x
|
ANNUAL
REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
1934
|
o
|
TRANSITION
REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT
OF 1934
|
NETWORK
CN INC.
|
(Exact
name of registrant as specified in its
charter)
|
Delaware
|
90-0370486
|
(State
or Other Jurisdiction of
|
(I.R.S.
Employer
|
Incorporation
or Organization)
|
Identification
Number)
|
Suite
3908, Shell Tower, Times Square, 1 Matheson Street, Causeway Bay, Hong
Kong
|
(Address
of principal executive
offices)
|
(852)
2833-2186
|
(Registrant’s
telephone number, including area
code)
|
Common
Stock, $0.001 Par Value
|
(Title
of Each Class)
|
Large
accelerated filer
o
|
Accelerated
filer
o
|
|
Non-accelerated
filer
þ
(Do not check if a smaller reporting company)
|
Smaller
reporting company
o
|
Class of
Securities
|
Shares
Outstanding
|
|
Common
Stock, $0.001 par value
|
422,522,071
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PART
I
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|||
5
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|||
13
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|||
28
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|||
28
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|||
29
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|||
29
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PART
II
|
|||
29
|
|||
31
|
|||
32
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|||
44
|
|||
45
|
|||
45
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|||
46
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|||
47
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PART
III
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|||
47
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|||
50
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|||
56
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|||
58
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|||
59
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PART
IV
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|||
60
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64
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|||
F-1 |
|
·
|
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;” and
|
|
·
|
changes
in economic conditions, including a general economic downturn or a
downturn in the securities markets.
|
|
·
|
“BVI”
are references to the British Virgin
Islands;
|
|
·
|
“China”
and “PRC” are to the People’s Republic of
China;
|
|
·
|
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 Huamin Management
Consultancy (Beijing) Company Limited, or NCN Huamin
,
a PRC limited company;
Cityhorizon Limited, or Cityhorizon Hong Kong, a Hong Kong limited
company, and its wholly owned subsidiaries, Cityhorizon Limited, or
Cityhorizon BVI, a BVI limited company;
Huizhong Lianhe
Media Technology Co., Ltd., or
Lianhe, a PRC
limited company; Linkrich Enterprise Advertising and Investment Limited,
or Linkrich Enterprise, a HK limited company, and its subsidiary, Yi Gao
Shanghai Advertising Limited, or Yi Gao, a PRC limited company and the
Company’s variable interest entities: Beijing Huizhong Bona Media
Advertising Co., Ltd., or
Bona, a PRC
limited company; and Huizhi Botong Media Advertising Beijing Co., Ltd., or
Botong, a PRC limited company.
|
|
·
|
“NCN
Landmark” are references to NCN Landmark International Hotel Group
Limited, a
BVI
limited company,
and its wholly-owned subsidiary, Beijing NCN Landmark Hotel Management
Limited, a PRC limited company;
|
|
·
|
“NCN
Management Services” are references to NCN Management Services Limited,
a
BVI
limited
company;
|
|
·
|
“Quo
Advertising ” are references to Shanghai Quo Advertising Co. Ltd, a PRC
limited company
|
|
·
|
“RMB”
are to the Renminbi, the legal currency of
China;
|
|
·
|
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;
|
|
·
|
“Tianma”,
are references to Guangdong Tianma International Travel Service Co., Ltd,
a PRC limited company;
|
|
·
|
“U.S.
dollar”, “$” and “US$” are to the legal currency of the United States;
and
|
|
·
|
“Xuancaiyi”
are references to Xuancaiyi (Beijing) Advertising Company Limited, a PRC
limited company
|
·
|
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;
and
|
·
|
slowing
demand due to the worldwide financial crisis and deteriorating economic
conditions in China, leading many customers to cut their advertising
budget. 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.
|
Location
|
No.
of Advertising
Panels
(1)
|
Panels
Installed
As
of March 1, 2010
|
Panels
Owned
As
of March 1,
2010
|
Expiration
(2)
|
Nanjing
Road Pedestrian Street, Shanghai
|
52
|
52
|
52
|
2010
|
Total
as of March 1, 2010
|
52
|
52
|
52
|
Location
|
No.
of Advertising
Panels
(1)
|
Panels
Installed
As
of March 1, 2010
|
Panels
Owned
As
of March 1,
2010
|
Expiration
(2)
|
Wuhan
|
1
|
1
|
1
|
2012
|
Beijing
|
1
|
1
|
1
|
2013
|
Total
as of March 1, 2010
|
2
|
2
|
2
|
1)
|
The
size of the Company’s typical roadside advertising panels ranges from 1.5
square meters to 4 square meters, while the mega-size advertising panels
are typically from 80 square meters to over 120 square
meters.
|
2)
|
Although
the Company has a contractual right to operate the panels for certain
period of time, governmental authorities in the PRC could limit the period
during which we can operate the panels if the government interprets the
current rules and regulations differently or if it were to implement new
rules and regulations.
|
Name
of Customer
|
Advertising
Sales %
|
For the year ended December 31,
2009
|
|
Shanghai
Wenchang Advertising Co., Ltd
|
16%
|
Shanghai
Chuangtian Advertising Co., Ltd
|
15%
|
Kinetic
|
15%
|
Beijing
Dentsu Advertising Co., Ltd.
|
11%
|
For the year ended December 31,
2008
|
|
OMD
|
38%
|
Beijing
Dentsu Advertising Co., Ltd.
|
16%
|
For the year ended December 31,
2007
|
|
MGI
Luxury Asia Pacific Ltd
|
26%
|
Shanghai
Gaorui Advertising Company Limited
|
16%
|
Binli
(Shanghai) Commercial Company Limited
|
14%
|
SMH
International Trading (Shanghai) Co., Ltd
|
14%
|
·
|
The
technology of a display module and settings method for colored LED panels,
which expires on November 22,
2017;
|
·
|
The
technology of the display system with blind spot checking function, which
expires on November 27, 2017;
and
|
·
|
The
invention of methodology in light intensity tuning for out-of-home LED
panels, which expires on November 8,
2027;
|
·
|
The
invention of methodology and monitoring system for staff in their
out-of-home LED panel maintenance;
|
·
|
The
invention of blind spot checking methodology for multi-LED panels;
and
|
·
|
The
invention of centralized remote management methodology for out-of-home LED
panels.
|
·
|
The Catalogue for Guiding Foreign Investment in Industry (2007); |
·
|
Advertising Law (1994); |
·
|
Regulations on Control of Advertisement (1987); |
·
|
Implementation Rules for Regulations on Control of Advertisement (2004); and |
·
|
The Administrative Regulations on Foreign-invested Advertising Enterprises (2004). |
·
|
The
Advertising Law (1994)
|
·
|
Regulations
on Control of Advertisement (1987);
and
|
·
|
The
Implementing Rules for the Advertising Administrative Regulations
(2004).
|
·
|
utilize traffic safety facilities and traffic signs; |
·
|
impede the use of public facilities, traffic safety facilities and traffic signs; |
·
|
obstruct commercial and public activities or create an eyesore in urban areas; |
·
|
be placed in restrictive areas near government offices, cultural landmarks or historical or scenic sites; and |
·
|
be placed in areas prohibited by the local governments from having out-of-home advertisements. |
·
|
The Foreign Investment Enterprise Law (1986), as amended; and |
·
|
Administrative Rules under the Foreign Investment Enterprise Law (2001). |
·
|
the
higher level of government
involvement;
|
·
|
the
early stage of development of the market-oriented sector of the
economy;
|
·
|
the
rapid growth rate;
|
·
|
the
higher level of control over foreign exchange;
and
|
·
|
the
allocation of resources.
|
·
|
revoking
the business and operating licenses of our PRC subsidiaries and
affiliates;
|
·
|
discontinuing
or restricting our PRC subsidiaries’ and affiliates’
operations;
|
·
|
imposing
conditions or requirements with which we or our PRC subsidiaries and
affiliates may not be able to
comply;
|
·
|
requiring
us or our PRC subsidiaries and affiliates to restructure the relevant
ownership structure or operation;
or
|
·
|
restricting
or prohibiting our use of the proceeds of this offering to finance our
business and operations in China.
|
·
|
a
general decline in economic
conditions
|
·
|
a
decline in economic conditions in the particular cities where we conduct
business
|
·
|
a
decision to shift advertising expenditures to other available advertising
media
|
·
|
a
decline in advertising expenditure in
general
|
•
|
advertising
claims made with respect to our client’s products or services are false,
deceptive or misleading;
|
|
|
•
|
our
clients’ products are defective or injurious and may be harmful to others;
marketing, communications or advertising materials created for our clients
infringe on the proprietary rights of third parties;
or
|
|
|
•
|
our
relationships with our local operating partners violate or interfere with
the contractual relationships or rights of third
parties;
|
|
•
|
our
actual or anticipated changes in our earnings, fluctuations in our
operating results or our failure to meet the expectations of financial
market analysts and investors;
|
|
•
|
changes
in financial estimates by us or by any securities analysts who might cover
our stock;
|
|
•
|
speculation
about our business in the press or the investment
community;
|
|
•
|
significant
developments relating to our relationships with our customers or
suppliers;
|
|
•
|
stock
market price and volume fluctuations of other publicly traded companies
and, in particular, those that are in the advertising
industry;
|
|
•
|
customer
demand for our products;
|
|
•
|
investor
perceptions of our industry in general and our company in
particular;
|
|
•
|
the
operating and stock performance of comparable
companies;
|
|
•
|
general
economic conditions and trends;
|
|
•
|
major
catastrophic events;
|
|
•
|
announcements
by us or our competitors of new products, significant acquisitions,
strategic partnerships or
divestitures;
|
|
•
|
changes
in accounting standards, policies, guidance, interpretation or principles;
and
|
|
•
|
loss
of external funding sources.
|
ITEM
5.
|
MARKET
FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER
MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES
|
Years
ended December 31
|
||||||||||||||||||||
2009
|
2008
|
2007
(1)
|
2006
|
2005
|
||||||||||||||||
Revenues
|
$ | 1,266,927 | $ | 4,622,270 | $ | 1,442,552 | $ | - | $ | - | ||||||||||
Cost
of revenues
|
(2,067,881 | ) | (17,374,713 | ) | (2,795,188 | ) | - | - | ||||||||||||
Operating
expenses
|
(5,423,074 | ) | (40,099,318 | ) | (12,088,954 | ) | (4,892,856 | ) | (421,439 | ) | ||||||||||
Other
income
|
36,572 | 91,348 | 23,414 | 35,569 | - | |||||||||||||||
Interest
and other debt-related expenses
|
(31,195,905 | ) | (7,082,378 | ) | (329,194 | ) | (358 | ) | - | |||||||||||
Net
loss from continuing operations
|
(37,383,361 | ) | (59,842,791 | ) | (13,755,038 | ) | (4,889,277 | ) | (381,804 | ) | ||||||||||
Net
income (loss) from discontinued operations
|
- | 45,041 | (953,629 | ) | 395,923 | (1,670,016 | ) | |||||||||||||
Net
loss attributable to NCN common stockholders
|
(37,359,188 | ) | (59,484,833 | ) | (14,646,619 | ) | (4,468,706 | ) | (2,051,455 | ) | ||||||||||
Net
loss per share from continuing operations attributable to NCN common
stockholders – basic and diluted
|
$ | (0.12 | ) | $ | (0.83 | ) | $ | (0.20 | ) | $ | (0.10 | ) | $ | (0.02 | ) |
Years
ended December 31
|
|||||||||||||||||||||
2009
|
2008
|
2007
(1)
|
2006
|
2005
|
|||||||||||||||||
Cash
|
$ | 1,969,549 | $ | 7,717,131 | $ | 2,233,528 | $ | 2,898,523 | $ | 85,919 | |||||||||||
Prepayments
for advertising operating rights, net
|
348,239 | 418,112 | 13,636,178 | - | - | ||||||||||||||||
Total
assets
|
4,655,442 | 13,072,666 | 27,107,343 | 10,527,134 | 3,289,603 | ||||||||||||||||
Convertible
promissory notes
|
3,854,934 | 30,848,024 | 12,626,292 | - | - | ||||||||||||||||
Total
liabilities
|
6,146,648 | 36,428,883 | 16,120,533 | 1,011,780 | 1,301,123 | ||||||||||||||||
Stockholders’
(deficit) equity
|
$ | (1,491,206 | ) | $ | (23,356,217 | ) | $ | 10,638,936 | $ | 9,425,252 | $ | 1,988,796 |
ITEM
7.
|
MANAGEMENT’S
DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
|
·
|
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;
and
|
·
|
slowing
demand due to the worldwide financial crisis and deteriorating economic
conditions in China, leading many customers to cut their advertising
budget. 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.
|
·
|
On
September 1, 2008, the Company completed the sale of all its interests in
NCN Management Services to an independent third party for a consideration
of HK$1,350,000, or approximately $173,000, in cash
.
