MOATABLE, INC. You should read the following discussion and analysis of our financial condition and results of operations in conjunction with the consolidated financial statements and the related notes included elsewhere in this annual report on Form 10-K. This discussion contains forward-looking statements based upon current expectations that involve risks and uncertainties. Our actual results and the timing of selected events could differ materially from those anticipated in these forward-looking statements as a result of various factors, including those set forth under "Item 1A. Risk Factors" and elsewhere in this annual
report on Form 10-K. Operating Results Overview
Our business model has been evolving continuously since our initial public offering inMay 2011 . At the time of our initial public offering, we were primarily a social networking service platform, and we had a number of ancillary businesses that were intended to monetize that platform. We gradually disposed of most of those ancillary businesses in the years that followed our initial public offering. Currently, we operate two SaaS businesses, Chime and Trucker Path. Chime offers an all-in-one real estate sales acceleration and client lifecycle management platform that allows real estate professionals to obtain leads, close transactions, and retain their clients. Trucker Path is a driver-centric online transportation management platform whose mission is to make freight transportation fast, reliable, and efficient. Trucker Path provides trip planning, navigation, freight sourcing, a market place that offers goods and services truckers use to operate their businesses and helps connect qualified brokers and carriers to expand their reach and initiate and complete transactions easily and efficiently. The majority of our revenues are generated by our SaaS businesses. Our SaaS businesses currently generate 100% of their revenue from the U.S. market. 42 Table of Contents
As ofDecember 31, 2022 , we have two reportable segments, Chime and Trucker Path. Our total revenues from the SaaS business increased fromUS$31.8 million in 2021 toUS$45.3 million in 2022, and loss from continuing operations in 2021 and 2022 wereUS$103.4 million andUS$76.4 million , respectively.
Financial Overview
Revenue
We derive substantially all of our revenues from SaaS subscription services, advertising services, and other related services. We recognize our revenues over the life of the SaaS subscriptions and net of business taxes or value added tax, as applicable. Timing of revenue recognition may differ from the timing of invoicing to customers. Deferred revenue mainly consists of payments received from customers related to unsatisfied performance obligations for SaaS subscription services and advertising services. Our total deferred revenue wasUS$2.6 million andUS$4.3 million as ofDecember 31, 2021 and 2022, respectively, most of which is expected to be recognized as revenue within one year.
The following table sets forth the principal components of our revenues.
For the Years Ended December 31,
2021 2022
(In thousands of US$)
Chime
Subscription services $ 16,612 $ 22,816
Advertising services 2,026 1,884
Other services 15 -
Subtotal $ 18,653 $ 24,700
Trucker Path
Subscription services $ 11,194 $ 17,982
Advertising services 1,906 2,325
Other services 44 631
Subtotal $ 13,144 $ 20,938
Other Operations
Other services $ 422 $ 170
Total revenues $ 32,219 $ 45,808
SaaS Revenue
Our subscription revenues are derived primarily from platform services provided
by Chime and Trucker Path. Our revenues from advertising services are derived
primarily of lead generation, point-of-interest, and banner advertising services
provided by Chime and Trucker Path.
Other Services
Our revenues from other services consist primarily of dispatching revenue from the Trucker Path segment and revenues from non-recurring equipment sales.
Cost of Revenues
Cost of revenues consists primarily of cloud hosting services, merchant fees, and print services. The cost of revenues in 2021 and 2022 wasUS$6.8 million andUS$10.4 million , respectively. 43 Table of Contents Operating Expenses
Our operating expenses consist primarily of selling and marketing expenses,
research and development expenses, and general and administrative expenses. The
following table sets forth our operating expenses for continuing operations,
both as dollar amounts and as percentages of our total revenues, for the periods
indicated.
Years ended December 31,
2021 2022
(in thousands of US$, except for percentages)
US$ % US$ %
Operating expenses:
Selling and marketing 13,998 43.4 % 19,624 42.8 %
Research and development 10,721 33.3 % 16,187 35.3 %
General and administrative 20,130 62.5 % 14,788 32.3 %Impairment of intangible asset - - % 962
2.1 %
Total operating expenses 44,849 139.2 % 51,561 112.5 %
Our selling and marketing expenses, research and development expenses, and general and administrative expenses include share-based compensation expenses.
Selling and marketing expenses
Selling and marketing expenses consist primarily of salaries, benefits and commissions for our sales and marketing personnel, online advertising, and other advertising and promotion expenses. Our selling and marketing expenses may increase in the near term if we increase our headcount or promotion expenses for our SaaS businesses.
Research and development expenses
Research and development expenses consist primarily of salaries and benefits for research and development personnel. Our research and development expenses may increase in the near term on an absolute basis as we intend to hire additional research and development personnel to develop new features for our various SaaS services, invest in new SaaS products and services, improve the customer experience, and further improve our technology infrastructure.
General and administrative expenses
General and administrative expenses consist primarily of salaries and benefits for our general and administrative personnel, fees and expenses for third-party professional services. Our general and administrative expenses may increase in the future on an absolute basis as our SaaS businesses grow.
