Kaixin Auto Holdings — FY2022 Form 20-F
Reporting period: Fiscal year ended December 31, 2022. This is an annual report, not a standalone Q4 filing; separate Q4 results are not provided. Amounts are in U.S. dollars unless otherwise noted.
Business context
Kaixin sells domestic and imported new vehicles and used cars in China, with a focus on premium used vehicles. It reported three dealerships at year-end and sold approximately 879 vehicles in 2022, versus 1,814 in 2021. Following the October 2022 disposal of Renren Finance and the related VIEs, the company said it operates through wholly owned subsidiaries rather than a VIE structure.
Financial performance and liquidity
| Metric | FY2022 | FY2021 |
|---|---|---|
| Revenue | $82.8 million | $253.8 million |
| Gross profit / margin | $0.6 million / 0.8% | $5.3 million / 2.1% |
| Operating loss | $47.9 million | $182.6 million |
| Net loss | $84.6 million | $195.9 million |
| Cash from operating activities | $(2.4) million | $(2.1) million |
| Cash and cash equivalents, year-end | $7.1 million | $5.3 million |
Revenue fell 67% year over year, which management attributed primarily to dealership closures. Gross margin narrowed, while selling and marketing and general and administrative expenses increased. The lower net loss mainly reflects the absence of the $143.7 million goodwill impairment recorded in 2021; 2022 also included $22.9 million of impairment of prepaid expenses and other current assets and a $15.1 million dealership-settlement provision.
At year-end, current assets were $42.3 million and current liabilities were $19.9 million; working capital was reported at $22.4 million. Total liabilities were $20.2 million. The balance sheet showed $2.0 million of short-term borrowings and $4.3 million of current convertible notes; separate loan payables of $3.0 million were included in accrued liabilities. Operating cash flow remained negative. Prepayments and other current assets totaled $26.3 million, and other receivables totaled $8.8 million, consisting of interest-free loans to disposed entities that the company expected the buyer to repay within one year.
Material changes, outlook and risks
- The dealership network was reduced to three locations; vehicle sales volume declined by about 52% from 2021.
- The company reported no firm financial guidance. Its NEV strategy includes a Bujia order for 5,000 logistics vehicles, stated to represent RMB1 billion over coming years; the first model was delivered in 2022. The proposed Morning Star/Yujie acquisition did not proceed after a prerequisite condition was unmet.
- The VIE disposal was for nominal cash consideration, with compensation tied to the disposal group’s net liabilities. The filing describes Series F preferred shares convertible into 50 million ordinary shares; issuance timing and the final compensation terms merit review.
- Management said it may need additional financing. The company has a history of losses, negative operating cash flow, and an accumulated deficit of $283.0 million. Cash and assets in China may be difficult to transfer abroad, and PRC regulation and foreign-exchange controls remain risks.
- Disclosure controls and internal control over financial reporting were assessed as ineffective at December 31, 2022. Reported material weaknesses include inadequate financial-reporting expertise, risk assessment and monitoring, and controls over vehicle-purchase prepayments.
- Nasdaq had notified the company of a minimum-bid-price deficiency; the filing said compliance had not been regained as of the report date. The company also disclosed new CSRC overseas-listing filing requirements taking effect in 2023.
Investor facts to verify
- Whether the $8.8 million receivable from the disposed entities was collected, and the recoverability of remaining dealership-related prepayments.
- Current cash availability, repayment status and maturity terms for borrowings, convertible notes and the $3.0 million of loan payables.
- Final Series F preferred-share issuance, conversion and compensation terms, including potential dilution from up to 50 million ordinary shares.
- Progress in remediating control weaknesses, and current Nasdaq listing compliance and CSRC filing status.
- The reported FY2022 loss per share of $(0.0004) does not appear to reconcile with the stated $84.7 million loss attributable to shareholders and 200.2 million weighted-average shares; verify the audited calculation or any presentation error.