UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM
(Mark One)
For the Quarterly Period Ended
OR
For the transition period from to .
Commission File Number:
(Exact Name Of Registrant As Specified In Its Charter)
(State Or Other Jurisdiction Of | (IRS Employer Identification No.) |
| (Zip Code) |
(
(Registrant’s Telephone Number, Including Area Code)
N/A
(Former Name, Former Address and Former Fiscal Year, if Changed Since Last Report)
Securities registered pursuant to Section 12(b) of the Act:
Title of each class |
| Trading Symbol(s) |
| Name of each exchange on which registered |
|
| |||
|
|
*Not for trading, but only in connection with the listing on The New York Stock Exchange of American depositary shares.
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).
Indicate by checkmark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer”, “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
Large accelerated filer | ☐ | Accelerated filer | ☐ |
☒ | Smaller reporting company | ||
Emerging growth company |
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No
As of May 10, 2023, the registrant had
Renren Inc.
Form 10-Q
For the Quarterly Period Ended March 31, 2023
TABLE OF CONTENTS
i
Note About Forward-Looking Statements
This Quarterly Report on Form 10-Q contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. These include, among other things, statements regarding:
| ● | future financial performance including statements about our revenue, cost of sales, gross margins, operating expenses, and business strategies; |
| ● | predictions regarding the size and growth potential of the markets for our products or our ability to serve those markets; |
| ● | ability to retain our customer base, grow the average subscription revenue per customer, or sell additional products and services to the customer base; |
| ● | ability to expand our sales organization or research and development activities to address effectively existing and serve new markets we intend to target; |
| ● | anticipate and address the technological or service needs of our customers, to release upgrades to our existing software platforms, and to develop new and enhanced applications to meet the needs of our customers; |
| ● | likelihood of macro-economic events that may impact the ability to operate within certain markets or disrupt the flow of products and services such as pandemics, wars, and deterioration of relations between sovereign entities; |
| ● | future regulatory, judicial, and legislative changes or developments in the U.S. and foreign countries, particularly those in which we operate and sell products; |
| ● | regulatory changes, business relationships and operating risks that impact our ability to compete within the industries we serve; |
| ● | anticipated investments, including in sales and marketing, research and development, customer service and support, data center infrastructure, and our expectations relating to such investments; |
| ● | ability to attract, hire, and retain talent including sales, software development, or management personnel to expand operations; |
| ● | accuracy of our estimates regarding expenses, future revenues, gross margins, and needs for additional financing; |
| ● | ability to obtain funding for our operations; |
| ● | ability to integrate and grow acquired businesses and achieve anticipated results from strategic partnerships; |
| ● | anticipated effect on the business of litigation to which we are or may become a party; |
| ● | effectiveness of lead generation, branding, and other demand generation strategies to reach our customers and sustain growth; |
| ● | our ability to consistently deliver uninterrupted service to our clients; |
as well as other statements regarding our future operations, financial condition and prospects, and business strategies. Forward-looking statements may appear throughout this report and other documents we file with the Securities and Exchange Commission (SEC), including without limitation, the following sections: Part I, Item 2, "Management's Discussion and Analysis of Financial Condition and Results of Operations" in this Quarterly Report on Form 10-Q and Part I, Item 1A, "Risk Factors" in our Annual Report on Form 10-K for the fiscal year ended December 31, 2022. Forward-looking statements generally can be identified by words such as "anticipates," "believes," "estimates," "expects," "intends," "plans," "predicts," "projects," "will be," "will continue," "may," "could," "will likely result," and similar expressions. These forward-looking statements are based on current expectations and assumptions that are subject to risks and uncertainties, which could cause our actual results to differ materially from those reflected in the forward-
1
looking statements. Factors that could cause or contribute to such differences include, but are not limited to, those discussed in this Quarterly Report on Form 10-Q, and in particular, the risks discussed in Part I, Item 1A, "Risk Factors" in our Annual Report on Form 10-K for the fiscal year ended December 31, 2022, and those discussed in other documents we file with the SEC. We undertake no obligation to revise or publicly release the results of any revision to these forward-looking statements, except as required by law. Given these risks and uncertainties, readers are cautioned not to place undue reliance on such forward-looking statements.
