| SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES | 3. (a). Basis of presentation The consolidated financial statements of the Company have been prepared in accordance with accounting principles generally accepted in the United States of America (“US GAAP”) and pursuant to the rules and regulations of the U.S. Securities and Exchange Commission (the “SEC”). (b). Liquidity The accompanying consolidated financial statements have been prepared assuming that the Company will continue as a going concern, which contemplates the realization of assets and the satisfaction of liabilities in the normal course of business. For the years ended December 31, 2022 and 2023, the Company incurred a loss from operations of $16,163 and $10,741, and used cash of $3,822 and $3,167 in operating activities, respectively. As of December 31, 2023, the Company had cash and cash equivalents of $33,913, excluding the restricted cash, and a working capital of $24,744. The Company assessed that it has the ability to continue as a going concern for the next 12 months following the issuance date of these financial statements. 3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - CONTINUED (c). Principles of consolidation The consolidated financial statements of the Company include the financial statements of Moatable, Inc., its subsidiaries, its VIE and VIE’s subsidiaries. All inter-company transactions and balances are eliminated upon consolidation. (d). Reclassifications Certain reclassifications have been made to the Company’s consolidated statements of cash flow of prior period to conform to current year reporting classifications. (e). 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 long-lived assets, and impairment of long-term investments. (f). Business combination Business combinations are recorded using the acquisition method of accounting. The assets acquired, the liabilities assumed, and any non-controlling interests of the acquiree at the acquisition date, if any, are measured at their fair values as of the acquisition date. Goodwill is recognized and measured as the excess of the total consideration transferred plus the fair value of any non-controlling interest of the acquiree and fair value of previously held equity interest in the acquiree, if any, at the acquisition date over the fair values of the identifiable net assets acquired. Common forms of the consideration made in acquisitions include cash and common equity instruments. Consideration transferred in a business acquisition is measured at the fair value as of the date of acquisition. Acquisition-related expenses and restructuring costs are expensed as incurred. (g). Cash and cash equivalents Cash and cash equivalents include cash on hand and all highly liquid investments purchased with original stated maturity of 90 days or less. (h). 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 agreement 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 $9,159 and nil as of December 31, 2022 and 2023. The restricted cash balances represent cash deposits pledged as security for debt borrowing of Kaixin Auto Holdings, consolidated by the Company before June 2021, or Kaixin, a Cayman Islands company whose shares are listed on the Nasdaq Capital Market (NASDAQ: KXIN) and its subsidiary (“Kaixin Subsidiary”), under an irrevocable standby letter of credit (“SBLC”) issued by East West Bank. The letter of credit secured a loan of RMB40,000 (“Kaixin RMB Loan”) and loan of $2,000 (“Kaixin USD Loan”). The guarantees matured in March 2023 and August 2023, the Company has concluded the possibility of the Kaixin and Kaixin Subsidiary repaying the loans when due is remote and therefore, the Company will be required to extend the guarantee or pay the debt on their behalf. The Company has, therefore, recorded a full provision for the value of the guarantee. 3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - CONTINUED On June 1, 2023, East West Bank assigned to the Company all of the its rights, title, and interest in and to the Kaixin USD Loan for a total consideration of approximately US$2,000. The Kaixin USD Loan was guaranteed by the letter of credit and secured by the pledged cash. The Company consequently used part of the pledged cash to purchase the Kaixin USD Loan. The Company is evaluating its options to pursue recovery from Kaixin after the assignment but considers any recovery remote. East West Bank had claimed approximately US$5,870 under the SBLC in connection with Kaixin’s default, through Kaixin Subsidiary, of the Kaixin RMB Loan. In December, 2023, the Company reimbursed East West Bank for the full amount of the claim. As a result, East and West Bank released the remaining restricted cash and made them available to the Company as unrestricted cash for operation, and the Company recorded a gain related to the unrestricted cash of $1,151. On August 28, 2023, the Company entered into an Escrow Agreement with U.S. Bank National Association to enhance directors and officers’ insurance coverage. The Company set aside $5,000 restricted cash into an escrow account with U.S. Bank as required by the contractual agreement with U.S. Bank National Association. As of December 31, 2022 2023 Restricted cash $ 9,159 $ 5,056 Less: Provision of restricted cash (9,159) — Restricted cash, net — 5,056 (i). 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 stockholders’ equity. Available-for-sale securities as of December 31, 2022 and 2023 were$24,004, and nil, respectively. For the years ended December 31, 2022 and 2023, the change in fair value of available-for-sale securities was recognized in other comprehensive loss amounting to $26, and nil, respectively. (j). Fair value measurements 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 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. 