Discontinued Operations
OnJune 25, 2021 , we completed the deconsolidation of Kaixin Auto Holdings ("Kaixin") throughKaixin's reverse acquisition ofHaitaoche Limited ("Haitaoche"), in whichKaixin issued an aggregate of 74,035,502 ordinary shares to acquire 100% of the share capital of Haitaoche. We refer to this transaction as the Haitaoche Acquisition throughout this annual report. Following the Haitaoche Acquisition, we owned less than 50% ofKaixin's total outstanding ordinary shares and lost control ofKaixin . Following the Haitaoche Acquisition, the management of Haitaoche became the management ofKaixin and obtained the right to elect a majority ofKaixin's board of directors. Haitaoche was not a related party of our company before the Haitaoche Acquisition. Under GAAP, loss of control of a subsidiary is deemed to have occurred when, among other things, a parent company owns less than a majority of the outstanding common stock of the subsidiary, and is unable to unilaterally control the subsidiary through other means such as having the ability or being able to obtain the ability to elect a majority of the subsidiary's board of directors. We determined that all of those loss of control factors were present with respect toKaixin onJune 25, 2021 . Accordingly, we deconsolidatedKaixin's financial statements and results of operations from ours, effectiveJune 25, 2021 , in accordance with ASC 810-10-40-4(c), Consolidation. 44
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For periods on and afterJune 25, 2021 , we are accounting for our retained noncontrolling investment inKaixin as an equity investment. We held approximately 32.8 million ordinary shares ofKaixin , or approximately 19.2% ofKaixin outstanding ordinary shares as ofDecember 31, 2021 and thus became a related party ofKaixin . In connection with the deconsolidation ofKaixin and in accordance with ASC 810, we recorded a gain on deconsolidation ofUS$123.7 million related to the remeasurement of our retained noncontrolling interest in 33.3% ofKaixin ordinary shares from cost to fair value based on the share price as ofJune 25, 2021 . The gain is included in the income from discontinued operation, net of tax, in the consolidated statements of operations for the year endedDecember 31, 2021 .Kaixin's results of operations for the period fromJanuary 1, 2021 throughJune 24, 2021 , the date immediately preceding the deconsolidation ofKaixin , are included in the consolidated results of operations as net gain/loss from the discontinued operations, net of nil taxes, for those respective periods, after intercompany eliminations, as applicable. The deconsolidation ofKaixin has allowed us to concentrate our operations and management attention on our SaaS businesses which have higher gross margins and require much less investment in physical infrastructure to achieve growth.
Change in Accounting Method for
As ofJune 30, 2022 , the Company determined that the investment in Kaixin Auto Holdings (NASDAQ: KXIN) ("Kaixin") should be accounted for as equity investment with readily determinable fair value, a change in accounting from the equity method. This determination is substantiated by the decrease in ownership to 16.6% compared to 19.2% as ofDecember 31, 2021 and the resignation ofRenren's representative fromKaixin's Board of Directors which, combined, result in a lack of significant influence inKaixin . As a result of the change in accounting methodology and because the fair value ofKaixin shares is readily determinable since the shares are listed and quoted on the Nasdaq Capital Market (NASDAQ: KXIN), the Company recognized a$10.4 million unrealized loss as a fair value adjustment to the investment inKaixin . The Company recognized its share of loss of$12.0 million fromKaixin under the equity method prior to the change in
accounting method.
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Results of Operations
Comparison of the Years Ended
The following table sets forth a summary of our consolidated results of operations for the years indicated.
Years ended December 31,
2021 2022
(in thousands of US$)
Revenues
SaaS revenue 31,849 45,309
Other services 370 499
Total revenues 32,219 45,808
Cost of revenues:
SaaS business 6,826 10,036
Other services 13 374
Total cost of revenues 6,839 10,410
Gross profit 25,380 35,398
Operating expenses:
Selling and marketing 13,998 19,624
Research and development 10,721 16,187
General and administrative 20,130 14,788Impairment of intangible asset -
962
Total operating expenses 44,849 51,561
Loss from operations (19,469) (16,163)
Other income 792 3,169Gain from fair value change of contingent consideration 1,115 - Loss from fair value change of a long-term investment -
(10,422)
Impairment of equity investments without readily determinable fair values (1,526)
(44,474)
Provision of restricted cash (9,284)
(50)
Provision of amount due from the deconsolidated subsidiary (3,943)
-
Interest income 238 602
Interest expenses (51) (25)Loss related to contingent liability settlement (13,246) - Total other expenses, net (25,905)
(51,200)
Loss before provision of income tax and loss in equity method investments and noncontrolling interest, net of tax (45,374)
(67,363)
Income tax benefits 969
2,342
Loss before loss in equity method investments and noncontrolling interest, net of tax (44,405)
(65,021)
Loss in equity method investments, net of tax (59,001)
(11,397)
Loss from continuing operations (103,406)
(76,418)
Our business has evolved rapidly in recent years. We believe that historical period-to-period comparisons of our results of operations may not be indicative of future performance.
Year Ended
Except where specified otherwise, the following commentary compares results for the year endedDecember 31, 2022 to results for the corresponding period in 2021, excluding those ofKaixin . EffectiveJune 25, 2021 ,Kaixin was deconsolidated, and fromJune 25, 2021 toJune 30, 2022 , we accounted for our retained noncontrolling investment inKaixin as an equity method investment as we were deemed to have the ability to exercise significant influence overKaixin's operating and financial policies through our voting interest, and right to designate a board member. OnJune 30, 2022 , our equity interest inKaixin decreased to 16.6% and our representative resigned fromKaixin's Board of Directors, which combined resulted in a lack of significant influence inKaixin and thus, our investment inKaixin was accounted for as equity investments with readily determinable fair value, a change in accounting the equity method.
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Revenues
Our revenues increased by 42.2% from US$32.2 million in 2021 to US$45.8 million
in 2022. This increase was primarily due to the increase in revenue from our
SaaS businesses.
Subscription Services. Our revenue from subscription services increased by
46.7% from
primarily due to the expansion of our SaaS businesses. The Company's paying
? subscriptions as of
3,600 and 91,000, by 34% and 30%, respectively, compared to
Purchased seats for Chime, defined as eligible users on a paid subscription,
increased to 29,000 as of
2021.
