Kaixin Auto(KXIN) - 2025 Q2 - Quarterly Report

Condensed Consolidated Balance Sheets As of June 30, 2025, Kaixin Holdings reported a decrease in total assets and total liabilities compared to December 31, 2024, with significant declines in cash and total equity Balance Sheet Overview As of June 30, 2025, Kaixin Holdings reported a decrease in total assets and total liabilities compared to December 31, 2024. Cash and cash equivalents significantly declined, while total equity also saw a reduction Condensed Consolidated Balance Sheet Highlights (in thousands of US dollars) | Item | June 30, 2025 (in thousands of US dollars) | December 31, 2024 (in thousands of US dollars) | Change (in thousands of US dollars) | Percentage Change | |:-----------------------------------|:------------------------------------------|:----------------------------------------------|:-----------------------------------|:------------------| | TOTAL EQUITY | $11,106 | $13,174 | $(2,068) | -15.7% | - The company's cash and cash equivalents decreased significantly by 76.9% from $2,388 thousand at December 31, 2024, to $552 thousand at June 30, 2025[2] - Total assets and total liabilities both decreased by approximately 15.7% over the six-month period[2][3] Unaudited Condensed Consolidated Statements of Operations and Comprehensive Loss For the six months ended June 30, 2025, Kaixin Holdings reported increased net revenue but widened net losses, primarily due to higher general and administrative expenses Operational Performance For the six months ended June 30, 2025, Kaixin Holdings reported net revenue of $95 thousand, a significant increase from zero revenue in the prior year period. However, the company continued to incur substantial net losses, which widened to $8.412 million from $5.370 million year-over-year, primarily due to increased general and administrative expenses Condensed Consolidated Statements of Operations Highlights (in thousands of US dollars) | Item | Six Months Ended June 30, 2025 (US dollars) | Six Months Ended June 30, 2024 (US dollars) | Change (US dollars) | Percentage Change | |:-------------------------------------|:--------------------------------------------|:--------------------------------------------|:--------------------|:------------------| | Basic and diluted net loss per share | $(0.86) | $(6.02) | $5.16 | -85.7% | - Revenue for the six months ended June 30, 2025, was $95 thousand, generated from consulting services related to electric vehicle design and development, compared to no revenue in the same period of 2024[5][35] - Net loss attributable to Kaixin's shareholders increased by 56.7% to $8.411 million for the six months ended June 30, 2025, from $5.370 million in the prior year[5] - Basic and diluted net loss per share improved significantly to $(0.86) in 2025 from $(6.02) in 2024, despite a higher net loss, due to a substantial increase in weighted average shares outstanding (from 892,491 to 9,769,065)[5][94] Unaudited Condensed Consolidated Statements of Changes in Equity Kaixin Holdings' total equity decreased from December 31, 2024, to June 30, 2025, driven by net loss, partially offset by share awards and convertible note conversions Equity Changes Overview Kaixin Holdings' total equity decreased from $13.174 million as of December 31, 2024, to $11.106 million as of June 30, 2025. This decline was primarily driven by the net loss incurred during the period, partially offset by the vesting of restricted share awards and issuance of ordinary shares for convertible note conversions Key Equity Changes (in thousands of US dollars) | Item | Balance, December 31, 2024 (in thousands of US dollars) | Net Loss (in thousands of US dollars) | Share-based Compensation (in thousands of US dollars) | Convertible Note Conversions (in thousands of US dollars) | Other (in thousands of US dollars) | Balance, June 30, 2025 (in thousands of US dollars) | |:-----------------------------------|:--------------------------------------------------------|:--------------------------------------|:-----------------------------------------------------|:-----------------------------------------------------------|:-----------------------------------|:----------------------------------------------------| | Total Equity | $13,174 | $(8,412) | $5,700 | $638 | $7 | $11,106 | - The company issued 3,800,000 Class A Ordinary Shares and 1,000,000 Class B Ordinary Shares under the Kaixin 2024 Plan during the six months ended June 30, 2025, contributing $5,700 thousand to additional paid-in capital[6][70][97] - Ordinary shares issued for the conversion of convertible notes amounted to $638 thousand for the six months ended June 30, 2025[6][59] Unaudited Consolidated Statements of Cash Flows Kaixin Holdings experienced continued net cash outflows from operating activities, with financing activities primarily using cash for related party repayments, leading to a significant decrease