The acquirer acquired
NCN Management Services along with its subsidiaries, which include 100%
interest in NCN Hotels Investment Limited, 100% interest in NCN Pacific
Hotels Limited and a 55% interest (through trust) in Tianma. The Company
reported a gain on the sale, net of income taxes of
$61,570.
|
·
|
On
September 30, 2008, the Company completed the sale of its 99.9% interest
in NCN Landmark to an independent third party for a cash consideration of
$20,000. The acquirer acquired NCN Landmark along with its subsidiary,
100% interest in Beijing NCN Landmark Hotel Management Limited, a PRC
corporation. The Company reported a gain on the sale, net of income taxes
of $4,515.
|
2009
|
2008
|
2007
|
||||||||||
Revenues
|
$ | - | $ | 24,528,096 | $ | 26,140,355 | ||||||
Cost
of revenues
|
- | (24,172,537 | ) | (25,830,401 | ) | |||||||
Gross
profit
|
- | 355,559 | 309,954 | |||||||||
Non-cash
impairment charges
|
- | - | (815,902 | ) | ||||||||
Operating
expenses
|
- | (477,481 | ) | (460,362 | ) | |||||||
Other
income
|
- | 98,838 | 9,210 | |||||||||
Interest
income
|
- | 2,040 | 3,471 | |||||||||
Interest
expenses
|
- | - | - | |||||||||
Net
loss from discontinued operations, net of income taxes
|
- | (21,044 | ) | (953,629 | ) | |||||||
Gain
from disposal of discontinued operations
|
- | 66,085 | - | |||||||||
Net
income (loss) from discontinued operations
|
$ | - | $ | 45,041 | $ | (953,629 | ) |
Years
ended December 31,
|
|||||||||||||
2009
|
2008
|
2007
|
|
||||||||||
Net
cash used in operating activities
|
$ | (5,428,273 | ) | $ | (17,944,568 | ) | $ | (21,320,216 | ) | ||||
Net
cash used in investing activities
|
(54,364 | ) | (6,689,257 | ) | (523,319 | ) | |||||||
Net
cash provided by (used in) financing activities
|
(250,000 | ) | 28,900,000 | 21,119,380 | |||||||||
Effect
of exchange rate changes on cash
|
(14,945 | ) | 1,217,428 | 59,160 | |||||||||
Net
increase (decrease) in cash and cash equivalents
|
(5,747,582 | ) | 5,483,603 | (664,995 | ) | ||||||||
Cash
and cash equivalents at the beginning of year
|
7,717,131 | 2,233,528 | 2,898,523 | ||||||||||
Cash
and cash equivalents at the end of year
|
$ | 1,969,549 | $ | 7,717,131 | $ | 2,233,528 |
Years
Ended December 31,
|
||||||||||||
2009
|
2008
|
2007
|
||||||||||
Payment
for prepayments for advertising operating rights
|
$ | 1,336,739 | $ | 7,405,975 | $ | 14,627,129 | ||||||
Settlement
of accrued advertising operating rights
|
733,000 | 49,385 | - | |||||||||
Total
payment
|
$ | 2,069,739 | $ | 7,455,360 | $ | 14,627,129 | ||||||
Amortization
of prepayments for advertising operating rights
|
$ | 1,388,980 | $ | 15,167,456 | $ | 990,951 | ||||||
Accrued
advertising operating rights fee recognized
|
104,684 | 733,000 | 49,385 | |||||||||
Total
advertising operating rights fee recognized
|
$ | 1,493,664 | $ | 15,900,456 | $ | 1,040,336 |
As
of December 31,
|
||||||||
2009
|
2008
|
|||||||
Prepayments
for advertising operating rights, net
|
$ | 348,239 | $ | 418,112 | ||||
Accrued
advertising operating rights fees
|
$ | 104,684 | $ | 733,000 |
Payments
due by period
|
||||||||||||||||||||
Total
|
Due
in
2010
|
Due
in
2011
- 2012
|
Due
in 2013-2014
|
Thereafter
|
||||||||||||||||
Long
Term Debt Obligations (a)
|
$ | 5,000,000 | $ | - | $ | 5,000,000 | $ | - | $ | - | ||||||||||
Operating
Lease Obligations (b)
|
465,352 | 395,317 | 70,035 | - | - | |||||||||||||||
Advertising
Operating Rights Fee obligations (c)
|
2,811,339 | 1,569,640 | 1,101,687 | 140,012 | - | |||||||||||||||
Purchase
Obligations (d)
|
$ | 18,000 | $ | 18,000 | $ | - | $ | - | $ | - |
Media
display equipment
|
5 -
7 years
|
|
Office
equipment
|
3 -
5 years
|
|
Furniture
and fixtures
|
3 -
5 years
|
|
Leasehold
improvements
|
Over
the unexpired lease terms
|
1)
|
Issuance
of 12% Convertible Promissory Note and Warrants and 3% Convertible
Promissory Notes and Warrants
|
2)
|
Debt
Restructuring and Issuance of 1% Convertible Promissory
Note
|
1.
|
Tianma,
in consultation with sub-agents, organizes a tour or travel package,
including making reservations for blocks of tickets, rooms, etc. with
third-party service providers. Tianma may be required to make deposits,
pay all or part of the ultimate fees charged by such service providers or
make legally binding commitments to pay such fees. For air-tickets, Tianma
normally books a block of air tickets with airlines in advance and pays
the full amount of the tickets to reserve seats before any tours are
formed. The air tickets are usually valid for a certain period of time. If
the pre-packaged tours do not materialize and are eventually not formed,
Tianma will resell the air tickets to other travel agents or customers.
For hotels, meals and transportation, Tianma usually pays an upfront
deposit of 50-60% of the total cost. The remaining balance is then settled
after completion of the tours.
|
2.
|
Tianma,
through its sub-agents, advertises tour and travel packages at prices set
by Tianma and sub-agents.
|
3.
|
Customers
approach Tianma or its appointed sub-agents to book an advertised packaged
tour.
|
4.
|
The
customers pay a deposit to Tianma directly or through its appointed
sub-agents.
|
5.
|
When
the minimum required number of customers (which number is different for
each tour based on the elements and costs of the tour) for a particular
tour is reached, Tianma will contact the customers for tour confirmation
and request full payment. All payments received by the appointed
sub-agents are paid to Tianma prior to the commencement of the
tours.
|
6.
|
Tianma
will then make or finalize corresponding bookings with outside service
providers such as airlines, bus operators, hotels, restaurants, etc. and
pay any unpaid fees or deposits to such
providers.
|
For
the Three Months ended
|
||||||||||||||||||||||||||||||||
December
31,
2009
|
September
30,
2009
|
June
30,
2009
|
March
31,
2009
|
December
31,
2008
|
September
30,
2008
|
June
30,
2008
|
March
31,
2008
|
|||||||||||||||||||||||||
Revenues,
net
|
$ | 454,094 | $ | 293,706 | $ | 333,978 | $ | 185,149 | $ | 463,741 | $ | 2,520,474 | $ | 1,053,888 | $ | 584,167 | ||||||||||||||||
Gross
loss
|
(100,564 | ) | (266,200 | ) | (167,080 | ) | (267,110 | ) | (2,652,901 | ) | (3,130,993 | ) | (3,591,376 | ) | (3,377,173 | ) | ||||||||||||||||
Net
loss from continuing operations
|
(2,134,801 | ) | (1,100,369 | ) | (30,300,722 | ) | (3,847,469 | ) | (26,882,698 | ) | (15,621,634 | ) | (8,859,055 | ) | (8,479,404 | ) | ||||||||||||||||
Net
income (loss) from discontinued operations
|
- | - | - | - | - | 67,352 | (56,865 | ) | 34,554 | |||||||||||||||||||||||
Net
loss attributable to NCN common stockholders
|
$ | (2,134,801 | ) | $ | (1,099,364 | ) | $ | (30,299,321 | ) | $ | (3,825,702 | ) | $ | (26,750,832 | ) | $ | (15,474,366 | ) | $ | (8,888,121 | ) | $ | (8,371,514 | ) | ||||||||
Net
income (loss) per common share – basic and diluted
|
||||||||||||||||||||||||||||||||
Loss
per common share from continuing operations
|
$ | - | $ | - | $ | (0.08 | ) | $ | (0.05 | ) | $ | (0.37 | ) | $ | (0.22 | ) | $ | (0.12 | ) | $ | (0.12 | ) | ||||||||||
Income
(loss) per common share from discontinued operations
|
- | - | - | - | - | - | - | - | ||||||||||||||||||||||||
Net
loss per common share – basic and diluted
|
$ | - | $ | - | $ | (0.08 | ) | $ | (0.05 | ) | $ | (0.37 | ) | $ | (0.22 | ) | $ | (0.12 | ) | $ | (0.12 | ) |
ITEM
9.
|
CHANGES
IN AND DISAGREEMENT WITH ACCOUNTANTS ON ACCOUNTING
AND FINANCIAL DISCLOSURE
|
Name
|
Age
|
Position
|
Director
Since
|
Earnest
Leung
|
53
|
Chief
Executive Officer and Chairperson of the Board
|
2009
|
Godfrey
Hui
|
50
|
Deputy
Chief Executive Officer and Director
|
2002
|
Jennifer
Fu
|
32
|
Chief
Financial Officer and Corporate Secretary
|
N/A
|
Ronald
Lee
|
63
|
Director
|
2009
|
Gerald
Godfrey
|
81
|
Director
|
2009
|
Name
of Director
|
Audit
|
Nominating
|
Remuneration
|
Ronald
Lee
|
M
|
C
|
M
|
Gerald
Godfrey
|
C
|
||
Peter
Mak**
|
C
|
M
|
Name
|
Position
|
Earnest
Leung
|
Chief
Executive Officer and Chairperson of the Board
|
Godfrey
Hui
|
Deputy
Chief Executive Officer and Director (Former Chief Executive
Officer)
|
Jennifer
Fu
|
Chief
Financial Officer and Corporate Secretary
|
Daley
Mok
|
Former
Chief Financial Officer, Former Corporate Secretary and Former
Director
|
Name
and
Principal
Position
|
Year
|
Salary
($)
|
(1)
Bonus
($)
|
(2)
Stock Awards
($)
|
Options
Awards
($)
|
Non-Equity
Incentive
Plan Compensation
($)
|
Change
in
Pension
Value
and
Nonqualified
Deferred
Compensation
Earnings
($)
|
(3)
All Other Compensation
($)
|
Total
($)
|
Earnest
Leung,
Chief
Executive
Officer
and
Director
|
2009
|
46,154
|
-
|
225,000
|
-
|
-
|
-
|
289,175
|
560,329
|
2008
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
|
2007
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
|
Godfrey
Hui,
Deputy
Chief
Executive
Officer
and
Director
|
2009
|
161,538
|
-
|
75,000
|
-
|
-
|
-
|
179,981
|
416,519
|
2008
|
216,923
|
-
|
777,000
|
-
|
-
|
85,237
|
1,079,160
|
||
2007
|
152,308
|
-
|
529,250
|
-
|
-
|
203,755
|
885,313
|
||
Jennifer
Fu, Chief
Financial
Officer
and
Corporate
Secretary
|
2009
|
72,495
|
-
|
7,500
|
-
|
-
|
-
|
1,538
|
81,533
|
2008
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
|
2007
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
|
Daley
Mok, Former
Chief
Financial
Officer,
Corporate
Secretary
and
Director
|
2009
|
93,718
|
-
|
-
|
-
|
-
|
-
|
37,578
|
131,296
|
2008
|
151,538
|
-
|
518,000
|
-
|
-
|
-
|
49,686
|
719,224
|
|
2007
|
97,179
|
-
|
262,750
|
-
|
-
|
-
|
46,910
|
406,839
|
(1) | No bonus was paid to the Named Executive Officers in fiscal 2009, 2008 and 2007. |
(2) | The aggregate number of stock awards vested to each of the Named Executive Officers for his service rendered in each fiscal period was summarized as follows: |
Named
Executive Officer
|
2009
|
2008
|
2007
|
Earnest
Leung
|
30,000,000
|
-
|
-
|
Godfrey
Hui
|
10,000,000
|
300,000
|
275,000
|
Jennifer
Fu
|
-
|
-
|
-
|
Daley
Mok
|
-
|
200,000
|
125,000
|
(3)
|
All
other compensation represents (a) contribution paid by the Company into a
mandatory provident fund for the benefit of the Named Executive Officers
(b) monthly cash allowance of HK$40,000 (approximately $5,161) paid to Dr.