As used herein, (i) "Renren," "the company," "we," "us," "our," and similar terms include Renren Inc. and its subsidiaries and, in the context of describing our consolidated financial information, also include the VIE and its subsidiaries, unless the context indicates otherwise; (ii) "ADSs" refers to American depositary shares, each of which represents 45 of our Class A ordinary shares, par value $0.001 per share; (iii) "Chime" refers to Chime Technologies, Inc., our majority-owned subsidiary incorporated in the State of Delaware; (iv) "PRC" and "China" refers to the People's Republic of China, excluding, for purposes of this Quarterly Report on Form 10-Q only, Hong Kong, Macau, and Taiwan; (v) "Qianxiang Shiji" and "WFOE" refers to Qianxiang Shiji Technology Development (Beijing) Co., Ltd., our wholly-owned subsidiary incorporated in China; (vi) "Qianxiang Tiancheng" and "VIE" refers to Beijing Qianxiang Tiancheng Technology Development Co., Ltd., a company incorporated in China; (vii) "Shares" and "ordinary shares" refer to our Class A ordinary shares and Class B ordinary shares, par value $0.001 per share; (viii) "Trucker Path" refers to Trucker Path, Inc., our majority-owned subsidiary incorporated in the State of Delaware; and (ix) all dollar amounts refer to United States (U.S.) dollars unless otherwise indicated.
“Renren,” “Chime,” “Trucker Path,” and other trademarks of ours appearing in this report are our property. We do not intend our use or display of other companies' trade names or trademarks to imply an endorsement or sponsorship of us by such companies, or any relationship with any of these companies.
2
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
RENREN INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
DECEMBER 31, 2022 AND MARCH 31, 2023
(In thousands of US dollars, except share data and per share data)
As of December 31, | As of March 31, | |||||
2022 |
| 2023 | ||||
| (As Adjusted1) | (Unaudited) | ||||
ASSETS |
|
|
|
| ||
Current assets |
|
|
|
| ||
Cash and cash equivalents | $ | | $ | | ||
Short-term investments |
| |
| | ||
Accounts receivable, net |
| |
| | ||
Prepaid expenses and other current assets, net |
| |
| | ||
Stipulation disbursement receivable |
| |
| | ||
Total current assets |
| |
| | ||
Non-current assets | ||||||
Property and equipment, net |
| |
| | ||
Intangible assets, net |
| |
| | ||
Goodwill |
| |
| | ||
Long-term investments |
| |
| | ||
Other non-current assets |
| |
| | ||
Total non-current assets | | | ||||
TOTAL ASSETS | $ | | $ | | ||
LIABILITIES AND SHAREHOLDERS’ EQUITY |
|
|
|
| ||
Current liabilities |
|
|
|
| ||
Accounts payable | $ | | $ | | ||
Accrued expenses and other current liabilities |
| |
| | ||
Operating lease liabilities - current |
| |
| | ||
Amounts due to related parties |
| |
| | ||
Deferred revenue | | | ||||
Income tax payable | | | ||||
Total current liabilities | | | ||||
Non-current liabilities | ||||||
Operating lease liabilities - non-current | | | ||||
Total non-current liabilities | | | ||||
TOTAL LIABILITIES | $ | | $ | | ||
1 See Note 2.
3
RENREN INC.
CONDENSED CONSOLIDATED BALANCE SHEETS- continued
DECEMBER 31, 2022 AND MARCH 31, 2023
(In thousands of US dollars, except share data and per share data)
As of December 31, | As of March 31, | |||||
2022 | 2023 | |||||
| (As Adjusted1) |
| (Unaudited) | |||
Commitments and contingencies | ||||||
Shareholders’ equity | ||||||
Class A ordinary shares, $ | $ | | $ | | ||
Class B ordinary shares, $ |
| |
| | ||
Treasury stock | | ( | ||||
Additional paid in capital |
| |
| | ||
Accumulated deficit |
| ( |
| ( | ||
Statutory reserves |
| |
| | ||
Accumulated other comprehensive loss |
| ( |
| ( | ||
Total Renren Inc. shareholders’ equity |
| |
| | ||
Non-controlling interest |
| ( |
| ( | ||
Total equity |
| |
| | ||
TOTAL LIABILITIES AND EQUITY | $ | | $ | | ||
1 See Note 2.
The accompanying notes are an integral part of these condensed consolidated financial statements.