? Advertising Services. Our revenue from advertising services slightly increased
by 7.0% from
Cost of revenues
Our cost of revenues increased by 52.2% fromUS$6.8 million in 2021 toUS$10.4 million in 2022. This increase was primarily due to the increase of software expenses directly related to the generation of revenue and cloud hosting services to provide a better user experience and grow the SaaS businesses.
Operating expenses
Our operating expenses increased by 15.0% from
Selling and marketing. Our selling and marketing expenses increased by 40.2%
from
? primarily due to the increase of marketing and promotion fees and the increase
in selling, marketing, and customer service headcount and personnel related
expenses for our SaaS solutions.
Research and development. Our research and development expenses increased by
? 51.0% from
was primarily due to an increase in our research and development headcount.
General and administrative. Our general and administrative expenses decreased
by 26.5% from
? was primarily due to lower share-based compensation expense and a decrease in
legal fees related to the settlement of
offset by higher personnel related expenses due to increased headcount.
Impairment of intangible asset. Our impairment of intangible asset increased
? from nil in 2021 to
to the impairment of intangible assets of
Other income
We had other income ofUS$3.2 million in 2022, compared with other income ofUS$0.8 million in 2021. The fluctuation was mainly due to the accrued expenses written off due to the disposal of subsidiaries and Paycheck Protection Program (PPP) loan proceeds received by Chime and Trucker Path.
Interest income
Our interest income wasUS$0.6 million in 2022, compared withUS$0.2 million in 2021. Our interest income in 2022 was primarily interest from the short-term investments managed bySilicon Valley Bank with a variable return, while interest income in 2021 was primarily interest from note issued to us byOak Pacific Investment in the OPI Transaction. 47 Table of Contents Interest expenses Our interest expense wasUS$0.03 million in 2022, compared withUS$0.05 million in 2021. The interest expense in 2021 and 2022 was primarily due to interest on loans that we borrowed from commercial banks. The fluctuation was mainly due to the decrease in the loan balance.
Loss from fair value change of a long-term investment
Our loss from fair value change of a long-term investment wasUS$10.4 million in 2022, compared with nil in 2021. The loss from fair value change of a long-term investment represents the unrealized loss from reduction in ordinary share price ofKaixin fromJune 30, 2022 toDecember 31, 2022 . OnJune 30, 2022 , our equity interest inKaixin decreased to 16.6% and we our representative resigned fromKaixin's Board of Directors, which resulted in a lack of significant influence inKaixin . Thus, fromJune 30, 2022 , the investment inKaixin's ordinary shares were accounted for as an equity investment with readily determinable fair value, a change in accounting from the equity method. We evaluate the change of fair value ofKaixin's ordinary shares at each period end.
Impairment of equity investments without readily determinable fair values
Our impairment of equity investments without readily determinable fair values wasUS$44.5 million in 2022, compared withUS$1.5 million in 2021. The impairment loss in 2022 was due to the impairment of Infinities ofUS$40.0 million and impairment of preferred shares ofKaixin ofUS$4.5 million . The net balance of equity investments without readily determinable fair values after the impairments isUS$0.7 million as ofDecember 31, 2022 .
Segment Operations
The Company is engaged in providing B2B SaaS platforms and services to customers primarily located inthe United States . The Company's operations are conducted in two reportable segments: Chime and Trucker Path. The Company defines its segments as those operations whose results the chief operating decision maker ("CODM") regularly reviews to analyze performance and allocate resources.
The Chime segment includes the Company's all-in-one real estate sales acceleration and client lifecycle management platform. The Trucker Path segment includes the Company's driver-centric online transportation management platform.
The Company measures the results of its segments using, among other measures, each segment's revenue and cost of sales. Revenue from Chime and Trucker Path for the year endedDecember 31, 2022 wasUS$24.7 million andUS$20.9 million , respectively. Cost of revenues for Chime and Trucker Path for the year endedDecember 31, 2022 wasUS$3.6 million andUS$6.7 million , respectively.
Liquidity and Capital Resources
The accompanying consolidated financial statements have been prepared assuming that we will continue as a going concern, which contemplates the realization of assets and the settlement of liabilities in the normal course of business. As ofDecember 31, 2022 , we had net current assets (current assets less current liabilities) ofUS$29.2 million , and an accumulated deficit ofUS$695.6 million . For the year endedDecember 31, 2022 , we incurred loss from continuing operations amounting toUS$76.4 million and negative cash flows from continuing operating activities ofUS$3.8 million . Our ability to continue as a going concern is dependent on our ability to generate cash flows from operations, and to make adequate financing arrangements. We had cash and cash equivalents ofUS$28.0 million , excluding restricted cash, and short-term investments of$24.0 million as ofDecember 31, 2022 . The cash reserve is expected to meet our operating needs for at least the next twelve months from the date of this annual report. However, if negative cash flow from operating activities persists in the long run, our cash resources may become insufficient to satisfy on-going cash requirements. Cash and short-term investments are held at multiple financial institutions. We have diversified our holding banks to reduce the impact of bank failures, such asSilicon Valley Bank ("SVB"), on our uninsured deposits and to facilitate international operations. OnMarch 10, 2023 , we had a banking relationship with SVB. As of the closure of SVB onMarch 10, 2023 , we held approximately$9.4 million in cash and cash equivalents at SVB, which represented approximately 19% of our total cash,
cash
equivalents and
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investments as of that date. SVB also managed approximately $33 million
short-term investments which were held in custody for us at U.S. Bank . SVB was
closed on March 10, 2023 by the California Department of Financial Protection
and Innovation , which appointed the FDIC as receiver. On March 12, 2023 , the
U.S. Treasury , Federal Reserve , and FDIC announced that SVB depositors will have
access to all of their money starting March 13, 2023 . On March 13, 2023 , we were
able to access all $9.4 million in cash and cash equivalents held at SVB. Except
for customary liquidity restrictions inherent to short-term investments, our
access to investment accounts held in custody by U.S. Bank was never restricted.
