative
(171,583
)
(229,589
)
(298,833
)
(503,014
)
Gain from write-off of long-aged
payables
437,749
-
437,749
-
Gain from disposal of subsidiaries
129,726
-
129,726
-
Stock based compensation for
services
(340,240
)
(6,291
)
(351,309
)
(68,182
)
Total Operating Expenses
55,652
(255,204
)
(82,667
)
(612,588
)
GAIN/(LOSS) FROM OPERATIONS
55,652
(478,199
)
(82,667
)
(1,020,573
)
OTHER INCOME, NET
Interest income
1
10
2
28
Other income, net
-
3,344
-
5,075
Total Other Income, Net
1
3,354
2
5,103
INTEREST AND OTHER DEBT-
RELATED EXPENSES
Amortization of deferred charges
and debt discount
9
-
(7,993
)
-
(935,588
)
Interest expense
7, 8&9
(116,187
)
(86,127
)
(225,686
)
(168,673
)
Total Interest and Other Debt–
Related Expenses
(116,187
)
(94,120
)
(225,686
)
(1,104,261
)
NET LOSS BEFORE INCOME
TAXES
(60,534
)
(568,965
)
(308,351
)
(2,119,731
)
Income taxes
-
-
-
NET LOSS
$
(60,534
)
$
(568,965
)
$
(308,351
)
$
(2,119,731
)
OTHER COMPREHENSIVE
INCOME (LOSS)
Foreign currency translation gain
(loss)
(2,315
)
1,190
1,446
8,189
Total other comprehensive
income (loss)
(2,315
)
1,190
1,446
8,189
COMPREHENSIVE LOSS
$
(62,849
)
$
(567,775
)
$
(306,905
)
$
(2,111,542
)
NET LOSS PER COMMON
SHARE – BASIC AND
DILUTED+
13
$
(0.0076
)
$
(0.0736
)
$
(0.0388
)
$
(0.2788
)
WEIGHTED AVERAGE
SHARES OUTSTANDING –
BASIC AND DILUTED+
13
7,974,482
7,727,964
7,942,848
7,603,427
Comments & Business Outlook
FOR THE THREE MONTHS ENDED MARCH 31, 2015 AND 2014
(UNAUDITED)
Three Months Ended
Note
March 31, 2015
March 31, 2014
REVENUES
Advertising services
$ - $ 244,002
COST OF REVENUES
-
Cost of advertising services
- (428,992 )
GROSS LOSS
- (184,990 )
OPERATING EXPENSES
Selling and marketing
- (22,068 )
General and administrative
(138,319 ) (335,316 )
Total Operating Expenses
(138,319 ) (357,384 )
LOSS FROM OPERATIONS
(138,319 ) (542,374 )
OTHER INCOME
Sundry income
- 1,731
Interest income
1 18
Total Other Income
1 1,749
INTEREST AND OTHER DEBT-RELATD EXPENSES
Amortization of deferred charges and debt discount
9 - (927,595 )
Interest expense
7, 8&9
(109,499 ) (82,546 )
Total Interest and Other Debt-Related Expenses
(109,499 ) (1,010,141 )
NET LOSS BEFORE INCOME TAXES
(247,817 ) (1,550,766 )
Income taxes
- -
NET LOSS
$ (247,817 ) $ (1,550,766 )
OTHER COMPREHENSIVE INCOME
Foreign currency translation gain
3,761 6,999
Total Other Comprehensive Income gain
3,761 6,999
COMPREHENSIVE LOSS
$ (244,056 ) $ (1,543,767 )
NET LOSS PER COMMON SHARE – BASIC AND DILUTED
13 $ (0.00 ) $ (0.01 )
WEIGHTED AVERAGE NUMBER OF SHARES OUTSTANDING – BASIC AND DILUTED
13 115,803,217 111,602,385
Managament Discussion and Analysis
Revenues – Our revenues consist primarily of income from out-of-home advertising panels. We recognize revenue in the period when advertisements are displayed. Revenues from advertising services for the three months ended March 31, 2015 were $nil, as compared to $244,002 for the corresponding prior year period. The decrease was attributed to the termination of two media advertising projects in Shanghai and Zuhai in June 2014 and September 2014, respectively.
Net Loss – The Company incurred a net loss of $247,817 for the three months ended March 31, 2015, a decrease of 84%, as compared to a net loss of $1,550,766 for the corresponding prior year period. The decrease in net loss was driven by several factors, including the decrease in revenues and general and administrative expenses and interest expense and other debt-related expenses as more particularly described above.