4
RENREN INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)
FOR THE THREE MONTHS ENDED MARCH 31, 2022 and 2023
(In thousands of US dollars, except share data and per share data)
For the three months ended March 31, | ||||||
| 2022 |
| 2023 | |||
Revenues: |
|
|
|
| ||
SaaS revenue | $ | | $ | | ||
Other services | | | ||||
Total revenues |
| |
| | ||
Cost of revenues: |
|
|
|
| ||
SaaS business | | | ||||
Other services | | | ||||
Total cost of revenues |
| |
| | ||
Gross profit |
| |
| | ||
Operating expenses |
|
|
|
| ||
Selling and marketing |
| |
| | ||
Research and development |
| |
| | ||
General and administrative |
| |
| | ||
Total operating expenses |
| |
| | ||
Loss from operations |
| ( |
| ( | ||
Other income (loss), net |
| |
| ( | ||
Gain from fair value change of a long-term investment |
| — |
| | ||
Interest income | | | ||||
(Loss) Income before provision of income tax and loss in equity method investments and noncontrolling interest, net of tax |
| ( |
| | ||
Income tax benefits | — | — | ||||
(Loss) Income before loss in equity method investments and noncontrolling interest, net of tax |
| ( |
| | ||
(Loss) Income in equity method investments, net of tax | ( | | ||||
Net (loss) income | $ | ( | $ | | ||
Net loss attributable to non-controlling interests | ( | ( | ||||
Net (loss) income attributable to Renren Inc. | $ | ( | $ | | ||
|
| |||||
Net (loss) income per share: | ||||||
Net (loss) income per share attributable to Renren Inc. shareholders: |
|
| ||||
Basic | $ | ( | $ | | ||
Diluted | $ | ( | $ | | ||
Weighted average number of shares used in calculating net (loss) income per share attributable to Renren Inc. shareholders: | ||||||
Basic | ||||||
Diluted | ||||||
5
RENREN INC.
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE (LOSS) INCOME (UNAUDITED)
FOR THE THREE MONTHS ENDED MARCH 31, 2022 and 2023
(In thousands of US dollars, except share data and per share data)
For the three months ended March 31, | ||||||
| 2022 |
| 2023 | |||
Net (loss) income | $ | ( | $ | | ||
Other comprehensive (loss) income, net of tax | — | — | ||||
Foreign currency translation, net of | ( | | ||||
Net unrealized gain on available-for-sale investments, net of tax of $ | — | ( | ||||
Other comprehensive (loss) income | ( | | ||||
Comprehensive (loss) income | ( | | ||||
Less: total comprehensive loss attributable to noncontrolling interest | ( | ( | ||||
Comprehensive (loss) income attributable to Renren Inc. | $ | ( | $ | | ||
The accompanying notes are an integral part of these condensed consolidated financial statements.
6
RENREN INC.
CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY (UNAUDITED)
FOR THE THREE MONTHS ENDED MARCH 31, 2022 and 2023
(In thousands of US dollars, except share data)
Accumulated | ||||||||||||||||||||||||||||||||||||
Additional | other | Non- | ||||||||||||||||||||||||||||||||||
Class A ordinary shares | Class B ordinary shares | Treasury stock | paid-in | Accumulated | Statutory | comprehensive | Total Renren | controlling | Total | |||||||||||||||||||||||||||
| Shares |
| Amount |
| Shares |
| Amount |
| Shares |
| Amount |
| capital |
| deficit |
| reserves |
| income (loss) |
| Inc.’s equity |
| interest |
| equity | |||||||||||
Balance as of December 31, 2021 |
| | $ | |
| | $ | | | $ | | $ | | $ | ( | $ | | $ | ( | $ | | $ | ( | $ | | |||||||||||
Stock-based compensation |
| — |
| — |
| — |
| — | — | — | |
| — |
| — |
| — |
| |
| |
| | |||||||||||||
Other comprehensive loss |
| — |
| — |
| — |
| — | — | — | — |
| — |
| — |
| ( |
| ( |
| |
| ( | |||||||||||||
Net loss |
| — |
| — |
| — |
| — | — | — | — |
| ( |
| — |
| — |
| ( |
| ( |
| ( | |||||||||||||
Balance as of March 31, 2022 |
| |
| |
| |
| | — | — | |
| ( |
| |
| ( |
| |
| ( |
| | |||||||||||||
— | — | |||||||||||||||||||||||||||||||||||
Balance as of December 31, 2022 (As Adjusted) | | $ | | | $ | | — | $ | — | $ | | $ | ( | $ | | $ | ( | $ | | $ | ( | $ | | |||||||||||||
Stock-based compensation | — | — | — | — | — | — | | — | — | — | | | | |||||||||||||||||||||||
Repurchase of Class A ordinary shares |
| — |
| — |
| — |
| — | ( | ( | — |
| — |
| — |
| — |
| ( |
| — |
| ( | |||||||||||||
Unrealized loss on short-term investments |
| — |
| — |
| — |
| — | — | — | — |
| — |
| — |
| ( |
| ( |
| — |
| ( | |||||||||||||
Other comprehensive income |
| — |
| — |
| — |
| — | — | — | — |
| — |
| — |
| |
| |
| |
| | |||||||||||||
Reclassification of additional paid-in capital | — | — | — | — | — | — | | ( | — | — | — | — | — | |||||||||||||||||||||||
Net income (loss) |
| — | — |
| — | — | — | — | — | | — | — | | ( | | |||||||||||||||||||||
Exercise of share options and restricted shares vesting | | | — | — | — | — | | — | — | — | | — | | |||||||||||||||||||||||
Balance as of March 31, 2023 | | $ | | | $ | | ( | $ | ( | $ | | $ | ( | $ | | $ | ( | $ | | $ | ( | $ | | |||||||||||||
The accompanying notes are integral part of these condensed consolidated financial statements.