While we have not experienced any losses in such accounts, the recent failure
of SVB exposed a portion of our cash and cash equivalents to significant credit
risk prior to the completion by the FDIC of the resolution that fully protected
all SVB depositors. We are in the process of transferring our accounts to one or
more alternate depository institutions, the financial position of which
management believes does not expose our company to significant credit risk or
jeopardizes our liquidity. Where possible, we will also continue to hold our
excess cash in short-term investments and money market accounts to further limit
exposure.
Our material cash uses included investments in short-term government and agency
securities, investment in adding product features and growing our enterprise
presence in Chime, Chime's entry into property management SaaS services, and in
research and development to add features to Trucker Path to allow us to extend
the services offered to drivers and to serve the needs of other industry
participants including brokers, fleets, and dispatchers. We issued a standby
letter of credit to the benefit of East West Bank that guarantees Kaixin and its
Subsidiary's payment of approximately US$9.3 million to East West Bank , which is
an uncollateralized guarantee carried over from our deconsolidation of Kaixin
and fully reserved. As of the date of this annual report, approximately $5.8
million had been claimed under our standby letter of credit in connection with
the Kaixin Subsidiary default of certain guaranteed loan. The Company believes
the other Kaixin loan guaranteed by the standby letter of credit will go default
in the foreseeable future, and as a result, East West Bank may seize our cash
deposits pledged as security under the standby letter of credit, which amounted
to US$9.2 million as of December 31, 2022 , and/or demand reimbursement from us.
The following table sets forth a summary of our cash flows for the periods
indicated:
Years ended December 31,
2021 2022
(inthousands of US$) Net cash used in operating activities from continuing operations
(18,978) (3,822)
Net cash provided by operating activities from discontinuing operations 870 -
Net cash provided by (used in) investing activities from continuing operations
58,038 (33,481)
Net cash used in financing activities from continuing operations (11,176)
(1,454)
Net cash provided by financing activities from discontinuing operations 267 -
Net increase (decrease) in cash and cash equivalents from continuing operations
27,884 (38,757)
Net increase in cash and cash equivalents from discontinued operations 1,137 -
Cash and cash equivalents and restricted cash at the beginning of the year from continuing operations
34,087 65,247
Cash and cash equivalents and restricted cash at the beginning of the year from discontinued operations
3,162 -
Effect of exchange rate changes from continuing operations (1,023)
1,470
Effect of exchange rate changes from discontinued operations - -
Cash and cash equivalents and restricted cash at end of year from continuing operations
65,247 27,960
Cash and cash equivalents and restricted cash at end of year from discontinued operations
- -
Operating Activities
Net cash used in operating activities from continuing operations amounted to
US$3.8 million in 2022, compared to net loss from continuing operations of
US$76.4 million . The principal change in operating assets and liabilities
accounting for the difference between our net loss and our net cash used in
operating activities in 2022 was a decrease in income tax payable of US$3.4
million , and partially offset by a decrease in prepaid expenses and other
current assets of US$2.9 million , an increase in deferred revenue of US$1.7
million . The principal adjustments to reconcile our net loss to our net cash
used in operating activities was impairment on and earnings (loss) in equity
method investments of US$11.4 million , share-based compensation expenses of
US$4.0 million , impairment on long-term investment without readily determinable
fair values of US$44.5 million , and fair value change on long-term investment of
US$10.4 million .
Net cash used in operating activities from continuing operations amounted to
US$19.0 million in 2021, compared to net loss from continuing operations of
US$103.4 million . The principal change in operating assets and liabilities
accounting for the difference between our net loss and our net cash used in
operating activities in 2021 was an increase in prepaid expenses and other
current assets of US$4.1 million , an increase in accounts receivable of US$1.1
million , an increase in amount due from subsidiary held for sale of US$1.6
million,
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and partially offset by the increase in deferred revenue and accrued expenses
and other current liabilities of US$3.7 million . The principal adjustments to
reconcile our net loss to our net cash used in operating activities was
impairment on and (loss) earnings in equity method investments of US$59.0
million , loss related to contingent liability settlement of US$13.2 million ,
share-based compensation expenses of US$8.5 million and the provision for amount
due from a deconsolidated subsidiary of US$3.9 million .
Investing Activities
Net cash used in investing activities from continuing operations amounted toUS$33.5 million in 2022, due mainly to, purchase of short-term investments ofUS$24.0 million , purchases of equipment and property ofUS$5.5 million , purchases of intangible assets ofUS$2.1 million and payment for acquisition of subsidiaries, net of cash acquired, of US1.8 million. Net cash provided by investing activities from continuing operations amounted toUS$58.0 million in 2021, due mainly to proceeds ofUS$68.0 million from repayment of the note issued by OPI, partially offset by payments to purchase preferred shares ofKaixin ofUS$6.0 million and net cash outflow from deconsolidation ofKaixin ofUS$4.3 million .
Financing Activities
Net cash used in financing activities from continuing operations was
Net cash used in financing activities from continuing operations was
Contractual Obligations
The following table sets forth our contractual obligations from the continuing operations including interest payment, if applicable, as ofDecember 31, 2022 : Less than 1 Payment Due by Period Total year 1-3 years
4-5 years More than 5 years
(in thousands of US$)
Operating lease obligations (1) 301 301 -
- -
Total 301 301 - - -
Notes:
(1)We lease facilities and offices under non-cancelable operating lease agreements.
