10q10k10q10k.net
Sound Group Inc.

Sound Group Inc.SOGPEarnings & Financial Report

Nasdaq · software industry

SoundHound AI, Inc. is an American music and speech recognition company based in Santa Clara, California. It was originally founded as Melodis in 2005 before rebranding to SoundHound Inc. in 2010, and SoundHound AI in 2022.

What changed in Sound Group Inc.'s 20-F — 2023 vs 2024

Top changes in Sound Group Inc.'s 2024 20-F

398 paragraphs added · 402 removed · 336 edited across 5 sections

Item 3. Legal Proceedings

Legal Proceedings — active lawsuits and investigations

147 edited+36 added−29 removed832 unchanged
Moreover, even if our management concludes that our internal control over financial reporting is effective, our independent registered public accounting firm, after conducting its own independent testing, may issue a report that is qualified if it is not satisfied with our internal controls or the level at which our controls are documented, designed, operated or reviewed, or if it interprets the relevant requirements differently from us.
Moreover, even if our management concludes that our internal control over financial reporting is effective, our independent registered public accounting firm, after conducting its own independent testing, may issue a report that is qualified if it is not satisfied with our internal controls or the level at which our controls are documented, designed, operated or reviewed, or if it interprets the relevant requirements differently from us.
Additionally, ineffective internal control over financial reporting could expose us to increased risk of fraud or misuse of corporate assets and subject us to potential delisting from the stock exchange on which we list, regulatory investigations and civil or criminal sanctions.
Additionally, ineffective internal control over financial reporting could expose us to increased risk of fraud or misuse of corporate assets and subject us to potential delisting from the stock exchange on which we list, regulatory investigations and civil or criminal sanctions.
Notwithstanding the foregoing, in the future, if it is determined that the PCAOB is unable to inspect or investigate our auditor completely, or the PCAOB expands the scope of its determinations so that we are subject to the HFCAA, as the same may be amended, you may be deprived of the benefits of such inspection.
Notwithstanding the foregoing, in the future, if it is determined that the PCAOB is unable to inspect or investigate our auditor completely, or the PCAOB expands the scope of its determinations so that we are subject to the HFCAA, as the same may be amended, you may be deprived of the benefits of such inspection.
We launched certain incentive programs to encourage content creation, enhance user spending and attract more hosts and users to our platforms, however, we cannot guarantee you that the hosts attracted to our platforms due to those incentive programs will remain active after we terminate such programs.
We launched certain incentive programs to encourage content creation, enhance user spending and attract more hosts and users to our platforms, however, we cannot guarantee you that the hosts attracted to our platforms due to those incentive programs will remain active after we terminate such programs.
In addition, if any third party suffers or alleges to have suffered physical, financial or emotional harm following contact initiated on our platforms or after hearing unsettling, inappropriate, fraudulent or misleading content that our content monitoring system failed to filter out, or if any third party suffers or alleges to have suffered damages as a result of improper or fraudulent activities on our platforms, we may face civil lawsuits or other liabilities initiated by the affected third party, or governmental or regulatory actions against us. 39 Table of Contents In response to allegations of illegal or inappropriate activities conducted through our platforms or any negative media coverage about us, PRC government authorities may hold us liable for non-compliance with PRC laws and regulations concerning the dissemination of information on the internet and subject us to administrative penalties or other sanctions, such as requiring us to restrict or discontinue some of the features and services provided on our website and mobile application, or even revoke our licenses or permits to provide internet content service.
In addition, if any third party suffers or alleges to have suffered physical, financial or emotional harm following contact initiated on our platforms or after hearing unsettling, inappropriate, fraudulent or misleading content that our content monitoring system failed to filter out, or if any third party suffers or alleges to have suffered damages as a result of improper or fraudulent activities on our platforms, we may face civil lawsuits or other liabilities initiated by the affected third party, or governmental or regulatory actions against us. 40 Table of Contents In response to allegations of illegal or inappropriate activities conducted through our platforms or any negative media coverage about us, PRC government authorities may hold us liable for non-compliance with PRC laws and regulations concerning the dissemination of information on the internet and subject us to administrative penalties or other sanctions, such as requiring us to restrict or discontinue some of the features and services provided on our website and mobile application, or even revoke our licenses or permits to provide internet content service.
We believe that our ability to compete effectively depends upon many factors both within and beyond our control, including: ● the popularity, usefulness, ease of use, performance and reliability of our services compared to those of our competitors, and the research and development abilities of us and our competitors; ● the unique content, services, products and interactive community we offer on our platforms that distinguish ourselves from other competing platforms; ● changes mandated by, or that we elect to make to address, legislation, regulations or government policies, some of which may have a disproportionate effect on us; ● acquisitions or consolidation within our industry, which may result in more formidable competitors; and ● our reputation and brand strength relative to our competitors. 36 Table of Contents In addition, our users have a vast array of entertainment choices.
We believe that our ability to compete effectively depends upon many factors both within and beyond our control, including: ● the popularity, usefulness, ease of use, performance and reliability of our services compared to those of our competitors, and the research and development abilities of us and our competitors; ● the unique content, services, products and interactive community we offer on our platforms that distinguish ourselves from other competing platforms; ● changes mandated by, or that we elect to make to address, legislation, regulations or government policies, some of which may have a disproportionate effect on us; ● acquisitions or consolidation within our industry, which may result in more formidable competitors; and ● our reputation and brand strength relative to our competitors. 37 Table of Contents In addition, our users have a vast array of entertainment choices.
We expect that these areas will receive greater and continued attention and scrutiny from regulators and the public going forward, which could increase our compliance costs and subject us to heightened risks and challenges associated with data security and protection. 20 Table of Contents While we have taken various measures to comply with all applicable laws and regulations regarding cybersecurity, information security, privacy and data protection in China, we cannot assure you that the measures we have taken or will take are adequate under the Cyber Security Law or other relevant laws and regulations, and we may be held liable in the event of any breach of the relevant requirements under the Cyber Security Law or other relevant laws and regulations.
We expect that these areas will receive greater and continued attention and scrutiny from regulators and the public going forward, which could increase our compliance costs and subject us to heightened risks and challenges associated with data security and protection. 21 Table of Contents While we have taken various measures to comply with all applicable laws and regulations regarding cybersecurity, information security, privacy and data protection in China, we cannot assure you that the measures we have taken or will take are adequate under the Cyber Security Law or other relevant laws and regulations, and we may be held liable in the event of any breach of the relevant requirements under the Cyber Security Law or other relevant laws and regulations.
Furthermore, the recently issued Opinions on Strictly Cracking Down on Illegal Securities Activities emphasized the need to strengthen the administration over “illegal securities activities” and the supervision on overseas listings by China-based companies, and proposed to take effective measures, such as promoting the construction of relevant regulatory systems to deal with the risks and incidents faced by China-based overseas-listed companies, although such opinions did not specify the definition of “illegal securities activities.” Such opinions further provided that the special provisions of the State Council on overseas offerings and listings by those companies limited by shares will be revised and therefore the duties of domestic industry competent authorities and regulatory agencies will be clarified.
Furthermore, the Opinions on Strictly Cracking Down on Illegal Securities Activities emphasized the need to strengthen the administration over “illegal securities activities” and the supervision on overseas listings by China-based companies, and proposed to take effective measures, such as promoting the construction of relevant regulatory systems to deal with the risks and incidents faced by China-based overseas-listed companies, although such opinions did not specify the definition of “illegal securities activities.” Such opinions further provided that the special provisions of the State Council on overseas offerings and listings by those companies limited by shares will be revised and therefore the duties of domestic industry competent authorities and regulatory agencies will be clarified.
Moreover, any incompliance or associated inquiries, investigations and other governmental actions may divert significant management time and attention and our financial resources, bring negative publicity, subject us to liabilities or administrative penalties, and materially and adversely affect our financial conditions, results of operations, and business prospects. 22 Table of Contents Under the PRC enterprise income tax law, we may be classified as a PRC “resident enterprise,” which could result in unfavorable tax consequences to us and our shareholders and ADS holders and have a material adverse effect on our results of operations and the value of your investment.
Moreover, any incompliance or associated inquiries, investigations and other governmental actions may divert significant management time and attention and our financial resources, bring negative publicity, subject us to liabilities or administrative penalties, and materially and adversely affect our financial conditions, results of operations, and business prospects. 23 Table of Contents Under the PRC enterprise income tax law, we may be classified as a PRC “resident enterprise,” which could result in unfavorable tax consequences to us and our shareholders and ADS holders and have a material adverse effect on our results of operations and the value of your investment.
Although we have been successfully blocking these attacks in the past, we cannot guarantee that this will always be the case, and in the incident if users experience a malware attack by using our platforms, our users may associate the malware with our websites or mobile apps, and our reputation, business, financial condition and results of operations would be materially and adversely affected. 41 Table of Contents Our operations mainly depend on the performance of the internet infrastructure, fixed telecommunications networks and mobile operating systems in China, which may experience unexpected system failure, interruption, inadequacy or security breaches.
Although we have been successfully blocking these attacks in the past, we cannot guarantee that this will always be the case, and in the incident if users experience a malware attack by using our platforms, our users may associate the malware with our websites or mobile apps, and our reputation, business, financial condition and results of operations would be materially and adversely affected. 42 Table of Contents Our operations mainly depend on the performance of the internet infrastructure, fixed telecommunications networks and mobile operating systems in China, which may experience unexpected system failure, interruption, inadequacy or security breaches.
Risks Related to Our American Depositary Shares ● Our ADSs have experienced and may continue to experience price and volume fluctuations regardless of our operating performance, which could lead to costly litigation for us and make an investment in us less appealing. ● Under our dual-class share structure with different voting rights, holders of Class B ordinary shares have complete control of the outcome of matters put to a vote of shareholders, which may limit ability of holders of our Class A ordinary shares and the ADSs to influence corporate matters and could discourage others from pursuing any change of control transactions that holders of our Class A ordinary shares and the ADSs may view as beneficial. ● The dual-class structure of our ordinary shares may adversely affect the trading market for our ADSs. ● The voting rights of holders of ADSs are limited by the terms of the deposit agreement, and you may not be able to exercise your right to direct the voting of the underlying Class A ordinary shares which are represented by your ADSs. ● We have not maintained compliance with the minimum bid price requirement of $1.00 per share for continued listing on the Nasdaq.
Risks Related to Our American Depositary Shares ● Our ADSs have experienced and may continue to experience price and volume fluctuations regardless of our operating performance, which could lead to costly litigation for us and make an investment in us less appealing. ● Under our dual-class share structure with different voting rights, holders of Class B ordinary shares have complete control of the outcome of matters put to a vote of shareholders, which may limit ability of holders of our Class A ordinary shares and the ADSs to influence corporate matters and could discourage others from pursuing any change of control transactions that holders of our Class A ordinary shares and the ADSs may view as beneficial. ● The dual-class structure of our ordinary shares may adversely affect the trading market for our ADSs. 14 Table of Contents ● The voting rights of holders of ADSs are limited by the terms of the deposit agreement, and you may not be able to exercise your right to direct the voting of the underlying Class A ordinary shares which are represented by your ADSs. ● We have not maintained compliance with the minimum bid price requirement of $1.00 per share for continued listing on the Nasdaq.
A number of factors could negatively affect user retention, growth and engagement, including if: ● we fail to provide sufficient, high-quality user-generated audio content that keep our users interested and draw them to our platforms; ● we are unable to provide user-friendly experience to our hosts or users or continue innovating our products to improve user experience; ● we fail to identify key changes in user preferences in a timely manner or effectively respond to the changing user preferences; ● we fail to keep pace with changes in technologies; ● technical or other problems prevent us from delivering our services in a rapid and reliable manner or otherwise adversely affect the user experience; ● we fail to comply with applicable laws and regulations, including those related to illegal or inappropriate content; ● our hosts fail to keep our users engaged with our services or platforms; ● we suffer from negative publicity, fail to maintain our brand or if our reputation is damaged; ● we fail to address user concerns related to privacy and communication, safety, security or other factors; and ● there are adverse changes in our services that are mandated by, or that we elect to make to address, legislation, regulations, government mandates or app store policies.
A number of factors could negatively affect user retention, growth and engagement, including if: ● we fail to provide sufficient, high-quality user-generated audio content that keep our users interested and draw them to our platforms; ● we are unable to provide user-friendly experience to our hosts or users or continue innovating our products to improve user experience; ● we fail to identify key changes in user preferences in a timely manner or effectively respond to the changing user preferences; 29 Table of Contents ● we fail to keep pace with changes in technologies; ● technical or other problems prevent us from delivering our services in a rapid and reliable manner or otherwise adversely affect the user experience; ● we fail to comply with applicable laws and regulations, including those related to illegal or inappropriate content; ● our hosts fail to keep our users engaged with our services or platforms; ● we suffer from negative publicity, fail to maintain our brand or if our reputation is damaged; ● we fail to address user concerns related to privacy and communication, safety, security or other factors; and ● there are adverse changes in our services that are mandated by, or that we elect to make to address, legislation, regulations, government mandates or app store policies.
New technologies in programming or operations could render our technologies, our platforms or products or services that we are developing or expect to develop in the future obsolete or unattractive, thereby limiting our ability to recover related product development costs, outsourcing costs and licensing fees, which could result in a decline in our revenues and market share. 44 Table of Contents Our business depends substantially on the continuing efforts of our executive officers, key employees and qualified personnel, and our business operations may be adversely and negatively impacted if we lose their services.
New technologies in programming or operations could render our technologies, our platforms or products or services that we are developing or expect to develop in the future obsolete or unattractive, thereby limiting our ability to recover related product development costs, outsourcing costs and licensing fees, which could result in a decline in our revenues and market share. 45 Table of Contents Our business depends substantially on the continuing efforts of our executive officers, key employees and qualified personnel, and our business operations may be adversely and negatively impacted if we lose their services.
Apart from services charges and loans among the VIEs and our PRC subsidiaries, there were no other assets transferred between the VIEs and Non-VIEs in 2021, 2022 and 2023. 5 Table of Contents As advised by our PRC legal counsel, for any amounts owed by the VIEs to our PRC subsidiaries under the VIE agreements, unless otherwise required by PRC governmental authorities, we are able to settle such amounts without limitations under the current effective PRC laws and regulations, provided that the VIEs have sufficient funds to do so.
Apart from services charges and loans among the VIEs and our PRC subsidiaries, there were no other assets transferred between the VIEs and Non-VIEs in 2022, 2023 and 2024. 5 Table of Contents As advised by our PRC legal counsel, for any amounts owed by the VIEs to our PRC subsidiaries under the VIE agreements, unless otherwise required by PRC governmental authorities, we are able to settle such amounts without limitations under the current effective PRC laws and regulations, provided that the VIEs have sufficient funds to do so.
Our business partners primarily include popular hosts and their agencies, third parties that promote our platforms and applications and third parties that provide us technology support; ● challenges in formulating effective marketing strategies targeting users from various jurisdictions and cultures, who have a diverse range of preferences and demands; ● challenges in attracting users to generate appealing content on our overseas platforms; ● challenges associated with internet infrastructure and telecommunication network services overseas and risks of system security breaches; ● local competition; ● local employment laws and practices; ● fluctuations in currency exchange rates; ● exposure to different tax jurisdictions that may subject us to greater fluctuations in our effective tax rate and assessments in multiple jurisdictions on various tax-related assertions, including transfer pricing adjustments and permanent establishment risks; and ● increased costs associated with doing business in foreign jurisdictions.
Our business partners primarily include popular hosts and their agencies, third parties that promote our platforms and applications and third parties that provide us technology support; 52 Table of Contents ● challenges in formulating effective marketing strategies targeting users from various jurisdictions and cultures, who have a diverse range of preferences and demands; ● challenges in attracting users to generate appealing content on our overseas platforms; ● challenges associated with internet infrastructure and telecommunication network services overseas and risks of system security breaches; ● local competition; ● local employment laws and practices; ● fluctuations in currency exchange rates; ● exposure to different tax jurisdictions that may subject us to greater fluctuations in our effective tax rate and assessments in multiple jurisdictions on various tax-related assertions, including transfer pricing adjustments and permanent establishment risks; and ● increased costs associated with doing business in foreign jurisdictions.
Between July 2008 and June 2010, this appreciation halted and the exchange rate between the RMB and the U.S. dollar remained within a narrow band. Since June 2010, the RMB has fluctuated against the U.S. dollar, at times significantly and unpredictably.
Between July 2008 and June 2010, this appreciation halted and the exchange rate between the RMB and the U.S. dollar remained within a narrow band. Since June 2010, the Renminbi has fluctuated against the U.S. dollar, at times significantly and unpredictably.
Therefore, investors of our company and our business face potential uncertainty from actions taken by the PRC government affecting our business. 21 Table of Contents Any failure or perceived failure by us to comply with Anti-monopoly Guidelines for Internet Platforms and other Anti-monopoly laws and regulations may result in governmental investigations or enforcement actions, litigation or claims against us and could have an adverse effect on our business, financial condition and results of operations.
Therefore, investors of our company and our business face potential uncertainty from actions taken by the PRC government affecting our business. 22 Table of Contents Any failure or perceived failure by us to comply with Anti-monopoly Guidelines for Internet Platforms and other Anti-monopoly laws and regulations may result in governmental investigations or enforcement actions, litigation or claims against us and could have an adverse effect on our business, financial condition and results of operations.
However, the payment of dividends by our PRC subsidiaries and PRC VIEs is an important source of income for us to meet our financing need, and such payment is and may be subject to various restrictions.
The payment of dividends by our PRC subsidiaries and PRC VIEs is an important source of income for us to meet our financing need, and such payment is and may be subject to various restrictions.
If we are not able to maintain our relationship with guilds, they may choose to devote their resources to hosts who release programs on the other platforms, or they may encourage their hosts to use other platforms, which could materially and adversely affect our business, financial condition and results of operations. 37 Table of Contents We may be liable for intellectual property infringement relating to intellectual properties of third parties, which may materially and adversely affect our business, financial condition and prospects.
If we are not able to maintain our relationship with guilds, they may choose to devote their resources to hosts who release programs on the other platforms, or they may encourage their hosts to use other platforms, which could materially and adversely affect our business, financial condition and results of operations. 38 Table of Contents We may be liable for intellectual property infringement relating to intellectual properties of third parties, which may materially and adversely affect our business, financial condition and prospects.
If others do not perceive our key operating metrics to be accurate representations of our results of operations, or if we discover material inaccuracies in our key operating metrics, our reputation may be harmed and customers and platforms’ partners may be less willing to allocate their resources or spending to us, which could negatively affect our business and operating results. 45 Table of Contents We are subject to risks relating to litigation and disputes, which could adversely affect our business, prospects, results of operations and financial condition.
If others do not perceive our key operating metrics to be accurate representations of our results of operations, or if we discover material inaccuracies in our key operating metrics, our reputation may be harmed and customers and platforms’ partners may be less willing to allocate their resources or spending to us, which could negatively affect our business and operating results. 46 Table of Contents We are subject to risks relating to litigation and disputes, which could adversely affect our business, prospects, results of operations and financial condition.
We cannot assure you that we will be successful with any of the above. 35 Table of Contents To achieve growth and improve profitability, we expect our costs and expenses to increase in the future as we anticipate that we will need to continue to implement, from time to time, a variety of new and upgraded operational, informational and financial systems, procedures and controls on an as-needed basis.
We cannot assure you that we will be successful with any of the above. 36 Table of Contents To achieve growth and improve profitability, we expect our costs and expenses to increase in the future as we anticipate that we will need to continue to implement, from time to time, a variety of new and upgraded operational, informational and financial systems, procedures and controls on an as-needed basis.
Any such penalties or changes in policies, regulations or enforcement by government authorities, may disrupt our operations and materially and adversely affect our business, financial condition and results of operations. 34 Table of Contents As of the date of this annual report, we have not been subject to any material penalties from the relevant government authorities for failure to obtain any licenses for our business operations in the past.
Any such penalties or changes in policies, regulations or enforcement by government authorities, may disrupt our operations and materially and adversely affect our business, financial condition and results of operations. 35 Table of Contents As of the date of this annual report, we have not been subject to any material penalties from the relevant government authorities for failure to obtain any licenses for our business operations in the past.
If any of these third-party online payment systems suffer from security breaches, users may lose confidence in such payment systems and refrain from purchasing our virtual gifts online, in which case our results of operations would be negatively impacted. 42 Table of Contents We exercise no control over the third parties with whom we have business arrangements.
If any of these third-party online payment systems suffer from security breaches, users may lose confidence in such payment systems and refrain from purchasing our virtual gifts online, in which case our results of operations would be negatively impacted. 43 Table of Contents We exercise no control over the third parties with whom we have business arrangements.
There is no explicit provision or official interpretation stating that the merging or acquisition of a company engaged in the internet content business requires security review, and there is no requirement that acquisitions completed prior to the promulgation of the Security Review Circular are subject to MOFCOM review. 25 Table of Contents In the future, we may grow our business by acquiring complementary businesses.
There is no explicit provision or official interpretation stating that the merging or acquisition of a company engaged in the internet content business requires security review, and there is no requirement that acquisitions completed prior to the promulgation of the Security Review Circular are subject to MOFCOM review. 26 Table of Contents In the future, we may grow our business by acquiring complementary businesses.
The CCPA gives California consumers certain rights similar to those provided by the GDPR, and users may seek similar assurances from suppliers regarding compliance. 43 Table of Contents Unauthorized use of our intellectual property by our hosts and employees and other third parties and the expenses incurred in protecting our intellectual property rights may harm our brands and reputation and materially and adversely affect our business.
The CCPA gives California consumers certain rights similar to those provided by the GDPR, and users may seek similar assurances from suppliers regarding compliance. 44 Table of Contents Unauthorized use of our intellectual property by our hosts and employees and other third parties and the expenses incurred in protecting our intellectual property rights may harm our brands and reputation and materially and adversely affect our business.
Our capital contributions to our PRC subsidiaries must be reported to the MOFCOM or its local counterpart. 26 Table of Contents On March 30, 2015, SAFE issued the Circular on the Reforming of the Management Method of the Settlement of Foreign Currency Capital of Foreign-Invested Enterprises, or SAFE Circular 19, which took effect on June 1, 2015 and was last amended on December 30, 2019.
Our capital contributions to our PRC subsidiaries must be reported to the MOFCOM or its local counterpart. 27 Table of Contents On March 30, 2015, SAFE issued the Circular on the Reforming of the Management Method of the Settlement of Foreign Currency Capital of Foreign-Invested Enterprises, or SAFE Circular 19, which took effect on June 1, 2015 and was last amended on December 30, 2019.
According to the Social Insurance Law, employees must participate in pension insurance, work-related injury insurance, medical insurance, unemployment insurance and maternity insurance and the employers must, together with their employees or separately, pay the social insurance premiums for such employees. 24 Table of Contents We expect our labor costs to increase due to the implementation of these new laws and regulations.
According to the Social Insurance Law, employees must participate in pension insurance, work-related injury insurance, medical insurance, unemployment insurance and maternity insurance and the employers must, together with their employees or separately, pay the social insurance premiums for such employees. 25 Table of Contents We expect our labor costs to increase due to the implementation of these new laws and regulations.
As we face increasing competition and as litigation becomes a more common method for resolving commercial disputes in China, we face a higher risk of being the subject of intellectual property infringement claims or other legal proceedings. 38 Table of Contents We have adopted systematic methods to reduce our exposure to the risks of intellectual property infringement claims.
As we face increasing competition and as litigation becomes a more common method for resolving commercial disputes in China, we face a higher risk of being the subject of intellectual property infringement claims or other legal proceedings. 39 Table of Contents We have adopted systematic methods to reduce our exposure to the risks of intellectual property infringement claims.
Business Overview—Content Moderation.” If we cannot develop or maintain an effective operation of artificial intelligence to assist in those areas, or if we fail to improve our AI-based system to align with the fast increase of our data volume, we may not have the technologies required to support our business operations and development.
Business Overview—Content Moderation.” If we cannot develop or maintain an effective operation of artificial intelligence to assist in those areas, or if we fail to improve our AI-backed system to align with the fast increase of our data volume, we may not have the technologies required to support our business operations and development.
Furthermore, as of the date of this annual report, more campaigns, such as the “Clean Up the Internet 2022”, “Clean Up the Internet 2023” and “Clean Up the Internet 2024 Spring Festival”, have then been launched, which are reported to be aiming at, among others, rectifying a number of illegal activities in the internet information services industry.
Furthermore, as of the date of this annual report, more campaigns, such as the “Clean Up the Internet 2022”, “Clean Up the Internet 2023”, “Clean Up the Internet 2024 Spring Festival”, “Clean Up the Internet 2025 Spring Festival” and “Clean Up the Internet 2025”, have then been launched, which are reported to be aiming at, among others, rectifying a number of illegal activities in the internet information services industry.