Comments & Business Outlook
CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS
For the Years Ended December 31,
Note(s)
2014
2013
2012
REVENUES
Advertising services
$
683,749
$
891,366
$
1,835,940
COST OF REVENUES
Cost of advertising services
(1,032,972)
(1,253,460)
(1,467,698)
GROSS (LOSS)/PROFIT
(349,223)
(362,094)
368,242
OPERATING EXPENSES
Selling and marketing
(52,977)
(90,215)
(267,595)
General and administrative
(795,840)
(1,367,090)
(2,092,180)
Gain from write-off of long-aged payables
-
-
34,804
Total Operating Expenses
(848,817)
(1,457,305)
(2,324,971)
LOSS FROM OPERATIONS
(1,198,040)
(1,819,399)
(1,956,729)
OTHER INCOME (EXPENSES), NET
Interest income
31
60
155
Gain on extinguishment of debt
9
-
-
1,877,594
Other income, net
7,959
36,305
10,740
Total Other Income (Expenses), Net
7,990
36,365
1,888,489
INTEREST AND OTHER DEBT-RELATED EXPENSES
Amortization of deferred charges and debt discount
9
(935,588)
(1,862,615)
(1,019,861)
Interest expense
8,9,10
(359,294)
(247,844)
(122,528)
Total Interest and Other Debt-Related Expenses
(1,294,882)
(2,110,459)
(1,142,389)
NET LOSS BEFORE INCOME TAXES
(2,484,932)
(3,893,493)
(1,210,629)
Income taxes
16
-
-
-
NET LOSS
(2,484,932)
(3,893,493)
(1,210,629)
OTHER COMPREHENSIVE GAIN/(LOSS)
Foreign currency translation gain/(loss)
2,100
(18,921)
(11,290)
Total other comprehensive gain/(loss)
2,100
(18,921)
(11,290)
COMPREHENSIVE LOSS
$
(2,482,832)
$
(3,912,414)
$
(1,221,919)
NET LOSS PER COMMON SHARE – BASIC AND
DILUTED
14
$
(0.02)
$
(0.04)
$
(0.01)
WEIGHTED AVERAGE NUMBER OF SHARES
OUTSTANDING – BASIC AND DILUTED *
14
115,047,825
105,253,782
96,895,329
Management Discussion and Analysis
Results of Operations
Net Loss. The Company incurred a net loss of $2,484,932 for the year ended December 31, 2014, an decrease of 36% compared to a net loss of $3,893,493 for the year ended December 31, 2013. The decrease in net loss was primarily due to decrease in General and Administrative Expenses and Interest and Other Debt-Related Expenses for the year ended December 31, 2014.
CFO Trail
Appointment of Chief Financial Officer
Comments & Business Outlook
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS
FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 2014 AND 2013
(UNAUDITED)
Three Months Ended
Six Months Ended
Note
June 30,
2014
June 30,
2013
June 30,
2014
June 30,
2013
REVENUES
Advertising services
$
219,516
$
150,318
$
463,518
$
556,955
COST OF REVENUES
Cost of advertising services
(442,511)
(152,375)
(871,503
)
(617,052
)
GROSS LOSS
(222,995)
(2,057)
(407,985)
(60,097)
OPERATING EXPENSES
Selling and marketing
(19,324
)
(3,600
)
(41,392
)
(56,479
)
General and administrative
(235,880
)
(284,366
)
(571,196
)
(785,799
)
Total Operating Expenses
(255,204
)
(287,966
)
(612,588
)
(842,278
)
LOSS FROM OPERATIONS
(478,199
)
(290,023
)
(1,020,573
)
(902,375
)
OTHER INCOME, NET
Interest income
10
4
28
13
Other income, net
3,344
19,305
5,075
19,305
Total Other Income, Net
3,354
19,309
5,103
19,318
INTEREST AND OTHER DEBT-
RELATED EXPENSES
Amortization of deferred charges
and debt discount
10
(7,993
)
(423,058
)
(935,588
)
(786,663
)
Interest expense
8, 9&10
(86,127
)
(55,522
)
(168,673
)
(102,899
)
Total Interest and Other Debt–
Related Expenses
(94,120
)
(478,580
)
(1,104,261
)
(889,562
)
NET LOSS BEFORE INCOME
TAXES
(568,965)
(749,294)
(2,119,731)
(1,772,619)
Income taxes
-
-
-
-
NET LOSS
$
(568,965)
$
(749,294)
$
(2,119,731)
$
(1,772,619)
OTHER COMPREHENSIVE
INCOME (LOSS)
Foreign currency translation gain
(loss)
1,190
(4,572
)
8,189
(5,596
)
Total other comprehensive
income (loss)
1,190
(4,572
)
8,189
(5,596
)
COMPREHENSIVE LOSS
$
(567,775)
$
(753,866)
$
(2,111,542)
$
(1,778,215)
NET LOSS PER COMMON
SHARE – BASIC AND DILUTED
14
$
(0.005
)
$
(0.007
)
$
(0.019
)
$
(0.017
)
WEIGHTED AVERAGE
SHARES OUTSTANDING –
BASIC AND DILUTED
14
115,919,467
105,419,467
114,051,399
104,742,809
Management Discussion and Analysis
Revenues – Our revenues consist primarily of income from out-of-home advertising panels. We recognize revenue in the period when advertisements are displayed. Revenues from advertising services for the three months ended June 30, 2014 were $219,516, as compared to $150,318 for the corresponding prior year period. During the three months ended June 30, 2014, the revenue was generated from two media advertising projects. During the three months ended June 30, 2013, the revenue was only generated from a new media advertising project in Zhuhai.