Off-Balance Sheet Arrangements
We issued a standby letter of credit to the benefit ofEast West Bank that guarantees theKaixin and its Subsidiary's payment of approximatelyUS$9.3 million toEast West Bank , which is an uncollateralized guarantee carried over from our deconsolidation ofKaixin and fully reserved.East West Bank declared the Kaixin Subsidiary default onMarch 17, 2023 for principal of approximately$5.8 million plus accrued interest and penalty costs. The Company believes the otherKaixin loan guaranteed by the standby letter of credit will go default in the foreseeable future. There is a prominent risk that our cash deposits ofUS$9.2 million as ofDecember 31, 2022 pledged as security under the standby letter of credit will be seized byEast West Bank . Except for this standby letter of credit, we have not entered into any financial guarantees or other commitments to guarantee the payment obligations of any third parties. We do not have any retained or contingent interest in assets transferred to an unconsolidated entity that serves as credit, liquidity or market risk support to such entity. We do not have any variable interest in any unconsolidated entity that provides financing, liquidity, market risk or credit support to us or engages in leasing, hedging or research and development services with us.
Capital Expenditures
We made capital expenditures ofUS$0.1 million andUS$7.6 million in 2021 and 2022, respectively. Our capital expenditures in 2022 were primarily used for construction of our corporate headquarters inPhoenix, Arizona and acquisition of the Lofty domain name for use with our Chime business. The depreciation on capital expenditures incurred for our corporate headquarters will commence
after
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completion of construction, expected to be the first quarter of 2023. Capital
expenditures in 2021 were primarily used to purchase servers and other equipment
for our business.
Our Holding Company Structure and Contractual Arrangements with Qianxiang Tiancheng
Please refer to "Item 1. Business-Organizational Structure-Contractual Arrangements with Qianxiang Tiancheng."
Financial Information relating to the VIE
Set forth below are the condensed consolidating schedule showing the financial position, results of operations and cash flows for the Parent, Non-VIE Subsidiaries and the VIE and its subsidiaries, eliminating adjustments and consolidated totals (in thousands of US$) as of and for the years endedDecember 31, 2021 and 2022. In the tables below, the column headings correspond to the following entities:
? "Parent" refers to
"Non-VIE Subsidiaries" refer to the sum of (i) Qianxiang Shiji Technology
?
subsidiaries of
"VIE and its subsidiaries" refer to the sum of (i) Qianxiang Tiancheng
?
Co., Ltd.
Selected Condensed Consolidated Statements of Operations Data
For the year ended December 31, 2021 For the year ended December 31, 2022
VIE and its Non-VIE VIE and its Non-VIE
subsidiaries Subsidiaries Inter-company Group subsidiaries Subsidiaries Inter-company Group
Parent Consolidated Consolidated elimination Consolidation Parent Consolidated Consolidated elimination Consolidation
(In thousands of US$) (In thousands of US$)
Revenue $ - $ 10,654 $ 33,745 $ (12,180) $ 32,219 $ - $ 107 $ 63,533 $ (17,832) $ 45,808
Cost of revenue $ - $ 13 $ 6,826 $ - $ 6,839 $ - $ 2 $ 10,398 $ 10 $ 10,410
Gross profit $ - $ 10,641 $ 26,919 $
(12,180)
(21,454)
9,274 $ (19,469) $ (6,582) $ (16,084) $ 7,210 $ (707) $ (16,163)
Share of loss from
subsidiaries $ (17,128) $ - $ - $ 17,128 $ - $ 616,369 $ - $ - $ (616,369) $ -
Net income (loss) $ 13,663 $ 1,434 $ (22,856) $ 17,124 $ 9,365 $ (75,244) $ (53,045) $ 88,351 $ (36,480) $ (76,418)
Less: net income
(loss) attributable
to non-controlling
interests $ - $ 10 $ (4,308) $ - $ (4,298) $ - $ - $ - $ (1,174) $ (1,174)
Net income (loss)
attributable to
Renren's
shareholders $ 13,663 $ 1,424 $ (18,548) $ 17,124 $ 13,663 $ (75,244) $ (53,045) $ 88,351 $ (35,306) $ (75,244)
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Selected Condensed Consolidated Balance Sheets Data
As of December 31, 2021 As of December 31, 2022
VIE and its Non-VIE VIE and its Non-VIE
Parent subsidiaries Subsidiaries Inter-company Group Parent subsidiaries Subsidiaries Inter-company Group
Company Consolidated Consolidated elimination Consolidation Company Consolidated Consolidated elimination Consolidation
(In thousands of US$) (In thousands of US$)
Amount due from
Non-VIE
Subsidiaries $ 520,436 $ 44,386 $ - $ (564,822) $ -$ 529,466 $ 46,486 $ (575,952) $ - Amount due from VIE and its subsidiaries $ - $ -$ 297,448 $ (297,448) $ -$ 8,208 $ -$ 272,954 $ (281,162) $ - Amount due from Parent $ -$ 33,393 $ 16,486 $ (49,879) $ - $ -$ 31,000 $ 16,640 $ (47,640) $ - Total current
assets$ 481,435 $ 20,725 $ 91,306 $ (519,209) $ 74,257 $ 478,772 $ 3,244 $ 106,723 $ (530,569) $ 58,170 Total non-current assets$ 36,594 $ 46,339 $ 322,896 $ (309,911) $ 95,918 $ 19 $ 5,840 $ 403,947 $ (373,268) $ 36,538 Total assets$ 518,029 $ 67,064 $ 414,202 $ (829,120) $ 170,175 $ 478,791 $ 9,084 $ 510,670 $ (903,837) $ 94,708 Amount due to VIE and its subsidiaries$ 33,393 $ -$ 44,386 $ (77,779) $ -$ 41,024 $ -$ 46,486 $ (87,510) $ - Amount due to Non-VIE Subsidiaries$ 16,486 $ 297,448 $ -$ (313,934) $ -$ 16,640 $ 272,954 $ -$ (289,594) $ - Amount due to Parent $ - $ -$ 520,436 $ (520,436) $ - $ - $ -$ 529,466 $ (529,466) $ - Total current liabilities$ 1,732 $ 11,857 $ 19,297 $ 214$ 33,100 $ 1,825 $ 10,630 $ 32,765 $ (16,278) $ 28,942 Deficit of Investments in VIEs and its subsidiaries and Non-VIE Subsidiaries$ 366,660 $ - $ -$ (366,660) $ -$ 397,312 $ - $ -$ (397,312) $ - Total non-current liabilities$ 366,660 $ - $ 278$ (366,875) $ 63$ 397,312 $ - $ 88$ (397,400) $ - Total liabilities$ 368,392 $ 11,857 $ 19,575 $
(366,661)