Moreover, we may be required to obtain additional licenses or approvals if the PRC government adopts more stringent policies or regulations for our industry. 33 Table of Contents To expand our business scope and explore innovative business models, we have adopted and will continue to adopt various operating strategies and measures.
Moreover, we may be required to obtain additional licenses or approvals if the PRC government adopts more stringent policies or regulations for our industry. 34 Table of Contents To expand our business scope and explore innovative business models, we have adopted and will continue to adopt various operating strategies and measures.
Also, our operations and development rely heavily on our AI technologies. We have developed an AI-based system to accomplish tasks that usually require a massive amount of manpower, such as monitoring hundreds of millions of podcasts uploaded to our platforms to protect us from improper or illegal use of our platforms.
Also, our operations and development rely heavily on our AI technologies. We have developed an AI-backed system to accomplish tasks that usually require a massive amount of manpower, such as monitoring hundreds of millions of podcasts uploaded to our platforms to protect us from improper or illegal use of our platforms.
The Cyber Security Law requires network operators to fulfill certain obligations to safeguard security in the cyberspace and enhance network information management. 40 Table of Contents On August 17, 2021, the State Council promulgated the Regulations on Key Information Infrastructure Security Protection, which has become effective on September 1, 2021.
The Cyber Security Law requires network operators to fulfill certain obligations to safeguard security in the cyberspace and enhance network information management. 41 Table of Contents On August 17, 2021, the State Council promulgated the Regulations on Key Information Infrastructure Security Protection, which has become effective on September 1, 2021.
We were likely a passive foreign investment company, or PFIC, for 2023 and there is a significant risk that we will be a PFIC for 2024 and possibly subsequent taxable years, in which case U.S. investors will generally be subject to adverse U.S. federal income tax consequences.
We were likely a passive foreign investment company, or PFIC, for 2024 and there is a significant risk that we will be a PFIC for 2025 and possibly subsequent taxable years, in which case U.S. investors will generally be subject to adverse U.S. federal income tax consequences.
For these reasons, we cannot express an expectation as to our PFIC status for 2024 or any future taxable year. U.S. holders of our ADSs or ordinary shares should consult their tax advisers regarding the value and characterization of our assets for purposes of the PFIC rules.
For these reasons, we cannot express an expectation as to our PFIC status for 2025 or any future taxable year. U.S. holders of our ADSs or ordinary shares should consult their tax advisers regarding the value and characterization of our assets for purposes of the PFIC rules.
The value of our goodwill for any taxable year may be determined in large part by reference to our average quarterly market capitalization for that year. Because our market capitalization declined substantially during 2022 and 2023, we believe we were likely a PFIC for our 2023 taxable year.
The value of our goodwill for any taxable year may be determined in large part by reference to our average quarterly market capitalization for that year. Because our market capitalization declined substantially during 2023 and 2024, we believe we were likely a PFIC for our 2024 taxable year.
The size of our user base and the level of our user engagement are critical to our success. We generate substantially all of our net revenues from virtual gift sales for our audio entertainment. Therefore, our success in monetization primarily depends on our ability to maintain and increase the size of our user base and user engagement level.
We generate substantially all of our net revenues from virtual gift sales for our audio entertainment. Therefore, our success in monetization primarily depends on our ability to maintain and increase the size of our user base and user engagement level.
The measures we take in response to such negative publicity, disputes or legal claims may be expensive, time consuming and disruptive to our operations and divert our management’s attention. 48 Table of Contents In addition, we have run into multiple incidents in the past where the users paid for our virtual currency through fraudulent methods, including illegal use of credit cards.
The measures we take in response to such negative publicity, disputes or legal claims may be expensive, time consuming and disruptive to our operations and divert our management’s attention. In addition, we have run into multiple incidents in the past where the users paid for our virtual currency through fraudulent methods, including illegal use of credit cards.
In case of a loss of virtual assets, we may be sued by our users and held liable for damages, which may negatively affect our reputation and business, financial condition and results of operations. 18 Table of Contents Our business is subject to complex and evolving Chinese and international laws and regulations, including those regarding data privacy and cybersecurity.
In case of a loss of virtual assets, we may be sued by our users and held liable for damages, which may negatively affect our reputation and business, financial condition and results of operations. Our business is subject to complex and evolving Chinese and international laws and regulations, including those regarding data privacy and cybersecurity.
It is unclear whether any new “negative list” to be issued under the PRC Foreign Investment Law will be different from the foregoing lists that already exist. 59 Table of Contents The PRC Foreign Investment Law leaves leeway for future laws, administrative regulations or provisions of the State Council to provide for contractual arrangements as a form of foreign investment.
It is unclear whether any new “negative list” to be issued under the PRC Foreign Investment Law will be different from the foregoing lists that already exist. The PRC Foreign Investment Law leaves leeway for future laws, administrative regulations or provisions of the State Council to provide for contractual arrangements as a form of foreign investment.
In the course of preparing our consolidated financial statements in the prior years, we identified two material weaknesses which have not been remedied in our internal control over financial reporting as of December 31, 2023.
In the course of preparing our consolidated financial statements in the prior years, we identified two material weaknesses which have not been remedied in our internal control over financial reporting as of December 31, 2024.
Any such PRC tax liability will reduce the returns on your investment in our ADSs. 23 Table of Contents There are uncertainties with respect to indirect transfers of PRC taxable properties.
Any such PRC tax liability will reduce the returns on your investment in our ADSs. 24 Table of Contents There are uncertainties with respect to indirect transfers of PRC taxable properties.
On December 15, 2022, the PCAOB removed mainland China and Hong Kong from the list of jurisdictions where it is unable to inspect or investigate completely registered public accounting firms. Our current auditor, Enrome LLP, is headquartered in Singapore and subject to inspection by the PCAOB on a regular basis.
On December 15, 2022, the PCAOB removed mainland China and Hong Kong from the list of jurisdictions where it is unable to inspect or investigate completely registered public accounting firms. Our current auditor, Enrome LLP, is headquartered in Singapore and subject to inspection by the PCAOB.
If we continue to fail to meet this requirement and Nasdaq determines to delist our ADSs, the delisting would adversely affect the market liquidity of our ADSs and the market price of our ADSs could decrease. 14 Table of Contents Risks Related to Our Audit Committee Independent Investigation, Internal Controls and Related Matters We completed an audit committee independent investigation in October 2024.
If we continue to fail to meet this requirement and Nasdaq determines to delist our ADSs, the delisting would adversely affect the market liquidity of our ADSs and the market price of our ADSs could decrease. Risks Related to Our Audit Committee Independent Investigation, Internal Controls and Related Matters We completed an audit committee independent investigation in October 2024.
Organizational Structure—Contractual Arrangements with the VIEs and the VIEs’ Respective Shareholders.” 53 Table of Contents In the opinion of our PRC counsel, Fangda Partners, based on its understanding of the relevant PRC laws and regulations, each of the contractual arrangements among each of our WFOEs, the VIEs, and their respective shareholders is valid, binding and enforceable in accordance with its terms.
Organizational Structure—Contractual Arrangements with the VIEs and the VIEs’ Respective Shareholders.” In the opinion of our PRC counsel, Fangda Partners, based on its understanding of the relevant PRC laws and regulations, each of the contractual arrangements among each of our WFOEs, the VIEs, and their respective shareholders is valid, binding and enforceable in accordance with its terms.
The markets for online audio platforms are relatively new and rapidly developing and are subject to significant challenges, especially in terms of maintaining a stable paying user base and attracting new paying users, as well as complying with changes in regulatory requirements on online audio content and social interactions.
The markets for online audio platforms are subject to significant challenges, especially in terms of maintaining a stable paying user base and attracting new paying users, as well as complying with changes in regulatory requirements on online audio content and social interactions.
Due to our declining market capitalization, there is a significant risk that we will also be a PFIC for 2024 and possibly future taxable years.
Due to our declining market capitalization, there is a significant risk that we will also be a PFIC for 2025 and possibly future taxable years.
Risk Factors—Risks Related to Our Corporate Structure.” 12 Table of Contents Our business is subject to a number of risks, including risks that may prevent us from achieving our business objectives or may adversely affect our business, financial condition, results of operations, cash flows, and prospects.
Risk Factors—Risks Related to Our Corporate Structure.” Our business is subject to a number of risks, including risks that may prevent us from achieving our business objectives or may adversely affect our business, financial condition, results of operations, cash flows, and prospects.
Our business, financial condition and results of operations may be materially and adversely affected by these and other risks associated with our global expansion. 52 Table of Contents We face risks related to natural disasters, health epidemics and other outbreaks, which could significantly disrupt our operations.
Our business, financial condition and results of operations may be materially and adversely affected by these and other risks associated with our global expansion. We face risks related to natural disasters, health epidemics and other outbreaks, which could significantly disrupt our operations.
The delisting of the ADSs, or the threat of their being delisted, may materially and adversely affect the value of your investment.” 3.A. [Reserved] 3.B. Capitalization and Indebtedness Not applicable. 3.C. Reason for the Offer and Use of Proceeds Not applicable. 3.D.
The delisting of the ADSs, or the threat of their being delisted, may materially and adversely affect the value of your investment.” 3.A. [Reserved] 3.B. Capitalization and Indebtedness Not applicable. 3.C. Reason for the Offer and Use of Proceeds Not applicable. 12 Table of Contents 3.D.
Our inability to take these actions as and when necessary could materially adversely affect our liquidity, results of operations, financial condition and ability to operate. 49 Table of Contents We do not currently have business insurance to cover our main assets and business.
Our inability to take these actions as and when necessary could materially adversely affect our liquidity, results of operations, financial condition and ability to operate. We do not currently have business insurance to cover our main assets and business.
Business Overview—Regulation—Regulations Related to Employee Stock Incentive Plan.” Our leased property interests may be defective and our right to lease the properties affected by such defects may be challenged, which could adversely affect our business. As of December 31, 2023, we lease 18 premises in China and overseas.
Business Overview—Regulation—Regulations Related to Employee Stock Incentive Plan.” Our leased property interests may be defective and our right to lease the properties affected by such defects may be challenged, which could adversely affect our business. As of December 31, 2024, we lease 19 premises in China and overseas.
The AI-based system also plays a key role in content distribution and recommendation. See “Item 4. Information on the Company—4.B.
The AI-backed system also plays a key role in content distribution and recommendation. See “Item 4. Information on the Company—4.B.
Hosts are rewarded usually for their high-quality content, which are the primary contributors to user stickiness on our platforms and are hard to be replicated by other hosts. Certain of our top hosts received a large portion of their virtual gifts from a limited number of paying users.
Certain hosts are able to attract a large follower base. Hosts are rewarded usually for their high-quality content, which are the primary contributors to user stickiness on our platforms and are hard to be replicated by other hosts. Certain of our top hosts received a large portion of their virtual gifts from a limited number of paying users.
For more details, please see “Item 4. Information on the Company—4.B. Business Overview—Regulations Related to M&A and Overseas Listings.” 55 Table of Contents Furthermore, on December 28, 2021, the CAC together with other regulatory authorities officially announced the Cybersecurity Review Measures.
For more details, please see “Item 4. Information on the Company—4.B. Business Overview—Regulations Related to M&A and Overseas Listings.” Furthermore, on December 28, 2021, the CAC together with other regulatory authorities officially announced the Cybersecurity Review Measures.
See “—We may be liable for intellectual property infringement relating to intellectual properties of third parties, which may materially and adversely affect our business, financial condition and prospects.” We cannot assure you that we will be able to defuse negative publicity about us, our management and/or our services to the satisfaction of our investors, users, customers and platforms’ partners.
See “—We may be liable for intellectual property infringement relating to intellectual properties of third parties, which may materially and adversely affect our business, financial condition and prospects.” We cannot assure you that we will be able to defuse negative publicity about us, our management and/or our services to the satisfaction of our investors, users, customers and platforms’ partners. 47 Table of Contents For instance, Mr.
Risks Related to Our Business and Industry ● If we fail to retain our existing users, to keep them engaged, to further grow our user base or to increase paying ratio, our business, operation, profitability and prospects may be materially and adversely affected. ● The PRC government may further tighten the regulation on online audio and entertainment platforms, which may materially and negatively affect our reputation, business, financial condition and results of operations. 13 Table of Contents ● We may fail to attract, cultivate and retain talented and popular hosts, which may materially and negatively affect our user retention and thus our business and operations. ● Our content monitoring system may not be effective in preventing misconduct by our platforms’ users and misuse of our platforms and such misconduct or misuse may materially and adversely impact our business, financial condition and results of operations. ● We may fail to offer attractive audio content on our platforms. ● We have limited experience in international markets.
The delisting of the ADSs, or the threat of their being delisted, may materially and adversely affect the value of your investment. 13 Table of Contents Risks Related to Our Business and Industry ● If we fail to retain our existing users, to keep them engaged, to further grow our user base or to increase paying ratio, our business, operation, profitability and prospects may be materially and adversely affected. ● The PRC government may further tighten the regulation on online audio and entertainment platforms, which may materially and negatively affect our reputation, business, financial condition and results of operations. ● We may fail to attract, cultivate and retain talented and popular hosts, which may materially and negatively affect our user retention and thus our business and operations. ● Our content monitoring system may not be effective in preventing misconduct by our platforms’ users and misuse of our platforms and such misconduct or misuse may materially and adversely impact our business, financial condition and results of operations. ● We may fail to offer attractive audio content on our platforms. ● We have limited experience in international markets.
If we are found in violation of any PRC laws or regulations, or if the contractual arrangements among any of our WFOEs, the VIEs and/or their respective shareholders are determined as illegal or invalid by the PRC court, arbitral tribunal or regulatory authorities, the relevant governmental authorities would have broad discretion in dealing with such violation, including, without limitation: ● revoking the business licenses and/or operating licenses of such entities; ● imposing fines on us; ● confiscating any of our income that they deem to be obtained through illegal operations; ● discontinuing or placing restrictions or onerous conditions on our operations; ● placing restrictions on our right to collect revenues; ● shutting down our servers or blocking our apps/websites; ● requiring us to restructure the operations in such a way as to compel us to establish a new enterprise, re-apply for the necessary licenses or relocate our businesses, staff and assets; ● imposing additional conditions or requirements with which we may not be able to comply; or ● taking other regulatory or enforcement actions against us that could be harmful to our business.
If we are found in violation of any PRC laws or regulations, or if the contractual arrangements among any of our WFOEs, the VIEs and/or their respective shareholders are determined as illegal or invalid by the PRC court, arbitral tribunal or regulatory authorities, the relevant governmental authorities would have broad discretion in dealing with such violation, including, without limitation: ● revoking the business licenses and/or operating licenses of such entities; ● imposing fines on us; ● confiscating any of our income that they deem to be obtained through illegal operations; ● discontinuing or placing restrictions or onerous conditions on our operations; ● placing restrictions on our right to collect revenues; ● shutting down our servers or blocking our apps/websites; ● requiring us to restructure the operations in such a way as to compel us to establish a new enterprise, re-apply for the necessary licenses or relocate our businesses, staff and assets; ● imposing additional conditions or requirements with which we may not be able to comply; or ● taking other regulatory or enforcement actions against us that could be harmful to our business. 54 Table of Contents The imposition of any of these penalties may result in a material and adverse effect on our ability to conduct our business operations.
For more information regarding our principal shareholders and their affiliated entities, see “Item 6. Directors, Senior Management and Employees—6.E. Share Ownership.” 58 Table of Contents We may rely on dividends paid by our PRC subsidiaries to fund cash and financing requirements.
For more information regarding our principal shareholders and their affiliated entities, see “Item 6. Directors, Senior Management and Employees—6.E. Share Ownership.” We may rely on dividends paid by our PRC subsidiaries to fund cash and financing requirements.
Further to SAT Circular 82, on August 3, 2011, the SAT issued the Administrative Measures of Enterprise Income Tax of Chinese-Controlled Offshore Incorporated Resident Enterprises (Trial), or SAT Bulletin 45, which became effective on September 1, 2011, to provide more guidance on the implementation of SAT Circular 82.
Further to SAT Circular 82, on July 27, 2011, the SAT issued the Administrative Measures of Enterprise Income Tax of Chinese-Controlled Offshore Incorporated Resident Enterprises (Trial), or SAT Bulletin 45, which became effective on September 1, 2011, to provide more guidance on the implementation of SAT Circular 82.
In the event we re-launch such incentive program in the future, there will be no assurance that it will achieve the anticipated effect to attract talents and enhance user spending. 30 Table of Contents Meanwhile, we strive to discover and cultivate promising hosts.
In the event we re-launch such incentive program in the future, there will be no assurance that it will achieve the anticipated effect to attract talents and enhance user spending. Meanwhile, we strive to discover and cultivate promising hosts.
Our current auditor, Enrome LLP, is headquartered in Singapore and subject to inspection by the PCAOB on a regular basis. Our current auditor was not among the PCAOB-registered public accounting firms headquartered in mainland China or Hong Kong that were subject to 2021 Determinations.
Our current auditor, Enrome LLP, is headquartered in Singapore and subject to inspection by the PCAOB. Our current auditor was not among the PCAOB-registered public accounting firms headquartered in mainland China or Hong Kong that were subject to 2021 Determinations.
We and certain of our directors and officers have been named as defendants in several shareholder class action lawsuits in the past, and if similar events occur again in the future, they could have a material adverse impact on our business, financial condition, results of operation, cash flows and reputation.
We and certain of our directors and officers were named as defendants in several shareholder class action lawsuits in the past, and if similar events occur again in the future, they could have a material adverse impact on our business, financial condition, results of operation, cash flows and reputation. In the past, we defended against the putative class action lawsuits.
This re-engineering process could require significant additional research and development resources, and we may not be able to complete it successfully. 46 Table of Contents Negative publicity may materially and adversely affect our brand, reputation, business and growth prospects.
This re-engineering process could require significant additional research and development resources, and we may not be able to complete it successfully. Negative publicity may materially and adversely affect our brand, reputation, business and growth prospects.
As of December 31, 2023, Sound Group Inc. had made cumulative capital contributions of US$57.5 million to our PRC subsidiaries through intermediate holding company, and were accounted as long-term investments of Sound Group Inc. These funds have been used by our PRC subsidiaries and the VIEs for their operations.
As of December 31, 2024, Sound Group Inc. had made cumulative capital contributions of US$31.0 million to our PRC subsidiaries through intermediate holding company, and were accounted as long-term investments of Sound Group Inc. These funds have been used by our PRC subsidiaries and the VIEs for their operations.
In the event that the shareholders of the VIEs breach the terms of these contractual arrangements and voluntarily liquidate the VIEs, or the VIEs declares bankruptcy and all or part of its assets become subject to liens or rights of third-party creditors, or are otherwise disposed of without our consent, we may be unable to conduct some or all of our business operations or otherwise benefit from the assets held by our affiliated entities, which could have a material adverse effect on our business financial condition and results of operations. 54 Table of Contents Most of the nominee shareholders of the VIEs are also the management of the Company.
In the event that the shareholders of the VIEs breach the terms of these contractual arrangements and voluntarily liquidate the VIEs, or the VIEs declares bankruptcy and all or part of its assets become subject to liens or rights of third-party creditors, or are otherwise disposed of without our consent, we may be unable to conduct some or all of our business operations or otherwise benefit from the assets held by our affiliated entities, which could have a material adverse effect on our business financial condition and results of operations.
Organizational Structure—Contractual Arrangements with the VIEs and the VIEs’ Respective Shareholders.” Our corporate structure involves unique risks to investors in the ADSs. In 2021, 2022 and 2023, the amount of revenues generated by the VIEs accounted for 93.0%, 98.6% and 99.9%, respectively, of our total net revenues.
Organizational Structure—Contractual Arrangements with the VIEs and the VIEs’ Respective Shareholders.” Our corporate structure involves unique risks to investors in the ADSs. In 2022, 2023 and 2024, the amount of revenues generated by the VIEs accounted for 98.6%, 99.9% and 99.8%, respectively, of our total net revenues.
Furthermore, on June 1, 2021, the Law of the PRC on the Protection of Minors (2020 Revision) took effect, which provides that, among others, live streaming service providers are not allowed to provide minors under age 16 with an online live streaming host account registration service, and must obtain the consent from parents or other guardians and verify the identity of the minors before allowing minors aged 16 or above to register live streaming host accounts.
Furthermore, on April 26, 2024, the Law of the PRC on the Protection of Minors (2024 Revision) took effect, which provides that, among others, live streaming service providers are not allowed to provide minors under age 16 with an online live streaming host account registration service, and must obtain the consent from parents or other guardians and verify the identity of the minors before allowing minors aged 16 or above to register live streaming host accounts.
Moreover, the PRC Constitution, the PRC Criminal Law, the General Rules of the PRC Civil Law and the Cybersecurity Law protect individual privacy in general, which require certain authorization or consent from internet users prior to collection, use or disclosure of their personal data and also protection of the security of the personal data of such users.
Moreover, the PRC Constitution, the PRC Criminal Law, the Civil Code of the People’s Republic of China and the Cybersecurity Law protect individual privacy in general, which require certain authorization or consent from internet users prior to collection, use or disclosure of their personal data and also protection of the security of the personal data of such users.
They in the aggregate hold approximately 23.5% of our total issued and outstanding share capital and 75.4% of the aggregate voting power of our total issued and outstanding share capital, excluding 5,008,430 Class A ordinary shares held by Kastle Limited, which holds such Class A ordinary shares in trust for the benefit of certain of our senior management and directors as of September 30, 2024.
They in the aggregate hold approximately 23.4% of our total issued and outstanding share capital and 75.4% of the aggregate voting power of our total issued and outstanding share capital, excluding 5,008,430 Class A ordinary shares held by Kastle Limited, which holds such Class A ordinary shares in trust for the benefit of certain of our senior management and directors as of February 28, 2025.
Due to the initial success of the interactive audio products, we plan to continue to strengthen and expand our interactive audio product offerings. Since December 2020, we started to collaborate with a number of automobile manufacturers and Internet of Vehicles platforms in China.
Due to the initial success of the interactive audio products, we plan to continue to strengthen and expand our interactive audio product offerings. We have been collaborating with a number of automobile manufacturers and Internet of Vehicles platforms in China since December 2020.
The government may impose other legal sanctions against us, including, in serious cases, suspending or revoking the licenses needed to operate our platforms. We have deployed AI-based technologies supplemented by a team primarily consisting of staff outsourced from third parties, to monitor content for any illegal, fraudulent or inappropriate content or activities on our platforms. See “Item 4.
The government may impose other legal sanctions against us, including, in serious cases, suspending or revoking the licenses needed to operate our platforms. 31 Table of Contents We have deployed AI-backed technologies supplemented by a team primarily consisting of staff outsourced from third parties, to monitor content for any illegal, fraudulent or inappropriate content or activities on our platforms.
There is no guarantee that we may succeed in adapting to such changes in the markets. 32 Table of Contents As the online audio industry in China is relatively young, there are few proven methods of projecting user demand or available industry standards on which we can rely.
There is no guarantee that we may succeed in adapting to such changes in the markets. 33 Table of Contents There are few proven methods of projecting user demand or available industry standards on which we can rely for the online audio industry in China.
As of December 31, 2022 and 2023, total assets of the VIEs, excluding amounts due from other companies in the Group, equaled to 45.2% and 35.6% of our consolidated total assets as of the same dates, respectively. Our contractual arrangements with the VIEs have not been tested in court.
As of December 31, 2023 and 2024, total assets of the VIEs, excluding amounts due from other companies in the Group, equaled to 35.6% and 41.5% of our consolidated total assets as of the same dates, respectively. Our contractual arrangements with the VIEs have not been tested in court.
A number of awards become vested upon the completion of our initial public offering in January 2020 and we recognized a significant amount of share-based compensation expenses upon then. As of December 31, 2023, our total unrecognized share-based compensation related to the Second Amended and Restated 2019 Share Incentive Plan amounted to RMB26.5 million (US$3.8 million).
A number of awards become vested upon the completion of our initial public offering in January 2020 and we recognized a significant amount of share-based compensation expenses upon then. As of December 31, 2024, our total unrecognized share-based compensation related to the Second Amended and Restated 2019 Share Incentive Plan amounted to RMB6.2 million (US$0.8 million).
Neither could we assure you that our ongoing and future attempts to innovate our communities and monetize our users will always be successful, profitable or accepted, and therefore the income potential of our business is difficult to gauge.
We cannot assure you that our efforts will continue to achieve satisfactory results. Neither could we assure you that our ongoing and future attempts to innovate our communities and monetize our users will always be successful, profitable or accepted, and therefore the income potential of our business is difficult to gauge.
Although we have achieved a positive working capital of RMB260.5 million (US$36.7 million) as of December 31, 2023, there is no assurance that we will generate sufficient net income or operating cash flows to meet our working capital requirements and repay our liabilities as they become due in the future due to a variety of factors, some of which are beyond our control.
Although we have achieved a positive working capital of RMB186.6 million (US$25.6 million) as of December 31, 2024, there is no assurance that we will generate sufficient net income or operating cash flows to meet our working capital requirements and repay our liabilities as they become due in the future due to a variety of factors, some of which are beyond our control.
There is no limit on the circumstances where holders of Class B ordinary shares may transfer or otherwise dispose of their Class B ordinary shares. As of September 30, 2024, Mr. Jinnan (Marco) Lai, our Founder, Chief Executive Officer and Chairman, and Mr.
There is no limit on the circumstances where holders of Class B ordinary shares may transfer or otherwise dispose of their Class B ordinary shares. As of February 28, 2025, Mr. Jinnan (Marco) Lai, our Founder, Chief Executive Officer and Chairman, and Mr.
As a result, the PRC tax authorities could require that the VIEs adjust their taxable income upward for PRC tax purposes. Such an adjustment could increase our WFOEs tax expenses, subject our WFOEs to late payment fees and other penalties for underpayment of taxes.
As a result, the PRC tax authorities could require that the VIEs adjust their taxable income upward for PRC tax purposes. Such an adjustment could increase our WFOEs tax expenses, subject our WFOEs to late payment fees and other penalties for underpayment of taxes. As a result, our consolidated results of operations may be adversely affected.
On April 8, 2024, the MOFCOM and NDRC promulgated the Special Administrative Measures for the Access of Foreign Investment (Negative List) (2024 Version), or the Negative List (2024), which will become effective on November 1, 2024.
On April 8, 2024, the MOFCOM and NDRC promulgated the Special Administrative Measures for the Access of Foreign Investment (Negative List) (2024 Version), or the Negative List (2024), which took effect on November 1, 2024.