Loss – The Company incurred a net loss of $568,965 for the three months ended June 30, 2014, a decrease of 24%, as compared to $749,294 for the corresponding prior year period. The decrease in net loss was primarily due to decrease in amortization of deferred charges and debt discount recorded during the three months ended June 30, 2014.
Comments & Business Outlook
For the Years Ended December 31,
Note(s)
2013
2012
2011
REVENUES
Advertising services
$
891,366
$
1,835,940
$
1,794,552
COST OF REVENUES
Cost of advertising services
(1,253,460)
(1,467,698)
(1,115,461)
GROSS (LOSS)/PROFIT
(362,094)
368,242
679,091
OPERATING EXPENSES
Selling and marketing
(90,215)
(267,595)
(521,109)
General and administrative
(1,367,090)
(2,092,180)
(1,489,460)
Gain from write-off of long-aged payables
-
34,804
3,254
Total Operating Expenses
(1,457,305)
(2,324,971)
(2,007,315)
LOSS FROM OPERATIONS
(1,819,399)
(1,956,729)
(1,328,224)
OTHER INCOME (EXPENSES), NET
Interest income
60
155
254
Gain on extinguishment of debt
10
-
1,877,594
-
Other income (expenses), net
36,305
10,740
(135,595)
Total Other Income (Expenses), Net
36,365
1,888,489
(135,341)
INTEREST AND OTHER DEBT-RELATED
EXPENSES
Amortization of deferred charges and debt discount
10
(1,862,615)
(1,019,861)
(588,983)
Interest expense
9,10,11
(247,844)
(122,528)
(50,000)
Total Interest and Other Debt-Related Expenses
(2,110,459)
(1,142,389)
(638,983)
NET LOSS BEFORE INCOME TAXES
(3,893,493)
(1,210,629)
(2,102,548)
Income taxes
17
-
-
-
NET LOSS
(3,893,493)
(1,210,629)
(2,102,548)
OTHER COMPREHENSIVE LOSS
Reversal of unrealized loss on available-for-sale securities,
net of taxes
-
-
153,559
Foreign currency translation (loss) gain
(18,921)
(11,290)
13,929
Total other comprehensive (loss) income
(18,921)
(11,290)
167,488
COMPREHENSIVE LOSS
$
(3,912,414)
$
(1,221,919)
$
(1,935,060)
NET LOSS PER COMMON SHARE – BASIC AND
DILUTED
15
$
(0.04)
$
(0.01)
$
(0.02)
WEIGHTED AVERAGE NUMBER OF SHARES
OUTSTANDING – BASIC AND DILUTED *
15
105,253,782
96,895,329
86,970,220
Management Discussion and Analysis
Results of Operations
Comparison of Years Ended December 31, 2012 and 2011.$1,835,940, as compared to $1,794,552 for the year ended December 31, 2011, an increase of 2%. Approximately 17% of the increase was attributed to the increase in revenue generated from two new media advertising projects respectively in Shanghai and Zhuhai during the year ended December 31, 2012. The increase was offset by 15% decrease of revenue from the Nanjing Road Project during the year ended December 31, 2012.
Net Loss. The Company incurred a net loss of $1,210,629 for the year ended December 31, 2012, a decrease of 42% compared to a net loss of $2,102,548 for the year ended December 31, 2011. The decrease in net loss was primarily due to a one-time gain on extinguishment of debt amounting to $1,877,594 recorded during the year ended December 31, 2012.