7
RENREN INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
FOR THE THREE MONTHS ENDED MARCH 31, 2022 and 2023
(In thousands of US dollars)
For the three months ended March 31, | ||||||
| 2022 |
| 2023 | |||
Cash flows from operating activities: |
|
|
|
| ||
Net (loss) income | $ | ( | $ | |||
Adjustments to reconcile net (loss) income to net cash used in operating activities: | ||||||
Share-based compensation expense |
| |
| | ||
Loss (income) in equity method investments |
| |
| ( | ||
Amortization of the right-of-use assets |
| |
| | ||
Depreciation and amortization | | | ||||
Gain on debt forgiveness |
| ( |
| — | ||
Fair value change on long-term investment | — | ( | ||||
Changes in operating assets and liabilities: | ||||||
Accounts receivable |
| |
| ( | ||
Prepaid expenses and other current assets |
| |
| | ||
Accounts payable | ( | ( | ||||
Amounts due from/to related parties | ( | | ||||
Accrued expenses and other current liabilities |
| |
| ( | ||
Deferred revenue |
| |
| ( | ||
Operating lease liabilities |
| ( |
| ( | ||
Income tax payable |
| |
| — | ||
Net cash used in operating activities |
| ( |
| ( | ||
Cash flows from investing activities: | ||||||
Redemption (purchase) of short-term investments | | ( | ||||
Dividend received from equity investment | — | |||||
Purchases of intangible assets | — | ( | ||||
Proceeds from disposal of equipment and property | | |||||
Purchases of property and refurbishment construction |
| ( |
| ( | ||
Net cash used in investing activities | ( | ( | ||||
Cash flows from financing activities: | ||||||
Proceeds from exercise of share options | — | | ||||
Ordinary share buyback | — | ( | ||||
Dividend from stipulation settlement | — | |||||
Repayment of borrowings | ( | — | ||||
Net cash (used in)/provided by financing activities | ( | | ||||
Net decrease in cash and cash equivalents and restricted cash | ( | ( | ||||
Cash and cash equivalents and restricted cash at beginning of period | | | ||||
Effect of exchange rate changes | | |||||
Cash and cash equivalents and restricted cash at end of period | $ | | | |||
Supplemental schedule of cash flows information: | ||||||
Income taxes paid | $ | — | $ | — | ||
|
| |||||
Schedule of non-cash activities: |
|
| ||||
Obtaining right-of-use assets in exchange for operating lease liabilities | $ | — | $ | | ||
The accompanying notes are an integral part of these condensed consolidated financial statements.
