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Kaixin Auto(KXIN) - 2022 Q4 - Annual Report
KXINKaixin Auto(KXIN)2023-05-15 16:00

Business Operations - As of December 31, 2022, the company operated three used car dealerships across three cities in China, focusing on premium brands such as Audi, BMW, and Mercedes-Benz[432]. - The company sold approximately 879 new and used vehicles in 2022, a decrease from 1,814 vehicles sold in 2021[433]. - The competitive landscape in the used car industry in China is highly fragmented, with trends towards consolidation and increased online technologies affecting market dynamics[439]. - Total revenues decreased from US253.8millionin2021toUS253.8 million in 2021 to US82.8 million in 2022, primarily due to the closure of several dealerships[464]. - The company aims to expand into the electric vehicle market and has released a strategic plan for new energy vehicles targeting commercial applications[442]. Financial Performance - Revenues from car sales were 82.8millionin2022,downfrom82.8 million in 2022, down from 253.8 million in 2021, indicating a decline of approximately 67.5%[445]. - The cost of revenues for car sales in 2022 was 82.2million,whichisconsistentwiththetotalrevenues,resultinginagrossmarginof082.2 million, which is consistent with the total revenues, resulting in a gross margin of 0%[449]. - Operating expenses for 2022 totaled 48.6 million, with selling and marketing expenses accounting for approximately 4.3% of total operating expenses[456]. - The company recorded a full impairment loss of 143.7millioningoodwillfortheyearendedDecember31,2021,impactingfinancialresultssignificantly[454].−GrossprofitdeclinedfromUS143.7 million in goodwill for the year ended December 31, 2021, impacting financial results significantly[454]. - Gross profit declined from US5,257 thousand in 2021 to US646thousandin2022[466].−TotaloperatingexpensesdecreasedfromUS646 thousand in 2022[466]. - Total operating expenses decreased from US187.9 million in 2021 to US48.6millionin2022,mainlyduetoaone−timelossfromgoodwillimpairmentofUS48.6 million in 2022, mainly due to a one-time loss from goodwill impairment of US143.7 million[467]. - Net loss was US195.9millionin2021andUS195.9 million in 2021 and US84.6 million in 2022[469]. - Cash flows from operating activities were negative, amounting to US2.4millionin2022,withsignificantlossesfromimpairmentandprovisions[486].FinancingandCapitalStructure−Thecompanyhashistoricallyfundedoperationsthroughvariousmeans,includingABSissuanceandtermloans,andanticipatesfuturegrowthwillinvolveadditionalfinancing[444].−Thecompanyintendstoseekadditionalequityordebtfinancingtosupportbusinessgrowth[484].−Cashandcashequivalentsattheendof2022wereapproximatelyUS2.4 million in 2022, with significant losses from impairment and provisions[486]. Financing and Capital Structure - The company has historically funded operations through various means, including ABS issuance and term loans, and anticipates future growth will involve additional financing[444]. - The company intends to seek additional equity or debt financing to support business growth[484]. - Cash and cash equivalents at the end of 2022 were approximately US7.1 million[485]. - Net cash used in financing activities was US5.4millionin2022,primarilyfromproceedsofUS5.4 million in 2022, primarily from proceeds of US4.7 million from ordinary shares and US2.0millionfromaconvertiblenote,offsetbyUS2.0 million from a convertible note, offset by US2.0 million in offering costs[490]. - The company has long-term borrowings totaling US2.0million,maturinginAugust2023,andtwoconvertiblenotesofUS2.0 million, maturing in August 2023, and two convertible notes of US2.0 million maturing in May 2023 and October 2023[494]. Employee and Management Structure - The company had 27 employees as of December 31, 2022, with 78% in management and administration, 4% in sales and marketing, and 18% in research and development[554]. - The company plans to hire additional experienced employees in areas such as new energy vehicles design and manufacturing, big data analytics, marketing, operations, risk management, and sales as it expands its business[555]. - The total compensation paid to directors and executive officers for the fiscal year ended December 31, 2022, was approximately US396thousand[525].−Thecompanyhasenteredintoemploymentagreementswitheachexecutiveofficer,allowingterminationforcausewithoutadvancenotice[526].CorporateGovernance−ThecompanyhasestablishedthreecommitteesundertheBoard:anauditcommittee,acompensationcommittee,andanominatingandgovernancecommittee[546].−TheauditcommitteeischairedbyLinCong,whoisrecognizedasan"auditcommitteefinancialexpert"andoverseesthecompany′saccountingandfinancialreportingprocesses[547].