Deal Flow
Item 1.01. Entry into a Material Definitive Agreement sold 3 million (3,000,000) shares of the Company’s common stock (the “Shares”) to CPE II, L.P. pursuant to the terms of a Common Stock Purchase Agreement between the Company and CPE II, L.P., dated February 24, 2014. The purchase price paid by CPE II, L.P. for the Shares was $0.10 per Share for an aggregate sum of Three Hundred Thousand U.S. Dollars (US$300,000.00). Net proceeds from the financing will be used for general corporate purposes.
sold 1.5 million (1,500,000) shares of the Company’s common stock to FAVA International Holdings Limited pursuant to the terms of a Common Stock Purchase Agreements between the Company and FAVA International Holdings Limited, dated February 24, 2014. The purchase price paid by FAVA International Holdings Limited for the Shares was $0.10 per Share for an aggregate sum of One Hundred Fifty Thousand U.S. Dollars (US$150,000.00). Net proceeds from the financing will be used for general corporate purposes.
sold 3 million (3,000,000) shares of the Company’s common stock to Wong Wing Kong pursuant to the terms of a Common Stock Purchase Agreement between the Company and Wong Wing Kong, dated February 24, 2014. The purchase price paid by Wong Wing Kong for the Shares was $0.10 per Share for an aggregate sum of Three Hundred Thousand U.S. Dollars (US$300,000.00). Net proceeds from the financing will be used for general corporate purposes.
Joint Venture
HONG KONG, February 24, 2014 /PRNewswire/ -- Network CN Inc. (OTCBB:NWCN), a media and advertising company headquartered in Hong Kong, today announced the completion of three private placements of 7.5 million shares of restricted common stock at $0.1 per share. The transaction took place with three investors and generated gross proceeds of $750,000. Net proceeds from the financing will be used for general corporate purposes including initiation of activities related to the Company's proposed business in China.
The offering was made pursuant to an exemption from registration with the SEC pursuant to Regulation S. The securities have not been registered under the Securities Act of 1933 or any state securities laws and unless so registered may not be offered or sold in the United States except pursuant to an exemption from, or in a transaction not subject to, the registration requirements of the Securities Act of 1933 and applicable state securities laws. The Company did not grant any registration rights to the new shareholder with respect to the Shares in the offering.
This press release does not constitute an offer to sell or the solicitation of an offer to buy any of the securities nor shall there be any sale of these securities in any state in which such offer, solicitation or sale would be unlawful prior to registration or qualification of the securities under the securities laws of any such state.
Network CN Inc. Signs Cross Selling Agreement with Grand Vision Media Limited
The Company and Grand Vision Media Limited ("Grand Vision") have signed the Cross Selling Agreement to cross sell each other's products. Grand Vision has its well-established sales team in Beijing, Guangzhou and Hong Kong, we can leverage their sales force and enlarge our customer base.
Grand Vision has the exclusive rights to operate the advertising panels at "Stellar International Theater Chain" theaters and they plan to install the glass-free 3D LED panels. At present, Stellar International Cineplex has established 56 modern cineplexes in many major cities in China, such as Beijing, Shanghai, Chengdu, Chongqing, Xuzhou, Tianjin, Shenyang, Lanzhou, Guangzhou, Qingdao and Hohhot.
SMI Corp Ltd. ("SMI"), the operator of Stellar International Theater Chain, is a leading China theaters' operator, currently engaged in movie theater operation, film operation, film investment, in-theater counter sales and online shopping. SMI offer more than 20 types of advertising and planned to build 50 mega LED displayers per annum to attract potential advertisers. As SMI's theaters network continues to expand, we believe that advertising platform will significantly benefit from its synergies effect. The rapid development of the Chinese film industry in recent years makes it as the world's second largest market. Benefiting from China robust economy together with the improvement of its income per capita and urbanization rate, the Chinese file industry continues to flourish.
Earnest Leung, Chief Executive Officer of Network CN Inc. stated, "We are delighted to expand our media network beyond Shanghai into China's major cities. We look forward to further strengthening our position in the out-of-home media business in China."
Joint Venture
HONG KONG , Sept. 12, 2013 /PRNewswire / -- Network CN Inc. (OTCBB.NWCN) announced today that the Company's wholly owned subsidiary, Yi Gao Shanghai Advertising Limited, has entered into an agreement with Shanghai Railway Culture & Advertising Development Co., Ltd ("SRMG") to operate the 91 advertising lightboxes in arrival hall of Shanghai Hongqiao Railway Station.
Under the agreement, NWCN obtained the exclusive rights to operate the 91 advertising lightboxes in arrival hall of Shanghai Hongqiao Railway Station from September 10, 2013 to December 9, 2016. SRMG is the only authorized party by Shanghai Railway Bureau to advertise in the station.