Earnest Leung and Mr. Godfrey Hui commencing from July 2009and (c) income
tax reimbursement to be paid to Dr. Earnest Leung and Mr. Godfrey Hui in
order to sufficiently cover their Hong Kong salary taxes resulting from
their employment during each fiscal year and to Mr. Daley Mok for his
employment commencing from July 1, 2007 till June 15, 2009. As the
aggregate of all other perquisites and other personal benefits received by
each Named Executive Officer was less than $10,000, they are not included
in the above.
|
Named
Executive Officer
|
Base
Salary
(1)
($)
|
Common
Stock Grant
|
|
Godfrey
Hui
|
15,384
|
2,000,000
(2)
|
|
Daley
Mok
|
8,974
|
1,500,000
(3)
|
Named
Executive Officer
|
Adjusted
Base Salary
On
January 1, 2008 ($)
|
Adjusted
Base Salary
on
July 1, 2008 ($)
|
Godfrey
Hui
|
16,923
|
19,231
|
Daley
Mok
|
9,872
|
15,385
|
·
|
Each
employment agreement shall continue until termination by either party with
three-month advance notice or for cause or
disability.
|
·
|
Discretionary
bonus is determined by the board of directors of the NCN Group based on
the realization of financial and performance goals of the Company and the
NCN Group.
|
·
|
Restrictive
covenants regarding confidentiality, other employment after termination
for a period of six months without the approval of the NCN Group’s Board
of Directors, and solicitation of customers, suppliers or employees of the
NCN Group.
|
·
|
Income
tax reimbursement which will be sufficient to cover their Hong Kong
personal income taxes resulting from their employment under the respective
employment agreements.
|
·
|
In
the event employment is terminated other than for cause, disability, or in
the event of their resignation for good reason, each officer is entitled
to severance payments consisting of his then base salary for 48 months
provided there has been no change in control of either the NCN Group or
the Company, or for 60 months if there has been a change in control of
either the NCN Group or the Company in the preceding one year. In
addition, he shall be entitled to accelerated vesting of all stock grants,
as of the date of such termination other than for cause, remain
unexercised and unvested, to the extent permissible by law. The employment
agreements also provide that, in the event employment is terminated for
disability, each officer shall be potentially eligible for disability
benefits under any Company-provided disability plan in which he then
participate, and shall be entitled to accelerated vesting of all stock
grants, as of the date of such disability, remain unexercised and
unvested, to the extent permissible by
law.
|
Name
|
Grant
Date
|
All
Other
Stock
Awards:
Number
of
Shares
of
Stock
or
Units (#)
|
All
Other
Option
Awards:
Number
of
Securities
Underlying
Options
(#)
(1)
|
Exercise
or
Base
Price
of
Option
Awards
($/share)
|
Grant
Date
Fair
Value
of
Stock
and
Options
Awards
|
Closing
Price
on
Grant
Date
($/share)
|
||||||||||||||||
Earnest
Leung
|
July
15, 2009
|
30,000,000
|
-
|
-
|
-
|
900,000
|
||||||||||||||||
Godfrey
Hui
|
July
15, 2009
|
10,000,000
|
-
|
-
|
-
|
300,000
|
||||||||||||||||
Jennifer
Fu
|
July
15, 2009
|
1,000,000
|
-
|
-
|
-
|
30,000
|
||||||||||||||||
Daley
Mok
|
-
|
-
|
-
|
-
|
-
|
-
|
Option Awards
|
Stock Awards
|
||||||||||||||||
Name
|
Number of
Securities
Underlying
Unexercised
Options (#)
Exercisable
|
Number of
Securities
Underlying
Unexercised
Options (#)
Unexercisable
|
Option Exercise
Price ($)
|
Option
Expiration
Date
|
Number of
Shares or
Units of
Stock That
Have Not
Vested (#)
|
Market Value
of Shares or
Units of Stock
That Have
Not Vested
($)
|
|||||||||||
Earnest
Leung
|
-
|
-
|
-
|
-
|
-
|
-
|
|||||||||||
Godfrey
Hui
|
-
|
-
|
-
|
-
|
-
|
-
|
|||||||||||
Jennifer
Fu
(1)
|
-
|
-
|
-
|
-
|
1,000,000
|
$49,810
|
|||||||||||
Daley
Mok
|
-
|
-
|
-
|
-
|
-
|
-
|
(1)
|
As
disclosed elsewhere herein, Ms. Fu is entitled to a stock grant of
1,000,000 shares of the Company’s common stock, subject to annual vesting
over two years if she remains employed by the Company through the vesting
date. Such shares with par value of $0.001 were issued on July 28, 2009
but will not vest until July 14, 2010 after which the relevant share
certificate will be handed to her.
|
Name
of director
|
Fees
Earned
or
Paid
(1)
in
Cash
($)
|
Stock
Awards
(2)
($)
|
Option
Awards
($)
|
Non-Equity
Incentive
Plan
Compensation
($)
|
Change
in
Pension
Value
and
Nonqualified
Deferred
Compensation
Earnings($) |
All
Other
Compensation
($)
|
Total
($)
|
Earnest
Leung
|
52,147
|
-
|
-
|
-
|
-
|
-
|
52,147
|
Godfrey
Hui
|
28,000
|
15,000
|
-
|
-
|
-
|
-
|
43,000
|
Ronald
Lee*
|
12,000
|
9,000
|
-
|
-
|
-
|
-
|
21,000
|
Gerald
Godfrey*
|
12,000
|
9,000
|
-
|
-
|
-
|
-
|
21,000
|
Peter
Mak*
|
27,000
|
24,000
|
-
|
-
|
-
|
-
|
51,000
|
Daley
Mok
|
7,500
|
10,000
|
-
|
-
|
-
|
-
|
17,500
|
Daniel
So
|
7,500
|
10,000
|
-
|
-
|
-
|
-
|
17,500
|
Stanley
Chu
|
7,500
|
10,000
|
-
|
-
|
-
|
-
|
17,500
|
Edward
Lu*
|
10,000
|
10,000
|
-
|
-
|
-
|
-
|
20,000
|
Gerd
Jakob*
|
6,667
|
-
|
-
|
-
|
-
|
-
|
6,667
|
Ronglie
Xu*
|
15,000
|
15,000
|
-
|
-
|
-
|
-
|
30,000
|
Plan
Category
|
Number
Of Securities To
Be
Issued Upon Exercise Of
Outstanding
Options,
Warrants And Rights
(a)
|
Weighted
Average
Exercise
Price Of
Outstanding
Options,
Warrants And Rights
(b)
|
Number
Of Securities Remaining
Available
For Future Issuance
Under
Equity Compensation
Plans
(Excluding Securities
Reflected In Column
(A))
(c)
|
|
Equity
compensation
plans
approved by
security
holders
|
-
|
-
|
1,000,000
(1)
|
|
Equity
compensation
plans
not approved by
security
holders
|
100,000
(2)
|
$0.7
|
-
|
|
Total
|
100,000
(2)
|
$0.7
|
1,000,000
|
|
(1)
|
We
reserved 3,000,000 shares for issuance under our 2004 Stock Incentive
Plan, of which 1,000,000 shares are still available for issuance as of
December 31, 2009. We reserved 7,500,000 shares for issuance under our
2007 Stock Option/Stock Issuance Plan. All 7,500,000 shares were issued as
of December 31, 2009 and 36,997,260 shares were currently issued in
excessive of the number of shares of common stock available for issuance
under 2007 Stock Option/Stock Issuance Plan. Such excessive shares are
held in escrow by the Company, in accordance with the plan, pending
shareholders’ approval. See below subsection
- " Equity Incentive
Plans"
for more information about the
plan.
|
(2)
|
A
warrant to purchase 100,000 shares of restricted common stock was granted
to a consultant on August 25, 2006 with an exercise price of $0.70 per
share. One-fourth of the shares underlying the warrant become exercisable
every 45 days beginning from the date of issuance. The warrant shall
remain exercisable until August 25, 2016. The warrant remained unexercised
as of December 31, 2009.
|
Title of Class
|
Name and Address of
Beneficial Owner
|
Office, If Any
|
Amount & Nature of
Beneficial
Ownership
(1)
|
Percent of
Class
(3)
|
||||
Common Stock
|
Earnest
Leung
|
CEO
and Director
|
31,463,000
|
7.4
|
||||
Common
Stock
|
Godfrey
Hui
|
Deputy
CEO and Director
|
11,135,000
|
2.6
|
||||
Common
Stock
|
Jennifer
Fu
|
CFO
|
10,000
|
*
|
||||
Common
Stock
|
Ronald
Lee
|
Director
|
-
|
-
|
||||
Common
Stock
|
Gerald
Godfrey
|
Director
|
-
|
-
|
||||
All
Officers and Directors as a
group (5 persons named above) |
42,608,000
|
|||||||
Common
Stock
|
Keywin
Holdings Limited
Room
902, 9/F1., Universal Trade Centre, 3 Arbuthnot Road, Central, Hong
Kong
|
5%
Security Holder
|
243,523,668
(2)
|
44.7
|
||||
Sino
Portfolio International Ltd
3104
-7, 31/F, Central Plaza, 18 Harbour Road, Hong Kong
|
5%
Security Holder
|
137,681,437
|
32.6
|
|||||
Total
Shares Owned by Persons Named above
|
423,813,105
|
·
|
the
benefits to the Company of the
transaction;
|
·
|
the
nature of the related party’s interest in the
transaction;
|
·
|
whether
the transaction would impair the judgment of a director or executive
officer to act in the best interest of the Company and its stockholders;
|
·
|
the
potential impact of the transaction on a director’s independence;
and
|
·
|
any
other matters the Audit Committee deems
appropriate.
|
Fee
Category
|
2009
|
2008
|
||||||
Audit
Fees
|
$ | 102,423 | $ | 139,526 | ||||
Audit-Related
Fees
|
$ | -- | $ | -- | ||||
Tax
Fees
|
$ | -- | $ | -- | ||||
All
Other Fees
|
$ | -- | $ | -- |
ITEM
15
|
EXHIBITS,
FINANCIAL STATEMENT
SCHEDULES
|
(i)
|
Reports
of Independent Registered Public Accounting Firms
|
F-2
|
(ii)
|
Consolidated
Balance Sheets as of December 31, 2009 and 2008
|
F-6
|
(iii)
|
Consolidated
Statements of Operations and Comprehensive Loss for the years ended
December 31, 2009, 2008 and 2007 (Restated)
|
F-7
|
(iv)
|
Consolidated
Statement of Stockholders’ Equity for the years ended December 31, 2009,
2008 and 2007 (Restated)
|
F-9
|
(v)
|
Consolidated
Statements of Cash Flows for the years ended December 31, 2009, 2008 and
2007 (Restated)
|
F-13
|
(vi)
|
Notes
to Consolidated Financial Statements
|
F-15
|
Exhibit
No.
|
Description
|
3.1
|
Amended
And Restated Certificate Of Incorporation incorporated herein by reference
from Exhibit A to Registrant’s Definitive Information Statement on
Schedule 14C filed with the SEC on January 10, 2007.
|
3.2
|
Amended
and Restated By-Laws, adopted on January 10, 2006, is incorporated herein
by reference from Exhibit 3-(II) to Registrant’s Current Report on Form
8-K filed with the SEC on January 18, 2006.
|
3.3
|
Amended
and Restated Certificate of Incorporation filed with the Delaware
Secretary of State on July 27, 2009 (incorporated herein by reference from
Registrant's Current Report on Form 8-Kfiled with the SEC on July 29,
2009).
|
4.1
|
Form
of Registrant’s Common Stock Certificate.
|
4.2
|
Form
of Amended and Restated Secured Convertible Promissory Note (incorporated
herein by reference from Registrant's Current Report on Form 8-Kfiled with
the SEC on February 6, 2008).
|
4.3
|
Form
of Warrant (incorporated herein by reference from Registrant's Current
Report on Form 8-K filed with the SEC on February 6,
2008).
