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    NWCN   US64125G3083

NETWORK CN INC.

(NWCN)
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NETWORK CN : MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS. (form 10-Q)

05/14/2021 | 07:07am EDT

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 China's legal system and economic, political and social
events in China; Securities and Exchange Commission regulations which affect
trading in the securities of "penny stocks"; changes in economic conditions,
including a general economic downturn or a downturn in the securities markets;
and any of the factors and risks mentioned in the "Risk Factors" sections of our
Annual Report on Form 10-K for fiscal year ended December 31, 2020 and in Part
2, Item 1A of this Form 10-Q. The Company assumes no obligation and does not
intend to update any forward-looking statements, except as required by law.


COVID-19 Pandemic



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.



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 first quarter 2021
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.



  16


   Table of Contents




Use of Terms


Except as otherwise indicated by the context, references in this report to:

l "BVI" are references to the British Virgin Islands;

l "China" and "PRC" are to the People's Republic of China;

l the "Company", "NCN", "we", "us", or "our", are references to Network CN Inc.,

a Delaware corporation and its direct and indirect subsidiaries: NCN Group

Limited, or NCN Group, a BVI limited company; NCN Media Services Limited, a BVI

limited company; NCN Group Management Limited, or NCN Group Management, a Hong

Kong limited company; Crown Winner International Limited, or Crown Winner, a

Hong Kong Limited company, and its subsidiary, and its variable interest

entity, Xingpin Shanghai Advertising Limited; Crown Eagle Investments Limited,

a Hong Kong limited company;; Cityhorizon Limited, or Cityhorizon Hong Kong, a

Hong Kong limited company, and its subsidiary, Huizhong Lianhe Media Technology

Co., Ltd., or Lianhe, a PRC limited company; Chuanghua Shanghai advertising

Limited, a PRC limited company; NCN Huamin Management Consultancy (Beijing)

Company Limited, or NCN Huamin, a PRC limited company; and the Company's

variable interest entity, Beijing Huizhong Bona Media Advertising Co., Ltd.,

or Bona, a PRC limited company;

l "NCN Management Services" are references to NCN Management Services Limited, a

BVI limited company;

l "RMB" are to the Renminbi, the legal currency of China;

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 "U.S. dollar", "$" and "US$" are to the legal currency of the United States.





Overview of Our Business



Our mission is to become a nationwide leader in providing out-of-home
advertising in China, primarily serving the needs of branded corporate
customers. Our business direction to not just selling air-time for its media
panels but also started working closely with property developers in media
planning for the property at the very early stage. As a media planner we share
the advertising profits with the property developers without paying significant
rights fees, so we expect to achieve a positive return from these projects.



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. We have also re-assessed the commercial viability of each of our
concession rights contracts and have terminated those of our concession rights
that we determined were no longer commercially viable due to high annual fees.
Management has also successfully negotiated some reductions in advertising
operating rights fees under remaining contracts.



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 December
31, 2020.



Recent Development


Issuance of Convertible Promissory Note

On January 14, 2020, the Company entered into a Subscription Agreement with
Tsang Wai Yee Terri ("the Subscriber") under which the Subscriber agreed to
purchase the 1% Senior Unsecured Convertible Note Agreement from the Company for
an agreement purchase price of six hundred and forty-five thousand US Dollars
($645,000). On the same date, the Company signed the 1% Senior Unsecured
Convertible Note Agreement under which the Company may sell and issue to the
Subscriber up to an aggregate maximum amount of $645,000 in principal amount of
Convertible Notes prior to January 13, 2025. The Convertible Promissory Notes
issued to the Investor are convertible at the holder's option into shares of
Company common stock at $1.00 per share.



  17


   Table of Contents




On January 14, 2020, the Company entered into a Letter of Intent with Earthasia
Worldwide Holdings Limited ("EWHL") that the Company will acquire 100% of the
EWHL's issued and outstanding stock owned by the shareholders of the EWHL and
the EWHL will become a wholly owned subsidiary of the Company.



On July 23, 2020, the Company entered into Share Exchange Agreement with Ease
Global Limited ("Ease Global"), the shareholder of Trade More Global Limited
('Trade More") that the Company will purchase, One Thousand and One Hundred
(1,100) currently issued shares of common stock of Trade More from Ease Global
and in exchange for Forty-nine Million (49,000,000) shares of newly-issued
shares of common stock of the Company. The closing of the Exchange shall occur
on September 2, 2020 or such other date as agreed by the parties of the Share
Exchange Agreement. Upon completion of the Exchange, 78% of issued shares of
common stock of the Company shall be held by the Ease Global while all of the
shares of capital stock of Trade More shall be held by the Company. EWHL is a
wholly owned subsidiary of Trade More.



Increase of authorized capital




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 26,666,667 to 100,000,000,000.



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 U.S. dollars.



Comparison of Three Months Ended March 31, 2021 and March 31, 2020




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 March 31, 2021 decreased by 14.9% to $65,680, as
compared to $77,204 for the corresponding prior year period. The decrease in
general and administrative expenses for the three months ended March 2021
compared to March 31, 2020 was due to decrease in salary.