3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - CONTINUED Accounting guidance also describes three main approaches to measuring the fair value of assets and liabilities: (1) market approach; (2) income approach and (3) cost approach. The market approach uses prices and other relevant information generated from market transactions involving identical or comparable assets or liabilities. The income approach uses valuation techniques to convert future amounts to a single present value amount. The measurement is based on the value indicated by current market expectations about those future amounts. The cost approach is based on the amount that would currently be required to replace an asset. Financial assets and liabilities of the Group primarily consist of cash and cash equivalents, restricted cash, short-term investment, other receivables included in prepaid expenses and other current assets, amount due from related parties, long-term investment, accounts payable, other payables included in accrued expenses and other current liabilities, amount due to related parties and operating lease liabilities. Cash and cash equivalents and restricted cash approximated fair value and represented a level 1 measurement. Short-term investments were comprised of corporate bonds/notes and U.S. treasuries with determinable fair market value, and thus represented a level 1 measurement. Equity investments without readily determinable fair values represented a level 3 measurement considering inputs are unobservable and reflect management’s estimates of assumptions that market participants use in pricing the investments. Equity investments with readily determinable fair values represented a level 1 measurement considering the investment is in publicly-traded company and pricing information is provided on an ongoing basis. The carrying amounts of other current financial assets and liabilities approximate their fair values due to the short-term maturity. The carrying amount of non-current liabilities including operating lease liabilities approximates their fair value as the related interest rates approximate market rates for similar debt instruments of comparable maturities. (k). Investments Equity method investments Equity investment in common stock or in-substance common stock of an entity where the Company can exercise significant influence, but not control, is accounted for using the equity method. Significant influence is generally considered to exist when the Company has an ownership interest in the voting stock of the investee between 20% and 50%.Other factors, such as representation on the investee’s board of directors, voting rights, the impact of commercial arrangements, and the extent to which the Company guarantees the investee’s obligations and is committed to provide additional funding are also considered in determining whether the equity method of accounting is appropriate. An investment in in-substance common stock is an investment in an entity that has risk and reward characteristics that are substantially similar to that entity’s common stock. The Company considers subordination, risks and rewards of ownership, and the existence of obligations to transfer value when determining whether an investment in an entity is substantially similar to an investment in that entity’s common stock. Under the equity method, the investment is initially recorded at cost and subsequently adjusted for the Company’s share of undistributed earnings or losses of the investee. When the Company’s carrying value in an equity method investee company is reduced to zero, no further losses are recorded in the Company’s consolidated financial statements unless the Company guaranteed obligations of the affiliated company or has committed additional funding. When the affiliated company subsequently reports income, the Company will not record its share of such income until it exceeds the amount of its share of losses not previously recognized. The Company recorded impairment losses on equity method investments of nil, and $2,132 in the impairment on and loss in equity method investments, net of tax in the consolidated statements of operations for the years ended December 31, 2022 and 2023, respectively. 3. Equity Investments with Readily Determinable Fair Values Equity investments with readily determinable fair values is investment in publicly-traded company for which the Company does not exercise significant influence and are measured at fair value based on the respective closing stock price at the period end date. Equity investments with readily determinable fair values are classified within Level 1 in the fair value hierarchy as the valuation can be obtained from real-time quotes in active markets. Subsequent changes in fair value are recognized in net gain (loss) on investments on the consolidated statements of operations. The Company recorded loss from fair value changes of long-term investments of $10,422 and $7,715 for the years ended December 31, 2022 and 2023, respectively. Equity Investments without Readily Determinable Fair Values In January 2018, the Company adopted Accounting Standards Update (‘‘ASU’’) 2016-01, Financial Instruments—Recognition and Measurement of Financial Assets and Financial Liabilities, and accounts for equity investments that do not have a readily determinable fair value using the measurement alternative prescribed