Selected Condensed Consolidated Cash Flows Data
For the year ended December 31, 2021 For the year ended December 31, 2022
VIE and its Non-VIE VIE and its Non-VIE
subsidiaries Subsidiaries Inter-company Group subsidiaries Subsidiaries Inter-company Group
Parent Consolidated Consolidated elimination Consolidation Parent Consolidated Consolidated elimination Consolidation
(In thousands of US$) (In thousands of US$)
Net cash (used in)
provided by
operating
activities $ (50,323) $ 971 $ 30,374 $ - $ (18,978) $ 146 $ (1,170) $ (2,798) $ - $ (3,822)
Net cash provided
by (used in)
investing
activities $ 61,985 $ 454 $ (74,812) $ 70,411 $ 58,038 $ - $ - $ (49,386) $ 15,906 $ (33,480)
Net cash provided
by (used in)
financing
activities $ (11,176) $ - $ 74,710 $ (74,710) $ (11,176) $ 190 $ - $ 14,262 $ (15,906) $ (1,454)
Effect of exchange
rate changes $ - $ - $ (1,023) $ - $ (1,023) $ - $ - $ 1,469 $ - $ 1,469
Net increase
(decrease) in cash,
cash equivalents
and restricted cash $ 486 $ 1,425 $ 29,249 $ (4,299) $ 26,861 $ 336 $ (1,170) $ (36,453) $ - $ (37,287)
We expect that the financial position, results of operations, and cash flows
generated by the VIE and its subsidiaries will constitute an immaterial portion
of our consolidated financial information for the foreseeable future.
Accordingly, we believe the risks associated with the contractual arrangement
with Qianxiang Tiancheng and its shareholders, if materialized, would not result
in a material change in our financial position, results of operations, prospects
or the value of the ADSs.
Cash and Asset Flows through Our Organization
The VIE and its subsidiaries generate revenue fromRenren, Inc. and its subsidiaries by providing research and development as well as general and administrative services. The VIE and its subsidiaries are paid each month for services rendered. In addition, the VIE and its subsidiaries provide general and administrative as well as back-office services to OPI and receive payment for these services. Except for the foregoing, the VIE and its subsidiaries do not receive cash or revenue from any other sources or third parties. As a holding company, our ability to pay dividends and other cash distributions to our shareholders depends partly upon dividends and other distributions paid to us by our PRC subsidiaries. The amount of dividends paid by each of our PRC subsidiaries to us depends solely on the service and license fees paid to Qianxiang Shiji by Qianxiang Tiancheng with which it has contractual arrangements. Under PRC law, all of our PRC subsidiaries and the VIE and its subsidiaries inChina are required to set aside at least 10% of their respective 52 Table of Contents
after-tax profits each year, if any, to fund a statutory reserve until such reserve reaches 50% of their respective registered capital. Although the statutory reserves can be used, among other ways, to increase the registered capital and eliminate future losses in excess of retained earnings of the respective companies, the reserve funds are not distributable as cash dividends except in the event of liquidation. Our PRC subsidiaries are permitted to pay dividends to us only out of their respective retained earnings, if any, as determined in accordance with PRC accounting standards and regulations. Pursuant to the contractual arrangements between Qianxiang Shiji and Qianxiang Tiancheng and its shareholders, Qianxiang Tiancheng's earnings and cash (including dividends received from its subsidiaries) are used to pay service and license fees in Renminbi to Qianxiang Shiji, in the manner and amount set forth in these agreements. After paying the withholding taxes applicable to Qianxiang Shiji's revenues and earnings, making appropriations for its statutory reserve requirements and retaining any profits from accumulated profits, the remaining net profits of Qianxiang Shiji would be available for distribution to us by the offshore holding companies through which we own Qianxiang Shiji, although we have not, and do not have, any present plan to make such distributions. As ofDecember 31, 2022 , the negative net assets of Qianxiang Shiji and the VIE and its subsidiaries, which were restricted due to statutory reserve requirements and other applicable laws and regulations and thus not available for distribution, amounted toUS$251.3 million in the aggregate. We do not believe that these restrictions on the distribution of our net assets will have a significant impact on our ability to meet our financial obligations in the future. Furthermore, cash transfers from our PRC subsidiaries to our subsidiaries outside ofChina are subject to PRC government control of currency conversion. Restrictions on the availability of foreign currency may affect the ability of our PRC subsidiaries and the VIE and its subsidiaries to remit sufficient foreign currency to pay dividends or other payments to us, or otherwise satisfy their foreign currency denominated obligations. The condensed consolidating table below quantified the transfer betweenRenren Inc. , its Non-VIE subsidiaries, VIE and its subsidiaries for the years endedDecember 31, 2021 and 2022, respectively. These transfers were only for the purpose of providing working capital betweenRenren Inc. , its Non-VIE subsidiaries, VIE and its subsidiaries. No dividend or distribution was made. For the year ended December 31, 2021 For the year ended December 31, 2022 To To VIE and its To Non-VIE VIE and its To Non-VIE subsidiaries Subsidiaries subsidiaries Subsidiaries To Renren Inc. Consolidated Consolidated To Renren Inc. Consolidated Consolidated (In thousands of US$) Transfer from Renren Inc. $ - $ -$ 41,270 $ - $ - $
4,000
VIE and its subsidiaries $ - $ -$ 1,738 $ - $ - $ - Non-VIE Subsidiaries $ 605$ 31,096 $ - $ 188$ 11,718 $ -
Research and Development, Patents, and Licenses, etc.