8
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
Renren Inc. was incorporated in the Cayman Islands. Renren Inc, its consolidated subsidiaries, variable interest entity (“VIE”) and VIE’s subsidiaries (collectively referred to as the “Company”) operate
As of March 31, 2023, Renren Inc.’s major subsidiaries, VIE and VIE’s subsidiaries are as follows:
Later of date | Percentage of | |||||||
of incorporation | Place of | legal ownership | Principal | |||||
Name of Subsidiaries |
| or acquisition |
| incorporation |
| by Renren Inc. |
| activities |
Subsidiaries: |
|
|
|
|
|
|
|
|
Chime Technologies, Inc.(“Chime”) |
|
| | % | ||||
Trucker Path, Inc. (“Trucker Path”) |
|
| | % | ||||
Lucrativ Inc. |
|
| | % | ||||
Renren Giantly Philippines Inc. |
|
| | % | ||||
Qianxiang Shiji Technology Development (Beijing) Co., Ltd. (“Qianxiang Shiji”) |
|
| | % | ||||
|
| |||||||
Variable Interest Entity: |
|
| ||||||
Beijing Qianxiang Tiancheng Technology Development Co., Ltd. (“Qianxiang Tiancheng”) |
|
| N/A | |||||
|
|
| ||||||
Subsidiaries of Variable Interest Entity: |
|
| ||||||
Beijing Qianxiang Wangjing Technology Development Co., Ltd. (“Qianxiang Wangjing”) |
|
| N/A | |||||
Shandong Jieying Huaqi Automobile Service Co., Ltd (“Shandong Jieying”) |
|
| N/A |
The VIE arrangements
PRC regulations currently limit direct foreign ownership of business entities providing value-added telecommunications services, online advertising services and internet services in the PRC where certain licenses are required for the provision of such services. Although the Company no longer operates businesses requiring the VIE, historically, the Company provided online advertising, Internet value-added services (“IVAS”), and internet finance services through its VIE. Qianxiang Tiancheng, which is referred to as the “VIE”.
Qianxiang Shiji (“WFOE”), the Company’s Wholly Foreign-Owned Enterprise, entered into a series of contractual arrangements, including: (1) Power of Attorney; (2) Business Operation Agreements; (3) Exclusive Equity Option Agreement; (4) Spousal Consent Agreement; (5) Exclusive Technical and Consulting Services Agreement; (6) Intellectual Property Licenses Agreement; (7) Loan Agreements, and (8) Equity Interest Pledge Agreement with the VIE that enable the Company to (1) have power to direct the activities that most significantly affects the economic performance of the VIE, and (2) receive the economic benefits of the VIE that could be significant to the VIE. Accordingly, the WFOE is considered the primary beneficiary of the VIE and has consolidated the VIE’s financial results of operations, assets and liabilities in the Company’s consolidated financial statements. In making the conclusion that the Company is the primary beneficiary of the VIE, the Company believes the Company’s rights under the terms of the exclusive option agreement and power of attorney are substantive as they relate to operating matters, which provide the Company with a substantive kick-out right.
More specifically, the Company believes the terms of the contractual agreements are valid, binding and enforceable under PRC laws and regulations currently in effect. In particular, the Company also believes that the minimum amount of consideration permitted by the applicable PRC law to exercise the exclusive option does not represent a financial barrier or disincentive for the Company to currently exercise its rights under the exclusive option agreement. A simple majority vote of the Company’s board of directors is required to pass a resolution to exercise the Company’s rights under the exclusive option agreement, for which the consent from Mr. Joe Chen, who holds the most voting interests in the Company and is also the Company’s chairman and CEO, is not required. The Company’s rights under the exclusive option agreement give the Company the power to control the shareholders of the VIE and thus the power to direct the activities that most significantly impact the VIE’s economic performance. In addition, the Company’s rights
9
under powers of attorney also reinforce the Company’s abilities to direct the activities that most significantly impact the VIE’s economic performance. The Company also believes that this ability to exercise control ensures that the VIE will continue to execute and renew service agreements that benefit the Company, currently largely comprised of Research and Development services to the Company’s SaaS businesses. By charging service fees at the sole discretion of the Company, and by ensuring that service agreements are executed and renewed indefinitely, the Company has the right to receive substantially all of the economic benefits from the VIE.
The VIE and its subsidiaries hold the requisite licenses and permits necessary to conduct the Company’s business in PRC under the current business arrangements.
The following financial statement balances and amounts of the Company’s VIE were included in the accompanying condensed consolidated financial statements after elimination of intercompany balances and transactions between the offshore companies, WFOE, VIE and VIE’s subsidiaries. As of December 31, 2022 and March 31, 2023, the balance of the amounts payable by the VIE and its subsidiaries to the WFOE related to the service fees were
| As of December 31, |
| As of March 31, | |||
2022 | 2023 | |||||
Total assets | $ | | $ | | ||
Total liabilities | $ | | $ | | ||
For the three months ended March 31, | ||||||
| 2022 |
| 2023 | |||
Revenues | $ | | $ | | ||
Net Loss | $ | ( | $ | ( | ||
For the three months ended March 31, | ||||||
| 2022 |
| 2023 | |||
Net cash (used in) provided by operating activities | $ | ( | $ | | ||
Net cash used in investing activities | $ | — | $ | ( | ||
Net cash used in financing activities | $ | — | $ | — | ||
There are no consolidated VIE assets that are collateral for the VIE obligations and can only be used to settle the VIE obligations. There are no creditors (or beneficial interest holders) of the VIE that have recourse to the general credit of the Company or any of its consolidated subsidiaries. However, if the VIE ever need financial support, the Company or its subsidiaries may, at its option and subject to statutory limits and restrictions, provide financial support to its VIE through loans to the shareholders of the VIE or entrustment loans to the VIE.