Shanghai Hongqiao Railway Station ("Hongqiao Station") is one of the major railway stations in Shanghai . It is the largest railway station in Asia with total area of 1.3 million square meters. Hongqiao Station located in Minhang District of Shanghai , is a major part of the Hongqiao Comprehensive Transportation Hub. The station achieves a zero-distance transfer with the Terminal 2 of Shanghai Hongqiao International Airport, as well as Line 2 and Line 10 of Shanghai Metro. Hongqiao Station is the most important high-speed railway station in China . It primarily served as the Shanghai terminus of high speed rail line, such as Shanghai-Nanjing High-Speed Railway line, the Shanghai-Hangzhou High-Speed Railway line and the Beijing-Shanghai High-Speed Railway line. It has some normal intercity lines as well which is the largest traffic transfer hub in China , integrating train, plane, subway, city-bus, and long-distance bus.
"China has the world's longest high-speed railway and its daily ridership has already reached 1.33 million in 2012, making the Chinese high-speed rail network the busiest in the world. With the increase of popularity of high-speed railway and the network is still rapidly expanding, we expect ridership will continue to grow substantially. We have no doubt that the strategic locations of the lightboxes can cover every point at arrival hall which allow advertisers to communicate with their target audiences," commented by Earnest Leung , NWCN's Chief Executive Officer. "It is our aim to build the largest advertising network in high-speed railway stations of Yangtze River Delta. NWCN also targets at providing the best media solutions to cater the different needs of advertisers. With the appointment ofMichael Liu as our Chief Operating Officer, we are pleased to further strengthen our advertising network by launching new projects."
Comments & Business Outlook
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE (LOSS) INCOME
FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 2013 AND 2012
(UNAUDITED)
Three Months Ended
Six Months Ended
Note
June 30,
2013
June 30,
2012
June 30,
2013
June 30,
2012
REVENUES
Advertising services
$
150,318
$
536,208
$
556,955
$
942,983
COST OF REVENUES
Cost of advertising services
(152,375
)
(352,637
)
(617,052
)
(631,322
)
GROSS (LOSS) PROFIT
(2,057
)
183,571
(60,097
)
311,661
OPERATING EXPENSES
Selling and marketing
(3,600
)
(91,352
)
(56,479
)
(185,306
)
General and administrative
(284,366
)
(495,701
)
(785,799
)
(979,821
)
Total Operating Expenses
(287,966
)
(587,053
)
(842,278
)
(1,165,127
)
LOSS FROM OPERATIONS
(290,023
)
(403,482
)
(902,375
)
(853,466
)
OTHER INCOME, NET
Interest income
4
36
13
102
Gain on extinguishment of debt
10
-
1,877,594
-
1,877,594
Other income, net
19,305
4,467
19,305
4,467
Total Other Income, Net
19,309
1,882,097
19,318
1,882,163
INTEREST AND OTHER DEBT-
RELATED EXPENSES
Amortization of deferred charges
and debt discount
10
(423,058
)
(287,482
)
(786,663
)
(445,359
)
Interest expense
8, 9&10
(55,522
)
(32,741
)
(102,899
)
(48,391
)
Total Interest and Other Debt–
Related Expenses
(478,580
)
(320,223
)
(889,562
)
(493,750
)
NET (LOSS) INCOME BEFORE
INCOME TAXES
(749,294
)
1,158,392
(1,772,619
)
534,947
Income taxes
-
-
-
-
NET (LOSS) INCOME
$
(749,294
)
$
1,158,392
$
(1,772,619
)
$
534,947
OTHER COMPREHENSIVE LOSS
Foreign currency translation loss
(4,572
)
(4,557)
(5,596
)
(4,397)
Total other comprehensive loss
(4,572
)
(4,557)
(5,596
)
(4,397)
COMPREHENSIVE (LOSS) INCOME
$
(753,866
)
$
1,153,835
$
(1,778,215
)
$
530,550
NET (LOSS) INCOME PER
COMMON SHARE – BASIC
AND DILUTED
14
$
(0.007
)
$
0.012
$
(0.017
)
$
0.006
WEIGHTED AVERAGE
SHARES OUTSTANDING –
BASIC AND DILUTED
14
105,419,467
96,777,707
104,742,809
96,641,087
Comments & Business Outlook
FOR THE THREE MONTHS ENDED MARCH 31, 2013 AND 2012
(UNAUDITED)
Three Months Ended
Note
March 31, 2013
March 31, 2012
REVENUES
Advertising services
$ 406,637 $ 406,775
COST OF REVENUES