in cash and cash equivalents Cash Flow Analysis Kaixin Holdings experienced continued net cash outflows from operating activities, with a slight increase in usage for the six months ended June 30, 2025, compared to the prior year. Investing activities provided minimal cash, while financing activities used cash primarily for repayment of borrowings from related parties, leading to a significant decrease in cash and cash equivalents at the end of the period Condensed Consolidated Statements of Cash Flows Highlights (in thousands of US dollars) | Item | June 30, 2025 (in thousands of US dollars) | June 30, 2024 (in thousands of US dollars) | Change (in thousands of US dollars) | |:-------------------------------------------|:-------------------------------------------|:-------------------------------------------|:-----------------------------------| | Cash and cash equivalents at end of period | $552 | $628 | $(76) | - Net cash used in operating activities increased slightly to $1,478 thousand for the six months ended June 30, 2025, from $1,438 thousand in the same period of 2024[7] - Financing activities shifted from no cash usage in 2024 to $356 thousand used in 2025, primarily due to the repayment of borrowings from related parties[7] - Cash and cash equivalents at the end of the period decreased to $552 thousand as of June 30, 2025, from $628 thousand as of June 30, 2024[7] Notes to Condensed Consolidated Financial Statements This section provides detailed explanations and disclosures regarding the company's accounting policies, significant transactions, and financial statement line items 1. Organization and Principal Activities Kaixin Holdings, incorporated in the Cayman Islands, operates primarily in domestic automobile and used car sales in the PRC. The company underwent significant share capital structure changes in 2023 and 2024, including share consolidations and authorized capital increases. It also established new subsidiaries in 2024 and 2025 and disposed of several subsidiaries, though management believes these dispositions do not represent a strategic shift - Kaixin Holdings (KX) was incorporated in the Cayman Islands in 2016 and completed a reverse acquisition with Haitaoche Limited in June 2021, with Haitaoche deemed the accounting acquirer[8][9][10] - The Group effected a one-for-fifteenth share consolidation on September 14, 2023, and a one-for-sixty share consolidation on October 25, 2024, along with an increase in authorized share capital from $500,000 to $36,500,000[11][14][67][68] - New subsidiaries, Zhejiang Kaixin Zhihui Auto Co. Ltd. (100% owned) and Zhejiang Kaixin Changxing Auto Sales Co. Ltd. (51% owned), were set up in January 2024 and February 2025, respectively[12][13] - Several subsidiaries, including Kaixin Manman Commuting Technology Co. Ltd., Wuhan Jieying Chimei Automobile Sales Co., Ltd., Chongqing Jieying Shangyue Automobile Sales Co., Ltd., Anhui Kaixin New Energy Vehicle Co., Ltd., and Morning Star Auto Inc., were disposed of during 2024. Kaixin Daman and Kaixin Jingtao were also disposed of in 2024 and 2025, respectively, due to minimal operations[15] - The Group's primary business is sales of domestic automobiles and used cars in the People's Republic of China (PRC)[17] 2. Summary of Significant Accounting Policies The financial statements are prepared in accordance with U.S. GAAP for interim reporting, with certain disclosures condensed or omitted. The company faces substantial doubt about its ability to continue as a going concern due to recurring net losses and operating cash outflows, though management believes it will continue for the next 12 months with potential financial support. Key accounting policies cover fair value measurement, warrant classification, revenue recognition (including new consulting services), and share-based compensation. Several new accounting pronouncements were issued, with the company evaluating their impact - The unaudited condensed consolidated financial statements are prepared in accordance with U.S. GAAP for interim financial reporting and have not been reviewed by an independent certified public accountant[18][19][20] - The Company reported net losses of approximately $8.4 million and $5.4 million, and operating cash outflows of approximately $1.5 million and $1.4 million for the six months ended June 30, 2025 and 2024, respectively. Accumulated deficits reached $386.0 million as of June 30, 2025, raising substantial doubt about its going concern ability[21] - Management believes the Company will continue as a going concern for the next 12 months, supported by highly liquid cash of $0.6 million and agreements from two major shareholders to consider providing necessary financial support[22][23] - Revenue from consulting services related to design and development of electric vehicles was recognized for the first time, amounting to $95 thousand for the six months ended June 30, 