within ASU 2016-01, to the extent such investments are not subject to consolidation or the equity method. Under the measurement alternative, these financial instruments are carried at cost, less any impairment (assessed quarterly), plus or minus changes resulting from observable price changes in orderly transactions for an identical or similar investment of the same issuer. In addition, income is recognized when dividends are received only to the extent they are distributed from net accumulated earnings of the investee. Otherwise, such distributions are considered returns of investment and are recorded as a reduction of the cost of the investment. The Company recorded impairment losses of $44,474 and nil on equity securities without readily determinable fair values during the years ended December 31, 2022 and 2023, respectively. (l). Accounts receivable and allowance for credit loss Accounts receivable are stated at the original amount less an allowance for credit loss. Accounts receivable are recognized in the period when the Company has provided services to its customers and when its right to consideration is unconditional. The Company evaluates its accounts receivable for expected credit losses on a regular basis. The Company maintains an estimated allowance for credit losses to reduce its accounts receivable to the amount that it believes will be collected. The Company considers factors in assessing the collectability of its receivables, such as the age of the amounts due, the customer’s payment history, credit-worthiness and other specific circumstances related to the accounts. The Company adjusts the allowance percentage periodically when there are significant differences between estimated bad debts and actual bad debts. If there is strong evidence indicating that the accounts receivable is likely to be unrecoverable, the Company also makes specific allowance in the period in which a loss is determined to be probable. Accounts receivable balances are written off after all collection efforts have been exhausted. For the years ended December 31, 2022 and 2023, the Company recorded nil and $153 allowance for credit loss for accounts receivable. Adoption of Accounting Standards Update (“ASU”) 2016-13 On January 1, 2023, the Company adopted ASU 2016-13, “Financial Instruments — Credit Losses (Accounting Standards Codification (“ASC”) Topic 326): Measurement on Credit Losses on Financial Instruments”, including certain subsequent amendments, transitional guidance and other interpretive guidance within ASU 2018-19, ASU 2019-04, ASU 2019-05, ASU 2019-11, ASU 2020-02 and ASU 2020-03 (collectively, including ASU 2016-13, “ASC 326”). ASC 326 requires entities to measure all expected credit losses for financial assets held at the reporting date based on historical experience, current conditions, and reasonable and supportable forecasts. This replaces the existing incurred loss model and is applicable to the measurement of credit losses on financial assets measured at amortized cost. The adoption of this ASU did not have a material impact on its consolidated financial statements. (m). Inventories Inventories primarily consists of the purchased electronic logging devices for use of SaaS related business, which are stated at the lower of cost and net realizable value as of December 31, 2022 and 2023. 3. A valuation allowance is recorded to write down the cost of inventories to the estimated net realizable value, if lower than cost or products are slow-moving or damaged. When evaluating the need for a valuation allowance we evaluate factors such as historical and forecast consumer demand, obsolescence, and the economic environment. Net realizable value is determined by the estimated selling prices reduced by estimated additional cost of sale, selling expenses, and business taxes. No valuation allowance was recognized for the inventories for the years ended December 31, 2022, and 2023, respectively. (n). Property and equipment, net Property and equipment, net is carried at cost less accumulated depreciation and any impairment. Depreciation is calculated on a straight-line basis over the following estimated useful lives: Category Estimated useful life Server & network equipment 3 years Computer equipment and application software 2-3 years Furniture and vehicles 3-5 years Building 30 Leasehold improvements Over the lesser of the lease term or useful life of the assets (o). Intangible assets Intangible assets consist of computer software, customer relationships, technology and website domain name. The Company performs valuation of the intangible assets arising from business combination to determine the relative fair value to be assigned to each asset acquired. Intangible assets with indefinite useful lives that are acquired separately are carried at cost less accumulated impairment losses. The acquired intangible assets are recognized and measured at fair value. Intangible assets with useful lives are amortized using the straight-line approach over the estimated economic useful lives of the assets as follows: Category Estimated useful life Computer software 5 Customer relationships 10 Technology platform 8 Website domain name Indefinite Trade name 3 years (p). Leases The Company leases premises for offices under non-cancellable operating leases. According to ASC 842, the lease liabilities are recognized upon lease commencement for operating leases based on the present value of lease payments over the lease term. The right-of-use assets are initially measured at cost, which comprises the initial amount of the lease liability adjusted