… 132 more changes not shown on this page.

Item 4. Mine Safety Disclosures

Mine Safety Disclosures — required of mining issuers

105 edited+23 added−28 removed262 unchanged
On December 31, 2021, the CAC together with other regulatory authorities published Administrative Provisions on Algorithm Recommendation for Internet Information Services, effective on March 1, 2022 which provides, among others, that algorithm recommendation service providers shall (i) establish and improve the management systems and technical measures for algorithm mechanism and principle review, scientific and technological ethics review, user registration, information release review, data security and personal information protection, anti-telecommunications and Internet fraud, security assessment and monitoring, and security incident emergency response, formulate and disclose the relevant rules for algorithm recommendation services, and be equipped with professional staff and technical support appropriate to the scale of the algorithm recommendation service; (ii) regularly review, evaluate and verify the principle, models, data and application results of algorithm mechanisms, (iii) strengthen information security management, establish and improve a feature database for identifying illegal and bad information, and improve entry standards, rules and procedures; and (iv) strengthen the management of user models and user labels, and improve the rules on points of interest recorded into user models and user label management, and shall not record illegal and harmful information keywords into the points of interest of users or use them as user labels to push information.
On December 31, 2021, the CAC together with other regulatory authorities published Administrative Provisions on Algorithm Recommendation for Internet Information Services, to be effective on March 1, 2022 which provides, among others, that algorithm recommendation service providers shall (i) establish and improve the management systems and technical measures for algorithm mechanism and principle review, scientific and technological ethics review, user registration, information release review, data security and personal information protection, anti-telecommunications and Internet fraud, security assessment and monitoring, and security incident emergency response, formulate and disclose the relevant rules for algorithm recommendation services, and be equipped with professional staff and technical support appropriate to the scale of the algorithm recommendation service; (ii) regularly review, evaluate and verify the principle, models, data and application results of algorithm mechanisms, (iii) strengthen information security management, establish and improve a feature database for identifying illegal and bad information, and improve entry standards, rules and procedures; (iv) strengthen the management of user models and user labels, and improve the rules on points of interest recorded into user models and user label management, and shall not record illegal and harmful information keywords into the points of interest of users or use them as user labels to push information.
Guangzhou Lizhi currently holds the Internet Culture Operating License issued by the Ministry of Culture and Tourism of the Guangdong Province on August 2, 2022. Guangzhou Huanliao currently holds the Internet Culture Operating License issued by the Ministry of Culture and Tourism of the Guangdong Province on November 21, 2022.
Guangzhou Lizhi currently holds the Internet Culture Operating License issued by the Ministry of Culture and Tourism of the Guangdong Province on August 2, 2022. Guangzhou Huanliao currently holds the Internet Culture Operating License issued by the Ministry of Culture and Tourism of the Guangdong Province on November 21, 2022.
These provisions also stipulated that, when data processors that are not critical information infrastructure operators have cumulatively provided to an overseas recipient the personal information (excluding sensitive personal information) of not less than 100,000 individuals but less than 1 million individuals or the sensitive personal information of less than 10,000 individuals, the data processors must enter into a standard contract for cross-border transfer of personal information with the data recipient or pass a personal information protection certification.
These provisions also stipulated that, when data processors that are not critical information infrastructure operators have cumulatively provided to an overseas recipient the personal information (excluding sensitive personal information) of not less than 100,000 individuals but less than 1 million individuals or the sensitive personal information of less than 10,000 individuals, the data processors must enter into a standard contract for cross-border transfer of personal information with the data recipient or pass a personal information protection certification.
Trademark Pursuant to the Trademark Law of the PRC promulgated by the SCNPC on August 23, 1982 and last revised on April 23, 2019 and came into effect on November 1, 2019, and the Implementation Rules of PRC Trademark Law promulgated on August 3, 2002 and last amended on April 29, 2014 by the State Council and became effective on May 1, 2014, a registered trademark means a trademark that has been approved by and registered with the trademark office, including goods marks, service marks, collective marks and certification marks.
Trademark Pursuant to the Trademark Law of the PRC promulgated by the SCNPC on August 23, 1982 and revised on April 23, 2019 and came into effect on November 1, 2019, and the Implementation Rules of PRC Trademark Law promulgated on August 3, 2002 and last amended on April 29, 2014 by the State Council and became effective on May 1, 2014, a registered trademark means a trademark that has been approved by and registered with the trademark office, including goods marks, service marks, collective marks and certification marks.
Patent In accordance with the Patent Law of PRC, or the Patent Law, promulgated on March 12, 1984 and last amended on December 27, 2008 by the SCNPC and became effective on October 1,2009, and the Rules for the Implementation of the Patent Law of PRC promulgated on January 19, 1985 and last amended on January 9, 2010 by the State Council, patent is divided in to 3 categories, i.e., invention patent, design patent and utility model patent.
Patent In accordance with the Patent Law of PRC, or the Patent Law, promulgated on March 12, 1984 and amended on December 27, 2008 by the SCNPC and became effective on October 1,2009, and the Rules for the Implementation of the Patent Law of PRC promulgated on January 19, 1985 and last amended on January 9, 2010 by the State Council, patent is divided in to 3 categories, i.e., invention patent, design patent and utility model patent.
Such actions include, among other things, incurrence of debt to a third party, change of directors or senior management, acquisition or disposal of assets or shares, amendment to its articles of association or business scope and other matters.
Such actions include, among other things, incurrence of debt to a third party, change of directors or senior management, acquisition or disposal of assets or shares, amendment to its articles of association or business scope and other matters.
According to Announcement of SAT on Issuing the Measures for the Administration of Non-Resident Taxpayers’ Enjoyment of the Treatment under Tax Agreements effective on January 1, 2020, non-resident taxpayers claiming treaty benefits shall be handled in accordance with the principles of “self-assessment, claiming benefits, retention of the relevant materials for future inspection.” Where a non-resident taxpayer self-assesses and concludes that it satisfies the criteria for claiming treaty benefits, it may enjoy treaty benefits at the time of tax declaration or at the time of withholding through the withholding agent, simultaneously gather and retain the relevant materials for future inspection and accept follow-up administration by the tax authorities. 97 Table of Contents Pursuant to the Announcement on Matters Concerning “Beneficial Owners” in Tax Treaties, issued by the SAT on February 3, 2018 and came into effect on April 1, 2018, when determining an applicant’s “beneficial owner” status regarding tax treatments in connection with dividends, interests or royalties in tax treaties, several factors set forth below will be taken into account, although the actual analysis will be fact-specific: (i) whether the applicant is obligated to pay more than 50% of his or her income in 12 months to residents in a third country or region; (ii) whether the business operated by the applicant constitutes a substantial business operation; and (iii) whether the counterparty country or region to the tax treaties does not levy any tax or grant tax exemption on relevant incomes or levy tax at an extremely low rate.
According to Announcement of SAT on Issuing the Measures for the Administration of Non-Resident Taxpayers’ Enjoyment of the Treatment under Tax Agreements effective on January 1, 2020, non-resident taxpayers claiming treaty benefits shall be handled in accordance with the principles of “self-assessment, claiming benefits, retention of the relevant materials for future inspection.” Where a non-resident taxpayer self-assesses and concludes that it satisfies the criteria for claiming treaty benefits, it may enjoy treaty benefits at the time of tax declaration or at the time of withholding through the withholding agent, simultaneously gather and retain the relevant materials for future inspection and accept follow-up administration by the tax authorities. 96 Table of Contents Pursuant to the Announcement on Matters Concerning “Beneficial Owners” in Tax Treaties, issued by the SAT on February 3, 2018 and came into effect on April 1, 2018, when determining an applicant’s “beneficial owner” status regarding tax treatments in connection with dividends, interests or royalties in tax treaties, several factors set forth below will be taken into account, although the actual analysis will be fact-specific: (i) whether the applicant is obligated to pay more than 50% of his or her income in 12 months to residents in a third country or region; (ii) whether the business operated by the applicant constitutes a substantial business operation; and (iii) whether the counterparty country or region to the tax treaties does not levy any tax or grant tax exemption on relevant incomes or levy tax at an extremely low rate.
On December 31, 2021, the CAC together with other regulatory authorities published Administrative Provisions on Algorithm Recommendation for Internet Information Services, to be effective on March 1, 2022 which provides, among others, that algorithm recommendation service providers shall (i) establish and improve the management systems and technical measures for algorithm mechanism and principle review, scientific and technological ethics review, user registration, information release review, data security and personal information protection, anti-telecommunications and Internet fraud, security assessment and monitoring, and security incident emergency response, formulate and disclose the relevant rules for algorithm recommendation services, and be equipped with professional staff and technical support appropriate to the scale of the algorithm recommendation service; (ii) regularly review, evaluate and verify the principle, models, data and application results of algorithm mechanisms, (iii) strengthen information security management, establish and improve a feature database for identifying illegal and bad information, and improve entry standards, rules and procedures; (iv) strengthen the management of user models and user labels, and improve the rules on points of interest recorded into user models and user label management, and shall not record illegal and harmful information keywords into the points of interest of users or use them as user labels to push information. 91 Table of Contents On July 7, 2022, the CAC promulgated the Measures for the Security Assessment of Data Cross-border Transfer, which took effect on September 1, 2022.
On December 31, 2021, the CAC together with other regulatory authorities published Administrative Provisions on Algorithm Recommendation for Internet Information Services, effective on March 1, 2022 which provides, among others, that algorithm recommendation service providers shall (i) establish and improve the management systems and technical measures for algorithm mechanism and principle review, scientific and technological ethics review, user registration, information release review, data security and personal information protection, anti-telecommunications and Internet fraud, security assessment and monitoring, and security incident emergency response, formulate and disclose the relevant rules for algorithm recommendation services, and be equipped with professional staff and technical support appropriate to the scale of the algorithm recommendation service; (ii) regularly review, evaluate and verify the principle, models, data and application results of algorithm mechanisms, (iii) strengthen information security management, establish and improve a feature database for identifying illegal and bad information, and improve entry standards, rules and procedures; and (iv) strengthen the management of user models and user labels, and improve the rules on points of interest recorded into user models and user label management, and shall not record illegal and harmful information keywords into the points of interest of users or use them as user labels to push information. 74 Table of Contents On July 7, 2022, the CAC promulgated the Measures for the Security Assessment of Data Cross-border Transfer, which took effect on September 1, 2022.
This includes: (a) cancelling the two administrative approvals, namely the foreign exchange registration approvals under domestic and overseas direct investments, which shall be verified directly by banks instead; (b) simplifying the management of registration and confirmation of capital contribution by foreign investors under domestic direct investment; and (c) cancelling the annual foreign exchange inspection of direct investments. 95 Table of Contents According to the Notice of the SAFE on Issues concerning Foreign Exchange Administration of the Overseas Investment and Financing and the Round-tripping Investment Made by Domestic Residents through Special-Purpose Companies, or the Circular 37, promulgated by the SAFE on July 4, 2014, a domestic resident (domestic institution or domestic resident individual), which/who, for the purposes of offshore investment and financing, directly establishes or indirectly controls a special purpose company, and directly or indirectly undertakes domestic direct investment activities through such special purpose company using legitimately held domestic company assets or equities, or using legitimately held overseas company assets or equities, namely the activity of establishing a domestic foreign investment enterprise or project by merger and acquisition or incorporating a new entity while acquiring ownership title, rights of control, rights of business operation and management and so on, must apply to the SAFE for registration of foreign exchange for overseas investments.
This includes: (a) cancelling the two administrative approvals, namely the foreign exchange registration approvals under domestic and overseas direct investments, which shall be verified directly by banks instead; (b) simplifying the management of registration and confirmation of capital contribution by foreign investors under domestic direct investment; and (c) cancelling the annual foreign exchange inspection of direct investments. 94 Table of Contents According to the Notice of the SAFE on Issues concerning Foreign Exchange Administration of the Overseas Investment and Financing and the Round-tripping Investment Made by Domestic Residents through Special-Purpose Companies, or the Circular 37, promulgated by the SAFE on July 4, 2014, a domestic resident (domestic institution or domestic resident individual), which/who, for the purposes of offshore investment and financing, directly establishes or indirectly controls a special purpose company, and directly or indirectly undertakes domestic direct investment activities through such special purpose company using legitimately held domestic company assets or equities, or using legitimately held overseas company assets or equities, namely the activity of establishing a domestic foreign investment enterprise or project by merger and acquisition or incorporating a new entity while acquiring ownership title, rights of control, rights of business operation and management and so on, must apply to the SAFE for registration of foreign exchange for overseas investments.
No overseas offering and listing shall be made under any of the following circumstances: (1) where such securities offering and listing is explicitly prohibited by provisions in laws, administrative regulations and relevant state rules; (2) where the intended securities offering and listing may endanger national security as reviewed and determined by competent authorities; (3) where the PRC domestic enterprise intending to make the securities offering and listing, or its controlling shareholders and the actual controller, have committed crimes such as corruption, bribery, embezzlement, misappropriation of property or undermining the order of the socialist market economy during the latest three years;(4) where the PRC domestic enterprise intending to make the securities offering and listing is suspected of committing crimes or major violation of laws and regulations, and is under investigation according to law, and no conclusion has yet been made thereof; and (5) where there are material ownership disputes over equity held by the PRC domestic enterprise’s controlling shareholder or by other shareholders that are controlled by the controlling shareholder and/or actual controller. ​ ​ 99 Table of Contents 4.C.
No overseas offering and listing shall be made under any of the following circumstances: (1) where such securities offering and listing is explicitly prohibited by provisions in laws, administrative regulations and relevant state rules; (2) where the intended securities offering and listing may endanger national security as reviewed and determined by competent authorities; (3) where the PRC domestic enterprise intending to make the securities offering and listing, or its controlling shareholders and the actual controller, have committed crimes such as corruption, bribery, embezzlement, misappropriation of property or undermining the order of the socialist market economy during the latest three years;(4) where the PRC domestic enterprise intending to make the securities offering and listing is suspected of committing crimes or major violation of laws and regulations, and is under investigation according to law, and no conclusion has yet been made thereof; and (5) where there are material ownership disputes over equity held by the PRC domestic enterprise’s controlling shareholder or by other shareholders that are controlled by the controlling shareholder and/or actual controller. ​ ​ 98 Table of Contents 4.C.
Regulations Related to Employee Stock Incentive Plan Pursuant to the Notice of Issues Related to the Foreign Exchange Administration for Domestic Individuals Participating in Stock Incentive Plan of Overseas Listed Company, or Circular 7, which was issued by the SAFE on February 15, 2012, employees, directors, supervisors, and other senior management who participate in any stock incentive plan of an publicly-listed overseas company and who are PRC citizens or non-PRC citizens residing in China for a continuous period of no less than one year, subject to a few exceptions, are required to register with SAFE or its local branches through a qualified domestic agent, which may be a PRC subsidiary of such overseas listed company, and complete certain other procedures with respect to the stock incentive plan. 98 Table of Contents In addition, the State Administration for Taxation has issued circulars in relation to employee stock incentive awards, under which our employees based in the PRC shall be subject to PRC individual income tax for exercising their incentive awards.
Regulations Related to Employee Stock Incentive Plan Pursuant to the Notice of Issues Related to the Foreign Exchange Administration for Domestic Individuals Participating in Stock Incentive Plan of Overseas Listed Company, or Circular 7, which was issued by the SAFE on February 15, 2012, employees, directors, supervisors, and other senior management who participate in any stock incentive plan of an publicly-listed overseas company and who are PRC citizens or non-PRC citizens residing in China for a continuous period of no less than one year, subject to a few exceptions, are required to register with SAFE or its local branches through a qualified domestic agent, which may be a PRC subsidiary of such overseas listed company, and complete certain other procedures with respect to the stock incentive plan. 97 Table of Contents In addition, the State Administration for Taxation has issued circulars in relation to employee stock incentive awards, under which our employees based in the PRC shall be subject to PRC individual income tax for exercising their incentive awards.
(iii) any internet information service provider, who provides its users with information memory space for such users to provide the works, performance and audio-visual products to the general public via the information network, will not be required to assume the indemnification liabilities if (a) it clearly indicates that the information memory space is provided to the users and publicizes its own name, contact person and web address; (b) it has not altered the works, performance and audio-visual products that are provided by the users; (c) it is not aware of or has reason to know the infringement of the works, performance and audio-visual products provided by the users; (d) it has not directly derived any economic benefit from the provision of the works, performance and audio-visual products by its users; and (e) after receiving a notice from the right holder, it has deleted such works, performance and audio-visual products as alleged for infringement pursuant to such regulation. 93 Table of Contents (iv) an internet information service provider, who provides its users with search services or links, will not be required to assume the indemnification liabilities if, after receiving a notice from the right holder, it has disconnected the link to the works, performance and audio-visual products as alleged for copyright infringement pursuant to this regulation.
(iii) any internet information service provider, who provides its users with information memory space for such users to provide the works, performance and audio-visual products to the general public via the information network, will not be required to assume the indemnification liabilities if (a) it clearly indicates that the information memory space is provided to the users and publicizes its own name, contact person and web address; (b) it has not altered the works, performance and audio-visual products that are provided by the users; (c) it is not aware of or has reason to know the infringement of the works, performance and audio-visual products provided by the users; (d) it has not directly derived any economic benefit from the provision of the works, performance and audio-visual products by its users; and (e) after receiving a notice from the right holder, it has deleted such works, performance and audio-visual products as alleged for infringement pursuant to such regulation. 92 Table of Contents (iv) an internet information service provider, who provides its users with search services or links, will not be required to assume the indemnification liabilities if, after receiving a notice from the right holder, it has disconnected the link to the works, performance and audio-visual products as alleged for copyright infringement pursuant to this regulation.
Any company that fails to file the necessary application will be subject to sanctions, including but not limited to mandatory corrective actions and fines. 92 Table of Contents Regulations Related to Intellectual Property Rights Copyright According to the Copyright Law of the PRC, or the Copyright Law promulgated by the SCNPC on September 7, 1990 and last amended on February 26, 2010 and became effective on April 1, 2010, and its related Implementing Regulations issued by the State Council on August 2, 2002 and last amended on January 30, 2013 and became effective on March 1, 2013, Chinese citizens, legal persons, or other organizations shall, whether published or not, own copyright in their works, which include, among others, works of literature, art, natural science, social science, engineering technology and computer software.
Any company that fails to file the necessary application will be subject to sanctions, including but not limited to mandatory corrective actions and fines. 91 Table of Contents Regulations Related to Intellectual Property Rights Copyright According to the Copyright Law of the PRC, or the Copyright Law promulgated by the SCNPC on September 7, 1990 and amended on February 26, 2010 and became effective on April 1, 2010, and its related Implementing Regulations issued by the State Council on August 2, 2002 and last amended on January 30, 2013 and became effective on March 1, 2013, Chinese citizens, legal persons, or other organizations shall, whether published or not, own copyright in their works, which include, among others, works of literature, art, natural science, social science, engineering technology and computer software.
These contractual arrangements include the operation agreement, equity pledge agreement, exclusive equity transfer option agreement, exclusive technical consulting and service agreement, etc., as the case may be. As a result of these contractual arrangements, we are considered the primary beneficiary of the VIEs and consolidate their operating results in our financial statements under U.S.
These contractual arrangements include the operation agreement, equity pledge agreement, exclusive equity transfer option agreement, exclusive technical consulting and service agreement, etc., as the case may be. As a result of these contractual arrangements, we are considered the primary beneficiary of the VIEs and consolidate their operating results in our financial statements under U.S. GAAP.
The existing exclusive equity transfer option agreement was initially entered into in March 2011 and was subsequently amended and restated on substantially similar terms in December 2014, June 2017, August 2017, June 2019 and January 2023, respectively. 102 Table of Contents Exclusive Technical Consulting and Service Agreement Pursuant to an exclusive technical consulting and service agreement entered into on June 9, 2017 by and between Hongyi Technology and Guangzhou Lizhi, Guangzhou Lizhi agreed to appoint Hongyi Technology as its exclusive provider of technology services, including software development, internet maintenance, network security and other services in exchange for a service fee which are subject to the adjustment by the Company’s relevant subsidiaries at its sole discretion, for a term of ten years starting from the date thereof.
The existing exclusive equity transfer option agreement was initially entered into in March 2011 and was subsequently amended and restated on substantially similar terms in December 2014, June 2017, August 2017, June 2019 and January 2023, respectively. 101 Table of Contents Exclusive Technical Consulting and Service Agreement Pursuant to an exclusive technical consulting and service agreement entered into on June 9, 2017 by and between Hongyi Technology and Guangzhou Lizhi, Guangzhou Lizhi agreed to appoint Hongyi Technology as its exclusive provider of technology services, including software development, internet maintenance, network security and other services in exchange for a service fee which are subject to the adjustment by the Company’s relevant subsidiaries at its sole discretion, for a term of ten years starting from the date thereof.