Relevant PRC laws and regulations restrict the VIE from transferring a portion of its net assets, equivalent to the balance of its statutory reserve and its share capital, to the Company in the form of loans and advances or cash dividends.
2. REVISION TO PRIOR PERIOD FINANCIAL STATEMENTS
Subsequent to the filing of the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2022 with the SEC on March 31, 2023 (the “2022 Form 10-K”), management of the Company discovered that the Company’s share of loss in the equity investment of Beijing Fenghou Tianyuan Investment and Management Center L.P. (“FHTY”) was different than the amount previously included in its consolidated financial statements as of and for the year ended December 31, 2022. The difference was discovered upon receipt of additional financial information from FHTY that showed impairments on certain investments held by FHTY as of December 31, 2022. The differences resulted from a change in fair value of certain investments held by FHTY for which the Company should have picked up a loss in the amount of $1.6 million had the Company known of the impairments or had a policy in place to incorporate lag reporting for equity method investments.
Additionally, in connection with the settlement of the Renren shareholder derivative lawsuit, the Company received a one-time dividend of US$
10
In accordance with Staff Accounting Bulletin (“SAB”) No. 99, “Materiality,” and SAB No. 108, “Considering the Effects of Prior Year Misstatements when Quantifying Misstatements in Current Year Financial Statements,” the Company evaluated the adjustments detailed above, and determined the related impact did not materially misstate its consolidated financial statements as of and for the year ended December 31, 2022. Although the Company concluded that the misstatement was not material to its consolidated financial statements as of and for the year ended December 31, 2022, the Company has determined it is appropriate to adjust its consolidated balance sheets as of December 31, 2022 on a prospective basis to provide appropriate context to stakeholders within comparative financial statements and due to the materiality to the fiscal period ending March 31, 2023. The impact on the statement of operations will be displayed on the Company’s consolidated financial statements for the year ended December 31, 2023. The following are the relevant line items from the Company’s consolidated balance sheet as of December 31, 2022 which illustrate the effect of the adjustments to the periods presented:
Selected consolidated balance sheets information as of December 31, 2022
| As previously reported |
| Adjustment |
| As adjusted | |
Assets |
|
|
|
|
|
|
Stipulation disbursement receivable |
| — |
| |
| |
Total current assets |
| |
| |
| |
Long-term investment |
| |
| ( |
| |
Total Assets |
| |
| |
| |
Shareholders’ equity |
|
|
|
|
|
|
Accumulated deficit |
| ( |
| |
| ( |
Additional paid-in capital |
| |
| |
| |
Accumulated other comprehensive loss |
| ( |
| ( |
| ( |
Total Renren Inc. shareholders’ equity |
| |
| |
| |
3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of presentation
The condensed consolidated financial statements of the Company have been prepared in accordance with accounting principles generally accepted in the United States of America (“US GAAP”) for interim financial information, and with the rules and regulations of the United States Securities and E Exchange Commission (the “SEC”). Accordingly, they do not include all of the information and footnotes required by U.S. GAAP for complete financial statements. Unaudited interim results are not necessarily indicative of the results for the full fiscal year. The accompanying unaudited condensed consolidated financial statements should be read in conjunction with audited consolidated financial statements and accompanying notes in the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2022.
Principles of consolidation
The condensed consolidated financial statements of the Company include the financial statements of Renren Inc., its subsidiaries, its VIE and VIE’s subsidiaries. All inter-company transactions and balances are eliminated upon consolidation.
Use of estimates
The preparation of financial statements in conformity with US GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, and the reported amounts of revenues and expenses in the financial statements and accompanying notes. Significant accounting estimates reflected in the Company’s consolidated financial statements include, but are not limited to, allowance for doubtful accounts, the fair value of share-based compensation awards, the realization of deferred income tax assets, impairment of goodwill and indefinite-lived intangible assets, impairment of long-term investments, and the purchase price allocation and the fair value of contingent consideration for business acquisitions.