|
4.4
|
Form
of 3% Senior Secured Convertible Promissory Note (incorporated herein by
reference from Registrant's Current Report on Form 8-K filed with the SEC
on November 14, 2007).
|
4.5
|
Form
of Warrant (incorporated herein by reference from Registrant's Current
Report on Form 8-K filed with the SEC on November 14,
2007).
|
4.6
|
TEDA
Travel Group, Inc. 2004 Stock Incentive Plan (incorporated herein by
reference from Registrant's Registration Statement on Form S-8 filed with
the SEC on April 22, 2004).
|
4.7
|
2007
Stock Option/Stock Issuance Plan (incorporated herein by reference from
Registrant's Registration Statement on Form S-8 filed with the SEC on
April 6, 2007).
|
4.8
|
Form
of Note 1% Senior Unsecured Convertible Promissory Note, dated April 2,
2009 (incorporated herein by reference from Registrant's Current Report on
Form 8-K filed with the SEC on April 6, 2009).
|
4.9
|
Registration
Rights Agreement, dated April 2, 2009, by and among the Company, Sculptor
Finance (MD) Ireland Limited, Sculptor Finance (AS) Ireland Limited,
Sculptor Finance (SI) Ireland Limited and Keywin Holdings Limited
(incorporated herein by reference from Registrant's Current Report on Form
8-K filed with the SEC on April 6, 2009)
|
10.1
|
Purchase
Agreement, dated November 19, 2007 (incorporated herein by reference from
Registrant's Current Report on Form 8-K filed with the SEC on November 26,
2007).
|
10.2
|
First
Amendment to Note and Warrant Purchase Agreement, dated January 31, 2008
(incorporated herein by reference from Registrant's Current Report on Form
8-K filed with the SEC on February 6, 2008).
|
10.3
|
Security
Agreement, dated January 31, 2008 (incorporated herein by reference from
Registrant's Current Report on Form 8-K filed with the SEC on February 6,
2008).
|
10.4
|
Registration
Rights Agreement, dated November 19, 2007 (incorporated herein by
reference from Registrant's Current Report on Form 8-K filed with the SEC
on November 26, 2007).
|
10.5
|
Share
Purchase Agreement dated January 1, 2008 (incorporated herein by reference
from Registrant's Current Report on Form 8-K filed with the SEC on January
7, 2008).
|
10.6
|
Agreement
for Co-operation in Business between Shanghai Quo Advertising Company
Limited and Wuhan Weiao Advertising Company Limited dated as of August 16,
2007 (incorporated herein by reference from Registrant's Current Report on
Form 8-K filed with the SEC on August 21, 2007).
|
10.7
|
Note
and Warrant Purchase Agreement dated November 12, 2007 by and between the
Company and Wei An Developments Limited (incorporated herein by reference
from Registrant's Current Report on Form 8-K filed with the SEC on
November 14, 2007).
|
10.8
|
Contract
for the Rebuilding and Leasing of Advertisement Light Boxes on Nanjing
Road Pedestrian Street (incorporated herein by reference from
Registrant's Current Report on Form 8-K filed with the SEC on June 26,
2007) .
|
10.9
|
Agreement
for Advertising Business dated April 26, 2007, by and among Shanghai Quo
Advertising Company Limited, a subsidiary of Network CN Inc., and Shanghai
Yukang Advertising Company Limited (incorporated herein by reference from
Registrant's Current Report on Form 8-K filed with the SEC on May 2,
2007).
|
10.10
|
Agreement
for Co-operation and Agency in the Publication of Advertisements dated
April 14, 2007, by and among Shanghai Quo Advertising Company Limited, a
subsidiary of Network CN Inc., and Shanghai Qian Ming Advertising Company
Limited (incorporated herein by reference from Registrant's Current Report
on Form 8-K filed with the SEC on April 20, 2007).
|
10.11
|
Stock
Transfer Agreement between Youwei Zheng and NCN Management Services
Limited for acquisition of 55% equity interest in Guangdong Tianma
International Travel Service Co., Ltd., dated June 16, 2006 (incorporated
herein by reference from Registrant’s Current Report on Form 8-K filed
with the SEC on March 30, 2007).
|
10.12
|
Business
Joint Venture Agreement, between Shanghai Zhong Ying Communication
Engineering Company Limited and Shanghai Quo Advertising Company Limited
to manage LED outdoor project in Huangpu district of Shanghai, China
(incorporated herein by reference from Registrant’s Current Report on Form
8-K filed with the SEC on February 7, 2007).
|
10.13
|
Business
Joint Venture Agreement, between Nanjing Yiyi Culture Advertising Company
Limited and Shanghai Quo Advertising Company Limited to manage LED outdoor
project in Nanjing (incorporated herein by reference from Registrant’s
Current Report on Form 8-K filed with the SEC on February 15,
2007).
|
10.14
|
Business
Joint Venture Agreement, between Wuhan Xin An Technology Development
Company Limited and Shanghai Quo Advertising Company Limited to manage LED
outdoor project in Wuhan (incorporated herein by reference from
Registrant’s Current Report on Form 8-K filed with the SEC on March 1,
2007).
|
10.15
|
Stock
Purchase Agreement dated as of September 1, 2008, between Zhanpeng Wang,
an individual, and NCN Group Limited, a British Virgin Islands
corporation.
|
10.16
|
Note
Exchange Agreement, dated April 2, 2009, by and among the Company,
Sculptor Finance (MD) Ireland Limited, Sculptor Finance (AS) Ireland
Limited, Sculptor Finance (SI) Ireland Limited, OZ Master Fund, Ltd., OZ
Asia Master Fund, Ltd. and OZ Global Special Investments Master Fund, L.P.
(incorporated herein by reference from Registrant's Current Report on Form
8-K filed with the SEC on April 6, 2009)
|
10.17
|
Note
Exchange and Option Agreement, dated April 2, 2009, between the Company
and Keywin Holdings Limited. (incorporated herein by reference from
Registrant's Current Report on Form 8-K filed with the SEC on April 6,
2009)
|
10.18
|
Letter
Agreement and Termination of Investor Rights Agreement, dated April 2,
2009, by and among the Company, Company, Sculptor Finance (MD) Ireland
Limited, Sculptor Finance (AS) Ireland Limited, Sculptor Finance (SI)
Ireland Limited, OZ Master Fund, Ltd., OZ Asia Master Fund, Ltd., OZ
Global Special Investments Master Fund, L.P. and Keywin Holdings Limited.
(incorporated herein by reference from Registrant's Current Report on Form
8-K filed with the SEC on April 6, 2009)
|
10.19
|
Employment
Agreement, dated July 15, 2009, between the Company and Earnest Leung.
(incorporated herein by reference from Registrant's Quarterly Report on
Form 10-Q filed with the SEC on August 10, 2009)
|
10.20
|
Employment
Agreement, dated July 15, 2009, between the Company and Godfrey Hui.
(incorporated herein by reference from Registrant's Quarterly Report on
Form 10-Q filed with the SEC on August 10, 2009)
|
10.21
|
Amendment
No. 1 to Note Exchange and Option Agreement, dated July 1, 2009, between
Keywin Holdings Limited and the Company. (incorporated herein by reference
from Registrant's Quarterly Report on Form 10-Q filed with the SEC on
August 10, 2009)
|
10.22
|
Amendment
No. 2 to Note Exchange and Option Agreement dated September 30, 2009,
between Keywin Holding Limited and the Company. (incorporated herein by
reference from Registrant's Quarterly Report on Form 10-Q filed with the
SEC on November 6, 2009)
|
10.23
|
Amendment
No. 3 to Note Exchange and Option Agreement dated January 1, 2010,
between Keywin Holding Limited and the Company
|
10.24
|
Lease
Agreement with Vision Tech International Holdings
Limited
|
14.1
|
Code
of Business Conduct and Ethics for Network CN Inc. as approved by the
Board of Directors as of December 31, 2003, is incorporated herein by
reference from Registrant’s Annual Report on Form 10-KSB filed with the
SEC on April 13, 2005.
|
16.1
|
Letter
of US Audit Practice of Jimmy CH Cheung & Co, dated February 9, 2010.
(incorporated herein by reference from Registrant's Current Report on Form
8-K filed with the SEC on February 9, 2010)
.
|
21.1
|
Subsidiaries
of the registrant.*
|
23.1
|
Consent
of independent auditors Jimmy C.H. Cheung & Co.*
|
23.2 | Consent of independent auditors Baker Tilly Hong Kong Limited.* |
24.1
|
Power
of Attorney (included in the Signatures section of this
report).
|
31.1
|
Certification
of Chief Executive Officer pursuant to Exchange Act Rules 13a-14(a) and
15d-14(a), as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of
2002.*
|
31.2
|
Certification
of Chief Financial Officer pursuant to Exchange Act Rules 13a-14(a) and
15d-14(a), as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of
2002.*
|
32.1
|
Certification
of Chief Executive Officer Pursuant to 18 U.S.C. Section 1350, as
Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of
2002.*
|
32.2
|
Certification
of Chief Financial Officer Pursuant to 18 U.S.C. Section 1350, as
Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of
2002.*
|
NETWORK CN INC | |||
|
By:
|
/s/ Earnest Leung | |
Earnest Leung | |||
Chief Executive Officer | |||
(Principal Executive Officer) | |||
Date: March 31, 2010 |
|
By:
|
/s/ Jennifer Fu | |
Jennifer Fu | |||
Chief Financial Officer | |||
(Principal Financial and Accounting Officer) | |||
Date: March 31, 2010 |
Name
|
Title
|
Date
|
|
/s/
Earnest Leung
|
Chief
Executive Officer and Director
|
March 31,
2010
|
|
Earnest
Leung
|
(Principal
Executive Officer)
|
||
/s/
Jennifer Fu
|
Chief
Financial Officer
|
March
31, 2010
|
|
Jennifer
Fu
|
(Principal
Financial and Accounting Officer)
|
||
/s/
Godfrey Hui
|
Deputy
Chief Executive Officer and Director
|
March
31, 2010
|
|
Godfrey
Hui
|
|||
/s/
Ronald Lee
|
Director
|
March
31, 2010
|
|
Ronald
Lee
|
Contents
|
Page
|
|
F-2
|
||
F-6
|
||
F-7
|
||
F-9
|
||
F-13
|
||
F-15
|
|
Jimmy
C.H. Cheung & Co
Certified
Public Accountants
|
1607
Dominion Centre, 43 Queen’s Road East, Wanchai, Hong Kong
Tel: (852)
25295500 Fax: (852) 21277660
Email:
jimmy.cheung@jchcheungco.hk
Website: http://www.jchcheungco.hk
|
As
of December 31,
|
||||||||||||
Note
|
2009
|
2008
|
||||||||||
ASSETS
|
||||||||||||
Current
Assets
|
||||||||||||
Cash
|
$ | 1,969,549 | $ | 7,717,131 | ||||||||
Accounts