The Notice on Issues about the Determination of Chinese-Controlled Enterprises Registered Abroad as Resident Enterprises on the Basis of Their Body of Actual Management issued by the State Administration of Taxation, or the SAT, on April 22, 2009 and effective on January 1, 2008 and partly amended on December 29, 2017 and became effective on the same date, sets up a more specific definition of “de facto management bodies” standard. 96 Table of Contents Pursuant to the Administrative Measures for the Recognition of High and New Technology Enterprises promulgated by the Ministry of Science and Technology, the MOF and the SAT on April 14, 2008 and last revised on January 29, 2016 and came into effect on January 1, 2016, the certificate of a high and new technology enterprise is valid for three years.
The Notice on Issues about the Determination of Chinese-Controlled Enterprises Registered Abroad as Resident Enterprises on the Basis of Their Body of Actual Management issued by the State Administration of Taxation, or the SAT, on April 22, 2009 and effective on January 1, 2008 and partly amended on December 29, 2017 and became effective on the same date, sets up a more specific definition of “de facto management bodies” standard. 95 Table of Contents Pursuant to the Administrative Measures for the Recognition of High and New Technology Enterprises promulgated by the Ministry of Science and Technology, the MOF and the SAT on April 14, 2008 and last revised on January 29, 2016 and came into effect on January 1, 2016, the certificate of a high and new technology enterprise is valid for three years.
On June 15, 2001, the State Council promulgated the Implementation Rules for the Patent Law of the PRC, which was last amended on December 11, 2023 and became effective from January 20, 2024. 94 Table of Contents Domain name In accordance with the Measures on Administration for Internet Domain issued on August 24, 2017 by the Ministry of Industry & Information Technology and became effective on November 1, 2017, the Rules for the Registration of National Top-level Domain Names issued by China Internet Network Information Center, or the CNNIC, on June 18, 2019 and became effective on the same date, the Measures for Dispute Resolutions over National Top-level Domain Names issued by CNNIC on June 18, 2019 and became effective on the same date, and the Procedures for Dispute Resolutions over National Top-level Domain Names issued on June 18, 2019 and became effective on the same date, the applicants become domain name holders upon successful registration.
On June 15, 2001, the State Council promulgated the Implementation Rules for the Patent Law of the PRC, which was last amended on December 11, 2023 and became effective from January 20, 2024. 93 Table of Contents Domain name In accordance with the Measures on Administration for Internet Domain issued on August 24, 2017 by the Ministry of Industry & Information Technology and became effective on November 1, 2017, the Rules for the Registration of National Top-level Domain Names issued by China Internet Network Information Center, or the CNNIC, on June 18, 2019 and became effective on the same date, the Measures for Dispute Resolutions over National Top-level Domain Names issued by CNNIC on June 18, 2019 and became effective on the same date, and the Procedures for Dispute Resolutions over National Top-level Domain Names issued on June 18, 2019 and became effective on the same date, the applicants become domain name holders upon successful registration.
Risk Factors—Risks Related to Our Corporate Structure.” In the opinion of Fangda Partners, our PRC counsel: ● the ownership structures of the VIEs do not and will not contravene any PRC laws or regulations currently in effect; and ● the contractual arrangements among Hongyi Technology, Guangzhou Lizhi and their respective shareholders, as well as among Guangzhou QingYin, Guangzhou Huanliao and their respective shareholders governed by PRC laws are valid and binding upon each party to such arrangements and enforceable against each party thereto in accordance with their terms and applicable PRC laws and regulations currently in effect. 101 Table of Contents There are uncertainties regarding the interpretation and application of current and future PRC laws, regulations and rules.
Risk Factors—Risks Related to Our Corporate Structure.” In the opinion of Fangda Partners, our PRC counsel: ● the ownership structures of the VIEs do not and will not contravene any PRC laws or regulations currently in effect; and ● the contractual arrangements among Hongyi Technology, Guangzhou Lizhi and their respective shareholders, as well as among Guangzhou QingYin, Guangzhou Huanliao and their respective shareholders governed by PRC laws are valid and binding upon each party to such arrangements and enforceable against each party thereto in accordance with their terms and applicable PRC laws and regulations currently in effect. 100 Table of Contents There are uncertainties regarding the interpretation and application of current and future PRC laws, regulations and rules.
Concurrently with such termination, Guangzhou QingYin entered into a new series of contractual arrangements by and among Guangzhou QingYin, Guangzhou Huanliao and then shareholder(s) of Guangzhou Huanliao in July 2022, which were last amended and restated in May 2023 as below. 103 Table of Contents Equity Pledge Agreement Pursuant to the equity pledge agreement and its supplementary agreement respectively entered into on January 6, 2023 and May 8, 2023 by and between Guangzhou QingYin and then shareholders of Guangzhou Huanliao, such shareholders of Guangzhou Huanliao pledged all of their equity interests in Guangzhou Huanliao to Guangzhou QingYin to guarantee the performance of Guangzhou Huanliao and, to the extent applicable, such shareholders of Guangzhou Huanliao, of their obligations under the contractual arrangement of the VIE.
Concurrently with such termination, Guangzhou QingYin entered into a new series of contractual arrangements by and among Guangzhou QingYin, Guangzhou Huanliao and then shareholder(s) of Guangzhou Huanliao in July 2022, which were last amended and restated in May 2023 as below. 102 Table of Contents Equity Pledge Agreement Pursuant to the equity pledge agreement and its supplementary agreement respectively entered into on January 6, 2023 and May 8, 2023 by and between Guangzhou QingYin and then shareholders of Guangzhou Huanliao, such shareholders of Guangzhou Huanliao pledged all of their equity interests in Guangzhou Huanliao to Guangzhou QingYin to guarantee the performance of Guangzhou Huanliao and, to the extent applicable, such shareholders of Guangzhou Huanliao, of their obligations under the contractual arrangement of the VIE.
Each ADS represents two hundred (200) of our Class A ordinary shares following the ratio change of the Company’s ADSs to Class A ordinary shares, which commenced on September 20, 2023.
Following the ratio change of the Company’s ADSs to Class A ordinary shares, which commenced on September 20, 2023, each ADS now represents two hundred (200) of our Class A ordinary shares.
The existing operation agreement was initially entered into in July 2022 and was subsequently amended and restated on substantially similar terms in January 2023. 104 Table of Contents Power of Attorney Pursuant to a series of power of attorney issued by shareholders of Guangzhou Huanliao on January 6, 2023, such shareholders of Guangzhou Huanliao irrevocably appointed Guangzhou QingYin as their attorney-in-fact to act on their behalf on all shareholder matters of Guangzhou Huanliao and exercise all rights as shareholders of Guangzhou Huanliao.
The existing operation agreement was initially entered into in July 2022 and was subsequently amended and restated on substantially similar terms in January 2023. 103 Table of Contents Power of Attorney Pursuant to a series of power of attorney issued by shareholders of Guangzhou Huanliao on January 6, 2023, such shareholders of Guangzhou Huanliao irrevocably appointed Guangzhou QingYin as their attorney-in-fact to act on their behalf on all shareholder matters of Guangzhou Huanliao and exercise all rights as shareholders of Guangzhou Huanliao.
Directors, Senior Management and Employees—6.B. Compensation” for more information about our share incentive plan. Health, Safety, Social, and Environmental Matters We do not operate any manufacturing or warehousing facilities. Therefore, we are not subject to significant health, safety, social, or environmental risks.
See “Item 6. Directors, Senior Management and Employees—6.B. Compensation” for more information about our share incentive plan. Health, Safety, Social, and Environmental Matters We do not operate any manufacturing or warehousing facilities. Therefore, we are not subject to significant health, safety, social, or environmental risks.
For more details, please see “—4.B. Business Overview—Regulations Related to M&A and Overseas Listings.” As these opinions and regulations were newly issued, there are still uncertainties regarding the interpretation and implementation of such opinions and regulations. In addition, new rules or regulations promulgated in the future could impose additional requirements on us.
For more details, please see “—4.B. Business Overview—Regulations Related to M&A and Overseas Listings.” 75 Table of Contents As these opinions and regulations were newly issued, there are still uncertainties regarding the interpretation and implementation of such opinions and regulations. In addition, new rules or regulations promulgated in the future could impose additional requirements on us.
Risk Factors—Risks Related to Our Business and Industry—Our business depends on a strong brand, and any failure to maintain, protect and enhance our brand would hurt our ability to retain or expand our user and customer base, or our ability to increase their level of engagement.” 81 Table of Contents We implement comprehensive measures to protect our intellectual property in addition to making trademark and patent registration applications.
Risk Factors—Risks Related to Our Business and Industry—Our business depends on a strong brand, and any failure to maintain, protect and enhance our brand would hurt our ability to retain or expand our user and customer base, or our ability to increase their level of engagement.” We implement comprehensive measures to protect our intellectual property in addition to making trademark and patent registration applications.
Taxation.” 77 Table of Contents Implication of the Holding Foreign Companies Accountable Act Trading in our securities on U.S. markets, including the Nasdaq Stock Market LLC, or the Nasdaq, may be prohibited under the Holding Foreign Companies Accountable Act (the “HFCAA”) if the PCAOB determines that it is unable to inspect or investigate completely our auditor for two consecutive years.
Taxation.” Implication of the Holding Foreign Companies Accountable Act Trading in our securities on U.S. markets, including the Nasdaq Stock Market LLC, or the Nasdaq, may be prohibited under the Holding Foreign Companies Accountable Act (the “HFCAA”) if the PCAOB determines that it is unable to inspect or investigate completely our auditor for two consecutive years.
Guangzhou Lizhi has obtained the License for Production and Operation of Radio and TV Programs for its business. Regulations Related to Advertising Business The State Administration for Market Regulation (formerly known as State Administration of Industry and Commerce, “SAMR”) is the primary governmental authority regulating advertising activities in China.
Guangzhou Lizhi has obtained the License for Production and Operation of Radio and TV Programs for its business. 87 Table of Contents Regulations Related to Advertising Business The State Administration for Market Regulation (formerly known as State Administration of Industry and Commerce, “SAMR”) is the primary governmental authority regulating advertising activities in China.
BHD. currently focus on our overseas business. ​ ​ 100 Table of Contents Contractual Arrangements with the VIEs and the VIEs’ Respective Shareholders Currently, our businesses in China are operated primarily through the VIEs and the VIEs’ subsidiaries, due to PRC legal restrictions on foreign ownership in value-added telecommunication services and other internet related business.
LTD. currently focus on our overseas business. ​ ​ 99 Table of Contents Contractual Arrangements with the VIEs and the VIEs’ Respective Shareholders Currently, our businesses in China are operated primarily through the VIEs and the VIEs’ subsidiaries, due to PRC legal restrictions on foreign ownership in value-added telecommunication services and other internet related business.
As a result of these contractual arrangements, we are considered the primary beneficiary of the VIEs for accounting purposes and consolidate their operating results in our consolidated financial statements under U.S. GAAP. In 2021, 2022 and 2023, the amount of revenues generated by the VIEs accounted for 93.0%, 98.6% and 99.9%, respectively, of our total net revenues.
As a result of these contractual arrangements, we are considered the primary beneficiary of the VIEs for accounting purposes and consolidate their operating results in our consolidated financial statements under U.S. GAAP. In 2022, 2023 and 2024, the amount of revenues generated by the VIEs accounted for 98.6%, 99.9% and 99.8%, respectively, of our total net revenues.
Employees” for more information about our employees. 82 Table of Contents Licenses and Approvals The following table sets forth a list of material licenses and approvals, subject to further renewal, that the VIEs and subsidiaries of VIEs are required to obtain to carry out our operations in China. ​ ​ ​ License Entity Holding the License Type of the Entity Regulatory Authority ICP License ​ Guangzhou Lizhi ​ VIE ​ Guangdong branch of the MIIT Internet Culture Operating License ​ Guangzhou Lizhi ​ VIE ​ The Ministry of Culture and Tourism of the Guangdong Province ICP License ​ Guangzhou Huanliao ​ VIE ​ Guangdong branch of the MIIT Internet Culture Operating License ​ Guangzhou Huanliao ​ VIE ​ The Ministry of Culture and Tourism of the Guangdong Province ICP License ​ Wuhan Lizhi ​ VIE’s Subsidiary ​ Hubei branch of the MIIT Internet Culture Operating License ​ Wuhan Lizhi ​ VIE’s Subsidiary ​ Wuhan Branch of the Ministry of Culture and Tourism of PRC ICP License ​ Wuhan Yuyin ​ VIE’s Subsidiary ​ Hubei branch of the MIIT Internet Culture Operating License ​ Wuhan Yuyin ​ VIE’s Subsidiary ​ Wuhan Branch of the Ministry of Culture and Tourism of PRC ICP License ​ Wuhan Zhiyin ​ VIE’s Subsidiary ​ Hubei branch of the MIIT Internet Culture Operating License ​ Wuhan Zhiyin ​ VIE’s Subsidiary ​ Wuhan Branch of the Ministry of Culture and Tourism of PRC ICP License ​ Huaian Lizhi ​ VIE’s Subsidiary ​ Jiangsu branch of the MIIT Internet Culture Operating License ​ Huaian Lizhi ​ VIE’s Subsidiary ​ The Ministry of Culture and Tourism of the Jiangsu Province ​ Regulation Regulations Related to Foreign Investment Industry Catalogue Related to Foreign Investment The establishment, operation and management of corporate entities in the PRC is governed by the Company Law of the PRC, or the Company Law, which was promulgated by the Standing Committee of the National People’s Congress, or the SCNPC, on December 29, 1993 and last amended on December 29, 2023 and became effective on July 1, 2024.
Licenses and Approvals The following table sets forth a list of material licenses and approvals, subject to further renewal, that the VIEs and subsidiaries of VIEs are required to obtain to carry out our operations in China. ​ ​ ​ License Entity Holding the License Type of the Entity Regulatory Authority ICP License ​ Guangzhou Lizhi ​ VIE ​ Guangdong branch of the MIIT Internet Culture Operating License ​ Guangzhou Lizhi ​ VIE ​ The Ministry of Culture and Tourism of the Guangdong Province ICP License ​ Guangzhou Huanliao ​ VIE ​ Guangdong branch of the MIIT Internet Culture Operating License ​ Guangzhou Huanliao ​ VIE ​ The Ministry of Culture and Tourism of the Guangdong Province ICP License ​ Wuhan Lizhi ​ VIE’s Subsidiary ​ Hubei branch of the MIIT Internet Culture Operating License ​ Wuhan Lizhi ​ VIE’s Subsidiary ​ Wuhan Branch of the Ministry of Culture and Tourism of PRC ICP License ​ Wuhan Yuyin ​ VIE’s Subsidiary ​ Hubei branch of the MIIT Internet Culture Operating License ​ Wuhan Yuyin ​ VIE’s Subsidiary ​ Wuhan Branch of the Ministry of Culture and Tourism of PRC ICP License ​ Wuhan Zhiyin ​ VIE’s Subsidiary ​ Hubei branch of the MIIT Internet Culture Operating License ​ Wuhan Zhiyin ​ VIE’s Subsidiary ​ Wuhan Branch of the Ministry of Culture and Tourism of PRC ICP License ​ Guangzhou Qianyue ​ VIE’s Subsidiary ​ Guangdong branch of the MIIT Internet Culture Operating License ​ Guangzhou Qianyue ​ VIE’s Subsidiary ​ The Ministry of Culture and Tourism of the Guangdong Province ​ Regulation Regulations Related to Foreign Investment Industry Catalogue Related to Foreign Investment The establishment, operation and management of corporate entities in the PRC is governed by the Company Law of the PRC, or the Company Law, which was promulgated by the Standing Committee of the National People’s Congress, or the SCNPC, on December 29, 1993 and last amended on December 29, 2023 and became effective on July 1, 2024.
Our current auditor, Enrome LLP, is headquartered in Singapore and subject to inspection by the PCAOB on a regular basis. Our current auditor was not among the PCAOB-registered public accounting firms headquartered in mainland China or Hong Kong that were subject to 2021 Determinations.
Our current auditor, Enrome LLP, is headquartered in Singapore and subject to inspection by the PCAOB. Our current auditor was not among the PCAOB-registered public accounting firms headquartered in mainland China or Hong Kong that were subject to 2021 Determinations.
As of December 31, 2023, we had registered: ● 466 trademarks in China; ● 416 trademarks in Hong Kong and other jurisdictions; ● 109 domain names; ● 65 patents in China; and ● 133 software copyrights in China, relating to all of our online communities and other products.
As of December 31, 2024, we had registered: ● 466 trademarks in China; ● 496 trademarks in Hong Kong and other jurisdictions; ● 109 domain names; ● 65 patents in China; and ● 133 software copyrights in China, relating to all of our online communities and other products.
An Internet culture business entity shall establish and improve its content management system. The content management system of an internet culture business entity is required to specify the responsibilities, standards and processes for content review as well as accountability measures, and is required be filed with the provincial level counterpart of the MOC.
The content management system of an internet culture business entity is required to specify the responsibilities, standards and processes for content review as well as accountability measures, and is required be filed with the provincial level counterpart of the MOC.
Regulations Related to Tax Enterprise Income Tax Law According to the PRC Enterprise Income Tax Law, or the EIT Law, which was issued by the NPC on March 16, 2007 and last revised by the SCNPC on December 29, 2018, and the Regulation on the Implementation of the Enterprise Income Tax Law, or the EIT Regulation, issued by the State Council on December 6, 2007 and became effective on January 1, 2008 and partly amended on April 23, 2019 and became effective on the same date, both domestic and foreign-invested enterprises established under the laws of foreign countries or regions whose “de facto management bodies” are located in the PRC are considered resident enterprises, and will generally be subject to the EIT Law at the rate of 25% of their global income.
Regulations Related to Tax Enterprise Income Tax Law According to the PRC Enterprise Income Tax Law, or the EIT Law, which was issued by the NPC on March 16, 2007 and last revised by the SCNPC on December 29, 2018, and the Regulation on the Implementation of the Enterprise Income Tax Law, or the EIT Regulation, issued by the State Council on December 6, 2007 and became effective on January 1, 2008 and last amended on December 6, 2024 and became effective on January 20, 2025, both domestic and foreign-invested enterprises established under the laws of foreign countries or regions whose “de facto management bodies” are located in the PRC are considered resident enterprises, and will generally be subject to the EIT Law at the rate of 25% of their global income.
On April 8, 2024, the MOFCOM and NDRC promulgated the Special Administrative Measures for the Access of Foreign Investment (Negative List) (2024 Version), or the Negative List (2024), which will become effective on November 1, 2024. Pursuant to the Encouraging Catalogue and the Negative List (2021) and the Negative List (2024), foreign-invested projects are categorized as encouraged, restricted and prohibited.
On April 8, 2024, the MOFCOM and NDRC promulgated the Special Administrative Measures for the Access of Foreign Investment (Negative List) (2024 Version), or the Negative List (2024), which took effect on November 1, 2024. Pursuant to the Encouraging Catalogue and the Negative List (2021) and the Negative List (2024), foreign-invested projects are categorized as encouraged, restricted and prohibited.
We also offer onboarding sessions for new employees to meet each other and familiarize themselves with our product and technology offerings. Furthermore, we focus on developing the management and organizational skills of both new and seasoned managers through leadership programs. Compensation and Benefits We provide competitive compensation for our employees and benefits, including share incentive plan. See “Item 6.
We also offer onboarding sessions for new employees to meet each other and familiarize themselves with our product and technology offerings. Furthermore, we focus on developing the management and organizational skills of both new and seasoned managers through leadership programs. 81 Table of Contents Compensation and Benefits We provide competitive compensation for our employees and benefits, including share incentive plan.
According to the Administrative Measures on Internet Information Services promulgated by the State Council on September 25, 2000 and last amended in January 8, 2011 and became effective on the same date, “internet information services” refer to the provision of information through the internet to online users, including “commercial internet information services” and “non-commercial internet information services.” A commercial internet information service operator must obtain an ICP License from the competent governmental authorities before engaging in commercial internet information services in China, while ICP License is not required if the operator will only provide internet information on a non-commercial basis.
According to the Administrative Measures on Internet Information Services promulgated by the State Council on September 25, 2000 and last amended in December 6, 2024 and became effective on January 1 2025, “internet information services” refer to the provision of information through the internet to online users, including “commercial internet information services” and “non-commercial internet information services.” A commercial internet information service operator must obtain an ICP License from the competent governmental authorities before engaging in commercial internet information services in China, while ICP License is not required if the operator will only provide internet information on a non-commercial basis.
Virtual gift sales At current stage, we strategically offer most of our podcast content for free to create a loyal and engaged audio ecosystem, which we believe is essential in expanding our user base and may provide monetization potential through audio entertainment, as well as podcast, advertising and others.
Monetization We generate net revenues through virtual gift sales in relation to audio entertainment, as well as podcast, advertising and others. 79 Table of Contents Virtual gift sales At current stage, we strategically offer most of our podcast content for free to create a loyal and engaged audio ecosystem, which we believe is essential in expanding our user base and may provide monetization potential through audio entertainment, as well as podcast, advertising and others.
Corporate Information Our principal executive offices are located at 60 Anson Road, Mapletree Anson, #09-01/02, Singapore, 079914. Our telephone number at this address is +65 62021360. Our registered office in the Cayman Islands is located at the offices of Osiris International Cayman Limited, Suite #4-210, Governors Square, 23 Lime Tree Bay Avenue, PO Box 32311, Grand Cayman KY1-1209, Cayman Islands.
Corporate Information Our principal executive offices are located at 108 Robinson Road, #09-01 Singapore 068900. Our telephone number at this address is +65 62021360. Our registered office in the Cayman Islands is located at the offices of Osiris International Cayman Limited, Suite #4-210, Governors Square, 23 Lime Tree Bay Avenue, PO Box 32311, Grand Cayman KY1-1209, Cayman Islands.
As of December 31, 2023, we had 34 pending trademark applications in China and overseas. In addition, we are in the process of applying for registration of another 36 patents in China.
As of December 31, 2024, we had 106 pending trademark applications in China and overseas. In addition, we are in the process of applying for registration of another 36 patents in China.
Organizational Structure—Contractual Arrangements with the VIEs and the VIEs’ Respective Shareholders.” As such, we refer to each of Hongyi Technology, Guangzhou Tiya and Guangzhou QingYin as our wholly foreign owned entity, or WFOE, and to each of Guangzhou Lizhi and Guangzhou Huanliao as our variable interest entity, or VIE, in this annual report. In January 2019, Sound Group Inc.
Organizational Structure—Contractual Arrangements with the VIEs and the VIEs’ Respective Shareholders.” As such, we refer to each of Hongyi Technology, Guangzhou Tiya,Guangzhou QingYin, Guangzhou Yuyin and Guangzhou Yuechuang as our wholly foreign owned entity, or WFOE, and to each of Guangzhou Lizhi and Guangzhou Huanliao as our variable interest entity, or VIE, in this annual report.
For the year ended December 31, 2023, we had not been subject to any fines or other penalties due to non-compliance with health, work safety, social, or environmental regulations. See “Item 6. Directors, Senior Management and Employees-6.D.
For the year ended December 31, 2024, we had not been subject to any fines or other penalties due to non-compliance with health, work safety, social, or environmental regulations. See “Item 6. Directors, Senior Management and Employees-6.D. Employees” for more information about our employees.
Property, Plant and Equipment Our principal executive offices are located in Singapore. As of December 31, 2023, we have leased office space with an aggregate area of approximately 8,846 square meters, of which approximately 5,882 square meters are in Guangzhou, 840 square meters are in other cities in the PRC and 2,124 square meters are overseas.
Property, Plant and Equipment Our principal executive offices are located in Singapore. As of December 31, 2024, we have leased office space with an aggregate area of approximately 8,476 square meters, of which approximately 5,882 square meters are in Guangzhou, 418 square meters are in other cities in the PRC and 2,176 square meters are overseas.
The Measures for the Security Assessment of Data Cross-border Transfer requires that any data processor providing data collected and generated during operations within the territory of the PRC or personal information to an overseas recipient in the following situations shall report security assessment for its outbound data transfer to the CAC: (a) a data processor provides important data abroad; (b) a critical information infrastructure operator or a data processor processing personal information of more than one million individuals provides personal information abroad; (c) a data processor has provided personal information of more than one hundred thousand individuals abroad or sensitive personal information of more than ten thousand individuals abroad since January 1, 2021; and (d) other situations that are stipulated by CAC.
The Measures for the Security Assessment of Data Cross-border Transfer requires that any data processor providing data collected and generated during operations within the territory of the PRC or personal information to an overseas recipient in the following situations shall report security assessment for its outbound data transfer to the CAC: (a) a data processor provides important data abroad; (b) a critical information infrastructure operator or a data processor processing personal information of more than one million individuals provides personal information abroad; (c) a data processor has provided personal information of more than one hundred thousand individuals abroad or sensitive personal information of more than ten thousand individuals abroad since January 1, 2021; and (d) other situations that are stipulated by CAC. 90 Table of Contents On February 22, 2023, the CAC promulgated the Measures for the Standard Contractual Measures for Cross-border Transfer of Personal Information, which took effect on June 1, 2023.