Cost of advertising services
(464,677 ) (278,685 )
GROSS (LOSS)/PROFIT
(58,040 ) 128,090
OPERATING EXPENSES
Selling and marketing
(52,879 ) (93,954 )
General and administrative
(501,433 ) (484,120 )
Total Operating Expenses
(554,312
)
(578,074
)
LOSS FROM OPERATIONS
(612,352 ) (449,984 )
OTHER INCOME
Interest income
9 66
Total Other Income
9 66
INTEREST AND OTHER DEBT-RELATD EXPENSES
Amortization of deferred charges and debt discount
10 (363,605 ) (157,877 )
Interest expense
8, 9&10
(47,377 ) (15,650 )
Total Interest and Other Debt-Related Expenses
(410,982 ) (173,527 )
NET LOSS BEFORE INCOME TAXES
(1,023,325 ) (623,445 )
Income taxes
- -
NET LOSS
$ (1,023,325 ) $ (623,445 )
OTHER COMPREHENSIVE (LOSS) INCOME
Foreign currency translation (loss) gain
(1,024 ) 160
Total Other Comprehensive (Loss) Income
(1,024 ) 160
COMPREHENSIVE LOSS
$ (1,024,349 ) $ (623,285 )
NET LOSS PER COMMON SHARE – BASIC AND DILUTED
14 $ (0.01 ) $ (0.01 )
WEIGHTED AVERAGE NUMBER OF SHARES
OUTSTANDING – BASIC AND DILUTED
14
104,423,647
96,504,467
Comments & Business Outlook
CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS
FOR THE YEARS ENDED DECEMBER 31, 2012, 2011 AND 2010
Years Ended December 31,
Note(s)
2012
2011
2010
REVENUES
Advertising services
$
1,835,940
$
1,794,552
$
2,207,479
COST OF REVENUES
Cost of advertising services
(1,467,698)
(1,115,461)
(1,503,898
)
GROSS PROFIT
368,242
679,091
703,581
OPERATING EXPENSES
Selling and marketing
(267,595)
(521,109)
(449,320
)
General and administrative
(2,092,180)
(1,489,460)
(2,756,180
)
Gain from write-off of long-aged payables
34,804
3,254
438,917
Net allowance for doubtful debts
4,6
-
-
(11,421
)
Total Operating Expenses
(2,324,971)
(2,007,315)
(2,778,004
)
LOSS FROM OPERATIONS
(1,956,729)
(1,328,224)
(2,074,423
)
OTHER INCOME (EXPENSES), NET
Interest income
155
254
1,374
Gain on extinguishment of debt
10
1,877,594
-
-
Other income (expenses), net
10,740
(135,595)
48,307
Total Other Income (Expenses), Net
1,888,489
(135,341)
49,681
INTEREST AND OTHER DEBT-RELATED
EXPENSES
Amortization of deferred charges and debt discount
10
(1,019,861)
(588,983)
(528,462
)
Interest expense
9,10,11
(122,528)
(50,000)
(50,180
)
Total Interest and Other Debt-Related Expenses
(1,142,389)
(638,983)
(578,642
)
NET LOSS BEFORE INCOME TAXES
(1,210,629)
(2,102,548)
(2,603,384
)
Income taxes
17
-
-
-
NET LOSS
(1,210,629)
(2,102,548)
(2,603,384
)
OTHER COMPREHENSIVE LOSS
Change in unrealized loss on available-for-sale securities,
net of taxes
-
-
(153,559
)
Reversal of unrealized loss on available-for-sale securities,
net of taxes
-
153,559
-
Foreign currency translation (loss) gain
(11,290)
13,929
41,932
Total other comprehensive (loss) income
(11,290)
167,488
(111,627
)
COMPREHENSIVE LOSS
$
(1,221,919)
$
(1,935,060)
$
(2,715,011
)
NET LOSS PER COMMON SHARE – BASIC AND
DILUTED
15
$
(0.01)
$
(0.02)
$
(0.03
)
WEIGHTED AVERAGE NUMBER OF SHARES
OUTSTANDING – BASIC AND DILUTED *
15
96,895,329
86,970,220
84,509,069
CFO Trail
On January 20, 2012, Network CN Inc., a Delaware corporation (the “Company”), reported that the Company’s Chief Financial Officer and Corporate Secretary, Ms Jennifer Fu, had tendered her resignation from her position for personal reasons. Ms. Fu’s resignation was effective on April 1, 2012.
The Board of Directors of the Company appointed Ms. Shirley Cheng to serve as the Company’s Interim Chief Financial Officer, effective on April 1, 2012.
CFO Trail
Item 5.02. Departure of Directors or Certain Officers; Election of Directors; Appointment of
On January 16, 2012, Ms. Jennifer Fu, the Chief Financial Officer of Network CN Inc. (the “Company”) notified the Company of her intention to resign from her position for personal reasons. Ms. Fu’s resignation will become effective on the earlier of (i) the filing of the Company’s Annual Report on Form 10-K for the year ended December 31, 2011 or (ii) the appointment of a new Chief Financial Officer to serve as her replacement.