receivable, net
|
6 | 90,065 | 217,402 | |||||||||
Prepayments
for advertising operating rights, net
|
7 | 348,239 | 418,112 | |||||||||
Prepaid
expenses and other current assets, net
|
8 | 665,907 | 630,132 | |||||||||
Total
Current Assets
|
3,073,760 | 8,982,777 | ||||||||||
Equipment,
Net
|
9 | 1,389,691 | 2,397,624 | |||||||||
Intangible
Assets, Net
|
10 | - | 449,307 | |||||||||
Deferred
Charges, Net
|
11 | 191,991 | 1,242,958 | |||||||||
TOTAL
ASSETS
|
$ | 4,655,442 | $ | 13,072,666 | ||||||||
LIABILITIES AND STOCKHOLDERS’
DEFICIT
|
||||||||||||
Current
Liabilities
|
||||||||||||
Accounts
payable, accrued expenses and other payables
|
12 | $ | 2,288,059 | $ | 5,577,204 | |||||||
Current
liabilities from discontinued operations
|
3,655 | 3,655 | ||||||||||
Total
Current Liabilities
|
2,291,714 | 5,580,859 | ||||||||||
3%
Convertible Promissory Notes Due 2011, Net
|
13 | - | 30,848,024 | |||||||||
1%
Convertible Promissory Note Due 2012, Net
|
13 | 3,854,934 | - | |||||||||
TOTAL
LIABILITIES
|
6,146,648 | 36,428,883 | ||||||||||
COMMITMENTS
AND CONTINGENCIES
|
14 | |||||||||||
STOCKHOLDERS’
DEFICIT
|
15 | |||||||||||
Preferred
stock, $0.001 par value, 5,000,000 shares authorized
None
issued and outstanding
|
- | - | ||||||||||
Common
stock, $0.001 par value, 2,000,000,000 shares authorized
Shares
issued and outstanding: 423,122,071 and 71,641,608 as of December 31, 2009
and 2008 respectively
|
423,122 | 71,642 | ||||||||||
Additional
paid-in capital
|
119,323,848 | 59,578,612 | ||||||||||
Deferred
stock-based compensation
|
(900,000 | ) | - | |||||||||
Accumulated
deficit
|
(122,013,120 | ) | (84,653,932 | ) | ||||||||
Accumulated
other comprehensive income
|
1,674,944 | 1,647,461 | ||||||||||
TOTAL
STOCKHOLDERS’ DEFICIT
|
(1,491,206 | ) | (23,356,217 | ) | ||||||||
TOTAL
LIABILITIES AND STOCKHOLDERS’ DEFICIT
|
$ | 4,655,442 | $ | 13,072,666 |
Years
Ended December 31,
|
||||||||||||||||
Note(s)
|
2009
|
2008
|
2007
Restated
(1)
|
|||||||||||||
REVENUES
|
|
|||||||||||||||
Advertising
services
|
$ | 1,266,927 | $ | 4,622,270 | $ | 1,442,552 | ||||||||||
COST
OF REVENUES
|
||||||||||||||||
Cost
of advertising services
|
(2,067,881 | ) | (17,374,713 | ) | (2,795,188 | ) | ||||||||||
GROSS
LOSS
|
(800,954 | ) | (12,752,443 | ) | (1,352,636 | ) | ||||||||||
OPERATING
EXPENSES
|
||||||||||||||||
Selling
and marketing
|
(630,730 | ) | (2,996,142 | ) | (504,758 | ) | ||||||||||
General
and administrative
|
(4,532,628 | ) | (11,254,933 | ) | (11,067,777 | ) | ||||||||||
Net
write-back of /(allowance for) doubtful debts
|
6,8 | 542,771 | (7,739,043 | ) | - | |||||||||||
Non-cash
impairment charges
|
7,9,10 | (802,487 | ) | (18,109,200 | ) | (516,419 | ) | |||||||||
Total
Operating Expenses
|
(5,423,074 | ) | (40,099,318 | ) | (12,088,954 | ) | ||||||||||
LOSS
FROM OPERATIONS
|
(6,224,028 | ) | (52,851,761 | ) | (13,441,590 | ) | ||||||||||
OTHER
INCOME
|
||||||||||||||||
Interest
income
|
22,486 | 90,703 | 23,340 | |||||||||||||
Other
income
|
14,086 | 645 | 74 | |||||||||||||
Total
Other Income
|
36,572 | 91,348 | 23,414 | |||||||||||||
INTEREST
AND OTHER DEBT-RELATED EXPENSES
|
||||||||||||||||
Amortization
of deferred charges and debt discount
|
13 | (18,873,863 | ) | (5,589,920 | ) | (206,391 | ) | |||||||||
Non-cash
debt conversion charges
|
13 | (10,204,627 | ) | - | - | |||||||||||
Loss
on early extinguishment of debt
|
13 | (1,696,684 | ) | - | - | |||||||||||
Interest
expense
|
13 | (420,731 | ) | (1,492,458 | ) | (122,803 | ) | |||||||||
Total
Interest and Other Debt-Related Expenses
|
(31,195,905 | ) | (7,082,378 | ) | (329,194 | ) | ||||||||||
NET
LOSS BEFORE INCOME TAXES
|
(37,383,361 | ) | (59,842,791 | ) | (13,747,370 | ) | ||||||||||
Income
taxes
|
20 | - | - | (7,668 | ) | |||||||||||
NET
LOSS FROM CONTINUING OPERATIONS
|
(37,383,361 | ) | (59,842,791 | ) | (13,755,038 | ) | ||||||||||
DISCONTINUED
OPERATIONS
|
||||||||||||||||
Net
loss from discontinued operations, net of income taxes
|
18 | - | (21,044 | ) | (953,629 | ) | ||||||||||
Gain
from disposal of discontinued operations
|
18 | - | 66,085 | - | ||||||||||||
NET
INCOME (LOSS) FROM DISCONTINUED OPERATIONS
|
- | 45,041 | (953,629 | ) | ||||||||||||
NET
LOSS
|
$ | (37,383,361 | ) | $ | (59,797,750 | ) | $ | (14,708,667 | ) | |||||||
LESS:
NET LOSS ATTRIBUTABLE TO NONCONTROLLING INTERESTS, NET OF INCOME
TAXES
|
24,173 | 312,917 | 62,048 | |||||||||||||
NET
LOSS ATTRIBUTABLE TO NCN COMMON STOCKHOLDERS
|
$ | (37,359,188 | ) | $ | (59,484,833 | ) | $ | (14,646,619 | ) | |||||||
OTHER
COMPREHENSIVE INCOME
|
||||||||||||||||
Total
other comprehensive income
|
26,655 | 1,589,247 | 65,712 | |||||||||||||
Less:
foreign currency translation (gain) loss attributable to noncontrolling
interests
|
828 | (7,083 | ) | (3,895 | ) | |||||||||||
Foreign
currency translation gain attributable To NCN common
stockholders
|
27,483 | 1,582,164 | 61,817 |
Common
Stock
|
||||||||||||||||||||||||||||
Share
|
Amount
|
Additional
Paid-In
Capital
|
Deferred
Stock-Based
Compensation
|
Accumulated
Deficit
|
Accumulated
Other
Comprehensive
Income
|
Total
|
||||||||||||||||||||||
Balance
as of December
31,
2006
|
67,300,718 | $ | 67,301 | $ | 22,721,951 | $ | (2,845,000 | ) | $ | (10,522,480 | ) | $ | 3,480 | $ | 9,425,252 | |||||||||||||
Issuance
of stock for
private
placement
|
500,000 | 500 | 1,499,500 | - | - | - | 1,500,000 | |||||||||||||||||||||
Issuance
of stock for
acquisition
of a
subsidiary
|
300,000 | 300 | 843,300 | - | - | - | 843,600 | |||||||||||||||||||||
Issuance
of stock for
services
rendered by
directors
and officers
|
607,260 | 607 | 166,227 | - | - | - | 166,834 | |||||||||||||||||||||
Issuance
of stock for
services
rendered by
consultants
|
218,630 | 219 | 441,785 | - | - | - | 442,004 | |||||||||||||||||||||
Exercise
of warrants by a consultant
|
225,000 | 225 | 22,275 | - | - | - | 22,500 | |||||||||||||||||||||
Stock-based
compensation
for stock
granted
to directors,
officers
and employees
for
services
|
- | - | 2,378,380 | - | - | - | 2,378,380 | |||||||||||||||||||||
Stock-based
compensation
for stock option/warrants issued
to
consultants for
services
|
- | - | 27,921 | - | - | - | 27,921 | |||||||||||||||||||||
Stock-based
compensation
for stock
warrants
issued to a
placement
agent for
services
|
- | - | 21,305 | - | - | - | 21,305 |
Amortization
of deferred
stock-based
compensation
|
- | - | - | 2,845,000 | - | - | 2,845,000 | |||||||||||||||||||||
Value
of warrants
associated
with
convertible
notes
|
- | - | 2,823,670 | - | - | - | 2,823,670 | |||||||||||||||||||||
Value
of beneficial
conversion
feature of
convertible
notes to
common
stock
|
- | - | 4,727,272 | - | - | 4,727,272 | ||||||||||||||||||||||
Translation
adjustment
|
- | - | - | - | - | 61,817 | 61,817 | |||||||||||||||||||||
Net
loss for the year -
Restated
(1)
|
- | - | - | - | (14,646,619 | ) | - | (14,646,619 | ) | |||||||||||||||||||
Balance
as of December
31,
2007- Restated
(1)
|
69,151,608 | $ | 69,152 | $ | 35,673,586 | $ | - | $ | (25,169,099 | ) | $ | 65,297 | $ | 10,638,936 | ||||||||||||||
Value
of warrants
associated
with
convertible
notes
|
- | - | 5,810,000 | - | - | - | 5,810,000 | |||||||||||||||||||||
Value
of beneficial
conversion
feature of
convertible
notes to
common
stock
|
- | - | 11,030,303 | - | - | - | 11,030,303 | |||||||||||||||||||||
Issuance
of stock for
acquisition
of
subsidiaries
|
1,500,000 | 1,500 | 3,736,500 | - | - | - | 3,738,000 | |||||||||||||||||||||
Issuance
of stock for services rendered by directors and officers
|
330,000 | 330 | (330 | ) | - | - | - | - | ||||||||||||||||||||
Issuance
of stock for
services
rendered by
employees
|
660,000 | 660 | (660 | ) | - | - | - | - | ||||||||||||||||||||
Stock-based
compensation
for stock
granted
to directors,
officers
and employees
for
services
|
- | - | 3,149,028 | - | - | - | 3,149,028 |
Exchange
of accrued
and
unpaid interests of
3%
Convertible
Promissory
Notes to
Common
Stock
|
1,665,675 | 1,665,675 | ||||||||||||||||||||||||||
Non-Cash
Debt
Conversion
Charges
|
- | - | 10,204,627 | - | - | - | 10,204,627 | |||||||||||||||||||||
Value
of beneficial
conversion
feature of
convertible
note to
common
stock
|
1,447,745 | 1,447,745 | ||||||||||||||||||||||||||
Amortization
of deferred
stock-based
compensation
|
- | - | - | 300,000 | - | - | 300,000 | |||||||||||||||||||||
Translation
adjustment
|
- | - | - | - | - | 27,483 | 27,483 | |||||||||||||||||||||
Net
loss for the year
|
- | - | - | - | (37,359,188 | ) | - | (37,359,188 | ) | |||||||||||||||||||
Balance
as of December
31,
2009
|
423,122,071 | $ | 423,122 | $ | 119,323,848 | $ | (900,000 | ) | $ | (122,013,120 | ) | $ | 1,674,944 | $ | (1,491,206 | ) |
Cash
paid during the year for:
|
|||||||||||
Income
taxes
|
$ | - | $ | - | $ | - | |||||
Interest
paid for 12% convertible promissory note
|
$ | - | $ | 69,041 | $ | 78,934 | |||||
Interest
paid for 1% convertible promissory note
|
$ | 24,795 | $ | - | $ | - | |||||
Interest
paid for capital lease arrangement
|
$ | - | $ | - | $ | 421 |
Media
display equipment
|
5 -
7 years
|
Office
equipment
|
3 -
5 years
|
Furniture
and fixtures
|
3 -
5 years
|
Leasehold
improvements
|
Over
the unexpired lease terms
|
1.
|
Tianma,
in consultation with sub-agents, organizes a tour or travel package,
including making reservations for blocks of tickets, rooms, etc. with
third-party service providers. Tianma may be required to make deposits,
pay all or part of the ultimate fees charged by such service providers or
make legally binding commitments to pay such fees. For air-tickets, Tianma
normally books a block of air tickets with airlines in advance and pays
the full amount of the tickets to reserve seats before any tours are
formed. The air tickets are usually valid for a certain period of time. If
the pre-packaged tours do not materialize and are eventually not formed,
Tianma will resell the air tickets to other travel agents or customers.