Fair value
Fair value is the price that would be received from selling an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. When determining the fair value measurements for assets and liabilities required or
11
permitted to be recorded at fair value, the Company considers the principal or most advantageous market in which it would transact and it considers assumptions that market participants would use when pricing the asset or liability.
Authoritative literature provides a fair value hierarchy, which prioritizes the inputs to valuation techniques used to measure fair value into three broad levels. The level in the hierarchy within which the fair value measurement in its entirety falls is based upon the lowest level of input that is significant to the fair value measurement as follows:
Level 1-inputs are based upon unadjusted quoted prices for identical assets or liabilities traded in active markets.
Level 2-inputs are based upon quoted prices for similar assets and liabilities in active markets, quoted prices for identical or similar assets and liabilities in markets that are not active and model-based valuation techniques for which all significant assumptions are observable in the market or can be corroborated by observable market data for substantially the full term of the assets or liabilities.
Level 3-inputs are generally unobservable and typically reflect management’s estimates of assumptions that market participants would use in pricing the asset or liability. The fair values are therefore determined using model-based techniques that include option pricing models, discounted cash flow models, and similar techniques.
Restricted Cash
Restricted cash is the cash deposits pledged as security for the debt borrowings which are expected to be released in accordance with the debt agreement. The restriction will lapse when the related debt is paid off. The restricted cash represents cash deposited into bank accounts which is not expected to be released within the next twelve months.
The cash deposits pledged as security were $
Short-term investments
Short-term investments, which are comprised of corporate bonds/notes and US treasuries, are accounted for in accordance with ASC 320, “Investments – Debt and Equity Securities” (“ASC 320”). The Company considers all of its securities for which there is a determinable fair market value, and there are no restrictions on the Company’s ability to sell within the next 12 months, as available for sale. Available-for-sale securities are carried at fair value, with unrealized gains and losses reported as a component of shareholders’ equity. Available-for-sale securities as of December 31, 2022 and March 31, 2023 were $
Revenue recognition
The Company recognizes revenue when control of the good or service has been transferred to the customer, generally upon delivery to a customer. The contracts have a fixed contract price and revenue is measured as the amount of consideration the Company expects to receive in exchange for transferring goods or providing services. The Company collects taxes from customers on behalf of governmental authorities at the time of sale. These taxes are accounted for on a net basis and are not included in revenues and cost of revenues. The Company generally expenses sales commissions when incurred because the amortization period is less than one year. These costs are recorded within selling and marketing expenses. The Company does not have any significant financing payment terms as payment is received at or shortly after the point of sale.
12
Revenue from Contracts with Customers (“ASC 606”) prescribes a five-step model that includes: (1) identify the contract; (2) identify the performance obligations; (3) determine the transaction price; (4) allocate the transaction price to the performance obligations; and (5) recognize revenue when (or as) performance obligations are satisfied.
The Company generated the majority of revenue from SaaS services.
SaaS revenue: SaaS revenue mainly includes the revenue generated from the subscription and advertising services provided by Chime and Trucker Path. The Company recognizes revenue for subscription services over the life of the subscription. For Chime’s advertising service, the Company acts as an agent to place advertisements on third-party websites or platforms. For Trucker Path’s advertising service, the Company acts as principal to place advertisements on Trucker Path’s platform. The Company recognizes revenue for advertising services over the advertising periods.
Other services: Other services mainly include revenue from the provision of back-office services to OPI and revenue from non-recurring sources.
The Company provides back-office services including accounting, legal, and business-related consulting services, which is a single performance obligation provided over the contract periods with pre-determined stand-alone selling price. The Company recognizes revenue over the contract periods.