In 2021, 2022 and 2023, we generated RMB2,101.5 million, RMB2,174.3 million and RMB2,063.3 million, (US$290.6 million) from virtual gift sales to users of our audio entertainment products, representing 99.1%, 99.5% and 99.6% of our total net revenues for the same periods. In 2023, we had approximately 417.4 thousand average audio entertainment paying users on our apps.
In 2022, 2023 and 2024, we generated RMB2,174.3 million, RMB2,063.3 million and RMB2,018.6 million, (US$276.5 million) from virtual gift sales to users of our audio entertainment products, representing 99.5%, 99.6% and 99.4% of our total net revenues for the same periods. In 2024, we had approximately 360.3 thousand average audio entertainment paying users on our apps.
The average mobile monthly active users for audio entertainment decreased to 8.34 million in 2023 from 9.33 million in 2022 and 8.99 million in 2021. 78 Table of Contents We launched audio live streaming as our first audio entertainment product feature on the LIZHI App in 2016, enabling our users to enjoy a multi-dimensional interactive audio experience.
The average mobile monthly active users for audio entertainment decreased to 6.72 million in 2024 from 8.34 million in 2023 and 9.33 million in 2022. We launched audio live streaming as our first audio entertainment product feature on the LIZHI App in 2016, enabling our users to enjoy a multi-dimensional interactive audio experience.
In 2021, 2022 and 2023, the amount of technical development service fees paid to our PRC subsidiaries from the VIEs was RMB26.4 million, RMB76.0 million and RMB137.0 million (US$19.3 million), respectively. We expect that the amounts of such service fees will increase in the foreseeable future as our PRC business continues to grow.
In 2022, 2023 and 2024, the amount of technical development service fees paid to our PRC subsidiaries from the VIEs was RMB76.0 million, RMB137.0 million and RMB176.0 million (US$24.5 million), respectively. We expect that the amounts of such service fees will increase in the foreseeable future as our PRC business continues to grow.
On July 13, 2006, the Ministry of Information Industry of the PRC, or the MII (the predecessor of the Ministry of Industry and Information Technology of the PRC, or the MIIT), issued the Circular on Strengthening the Administration of Foreign Investment in and Operation of Value-added Telecommunications Business, or the MII Circular, which provides that (a) foreign investors can only operate telecommunications business in China through telecommunications enterprises with valid telecommunications business operation license; (b) domestic licensees may not rent, transfer or sell telecommunications business licenses to foreign investors in any form or provide any foreign investors with resources, venues or facilities to promote unlicensed operations of telecommunications businesses in China; (c) value-added telecommunications service providers or their shareholders must directly own the domain names and registered trademarks that are used in their daily operations; (d) each value-added telecommunications service provider must have necessary facilities for its approved business operations and maintain such facilities in the geographic regions specified in its license; and (e) all value-added telecommunications service providers should improve their network and information security, establish relevant information safety system and set up emergency plans to ensure network and information safety.
On July 13, 2006, the Ministry of Information Industry of the PRC, or the MII (the predecessor of the Ministry of Industry and Information Technology of the PRC, or the MIIT), issued the Circular on Strengthening the Administration of Foreign Investment in and Operation of Value-added Telecommunications Business, or the MII Circular, which provides that (a) foreign investors can only operate telecommunications business in China through telecommunications enterprises with valid telecommunications business operation license; (b) domestic licensees may not rent, transfer or sell telecommunications business licenses to foreign investors in any form or provide any foreign investors with resources, venues or facilities to promote unlicensed operations of telecommunications businesses in China; (c) value-added telecommunications service providers or their shareholders must directly own the domain names and registered trademarks that are used in their daily operations; (d) each value-added telecommunications service provider must have necessary facilities for its approved business operations and maintain such facilities in the geographic regions specified in its license; and (e) all value-added telecommunications service providers should improve their network and information security, establish relevant information safety system and set up emergency plans to ensure network and information safety. 83 Table of Contents Regulations Related to Telecommunications Services According to the Telecommunications Regulations of the PRC, or the Telecommunications Regulations, promulgated by the State Council on September 25, 2000 and last revised and came into effect on February 6, 2016, all telecommunications businesses in China have been categorized by the Telecommunications Regulations into basic telecommunications services and value-added telecommunications services.
According to the Measures for the Administration of Internet Performance Business Operations promulgated by the MOC on December 2, 2016 and came into effect on January 1, 2017, entities engaged in internet performance business operations shall, in accordance with the Internet Culture Provisions, apply to the cultural administrative department at the provincial level for an Internet Culture Operation License, and the business scope in the license shall expressly include internet performance.
Entities engaged in commercial internet cultural activities shall file the application to the applicable provincial level counterpart of the MOC for approval and obtain an Internet Culture Operation License. 86 Table of Contents According to the Measures for the Administration of Internet Performance Business Operations promulgated by the MOC on December 2, 2016 and came into effect on January 1, 2017, entities engaged in internet performance business operations shall, in accordance with the Internet Culture Provisions, apply to the cultural administrative department at the provincial level for an Internet Culture Operation License, and the business scope in the license shall expressly include internet performance.
In 2021, 2022 and 2023, we generated RMB18.0 million, RMB11.0 million and RMB8.4 million (US$1.2 million) from podcast, advertising and others, representing 0.9%, 0.5% and 0.4% of our total net revenues for the same periods.
In 2022, 2023 and 2024, we generated RMB11.0 million, RMB8.4 million and RMB13.2 million (US$1.8 million) from podcast, advertising and others, representing 0.5%, 0.4% and 0.6% of our total net revenues for the same periods.
Foreign-invested projects that are not listed in the Negative list (2021) and Negative List (2024) are permitted foreign-invested projects. 83 Table of Contents Foreign Investment in Value-Added Telecommunication Business According to the Negative List, foreign investors are prohibited from holding more than 50% of equity interests in an enterprise which provides value-added telecommunications services (except for e-commerce business, domestic multi-party communications services, store and forward services and call center services).
Foreign Investment in Value-Added Telecommunication Business According to the Negative List, foreign investors are prohibited from holding more than 50% of equity interests in an enterprise which provides value-added telecommunications services (except for e-commerce business, domestic multi-party communications services, store and forward services and call center services).
Currently, our in-car audio application is available on certain automobile models through in-car intelligent systems or Internet of Vehicles platforms. Content Creation We are committed to offering a diverse range of pre-recorded and real-time audio content across our platforms, spanning various categories. A significant portion of our audio content is user-generated.
Since December 2020, we started to collaborate with certain automobile manufacturers and Internet of Vehicles platforms. Currently, our in-car audio application is available on certain automobile models through in-car intelligent systems or Internet of Vehicles platforms. Content Creation We are committed to offering a diverse range of pre-recorded and real-time audio content across our platforms, spanning various categories.
Regulations that apply to the advertising business primarily include: (i) the PRC Advertisement Law, promulgated by the Standing Committee of the National People’s Congress on October 27, 1994 and most recently amended on April 29, 2021 and became effective on the same date; and (ii) the Administrative Regulations for Advertising, promulgated by the State Council on October 26, 1987 and which has been effective since December 1, 1987. 88 Table of Contents On July 4, 2016, the SAMR issued the Interim Measures for the Administration of Internet Advertising, or the Internet Advertising Measures, which became effective on September 1, 2016.
Regulations that apply to the advertising business primarily include: (i) the PRC Advertisement Law, promulgated by the Standing Committee of the National People’s Congress on October 27, 1994 and most recently amended on April 29, 2021 and became effective on the same date; and (ii) the Administrative Regulations for Advertising, promulgated by the State Council on October 26, 1987 and which has been effective since December 1, 1987.
GAAP. 76 Table of Contents We do not have any equity interests in the VIEs who are owned by certain nominee shareholders.
We do not have any equity interests in the VIEs who are owned by certain nominee shareholders.
By providing tools for creating innovative audio content and enriching features for audio entertainment on our platforms, we encourage users to create audio content and engage in audio entertainment activities.
A significant portion of our audio content is user-generated. By providing tools for creating innovative audio content and enriching features for audio entertainment on our platforms, we encourage users to create audio content and engage in audio entertainment activities.
In March 2019, Guangzhou Tiya, our wholly owned subsidiary, was established in the PRC. In May 2019, Guangzhou Tiya entered into a series of contractual arrangements with Guangzhou Huanliao and then shareholder of Guangzhou Huanliao, by which Guangzhou Tiya may consolidate Guangzhou Huanliao’s financial statements under U.S. GAAP.
In May 2019, Guangzhou Tiya entered into a series of contractual arrangements with Guangzhou Huanliao and then shareholder of Guangzhou Huanliao, by which Guangzhou Tiya may consolidate Guangzhou Huanliao’s financial statements under U.S. GAAP.
Now we offer a variety of audio entertainment content categories, such as social, talk shows, music, ACG, etc. Content creators or hosts can easily initiate an audio live streaming channel on our various platforms, personalize their channels, and manage them. Users are encouraged to interact with hosts and each other through our interactive audio features.
Now we operate several audio entertainment platforms and offer a variety of audio entertainment content categories, such as social, talk shows, music, ACG, etc. Content creators or hosts can easily initiate an audio live streaming channel on our various platforms, personalize their channels, and manage them.
GAAP. For details, please refer to “Item 4. Information on the Company—4.C. Organizational Structure—Contractual Arrangements with the VIEs and the VIEs’ Respective Shareholders.” In October 2013, we launched our LIZHI App operated by Guangzhou Lizhi. In December 2015, Huai’an Lizhi Network Technology Co., Ltd., or Huai’an Lizhi, was established in the PRC.
GAAP. For details, please refer to “Item 4. Information on the Company—4.C. Organizational Structure—Contractual Arrangements with the VIEs and the VIEs’ Respective Shareholders.” In October 2013, we launched the LIZHI App operated by Guangzhou Lizhi.
The Measures for the Standard Contractual Measures for Cross-border Transfer of Personal Information, specified the applicable scope of, conditions to enter into and detailed filing requirements for standard contracts on cross-border transfer of personal information, which became a part of the compliance mechanism for personal information protection. 75 Table of Contents On March 22, 2024, the CAC issued the Provisions on Promoting and Regulating Cross-border Data Flows, which required security assessment for the data processor that provides data to an overseas recipient and meets any of the following conditions, (i) for critical information infrastructure operators that provide any personal information or important data to an overseas recipient, and (ii) for data processors that are not critical information infrastructure operators, that provide any important data to an overseas recipient, or that have cumulatively provided the personal information (excluding sensitive personal information) of not less than 1 million individuals or the sensitive personal information of not less than 10,000 individuals to overseas recipients as of January 1 of the current year.
On March 22, 2024, the CAC issued the Provisions on Promoting and Regulating Cross-border Data Flows, which required security assessment for the data processor that provides data to an overseas recipient and meets any of the following conditions, (i) for critical information infrastructure operators that provide any personal information or important data to an overseas recipient, and (ii) for data processors that are not critical information infrastructure operators, that provide any important data to an overseas recipient, or that have cumulatively provided the personal information (excluding sensitive personal information) of not less than 1 million individuals or the sensitive personal information of not less than 10,000 individuals to overseas recipients as of January 1 of the current year.
The competent governmental authorities as well as the supervision and administrative authorities of the aforementioned important industries and sectors will be responsible for (i) organizing the identification of critical information infrastructures in their respective industries in accordance with certain identification rules, and (ii) promptly notifying the identified operators and the public security department of the State Council of the identification results. 90 Table of Contents On August 20, 2021, the SCNPC promulgated the Personal Information Protection Law, effective on November 1, 2021.
The competent governmental authorities as well as the supervision and administrative authorities of the aforementioned important industries and sectors will be responsible for (i) organizing the identification of critical information infrastructures in their respective industries in accordance with certain identification rules, and (ii) promptly notifying the identified operators and the public security department of the State Council of the identification results.
ITEM 4. INFORMATION ON THE COMPANY 4.A. History and Development of the Company Corporate History We commenced operations in 2010 with the establishment of Guangzhou Lizhi. 72 Table of Contents In November and October 2010, each of Lizhi Holding Limited and Lizhi Inc., our wholly owned subsidiaries, was incorporated in Hong Kong and the British Virgin Islands, respectively.
ITEM 4. INFORMATION ON THE COMPANY 4.A. History and Development of the Company Corporate History We commenced operations in 2010 with the establishment of Guangzhou Lizhi. 72 Table of Contents In November and October 2010, each of Lizhi Holding Limited and Lizhi Inc.
Wuhan Lizhi currently holds the Internet Culture Operating License issued by the Wuhan Branch of the Ministry of Culture and Tourism of PRC on April 13, 2024. Huaian Lizhi currently holds the Internet Culture Operating License issued by the Ministry of Culture and Tourism of the Jiangsu Province on April 1, 2022.
Guangzhou Qianyue currently holds the Internet Culture Operating License issued by the Ministry of Culture and Tourism of the Guangdong Province on May 21, 2024. Wuhan Lizhi currently holds the Internet Culture Operating License issued by the Wuhan Branch of the Ministry of Culture and Tourism of PRC on April 13, 2024.
The establishment and operations of wholly foreign-owned enterprises were mainly governed by the Law of the PRC on Wholly Foreign-Owned Enterprises, which was promulgated by the National People’s Congress, or the NPC, on April 12, 1986 and last amended by the SCNPC on September 3, 2016 and became effective on October 1, 2016.
A foreign-invested company is also subject to the Company Law unless otherwise provided in the foreign investment laws. 82 Table of Contents The establishment and operations of wholly foreign-owned enterprises were mainly governed by the Law of the PRC on Wholly Foreign-Owned Enterprises, which was promulgated by the National People’s Congress, or the NPC, on April 12, 1986 and last amended by the SCNPC on September 3, 2016 and became effective on October 1, 2016.
According to the Measures for the Administration of Record-filing of Non-commercial Internet Information Services promulgated by the MII on February 8, 2005 and came into effect on March 20, 2005, entities engaged in non-commercial internet information services shall go through the record-filing procedures with the provincial telecommunications administration.
According to the Measures for the Administration of Record-filing of Non-commercial Internet Information Services promulgated by the MII on February 8, 2005 and last amended on January 18, 2024 and became effective on the same date entities engaged in non-commercial internet information services shall go through the record-filing procedures with the provincial telecommunications administration.
An internet information service provider must also keep such information strictly confidential, and is further prohibited from divulging, tampering or destroying any such information, or selling or illegally providing such information to other parties.
An internet information service provider must also keep such information strictly confidential, and is further prohibited from divulging, tampering or destroying any such information, or selling or illegally providing such information to other parties. An internet information service provider is required to take technical and other measures to prevent the collected personal information from any unauthorized disclosure, damage or loss.
LTD., Vocalbeats CO., LTD., Tiya Inc.(USA) and SONICO SDN.
LTD., Vocalbeats CO., LTD., Tiya Inc.(USA), SONICO SDN. BHD and BUZ TECHNOLOGY PTE.
In June 2021, Hainan Kuangyin Network Technology Co., Ltd. was established in the PRC. To streamline our operations in China, we terminated the entire series of VIE arrangements between and among Guangzhou Tiya, Guangzhou Huanliao and the shareholder(s) of Guangzhou Huanliao in July 2022.
To streamline our operations in China, we terminated the entire series of VIE arrangements between and among Guangzhou Tiya, Guangzhou Huanliao and the shareholder(s) of Guangzhou Huanliao in July 2022.
The opinions aim to achieve this by establishing a regulatory system and revising the existing rules and regulations for overseas listings by Chinese entities and affiliates, including potential extraterritorial application of China’s securities laws.
The opinions aim to achieve this by establishing a regulatory system and revising the existing rules and regulations for overseas listings by Chinese entities and affiliates, including potential extraterritorial application of China’s securities laws. 89 Table of Contents On July 30, 2021, the State Council promulgated the CII Regulations, effective on September 1, 2021.
We also conduct branding and promotional activities through various online and offline events. Competition Online audio is an emerging industry in China. As one of the leading players in this market, we face competition from providers offering similar services. Other platforms in both the online audio and interactive audio entertainment markets directly compete with us for content and users.
We also conduct branding and promotional activities through various online and offline events. 80 Table of Contents Competition Online audio is an emerging industry in China. As one of the leading players in this market, we face competition from providers offering similar services.
Otherwise, the entities handling personal information could be ordered to correct, or suspend or terminate the provision of services, and face confiscation of illegal income, fines or other penalties.
Otherwise, the entities handling personal information could be ordered to correct, or suspend or terminate the provision of services, and face confiscation of illegal income, fines or other penalties. On December 28, 2021, twelve regulatory authorities jointly released the Cybersecurity Review Measures.
Pursuant to this notice, the provincial branches of SAPPRFT shall have the authority to supervise radio stations and websites that offer audio-visual programs within its jurisdiction and require them to further improve their content management systems and implement relevant management requirements.
Pursuant to this notice, the provincial branches of SAPPRFT shall have the authority to supervise radio stations and websites that offer audio-visual programs within its jurisdiction and require them to further improve their content management systems and implement relevant management requirements. 85 Table of Contents On November 4, 2016, the State Internet Information Office promulgated the Administrative Provisions on Internet Live-Streaming Services, or Internet Live-Streaming Services Provisions.
Risk Factors—Risks Related to Doing Business in China—Our ADSs may be prohibited from trading in the United States under the HFCAA in the future if the PCAOB is unable to inspect or investigate completely our auditor. The delisting of the ADSs, or the threat of their being delisted, may materially and adversely affect the value of your investment.” 4.B.
Risk Factors—Risks Related to Doing Business in China—Our ADSs may be prohibited from trading in the United States under the HFCAA in the future if the PCAOB is unable to inspect or investigate completely our auditor.
We are a holding company and do not directly own any substantive business operations in the PRC. We currently focus our business operations within the PRC through the VIEs, Guangzhou Lizhi and Guangzhou Huanliao. See “Item 3. Key Information—3.D.
We currently focus our business operations within the PRC through the VIEs, Guangzhou Lizhi and Guangzhou Huanliao. See “Item 3. Key Information—3.D.
Furthermore, if certain procedural requirements are satisfied, the payment of current account items, including profit distributions and trade and service related foreign exchange transactions, can be made in foreign currencies without prior approval from State Administration of Foreign Exchange (the “SAFE”) or its local branches.
As a result, our PRC subsidiaries may not have sufficient distributable profits to pay dividends to us in the near future. 76 Table of Contents Furthermore, if certain procedural requirements are satisfied, the payment of current account items, including profit distributions and trade and service related foreign exchange transactions, can be made in foreign currencies without prior approval from State Administration of Foreign Exchange (the “SAFE”) or its local branches.
We hope to inspire everyone to be a content creator and promote the popularity of our content creators through both online and offline activities. 79 Table of Contents Technology We developed DOREME, our proprietary real-time audio and video streaming technology solution to provide real-time communication (RTC) technology support for our various products, aiming to reduce voice delay, enhance the audio quality, and ensure a stable and smooth audio experience.
Technology We developed DOREME, our proprietary real-time audio and video streaming technology solution to provide real-time communication (RTC) technology support for our various products, aiming to reduce voice delay, enhance the audio quality, and ensure a stable and smooth audio experience.
Risk Factors—Risks Related to Our Corporate Structure.” Guangzhou Lizhi and Guangzhou Huanliao and their respective subsidiaries hold our ICP License, Internet Culture Operation License, Radio and Television Program Production and Operating Permit, and other licenses or permits that are necessary for our business operations in the PRC. 73 Table of Contents In January 2020, we completed an initial public offering in which we offered and sold an aggregate of 82,000,000 Class A ordinary shares in the form of ADSs.
Risk Factors—Risks Related to Our Corporate Structure.” Guangzhou Lizhi and Guangzhou Huanliao and their respective subsidiaries hold our ICP License, Internet Culture Operation License, Radio and Television Program Production and Operating Permit, and other licenses or permits that are necessary for our business operations in the PRC.
(formerly known as LIZHI INC.), our current ultimate holding company, was incorporated under the laws of the Cayman Islands as part of the restructuring transactions in contemplation of our initial public offering. In connection with its incorporation, in March 2019, we completed a share swap transaction and issued ordinary and preferred shares of Sound Group Inc.
In January 2019, Sound Group Inc. (formerly known as LIZHI INC.), our current ultimate holding company, was incorporated under the laws of the Cayman Islands as part of the restructuring transactions in contemplation of our initial public offering.
For severe violations, we will temporarily or permanently close down relevant user or host accounts. 80 Table of Contents User Data Security and Cyber Security We store our user data in encrypted form, and only allows access from our company’s intranet.
If we detect minor violations, we will intervene and rectify by deleting relevant content and images, posting warnings, closing or suspending user accounts. For severe violations, we will temporarily or permanently close down relevant user or host accounts. User Data Security and Cyber Security We store our user data in encrypted form, and only allows access from our company’s intranet.
In December 2020, Beijing Guoyin Network Technology Co., Ltd. was established in the PRC. These entities are wholly and directly held by Guangzhou Lizhi and provide supporting services to our apps. In July 2016, Guangzhou Huanliao Network Technology Co., Ltd., was established in the PRC by Guangzhou Lizhi.
From 2015 to 2020, a number of entities were established, all of which are wholly and directly held by Guangzhou Lizhi and provide supporting services to our apps. In July 2016, Guangzhou Huanliao Network Technology Co., Ltd., was established in the PRC by Guangzhou Lizhi. In March 2019, Guangzhou Tiya, our wholly owned subsidiary, was established in the PRC.
We currently have trademark applications pending, any of which may be the subject of a governmental or third-party objection, which could prevent the registration of the same. See “Item 3. Key Information—3.D.
(“ Guangzhou Qianyue ”), for the purpose of maintaining and renewing their operating licenses as required by relevant PRC government authorities. We currently have trademark applications pending, any of which may be the subject of a governmental or third-party objection, which could prevent the registration of the same. See “Item 3. Key Information— 3.D.
In March 2011, Beijing Hongyiyichuang Information Technology Co., Ltd., or Hongyi Technology, our wholly owned subsidiary, was established in the PRC.
(“ Lizhi BVI ”), our wholly owned subsidiaries, was incorporated in Hong Kong and the British Virgin Islands, respectively. In March 2011, Beijing Hongyiyichuang Information Technology Co., Ltd., or Hongyi Technology, our wholly owned subsidiary, was established in the PRC.