For
hotels, meals and transportation, Tianma usually pays an upfront
deposit of 50-60% of the total cost. The remaining balance is then settled
after completion of the tours.
|
2.
|
Tianma,
through its sub-agents, advertises tour and travel packages at prices set
by Tianma and sub-agents.
|
3.
|
Customers
approach Tianma or its appointed sub-agents to book an advertised packaged
tour.
|
4.
|
The
customers pay a deposit to Tianma directly or through its appointed
sub-agents.
|
5.
|
When
the minimum required number of customers (which number is different for
each tour based on the elements and costs of the tour) for a particular
tour is reached, Tianma will contact the customers for tour confirmation
and request full payment. All payments received by the appointed
sub-agents are paid to Tianma prior to the commencement of the
tours.
|
6.
|
Tianma
will then make or finalize corresponding bookings with outside service
providers such as airlines, bus operators, hotels, restaurants, etc. and
pay any unpaid fees or deposits to such
providers.
|
For the year ended December 31,
2007
|
As
Previously
Reported
|
Restatement
Adjustments
|
As
Restated
|
|||||||||
Interest
and Other Debt-Related Expenses
|
||||||||||||
Amortization
of deferred charges and debt discount
|
$ | 4,866,351 | $ | (4,659,960 | ) | $ | 206,391 | |||||
Net
loss attributable to NCN common stockholders
|
(19,306,579 | ) | 4,659,960 | (14,646,619 | ) | |||||||
Comprehensive
loss
|
(19,244,762 | ) | 4,659,960 | (14,584,802 | ) | |||||||
Net
loss per common share – basic and diluted
|
$ | (0.28 | ) | $ | 0.07 | $ | (0.21 | ) | ||||
As of December 31, 2007
|
As
Previously
Reported
|
Restatement
Adjustments
|
As
Restated
|
|||||||||
Liabilities
|
||||||||||||
3%
convertible promissory notes due 2011, net
|
$ | 12,545,456 | $ | (4,659,960 | ) | $ | 7,885,496 | |||||
Total
liabilities
|
20,780,493 | (4,659,960 | ) | 16,120,533 | ||||||||
Stockholders’
Equity
|
||||||||||||
Accumulated
deficit
|
(29,829,059 | ) | 4,659,960 | (25,169,099 | ) | |||||||
Total
stockholder’s equity
|
$ | 5,978,976 | $ | 4,659,960 | $ | 10,638,936 |
Name
|
Place
of
Incorporation
|
Ownership
interest
attributable to
the Company
|
Principal activities
|
NCN
Group Limited
|
BVI
|
100%
|
Investment
holding
|
NCN
Media Services Limited
|
BVI
|
100%
|
Investment
holding
|
NCN
Travel Services Limited
|
BVI
|
100%
|
Dormant
|
Linkrich
Enterprise Advertising and Investment Limited
|
Hong
Kong
|
100%
|
Investment
holding
|
Crown
Winner International Limited
|
Hong
Kong
|
100%
|
Investment
holding
|
Cityhorizon
Limited
|
Hong
Kong
|
100%
|
Investment
holding
|
NCN
Group Management Limited
|
Hong
Kong
|
100%
|
Provision
of administrative and management services
|
Crown
Eagle Investment Limited
|
Hong
Kong
|
100%
|
Dormant
|
Profit
Wave Investment Limited
|
Hong
Kong
|
100%
|
Dormant
|
NCN
Huamin Management Consultancy (Beijing) Company Limited
|
PRC
|
100%
|
Provision
of administrative and management services
|
Shanghai
Quo Advertising Company Limited
|
PRC
|
100%
|
Provision
of advertising services
|
Teda
(Beijing) Hotels Management Limited
|
PRC
|
100%
|
Dormant;
undergoing liquidation process
|
Huizhong
Lianhe Media Technology Co., Ltd.
|
PRC
|
100%
|
Provision
of high-tech services
|
Beijing
Huizhong Bona Media Advertising Co., Ltd.
|
PRC
|
100%
|
Provision
of advertising services
|
Huizhi
Botong Media Advertising Beijing Co., Ltd.
|
PRC
|
100%
|
Provision
of advertising services
|
Yi
Gao Shanghai Advertising Limited
|
PRC
|
100%
|
Provision
of advertising services
|
(A)
|
Transactions
Completed in 2007
|
1.
|
Acquisition
of Quo Advertising
|
Cash
|
|
$
|
18,001
|
|
Accounts
receivable, net
|
|
|
83,791
|
|
Prepaid
expenses and other current assets, net
|
|
|
298,559
|
|
Equipment,
net
|
|
|
15,114
|
|
Intangible
right
|
|
|
536,540
|
|
Accounts
payable, accrued expenses and other payables
|
|
|
(44,405
|
)
|
Total
purchase price
|
|
$
|
907,600
|
|
2.
|
Acquisition
of Xuancaiyi
|
1.
|
An
initial payment of RMB2,500,000 (approximately
$330,000);
|
2.
|
Up
to RMB 2,454,300 (approximately $337,000) based on Xuancaiyi’s net profit
for the four months ended December 31,
2007;
|
3.
|
Up
to RMB 1,834,500 (approximately $252,000) based on Xuancaiyi’s net profit
for the first quarter of fiscal year
2008;
|
4.
|
Up
to RMB 1,827,400 (approximately $251,000) based on Xuancaiyi’s net profit
for the second quarter of fiscal year
2008;
|
5.
|
Up
to RMB1,819,100 (approximately $250,000) based on Xuancaiyi’s net profit
for the third quarter of fiscal year 2008;
and
|
6.
|
Up
to RMB1,809,700 (approximately $248,000) based on Xuancaiyi’s net profit
for the fourth quarter of fiscal year
2008.
|
Cash
|
$ | 57,971 | ||
Prepaid
expenses and other current assets, net
|
82,150 | |||
Equipment,
net
|
6,955 | |||
Intangible
right
|
586,066 | |||
Accounts
payable, accrued expenses and other payables
|
(85,833 | ) | ||
Noncontrolling
interests
|
(317,181 | ) | ||
Total
purchase price
|
$ | 330,128 |
(B)
|
Transactions
Completed in 2008
|
Cash
|
$
|
2,427,598
|
||
Prepayments
for advertising operating rights
|
2,450,794
|
|||
Prepayments
and other current assets, net
|
170,347
|
|||
Equipment,
net
|
1,995,702
|
|||
Intangible
assets, net
|
1,973,865
|
|||
Accounts
payable, accrued expenses and other payables
|
(280,306
|
)
|
||
Total
purchase price
|
$
|
8,738,000
|
Cash
|
$
|
653
|
||
Prepaid
expenses and other current assets, net
|
102,154
|
|||
Equipment,
net
|
599,348
|
|||
Intangible
asset
|
551,031
|
|||
Accounts
payable, accrued expenses and other payables
|
(1,116,007
|
)
|
||
Net
assets
|
$
|
137,179
|
(C)
|
Unaudited
Pro Forma Consolidated Financial
Information
|
|
Year
ended December 31,2007
|
|||
|
(Unaudited)
(Restated)
|
|||
Revenues
|
$ | 27,619,599 | ||
Net
loss before income taxes and noncontrolling interests
|
$ | (14,807,565 | ) | |
Net
loss attributable to NCN common stockholders
|
$ | (14,753,561 | ) | |
Net
loss per share
-
Basic and diluted
|
$ | (0.22 | ) |
2009
|
2008
|
|||||||
Accounts
receivable
|
$ | 93,909 | $ | 817,643 | ||||
Less:
allowance for doubtful debts
|
(3,844 | ) | (600,241 | ) | ||||
Total
|
$ | 90,065 | $ | 217,402 |
2009
|
2008
|
|||||||
Gross
carrying amount
|
||||||||
Beginning
|
$ | 24,606,150 | $ | 14,627,129 | ||||
Addition
|
2,069,739 | 7,455,360 | ||||||
Transfer
from prepaid expenses and other current assets
|
- | 2,283,791 | ||||||
Write
off
|
(23,907,912 | ) | - | |||||
Translation
adjustments
|
39,061 | 239,870 | ||||||
Total
gross carrying amount
|
2,807,038 | 24,606,150 | ||||||
Accumulated
amortization
|
||||||||
Beginning
|
(16,275,735 | ) | (990,951 | ) | ||||
Transfer
from accrued advertising operating rights fee
|
(733,000 | ) | - | |||||
Amortization
for the year
|
(1,388,980 | ) | (15,167,456 | ) | ||||
Write
off
|
16,031,388 | - | ||||||
Translation
adjustments
|
16,625 | (117,328 | ) | |||||
Total
accumulated amortization
|
(2,349,702 | ) | (16,275,735 | ) | ||||
Provision
for impairment
|
||||||||
Beginning
|
(7,912,303 | ) | - | |||||
Addition
|
- | (7,979,808 | ) | |||||
Write
off
|
7,876,523 | - | ||||||
Translation
adjustments
|
(73,317 | ) | 67,505 | |||||
Total
Provision for impairment
|
(109,097 | ) | (7,912,303 | ) | ||||
Prepayments
for advertising operating rights, net
|
$ | 348,239 | $ | 418,112 |
2009
|
2008
|
|||||||
Rental
deposits
|
$ | 91,548 | $ | 93,294 | ||||
Deposits
paid for soliciting potential media projects
|
- | 3,109,609 | ||||||
Payments
from customers withheld by a third party
|
1,404,977 | 1,402,751 | ||||||
Receivable
from a related party (Note 16)
|
413,309 | - | ||||||
Other
receivables
|
10,914 | 2,937,228 | ||||||
Prepaid
expenses
|
158,722 | 222,679 | ||||||
Sub-total
|
2,079,470 | 7,765,561 | ||||||
Less:
allowance for doubtful debts
|
(1,413,563 | ) | (7,135,429 | ) | ||||
Total
|
$ | 665,907 | $ | 630,132 |
2009
|
2008
|
|||||||
Media
display equipment
|
$ | 5,230,837 | $ | 5,389,316 | ||||
Office
equipment
|
321,257 | 484,827 | ||||||
Furniture
and fixtures
|
15,566 | 54,520 | ||||||
Construction
in progress
|
- | 378,106 | ||||||
Sub-Total
|
5,567,660 | 6,306,769 | ||||||
Less:
accumulated depreciation
|
(1,232,235 | ) | (928,466 | ) | ||||
Less:
provision for impairment
|
(2,945,734 | ) | (2,980,679 | ) | ||||
Total
|
$ | 1,389,691 | $ | 2,397,624 |
2009
|
2008
|
|||||||
Amortized
intangible rights
|
||||||||
Gross
carrying amount
|
$ | 551,031 | $ | 7,137,097 | ||||
Less:
accumulated amortization
|
(203,448 | ) | (1,312,790 | ) | ||||
Less:
provision for impairment loss
|
(347,583 | ) | (5,375,000 | ) | ||||
Amortized
intangible rights, net
|
- | 449,307 | ||||||
Amortized
acquired application systems
|
||||||||
Gross
carrying amount
|
1,973,865 | 1,973,865 | ||||||
Less:
accumulated amortization
|
(197,388 | ) | (197,388 | ) | ||||
Less:
provision for impairment loss
|
(1,776,477 | ) | (1,776,477 | ) | ||||
Amortized
acquired application systems, net
|
- | - | ||||||
Intangible
assets, net
|
$ | - | $ | 449,307 |
2009
|
2008
|
|||||||
Deferred
charges
|
$ | 250,000 | $ | 1,700,000 | ||||
Less:
accumulated amortization
|
(58,009 | ) | (457,042 | ) | ||||
Total
|
$ | 191,991 | $ | 1,242,958 |
NOTE
12
|
ACCOUNTS
PAYABLE, ACCRUED EXPENSES AND OTHER
PAYABLES
|
2009
|
2008
|
|||||||
Accounts
payable
|
$ | 105,957 | $ | 801,627 | ||||
Accrued
professional fee
|
468,942 | 461,953 | ||||||
Accrued
staff benefit and related fees
|
908,832 | 1,028,049 | ||||||
Accrued
interest expenses
|
12,603 | 1,467,417 | ||||||
Other
accrued expenses
|
558,369 | 839,519 | ||||||
Payable
to a related party (Note 16)
|
17,692 | - | ||||||
Other
payables
|
215,664 | 978,639 | ||||||
Total
|
$ | 2,288,059 | $ | 5,577,204 |
1)
|
On
November 19, 2007, 3% Convertible Promissory Notes in the aggregate
principal amount of $6,000,000, Warrants exercisable for 2,400,000 shares
at $2.50 per share and Warrants exercisable for 1,714,285 shares at $3.50
per share were issued;
|
2)
|
On
November 28, 2007, 3% Convertible Promissory Notes in the aggregate
principal amount of $9,000,000, Warrants exercisable for 3,600,000 shares
at $2.50 per share and Warrants exercisable for 2,571,430 shares at $3.50
per share were issued; and
|
3)
|
On
January 31, 2008 (the “Third Closing”), 3% Convertible Promissory Notes in
the aggregate principal amount of $35,000,000, Warrants exercisable for
14,000,000 shares at $2.50 per share and Warrants exercisable for
10,000,000 shares at $3.50 per share were
issued.