Gain from write-off of long aged payables- Gain from write-off of long-aged
payables for the three months ended March 31, 2020 was $386,772, compared to
$nil for the three months ended March 31, 2021. We believe the obligation for
future settlement for such long-aged payables is remote and therefore wrote
them
off.



Interest and Other Debt-Related Expenses - Interest expense and other
debt-related expenses for the three months ended March 31, 2021 decreased to
$129,953, or by 9%, as compared to $142,903 for the corresponding prior year
period. The decrease was mainly due to the decreased in interest to convertible
note result from the abandonment of convertible note from the noteholders in
December 2020.



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 March 31, 2021 and 2020, because the Company and all of its subsidiaries
and variable interest entities operated at a taxable loss during the respective
periods.


Net Loss - The Company incurred a net loss of $195,633 for the three months ended March 31, 2021, as compared to a net profit of $166,665 for the corresponding prior year period. The result was driven by the decrease in gain from write-off of long aged payables.

Liquidity and Capital Resources

As of March 31, 2021, we had cash of $6,073, as compared to $5,967 as of December 31, 2020, an insignificant increase of $106.



  18


   Table of Contents




The following table sets forth a summary of our cash flows for the periods
indicated:



                                                                Three Months Ended
                                                       March 31, 2021        March 31, 2020
Net cash provided by/(used in) operating activities   $             123     $       (644,871 )
Net cash provided by financing activities                             -    

645,000

Effect of exchange rate changes on cash                             (17 )               (148 )
Net (decrease)/increase in cash                                     106    
             (19 )
Cash, beginning of period                                         5,967                5,510
Cash, end of period                                   $           6,073     $          5,491




Operating Activities


Net cash provided by operating activities for the three months ended March 31,
2021 was $123, as compared to net cash used in operating activities amounting to
$644,871 for the corresponding prior year period. This was mainly attributable
to increase in repayment for accrued short term loan interest during the three
months ended March 31, 2020.



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 Keywin's exercise of its
outstanding option to purchase $2 million in shares of our common stock or 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, or that
Keywin will exercise its option before its expiration 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 three months ended March 31, 2021 and 2020 was $nil.




Financing Activities



Net cash provided by financing activities was $nil for the three months ended
March 31, 2021, as compared to $645,000 for the corresponding prior year period.
The decrease was mainly due to no proceeds from convertible promissory note
during the three months ended March 31, 2021.



Short-term Loan



As of March 31, 2021, the Company recorded an aggregated amount of $2,973,211
short-term loans. Those loans were borrowed from unrelated individuals. Those
loans with an aggregate amount of $2,845,006 are unsecured, bear a monthly
interest of 1.5% and shall be repayable in one month and loan with an aggregate
amount of $128,205 is unsecured, bear a yearly interest of 1% and shall be
repayable in one month. However, according to the agreement, the Company shall
have the option to shorten or extend the life of those short-term loans if the
need arises and the Company has agreed with the lender to extend the short-term
loans on the due date. Up to the date of this report, those loans have not
yet
been repaid.



Capital Expenditures


During the three months ended March 31, 2021 and 2020, we did not acquire equipment.

Contractual Obligations and Commercial Commitments

The following table presents certain payments due under contractual obligations with minimum firm commitments as of March 31, 2021:



                                                               Payments due by period
                                                    Due in           Due in            Due in
                                     Total           2021           2022-2023         2023-2024        Thereafter
Debt Obligations (a)              $   645,000     $         -     $           -     $           -     $    645,000
Short Term Loan (b)                 2,973,211       2,973,211                 -                 -                -




  19


   Table of Contents



(a) Debt Obligations. We issued an aggregate of $645,000 in 1% Convertible Promissory Notes in January 2020 to our investors and such 1% Convertible Promissory Notes matured in January 2025. For details, please refer to the Note 7 of the consolidated financial statements.




(b) Short Term Loan. We have entered into short-term loan agreements with
unrelated individuals. Those loans with an aggregate amount of $2,845,006 are
unsecured, bear a monthly interest of 1.5% and shall be repayable in one month
and loan with an aggregate amount of $128,205 is unsecured, bear a yearly
interest of 1% and shall be repayable in one month. However, according to the
agreement, the Company shall have the option to shorten or extend the life of
those short-term loans if the need arises and the Company has agreed with the
lender to extend the short-term loans on the due date. Up to the date of this
report, those loans have not yet been repaid.



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.

© Edgar Online, source Glimpses

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Financials (USD)
Sales 2020 - - -
Net income 2020 4,87 M - -
Net Debt 2020 3,61 M - -
P/E ratio 2020 1,26x
Yield 2020 -
Capitalization 5,26 M 5,26 M -
EV / Sales 2019 -
EV / Sales 2020 -
Nbr of Employees 2
Free-Float 38,1%
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Income Statement Evolution
Managers and Directors
NameTitle
Chi Wah Leung Chairman & Chief Executive Officer
Siu Yin Cheng Chief Financial Officer, Secretary & Director
Wing Kong Wong Independent Director
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