… 76 more changes not shown on this page.

Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

58 edited+3 added−6 removed150 unchanged
The Company will evaluate and adjust its marketing strategy and budget based on the Company’s performance, operational needs and market conditions. General and administrative expenses .
The Company will evaluate and adjust its marketing strategy and budget based on the Company’s performance, operational needs and market conditions. General and administrative expenses .
Financing activities Net cash used in financing activities was RMB71.7 million in 2023 primarily due to third-party loans net repayment by our subsidiary and the VIEs. Net cash generated from financing activities was RMB4.8 million in 2022 primarily due to third-party loans taken out by our subsidiary and the VIEs.
Net cash used in financing activities was RMB71.7 million in 2023 primarily due to third-party loans net repayment by our subsidiary and the VIEs. Net cash generated from financing activities was RMB4.8 million in 2022 primarily due to third-party loans taken out by our subsidiary and the VIEs.
With the completion of our initial public offering in January 2020, it is no longer necessary for us to estimate the fair value of our ordinary shares in connection with our accounting for granted options, restricted shares and restricted share units and the market price of our publicly traded ADSs is used as an indicator of fair value of our ordinary shares. 117 Table of Contents Recently issued accounting pronouncements For detailed discussion on recent accounting pronouncements, see Note 2(dd) to our consolidated financial statements included elsewhere in this annual report. 5.B Liquidity and Capital Resources Cash flows and working capital Our principal sources of liquidity have been cash generated from our operations, contributions from our shareholders, and bank loans taken out by our subsidiary and the VIEs.
With the completion of our initial public offering in January 2020, it is no longer necessary for us to estimate the fair value of our ordinary shares in connection with our accounting for granted options, restricted shares and restricted share units and the market price of our publicly traded ADSs is used as an indicator of fair value of our ordinary shares. 116 Table of Contents Recently issued accounting pronouncements For detailed discussion on recent accounting pronouncements, see Note 2(dd) to our consolidated financial statements included elsewhere in this annual report. 5.B Liquidity and Capital Resources Cash flows and working capital Our principal sources of liquidity have been cash generated from our operations, contributions from our shareholders, and bank loans taken out by our subsidiary and the VIEs.
Cost of revenues was RMB1,486.4 million (US$209.4 million) in fiscal year 2023, representing a 1% increase from RMB1,468.9 million in the prior year, mainly attributable to (i) an increase in the total revenue sharing fees to our content creators resulting from a sharing percentage adjustment in our revenue sharing policies, (ii) increased salary and welfare benefits expenses which primarily resulted from an increase in our severance pay to our operation’s employees, and (iii) partially offset by declines in payment handling costs, other miscellaneous costs and share-based compensation expenses.
Cost of revenues was RMB1,486.4 million in fiscal year 2023, representing a 1% increase from RMB1,468.9 million in the prior year, mainly attributable to (i) an increase in the total revenue sharing fees to our content creators resulting from a sharing percentage adjustment in our revenue sharing policies, (ii) increased salary and welfare benefits expenses which primarily resulted from an increase in our severance pay to our operation’s employees, and (iii) partially offset by declines in payment handling costs, other miscellaneous costs and share-based compensation expenses.
Unfavorable changes in any of these general industry conditions could negatively affect demand for our services and materially and adversely affect our results of operations. 105 Table of Contents Specific Factors Affecting Our Results of Operations While our business is influenced by general factors affecting the online audio industry in China and overseas, we believe our results of operations are more directly affected by company specific factors, including the following major factors: Our ability to expand user base and enhance user engagement We rely on our engaged user community to drive our net revenue growth.
Unfavorable changes in any of these general industry conditions could negatively affect demand for our services and materially and adversely affect our results of operations. 104 Table of Contents Specific Factors Affecting Our Results of Operations While our business is influenced by general factors affecting the online audio industry in China and overseas, we believe our results of operations are more directly affected by company specific factors, including the following major factors: Our ability to expand user base and enhance user engagement We rely on our engaged user community to drive our net revenue growth.
To achieve the core principle of this standard, we applied the following five steps: (i) identification of the contract, or contracts, with the customer; (ii) identification of the performance obligations in the contract; (iii) determination of the transaction price; (iv) allocation of the transaction price to the performance obligations in the contract; and (v) recognition of the revenue when, or as, a performance obligation is satisfied. 113 Table of Contents We recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to receive in exchange for those goods or services.
To achieve the core principle of this standard, we applied the following five steps: (i) identification of the contract, or contracts, with the customer; (ii) identification of the performance obligations in the contract; (iii) determination of the transaction price; (iv) allocation of the transaction price to the performance obligations in the contract; and (v) recognition of the revenue when, or as, a performance obligation is satisfied. 112 Table of Contents We recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to receive in exchange for those goods or services.
Apart from such cash and cash equivalents held in the Cayman Islands, substantially all of our assets were held and substantially all of our net revenues were generated by our PRC subsidiaries, the VIEs and their subsidiaries. 121 Table of Contents As an offshore holding company, we are permitted under PRC laws and regulations to provide funding from the proceeds of our offshore fund raising activities to our PRC subsidiaries only through loans or capital contributions, and to the VIEs only through loans, in each case subject to the satisfaction of the applicable government registration and approval requirements.
Apart from such cash and cash equivalents held in the Cayman Islands, substantially all of our assets were held and substantially all of our net revenues were generated by our PRC subsidiaries, the VIEs and their subsidiaries. 120 Table of Contents As an offshore holding company, we are permitted under PRC laws and regulations to provide funding from the proceeds of our offshore fund raising activities to our PRC subsidiaries only through loans or capital contributions, and to the VIEs only through loans, in each case subject to the satisfaction of the applicable government registration and approval requirements.
Trend Information Other than as disclosed elsewhere in this annual report, we are not aware of any trends, uncertainties, demands, commitments or events for the year ended December 31, 2023 that are reasonably likely to have a material and adverse effect on our net revenues, income, profitability, liquidity or capital resources, or that would cause the disclosed financial information to be not necessarily indicative of future results of operations or financial condition. 5.E.
Trend Information Other than as disclosed elsewhere in this annual report, we are not aware of any trends, uncertainties, demands, commitments or events for the year ended December 31, 2024 that are reasonably likely to have a material and adverse effect on our net revenues, income, profitability, liquidity or capital resources, or that would cause the disclosed financial information to be not necessarily indicative of future results of operations or financial condition. 5.E.
For a detailed discussion of our significant accounting policies and related judgments, see “Note 2 Significant Accounting Policies” in the Notes to Consolidated Financial Statements included elsewhere in this annual report. 122 Table of Contents The following is a brief description of our critical accounting estimate: Critical accounting estimate in provision for income taxes and valuation allowance for deferred tax assets We are subject to the income tax laws of the various jurisdictions in which we operate.
For a detailed discussion of our significant accounting policies and related judgments, see “Note 2 Significant Accounting Policies” in the Notes to Consolidated Financial Statements included elsewhere in this annual report. 121 Table of Contents The following is a brief description of our critical accounting estimate: Critical accounting estimate in provision for income taxes and valuation allowance for deferred tax assets We are subject to the income tax laws of the various jurisdictions in which we operate.
Our research and development expenses were RMB301.5 million (US$42.5 million) in fiscal year 2023, representing a 6% increase from RMB283.3 million in the prior year, primarily due to (i) increased salary and welfare benefits expenses related to an increase in the average salary and severance pay, (ii) increased share-based compensation expenses, (iii) increased rental expenses, and (iv) partially offset by the decrease in other miscellaneous expenses.
Our research and development expenses were RMB301.5 million in fiscal year 2023, representing a 6% increase from RMB283.3 million in the prior year, primarily due to (i) increased salary and welfare benefits expenses related to an increase in the average salary and severance pay, (ii) increased share-based compensation expenses, (iii) increased rental expenses, and (iv) partially offset by the decrease in other miscellaneous expenses.
The enterprise income tax is calculated based on the entity’s global income as determined under PRC tax laws and accounting standards. 112 Table of Contents Guangzhou Lizhi obtained High and New Technology Enterprise, or HNTE, status from December 28, 2023 to December 28, 2026, and it enjoyed a preferential tax rate of 15% in enterprise income tax to the extent it has taxable income under the PRC Enterprise Income Tax Law.
The enterprise income tax is calculated based on the entity’s global income as determined under PRC tax laws and accounting standards. 111 Table of Contents Guangzhou Lizhi obtained High and New Technology Enterprise, or HNTE, status from December 28, 2023 to December 28, 2026, and it enjoyed a preferential tax rate of 15% in enterprise income tax to the extent it has taxable income under the PRC Enterprise Income Tax Law.
Although we have achieved a positive working capital as of December 31, 2023, there is no assurance that we will generate sufficient net income or operating cash flows to meet our working capital requirements and repay our liabilities as they become due in the future due to a variety of factors, some of which are beyond our control.
Although we have achieved a positive working capital as of December 31, 2024, there is no assurance that we will generate sufficient net income or operating cash flows to meet our working capital requirements and repay our liabilities as they become due in the future due to a variety of factors, some of which are beyond our control.
As of December 31, 2022 and 2023, management does not believe that sufficient positive evidence exists to conclude that the recoverability of our deferred tax assets is more likely than not to be realized. Consequently, we have provided full valuation allowances on the related deferred tax assets. Our provision for income taxes is composed of current and deferred taxes.
As of December 31, 2023 and 2024, management does not believe that sufficient positive evidence exists to conclude that the recoverability of our deferred tax assets is more likely than not to be realized. Consequently, we have provided full valuation allowances on the related deferred tax assets. Our provision for income taxes is composed of current and deferred taxes.
We will continue to make cash commitments, including capital expenditures to support the short-term and/or long-term growth of our business. 120 Table of Contents We have not entered into any financial guarantees or other commitments to guarantee the payment obligations of any third parties. We do not have retained or contingent interests in assets transferred.
We will continue to make cash commitments, including capital expenditures to support the short-term and/or long-term growth of our business. 119 Table of Contents We have not entered into any financial guarantees or other commitments to guarantee the payment obligations of any third parties. We do not have retained or contingent interests in assets transferred.
Under the 2018 BVI Plan, Lizhi BVI granted 27,765,900 options and restricted shares to its certain management members, employees and a consultant corresponding to 27,765,900 ordinary shares. 115 Table of Contents We adopted a share incentive plan on May 31, 2019, or the 2019 Share Incentive Plan.
Under the 2018 BVI Plan, Lizhi BVI granted 27,765,900 options and restricted shares to its certain management members, employees and a consultant corresponding to 27,765,900 ordinary shares. 114 Table of Contents We adopted a share incentive plan on May 31, 2019, or the 2019 Share Incentive Plan.
Other than as discussed above, we did not have any significant capital and other commitments, long-term obligations or guarantees as of December 31, 2023. Off-Balance Sheet Commitments and Arrangements We have not entered into any financial guarantees or other commitments to guarantee the payment obligations of any third parties.
Other than as discussed above, we did not have any significant capital and other commitments, long-term obligations or guarantees as of December 31, 2024. Off-Balance Sheet Commitments and Arrangements We have not entered into any financial guarantees or other commitments to guarantee the payment obligations of any third parties.
Our general and administrative expenses were RMB193.9 million (US$27.3 million) in fiscal year 2023, compared with RMB106.7 million in the prior year, mainly driven by (i) increased provision for credit losses, (ii) increased professional services expenses, partially offset by (iii) decreased share-based compensation expenses, salary and welfare benefits expenses related to decreases in our general and administrative headcount, and (iv) decreased provision for litigation contingencies.
Our general and administrative expenses were RMB193.9 million in fiscal year 2023, compared with RMB106.7 million in the prior year, mainly driven by (i) increased provision for credit losses, (ii) increased professional services expenses, partially offset by (iii) decreased share-based compensation expenses, salary and welfare benefits expenses related to decreases in our general and administrative headcount, and (iv) decreased provision for litigation contingencies.
During the years ended December 31, 2021, 2022 and 2023, we did not have any arrangement where the performance obligations had already been satisfied in the past period but recognized the corresponding revenue in the current period.
During the years ended December 31, 2022, 2023 and 2024, we did not have any arrangement where the performance obligations had already been satisfied in the past period but recognized the corresponding revenue in the current period.
Material Cash Requirements Other than the ordinary cash requirements for our operations, our material cash requirements as of December 31, 2023 and any subsequent interim period primarily include our capital expenditures, repayment of short-term loans and operating lease obligations.
Material Cash Requirements Other than the ordinary cash requirements for our operations, our material cash requirements as of December 31, 2024 and any subsequent interim period primarily include our capital expenditures, repayment of short-term loans and operating lease obligations.
Other costs of revenues include other taxes and surcharges, advertising production cost, depreciation and amortization and other costs. 109 Table of Contents Operating Expenses Our operating expenses consist of (i) selling and marketing expenses; (ii) research and development expenses; and (iii) general and administrative expenses.
Other costs of revenues include other taxes and surcharges, advertising production cost, depreciation and amortization and other costs. 108 Table of Contents Operating Expenses Our operating expenses consist of (i) selling and marketing expenses; (ii) research and development expenses; and (iii) general and administrative expenses.
Adjustments based on filed returns are generally recorded in the period when the tax returns are filed and the global tax implications are known, which could impact our effective tax rate. 123 Table of Contents
Adjustments based on filed returns are generally recorded in the period when the tax returns are filed and the global tax implications are known, which could impact our effective tax rate. 122 Table of Contents
Selling and marketing expenses. Our selling and marketing expenses were RMB237.6 million (US$33.5 million) in fiscal year 2023, compared with RMB259.6 million in the prior year, mainly attributable to a decrease in branding and marketing expenses, partially offset by increased salary and welfare benefits expenses related to an increase in average salary and severance pay.
Selling and marketing expenses. Our selling and marketing expenses were RMB237.6 million in fiscal year 2023, compared with RMB259.6 million in the prior year, mainly attributable to a decrease in branding and marketing expenses, partially offset by increased salary and welfare benefits expenses related to an increase in average salary and severance pay.
We expect that the foreign currency translation adjustments will continue to fluctuate in accordance with the fluctuation between Renminbi and U.S. dollars in future periods. 110 Table of Contents Results of Operations Year Ended December 31, 2023 Compared to Year Ended December 31, 2022 Net revenues.
We expect that the foreign currency translation adjustments will continue to fluctuate in accordance with the fluctuation between Renminbi and U.S. dollars in future periods. 109 Table of Contents Results of Operations Year Ended December 31, 2024 Compared to Year Ended December 31, 2023 Net revenues.
For the years ended December 31, 2021, 2022 and 2023, the Company’s overseas entity recognized income tax expense/(credit) amounted to RMB0.3 million, RMB0.1 million and RMB(0.1) million, respectively, for the assessable profits base on the existing legislation, interpretation and practice of Singapore.
For the years ended December 31, 2022, 2023 and 2024, the Company’s overseas entity recognized income tax expense/(credit) amounted to RMB0.1 million, RMB(0.1) million and nil, respectively, for the assessable profits base on the existing legislation, interpretation and practice of Singapore.
No share option was granted for the year ended December 31, 2019, and all share options granted in 2021, 2022 and 2023 were with little to no exercise price for which fair value was measured as the grant date price of our ordinary shares. Share-based compensation expenses are recorded net of actual forfeitures.
No share option was granted for the year ended December 31, 2019, and all share options granted after were with little to no exercise price for which fair value was measured as the grant date price of our ordinary shares. Share-based compensation expenses are recorded net of actual forfeitures.
Among those, a total of 5,008,430 Class A ordinary shares corresponding to restricted shares granted to certain of our management members and director, which has been redesignated as Class A ordinary shares on a one-on-one basis immediately prior to the completion of IPO, were held by Kastle Limited, a company incorporated with limited liability under the laws of Hong Kong as of September 30, 2024.
Among those, a total of 5,008,430 Class A ordinary shares corresponding to restricted shares granted to certain of our management members and director, which has been redesignated as Class A ordinary shares on a one-on-one basis immediately prior to the completion of IPO, were held by Kastle Limited, a company incorporated with limited liability under the laws of Hong Kong as of February 28, 2025.
The accounts receivable arises primarily from our advertising customers. ​ ​ ​ ​ ​ ​ ​ As of December 31, ​ 2022 2023 ​ ​ (RMB in thousands) Accounts receivable 3,233 1,557 ​ Please see Note 4 of consolidated financial statements for additional information. There were no material contract assets as of December 31, 2022 and 2023.
The accounts receivable arises primarily from our advertising customers. ​ ​ ​ ​ ​ ​ ​ As of December 31, ​ 2023 2024 ​ ​ (RMB in thousands) Accounts receivable 1,557 1,082 ​ Please see Note 4 of consolidated financial statements for additional information. There were no material contract assets as of December 31, 2023 and 2024.
For the years ended December 31, 2021, 2022 and 2023, we had recorded income tax expenses of RMB0.4 million, RMB0.2 million and RMB0.4 million (US$0.1 million), respectively. Deferred taxes arise from differences between assets and liabilities measured for financial reporting versus income tax return purposes.
For the years ended December 31, 2022, 2023 and 2024, we had recorded income tax expenses of RMB0.2 million, RMB0.4 million and RMB3.3 million (US$0.5 million), respectively. Deferred taxes arise from differences between assets and liabilities measured for financial reporting versus income tax return purposes.
Contract liabilities Contract liabilities primarily consist of deferred revenue which comprises unconsumed virtual currency, unamortized revenue from time-based virtual items and unamortized subscription fees for podcast services. 114 Table of Contents During the years ended December 31, 2021, 2022 and 2023, we recognized revenue amounted to RMB11.0 million, RMB12.5 million and RMB14.0 million (US$2.0 million), respectively that was included in the corresponding opening deferred revenue balance of the year.
Contract liabilities Contract liabilities primarily consist of deferred revenue which comprises unconsumed virtual currency, unamortized revenue from time-based virtual items and unamortized subscription fees for podcast services. 113 Table of Contents During the years ended December 31, 2022, 2023 and 2024, we recognized revenue amounted to RMB12.5 million, RMB14.0 million and RMB12.9 million (US$1.8 million), respectively that was included in the corresponding opening deferred revenue balance of the year.
Net revenue was RMB2,071.8 million (US$291.8 million) in the fiscal year 2023, compared with RMB2,185.3 million in the prior year. The decrease was primarily due to the decline in the average paying users on our audio entertainment products. Cost of revenues.
Year Ended December 31, 2023 Compared to Year Ended December 31, 2022 Net revenues. Net revenue was RMB2,071.8 million in the fiscal year 2023, compared with RMB2,185.3 million in the prior year. The decrease was primarily due to the decline in the average paying users on our audio entertainment products. Cost of revenues.
The following table sets forth our average total mobile MAUs for each of the quarters indicated. ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ For the Three Months Ended ​ March 31, June 30, September December March 31, June 30, September December ​ ​ 2022 ​ 2022 ​ 30, 2022 ​ 31, 2022 ​ 2023 ​ 2023 ​ 30, 2023 ​ 31, 2023 ​ ​ (in thousands) Average Total Mobile MAUs 51,495 49,682 49,749 50,760 49,622 45,607 42,138 36,022 ​ Our ability to maintain and expand our user base, as well as maintain and enhance user engagement, depends on, among other things, our ability to develop applications that meet diverse user needs globally, our ability to cultivate and retain high-quality hosts, our ability to continuously produce quality content, our ability to maintain our pivotal position in the growing online audio industry in China, our ability to maintain our growth in the overseas market, and our ability to continually improve user experience through technological innovation.
The following table sets forth our average total mobile MAUs for each of the quarters indicated. ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ For the Three Months Ended ​ March 31, June 30, September December March 31, June 30, September December ​ ​ 2023 ​ 2023 ​ 30, 2023 ​ 31, 2023 ​ 2024 ​ 2024 ​ 30, 2024 ​ 31, 2024 ​ ​ (in thousands) Average Total Mobile MAUs 49,622 45,607 42,138 36,022 35,776 35,564 32,251 33,173 ​ Our ability to maintain and expand our user base, as well as maintain and enhance user engagement, depends on, among other things, our ability to develop applications that meet diverse user needs globally, our ability to cultivate and retain high-quality hosts, our ability to continuously produce quality content, our ability to maintain our pivotal position in the growing online audio industry in China, our ability to maintain our growth in the overseas market, and our ability to continually improve user experience through technological innovation.
Gross profit. As a result of the foregoing, our gross profit was RMB585.4 million (US$82.4 million) in fiscal year 2023, compared with RMB716.3 million in the prior year. Operating expenses. Our total operating expenses were RMB733.0 million (US$103.2 million) in fiscal year 2023, representing a 13% increase from RMB649.7 million in the prior year. Research and development expenses.
Gross profit. As a result of the foregoing, our gross profit was RMB585.4 million in fiscal year 2023, compared with RMB716.3 million in the prior year. Operating expenses. Our total operating expenses were RMB733.0 million in fiscal year 2023, representing a 13% increase from RMB649.7 million in the prior year. 110 Table of Contents Research and development expenses.
To increase paying user base, we intend to attract and train more popular hosts, provide more high-quality content, expand user paying scenarios on our platforms, and enhance interactions between hosts and audiences. 106 Table of Contents The following table sets forth the number of average total monthly paying users across our platforms and apps for each of the quarters indicated. ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ For the Three Months Ended ​ March 31, June 30, September December March 31, June 30, September December ​ ​ 2022 ​ 2022 ​ 30, 2022 ​ 31, 2022 ​ 2023 ​ 2023 ​ 30, 2023 ​ 31, 2023 ​ ​ (in thousands) Average total monthly paying users 482.2 485.1 476.7 491.8 471.5 433.7 402.6 365.3 ​ We will continue to expand our product offerings to diversify our monetization channels.
To increase paying user base, we intend to attract and train more popular hosts, provide more high-quality content, expand user paying scenarios on our platforms, and enhance interactions between hosts and audiences. 105 Table of Contents The following table sets forth the number of average total monthly paying users across our platforms and apps for each of the quarters indicated. ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ For the Three Months Ended ​ March 31, June 30, September December March 31, June 30, September December ​ ​ 2023 ​ 2023 ​ 30, 2023 ​ 31, 2023 ​ 2024 ​ 2024 ​ 30, 2024 ​ 31, 2024 ​ ​ (in thousands) Average total monthly paying users 471.5 433.7 402.6 365.3 363.7 388.8 398.9 413.6 ​ We will continue to expand our product offerings to diversify our monetization channels.
Capital Expenditures We made capital expenditures of RMB20.9 million, RMB11.8 million and RMB7.2 million (US$1.0 million) in 2021, 2022 and 2023, respectively. In these periods, our capital expenditures were mainly used for purchases of property, equipment, leasehold improvement and intangible assets.
Capital Expenditures We made capital expenditures of RMB11.8 million, RMB7.2 million and RMB12.2 million (US$1.7 million) in 2022, 2023 and 2024, respectively. In these periods, our capital expenditures were mainly used for purchases of property, equipment, leasehold improvement and intangible assets.
Operating loss was RMB147.7 million (US$20.8 million) in the fiscal year 2023, compared to an operating income of RMB66.7 million in the prior year. Net loss was RMB134.5 million (US$18.9 million) in the fiscal year 2023, compared to net income of RMB86.5 million in the prior year.