Research and Development
Our research and development efforts focus on developing and improving the scalability, features and functions of our SaaS services, including the compilation and use of data to increase automation of our services and enhance the customer experience. We have a large team of 323 engineers and developers as ofDecember 31, 2022 , accounting for 53% of our employees as of that date. Most of our engineers and developers are based at our subsidiary office inBeijing, China . Our research and development personnel support all areas of our business, mainly focusing on the improvement and enhancement of our SaaS businesses, Chime and Trucker Path. Our research and development personnel also focus on enhancing the user experience through commonly used user interfaces, including mobile apps, and ensuring our products are fully compatible with the latest mobile operating systems such as iOS, Android, and Windows. In 2023, with the acquisition of Rentancy by Chime, we expect to increasingly invest in developing Chime products to serve property managers and landlords. We periodically shift the priorities of our R&D personnel to ensure we continually develop new products and services to extend our customer reach and meet the needs of our user base and customers.
Our research and development expenses primarily include salaries and benefits
for our research and development personnel. We incurred
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Intellectual Property
Our intellectual property includes trademarks and trademark applications related
to our brands and services, copyrights in software, trade secrets, patent
applications and other intellectual property rights and licenses. We seek to
protect our intellectual property assets and brand through a combination of
monitoring and enforcement of trademark, patent, copyright and trade secret
protection laws in the US, PRC, and other jurisdictions, as well as through
confidentiality agreements and procedures.
We have been granted 11 patents. In addition, we maintain 32 copyright
registrations, all of which are computer software copyright registrations as of
December 31, 2022 . Our employees sign confidentiality and non-compete agreements
when hired.
Trend Information
Other than as disclosed elsewhere in this annual report, we are not aware of any
trends, uncertainties, demands, commitments or events for the year ended
December 31, 2022 that are reasonably likely to have a material adverse effect
on our revenues, income, profitability, liquidity or capital resources, or that
would cause the disclosed financial information to be not necessarily indicative
of future operating results or financial conditions.
Critical Accounting Policies and Estimates
Our consolidated financial statements are prepared in accordance with accounting principles generally accepted inthe United States of America , which require us to make estimates and assumptions that affect the reported amounts of assets and liabilities as of the date of the financial statements, the reported amounts of revenues and expenses during the reporting periods and the related disclosures in the consolidated financial statements and accompanying footnotes. Out of our significant accounting policies, which are described in Note 2-Summary of Significant Accounting Policies of our consolidated financial statements included elsewhere in this Form 10-K, certain accounting policies are deemed "critical," as they require management's highest degree of judgment, estimates and assumptions, including (i) revenue recognition; (ii) long-term investment - without readily determinable fair values and equity method; (iii) Share based compensation, and (iv) fair value change of contingent consideration. While management believes its judgments, estimates and assumptions are reasonable, they are based on information presently available and actual results may differ significantly from those estimates under different assumptions and conditions. We believe that the following critical accounting estimates involve the most significant judgments used in the preparation of our financial statements.
Allowance for doubtful accounts and provision for restricted cash and
receivables related to
Accounts receivable represents those receivables derived in the ordinary course of business. An allowance for doubtful accounts is provided based on aging analyses of accounts receivable balances, historical bad debt rates, repayment patterns and customer credit worthiness. No allowances for doubtful receivables were recorded as ofDecember 31, 2021 andDecember 31, 2022 . During the year endedDecember 31, 2021 , we recorded a full provision for restricted cash, which is the security for debt borrowing in the amount ofUS$9.3 million ofKaixin under an irrevocable standby letter of credit issued byEast West Bank , in the amount ofUS$9.3 million because we do not expectKaixin could repay the loans or the guarantee deposit could be collectible in the foreseeable future. During the year endedDecember 31, 2021 , we also recorded a provision for the amount due fromKaixin in the amount of$3.7 million because we do not expectKaixin could repay the loan in the foreseeable future. Such estimate has not been changed in year 2022.
Valuation and recognition of share-based compensation arrangements
Share-based payment transactions with employees, such as share options, are
measured based on the grant date fair value of the equity instrument. We
recognize the compensation costs, net of estimated forfeitures, using the
straight-line method over the applicable vesting period. The estimate of
forfeitures will be adjusted over the requisite service period to the extent
that actual forfeitures differ, or are expected to differ, from such estimates.
Changes in estimated forfeitures will be recognized through a cumulative
catch-up adjustment in the period of change and will also impact the amount of
stock compensation expense to be recognized in future periods. Share options
granted to employees with market conditions attached are measured at fair value
on the grant date and are recognized as the compensation costs over the
estimated requisite service period, regardless of whether the market condition
has been met.
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A change in any of the terms or conditions of share options is accounted for as
a modification of stock options. We calculate the incremental compensation cost
of a modification as the excess of the fair value of the modified option over
the fair value of the original option immediately before its terms are modified,
measured based on the share price and other pertinent factors at the
modification date. For vested options, we recognize incremental compensation
cost in the period the modification occurred. For unvested options, we
recognize, over the remaining requisite service period, the sum of the
incremental compensation cost and the remaining unrecognized compensation cost
for the original award on the modification date.
