Nisun International Enterprise Development Group Co., Ltd. — FY2021 Form 20-F
Reporting period and identity: This is an annual report for the fiscal year ended December 31, 2021, not a standalone fourth-quarter report. The filing identifies the registrant as Nisun International Enterprise Development Group Co., Ltd. (Nasdaq: NISN), not AIOS Tech Inc.; confirm that this is the intended filing.
Business context and key financial results
Nisun is a BVI holding company whose China-based operations provide SME financing services, supply-chain financing and management, other financing services, and supply-chain trading. The company reports results from PRC subsidiaries and variable-interest entities (VIEs) consolidated under U.S. GAAP. It disposed of its legacy equipment and engineering business in 2020.
| Metric | FY2021 | FY2020 |
|---|---|---|
| Revenue | $160.2 million | $42.2 million |
| Gross profit / gross margin | $54.0 million / 33.7% | $22.2 million / 52.7% |
| Operating income / operating margin | $38.2 million / 23.8% | $10.0 million / 23.8% |
| Net income (loss) | $30.5 million; $30.4 million attributable to Nisun shareholders | $(13.1) million, including a discontinued-operations loss |
| Operating cash flow | $23.9 million | $2.3 million from continuing operations |
| Cash, cash equivalents and restricted cash | $91.6 million | $22.2 million |
Revenue rose 280% year over year. SME financing contributed $87.1 million, supply-chain financing services $4.9 million, and supply-chain trading $68.1 million. Trading began in July 2021 and accounted for 43% of revenue. Gross margin declined substantially as trading, a lower-margin merchandise business, became a significant share of sales.
At year-end, total assets were $274.0 million and total liabilities $89.4 million. Current assets of $227.8 million exceeded current liabilities of $88.7 million. Current liabilities included $35.0 million of accounts payable, $25.9 million payable for supply-chain solutions, a $10.5 million related-party loan, and $0.8 million of short-term bank loans. The bank loans were repaid in February and March 2022; the related-party loan was reported as non-interest-bearing and due on demand. No long-term interest-bearing debt was reported.
Cash flow, liquidity and financing
Operating cash flow increased to $23.9 million, but working capital absorbed cash, notably a $48.2 million increase in supply-chain receivables, a $13.3 million increase in accounts receivable, and $9.2 million in supplier advances. The filing reports $59.8 million of supply-chain receivables at year-end and says approximately $44.3 million had been collected by the report date.
Investing activities used $25.3 million, including purchases of short-term investments; financing activities provided $70.5 million, principally from a December 2021 public offering of common shares and pre-funded warrants. The offering generated $77 million gross and approximately $70.8 million net proceeds. Management stated that available funds were sufficient for the next 12 months. Cash is largely held in China, and transfers and dividends are subject to PRC rules, statutory reserves, currency controls and other restrictions.
Changes, outlook and notable matters
- Revenue growth reflected expansion in SME financing, supply-chain services and the newly launched trading business. Management said supply-chain sales revenue was expected to continue growing, but gave no quantified guidance.
- Operating expenses increased 30% to $15.9 million, including higher administration and compliance costs and $1.6 million of R&D spending. Other income rose to $2.6 million, partly due to investment income.
- The 2020 net loss included a $23.0 million discontinued-operations loss, principally associated with impairment of the former equipment and engineering business. FY2021 had no discontinued-operations result.
- Management said COVID-19 did not materially affect FY2021 financial services or supply-chain solutions. It warned that renewed disruptions could affect 2022 operations, customers, logistics and product pricing.
- The company reported no material pending legal proceedings. A securities class action following short-seller allegations was dismissed in its entirety in September 2021; the company said an independent investigation found the allegations substantially unfounded.
- The financial-statement auditor issued an unqualified opinion on the financial statements, but an adverse opinion on internal control over financial reporting. Identified material weaknesses involved insufficient U.S. GAAP/SEC reporting expertise and deficient IT general controls. Management described remediation plans but gave no assurance of successful or timely remediation.
Principal risks and contingencies
- VIE and China regulatory exposure: Investors own shares in the BVI holding company, not equity in the VIEs. Control and economic benefits depend on contractual arrangements whose enforceability under PRC law is uncertain. Regulatory changes, including data-security, cybersecurity and overseas-listing rules, could constrain operations or future financing.
- Customer and working-capital concentration: Two customers represented 37% and 15% of financial-services revenue; two others represented 71% and 10% of supply-chain trading revenue. Two customers represented about 60% of year-end accounts receivable. The filing says major-customer arrangements are not long-term contracts.
- Receivable and investment exposure: Supply-chain receivables grew materially. The auditor identified valuation of a limited-partnership investment and goodwill valuation as critical audit matters. The limited-partnership investment was approximately $16.2 million; goodwill was approximately $25.8 million.
- Capital access and share trading: The filing discusses HFCAA-related delisting risk if the PCAOB cannot inspect the auditor for the required consecutive years. It states the current auditor is U.S.-headquartered and subject to PCAOB inspections.
- Distributions and controls: No dividends were paid or expected in the foreseeable future. PRC statutory reserves were $6.9 million, and the filing reports $64.6 million of restricted net assets. Currency conversion and remittance restrictions could limit access to China-held funds.
Investor verification priorities
- Confirm the registrant and filing match the intended company: the supplied filing is for Nisun International, although the request metadata names AIOS Tech Inc.
- Reconcile the share-count disclosures: the cover reports 32,752,629 Class A shares at period-end, while the audited balance sheet reports 39,812,629 issued and outstanding at December 31, 2021. The filing also reports 7.06 million pre-funded warrants outstanding at year-end.
- Assess the collectability, aging and subsequent receipts of the $59.8 million in supply-chain receivables, and the credit quality of concentrated customers.
- Review the terms, related-party status and repayment prospects of the $10.5 million demand loan, and the accessibility of reported China-held cash.
- Track remediation of the material weaknesses and any developments in PRC VIE, cybersecurity, data-protection or overseas-listing requirements.