Ms Fu’s resignation was not because of any disagreement with the Company on any matter relating to the Company’s operations, policies or practices.
The Company’s Board of Directors is in the process of vetting suitable candidates to appoint as the Company’s new Chief Financial Officer and will announce any such appointment as soon as it is complete.
Investor Alert
On March 20, 2008, our wholly-owned subsidiary, NCN Huamin, entered into a rental agreement with Beijing Chengtian Zhihong TV & Film Production Co., Ltd., or Chengtian, pursuant to which a certain office premises located in Beijing was leased from Chengtian to NCN Huamin for a term of three years, commencing April 1, 2008. On December 30, 2008, NCN Huamin issued a notice to Chengtian to terminate the rental agreement effective on December 31, 2008 due to the fact that Chengtian had breached several provisions of the rental agreement and refused to take any remedial actions. On January 14, 2009, NCN Huamin received a notice from Beijing Arbitration Commission that Chengtian, as plaintiff, had initiated a lawsuit against NCN Huamin seeking an aggregate of RMB3,475,482 (equivalent to approximately US$505,000 at the then-prevailing exchange rate) for unpaid rental-related expenses, plus accrued interest, as well as compensation for unilateral termination of the rental contract. On February 25, 2009, NCN Huamin counter-claimed for breach of rental contract against Chengtian, seeking an aggregate of RMB1,069,094 (equivalent to approximately US$155,000 at the then-prevailing exchange rate) from Chengtian for overpayment of rental expenses and compensation for Chengtian’s breach of contract. In July 2009, the Beijing Arbitration Commission made a judgment that Huamin is liable to pay Chengtian of RMB1,930,243 (equivalent to approximately US$280,000 at the then-prevailing exchange rate).final judgment to rescind the original judgment made by the Beijing Arbitration Commission.On December 1, 2010, the Beijing Chaoyang People’s Court made a judgment that Chengtian is liable to refund the rental deposit back to NCN Huamin of RMB1,455,197 (equivalent to approximately US$219,000 at the then-prevailing exchange rate).and NCN Huamin is liable to pay Chengtian for the unpaid rent and rental-related expenses of RMB641,651 (equivalent to approximately US$97,000 at the then-prevailing exchange rate), as a result, Chengtian is liable to refund a net balance of RMB813,546 (equivalent to approximately US$122,000 at the then-prevailing exchange rate) back to NCN Huamin.In light of our current liquidity position, we believe that the outcome of this litigation may have a material impact on our cash flow .
Liquidity Requirements
Our existing cash and cash equivalents together with our liquid current assets are
insufficient to fund our projected cash outflow in the coming twelve months. As such, we intend to rely on cash generated from our operations and Keywin’s exercise of its outstanding option to purchase US$2 million in shares of our common stock or the issuance of equity and debt securities in order to fund our operations.
Comments & Business Outlook
Years Ended December 31,
Note(s)
2010
2009
2008
REVENUES
Advertising services
$ 2,207,479 $ 1,266,927 $ 4,622,270
COST OF REVENUES
Cost of advertising services
(1,503,898 ) (2,067,881 ) (17,374,713 )
GROSS PROFIT (LOSS)
703,581 (800,954 ) (12,752,443 )
OPERATING EXPENSES
Selling and marketing
(449,320 ) (630,730 ) (2,996,142 )
General and administrative
(2,756,180 ) (4,532,628 ) (11,254,933 )
Gain from write-off of long-aged payables
438,917 - -
Net write-back of ( allowance for) doubtful debts
5,8 (11,421 ) 542,771 (7,739,043 )
Non-cash impairment charges
6,9 - (802,487 ) (18,109,200 )
Total Operating Expenses
(2,778,004 ) (5,423,074 ) (40,099,318 )
LOSS FROM OPERATIONS
(2,074,423 ) (6,224,028 ) (52,851,761 )
OTHER INCOME
Interest income
1,374 22,486 90,703
Other income
48,307 14,086 645
Total Other Income
49,681 36,572 91,348
INTEREST AND OTHER DEBT-RELATED EXPENSES
Amortization of deferred charges and debt discount
12 (528,462 ) (18,873,863 ) (5,589,920 )
Non-cash debt conversion charges
12 - (10,204,627 ) -
Loss on early extinguishment of debt
12 - (1,696,684 ) -
Interest expense
12 (50,180 ) (420,731 ) (1,492,458 )
Total Interest and Other Debt-Related Expenses
(578,642 ) (31,195,905 ) (7,082,378 )
NET LOSS BEFORE INCOME TAXES
(2,603,384 ) (37,383,361 ) (59,842,791 )
Income taxes
19 - - -
NET LOSS FROM CONTINUING OPERATIONS
(2,603,384 ) (37,383,361 ) (59,842,791 )
DISCONTINUED OPERATIONS
Net loss from discontinued operations, net of income taxes