Operating loss was RMB147.7 million in the fiscal year 2023, compared to an operating income of RMB66.7 million in the prior year. Net loss was RMB134.5 million in the fiscal year 2023, compared to net income of RMB86.5 million in the prior year.
As of December 31, 2023, we had RMB495.0 million (US$69.7 million) in cash and cash equivalents. Our cash and cash equivalents mainly represent demand deposits which are placed in bank and large reputable financial institutions, that are readily convertible to fixed amounts of cash and with original maturities from the date of purchase with terms of three months or less.
As of December 31, 2024, we had RMB441.9 million (US$60.5 million) in cash and cash equivalents. Our cash and cash equivalents mainly represent demand deposits which are placed in bank and large reputable financial institutions, that are readily convertible to fixed amounts of cash and with original maturities from the date of purchase with terms of three months or less.
We reassess the probability of vesting at each reporting period for awards with performance conditions and adjusts compensation expenses based on its probability assessment, unless on certain situations, we may not be able to determine that it is probable that a performance condition will be satisfied until the event occurs. 116 Table of Contents An aggregate of 22,280,320 options and restricted share units was granted for the years ended December 31, 2023.
We reassess the probability of vesting at each reporting period for awards with performance conditions and adjusts compensation expenses based on its probability assessment, unless on certain situations, we may not be able to determine that it is probable that a performance condition will be satisfied until the event occurs. 115 Table of Contents No share option and restricted share unit was granted for the years ended December 31, 2024.
Contractual obligation The following table sets forth our contractual obligations as of December 31, 2023: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Payment Due by Years Ending ​ Less than ​ ​ More than ​ ​ ​ 1 year ​ 1-3 years ​ 3-5 years ​ 5 years ​ Total ​ (in RMB thousands) Lease obligations (1) 10,838 4,048 — — 14,886 Note: (1) Lease obligation represents the minimum commitments under non-cancelable operating lease agreements for our office premises and staff quarters.
Contractual obligation The following table sets forth our contractual obligations as of December 31, 2024: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Payment Due by Years Ending ​ Less than ​ ​ More than ​ ​ ​ 1 year ​ 1-3 years ​ 3-5 years ​ 5 years ​ Total ​ (in RMB thousands) Lease obligations (1) 9,641 5,087 — — 14,728 Short-term loans 7,188 — — — 7,188 Note: (1) Lease obligation represents the minimum commitments under non-cancelable operating lease agreements for our office premises and staff quarters.
The following table sets forth sources of our net revenues in absolute amounts and as percentages of total net revenues for the periods indicated: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ For the Year Ended December 31, ​ ​ 2021 ​ 2022 ​ 2023 ​ RMB % RMB % RMB US$ % ​ ​ (in thousands, except for percentages) Net revenues Audio entertainment 2,101,475 99.1 2,174,314 99.5 2,063,346 290,616 99.6 Podcast, advertising and others 18,039 0.9 10,952 0.5 8,426 1,187 0.4 Total 2,119,514 100.0 2,185,266 100.0 2,071,772 291,803 100.0 ​ Cost of Revenues Our cost of revenues consists of (i) revenue sharing fees, (ii) salary and welfare benefits, (iii) payment handling costs, (iv) bandwidth costs, (v) share-based compensation expenses and (vi) others.
The following table sets forth sources of our net revenues in absolute amounts and as percentages of total net revenues for the periods indicated: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ For the Year Ended December 31, ​ ​ 2022 ​ 2023 ​ 2024 ​ RMB % RMB % RMB US$ % ​ ​ (in thousands, except for percentages) Net revenues Audio entertainment 2,174,314 99.5 2,063,346 99.6 2,018,598 276,547 99.3 Podcast, advertising and others 10,952 0.5 8,426 0.4 13,208 1,809 0.7 Total 2,185,266 100.0 2,071,772 100.0 2,031,806 278,356 100.0 ​ Cost of Revenues Our cost of revenues consists of (i) revenue sharing fees, (ii) salary and welfare benefits, (iii) payment handling costs, (iv) bandwidth costs, (v) share-based compensation expenses and (vi) others.
As of September 30, 2024, 60,651,040 options and restricted share units corresponding to 60,651,040 of our ordinary shares are outstanding, which has been redesignated as Class A ordinary shares on a one-on-one basis immediately prior to the completion of our initial public offering (the “2019 Replacement”).
As of February 28, 2025, 58,748,670 options and restricted share units corresponding to 58,748,670 of our ordinary shares are outstanding, which has been redesignated as Class A ordinary shares on a one-on-one basis immediately prior to the completion of our initial public offering (the “2019 Replacement”).
The following table sets forth the components of our operating expenses in absolute amounts and as percentages ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ For the Year Ended December 31, ​ ​ 2021 ​ 2022 ​ 2023 ​ RMB % RMB % RMB US$ % ​ ​ (in thousands, except for percentages) Operating expenses Selling and marketing expenses 386,204 51.1 259,618 40.0 237,646 33,472 32.4 Research and development expenses 264,706 35.0 283,349 43.6 301,490 42,464 41.1 General and administrative expenses 104,617 13.9 106,727 16.4 193,907 27,311 26.5 Total 755,527 100.0 649,694 100.0 733,043 103,247 100.0 ​ Selling and Marketing Expenses Our selling and marketing expenses primarily consist of (i) advertising and promotional expenses, including traffic promotion and brand marketing, (ii) salaries and welfare benefits to our sales and marketing personnel, and (iii) share-based compensation to our sales and marketing personnel.
The following table sets forth the components of our operating expenses in absolute amounts and as percentages ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ For the Year Ended December 31, ​ ​ 2022 ​ 2023 ​ 2024 ​ RMB % RMB % RMB US$ % ​ ​ (in thousands, except for percentages) Operating expenses Selling and marketing expenses 259,618 40.0 237,646 32.4 307,281 42,097 47.5 Research and development expenses 283,349 43.6 301,490 41.1 232,693 31,879 16.5 General and administrative expenses 106,727 16.4 193,907 26.5 106,587 14,602 36.0 Total 649,694 100.0 733,043 100.0 646,561 88,578 100.0 ​ Selling and Marketing Expenses Our selling and marketing expenses primarily consist of (i) advertising and promotional expenses, including traffic promotion and brand marketing, (ii) salaries and welfare benefits to our sales and marketing personnel, and (iii) share-based compensation to our sales and marketing personnel.
The increase in deferred revenue was primarily attributable to the growth in unconsumed virtual currency in parallel with the growth of our business. 119 Table of Contents Investing activities Net cash generated from investing activities was RMB105.7 million in 2023 mainly attributed to maturities of short-term investments of RMB111.0 million and disposal of property, equipment and leasehold improvement of RMB1.8 million, respectively, which offset by purchasing of intangible assets, property, equipment and leasehold improvement of RMB7.2 million.
Net cash generated from investing activities was RMB105.7 million in 2023 mainly attributed to maturities of short-term investments of RMB111.0 million and disposal of property, equipment and leasehold improvement of RMB1.9 million, respectively, which offset by purchasing of intangible assets, property, equipment and leasehold improvement of RMB7.2 million.
Net cash used in investing activities was RMB122.8 million in 2022 mainly attributed to purchase of short-term investments of RMB111.0 million and property, equipment and leasehold improvement of RMB11.7 million.
Net cash used in investing activities was RMB122.8 million in 2022 mainly attributed to purchase of short-term investments of RMB191.0 million and property, equipment and leasehold improvement of RMB11.7 million. Financing activities Net cash used in financing activities was RMB3.0 million (US$0.4 million) in 2024 primarily due to repayments of short-term loans of RMB11.2 million (US$1.5 million).
If we experience working capital deficits in the future, our business, liquidity, financial condition and results of operations may be materially and adversely affected.” 118 Table of Contents The following table presents the summary of our consolidated cash flows data for the years ended December 31, 2021, 2022 and 2023. ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ For the Year Ended December 31, ​ ​ 2021 ​ 2022 ​ 2023 ​ RMB RMB RMB US$ ​ ​ (in thousands) Net cash (used in)/generated from operating activities (40,426) 136,267 (117,045) (16,487) Net cash generated from/(used in) investing activities 52,101 (122,783) 105,653 14,880 Net cash generated from/(used in) financing activities 212,682 4,771 (71,674) (10,094) Effect of foreign exchange rate changes on cash, cash equivalents, and restricted cash (6,063) 22,812 2,168 307 Net increase/(decrease) in cash, cash equivalents, and restricted cash 218,294 41,067 (80,898) (11,394) Cash, cash equivalents, and restricted cash at the beginning of the year 319,154 537,448 578,515 81,482 Cash, cash equivalents, and restricted cash at the end of the year 537,448 578,515 497,617 70,088 ​ Operating activities Net cash used in operating activities was RMB117.0 million in 2023.
If we experience working capital deficits in the future, our business, liquidity, financial condition and results of operations may be materially and adversely affected.” 117 Table of Contents The following table presents the summary of our consolidated cash flows data for the years ended December 31, 2022, 2023 and 2024. ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ For the Year Ended December 31, ​ ​ 2022 ​ 2023 ​ 2024 ​ RMB RMB RMB US$ ​ ​ (in thousands) Net cash generated from/(used in) operating activities 136,267 (117,045) (26,469) (3,625) Net cash(used in)/ generated from investing activities (122,783) 105,653 (11,974) (1,641) Net cash generated from/(used in) financing activities 4,771 (71,674) (2,995) (410) Effect of foreign exchange rate changes on cash, cash equivalents, and restricted cash 22,812 2,168 (3,016) (414) Net increase/(decrease) in cash, cash equivalents, and restricted cash 41,067 (80,898) (44,454) (6,090) Cash, cash equivalents, and restricted cash at the beginning of the year 537,448 578,515 497,617 68,173 Cash, cash equivalents, and restricted cash at the end of the year 578,515 497,617 453,163 62,083 ​ Operating activities Net cash used in operating activities was RMB26.5 million (US$3.6 million) in 2024.
The table below sets forth a breakdown of our cost of revenues in absolute amounts and as percentages of total cost of revenues for the periods indicated: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ For the Year Ended December 31, ​ ​ 2021 ​ 2022 ​ 2023 ​ RMB % RMB % RMB US$ % ​ ​ (in thousands, except for percentages) Cost of revenues Revenue sharing fees 1,357,270 90.3 1,351,096 92.0 1,368,498 192,749 92.1 Salary and welfare benefits 52,268 3.5 40,653 2.8 45,273 6,377 3.0 Payment handling costs 32,506 2.2 22,899 1.6 21,076 2,968 1.4 Bandwidth costs 30,889 2.1 32,795 2.2 39,424 5,553 2.7 Share-based compensation expense 11,484 0.7 7,052 0.5 3,845 542 0.3 Others 18,088 1.2 14,426 0.9 8,281 1,166 0.5 Total 1,502,505 100 1,468,921 100 1,486,397 209,355 100 ​ Revenue sharing fees .
The table below sets forth a breakdown of our cost of revenues in absolute amounts and as percentages of total cost of revenues for the periods indicated: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ For the Year Ended December 31, ​ ​ 2022 ​ 2023 ​ 2024 ​ RMB % RMB % RMB US$ % ​ ​ (in thousands, except for percentages) Cost of revenues Revenue sharing fees 1,351,096 92.0 1,368,498 92.1 1,377,765 188,753 93.4 Salary and welfare benefits 40,653 2.8 45,273 3.0 28,600 3,918 1.9 Payment handling costs 22,899 1.6 21,076 1.4 20,836 2,855 1.4 Bandwidth costs 32,795 2.2 39,424 2.7 36,218 4,962 2.5 Share-based compensation expense 7,052 0.5 3,845 0.3 1,788 245 0.1 Others 14,426 0.9 8,281 0.5 9,741 1,334 0.7 Total 1,468,921 100 1,486,397 100 1,474,948 202,067 100.0 ​ Revenue sharing fees .
We expect the adoption of advanced streaming and AI technologies to improve our operational efficiency, which, together with our business growth, will enable us to benefit further from economies of scale. 107 Table of Contents Key Components of Results of Operations ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ For the Year Ended December 31, ​ ​ 2021 ​ 2022 ​ 2023 ​ RMB RMB RMB US$ ​ ​ (in thousands, except for share and per share data) Net revenues 2,119,514 2,185,266 2,071,772 291,803 Cost of revenues (1,502,505) (1,468,921) (1,486,397) (209,355) Gross profit: 617,009 716,345 585,375 82,448 Operating expenses: ​ ​ ​ ​ Selling and marketing expenses (386,204) (259,618) (237,646) (33,472) General and administrative expenses (104,617) (106,727) (193,907) (27,311) Research and development expenses (264,706) (283,349) (301,490) (42,464) Total operating expenses (755,527) (649,694) (733,043) (103,247) Operating (loss)/income (138,518) 66,651 (147,668) (20,799) Other income: ​ ​ ​ ​ Interest expenses (2,904) (2,474) (1,563) (220) Foreign exchange losses (738) (1,052) (1,488) (210) Interest and investment income 2,269 7,282 10,820 1,524 Government grants 13,496 14,360 9,395 1,323 Others, net (479) 1,944 (3,577) (504) (Loss)/income before income taxes (126,874) 86,711 (134,081) (18,886) Income tax expense (376) (207) (434) (61) Net (loss)/income (127,250) 86,504 (134,515) (18,947) Net loss attributable to the non-controlling interests shareholders — 13 7,864 1,108 Net (loss)/income attributable to our Company’s ordinary shareholders (127,250) 86,517 (126,651) (17,839) ​ ​ ​ ​ ​ ​ ​ ​ ​ Net (loss)/income (127,250) 86,504 (134,515) (18,947) Other comprehensive (loss)/income: ​ Foreign currency translation adjustments (7,848) 24,314 3,277 462 Total other comprehensive (loss)/income (7,848) 24,314 3,277 462 Total comprehensive (loss)/income (135,098) 110,818 (131,238) (18,485) Comprehensive loss attributable to the non-controlling interests shareholders — 13 7,953 1,120 Comprehensive (loss)/income attributable to our Company’s ordinary shareholders (135,098) 110,831 (123,285) (17,365) Net (loss)/income attributable to our Company’s ordinary shareholders per share Basic (0.13) 0.08 (0.12) (0.02) Diluted (0.13) 0.08 (0.12) (0.02) Weighted average number of ordinary shares Basic 991,715,849 1,036,485,949 1,078,969,851 1,078,969,851 Diluted 991,715,849 1,038,617,910 1,078,969,851 1,078,969,851 Net (loss)/income attributable to our Company’s ordinary shareholders per ADSs Basic (25.66) 16.69 (23.48) (3.31) Diluted (25.66) 16.66 (23.48) (3.31) Weighted average number of ADSs Basic 4,958,579 5,182,430 5,394,849 5,394,849 Diluted 4,958,579 5,193,090 5,394,849 5,394,849 ​ 108 Table of Contents Net Revenues We generate net revenues through (i) sales of virtual gifts to users in relation to audio entertainment, and (ii) podcast, advertising and others.
We expect the adoption of advanced streaming and AI technologies to improve our operational efficiency, which, together with our business growth, will enable us to benefit further from economies of scale. 106 Table of Contents Key Components of Results of Operations ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ For the Year Ended December 31, ​ ​ 2022 ​ 2023 ​ 2024 ​ RMB RMB RMB US$ ​ ​ (in thousands, except for share and per share data) Net revenues 2,185,266 2,071,772 2,031,806 278,356 Cost of revenues (1,468,921) (1,486,397) (1,474,948) (202,067) Gross profit: 716,345 585,375 556,858 76,289 Operating expenses: ​ ​ ​ ​ Selling and marketing expenses (259,618) (237,646) (307,281) (42,097) General and administrative expenses (106,727) (193,907) (106,587) (14,602) Research and development expenses (283,349) (301,490) (232,693) (31,879) Total operating expenses (649,694) (733,043) (646,561) (88,578) Operating income/(loss) 66,651 (147,668) (89,703) (12,289) Other income/(loss): ​ ​ ​ ​ Interest expenses (2,474) (1,563) (416) (57) Foreign exchange losses (1,052) (1,488) (4,209) (577) Interest and investment income 7,282 10,820 10,042 1,376 Government grants 14,360 9,395 2,148 294 Others, net 1,944 (3,577) 4,423 606 Income/(loss) before income taxes 86,711 (134,081) (77,715) (10,647) Income tax expense (207) (434) (3,261) (447) Net income/(loss) 86,504 (134,515) (80,976) (11,094) Net loss attributable to the non-controlling interests shareholders 13 7,864 11,396 1,561 Net income/(loss) attributable to our Company’s ordinary shareholders 86,517 (126,651) (69,580) (9,533) ​ ​ ​ ​ ​ ​ ​ ​ ​ Net income/(loss) 86,504 (134,515) (80,976) (11,094) Other comprehensive income: ​ ​ Foreign currency translation adjustments 24,314 3,277 11,754 1,610 Total other comprehensive income 24,314 3,277 11,754 1,610 Total comprehensive income/(loss) 110,818 (131,238) (69,222) (9,484) Comprehensive loss attributable to the non-controlling interests shareholders 13 7,953 11,522 1,579 Comprehensive income/(loss) attributable to our Company’s ordinary shareholders 110,831 (123,285) (57,700) (7,905) Net income/(loss) attributable to our Company’s ordinary shareholders per share ​ ​ Basic 0.08 (0.12) (0.07) (0.01) Diluted 0.08 (0.12) (0.07) (0.01) Weighted average number of ordinary shares ​ ​ Basic 1,036,485,949 1,078,969,851 1,026,725,421 1,026,725,421 Diluted 1,038,617,910 1,078,969,851 1,026,725,421 1,026,725,421 Net income/(loss) attributable to our Company’s ordinary shareholders per ADSs ​ ​ Basic 16.69 (23.48) (13.55) (1.86) Diluted 16.66 (23.48) (13.55) (1.86) Weighted average number of ADSs ​ ​ Basic 5,182,430 5,394,849 5,133,627 5,133,627 Diluted 5,193,090 5,394,849 5,133,627 5,133,627 ​ 107 Table of Contents Net Revenues We generate net revenues through (i) sales of virtual gifts to users in relation to audio entertainment, and (ii) podcast, advertising and others.
The difference between our net cash used in operating activities and our net loss of RMB127.3 million was due to (i) an increase in salary and welfare payable of RMB30.0 million, (ii) depreciation of property, equipment and leasehold improvement of RMB19.2 million, (iii) an increase in accrued expenses and other current liabilities of RMB2.9 million, and (iv) an increase in deferred revenue of RMB3.7 million, partially offset by an increase in prepayments and other current assets of RMB15.9 million, an increase in accounts payable of RMB2.5 million and an increase in taxes payable of RMB1.7 million.
The difference between our net cash used in operating activities and our net loss of RMB81.0 million (US$11.1 million) was due to (i) depreciation of property, equipment and leasehold improvement of RMB10.7 million (US$1.5 million), (ii) share-based compensation expenses of RMB14.2 million (US$1.9 million), (iii) a decrease in salary and welfare payable of RMB5.1 million (US$0.7 million), a decrease in accounts payable of RMB3.8 million (US$0.5 million), and (iv) partially offset by an increase in accrued expenses and other current liabilities of RMB29.7 million (US$4.1 million).
In addition, Guangzhou Huanliao qualified as a HNTE which allows it to enjoy a three-year preferential EIT rate of 15% from December 20, 2021 to December 21, 2024. They will enjoy the 15% preferential tax rate as long as it re-applies for HNTE status every three years and meet the HNTE criteria during this three-year period.
They will enjoy the 15% preferential tax rate as long as it re-applies for HNTE status every three years and meet the HNTE criteria during this three-year period.
We held cash and cash equivalents and restricted cash of RMB497.6 million (US$70.1 million) as of December 31, 2023, among which RMB70.5 million (US$10.0 million) was held by Sound Group Inc.
We held cash and cash equivalents and restricted cash of RMB453.2 million (US$63.0 million) as of December 31, 2024, among which RMB132.8 million (US$18.5 million) was held by Sound Group Inc.
Selling and marketing expenses. Our selling and marketing expenses were RMB259.6 million in the fiscal year 2022, compared to RMB386.2 million in the prior year, mainly attributable to a decrease in branding and marketing expenses, partially offset by increased salary and welfare benefits expenses related to an increase in the average salary.
Selling and marketing expenses. Our selling and marketing expenses were RMB307.3 million (US$42.1 million) in fiscal year 2024, represent a 29% increase from RMB237.6 million in the prior year, mainly attributable to the increased branding and marketing expenses, and partially offset by the decreased salary and welfare benefits expenses related to the decreased number of our selling and marketing staff.
Our general and administrative expenses were RMB106.7 million in the fiscal year 2022, representing an increase of 2% from RMB104.6 million in the prior year, mainly driven by a decrease in professional service fees, share-based compensation expenses and other miscellaneous expenses, partially offset by increasing rental expenses and higher salary and welfare benefits expenses related to an increase in the average salary.
Our general and administrative expenses were RMB106.6 million (US$14.6 million) in fiscal year 2024, compared with RMB193.9 million in the prior year, mainly driven by the decreased provision for credit loss, share-based compensation expenses, professional service fees and other miscellaneous expenses, and partially offset by the increased salary and welfare benefits expenses related to the increased average salary , provision for litigation contingencies and rental expenses.
Operating income was RMB66.7 million in the fiscal year 2022, compared to an operating loss of RMB138.5 million in the prior year. Net income was RMB86.5 million in the fiscal year 2022, compared to net loss of RMB127.3 million in the prior year.
Operating loss was RMB89.7 million (US$12.3 million) in the fiscal year 2024, compared to an operating loss of RMB147.7 million in the prior year. Net loss was RMB81.0 million (US$11.1 million) in the fiscal year 2024, compared to net loss of RMB134.5 million in the prior year.
Our research and development expenses were RMB283.3 million in the fiscal year 2022, representing an increase of 7% from RMB264.7 million in the prior year, primarily due to increasing rental expenses and higher salary and welfare benefits expenses related to an increase in average salary, partially offset by declining expenses related to research and development services provided by third parties.
Our research and development expenses were RMB232.7 million (US$31.9 million) in fiscal year 2024, compared to RMB301.5 million in the prior year, primarily due to (i) the decreased salary and welfare benefits expenses related to the decreased number of research and development staff, and (ii) the decreased share-based compensation expenses, partially offset by the increased expenses related to research and development services provided by third parties.
We had a positive working capital (defined as total current assets deducted by total current liabilities) of RMB260.5 million (US$36.7 million) as of December 31, 2023 primarily due to our business expansion, particularly, the expansion of our audio entertainment products operations.
We had a positive working capital (defined as total current assets deducted by total current liabilities) of RMB186.6 million (US$25.6 million) as of December 31, 2024.
The decrease in accrued expenses and other current liabilities was primarily attributable to a decrease in professional and miscellaneous expenses, as well as a decline in accrued sales rebates for advertising business. Net cash used in operating activities was RMB40.4 million in 2021.
The decrease in accrued expenses and other current liabilities was primarily attributable to a decrease in professional and miscellaneous expenses, as well as a decline in accrued sales rebates for advertising business. 118 Table of Contents Investing activities Net cash used in investing activities was RMB12.0 million (US$1.6 million) in 2024 mainly attributed to (i) the purchase of short-term investments of RMB125.0 million (US$17.1 million) and (ii) the purchase of property, equipment and leasehold improvement of RMB11.1 million (US$1.5 million), which was partially offset by maturities of short-term investments of RMB125.0 million (US$17.1 million).
The increase in accrued expenses and other current liabilities was primarily attributable to an increase in professional and miscellaneous expenses in line with our business growth.
The decrease in salary and welfare payable was primarily attributable to the decreased number of staff. Accounts payable decreased mainly due to the quicker settlement with our content creators. The increase in accrued expenses and other current liabilities was primarily attributable to an increase in provision for litigation contingencies and advertising and promotional expenses.
Our total operating expenses were RMB649.7 million in fiscal year 2022, compared to RMB755.5 million in the prior year. Research and development expenses.
As a result of the foregoing, our gross profit was RMB556.8 million (US$76.3 million) in fiscal year 2024, compared with RMB585.4 million in the prior year. Operating expenses. Our total operating expenses were RMB646.6 million (US$88.6 million) in fiscal year 2024, compared to RMB733.0 million in the prior year. Research and development expenses.
Our cost of revenue was RMB1,468.9 million in the fiscal year 2022, compared to RMB1,502.5 million in the prior year, mainly attributable to a decrease in the total revenue sharing fees to our content creators resulting from a sharing percentage adjustment in our revenue sharing policies, as well as decreases in share-based compensation expenses and salary and welfare benefits expenses which resulted from decreases in our operation’s headcount, and a decline in other miscellaneous costs.
Cost of revenues was RMB1,474.9 million (US$202.1 million) in fiscal year 2024, compared to RMB1,486.4 million in the prior year, mainly attributable to (i) the decreased salary and welfare benefits expenses related to the decreased operation staff, as well as (ii) the decreased bandwidth costs, share-based compensation expenses, and payment handling costs. Gross profit.
Removed
Year Ended December 31, 2022 Compared to Year Ended December 31, 2021 Net revenues. Our net revenue was RMB2,185.3 million in the fiscal year 2022, representing a 3% increase from RMB2,119.5 million in the prior year. The increase was primarily due to the growth in average user spending on our audio entertainment products. Cost of revenues.
Added
Net revenue was RMB2,031.8 million (US$278.4million) in the fiscal year 2024, compared with RMB2,071.8 million in the prior year. The decrease was primarily due to the decrease in the number of paying users. Cost of revenues.
Removed
The decreases were partially offset by increasing bandwidth costs. Gross profit. As a result of the foregoing, our gross profit was RMB716.3 million in fiscal year 2022, representing an increase of 16% from RMB617.0 million in the prior year. 111 Table of Contents Operating expenses.
Added
In addition, Guangzhou Huanliao qualified as a HNTE which allows it to enjoy a three-year preferential EIT rate of 15% from December 20, 2021 to December 21, 2024. Guangzhou Huanliao renewed its HNTE qualification in November 19, 2024 and is entitled to continue to enjoy such preferential tax rate from 2024 to 2027.
Removed
The increase in salary and welfare payable was attributable to our business growth which requires and is likely to continue to require higher labor cost. The increase in the depreciation of property, equipment and leasehold improvement is likely to continue as a result of our continued growth.
Added
Net cash used in operating activities was RMB117.0 million in 2023.
Removed
The increase in prepayments and other current assets was primarily attributable to an increase in deposits for operating lease, prepaid service fees and receivables from third-party online payment platform, which in line with our business growth.
Removed
Net cash generated from investing activities was RMB52.1 million in 2021 primarily due to maturities of short-term investments of RMB73.0 million, which offset by purchasing of intangible assets, property, equipment and leasehold improvement of RMB20.9 million.
Removed
Net cash generated from financing activities was RMB212.7 million in 2021 primarily due to the completion of our follow-on public offering in April 2021 and third-party loans taken out by the VIEs.