The following tables disaggregate revenue by subscription, advertising, and other services:
| For the three months ended March 31, | |||||
2022 |
| 2023 | ||||
Chime | ||||||
Subscription services | $ | | $ | | ||
Advertising services |
| |
| | ||
$ | | $ | | |||
Trucker Path | ||||||
Subscription services | $ | | $ | | ||
Advertising services | | | ||||
Other SaaS revenue |
| |
| ( | ||
$ | | $ | | |||
Other Operations | ||||||
Other services | $ | $ | | |||
Total Revenue | $ | | $ | | ||
Contract balances: Timing of revenue recognition may differ from the timing of invoicing to customers. Accounts receivable represent amounts invoiced and contract assets are recognized prior to invoicing when the Company has satisfied the Company’s performance obligation and has the unconditional right to payment. There were
Deferred revenue mainly represents payments received from customers related to unsatisfied performance obligations for SaaS. The Company’s total deferred revenue was $
Recently adopted accounting pronouncements
In June 2016, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update No. 2016-13, “Financial Instruments - Credit Losses (Topic 326)” (“ASU 2016-13”). ASU 2016-13 revises the methodology for measuring credit losses on financial instruments and the timing of when such losses are recorded. In November 2019, FASB issued ASU 2019-10, “Financial Instruments - Credit Losses (Topic 326), Derivatives and Hedging (Topic 815), and Leases (Topic 842).” This ASU defers the effective date of ASU 2016-13 for public companies that are considered smaller reporting companies as defined by the SEC to fiscal years beginning after December 15, 2022, including interim periods within those fiscal years. The Company has adopted this standard
13
beginning on January 1, 2023, and the adoption of ASU 2016-13 did not have a material impact on the consolidated financial statements.
In October 2021, the FASB issued ASU No. 2021-08, Business Combinations (Topic 805): Accounting for Contract Assets and Contract Liabilities from Contracts with Customers (“ASU 2021-08”). This ASU requires acquiring entities to apply Topic 606 to recognize and measure contract assets and contract liabilities in a business combination. This guidance is effective for public entities for fiscal years beginning after December 15, 2022, including interim periods within those fiscal years. The Company has adopted this standard beginning on January 1, 2023, and the adoption of ASU 2021-08 did not have a material impact on the consolidated financial.
Recently issued ASUs by the FASB, except for the ones mentioned above, have no material impact on the Company’s consolidated results of operations or financial position.
4. LONG-TERM INVESTMENTS
December 31, | March 31, | |||||||
| Note |
| 2022 |
| 2023 | |||
Equity method investments: |
|
|
|
|
|
| ||
Fundrise, L.P. |
| (i) | | | ||||
Other | (ii) | | | |||||
Total equity method investments |
|
|
| |
| | ||
Equity investment with readily determinable fair values |
| |||||||
Kaixin Auto Holdings | (iii) | $ | | $ | | |||
Equity investment without readily determinable fair values |
|
|
|
|
|
| ||
Suzhou Youge Interconnection Venture Capital Center | | | ||||||
Total long-term investments |
|
| $ | | $ | | ||
| (i) | In October 2014, the Company entered into an agreement to purchase limited partnership interest of Fundrise, L.P. for a total consideration of $ |
| (ii) | In May 2014, the Company entered into an agreement to purchase limited partnership interest of Beijing Fenghou Tianyuan Investment and Management Center L.P. for a total consideration of $ |
| (iii) | From June 30, 2022, the Company’s equity interest in Kaixin Auto Holdings ("Kaixin") decreased to |
5. OPERATING LEASES
The Company leases its facilities and offices under non-cancellable operating lease agreements. These leases expire through 2025 and are renewable upon negotiation.
For the three months ended March 31, 2022 and 2023, cash paid for amounts included in the measurement of lease liabilities was $
14
The operating lease cost and short-term lease cost for the three months ended March 31, 2022 and 2023 were as follows:
For the three months ended March 31, | ||||||
2022 | 2023 | |||||
Selling expenses | $ | | $ | | ||
Research and development expenses | | | ||||
General and administrative expenses | | | ||||
Total operating lease cost | | | ||||
Short-term lease cost | | | ||||
Total lease cost | $ | | $ | | ||
The weighted average remaining lease term as of December 31, 2022 and March 31, 2023 was
Operating Lease | |||
Remainder of 2023 |
| $ | |
2024 |
|
| |
Total undiscounted lease payment |
|
| |
Less: Imputed interest |
|
| ( |
Present value of lease liabilities |
| $ | |
6. ORDINARY SHARES
Exercise of share options and restricted shares vesting
During the three months ended March 31, 2022 and 2023,
Stock Repurchase
On November 7, 2022, the Company’s Board of Directors (the “Board”) authorized the repurchase of up to an aggregate of $
The Stock Repurchase Program does not obligate the Company to repurchase any particular amount of the Company’s ordinary shares, and may be modified, extended, suspended, or discontinued at any time. The timing and amount of repurchases will be determined by the Company’s management based on a variety of factors such as the market price of the Company’s ordinary shares, the Company’s corporate cash requirements, and overall market conditions. The Stock Repurchase Program is subject to applicable legal requirements, including federal and state securities laws and applicable Nasdaq rules.
For the three months ended March 31, 2023, the Company repurchased
15