Filing scope and business context
The provided filing is TuanChe Limited’s Form 20-F for the fiscal year ended December 31, 2022, not a filing for “Token Cat Ltd” or a standalone 2022 fourth quarter. The company is a Cayman Islands holding company whose China operations are conducted through subsidiaries and variable interest entities (VIEs) under contractual arrangements. Its businesses include automotive auto shows and promotion events, online marketing, commercial-bank loan referrals, and social CRM services.
The financial statements are prepared under U.S. GAAP and audited by Marcum Asia CPAs LLP. The ADSs trade on Nasdaq under “TC”; each ADS represents 16 Class A ordinary shares.
2022 financial performance and liquidity
| Metric | 2022 | 2021 | Change |
|---|---|---|---|
| Revenue | RMB183.2 million (US$26.6 million) | RMB357.6 million | Down 48.8% |
| Gross profit | RMB121.0 million | RMB272.3 million | Down 55.6% |
| Gross margin | 66.1% | 76.1% | Down 10.0 percentage points |
| Operating loss | RMB110.9 million | RMB110.8 million | Broadly unchanged |
| Net loss | RMB158.1 million (US$22.9 million) | RMB101.9 million | Loss increased 55.1% |
| Adjusted EBITDA | Negative RMB65.1 million | Negative RMB82.9 million | Improved |
| Adjusted net loss | Negative RMB69.5 million | Negative RMB89.9 million | Improved |
| Net cash used in operating activities | RMB109.7 million | RMB92.3 million | Cash burn increased |
Reported net margin was approximately negative 86.3% and operating margin was approximately negative 60.6%. Selling and marketing expenses were RMB127.7 million, general and administrative expenses were RMB64.7 million, research and development expenses were RMB19.8 million, and long-lived asset impairment was RMB19.7 million.
Revenue mix shifted materially. Auto-show revenue fell 77.8% to RMB54.0 million, commercial-bank referral revenue fell 34.0% to RMB44.2 million, online marketing revenue rose to RMB50.8 million, and other services revenue rose to RMB32.7 million. The company ceased the commercial-bank referral business in April 2022.
At December 31, 2022, cash and cash equivalents were RMB69.9 million, restricted cash was RMB6.9 million, and total cash, cash equivalents and restricted cash were RMB76.8 million. Net current assets were RMB73.5 million. Accounts and notes receivable, net, were RMB50.0 million, against an allowance for doubtful accounts of RMB31.4 million.
Total borrowings were RMB4.7 million, consisting of RMB3.2 million of short-term borrowings and RMB1.5 million of long-term borrowings. The company also reported a warrant liability of RMB24.4 million and operating lease liabilities of RMB12.7 million. Future minimum payments under non-cancelable leases were approximately RMB13.7 million.
Material changes versus the prior comparable period
- Auto shows declined from 450 in 2021 to 150 in 2022, and the number of cities served declined from 142 to 76. Facilitated vehicle transactions declined from 104,689 to 22,176.
- COVID-19-related restrictions resulted in the cancellation of 109 auto shows in 2022, compared with 157 in 2021. These cancellations drove the substantial decline in offline revenue.
- Total operating expenses declined 39.5%, but not enough to offset the revenue decline. Selling and marketing expenses fell 53.5%, general and administrative expenses fell 11.1%, and research and development expenses fell 44.5%.
- Gross margin declined because online marketing and other services increased as a proportion of revenue and because of higher other direct costs related to information acquisition.
- The company recognized RMB69.9 million of goodwill impairment and RMB19.7 million of long-lived asset impairment. These charges materially affected reported earnings but were excluded from adjusted EBITDA and adjusted net loss.
- The company raised approximately US$13.6 million net from its November 2022 offering. The transaction included 3,654,546 ADSs, pre-funded warrants for 1,800,000 ADSs, and warrants for up to 5,454,546 ADSs. The warrant liability generated a RMB11.2 million fair-value gain in 2022.
- Employees declined from 621 at December 31, 2021 to 431 at December 31, 2022, reflecting workforce reductions and cost-control measures.
Outlook, risks, contingencies and unusual items
Management did not provide formal numerical revenue or earnings guidance. Management expects operating losses and negative operating cash flow to continue for the foreseeable future and intends to reduce fixed labor costs, improve utilization of existing staff, pursue electric-vehicle industry opportunities, and seek potential financing.
The auditor included an explanatory paragraph stating that recurring losses and negative operating cash flows raise substantial doubt about the company’s ability to continue as a going concern. Management believes available cash and anticipated operating and financing cash flows should cover expected needs for at least 12 months from the filing date, but acknowledges that its plans may not be successfully implemented.
- The company relies on VIE contractual arrangements rather than direct ownership for certain China operations. PRC authorities could challenge the structure, restrict operations, or require restructuring.
- Cash transfers from China to the offshore holding company may be limited by PRC foreign-exchange, tax, dividend, and capital-control rules.
- Management determined that internal control over financial reporting was ineffective as of December 31, 2022 because of insufficient financial reporting and accounting personnel with U.S. GAAP expertise. The auditor was not required to provide an internal-control attestation because the company remains an emerging growth company.
- The company disclosed a potential regulatory risk relating to its former commercial-bank referral arrangements, which could be viewed as unlicensed financing-guarantee activity. The business ceased in April 2022, but potential penalties for past activity cannot be excluded.
- The company had not regained compliance with Nasdaq’s US$1.00 minimum bid-price requirement as of the filing date and faced an August 16, 2023 deadline, subject to possible additional relief. The filing does not provide the subsequent outcome.
- The company’s dual-class structure gives Class B shares 15 votes per share. Wei Wen beneficially controlled approximately 71.4% of voting power as of March 20, 2023.
- On March 13, 2023, the company adopted a 2023 share incentive plan reserving 169.2 million Class A shares, creating substantial potential dilution.
- COVID-19 restrictions, automotive-industry demand, customer concentration, accounts-receivable collectability, competition, cybersecurity and data privacy regulation, PRC regulatory intervention, and possible HFCA Act-related trading restrictions remain significant risks.
Facts investors should verify
- Confirm the issuer identity: the supplied filing is for TuanChe Limited, not Token Cat Ltd, and covers the full year ended December 31, 2022 rather than only Q4.
- Review the going-concern disclosures, cash-burn rate, receivable aging, restricted cash, and the company’s ability to obtain additional financing.
- Reconcile the 2022 offering proceeds, outstanding warrants, potential ADS issuance, and dilution under the 2023 share incentive plan.
- Assess whether auto-show activity and revenue recovered after COVID-19 restrictions and whether online and other services can offset the decline in offline marketing.
- Monitor remediation of the material weakness in internal control over financial reporting.
- Verify the status of Nasdaq’s minimum bid-price compliance and any subsequent delisting or ADS-ratio actions.
- Evaluate the enforceability and regulatory status of the VIE arrangements, required PRC approvals or filings, and any exposure from the discontinued bank-referral business.