for lease payments made at or before the lease commencement date, plus any initial direct costs incurred less any lease incentives received. As the rates implicit in the lease cannot be readily determined, the incremental borrowing rates at the lease commencement date are used in determining the imputed interest and present value of lease payments. The incremental borrowing rates were determined using a portfolio approach based on the rates of interest that the Company would have to borrow an amount equal to the lease payments on a collateralized basis over a similar term. The Company recognizes the single lease cost on a straight-line basis over the remaining lease term for operating leases . The Company has elected not to recognize right-of-use assets or lease liabilities for leases with an initial term of 12 months or less; expenses for these leases are recognized on a straight-line basis over the lease term. 3. (q). Impairment of long-lived assets The Company evaluates the recoverability of long-lived assets or asset group, including identifiable intangible assets, with determinable useful lives whenever events or changes in circumstances indicate that long-lived asset or asset group’s carrying amount may not be recoverable. The Company measures the carrying amount of long-lived asset or asset group against the estimated undiscounted future cash flows associated with it. The long-lived asset or asset group is not recoverable when the sum of the expected undiscounted future net cash flows is less than the carrying value of the asset being evaluated. Impairment loss is calculated as the amount by which the carrying value of the asset exceeds its fair value. Fair value is estimated based on various valuation techniques, including the discounted value of estimated future cash flows. The evaluation of asset impairment requires the Company to make assumptions about future cash flows over the life of the asset being evaluated. These assumptions require significant judgment and actual results may differ from assumed and estimated amounts. For the years ended December 31, 2022 and 2023, the Company recorded $962 and nil impairment losses for long-lived assets or definite-lived intangible assets. The Company evaluates indefinite-lived intangible assets as at each reporting period or more frequently if events or changes in circumstances indicate that it might be impaired to determine whether events and circumstances continue to support indefinite useful lives. The value of indefinite-lived intangible assets is not amortized, but tested for impairment annually or whenever events or changes in circumstances indicate that it is more likely than not that the asset is impaired in accordance with ASC 350. The Company first performs a qualitative assessment to assess all relevant events and circumstances that could affect the significant inputs used to determine the fair value of the indefinite-lived intangible asset. If after performing the qualitative assessment, the Company determines that it is more likely than not that the indefinite-lived intangible asset is impaired, the Company calculates the fair value of the intangible asset and performs the quantitative impairment test by comparing the fair value of the asset with its carrying amount. If the carrying amount of an indefinite-lived intangible asset exceeds its fair value, the Company recognizes an impairment loss in an amount equal to that excess. (r). Goodwill and Indefinite-lived Intangible Assets Goodwill represents the excess of the purchase price over the fair value of identifiable net assets acquired in business combinations. Goodwill is not amortized, but tested for impairment annually, or more frequently if events and circumstances indicate that they might be impaired. The Company has an option to first assess qualitative factors to determine whether it is necessary to perform the two-step quantitative goodwill impairment test. In the qualitative assessment, the Company considers primary factors such as industry and market considerations, overall financial performance of the reporting unit which is described in more detail below, and other specific information related to the operations. Based on the qualitative assessment, if it is more likely than not that the fair value of each reporting unit is less than the carrying amount, the quantitative impairment test is performed. The Company tests goodwill and intangible assets that are not subject to amortization for impairment annually on December 31, and the Company’s goodwill impairment review involves the following steps: 1) qualitative assessment – evaluate qualitative factors to determine whether it is more likely than not that the fair value of a reporting unit is less than its carrying amount, including goodwill. The factors the Company considers include, but are not limited to, macroeconomic conditions, industry and market considerations, cost factors, financial performance, or events specific to that reporting unit. If, or when, the Company determines it is more likely than not that the fair value of a reporting unit is less than the carrying amount, including goodwill, the Company would move to the quantitative method; 2) quantitative method –the Company performs the quantitative fair value test by comparing the fair value of a reporting unit with its carrying amount and an impairment charge is measured as the amount by which the carrying amount exceeds the reporting unit’s fair value; however, the loss recognized should not exceed the total amount of goodwill allocated to that reporting unit. 3. Application of the