2025[35] - The FASB issued several new ASUs (2025-05, 2025-01, 2024-03, 2023-09, 2023-06, 2023-01) related to credit losses, income statement expense disaggregation, income tax disclosures, and leasehold improvements. The Company is evaluating their impact, but does not expect a material effect from those not yet effective[39][40][41][42][43][44][45] 3. Disposal of Subsidiaries Kaixin Holdings disposed of two subsidiaries, Kaixin Jingtao in February 2025 and Kaixin Manman in May 2024, both resulting in no loss on disposal. These disposals involved transferring equity interests to third parties for minimal consideration - On February 10, 2025, the Company transferred 70% equity interest in Kaixin Jingtao for $2, resulting in no loss on disposal[46] - On May 21, 2024, the Company transferred 70% equity interest in Kaixin Manman for $16, also resulting in no loss on disposal[47] 4. Intangible Assets As of June 30, 2025, Kaixin Holdings' net intangible assets totaled $18.852 million, primarily comprising trademarks and technology. Amortization expense for the six months ended June 30, 2025, was $1.862 million, consistent with the prior year Intangible Assets, Net (in thousands of US dollars) | Item | June 30, 2025 (in thousands of US dollars) | December 31, 2024 (in thousands of US dollars) | |:---------------------------|:-------------------------------------------|:-----------------------------------------------| | Intangible assets, net | $18,852 | $20,713 | - Amortization expense for the six months ended June 30, 2025, was $1,862 thousand, unchanged from the same period in 2024[48] - The total remaining amortization for intangible assets is projected to be $18,852 thousand, with significant amounts expected in 2026-2029[48] 5. Related Party Transactions and Balances As of June 30, 2025, Kaixin Holdings had no outstanding amounts due to related parties, including its controlling shareholder and CEO, Mr. Lin Mingjun, and CFO, Mrs. Yang Yi, a significant reduction from $355 thousand at December 31, 2024 Amounts Due to Related Parties (in thousands of US dollars) | Item | June 30, 2025 (in thousands of US dollars) | December 31, 2024 (in thousands of US dollars) | |:------|:-------------------------------------------|:-----------------------------------------------| | Total | $— | $355 | - All amounts due to related parties were settled by June 30, 2025, showing a decrease from $355 thousand at December 31, 2024[50] 6. Income Taxes Kaixin Holdings is not subject to income or capital gains taxes in the Cayman Islands. Its Hong Kong subsidiaries had no assessable profits. PRC subsidiaries are subject to a 25% Enterprise Income Tax rate, and the Group incurred $276 thousand in deferred income tax expenses for both the six months ended June 30, 2025, and 2024 - The Group is exempt from income or capital gains taxes in the Cayman Islands and Hong Kong subsidiaries had no assessable profits[51][52] - PRC subsidiaries are subject to a statutory income tax rate of 25%[53] - Deferred income tax expenses were $276 thousand for both the six months ended June 30, 2025, and 2024[54] 7. Convertible Notes Kaixin Holdings fully settled its outstanding convertible notes as of June 30, 2025. During the six months ended June 30, 2025, the company issued $638 thousand in ordinary shares to settle a portion of Note B, following a $1,208 thousand settlement in the prior year period - The Group issued two Convertible Promissory Notes (Note A and Note B) to Streererville Capital, LLC, with a principal amount of $2,180 thousand each, bearing an 8% annual interest rate[55][56] - During the six months ended June 30, 2025, the Group issued 539,105 ordinary shares ($638 thousand) to settle a portion of Note B. The company fully settled outstanding balances of convertible notes as of June 30, 2025[59] - Interest expense related to convertible notes was $3 thousand for the six months ended June 30, 2025, a significant decrease from $121 thousand in the prior year period[58] 8. Mezzanine Equity and Warrant Liabilities Kaixin Holdings previously issued Series A convertible preferred shares, which were classified as mezzanine equity and subsequently converted into ordinary shares by August 2021, with no outstanding Series A Preferred Shares as of June 30, 2025. Associated warrants were classified as warrant liabilities and remeasured at fair value, with $22 thousand outstanding as of June 30, 2025 - Series A convertible preferred shares, initially classified as mezzanine equity, were fully converted into ordinary shares by August 2021, with no outstanding shares as of June 30, 2025[64][65] - Warrants (Series A, B, and C) issued in connection with Series A Preferred Shares were classified as warrant liabilities and remeasured at fair value at each reporting date[62][63][66] - As of June 30, 2025, and December 31, 2024, the Group had outstanding warrant liabilities of $22 thousand[66] 9. Equity Kaixin