On November 4, 2021 , our subsidiaries, Chime Technologies, Inc. and Trucker
Path, Inc. approved the adoption of their 2021 stock incentive plans, whereby
5,000,000 ordinary shares of Chime ("2021 Chime Plan") and 5,000,000 ordinary
shares of Trucker Path ("2021 Trucker Path Plan") are made available for future
grant for employees or consultants of Chime and Trucker Path, respectively,
either in the form of incentive share options or restricted shares. The 2021
Chime Plan and 2021 Trucker Path were retrospectively modified to reflect a
1:200 reverse split which reduced the total ordinary shares for each plan to
25,000. Aside reducing the plan shares and the share value accordingly to
reflect the 1:200 reverse stock split, the reverse split had no impact on the
financial statements of the company or the fair value of the grants.
During 2022, Chime granted an aggregate of 19,726 options under 2021 Chime Plan
to certain of its directors, officers and employees as compensation for their
services. The weighted average grant-date fair value of the share options
granted during the year ended December 31, 2022 was $34.00 per option with an
expected weighted-average vesting period of 2.93 years.
During 2022, Trucker Path granted an aggregate of 18,070 options under the 2021
Trucker Path Plan to certain of its directors, officers and employees to
compensate their services. The weighted-average grant-date fair value of the
share options granted during the year ended December 31, 2022 was $66.00 per
option with an expected weighted-average vesting period of 2.98 years.
In determining the fair value of share options under the Plans of Chime and
Trucker Path, a binomial option pricing model was applied. Assumptions used to
estimate the fair values of the share options granted or modified include the
risk-free interest rate, volatility, expected term, and exercise price.
Expected volatility was determined by calculating the historical volatility of
the share prices of comparable companies over the previous four years. Risk-free
interest rate was estimated based on the yield to maturity of treasury bonds of
the United States with a maturity period close to the expected life of the
options. During the years ended December 31, 2021 and 2022, we recorded
share-based payment expenses of $8.5 million and $4.0 million , respectively.
The fair value of restricted shares of the Company granted equals the closing market price of the ordinary shares as of the grant date.
Provision of income tax and valuation allowance for deferred tax asset
Current income taxes are provided for in accordance with the laws of the relevant tax authorities.
Deferred income taxes are recognized when temporary differences exist between the tax basis of assets and liabilities and their reported amounts in the financial statements and are recorded as non-current in the consolidated balance sheet. Net operating loss carry forwards and credits are applied using enacted statutory tax rates applicable to future years. Deferred tax assets are reduced by a valuation allowance when, in the opinion of management, it is more-likely-than-not that a portion of or all of the deferred tax assets will not be realized. The amount of valuation allowances was$46.0 million and$43.9 million as ofDecember 31, 2021 and 2022, respectively. The impact of an uncertain income tax position on the income tax return is recognized at the largest amount that is more-likely-than-not to be sustained upon audit by the relevant tax authority. An uncertain income tax position will not be recognized if it has less than a 50% likelihood of being sustained. Interest and penalties on income taxes will be classified as a component of the provisions for income taxes. We did not recognize any income tax due to uncertain tax position or incur any interest and penalties related to potential underpaid income tax expenses for the years endedDecember 31, 2021 and 2022.
Contingent consideration
Where the consideration in an acquisition includes contingent consideration and
the payment of which depends on the achievement of certain specified conditions
post-acquisition, the contingent consideration is recognized and measured at its
fair value at the
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acquisition date and if recorded as a liability, it is subsequently carried at fair value with changes in fair value reflected in earnings. If the classification of the contingent consideration changes as a result of events during the period, the contingent consideration is reclassified as of the date of the event that causes the reclassification. If the contingent consideration is reclassified from a liability to equity, gains or losses recorded to account for the arrangement at fair value during the period in which it was classified as a liability is not reversed. Fair value change gain of$1.1 million and nil was recorded in our consolidated statements of operations for the years endedDecember 31, 2021 and 2022, respectively.
Impairment of long-term investments
Equity method investments
We regularly evaluate the impairment of the equity investment based on
performance and the financial position of the investee as well as other evidence
of market value. Such evaluation includes, but is not limited to, reviewing the
investee's cash position, recent financings, projected and historical financial
performance, cash flow forecasts, and financing needs. An impairment charge is
recorded when the carrying amount of the investment exceeds its fair value and
this condition is determined to be other-than-temporary impaired ("OTTI"). We
did not record any impairment losses on equity method investments in the
consolidated statements of operations for the years ended December 31, 2021 and
2022.
Equity Investments without Readily Determinable Fair Values
We recorded impairment losses of$1.5 million and$44.5 million on equity securities without readily determinable fair values during the years endedDecember 31, 2021 and 2022, respectively. The$44.5 million impairment loss for the year endedDecember 31, 2022 , consisted of$40.0 million full impairment in the investment of Infinities as a result of adverse change in the government regulatory, economic and technological environment, the continuing worsened general market condition of both the geographic area and the industry in which the investees operate, and negative financial trends within the Infinities for which the management considered to be other-than-temporary. An additional$4.5 million impairment was recorded due to reduction in the fair value of the investment in preferred shares ofKaixin as there were indicators of impairment during the year 2022 with the operation and financial situation ofKaixin deteriorating, the Company recorded an impairment to reduce the preferred share to$3 million . And based on further assessment as ofDecember 31, 2022 and subsequent events including default of the Kaixin Subsidiary, we have fully impaired the preferred share as ofDecember 31, 2022 .
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