Item 6. [Reserved]

Selected Financial Data — reserved (removed by SEC in 2021)

24 edited+0 added−1 removed71 unchanged
Jinnan (Marco) Lai is our founder, Chief Executive Officer and director. Mr. Lai has served as a director and the Chief Executive Officer of Lizhi BVI since 2010 and as our director and Chief Executive Officer since January 2019. Before founding Sound Group Inc., Mr. Lai was a successful serial entrepreneur in China’s internet industry.
Jinnan (Marco) Lai is our founder, Chief Executive Officer and director. Mr. Lai has served as a director and the Chief Executive Officer of Lizhi BVI since 2010 and our director and Chief Executive Officer since January 2019. Before founding Sound Group Inc., Mr. Lai was a successful serial entrepreneur in China’s internet industry.
Ren received her bachelor’s degree from Hubei Polytechnic University and EMBA degree from Guanghua School of Management, Peking University. Mr. Yipeng Li served as our independent director since January 2020. Mr. Li has served as the Chief Financial Officer of Cloopen Group Holding Limited since May 2020. Prior to that, Mr.
Ren received her bachelor’s degree from Hubei Polytechnic University and EMBA degree from Guanghua School of Management, Peking University. Mr. Yipeng Li has served as our independent director since January 2020. Mr. Li has served as the Chief Financial Officer of Cloopen Group Holding Limited since May 2020. Prior to that, Mr.
Juan Ren 39 Vice President and Director Mr. Yipeng Li 47 Independent Director Mr. Ming Zhang 47 Independent Director Mr. Xiang Wang 63 Independent Director Ms. Chengfang Lu 37 Vice President of Finance and Acting Chief Financial Officer Mr. Ning Ding 45 Co-founder and Chief Technology Officer Mr. Zelong Li 39 Chief Operating Officer ​ Mr.
Juan Ren 39 Vice President and Director Mr. Yipeng Li 47 Independent Director Mr. Ming Zhang 47 Independent Director Mr. Xiang Wang 63 Independent Director Ms. Chengfang Lu 37 Vice President of Finance and Acting Chief Financial Officer Mr. Ning Ding 45 Co-founder and Chief Technology Officer Mr. Zelong Li 40 Chief Operating Officer ​ Mr.
The compensation committee is responsible for, among other things: ● reviewing and approving the compensation for our executive officers; ● reviewing and evaluating periodically the management succession plan in consultation with the chief executive officer; ● reviewing any incentive compensation or equity plans, programs or similar arrangements; ● selecting compensation consultant, legal counsel or other adviser only after taking into consideration of all factors relevant to that person’s independence from management; and ● reporting periodically to the board of directors. 128 Table of Contents Nominating and Corporate Governance Committee .
The compensation committee is responsible for, among other things: ● reviewing and approving the compensation for our executive officers; ● reviewing and evaluating periodically the management succession plan in consultation with the chief executive officer; ● reviewing any incentive compensation or equity plans, programs or similar arrangements; ● selecting compensation consultant, legal counsel or other adviser only after taking into consideration of all factors relevant to that person’s independence from management; and ● reporting periodically to the board of directors. 127 Table of Contents Nominating and Corporate Governance Committee .
He founded Great Wall Club Inc. in 2008 and has been serving as the Chairman of its Board of Directors. He is also a prominent cross-border angel investor and the founder of GASA (Global Academy of Science and Arts). Mr. Xiang Wang has served as our independent director since July 2020. Mr.
He founded Great Wall Club Inc. in 2008 and has been serving as the Chairman of its Board of Directors. He is also a prominent cross-border angel investor and the founder of GASA (Global Academy of Science and Arts). Mr. Xiang Wang has served as our independent director since July 2020. He is an independent consultant and investor.
All granted and outstanding awards under the 2018 BVI Plan have since been terminated. 125 Table of Contents We amended and restated the 2019 Share Incentive Plan on March 18, 2020, or the Amended and Restated 2019 Share Incentive Plan, to increase the maximum aggregate number of Class A ordinary shares we are authorized to issue under the Amended and Restated 2019 Share Incentive Plan to 100,000,000 Class A ordinary shares.
All granted and outstanding awards under the 2018 BVI Plan have since been terminated. 124 Table of Contents We amended and restated the 2019 Share Incentive Plan on March 18, 2020, or the Amended and Restated 2019 Share Incentive Plan, to increase the maximum aggregate number of Class A ordinary shares we are authorized to issue under the Amended and Restated 2019 Share Incentive Plan to 100,000,000 Class A ordinary shares.
None of our directors has a service contract with us that provides for benefits upon termination of service as a director. 127 Table of Contents Committees of the Board of Directors We have established the following committees in our board of directors upon our initial public offering: an audit committee, a compensation committee and a nominating and corporate governance committee.
None of our directors has a service contract with us that provides for benefits upon termination of service as a director. 126 Table of Contents Committees of the Board of Directors We have established the following committees in our board of directors upon our initial public offering: an audit committee, a compensation committee and a nominating and corporate governance committee.
Lu is a member of the Chinese Institution of Certified Public Accountants. 124 Table of Contents Mr. Ning Ding is our co-founder and Chief Technology Officer. Mr. Ding has served as a director of Lizhi BVI since March 2012, our Chief Technology Officer since January 2019, and our director from January 2019 to April 2022. Mr.
Lu is a member of the Chinese Institution of Certified Public Accountants. 123 Table of Contents Mr. Ning Ding is our co-founder and Chief Technology Officer. Mr. Ding has served as a director of Lizhi BVI since March 2012, our Chief Technology Officer since January 2019, and our director from January 2019 to April 2022. Mr.
The table below excludes 5,008,430 ordinary shares issued to Kastle Limited, which holds such ordinary shares in trust for the benefit of certain of our senior management and directors before the corresponding share awards granted to such senior management and directors are vested pursuant to the Second Amended and Restated 2019 Share Incentive Plan, except when calculating the number of shares underlying share options held by such person or group that are exercisable or options and restricted share units that will become vested within 60 days after September 30, 2024. ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Ordinary Shares ​ ​ ​ ​ ​ ​ ​ ​ Percentage of ​ ​ ​ ​ ​ ​ ​ ​ Total ordinary ​ total ordinary ​ Percentage of ​ ​ Class A ordinary ​ Class B ordinary ​ shares on an as- ​ shares on an as- ​ aggregate voting ​ shares shares converted basis converted basis power*** Directors and Executive Officers**†: ​ ​ ​ ​ ​ ​ Mr.
The table below excludes 5,008,430 ordinary shares issued to Kastle Limited, which holds such ordinary shares in trust for the benefit of certain of our senior management and directors before the corresponding share awards granted to such senior management and directors are vested pursuant to the Second Amended and Restated 2019 Share Incentive Plan, except when calculating the number of shares underlying share options held by such person or group that are exercisable or options and restricted share units that will become vested within 60 days after February 28, 2025. ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Ordinary Shares ​ ​ ​ ​ ​ ​ ​ ​ Percentage of ​ ​ ​ ​ ​ ​ ​ ​ Total ordinary ​ total ordinary ​ Percentage of ​ ​ Class A ordinary ​ Class B ordinary ​ shares on an as- ​ shares on an as- ​ aggregate voting ​ shares shares converted basis converted basis power*** Directors and Executive Officers**†: ​ ​ ​ ​ ​ ​ Mr.
The plan administrator has the authority to amend or terminate the Second Amended and Restated 2019 Share Incentive Plan, provided that, such termination or amendment shall not adversely affect in any material way any awards previously granted unless agreed by the relevant grantee. 126 Table of Contents The following table summarizes, as of September 30, 2024, the number of the outstanding awards granted under the Second Amended and Restated 2019 Share Incentive Plan to our directors and executive officers. ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Ordinary Shares Underlying ​ ​ ​ ​ ​ ​ Outstanding Options, Restricted ​ ​ ​ ​ ​ ​ ​ ​ Shares and Restricted Share ​ ​ ​ ​ Name ​ Exercise Price ​ Units Awards Granted ​ Date of Grant ​ Date of Expiration ​ ​ (US$/share) ​ ​ ​ ​ ​ ​ Mr.
The plan administrator has the authority to amend or terminate the Second Amended and Restated 2019 Share Incentive Plan, provided that, such termination or amendment shall not adversely affect in any material way any awards previously granted unless agreed by the relevant grantee. 125 Table of Contents The following table summarizes, as of February 28, 2025, the number of the outstanding awards granted under the Second Amended and Restated 2019 Share Incentive Plan to our directors and executive officers. ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Ordinary Shares Underlying ​ ​ ​ ​ ​ ​ Outstanding Options, Restricted ​ ​ ​ ​ ​ ​ ​ ​ Shares and Restricted Share ​ ​ ​ ​ Name ​ Exercise Price ​ Units Awards Granted ​ Date of Grant ​ Date of Expiration ​ ​ (US$/share) ​ ​ ​ ​ ​ ​ Mr.
Among those, a total 5,008,430 Class A ordinary shares corresponding to restricted shares units granted to certain of our management members and director, were held by Kastle Limited, a company incorporated with limited liability under the laws of Hong Kong, as of September 30, 2024.
Among those, a total 5,008,430 Class A ordinary shares corresponding to restricted shares units granted to certain of our management members and director, were held by Kastle Limited, a company incorporated with limited liability under the laws of Hong Kong, as of February 28, 2025.
In addition, none of our outstanding Class A ordinary shares was held by any record holder in the United States as of September 30, 2024. None of our shareholders has informed us that it is affiliated with a member of Financial Industry Regulatory Authority, or FINRA.
In addition, none of our outstanding Class A ordinary shares was held by any record holder in the United States as of February 28, 2025. None of our shareholders has informed us that it is affiliated with a member of Financial Industry Regulatory Authority, or FINRA.
Xiang Wang * — * * * ​ All Directors and Executive Officers as a Group 23,321,600 231,215,000 254,536,600 25.8 % 76.1 % Principal Shareholders: ​ ​ ​ ​ ​ ​ ​ Voice Future Ltd (1) — 192,215,000 192,215,000 19.5 % 62.7 % Voice Intelligence Ltd (2) — 39,000,000 39,000,000 4.0 % 12.7 % Notes: * Less than 1% of our total outstanding shares. ** For each person and group included in this column, percentage ownership is calculated by dividing the number of shares beneficially owned by such person or group by the sum of (i) 985,095,010, being the number of ordinary shares outstanding as of September 30, 2024, excluding 5,008,430 ordinary shares held by Kastle Limited, which holds such ordinary shares in trust for the benefit of certain of our senior management and directors before the corresponding share awards granted to such senior management and directors are vested pursuant to the Second Amended and Restated 2019 Share Incentive Plan, and (ii) the number of ordinary shares underlying options, restricted shares and restricted share units held by such person or group that are exercisable or issuable within 60 days after September 30, 2024. *** For each person and group included in this column, percentage of voting power is calculated by dividing the voting power beneficially owned by such person or group by the voting power of all of our ordinary shares as a single class. † The office address of our directors and executive officers is 60 Anson Road, Mapletree Anson, #09-01/02, Singapore, 079914. 131 Table of Contents (1) The number of ordinary shares beneficially owned represents 192,215,000 Class B ordinary shares held by Mr.
Xiang Wang * — * * * ​ All Directors and Executive Officers as a Group 23,321,600 231,215,000 254,536,600 25.9 % 76.2 % Principal Shareholders: ​ ​ ​ ​ ​ ​ ​ Voice Future Ltd (1) — 192,215,000 192,215,000 19.5 % 62.7 % Voice Intelligence Ltd (2) — 39,000,000 39,000,000 4.0 % 12.7 % Notes: * Less than 1% of our total outstanding shares. ** For each person and group included in this column, percentage ownership is calculated by dividing the number of shares beneficially owned by such person or group by the sum of (i) 987,114,810, being the number of ordinary shares outstanding as of February 28, 2025, excluding 5,008,430 ordinary shares held by Kastle Limited, which holds such ordinary shares in trust for the benefit of certain of our senior management and directors before the corresponding share awards granted to such senior management and directors are vested pursuant to the Second Amended and Restated 2019 Share Incentive Plan, and (ii) the number of ordinary shares underlying options, restricted shares and restricted share units held by such person or group that are exercisable or issuable within 60 days after February 28, 2025. *** For each person and group included in this column, percentage of voting power is calculated by dividing the voting power beneficially owned by such person or group by the voting power of all of our ordinary shares as a single class. † The office address of our directors and executive officers is 108 Robinson Road, #09-01 Singapore 068900. 130 Table of Contents (1) The number of ordinary shares beneficially owned represents 192,215,000 Class B ordinary shares held by Mr.
Share Ownership The following table sets forth information concerning the beneficial ownership of our ordinary shares as of September 30, 2024 by: ● each of our directors and executive officers; ● all of our directors and executive officers as a group; and ● each of our principal shareholders who beneficially own more than 5% of our total outstanding ordinary shares.
Share Ownership The following table sets forth information concerning the beneficial ownership of our ordinary shares as of February 28, 2025 by: ● each of our directors and executive officers; ● all of our directors and executive officers as a group; and 129 Table of Contents ● each of our principal shareholders who beneficially own more than 5% of our total outstanding ordinary shares.
Compensation Compensation For the fiscal year ended December 31, 2023, we paid an aggregate of RMB13.9 million (US$1.9 million) on an accrual basis to our executive officers, and an aggregate of RMB2.0 million (US$0.3 million) on an accrual basis to our non-executive directors.
Compensation Compensation For the fiscal year ended December 31, 2024, we paid an aggregate of RMB13.0 million (US$1.8 million) on an accrual basis to our executive officers, and an aggregate of RMB2.6 million (US$0.4 million) on an accrual basis to our non-executive directors.
Employees We had 563 employees as of December 31, 2023. As of December 31, 2023, 50 of our full-time employees were located outside of China.
Employees We had 563 employees as of December 31, 2024. As of December 31, 2024, 34 of our full-time employees were located outside of China.
The calculations in the table below are based on 985,095,010 ordinary shares issued and outstanding (excluding 5,008,430 ordinary shares issued to Kastle Limited). 130 Table of Contents Beneficial ownership is determined in accordance with the rules and regulations of the SEC.
The calculations in the table below are based on 987,114,810 ordinary shares issued and outstanding (excluding 5,008,430 ordinary shares issued to Kastle Limited). Beneficial ownership is determined in accordance with the rules and regulations of the SEC.
To our knowledge, as of September 30, 2024, a total of 797,689,080 Class A ordinary shares are held by one record holder in the United States, which was Deutsche Bank Trust Company Americas, the depositary of our ADR program, representing approximately 81.0% of our total outstanding shares.
To our knowledge, as of February 28, 2025, a total of 797,689,080 Class A ordinary shares are held by one record holder in the United States, which was Deutsche Bank Trust Company Americas, the depositary of our ADR program, representing approximately 80.8% of our total outstanding shares.
As of September 30, 2024, awards representing 60,651,040 Class A ordinary shares have been granted and outstanding under the Second Amended and Restated 2019 Share Incentive Plan. The awards issued under the Second Amended and Restated 2019 Share Incentive Plan are vested by equal instalment from nil to four years upon our initial public offering in January 2020.
As of February 28, 2025, awards representing 58,748,670 Class A ordinary shares have been granted and outstanding under the Second Amended and Restated 2019 Share Incentive Plan. The awards issued under the Second Amended and Restated 2019 Share Incentive Plan are vested by equal instalment from nil to four years upon our initial public offering in January 2020.
Wang is a senior consultant for Xiaomi Corporation, holding that position since December 30, 2022. Prior to that, he served as Xiaomi Corporation’s President from November 2019 and as Partner and President from August 2020 to December 2022. Before then, he also served as Xiaomi Corporation’s Senior Vice President from 2015 to 2019. Mr.
Since December 31, 2022, he has served as a senior adviser for Xiaomi Corporation. Prior to that, he served as Xiaomi Corporation’s President from November 2019 and as Partner and President from August 2020 to December 2022. Before then, he also served as Xiaomi Corporation’s Senior Vice President from 2015 to 2019. Mr.
As of September 30, 2024, other grantees under the Second Amended and Restated 2019 Share Incentive Plan as a group held awards representing 52,138,880 Class A ordinary shares. For discussions of our accounting policies and estimates for awards granted pursuant to the Second Amended and Restated 2019 Share Incentive Plan, see “Item 5. Operating and Financial Review and Prospects—5.A.
As of February 28, 2025, other grantees under the Second Amended and Restated 2019 Share Incentive Plan as a group held awards representing 50,236,510 Class A ordinary shares. For discussions of our accounting policies and estimates for awards granted pursuant to the Second Amended and Restated 2019 Share Incentive Plan, see “Item 5. Operating and Financial Review and Prospects—5.A.
As of September 30, 2024, there are 60,651,040 options and restricted share units outstanding that were granted to certain management members, employees and consultant corresponding to 60,651,040 of our Class A ordinary shares pursuant to the Second Amended and Restated 2019 Share Incentive Plan.
As of February 28, 2025, there are 58,748,670 options and restricted share units outstanding that were granted to certain management members, employees and consultant corresponding to 58,748,670 of our Class A ordinary shares pursuant to the Second Amended and Restated 2019 Share Incentive Plan.
The following table sets forth a breakdown of our employees by function as of December 31, 2023: ​ ​ ​ ​ ​ ​ ​ Number of ​ ​ ​ employees ​ % of total Research and development 386 68.6 % Operations and products 57 10.1 % Sales and marketing 53 9.4 % General and administration 67 11.9 % Total 563 100.0 % ​ Our success depends on our ability to attract, retain and motivate qualified personnel.
The following table sets forth a breakdown of our employees by function as of December 31, 2024: ​ ​ ​ ​ ​ ​ ​ Number of ​ ​ ​ employees ​ % of total Research and development 369 65.5 % Operations and products 60 10.7 % Sales and marketing 62 11.0 % General and administration 72 12.8 % Total 563 100.0 % ​ Our success depends on our ability to attract, retain and motivate qualified personnel.
A director will be removed from office automatically if, among other things, the director (i) becomes bankrupt or makes any arrangement or composition with his creditors; (ii) dies or is found by our company to be of unsound mind; (iii) resigns by notice in writing to our company; (iv) without special leave of absence from our board of directors, is absent from three consecutive meetings of the board and the board resolves that his office be vacated; (v) is prohibited by law from being a director; or (vi) is removed from office pursuant to any other provisions of the Second Amended and Restated Memorandum and Articles of Association.
A director will be removed from office automatically if, among other things, the director (i) becomes bankrupt or makes any arrangement or composition with his creditors; (ii) dies or is found by our company to be of unsound mind; (iii) resigns by notice in writing to our company; (iv) without special leave of absence from our board of directors, is absent from three consecutive meetings of the board and the board resolves that his office be vacated; (v) is prohibited by law from being a director; or (vi) is removed from office pursuant to any other provisions of the Second Amended and Restated Memorandum and Articles of Association. ​ 128 Table of Contents Board Diversity ​ ​ ​ ​ ​ ​ ​ Board Diversity Matrix (As of February 28, 2025) Country of Principal Executive Offices: Singapore Foreign Private Issuer Yes Disclosure Prohibited Under Home Country Law No Total Number of Directors 5 ​ ​ Female Male Non-Binary Did Not Disclose Gender ​ ​ ​ ​ ​ ​ ​ ​ Part I: Gender Identity ​ ​ ​ ​ ​ ​ ​ Directors 1 ​ 4 ​ 0 ​ 0 Part II: Demographic Background ​ ​ ​ ​ ​ ​ ​ Underrepresented Individual in Home Country Jurisdiction ​ ​ ​ – LGBTQ+ ​ ​ ​ – ​ 6.D.
Removed
Board Diversity ​ ​ ​ ​ ​ ​ ​ Board Diversity Matrix (As of September 30, 2024) Country of Principal Executive Offices: Singapore Foreign Private Issuer Yes Disclosure Prohibited Under Home Country Law No Total Number of Directors 5 ​ 129 Table of Contents ​ Female Male Non-Binary Did Not Disclose Gender ​ ​ ​ ​ ​ ​ ​ ​ Part I: Gender Identity ​ ​ ​ ​ ​ ​ ​ Directors 1 ​ 4 ​ 0 ​ 0 Part II: Demographic Background ​ ​ ​ ​ ​ ​ ​ Underrepresented Individual in Home Country Jurisdiction ​ ​ ​ – LGBTQ+ ​ ​ ​ – ​ 6.D.

Item 7. Management's Discussion & Analysis

Management's Discussion & Analysis (MD&A) — revenue / margin commentary

2 edited+0 added−2 removed1 unchanged
Board Practices—Terms of Directors and Officers.” Contractual Arrangements with the VIEs and the VIEs’ Respective Shareholders See “Item 4. Information on the Company—4.C. Organizational Structure—Contractual Arrangements with the VIEs and the VIEs’ Respective Shareholders.” 132 Table of Contents Employment Agreements and Indemnification Agreements See “Item 6. Directors, Senior Management and Employees—6.B.
Board Practices—Terms of Directors and Officers.” Contractual Arrangements with the VIEs and the VIEs’ Respective Shareholders See “Item 4. Information on the Company—4.C. Organizational Structure—Contractual Arrangements with the VIEs and the VIEs’ Respective Shareholders.” 131 Table of Contents Employment Agreements and Indemnification Agreements See “Item 6. Directors, Senior Management and Employees—6.B.
Compensation—Employment Agreements and Indemnification Agreements.” Share Incentives See “Item 6. Directors, Senior Management and Employees—6.B.
Compensation—Employment Agreements and Indemnification Agreements.” Share Incentives See “Item 6. Directors, Senior Management and Employees—6.B. Compensation—Share Incentive Plan.” Other Related Party Transactions During the year ended December 31, 2024, other than disclosed elsewhere, we did not have any other related party transactions. 7.C. Interests of Experts and Counsel Not applicable.
Removed
Compensation—Share Incentive Plan.” Other Related Party Transactions In January 2023, VOCAL BEATS Inc., our wholly owned subsidiary in the British Virgin Islands, entered into a share subscription agreement with Sky Voice Limited, a company registered in the British Virgin Islands and controlled by a family trust of Mr.
Removed
Jinnan (Marco) Lai (Founder, Chief Executive Officer and Chairman of the Company), pursuant to which VOCAL BEATS Inc. issued 31,481,481 ordinary shares to Sky Voice Limited at an aggregate subscription price of US$340,000. After the share subscription, the total issued shares of VOCAL BEATS Inc. were 100,000,000 at a par value of US$0.0001. 7.C.

Other SOGP 10-K year-over-year comparisons