|
12%
Convertible
Promissory
Note
|
3%
Convertible
Promissory
Notes
(first
and
second
tranches)
|
3%
Convertible
Promissory
Notes
(third
tranche)
|
1%
Convertible
Promissory
Notes
|
Total
|
||||||||||||||||
Proceeds
of convertible
promissory notes |
$ | 5,000,000 | $ | 15,000,000 | $ | 35,000,000 | $ | 5,000,000 | $ | 60,000,000 | ||||||||||
Allocation
of proceeds:
|
||||||||||||||||||||
Allocated
relative fair value
of warrants |
(333,670 | ) | (2,490,000 | ) | (5,810,000 | ) | - | (8,633,670 | ) | |||||||||||
Allocated
intrinsic value of
beneficial conversion feature |
- | (4,727,272 | ) | (11,030,303 | ) | (1,447,745 | ) | (17,205,320 | ) | |||||||||||
Total
net proceeds of the
convertible promissory notes |
4,666,330 | 7,782,728 | 18,159,697 | 3,552,255 | 34,161,010 | |||||||||||||||
Repayment
of 12% convertible
promissory note |
(5,000,000 | ) | - | - | - | (5,000,000 | ) | |||||||||||||
Conversion
of 3% convertible
promissory notes of $45 million |
- | (15,000,000 | ) | (30,000,000 | ) | - | (45,000,000 | ) | ||||||||||||
Cancellation
of 3% convertible
promissory notes of $5 million |
- | - | (5,000,000 | ) | - | (5,000,000 | ) | |||||||||||||
Amortization
of debt discount
|
333,670 | 7,217,272 | 16,840,303 | 302,679 | 24,693,924 | |||||||||||||||
Net
carrying value of
convertible promissory notes as of December 31, 2009 |
$ | - | $ | - | $ | - | $ | 3,854,934 | $ | 3,854,934 |
Warrants
|
Conversion
Features
|
Deferred
Charges
|
Total
|
|||||||||||||
12%
convertible promissory note
|
$ | - | $ | - | $ | - | $ | - | ||||||||
3%
convertible promissory notes
|
5,996,879 | 11,385,091 | 1,131,205 | 18,513,175 | ||||||||||||
1%
convertible promissory notes
|
- | 302,679 | 58,009 | 360,688 | ||||||||||||
Total
|
$ | 5,996,879 | $ | 11,687,770 | $ | 1,189,214 | $ | 18,873,863 |
Warrants
|
Conversion
Features
|
Deferred
Charges
|
Total
|
|||||||||||||
12%
convertible promissory note
|
$ | 259,204 | $ | - | $ | 80,700 | $ | 339,904 | ||||||||
3%
convertible promissory notes
|
1,657,004 | 3,145,827 | 447,185 | 5,250,016 | ||||||||||||
1%
convertible promissory notes
|
- | - | - | - | ||||||||||||
Total
|
$ | 1,916,208 | $ | 3,145,827 | $ | 527,885 | $ | 5,589,920 |
Warrants
|
Conversion
Features
|
Deferred
Charges
|
Total
|
|||||||||||||
12%
convertible promissory note
|
$ | 74,466 | $ | - | $ | 19,301 | $ | 93,767 | ||||||||
3%
convertible promissory notes
|
35,456 | 67,312 | 9,856 | 112,624 | ||||||||||||
1%
convertible promissory notes
|
- | - | - | - | ||||||||||||
Total
|
$ | 109,922 | $ | 67,312 | $ | 29,157 | $ | 206,391 |
For
the years ended December 31,
|
||||||||||||
2009
|
2008
|
2007
|
||||||||||
12%
convertible promissory note
|
$ | - | $ | 69,041 | $ | 122,803 | ||||||
3%
convertible promissory notes
|
383,334 | 1,423,417 | - | |||||||||
1%
convertible promissory notes
|
37,397 | - | - | |||||||||
Total
|
$ | 420,731 | $ | 1,492,458 | $ | 122,803 |
Fiscal
years ending December 31,
|
||||
2010
|
$
|
1,569,640
|
||
2011
|
513,248
|
|||
2012
|
588,439
|
|||
2013
|
94,642
|
|||
Thereafter
|
45,370
|
|||
Total
|
$
|
2,811,339
|
(A)
|
Stock,
Options and Warrants Issued for
Services
|
Noncontrolling
Interests
|
NCN
Common
Stockholders
|
Total
|
||||||||||
Total
deficit as of January 1, 2009
|
$ | - | $ | (23,356,217 | ) | $ | (23,356,217 | ) | ||||
Net
loss
|
(24,173 | ) | (37,359,188 | ) | (37,383,361 | ) | ||||||
Other
comprehensive income (loss)
|
(828 | ) | 27,483 | 26,655 | ||||||||
Preferred
stock
|
- | - | - | |||||||||
Common
stock
|
- | 351,480 | 351,480 | |||||||||
Additional
paid-in capital
|
- | 59,745,236 | 59,745,236 | |||||||||
Disposal
of investment
|
25,001 | - | 25,001 | |||||||||
Deferred
stock compensation
|
- | (900,000 | ) | (900,000 | ) | |||||||
Total
deficit as of December 31, 2009
|
$ | - | $ | (1,491,206 | ) | $ | (1,491,206 | ) |
2009
|
2008
|
2007
(Restated)
|
||||||||||
Numerator:
|
||||||||||||
Net
loss from continuing operations attributable to NCN common
stockholders
|
$ | (37,359,188 | ) | $ | (59,527,473 | ) | $ | (13,692,714 | ) | |||
Net
loss from discontinued operations attributable to NCN common
stockholders
|
- | 42,640 | (953,905 | ) | ||||||||
Net
loss attributable to NCN common stockholders
|
(37,359,188 | ) | (59,484,833 | ) | (14,646,619 | ) | ||||||
Denominator
:
|
||||||||||||
Weighted
average number of shares outstanding, basic
|
317,882,046 | 71,569,242 | 68,556,081 | |||||||||
Effect
of dilutive securities
|
||||||||||||
Options
and warrants
|
- | - | - | |||||||||
Weighted
average number of shares outstanding, diluted
|
317,882,046 | 71,569,242 | 68,556,081 | |||||||||
Net
loss per common share – basic and diluted
|
||||||||||||
Continuing
operations
|
(0.12 | ) | (0.83 | ) | (0.20 | ) | ||||||
Discontinued
operations
|
- | - | (0.01 | ) | ||||||||
Net
loss per common share – basic and diluted
|
$ | (0.12 | ) | $ | (0.83 | ) | $ | (0.21 | ) |
2009
|
2008
|
2007
|
||||||
Potential
common equivalent shares:
|
||||||||
Stock
warrants for services (1)
|
-
|
55,488
|
122,394
|
|||||
Warrant
associated with convertible promissory notes
|
-
|
-
|
364,436
|
|||||
Conversion
feature associated with convertible promissory notes to common
stock
|
214,961,307
|
-
|
11,174,242
|
|||||
Common
stock to be granted to directors executives and employees for services
(including non-vested shares)
|
-
|
7,305,000
|
8,000,000
|
|||||
Common
stock to be granted to consultants for services (including non-vested
shares)
|
100,000
|
100,000
|
-
|
|||||
Stock
options granted to Keywin
|
94,457,750
|
-
|
-
|
|||||
Total
|
309,519,057
|
7,460,488
|
19,661,072
|
(1)
|
As
of December 31, 2009, the number of potential common equivalent shares
associated with warrants issued for services was nil, which was related to
a warrant to purchase 100,000 shares of common stock issued by the Company
to a consultant in 2006 for service rendered at an exercise price of
$0.70, which will expire in August
2016.
|
Cash
|
$
|
662,515
|
||
Accounts
receivable, net
|
1,041,781
|
|||
Prepaid
expenses and other current assets, net
|
860,036
|
|||
Equipment,
net
|
17,464
|
|||
Noncontrolling
interests
|
(99,423
|
)
|
||
Liabilities
assumed
|
(2,370,866
|
)
|
||
Net
assets
|
$
|
111,507
|
Cash
|
$
|
3,389
|
||
Prepaid
expenses and other current assets, net
|
9,566
|
|||
Equipment,
net
|
10,053
|
|||
Liabilities
assumed
|
(7,523
|
)
|
||
Net
assets
|
$
|
15,485
|
2009
|
2008
|
2007
|
||||||||||
Revenues
|
$ | - | $ | 24,528,096 | $ | 26,140,355 | ||||||
Cost
of revenues
|
- | (24,172,537 | ) | (25,830,401 | ) | |||||||
Gross
profit
|
- | 355,559 | 309,954 | |||||||||
Non-cash
impairment charges
|
- | - | (815,902 | ) | ||||||||
Operating
expenses
|
- | (477,481 | ) | (460,362 | ) | |||||||
Other
income
|
- | 98,838 | 9,210 | |||||||||
Interest
income
|
- | 2,040 | 3,471 | |||||||||
Interest
expenses
|
- | - | - | |||||||||
Net
loss from discontinued operations, net of income taxes
|
- | (21,044 | ) | (953,629 | ) | |||||||
Gain
from disposal of discontinued operations
|
- | 66,085 | - | |||||||||
Net
income (loss) from discontinued operations
|
$ | $ | 45,041 | $ | (953,629 | ) |
2009
|
2008
|
2007
|
|||||
Customer
A
|
16%
|
||||||
Customer
B
|
15%
|
||||||
Customer
C
|
15%
|
||||||
Customer
D
|
11%
|
||||||
Customer
E
|
38%
|
-
|
|||||
Customer
F
|
-
|
16%
|
-
|
||||
Customer
G
|
-
|
-
|
26%
|
||||
Customer
H
|
-
|
-
|
16%
|
||||
Customer
I
|
-
|
-
|
14%
|
||||
Customer
J
|
-
|
-
|
14%
|
2009
|
2008
|
2007
(Restated)
|
||||||||||
United
States
|
$ | 32,127,551 | $ | 8,280,492 | $ | 4,275,859 | ||||||
Foreign
|
5,255,810 | 51,562,299 | 9,471,511 | |||||||||
$ | 37,383,361 | $ | 59,842,791 | $ | 13,747,370 |
2009
|
2008
|
2007
(Restated)
|
||||||||||
Current
|
$ | $ | $ | |||||||||
United
States
|
- | - | - | |||||||||
Foreign
|
- | - | 7,668 | |||||||||
$ | - | $ | - | $ | 7,668 | |||||||
Deferred
|
||||||||||||
United
States
|
- | - | - | |||||||||
Foreign
|
- | - | - | |||||||||
$ | - | $ | - | $ | - |
2009
|
2008
|
2007
(Restated)
|
||||||||||
Expected
income tax benefit
|
$ | 12,710,342 | $ | 20,346,549 | $ | 4,674,106 | ||||||
Operating
loss carried forward
|
(864,141 | ) | (2,815,367 | ) | (1,453,792 | ) | ||||||
Nondeductible expenses | (10,059,226 | ) | - | - | ||||||||
Tax
effect on foreign income which is not subject U.S. federal corporate
income tax rate of 34%
|
(1,786,975 | ) | (17,531,182 | ) | (3,212,646 | ) | ||||||
$ | - | $ | - | $ | 7,668 |
2009
|
2008
|
2007
(Restated)
|
||||||||||
Deferred
tax assets:
|
$ | $ | $ | |||||||||
Net
operating loss carried forward
|
7,486,656 | 6,622,515 | 3,807,148 | |||||||||
Less:
valuation allowance
|
(7,486,656 | ) | (6,622,515 | ) | (3,807,148 | ) | ||||||
Net
deferred tax assets
|
$ | - | $ | - | $ | - |
10.7
|
Note
and Warrant Purchase Agreement dated November 12, 2007 by and between the
Company and Wei An Developments Limited (incorporated herein by reference
from Registrant's Current Report on Form 8-K filed with the SEC on
November 14, 2007).
|
10.8
|
Contract
for the Rebuilding and Leasing of Advertisement Light Boxes on Nanjing
Road Pedestrian Street (incorporated herein by reference from
Registrant's Current Report on Form 8-K filed with the SEC on June 26,
2007) .
|
10.9
|
Agreement
for Advertising Business dated April 26, 2007, by and among Shanghai Quo
Advertising Company Limited, a subsidiary of Network CN Inc., and Shanghai
Yukang Advertising Company Limited (incorporated herein by reference from
Registrant's Current Report on Form 8-K filed with the SEC on May 2,
2007).
|
10.10
|
Agreement
for Co-operation and Agency in the Publication of Advertisements dated
April 14, 2007, by and among Shanghai Quo Advertising Company Limited, a
subsidiary of Network CN Inc., and Shanghai Qian Ming Advertising Company
Limited (incorporated herein by reference from Registrant's Current Report
on Form 8-K filed with the SEC on April 20, 2007).
|
10.11
|
Stock
Transfer Agreement between Youwei Zheng and NCN Management Services
Limited for acquisition of 55% equity interest in Guangdong Tianma
International Travel Service Co., Ltd., dated June 16, 2006 (incorporated
herein by reference from Registrant’s Current Report on Form 8-K filed
with the SEC on March 30, 2007).
|
10.12
|
Business
Joint Venture Agreement, between Shanghai Zhong Ying Communication
Engineering Company Limited and Shanghai Quo Advertising Company Limited
to manage LED outdoor project in Huangpu district of Shanghai, China
(incorporated herein by reference from Registrant’s Current Report on Form
8-K filed with the SEC on February 7, 2007).
|
10.13
|
Business
Joint Venture Agreement, between Nanjing Yiyi Culture Advertising Company
Limited and Shanghai Quo Advertising Company Limited to manage LED outdoor
project in Nanjing (incorporated herein by reference from Registrant’s
Current Report on Form 8-K filed with the SEC on February 15,
2007).
|
10.14
|
Business
Joint Venture Agreement, between Wuhan Xin An Technology Development
Company Limited and Shanghai Quo Advertising Company Limited to manage LED
outdoor project in Wuhan (incorporated herein by reference from
Registrant’s Current Report on Form 8-K filed with the SEC on March 1,
2007).
|
10.15
|
Stock
Purchase Agreement dated as of September 1, 2008, between Zhanpeng Wang,
an individual, and NCN Group Limited, a British Virgin Islands
corporation.
|
10.16
|
Note
Exchange Agreement, dated April 2, 2009, by and among the Company,
Sculptor Finance (MD) Ireland Limited, Sculptor Finance (AS) Ireland
Limited, Sculptor Finance (SI) Ireland Limited, OZ Master Fund, Ltd., OZ
Asia Master Fund, Ltd. and OZ Global Special Investments Master Fund, L.P.
