Business Context and Reporting Period
Company: Code Chain New Continent Limited (CCNC)
Filing Type: Form 8-K (Current Report)
Date of Report: September 28, 2022
Reporting Period: Event date September 28, 2022
The Company reported the termination of a Material Definitive Agreement involving its Variable Interest Entity (VIE) structure with Sichuan Wuge Network Games Co., Ltd. ("Wuge").
Key Financial Metrics
The filing does not provide specific revenue, profit, cash flow, margin, debt, or liquidity figures for the current period. However, it discloses the following transaction-specific financial data:
- Shares Cancelled: 4,000,000 shares of common stock previously issued to Wuge Shareholders.
- Valuation Basis: Cancellation based on an average closing price of $0.237 per share over the 30 trading days prior to the agreement date.
- Accounting Impact: Wuge will no longer be treated as a consolidated affiliated entity; its financial results and balance sheet will be deconsolidated from the Company's consolidated financial statements under U.S. GAAP.
Material Changes Versus Prior Period
The primary material change is the dissolution of the VIE structure established in 2020 and assigned in 2021. Previously, the Company consolidated Wuge's financial results. As of September 28, 2022, this consolidation has ceased, and the associated 4,000,000 shares have been cancelled.
Guidance, Outlook, and Risks
Management Commentary: The Company entered into a Termination Agreement with Wuge and its shareholders to terminate the VIE Agreements, including the Technical Consultation and Services Agreement, Equity Pledge Agreement, Equity Option Agreement, Voting Rights Proxy, and Financial Support Agreement.
Risks and Contingencies: The deconsolidation of Wuge will alter the Company's consolidated financial position. The filing references Unaudited pro forma condensed consolidated financial statements (Exhibit 99.1) to illustrate the impact of this transaction, though the specific numbers are not detailed in the text of the 8-K.
Investor Verification Checklist
- Review Exhibit 99.1 for the Unaudited pro forma condensed consolidated financial statements to quantify the impact of deconsolidating Wuge.
- Verify the exact number of shares remaining outstanding after the cancellation of the 4,000,000 shares.
- Examine the full text of the Termination Agreement (Exhibit 10.1) for any remaining liabilities or contingent obligations.
- Assess the impact of removing Wuge's revenue and expenses on the Company's future reported earnings and cash flow.