Holdings' equity structure underwent significant changes, including two share consolidations in 2023 and 2024, an increase in authorized share capital, and redesignation into Class A and Class B Ordinary Shares. The company also has various series of preferred shares (D, F, G, H) and previously issued warrants (2023, 2022). PRC statutory reserves and restricted net assets limit dividend payments from PRC subsidiaries - The Group completed two share consolidations (one-for-fifteenth in September 2023 and one-for-sixty in October 2024) and increased authorized share capital to $36,500,000, divided into Class A and Class B Ordinary Shares and various preferred shares[67][68][69] Outstanding Ordinary Shares (Number of Shares) | Item | June 30, 2025 (Number of Shares) | December 31, 2024 (Number of Shares) | |:--------|:---------------------------------|:-------------------------------------| | Class B | 2,100,000 | 1,100,000 | - Series D, F, G, and H Preferred Shares are considered permanent equity as their redemption is within the Group's control. As of June 30, 2025, 42,000 Series F Preferred Shares remained outstanding after partial settlements[74][77][81][85] - The Group issued 2023 Warrants to purchase Class A Ordinary Shares at an exercise price of $108.00 per share, and previously issued 2022 Warrants which were redeemed in November 2023 by issuing 6,500,000 ordinary shares[86][88][90] - PRC subsidiaries are required to provide for statutory reserves (10% of net profit after tax) and are restricted in their ability to transfer net assets (paid-in capital and statutory reserve, totaling $107,222 thousand) to the Group as dividends, loans, or advances[91][92] 10. Loss Per Share For the six months ended June 30, 2025, Kaixin Holdings reported a basic and diluted net loss per share of $(0.86), a significant improvement from $(6.02) in the prior year, despite a higher net loss. This improvement is attributed to a substantial increase in the weighted average shares outstanding Net Loss Per Share (in thousands of US dollars, except per share data) | Item | Six Months Ended June 30, 2025 (Number of Shares) | Six Months Ended June 30, 2024 (Number of Shares) | |:-------------------------------------------------------------|:--------------------------------------------------|:--------------------------------------------------| | Weighted average shares used in calculating net loss per share | 9,769,065 | 892,491 | - The weighted average shares used in calculating net loss per share increased over tenfold from 892,491 in 2024 to 9,769,065 in 2025[94] - Potential dilutive securities were not included in the calculation of diluted net loss per share for both periods as their inclusion would be anti-dilutive due to the net loss[94] 11. Share-Based Compensation Kaixin Holdings granted a significant number of restricted shares under the Kaixin 2024 Plan, leading to a substantial increase in share-based compensation expenses. As of June 30, 2025, there was approximately $1.824 million in unrecognized compensation cost related to unvested restricted shares, expected to be recognized over 2.60 years - For the six months ended June 30, 2025, the Group granted 3,800,000 Class A Ordinary Shares and 1,000,000 Class B Ordinary Shares under the Kaixin 2024 Plan[97] - Share-based compensation expenses increased significantly to $5,700 thousand for the six months ended June 30, 2025, from $1,447 thousand in the prior year period, charged to general and administrative expenses[99] - As of June 30, 2025, total unrecognized compensation cost related to unvested restricted shares was approximately $1,824 thousand, with a weighted average recognition period of 2.60 years[98] 12. Commitments and Contingencies Kaixin Holdings may be subject to legal proceedings, claims, and disputes in the ordinary course of business, but management does not believe these will have a material adverse impact on its financial position, results of income, or liquidity - The Company does not believe that current legal proceedings, claims, and disputes will have a material adverse impact on its financial position, results of income, or liquidity[100] 13. Subsequent Events Subsequent to the reporting period, on August 6, 2025, Kaixin Holdings resolved to issue 10,000 Series I Convertible Preferred Shares with a total stated value of $10,000 thousand to Discover Flux Ltd as compensation for the transfer of 100% equity interest in Morning Star Auto Inc., which had net asset deficits - On October 15, 2024, the Company transferred 100% equity interest of Morning Star Auto Inc. to Discover Flux Ltd. Morning Star Auto Inc. reported net asset deficits of approximately $8,400 thousand on the transfer day[101] - On August 6, 2025, the Company resolved to issue 10,000 Series I Convertible Preferred Shares with a total Stated Value of $10,000 thousand to Discover Flux Ltd as part of the equity transfer transaction[101]