−Thecompensationcommittee,alsochairedbyLinCong,isresponsibleforreviewingandapprovingthecompensationstructurefordirectorsandexecutiveofficers[548].−Theboardofdirectorscurrentlyconsistsoffivemembers,withspecificrightsforMr.MingjunLinandRenrentoappointandremovedirectors[545].ShareholderRightsandEquityPlans−ThecompanyislistedontheNasdaqCapitalMarketunderthesymbol"KXIN"[595].−ShareholdersareentitledtodividendsasdeclaredbytheBoard,withnodividendexceedingtheamountrecommendedbydirectors[598].−Eachordinarysharegrantsonevoteatgeneralmeetings,withasimplemajorityrequiredforordinaryresolutionsandtwo−thirdsforspecialresolutions[600].−ThecompanymayissueadditionalordinarysharesasdeterminedbytheBoard,whichmaydilutethevotingpowerofexistingshareholders[609].−The2020equityincentiveplanallowsforthegrantofupto5,000,000ordinarysharesasawards[528].−The2021equityincentiveplanpermitsthegrantofupto26,596,000ordinarysharesasawards[532].−The2022equityincentiveplanprovidesforthegrantofupto39,500,000ordinarysharesasawards[538].LegalandComplianceMatters−Thecompanyidentifiedfourmaterialweaknessesininternalcontroloverfinancialreporting,includinginadequatetechnicalcompetencyandlackofeffectiveriskassessment[498].−Thecompanyhasnotenteredintoanyfinancialguaranteesorderivativecontractsthatareindexedtoitsshares[491].−ThecompanydidnotrecognizeanyincometaxduetouncertaintaxpositionsorincuranyinterestandpenaltiesrelatedtopotentialunderpaidincometaxexpensesfortheyearsendedDecember31,2020,2021,and2022[518].−ThecompanyhasagreedtoindemnifyRenrenagainstliabilitiesarisingfrommisstatementsinSECfilingsrelatedtotheBusinessCombination[569].FuturePlansandStrategicInitiatives−ThecompanyplanstoreinvestallearningsfromitsPRCsubsidiariesintobusinessdevelopmentsanddoesnotplantorequestdividenddistributions[497].−Thecompanysignedasalesorderfor5,000newenergylogisticsvehiclesworthRMB1billion(approximately396 thousand[525]. - The company has entered into employment agreements with each executive officer, allowing termination for cause without advance notice[526]. Corporate Governance - The company has established three committees under the Board: an audit committee, a compensation committee, and a nominating and governance committee[546]. - The audit committee is chaired by Lin Cong, who is recognized as an "audit committee financial expert" and oversees the company's accounting and financial reporting processes[547]. - The compensation committee, also chaired by Lin Cong, is responsible for reviewing and approving the compensation structure for directors and executive officers[548]. - The board of directors currently consists of five members, with specific rights for Mr. Mingjun Lin and Renren to appoint and remove directors[545]. Shareholder Rights and Equity Plans - The company is listed on the Nasdaq Capital Market under the symbol "KXIN"[595]. - Shareholders are entitled to dividends as declared by the Board, with no dividend exceeding the amount recommended by directors[598]. - Each ordinary share grants one vote at general meetings, with a simple majority required for ordinary resolutions and two-thirds for special resolutions[600]. - The company may issue additional ordinary shares as determined by the Board, which may dilute the voting power of existing shareholders[609]. - The 2020 equity incentive plan allows for the grant of up to 5,000,000 ordinary shares as awards[528]. - The 2021 equity incentive plan permits the grant of up to 26,596,000 ordinary shares as awards[532]. - The 2022 equity incentive plan provides for the grant of up to 39,500,000 ordinary shares as awards[538]. Legal and Compliance Matters - The company identified four material weaknesses in internal control over financial reporting, including inadequate technical competency and lack of effective risk assessment[498]. - The company has not entered into any financial guarantees or derivative contracts that are indexed to its shares[491]. - The company did not recognize any income tax due to uncertain tax positions or incur any interest and penalties related to potential underpaid income tax expenses for the years ended December 31, 2020, 2021, and 2022[518]. - The company has agreed to indemnify Renren against liabilities arising from misstatements in SEC filings related to the Business Combination[569]. Future Plans and Strategic Initiatives - The company plans to reinvest all earnings from its PRC subsidiaries into business developments and does not plan to request dividend distributions[497]. - The company signed a sales order for 5,000 new energy logistics vehicles worth RMB1 billion (approximately 156 million) with Bujia, a leading automobile logistics service provider in China[443].