Revenue Performance - Revenue for the nine months ended September 30, 2023, was recognized at $1,667,355, compared to $10 for the same period in 2022[154]. - Revenues for the three months ended September 30, 2023, were $2,160,258, a decrease of $3,320,708 or 61% from $5,480,966 in the same period of 2022[167]. - Revenues for the nine months ended September 30, 2023, were $9,436,881, a decrease of $10,370,670 or 52% from $19,807,551 in the same period of 2022[178]. Cost and Expenses - The cost of direct materials accounted for over 90% of the total cost of revenue, indicating a significant dependency on material availability[146]. - Cost of revenues increased to $3,423,295 for the three months ended September 30, 2023, compared to $2,615,972 in 2022, primarily due to increased material costs[169]. - Gross profit was negative $1,263,037 for the three months ended September 30, 2023, compared to a gross profit of $2,864,994 in 2022, resulting in a gross margin decrease from 52.3% to (58.5%)[170]. - Gross profit for the nine months ended September 30, 2023, was $889,668, compared to $4,955,678 in 2022, with gross margin decreasing from 25% to 9% due to rising material costs[181]. - General and administrative expenses decreased by $1,155,613 to $354,902 for the three months ended September 30, 2023, primarily due to the absence of bad debt provisions that were recorded in the prior year[172]. - General and administrative expenses decreased by 46.93% to $1,094,228 for the nine months ended September 30, 2023, from $2,061,898 for the same period in 2022, primarily due to the absence of bad debt provision[184]. - Selling expenses decreased by $283,410 to $538,672 for the nine months ended September 30, 2023, from $822,082 in the same period in 2022, largely due to reduced freight insurance costs[182]. - The company incurred tariffs of $195,667 during the nine months ended September 30, 2023, down from $485,806 in the same period of 2022, reflecting the decrease in revenue[180]. Net Income and Loss - Net loss for the three months ended September 30, 2023, was $2,921,613, compared to a net income of $499,300 in 2022, driven by decreased revenue and increased expenses related to convertible notes[176]. - The net loss for the nine months ended September 30, 2023, was $(3,433,234), compared to a net income of $234,077 for the same period in 2022[186]. Cash Flow - Cash as of September 30, 2023, was $90,527, with operations primarily financed through business operations and borrowings[187]. - Net cash used in operating activities was $(1,447,563) for the nine months ended September 30, 2023, an improvement from $(5,220,616) for the same period in 2022[190]. - Net cash used in investing activities was $(7,642) for the nine months ended September 30, 2023, compared to $282,633 provided by investing activities for the same period in 2022[192]. - Net cash provided by financing activities was $1,843,913 for the nine months ended September 30, 2023, compared to $1,291,788 for the same period in 2022[193]. Operational Insights - The company has established multiple subsidiaries for manufacturing, distribution, and R&D, including Northann Building Solutions LLC and Crazy Industry, enhancing operational efficiency[140][142]. - The company has raised product prices to mitigate the impact of rising costs due to inflation and supply chain disruptions[149]. - The company’s operations have been adversely affected by global supply chain disruptions and rising inflation rates, impacting financial performance[149]. - The company recognizes revenue at the point of delivery, ensuring that control of the product is transferred to the customer[150]. - The company’s contracts typically do not allow for returns or refunds, which helps stabilize revenue recognition[150]. - The company has licensed patents to other manufacturers, aiming to promote its technologies in the flooring industry[145]. - The company has not accrued any liability, interest, or penalties related to uncertain tax positions for the nine months ended September 30, 2023[164]. - The company’s revenue recognition follows a five-step model as prescribed under ASU No. 2014-09, ensuring compliance with accounting standards[148]. Research and Development - Research and development expenses were $99,161 for the three months ended September 30, 2023, down from $383,289 in the same period last year, reflecting reduced spending on technology development[174]. - Research and development expenses were $609,476 for the nine months ended September 30, 2023, down from $1,299,301 for the same period last year[185]. Lease and Financing - Operating lease expenses for the nine months ended September 30, 2023, were $21,506, compared to $20,371 for the same period in 2022[196]. - The company believes its current cash levels will meet anticipated cash needs for at least the next twelve months but may seek additional resources for investments or acquisitions[188].
Northann (NCL) - 2023 Q3 - Quarterly Report