goodwill impairment test requires judgment, including the identification of reporting units, assignment of assets and liabilities to reporting units, assignment of goodwill to reporting units, and determination of the fair value of each reporting unit. The fair value of each reporting unit is estimated using the income approach. This analysis requires significant judgments, including estimation of future cash flows, which is dependent on internal forecasts, and assumptions that are consistent with the plans and estimates being used to manage the Company’s business, estimation of the long-term rate of growth for the Company’s business, estimation of the useful life over which cash flows will occur, and determination of the Company’s weighted average cost of capital. The estimates are used to calculate the fair value of a reporting unit change from year to year based on operating results and market conditions. Changes in these estimates and assumptions could materially affect the determination of fair value and goodwill impairment for the reporting unit. The Company recorded goodwill impairment of nil and $395 for the years ended December 31, 2022 and 2023. Certain of the Company's domain names have been assigned an indefinite life as the Company currently anticipate that they will contribute cash flows to the Company indefinitely. Indefinite-lived intangible assets are not amortized, but are evaluated at least annually to determine whether the indefinite useful life is appropriate. The Company measures the fair value of identifiable intangible assets upon acquisition and review for impairment annually on December 31, and whenever market or business events indicate there may be a potential impairment of that intangible. Impairment losses are recorded to the extent that the carrying value of the indefinite-lived intangible asset exceeds its fair value. The significant assumptions that are used to determine the estimated fair value for indefinite-lived intangible assets upon acquisition and subsequent impairment testing are: forecasted revenue growth rates; estimated future cash flows; and the market-participant discount rates.Nil and $1,500 impairment for intangible assets with indefinite life was recorded for the years ended December 31, 2022 and 2023, respectively. (s). 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. 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: 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. 3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - CONTINUED The following tables disaggregate revenue by subscription, advertising, and other services: For the Years Ended December 31, 2022 2023 (In thousands of US$) Lofty Subscription services $ 22,816 $ 27,164 Advertising services 1,884 1,488 Other services — 206 Subtotal $ 24,700 $ 28,858 Trucker Path Subscription services $ 17,982 $ 21,063 Advertising services 2,325 1,830 Other services 631 167 Subtotal $ 20,938 $ 23,060 Other Operations Other services $ 170 $ 155 Total revenues $ 45,808 $ 52,073 For the years ended December 31, 2022 2023 (In thousands of US$) Timing of revenue recognition Over time $ 40,798 $ 48,433 At a point in time 5,010 3,640 Total revenue $ 45,808 $ 52,073 Contract balances: Timing of revenue recognition may differ from the timing of invoicing to customers. Accounts receivable represent amounts invoiced and revenue recognized when the Company has satisfied the Company’s performance obligation and has the unconditional right to payment. There were no contract assets recorded as of December 31, 2022 and 2023. Deferred revenue mainly represents payments received from customers related to unsatisfied performance obligations for SaaS. The Company’s total deferred revenue was $4,323 and $4,322 as of December 31, 2022 and 2023, respectively, which is substantially recognized as revenue within one year. Revenue recognized in the period that was included in the beginning of the period contract liability balance were $2,596 and $4,323 for the years ended December 31, 2022 and 2023, respectively. (t). Cost of revenues Cost of revenues consists of costs directly related to SaaS business and other services. The major cost components include direct amortization of purchased software, commission costs paid to third party distributors of the Company’s software such as Apple and Google Play Stores, and bandwidth costs paid to telecommunications carriers for hosting of servers. (u). Income taxes Current income taxes are provided for in accordance with the laws of the relevant tax authorities. Deferred income taxes are recognized when temporary differences exist between the tax basis of assets and liabilities and their reported amounts in the financial statements and are recorded as non-current in the consolidated balance sheet. Net operating loss carry forwards and credits are applied using enacted statutory tax rates applicable to future years. Deferred tax assets are reduced by a valuation allowance when, in the opinion of management, it is more likely than not that a portion of or all of the deferred tax assets will not be realized. 3. The impact of an uncertain income tax position on the income tax return is recognized at the largest amount that is more-likely-than-not to be sustained upon audit by the relevant tax authority. An uncertain income tax position will not be recognized if it has less than a 50% likelihood of being sustained. Interest and penalties on income taxes will be classified as a component of the provisions for income taxes. The Company did not recognize any income tax due to uncertain tax position or incur |