17 - - (21,044 )
Gain from disposal of discontinued operations
17 - - 66,085
NET INCOME FROM DISCONTINUED OPERATIONS
- - 45,041
NET LOSS
$ (2,603,384 ) $ (37,383,361 ) $ (59,797,750 )
LESS: NET LOSS ATTRIBUTABLE TO NONCONTROLLING INTERESTS, NET OF INCOME TAXES
- 24,173 312,917
NET LOSS ATTRIBUTABLE TO NCN COMMON STOCKHOLDERS
$ (2,603,384 ) $ (37,359,188 ) $ (59,484,833 )
OTHER COMPREHENSIVE INCOME
Change in unrealized loss on available-for-sale securities, net of taxes
(153,559 ) - -
Foreign currency translation gain
41,932 26,655 1,589,247
Less: foreign currency translation (gain) loss attributable to noncontrolling interests
- 828 (7,083 )
Foreign currency translation gain (loss) attributable to NCN common stockholders
(111,627 ) 27,483 1,582,164
COMPREHENSIVE LOSS ATTRIBUTABLE TO NCN COMMON STOCKHOLDERS
$ (2,715,011 ) $ (37,331,705 ) $ (57,902,669 )
NET LOSS PER COMMON SHARE – BASIC AND DILUTED
Loss per common share from continuing operations attributable to NCN common stockholders
16 $ (0.01 ) $ (0.12 ) $ (0.83 )
Loss per common shares from discontinued operations attributable to NCN common stockholders
16 - - -
Net loss per common share – basic and diluted
16 $ (0.01 ) $ (0.12 ) $ (0.83 )
WEIGHTED AVERAGE SHARES OUTSTANDING – BASIC AND DILUTED
16 422,545,085 317,882,046 71,569,242
AMOUNTS ATTRIBUTABLE TO NCN COMMON STOCKHOLERS
Loss from continuing operations, net of tax
$ (2,603,384 ) $ (37,359,188 ) $ (59,527,473 )
Gain from discontinued operations, net of tax
- - 42,640
NET LOSS ATTRIBUTABLE TO NCN COMMON STOCKHOLDERS
$ (2,603,384 ) $ (37,359,188 ) $ (59,484,833 )
Comments & Business Outlook
Comparison of Three Months Ended September 30, 2010 and September 30, 2009
Revenues from advertising services for the three months ended September 30, 2010 were $733,440 as compared to $293,706 for the corresponding prior year period, an increase of 150% .
The increase was mainly attributed to the increase in the advertising sales orders as a result of the economic recovery in China.
The Company incurred a net loss of $416,489 for the three months ended September 30, 2010, a decrease of 62% compared to a net loss of $1,099,364 for the corresponding prior year period.
Our mission is to become a nationwide leader in providing out-of-home advertising in China, primarily serving the needs of branded corporate customers. We seek to acquire rights to install and operate roadside advertising panels and mega-size advertising panels in the major cities in China. In most cases, we are responsible for installing advertising panels, although in some cases, advertising panels might have already been installed, and we will be responsible for operating and maintaining the panels. Once the advertising panels are put into operation, we sell advertising airtime to our customers directly. Since late 2006, we have been operating an advertising network of LED digital video panels and light boxes in major Chinese cities. LED (known as “Light Emitting Diode”) technology has evolved to become a new and popular form of advertising in China, capable of delivering crisp, super-bright images both indoors and outdoors.
The following are the key factors which led to less than expected revenues and cash inflows:
the rising costs to acquire advertising rights due to competition among bidders for those rights;
slower than expected consumer acceptance of the digital form of advertising media;
strong competition from other media companies;
many customers continued to be cost-conscious in their advertising budget although there were signs of recovery in China in late 2009. The impact of the reduction in the pace of our advertising spending is expected to be more significant on our new digital form of media than traditional advertising platforms.
To address these unfavorable market conditions, in the latter half of 2008, we undertook drastic cost-cutting measures including reduction of our workforce, office rentals, and reductions to our selling and marketing expenses and other general and administrative expenses. We also re-assessed the commercial viability of each of our concession right contracts and determined that many of our concession rights are no longer commercially viable due to high annual fees and therefore such commercially non-viable concession right contracts were terminated. Management has also successfully negotiated some reductions in advertising operating rights fees under existing contracts. We also restructured our sales team to strengthen our ability to generate revenues. The outcome of these measures has been reflected in our financial results.