(incorporated herein by reference from Registrant's Current Report on Form
8-K filed with the SEC on April 6, 2009)
|
10.17
|
Note
Exchange and Option Agreement, dated April 2, 2009, between the Company
and Keywin Holdings Limited. (incorporated herein by reference from
Registrant's Current Report on Form 8-K filed with the SEC on April 6,
2009)
|
10.18
|
Letter
Agreement and Termination of Investor Rights Agreement, dated April 2,
2009, by and among the Company, Company, Sculptor Finance (MD) Ireland
Limited, Sculptor Finance (AS) Ireland Limited, Sculptor Finance (SI)
Ireland Limited, OZ Master Fund, Ltd., OZ Asia Master Fund, Ltd., OZ
Global Special Investments Master Fund, L.P. and Keywin Holdings Limited.
(incorporated herein by reference from Registrant's Current Report on Form
8-K filed with the SEC on April 6, 2009)
|
10.19
|
Employment
Agreement, dated July 15, 2009, between the Company and Earnest Leung.
(incorporated herein by reference from Registrant's Quarterly Report on
Form 10-Q filed with the SEC on August 10, 2009)
|
10.20
|
Employment
Agreement, dated July 15, 2009, between the Company and Godfrey Hui.
(incorporated herein by reference from Registrant's Quarterly Report on
Form 10-Q filed with the SEC on August 10,
2009)
|
10.21
|
Amendment
No. 1 to Note Exchange and Option Agreement, dated July 1, 2009, between
Keywin Holdings Limited and the Company. (incorporated herein by reference
from Registrant's Quarterly Report on Form 10-Q filed with the SEC on
August 10, 2009)
|
10.22
|
Amendment
No. 2 to Note Exchange and Option Agreement dated September 30, 2009,
between Keywin Holding Limited and the Company. (incorporated herein by
reference from Registrant's Quarterly Report on Form 10-Q filed with the
SEC on November 6, 2009)
|
10.23
|
Amendment
No. 3 to Note Exchange and Option Agreement dated January 1, 2010,
between Keywin Holding Limited and the Company
|
10.24
|
Lease
Agreement with Vision Tech International Holdings
Limited
|
14.1
|
Code
of Business Conduct and Ethics for Network CN Inc. as approved by the
Board of Directors as of December 31, 2003, is incorporated herein by
reference from Registrant’s Annual Report on Form 10-KSB filed with the
SEC on April 13, 2005.
|
16.1
|
Letter
of US Audit Practice of Jimmy CH Cheung & Co, dated February 9, 2010.
(incorporated herein by reference from Registrant's Current Report on Form
8-K filed with the SEC on February 9, 2010)
.
|
21.1
|
Subsidiaries
of the registrant.*
|
23.1 | Consent of independent auditors Jimmy C.H. Cheung & Co.* |
23.2 | Consent of independent auditors Baker Tilly Hong Kong Limited.* |
24.1
|
Power
of Attorney (included in the Signatures section of this
report).
|
31.1
|
Certification
of Chief Executive Officer pursuant to Exchange Act Rules 13a-14(a) and
15d-14(a), as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of
2002.*
|
31.2
|
Certification
of Chief Financial Officer pursuant to Exchange Act Rules 13a-14(a) and
15d-14(a), as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of
2002.*
|
32.1
|
Certification
of Chief Executive Officer Pursuant to 18 U.S.C. Section 1350, as
Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of
2002.*
|
32.2
|
Certification
of Chief Financial Officer Pursuant to 18 U.S.C. Section 1350, as
Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of
2002.*
|
NETWORK CN INC. | ||
By /s/ Godfrey Hui | ||
Name: Godfrey Hui | ||
Title: Director and Deputy CEO |
KEYWIN HOLDINGS LIMITED | ||
By /s/ Earnest Leung | ||
Name: Earnest Leung | ||
Title: Director |
Duration: | 1 November 2009 to 30 April 2010 |
Charge for Share of Office: | HK$69,000 per month |
Payment: | Payable in advance on the 1st day of each month |
Name
|
Place
of
Incorporation
|
Ownership
interest
attributable to
the Company
|
NCN
Group Limited
|
British
Virgin Islands
|
100%
|
NCN
Media Services Limited
|
British
Virgin Islands
|
100%
|
NCN
Travel Services Limited
|
British
Virgin Islands
|
100%
|
Linkrich
Enterprise Advertising and Investment Limited
|
Hong
Kong
|
100%
|
Crown
Winner International Limited
|
Hong
Kong
|
100%
|
Cityhorizon
Limited
|
Hong
Kong
|
100%
|
NCN
Group Management Limited
|
Hong
Kong
|
100%
|
Crown
Eagle Investment Limited
|
Hong
Kong
|
100%
|
Profit
Wave Investment Limited
|
Hong
Kong
|
100%
|
NCN
Huamin Management Consultancy (Beijing) Company Limited
|
The
PRC
|
100%
|
Shanghai
Quo Advertising Company Limited
|
The
PRC
|
100%
|
Teda
(Beijing) Hotels Management Limited
|
The
PRC
|
100%
|
Huizhong
Lianhe Media Technology Co., Ltd.
|
The
PRC
|
100%
|
Beijing
Huizhong Bona Media Advertising Co., Ltd.
|
The
PRC
|
100%
|
Huizhi
Botong Media Advertising Beijing Co., Ltd.
|
The
PRC
|
100%
|
Yi
Gao Shanghai Advertising Limited
|
The
PRC
|
100%
|
|
Jimmy
C.H. Cheung & Co
Certified
Public Accountants
|
1.
|
I
have reviewed this annual report on Form 10-K of Network CN
Inc.;
|
2.
|
Based
on my knowledge, this report does not contain any untrue statement of a
material fact or omit to state a material fact necessary to make the
statements made, in light of the circumstances under which such statements
were made, not misleading with respect to the period covered by this
report;
|
3.
|
Based
on my knowledge, the financial statements, and other financial information
included in this report, fairly present in all material respects the
financial condition, results of operations and cash flows of the
registrant as of, and for, the periods presented in this
report;
|
4.
|
The
registrant’s other certifying officer and I are responsible for
establishing and maintaining disclosure controls and procedures (as
defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal
control over financial reporting (as defined in Exchange Act Rules
13a-15(f) and 15d-15(f)) for the registrant and
have:
|
a)
|
Designed
such disclosure controls and procedures, or caused such disclosure
controls and procedures to be designed under our supervision, to ensure
that material information relating to the registrant, including its
consolidated subsidiaries, is made known to us by others within those
entities, particularly during the period in which this report is being
prepared;
|
b)
|
Designed
such internal control over financial reporting, or caused such internal
control over financial reporting to be designed under our supervision, to
provide reasonable assurance regarding the reliability of financial
reporting and the preparation of financial statements for external
purposes in accordance with generally accepted accounting
principles;
|
c)
|
Evaluated
the effectiveness of the registrant’s disclosure controls and procedures
and presented in this report our conclusions about the effectiveness of
the disclosure controls and procedures, as of the end of the period
covered by this report based on such evaluation;
and
|
d)
|
Disclosed
in this report any change in the registrant’s internal control over
financial reporting that occurred during the registrant’s most recent
fiscal quarter (the registrant’s fourth fiscal quarter in the case of an
annual report) that has materially affected, or is reasonably likely to
materially affect, the registrant’s internal control over financial
reporting; and
|
5.
|
The
registrant’s other certifying officer and I have disclosed, based on our
most recent evaluation of internal control over financial reporting, to
the registrant’s auditors and the audit committee of the registrant’s
Board of Directors (or persons performing the equivalent
functions):
|
a)
|
All
significant deficiencies and material weaknesses in the design or
operation of internal control over financial reporting which are
reasonably likely to adversely affect the registrant’s ability to record,
process, summarize and report financial information;
and
|
b)
|
Any
fraud, whether or not material, that involves management or other
employees who have a significant role in the registrant’s internal control
over financial reporting.
|
1.
|
I
have reviewed this annual report on Form 10-K of Network CN
Inc.;
|
2.
|
Based
on my knowledge, this report does not contain any untrue statement of a
material fact or omit to state a material fact necessary to make the
statements made, in light of the circumstances under which such statements
were made, not misleading with respect to the period covered by this
report;
|
3.
|
Based
on my knowledge, the financial statements, and other financial information
included in this report, fairly present in all material respects the
financial condition, results of operations and cash flows of the
registrant as of, and for, the periods presented in this
report;
|
4.
|
The
registrant’s other certifying officer and I are responsible for
establishing and maintaining disclosure controls and procedures (as
defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal
control over financial reporting (as defined in Exchange Act Rules
13a-15(f) and 15d-15(f)) for the registrant and
have:
|
a)
|
Designed
such disclosure controls and procedures, or caused such disclosure
controls and procedures to be designed under our supervision, to ensure
that material information relating to the registrant, including its
consolidated subsidiaries, is made known to us by others within those
entities, particularly during the period in which this report is being
prepared;
|
b)
|
Designed
such internal control over financial reporting, or caused such internal
control over financial reporting to be designed under our supervision, to
provide reasonable assurance regarding the reliability of financial
reporting and the preparation of financial statements for external
purposes in accordance with generally accepted accounting
principles;
|
c)
|
Evaluated
the effectiveness of the registrant’s disclosure controls and procedures
and presented in this report our conclusions about the effectiveness of
the disclosure controls and procedures, as of the end of the period
covered by this report based on such evaluation;
and
|
d)
|
Disclosed
in this report any change in the registrant’s internal control over
financial reporting that occurred during the registrant’s most recent
fiscal quarter (the registrant’s fourth fiscal quarter in the case of an
annual report) that has materially affected, or is reasonably likely to
materially affect, the registrant’s internal control over financial
reporting; and
|
5.
|
The
registrant’s other certifying officer and I have disclosed, based on our
most recent evaluation of internal control over financial reporting, to
the registrant’s auditors and the audit committee of the registrant’s
Board of Directors (or persons performing the equivalent
functions):
|
a)
|
All
significant deficiencies and material weaknesses in the design or
operation of internal control over financial reporting which are
reasonably likely to adversely affect the registrant’s ability to record,
process, summarize and report financial information;
and
|
b)
|
Any
fraud, whether or not material, that involves management or other
employees who have a significant role in the registrant’s internal control
over financial reporting.
|
/s/
Earnest Leung
|
||||
Earnest
Leung
|
||||
Chief
Executive Officer
|
||||
(Principal
Executive Officer)
|
/s/
Jennifer Fu
|
||||
Jennifer
Fu
|
||||
Chief
Financial Officer
|
||||
(Principal
Financial and Accounting Officer)
|